Table ofContents

 

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 20-F**

 

| **o**      | **REGISTRATION STATEMENT PURSUANT  TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF  1934**                                 |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                            |
| **OR**     |
| ** ** | ** **                                                                                                                                            |
| **x**      | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2008** |
| ** ** | ** **                                                                                                                                            |
| **OR**     |
| ** ** | ** **                                                                                                                                            |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                               |
| ** ** | ** **                                                                                                                                            |
| **OR**     |
| ** ** | ** **                                                                                                                                            |
| **o**      | **SHELL COMPANY REPORT PURSUANT  TO SECTION 23 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                            |

 

Dateof event requiring this shell company report . . . . . . . . . . . . . . . . ... .

 

**For the transition period from                      to                        **

 

Commissionfile number: 001-12440

 
| **ENERSIS S.A.**                                                                                                    |
|---------------------------------------------------------------------------------------------------------------------|
| (Exact name of Registrant as specified in its charter)                                                              |
|                                                                                                                |
| **ENERSIS S.A.**                                                                                                    |
| (Translation of Registrant’s name into English)                                                                |
|                                                                                                                |
| **CHILE**                                                                                                           |
| (Jurisdiction of incorporation or organization)                                                                     |
|                                                                                                                |
| **SANTA ROSA 76, SANTIAGO, CHILE**                                                                                  |
| (Address of principal executive offices)                                                                            |
|                                                                                                                |
| **Nicolás Billikopf  (56-2) 353-4639  nbe@enersis.cl  Santa Rosa 76, Piso 15, Santiago, Chile** |
| (Name, Telephone, E-mail and/or Facsimile number and Address of  Company Contact Person)                            |

 

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

 

| **Title  of Each Class**                                 | ** ** | **Name of  Each Exchange on Which Registered** |
|----------------------------------------------------------|------------|------------------------------------------------|
| American Depositary Shares representing Common Stock     |       | New York Stock Exchange                        |
| Common Stock, no par value *                             |       | New York Stock Exchange                        |
| $ 249,734,000 7.40% Notes due December 1, 2016 |       | New York Stock Exchange                        |
| $ 858,000 6.60% Notes due December 1, 2026     |       | New York Stock Exchange                        |

 

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

 

Securitiesregistered or to be registered pursuant to Section 12(g) of the Act: None

 

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Securitiesfor which there is a reporting obligation pursuant to Section 15(d) ofthe Act:

 
| **$ 350,000,000 7.375% Notes due January 15, 2014** |
|----------------------------------------------------------|

 

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

 

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

x Yes   o No

 

Ifthis report is an annual or transition report, indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934:

o Yes   x No

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days:

x Yes   o No

 

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

 

| Large accelerated filer x |   | Accelerated filer o |   | Non-accelerated filer o |
|---------------------------|--------|---------------------|--------|-------------------------|

 

Indicateby check mark which basis of accounting the registrant has used to prepare thefinancial statements included in this filing:

 

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

 

Indicateby check mark which financial statement item the registrant has elected tofollow:

o Item 17   x Item 18

 

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

o Yes   x No

 

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**Enersis’Simplified Organizational Structure (*)**

 

 

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(*) Only principal operating subsidiaries are presented here.Percentage ownership includes Enersis’ direct and indirect equity interests asof December 31, 2008.

 

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**TABLEOF CONTENTS**

 
| ** **                       | **Page**                                                                      |
|----------------------------------|-------------------------------------------------------------------------------|
|                             |                                                                          |
| GLOSSARY                         | 4                                                                             |
| INTRODUCTION                     | 8                                                                             |
| Financial Information            | 8                                                                             |
| Technical Terms                  | 9                                                                             |
| Calculation of Economic Interest | 10                                                                            |
| Forward-Looking Statements       | 10                                                                            |
| PART I                      | 11                                                                            |
| Item 1.                          | Identity  of Directors, Senior Management and Advisers                        | 11 |
| Item 2.                          | Offer  Statistics and Expected Timetable                                      | 11 |
| Item 3.                          | Key  Information                                                              | 11 |
| Item  4.                         | Information  on the Company                                                   | 26 |
| Item  4A.                        | Unresolved  Staff Comments                                                    | 93 |
| Item  5.                         | Operating  and Financial Review and Prospects                                 | 93 |
| Item  6.                         | Directors,  Senior Management and Employees                                   | 133 |
| Item  7.                         | Major  Shareholders and Related Party Transactions                            | 141 |
| Item 8.                          | Financial  Information                                                        | 143 |
| Item 9.                          | The Offer  and Listing                                                        | 145 |
| Item  10.                        | Additional  Information                                                       | 147 |
| Item  11(a) and 11(b)       | Quantitative  and Qualitative Disclosures about Market Risk                   | 165 |
| PART II                     |                                                                          | 170 |
| Item  13.                        | Defaults,  Dividend Arrearages and Delinquencies                              | 170 |
| Item  14.                        | Material  Modifications to the Rights of Security Holders and Use of Proceeds | 170 |
| Item 15.                    | Controls  and Procedures                                                      | 170 |
| Item  16A.                       | Audit  Committee Financial Expert                                             | 172 |
| Item 16B.                        | Code of  Ethics                                                               | 172 |
| Item  16D.                       | Exemptions  from Listing Requirements for Audit Committees                    | 174 |
| Item  16E.                       | Purchases  of Equity Securities by the Issuer and Affiliated Purchasers       | 174 |
| Item  16F.                       | Change  in Registrant’s Certifying Accountants                           | 174 |
| Item  16G.                       | Corporate  Governance                                                         | 174 |
| PART III                    |                                                                          | 176 |
| Item  17.                        | Financial  Statements                                                         | 176 |
| Item  18.                        | Financial  Statements                                                         | 176 |
| Item 19.                         | Exhibits                                                                      | 176 |
|                                  |                                                                               |  |  |

 

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**GLOSSARY**

 
| Acciona           | * * | *ACCIONA,  S.A.*                                                               |   | Spanish construction  holding company. Together with Enel, Acciona held a controlling interest in  Endesa Spain as of December 31, 2008.                                                                                                                                |
|-------------------|----------|--------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| ADR               | * * | *American  Depositary Receipt*                                                 |   | Receipt evidencing a  variable number of ADSs.                                                                                                                                                                                                                               |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| ADS               | * * | *American  Depositary Share*                                                   |   | One ADS represents 50  common shares of the Company.                                                                                                                                                                                                                         |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| AFP               | * * | *Administradora  de Fondos de Pensiones*                                       |   | Chilean pension fund.                                                                                                                                                                                                                                                        |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| Ampla             | * * | *Ampla Energia e Serviços S.A.*                                           |   | Brazilian distribution  company operating in Rio de Janeiro, owned by Endesa Brasil, a subsidiary of  Enersis.                                                                                                                                                               |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| ANEEL             | * * | *Agéncia  Nacional de Energia Elétrica*                              |   | Brazilian governmental  agency for electric energy.                                                                                                                                                                                                                          |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| Betania           | * * | *Central Hidroeléctrica de Betania S.A E.S.P.*                            |   | Endesa Chile’s  Colombian subsidiary which merged with Emgesa, another Endesa Chile  subsidiary, in 2007.                                                                                                                                                               |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| Bureau Veritas    | * * | *Bureau  Veritas*                                                              |   | International  independent certification company.                                                                                                                                                                                                                            |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| Cachoeira Dourada | * * | *Centrais Elétricas Cachoeira Dourada S.A.*                               |   | Brazilian generation  company owned by Endesa Brasil, a subsidiary of Enersis.                                                                                                                                                                                               |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| CAM               | * * | *Compañía Americana de Multiservicios Ltda.*                         |   | Enersis’ subsidiary  engaged in the electrical parts procurement business.                                                                                                                                                                                              |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| Cammesa           | * * | *Compañía Administradora del Mercado Mayorista Eléctrico  S.A.* |   | Argentine autonomous  entity in charge of the operation of the *Mercado Eléctrico  Mayorista* (Wholesale Electricity Market), or MEM. Cammesa’s  stockholders are generation, transmission and distribution companies, large  users and the Secretariat of Energy. |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| CDEC              | * * | *Centro  de Despacho Económico de Carga*                                  |   | Autonomous entity in  two Chilean electric systems in charge of coordinating the efficient  operation and dispatch of units to satisfy demand.                                                                                                                               |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| CELTA             | * * | *Compañía Eléctrica Tarapacá S.A.*                         |   | Endesa Chile’s  subsidiary that operates in the SING with thermal plants.                                                                                                                                                                                               |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| CEMSA             | * * | *Compañía de Energía del Mercosur S.A.*                         |   | Energy trading company  with operations in Argentina, a subsidiary of Endesa Chile.                                                                                                                                                                                          |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| Chilectra         | * * | *Chilectra  S.A.*                                                              |   | Chilean electricity  distribution company operating in the Santiago metropolitan area, a  subsidiary of Enersis.                                                                                                                                                             |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| CIEN              | * * | *Companhia de Interconexão Energética S.A.*                          |   | Brazilian transmission  company, wholly-owned by Endesa Brasil, a subsidiary of Enersis.                                                                                                                                                                                     |
|              | * * | * *                                                                       |   |                                                                                                                                                                                                                                                                         |
| CNE               | * * | *Comisión  Nacional de Energía*                                      |   | Chilean National Energy  Commission, governmental entity with responsibilities under the Chilean  regulatory framework.                                                                                                                                                      |

 

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| Codensa              | * * | *Codensa  S.A E.S.P.*                                              |   | Colombian distribution  company that operates mainly in Bogotá,  and is a subsidiary of Enersis.                                                                                             |
|----------------------|----------|--------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Coelce               | * * | *Companhia Energética do Ceará S.A.*                     |   | Brazilian distribution  company operating in the state of Ceará, Coelce is controlled by Endesa  Brasil, a subsidiary of Enersis.                                                            |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| CREG                 | * * | *Comisión de Regulación de Energía y Gas*           |   | Colombian Commission  for the Regulation of Energy and Gas.                                                                                                                                       |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| CTM                  | * * | *Compañía de Transmisión del Mercosur*              |   | Endesa Brasil’s  subsidiary transmission company with operations in Argentina.                                                                                                               |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Edegel               | * * | *Edegel  S.A.A.*                                                   |   | Peruvian generation  company, subsidiary of Endesa Chile.                                                                                                                                         |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Edelnor              | * * | *Empresa de Distribución Eléctrica de Lima Norte S.A.A.* |   | Peruvian distribution  company with a concession area in the northern part of Lima, and a subsidiary  of Enersis.                                                                                 |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Edesur               | * * | *Empresa  Distribuidora Sur S.A.*                                  |   | Argentine distribution  company with concession area in the south of the Buenos Aires larger  metropolitan area, and a subsidiary of Enersis.                                                     |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| El Chocón       | * * | *Central Hidroeléctrica El Chocón S.A.*                  |   | Endesa Chile’s  subsidiary with two hydroelectric plants, El Chocón and Arroyito, both  located in the Limay River, Argentina.                                                          |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Elesur               | * * | *Elesur  S.A.*                                                     |   | A former Chilean  subsidiary of Enersis that absorbed Chilectra, and later changed its name to  Chilectra.                                                                                        |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Emgesa               | * * | *Emgesa  S.A. E.S.P.*                                              |   | Colombian generation  company controlled by Endesa Chile.                                                                                                                                         |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Endesa Brasil        | * * | *Endesa  Brasil S.A.*                                              |   | Brazilian holding  company, a subsidiary of Enersis.                                                                                                                                              |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Endesa Chile         | * * | *Empresa  Nacional de Electricidad S.A.*                           |   | Our generation  subsidiary with operations in four countries in South America.                                                                                                                    |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| EndesaCostanera      | * * | *Endesa  Costanera S.A.*                                           |   | Argentine generation  company controlled by Endesa Chile.                                                                                                                                         |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Endesa Fortaleza     | * * | *Central Geradora Termelétrica Fortaleza S.A.*                |   | Operates a combined  cycle generating plant, located in the state of Ceará. Endesa Fortaleza is  wholly-owned by our subsidiary Endesa Brasil.                                               |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Endesa Latin America | * * | *Endesa  Latinoamérica, S.A.*                                 |   | A subsidiary of Endesa  Spain and our direct controller, formerly known as Endesa Internacional, S.A.                                                                                             |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Endesa Spain         | * * | *Endesa,  S.A.*                                                    |   | A Spanish electricity  generation and distribution company with a 60.6% beneficial interest in  Enersis.                                                                                          |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Enel                 | * * | *Enel SpA*                                                         |   | Italian power company,  with a controlling ownership of Endesa Spain.                                                                                                                             |
|                 | * * | * *                                                           |   |                                                                                                                                                                                              |
| Enersis              | * * | *Enersis  S.A.*                                                    |   | Chilean company with  subsidiaries engaged primarily in the generation, transmission and  distribution of electricity in Chile, Argentina, Brazil, Colombia and Peru.  Registrant of this report. |

 

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| ENRE       | * * | *Ente Nacional Regulatorio de la Energía*                                                                                                |   | Argentine national  regulatory authority of the energy sector.                                                                                                            |
|------------|----------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| Etevensa   | * * | *Empresa de Generación Termoeléctrica Ventanilla S.A.*                                                                              |   | Peruvian generation  company that merged with Edelnor in 2006.                                                                                                            |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| Foninvenem | * * | *Fondo Para Inversiones Necesarias Que Permitan  Incrementar La Oferta De Energía Eléctrica En El Mercado Eléctrico Mayorista* |   | Argentine fund created  to increase electricity supply in the MEM.                                                                                                        |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| GasAtacama | * * | *GasAtacama  S.A.*                                                                                                                            |   | Company involved in gas  transportation and electricity generation in the north of Chile, an affiliate  of Endesa Chile.                                                  |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| Gener      | * * | *AES Gener  S.A.*                                                                                                                             |   | Chilean generation  company that competes with the Company in Chile, Argentina, Brazil and  Colombia.                                                                     |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| GNLQ       | * * | *Gas Natural Quintero S.A.*                                                                                                                   |   | Company created to  develop, build, finance, own and operate a LNG regasification facility at  Quintero Bay (Chile) in which LNG will be unloaded, stored and regasified. |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| IFRS       | * * | *International  Financial Reporting Standards*                                                                                                |   | Accounting standards  adopted by the Company on January 1, 2009.                                                                                                |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| IMV        | * * | *Inmobiliaria  Manso de Velasco Ltda.*                                                                                                        |   | Enersis’ wholly-owned subsidiary  engaged in the real estate business.                                                                                               |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| LNG        | * * | *Liquefied  Natural Gas.*                                                                                                                     |   |                                                                                                                                                                      |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| MEM        | * * | *Mercado  Eléctrico Mayorista*                                                                                                           |   | Wholesale Electricity  Market in Argentina.                                                                                                                               |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| MME        | * * | *Ministério de Minas e Energia*                                                                                                          |   | Ministry of Mines and  Energy of Brazil.                                                                                                                                  |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| NIS        | * * | *Sistema  Interconectado Nacional*                                                                                                            |   | National interconnected  electric system. There are such systems in Chile, Argentina, Brazil and  Colombia.                                                               |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| ONS        | * * | *Operador Nacional do Sistema Elétrico*                                                                                                  |   | Electric System  National Operator. Brazilian non-profit private entity responsible for the  planning and coordination of operations in interconnected systems.           |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| Osinergmin | * * | *Organismo  Supervisor de la Inversión en Energía y Minería*                                                                   |   | Energy and Mining  Investment Supervisor Authority, the Peruvian regulatory electricity authority.                                                                        |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| Pangue     | * * | *Empresa  Eléctrica Pangue S.A.*                                                                                                         |   | Chilean electricity  company, owner of the Pangue power station. Pangue is an Endesa Chile  subsidiary.                                                                   |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| Pehuenche  | * * | *Empresa  Eléctrica Pehuenche S.A.*                                                                                                      |   | Chilean electricity  company, owner of three power stations in the Maule river basin. Pehuenche is  an Endesa Chile subsidiary.                                           |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| San Isidro | * * | *Compañía Eléctrica San Isidro S.A.*                                                                                           |   | Chilean electricity  company, owner of a thermal power station. San Isidro is wholly-owned by  Endesa Chile.                                                              |
|       | * * | * *                                                                                                                                      |   |                                                                                                                                                                      |
| SEF        | * * | *Superintendencia de Electricidad y Combustible*                                                                                              |   | Governmental entity in  charge of supervising the Chilean electricity industry.                                                                                           |

 

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| SEIN   | * * | *Sistema  Eléctrico Interconectado Nacional*  |   | Peruvian interconnected  electric system.                                                                      |
|--------|----------|----------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|
|   | * * | * *                                           |   |                                                                                                           |
| SIC    | * * | *Sistema  Interconectado Central*                  |   | Chilean central  interconnected electric system covering all of Chile except the north and the  extreme south. |
|   | * * | * *                                           |   |                                                                                                           |
| SING   | * * | *Sistema  Interconectado del Norte Grande*         |   | Electric interconnected  system operating in northern Chile.                                                   |
|   | * * | * *                                           |   |                                                                                                           |
| SVS    | * * | *Superintendencia de Valores y Seguros*            |   | Chilean authority in  charge of supervising public companies, securities and the insurance  business.          |
|   | * * | * *                                           |   |                                                                                                           |
| TESA   | * * | *Transportadora del Energía de Mercosur S.A.* |   | Endesa Brasil’s  transmission company subsidiary with operations in Argentina.                            |
|   | * * | * *                                           |   |                                                                                                           |
| UF     | * * | *Unidad  de Fomento*                               |   | Chilean  inflation-indexed, peso denominated monetary unit.                                                    |
|   | * * | * *                                           |   |                                                                                                           |
| UTA    | * * | *Unidad  Tributaria Anual*                         |   | Chilean annual tax  unit. One UTA equals 12 UTM.                                                               |
|   | * * | * *                                           |   |                                                                                                           |
| UTM    | * * | *Unidad  Tributaria Mensual*                       |   | Chilean monthly tax  unit used to define fines, among other purposes.                                          |
|   | * * | * *                                           |   |                                                                                                           |
| VAD    | * * | *Valor Agregado de Distribución*              |   | Value added from  distribution of electricity.                                                                 |
|   | * * | * *                                           |   |                                                                                                           |
| VNR    | * * | *Valor  Nuevo de Reemplazo*                        |   | The net replacement  value of electricity assets.                                                              |

 

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** **

**INTRODUCTION**

** **

*As used in this Report on Form 20-F, firstperson personal pronouns such as “we,” “us” or “our” refer to Enersis S.A.  (“Enersis” or the “Company”) and ourconsolidated subsidiaries unless the context indicates otherwise.  Unless otherwise noted, our interest in ourprincipal subsidiaries and affiliates is expressed in terms of our economicinterest as of December 31, 2008.*

* *

Weare a Chilean company with subsidiaries engaged primarily in the generation,transmission and distribution of electricity in Chile, Argentina, Brazil,Colombia and Peru.  As of the date ofthis Report, we own 60.0% of Empresa Nacional de Electricidad S.A. (“EndesaChile”) and 99.1% of Chilectra S.A.  Asof December 31, 2008 Endesa, S.A. (“Endesa Spain”), a Spanishelectricity generation and distribution company, owned 60.6% of Enersis.

 

**Financial Information**

** **

Inthis Report on Form 20-F, unless otherwise specified, references to “dollars”or “$” are to dollars of the United States of America; references to “pesos” or“Ch$” are to Chilean pesos, the legal currency of Chile; references to “Ar$” or“Argentine pesos” are to the legal currency of Argentina; references to “R$” or“reais” are to the Brazilian real, the legal currency of Brazil; references to “soles”are to soles, the legal currency of Peru; references to “CPs” or Colombianpesos are to the legal currency of Colombia; references to “€” or “Euros” areto the legal currency of the European Union; and references to “UF” are to *Unidades de Fomento*.

 

The*Unidad de Fomento* is a Chileaninflation-indexed, peso-denominated monetary unit.  The UF rate is set daily in advance based onchanges in the previous month’s inflation rate. As of December 31, 2008, UF 1 was equivalent to Ch$21,452.57.  The dollar equivalent of UF 1was $ 33.71 at December 31, 2008, using the Observed Exchange Rate,reported by the *Banco Central de Chile*(the “Chilean Central Bank” or the “Central Bank”) as of December 31, 2008,of Ch$ 636.45 per $ 1.00.  As of May 29,2009, UF 1 was equivalent to Ch$ 20,992.00.  The dollar equivalent of UF 1 was $ 37.45 asof May 29, 2009, using the Observed Exchange Rate reported by the CentralBank of Ch$ 560.58 per $ 1.00.

 

Ouraudited consolidated financial statements and, unless otherwise indicated,other financial information concerning us and our subsidiaries included in thisReport are presented in constant pesos in conformity with Chilean generallyaccepted accounting principles (“Chilean GAAP”) and the rules of the *Superintendencia de Valores y Seguros*, orSVS.  Data expressed in pesos for allperiods in the Company’s audited consolidated financial statements for thethree fiscal years ended December 31, 2008 are expressed in constantpesos as of December 31, 2008 (see note 2(c) to our consolidatedfinancial statements).  For Chileanaccounting purposes, inflation adjustments are calculated based on a “one-monthlag” convention using an inflation adjustment factor based on the *Indice de Precios al Consumidor* (Chileanconsumer price index, or “Chilean CPI”). The Chilean CPI is published monthly by Chile’s *Instituto Nacional de Estadísticas* (the “NationalBureau of Statistics”).  For example, theinflation adjustment applicable for the 2008 calendar year is the percentagechange between the November 2007 Chilean CPI and the November 2008Chilean CPI, which was 8.9%. On the other hand, economic inflation for 2008 isbased on the CPI change between December 31, 2007 and 2008, which amountedto 7.1%, and was lower than the figure used in accordance with accountingnorms.  Chilean GAAP differs in certainimportant respects from accounting principles generally accepted in the UnitedStates (“U.S. GAAP”).  See note 36 to ourconsolidated financial statements for a description of the principaldifferences between Chilean GAAP and U.S. GAAP, as they relate to us, and forreconciliation to U.S. GAAP of stockholders’ equity and net income as of andfor the three years in the period ended December 31, 2008.

 

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Under Chilean GAAP, we consolidate the results fromoperations of a company defined as a “subsidiary” under Law No.18,046 (the “ChileanCompanies Act”).  In order to consolidatea company, we must generally satisfy one of two criteria:

 

·                  control, directly or indirectly, morethan a 50% voting interest in such company; or

 

·                  nominate or have the power to nominate amajority of the Board of Directors of such company if we control 50% or less ofthe voting interest of that company.

 

As of December 31, 2008,we consolidated**Endesa Chile,Chilectra, *Inversiones Distrilima S.A.*(which in turn consolidated *Empresa deDistribución Eléctrica de Lima Norte S.A.A.,* or Edelnor), *Empresa Distribuidora Sur S.A.*, or Edesur,*Inmobiliaria Manso de Velasco Ltda.*,or IMV, *Synapsis Soluciones y Servicios ITLtda.*, or Synapsis, *CompañíaAmericana de Multiservicios Ltda.*, or CAM, and *Codensa S.A. E.S.P.*, or Codensa.  Through *Endesa Brasil S.A.*, or**EndesaBrasil, we consolidated*Ampla Energia eServiços S.A.*, or Ampla, *Investluz*(which in turn consolidated *CompanhiaEnergética do Ceará S.A.*, or Coelce), *Central Geradora Termelétrica Fortaleza S.A.*,**or Endesa Fortaleza*, Centrais Elétricas**Cachoeira Dourada S.A.*, or CachoeiraDourada, and *Companhia de InterconexãoEnergética S.A.*,**or**CIEN (which in turn consolidated *Compañíade Transmisión del Mercosur*,or CTM, and *Transportadora del Energía deMercosur S.A.*, orTESA).

 

EndesaChile, in turn, consolidated all of its operating Chilean subsidiaries.  In Argentina, Endesa Chileconsolidated *Central Hidroeléctrica ElChocón S.A.*, or El Chocón, and *EndesaCostanera S.A.*, or EndesaCostanera.  In Colombia, Endesa Chile consolidated *Emgesa S.A. E.S.P.*, or Emgesa.  Endesa Chile also consolidated *Edegel S.A.A.*, or Edegel, in Peru.

 

Forthe convenience of the reader, this Report contains translations of certainpeso amounts into dollars at specified rates. Unless otherwise indicated, the dollar equivalent for information inpesos is based on the Observed Exchange Rate, as defined in “Item 3.  Key Information — A. Selected Financial Data —Exchange Rates” at December 31, 2008. The Federal Reserve Bank of New York does not report a noon buying ratefor pesos.  No representation is madethat the peso or dollar amounts shown in this Report could have been or couldbe converted into dollars or pesos, as the case may be, at such rate or at anyother rate (See “Item 3.  Key Information— A. Selected Financial Data — Exchange Rates”).

 

**Technical Terms**

** **

Referencesto “GW” and “GWh” are to gigawatts and gigawatts hours, respectively;references to “MW” and “MWh” are to megawatts and megawatt hours, respectively;references to “kW” and “kWh” are to kilowatts and kilowatt hours, respectively;and references to “kV” are to kilovolts. Unless otherwise indicated, statistics provided in this Report with respectto electricity generation facilities are expressed in MW, in the case of theinstalled capacity of such facilities. One GW equals 1,000 MW, and one MW equals 1,000 kW.

 

Statisticsrelating to aggregate annual electricity production are expressed in GWh andbased on a year of 8,760 hours, except for 2008, a leap year, based on8,784 hours.  Statistics relating toinstalled capacity and production of the electricity industry do not includeelectricity of self-generators. Statistics relating to our production do not include electricityconsumed by us from our generators.

 

Energylosses during transmission are calculated by subtracting the number of GWh ofenergy sold from the number of GWh of energy purchased and generated (thatexcludes own energy consumption and losses of the power plant), within a givenperiod.

 

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**Calculation of EconomicInterest**

** **

Referencesare made in this Report to the “economic interest” of Enersis in itssubsidiaries or affiliates.  Incircumstances where we do not directly own an interest in a subsidiary oraffiliate, our economic interest in such ultimate subsidiary or affiliate iscalculated by multiplying the percentage economic interest in a directly heldsubsidiary or affiliate by the percentage economic interest of any entity inthe ownership chain of such subsidiary or affiliate.  For example, if we own 60% of a directly heldsubsidiary and that subsidiary owns 40% of an affiliate, our economic interestin such affiliate would be 24%.

 

**Forward-LookingStatements**

** **

ThisReport contains statements that are or may constitute forward-lookingstatements.  These statements appearthroughout this Report and include statements regarding our intent, belief orcurrent expectations, including but not limited to any statements concerning:

 

·                  our capital investment program;

 

·                  trends affecting our financial conditionor results from operations;

 

·                  our dividend policy;

 

·                  the future impact of competition andregulation;

 

·                  political and economic conditions in thecountries in which we or our related companies operate or may operate in thefuture;

 

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

 

·                  other statements contained orincorporated by reference in this Report regarding matters that are nothistorical facts.

 

Becausesuch statements are subject to risks and uncertainties, actual results maydiffer materially from those expressed or implied by such forward-lookingstatements.  Factors that could causeactual results to differ materially include, but are not limited to:

 

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

 

·                  our ability to implement proposed capitalexpenditures, including our ability to arrange financing where required;

 

·                  the nature and extent of futurecompetition in our principal markets;

 

·                  political, economic and demographicdevelopments in the emerging market countries of South America where we conductour business; and

 

·                  the factors discussed below under “RiskFactors”.

 

Youshould not place undue reliance on such statements, which speak only as of thedate that they were made.  Ourindependent public accountants have not examined or compiled theforward-looking statements, 

 

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and, accordingly, do not provide any assurance withrespect to such statements.  You shouldconsider these cautionary statements together with any written or oralforward-looking statements that we may issue in the future.  We do not undertake any obligation to releasepublicly any revisions to forward-looking statements contained in this Reportto reflect later events or circumstances or to reflect the occurrence ofunanticipated events.

 

Forall these forward-looking statements, we claim the protection of the safeharbor for forward-looking statements contained in the Private SecuritiesLitigation Reform Act of 1995.

 

**PART I**

** **

**Item 1.   Identity of Directors, Senior Management andAdvisers**

** **

Notapplicable

 

**Item 2.   Offer Statistics and Expected Timetable**

** **

Notapplicable

 

**Item 3.   Key Information**

** **

**A.            SelectedFinancial Data.**

** **

Thefollowing summary of consolidated financial data should be read in conjunctionwith, and is qualified in its entirety by reference to, our auditedconsolidated financial statements, included in this Report.  Our audited consolidated financial statementsare prepared in accordance with Chilean GAAP and the rules of the SVS,which differ in certain important respects from U.S. GAAP.  Note 37 to our audited consolidated financialstatements provides a description of the principal differences between ChileanGAAP and U.S. GAAP and a reconciliation to U.S. GAAP of net income andshareholders’ equity for the periods indicated therein.  Financial data as of and for each of the fiveyears ended December 31, 2008 in the following table have beenrestated in constant pesos as of December 31, 2008.

 

Ingeneral, amounts are in millions except for ratios, operating data, shares andADS data.  For the convenience of thereader, all data presented in dollars in the following summary, as of and forthe year ended December 31, 2008, are converted at the ObservedExchange Rate for December 31, 2008 of Ch$ 636.45 per$ 1.00.  No representation is madethat the peso or dollar amounts shown in this Report could have been or couldbe converted into dollars or pesos, at such rate or at any other rate.  For more information concerning historicalexchange rates, see “Exchange Rates” below.

 

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Theinformation detailed in the following table includes changes in certainaccounting policies for the five years ended as of December 31, whichaffect the comparability of the data presented below.  See Note 3 to our consolidated financialstatements for a description of changes in our accounting policies.

 
| ** **                                                                                       | ** **   | **As of or for the year ended December 31,**             | ** **   |
|--------------------------------------------------------------------------------------------------|--------------|---------------------------------------------------------------|--------------|
| ** **                                                                                       | ** **   | **2004**                                                      | ** **   | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2008  (1)** | ** ** |
| ** **                                                                                       | *** *** | **(Constant Ch$ Millions as of December 31, 2008,** | *** *** | **Millions** | *** *** |
| ** **                                                                                       | *** *** | **Except Shares and ADS data)**                               | *** *** | **of $** | *** *** |
| **CONSOLIDATED  INCOME STATEMENT DATA**                                                          |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| ** **                                                                                       |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| **Chilean  GAAP**                                                                                |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| Revenues from  Operations                                                                        |         | 3,378,064                                                     |         | 3,848,031 |   | 4,526,458 |   | 4,915,621 |   | 6,650,287 |   | 10,449 |   |
| Cost of Sales                                                                                    |         | (2,350,331                                                    | )            | (2,613,073 | ) | (3,030,346 | ) | (3,255,835 | ) | (4,305,904 | ) | (6,766 | ) |
| Administrative  and Selling Expenses                                                             |         | (218,731                                                      | )            | (265,684 | ) | (263,023 | ) | (291,029 | ) | (365,586 | ) | (574 | ) |
|                                                                                             |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| **Operating  Income**                                                                            | ** **   | **809,002**                                                   | ** **   | **969,274** | ** ** | **1,233,089** | ** ** | **1,368,757** | ** ** | **1,978,797** | ** ** | **3,109** | ** ** |
| Equity in Income  of Related Companies                                                           |         | 38,532                                                        |         | 8,055 |   | 5,894 |   | (59,635 | ) | (2,371 | ) | (4 | ) |
| Goodwill  Amortization                                                                           |         | (65,816                                                       | )            | (65,901 | ) | (65,389 | ) | (65,138 | ) | (65,496 | ) | (103 | ) |
| Interest  (Expense), Net                                                                         |         | (356,182                                                      | )            | (315,996 | ) | (306,029 | ) | (318,211 | ) | (319,339 | ) | (502 | ) |
| Price Level  Adjustment                                                                          |         | 16,863                                                        |         | (13,359 | ) | 7,655 |   | (4,375 | ) | (7,823 | ) | (12 | ) |
| Other non  Operating Income (loss), net                                                          |         | (113,877                                                      | )            | (108,954 | ) | (120,976 | ) | (162,684 | ) | 128,901 |   | 203 |   |
|                                                                                             |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| **Income  (loss) before Income Taxes, Minority Interest and Amortization of Negative  Goodwill** | ** **   | **328,522**                                                   | ** **   | **473,119** | ** ** | **754,244** | ** ** | **758,714** | ** ** | **1,712,669** | ** ** | **2,691** | ** ** |
| Income taxes                                                                                     |         | (169,786                                                      | )            | (207,982 | ) | (111,358 | ) | (275,678 | ) | (450,974 | ) | (709 | ) |
| Item  extraordinary                                                                              |         | —                                                        |         | — |   | — |   | — |   | — |   | — |   |
| Minority  Interest                                                                               |         | (125,084                                                      | )            | (202,422 | ) | (315,538 | ) | (282,710 | ) | (697,031 | ) | (1,095 | ) |
| Amortization of  Negative Goodwill                                                               |         | 21,164                                                        |         | 18,505 |   | 7,108 |   | 4,815 |   | 6,219 |   | 10 |   |
|                                                                                             |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| **Net  Income**                                                                                  | ** **   | **54,816**                                                    | ** **   | **81,220** | ** ** | **334,456** | ** ** | **205,141** | ** ** | **570,883** | ** ** | **897** | ** ** |
| Net Income  (loss) per Share                                                                     |         | 1.68                                                          |         | 2.49 |   | 10.24 |   | 6.28 |   | 17.48 |   | 0.0275 |   |
| Net Income  (loss) per ADS                                                                       |         | 83.94                                                         |         | 124.38 |   | 512.17 |   | 314.14 |   | 874.22 |   | 1.3736 |   |
|                                                                                             |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| **U.S.  GAAP (2)**                                                                               |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
|                                                                                             |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| Operating Income                                                                                 |         | 822,023                                                       |         | 984,996 |   | 1,191,606 |   | 1,107,738 |   | 1,890,919 |   | 2,971 |   |
| Equity in Income  of Related Companies                                                           |         | 38,533                                                        |         | (31,504 | ) | 11,122 |   | (57,303 | ) | 12,278 |   | 19 |   |
| Income taxes                                                                                     |         | (153,368                                                      | )            | (217,070 | ) | (119,165 | ) | (272,702 | ) | (413,869 | ) | (650 | ) |
| Net Income  (loss) from continuing operations                                                    |         | 187,765                                                       |         | 146,102 |   | 423,567 |   | 204,790 |   | 619,426 |   | 973 |   |
|                                                                                             |         |                                                          |         |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from discontinued operations net of tax and minority interest                     |         | —                                                        |         | — |   | — |   | — |   | — |   | — |   |
| Net Income  (loss)                                                                               |         | 187,765                                                       |         | 146,102 |   | 423,567 |   | 204,790 |   | 619,426 |   | 973 |   |
| Net Income  (loss) from continuing operations per Share                                          |         | 5.75                                                          |         | 4.47 |   | 12.97 |   | 6.27 |   | 18.97 |   | 0.03 |   |
| Net Income  (loss) from continuing operations per ADS                                            |         | 287.53                                                        |         | 223.73 |   | 648.62 |   | 313.60 |   | 948.55 |   | 1.49 |   |

 

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| Net Income  (loss) per Share                      |   | 5.75       |   | 4.47       |   | 12.97      |   | 6.27       |   | 18.97      |   | 0.03   |   |
|---------------------------------------------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|------------|--------|--------|--------|
| Net Income  (loss) per ADS                        |   | 287.53     |   | 223.73     |   | 648.62     |   | 313.60     |   | 948.55     |   | 1.49   |   |
| Cash Dividends  per share                         |   | —     |   | 0.51       |   | 2.49       |   | 6.23       |   | 5.19       |   | 0.01   |   |
| Cash Dividends  per ADS                           |   | —     |   | 25.50      |   | 124.50     |   | 311.50     |   | 259.50     |   | 0.41   |   |
| Capital stock                                     |   | 3,026,197  |   | 3,026,197  |   | 3,026,197  |   | 3,026,197  |   | 3,026,197  |   | 4,755  |   |
| Number of shares  of common stock (thousands)     |   | 32,651,166 |   | 32,651,166 |   | 32,651,166 |   | 32,651,166 |   | 32,651,166 |   |   |   |
| Number de  American Depository Shares (thousands) |   | 66,345     |   | 61,384     |   | 55,826     |   | 57,803     |   | 71,267     |   |   |   |
|                                              |   |       |   |       |   |       |   |       |   |       |   |   |   |
| **CONSOLIDATED  BALANCE SHEET DATA**              |   |       |   |       |   |       |   |       |   |       |   |   |   |
|                                              |   |       |   |       |   |       |   |       |   |       |   |   |   |
| **CHILEAN  GAAP**                                 |   |       |   |       |   |       |   |       |   |       |   |   |   |
|                                              |   |       |   |       |   |       |   |       |   |       |   |   |   |
| Total Assets                                      |   | 12,978,732 |   | 12,258,435 |   | 12,941,789 |   | 12,455,728 |   | 14,399,628 |   | 22,625 |   |
| Long Term  Liabilities                            |   | 4,709,412  |   | 4,036,994  |   | 4,587,995  |   | 4,424,083  |   | 4,501,485  |   | 7,073  |   |
| Minority  Interest                                |   | 3,866,060  |   | 3,343,660  |   | 3,356,668  |   | 2,985,784  |   | 3,677,146  |   | 5,778  |   |
| Stockholders’  Equity                        |   | 3,166,517  |   | 3,099,853  |   | 3,356,574  |   | 3,161,596  |   | 3,697,213  |   | 5,809  |   |
|                                              |   |       |   |       |   |       |   |       |   |       |   |   |   |
| **U.S.  GAAP (2)**                                |   |       |   |       |   |       |   |       |   |       |   |   |   |
|                                              |   |       |   |       |   |       |   |       |   |       |   |   |   |
| Total Assets                                      |   | 13,060,309 |   | 12,399,840 |   | 13,124,247 |   | 12,786,364 |   | 15,005,798 |   | 23,577 |   |
| Long Term  Liabilities                            |   | 4,941,689  |   | 4,245,064  |   | 4,808,899  |   | 4,720,329  |   | 5,082,648  |   | 7,986  |   |
| Minority  Interest                                |   | 3,589,123  |   | 3,104,671  |   | 3,133,135  |   | 2,688,822  |   | 3,325,806  |   | 5,226  |   |
| Stockholders’  Equity                        |   | 3,259,290  |   | 3,274,121  |   | 3,548,896  |   | 3,438,662  |   | 3,944,610  |   | 6,198  |   |
|                                              |   |       |   |       |   |       |   |       |   |       |   |   |   |
| **Other  Consolidated Financial Data**            |   |       |   |       |   |       |   |       |   |       |   |   |   |
| **CHILEAN  GAAP**                                 |   |       |   |       |   |       |   |       |   |       |   |   |   |
| Capital  Expenditures                             |   | 328,998    |   | 379,082    |   | 605,574    |   | 646,926    |   | 826,765    |   | 1,299  |   |
| Depreciation and  amortization                    |   | 477,897    |   | 448,923    |   | 494,122    |   | 463,290    |   | 566,127    |   | 890    |   |
|                                              |   |       |   |       |   |       |   |       |   |       |   |   |   |
| **U.S.  GAAP (2)**                                |   |       |   |       |   |       |   |       |   |       |   |   |   |
| Capital  Expenditures (3)                         |   | 328,998    |   | 379,082    |   | 605,574    |   | 646,926    |   | 826,765    |   | 1,299  |   |
| Depreciation and  amortization                    |   | 453,721    |   | 430,012    |   | 467,148    |   | 443,827    |   | 547,359    |   | 860    |   |

 

----

(1)              Solely for the convenience ofthe reader, peso amounts have been translated into dollars at the rate ofCh$ 636.45 per dollar, the Observed Exchange Rate as of December 31, 2008.

(2)              Does not includegoodwill and negative goodwill amortization.

(3)              Capex figuresrepresent effective payments for each year.

 

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| ** **                            | ** ** | **As of and for the year ended December 31,** | ** ** |
|---------------------------------------|------------|----------------------------------------------------|------------|
| ** **                            | ** ** | **2004**                                           | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** |
| **OPERATING  DATA OF SUBSIDIARIES**   | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                            | ** ** | ** **                                         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Chilectra  (Chile)*                  |       |                                               |       |   |   |   |   |   |   |   |   |
| Electricity Sold  (GWh)               |       | 11,317                                             |       | 11,851 |   | 12,377 |   | 12,923 |   | 12,535 |   |
| Number of  Customers (thousands)      |       | 1,371                                              |       | 1,404 |   | 1,437 |   | 1,483 |   | 1,534 |   |
| Total Energy  Losses (%)(1)           |       | 5.2                                                | %          | 5.5 | % | 5.4 | % | 5.9 | % | 5.9 | % |
|                                  |       |                                               |       |   |   |   |   |   |   |   |   |
| *Edesur(Argentina)*                   |       |                                               |       |   |   |   |   |   |   |   |   |
| Electricity Sold  (GWh)               |       | 13,322                                             |       | 14,018 |   | 14,837 |   | 15,833 |   | 16,160 |   |
| Number of  Customers (thousands)      |       | 2,139                                              |       | 2,165 |   | 2,196 |   | 2,228 |   | 2,262 |   |
| Total Energy  Losses (%)(1)           |       | 11.8                                               | %          | 11.4 | % | 10.5 | % | 10.7 | % | 10.6 | % |
|                                  |       |                                               |       |   |   |   |   |   |   |   |   |
| *Ampla(Brazil)*                       |       |                                               |       |   |   |   |   |   |   |   |   |
| Electricity Sold  (GWh)               |       | 7,628                                              |       | 8,174 |   | 8,668 |   | 8,985 |   | 9,119 |   |
| Number of  Customers (thousands)      |       | 2,115                                              |       | 2,216 |   | 2,316 |   | 2,379 |   | 2,466 |   |
| Total Energy  Losses (%)(1)           |       | 22.8                                               | %          | 22.4 | % | 21.9 | % | 21.4 | % | 20.2 | % |
|                                  |       |                                               |       |   |   |   |   |   |   |   |   |
| *Coelce(Brazil)*                      |       |                                               |       |   |   |   |   |   |   |   |   |
| Electricity Sold  (GWh)               |       | 6,141                                              |       | 6,580 |   | 6,769 |   | 7,227 |   | 7,571 |   |
| Number of  Customers (thousands)      |       | 2,334                                              |       | 2,438 |   | 2,543 |   | 2,689 |   | 2,842 |   |
| Total Energy  Losses (%)(1)           |       | 13.9                                               | %          | 14.0 | % | 13.0 | % | 12.5 | % | 11.7 | % |
|                                  |       |                                               |       |   |   |   |   |   |   |   |   |
| *Codensa(Colombia)*                   |       |                                               |       |   |   |   |   |   |   |   |   |
| Electricity Sold  (GWh)               |       | 9,656                                              |       | 10,094 |   | 10,755 |   | 11,441 |   | 11,822 |   |
| Number of  Customers (thousands)      |       | 2,015                                              |       | 2,073 |   | 2,138 |   | 2,209 |   | 2,285 |   |
| Total Energy  Losses (%)(1)           |       | 9.7                                                | %          | 9.4 | % | 8.9 | % | 8.7 | % | 8.1 | % |
|                                  |       |                                               |       |   |   |   |   |   |   |   |   |
| *Edelnor(Peru)*                       |       |                                               |       |   |   |   |   |   |   |   |   |
| Electricity Sold  (GWh)               |       | 4,250                                              |       | 4,530 |   | 4,874 |   | 5,201 |   | 5,599 |   |
| Number of  Customers (thousands)      |       | 912                                                |       | 925 |   | 952 |   | 986 |   | 1,028 |   |
| Total Energy  Losses (%)(1)           |       | 8.4                                                | %          | 8.6 | % | 8.2 | % | 8.1 | % | 8.2 | % |
|                                  |       |                                               |       |   |   |   |   |   |   |   |   |
| *Endesa Chile*                   |       |                                               |       |   |   |   |   |   |   |   |   |
| Installed  capacity in Chile (MW)     |       | 4,477                                              |       | 4,477 |   | 4,477 |   | 4,779 |   | 4,893 |   |
| Installed  capacity in Argentina (MW) |       | 3,623                                              |       | 3,623 |   | 3,639 |   | 3,644 |   | 3,652 |   |
| Installed  capacity in Colombia (MW)  |       | 2,609                                              |       | 2,657 |   | 2,779 |   | 2,829 |   | 2,895 |   |
| Installed  capacity in Brazil (MW)    |       | 658                                                |       | — |   | N.A. |   | N.A. |   | N.A. |   |
| Installed  capacity in Peru (MW)      |       | 967                                                |       | 969 |   | 1,426 |   | 1,468 |   | 1,467 |   |
| Production in  Chile (GWh)(3)         |       | 16,797                                             |       | 18,764 |   | 19,973 |   | 18,773 |   | 19,807 |   |
| Production in  Argentina (GWh)(3)     |       | 11,290                                             |       | 12,333 |   | 13,750 |   | 12,117 |   | 10,480 |   |
| Production in  Colombia (GWh)(3)      |       | 11,881                                             |       | 11,864 |   | 12,564 |   | 11,942 |   | 12,905 |   |
| Production in  Brazil (GWh)(3)(4)     |       | 3,262                                              |       | 2,645 |   | — |   | — |   | — |   |
| Production in  Peru (GWh)(3)          |       | 4,136                                              |       | 4,516 |   | 6,662 |   | 7,654 |   | 8,102 |   |
|                                  |       |                                               |       |   |   |   |   |   |   |   |   |
| *Endesa Brasil*                  |       |                                               |       |   |   |   |   |   |   |   |   |
| Installed  capacity in Brazil (MW)(2) |       | —                                             |       | 1,039 |   | 980 |   | 987 |   | 987 |   |
| Production in  Brazil (GWh)(3)        |       | —                                             |       | 3,954 |   | 4,489 |   | 3,954 |   | 3,379 |   |

 

----

(1)              Energy losses are calculatedby (a) subtracting the number of GWh of energy sold from theaggregate GWh of energy purchased and self-generated within a period and (b) calculatingthe percentage that the resulting sum bears to the aggregate number of GWh ofenergy purchased and self-generated within the same period.  Energy losses arise from illegally tappedenergy as well as technical failures.

 

(2)              As a result of the creationof Endesa Brasil, Cachoeira Dourada became a subsidiary of Enersis as of October 2005.  As of the same date, Enersis also started toconsolidate Endesa Fortaleza.  Ampla hadgeneration facilities which were sold in 2006.

 

(3)              Energy production is definedas total generation minus energy consumption and technical losses within ourown power plants.

 

(4)              Endesa Chile consolidatedCachoeira Dourada’s generation only through September 2005.

 

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** **

**Exchange Rates**

** **

Fluctuations in the exchange rate between the peso andthe dollar will affect the dollar equivalent of the peso price of our shares ofcommon stock, without par value (the “Shares” or the “Common Stock”), on the *Bolsa de Comercio de Santiago* (the “SantiagoStock Exchange”), the *Bolsa Electrónica deChile* (the “Chilean Electronic Exchange”) and the *Bolsa de Corredores de Valparaíso* (the “ValparaísoStock Exchange”) (collectively, the “Chilean Exchanges”).  These exchange rate fluctuations will likelyaffect the price of the Company’s American Depositary Shares (“ADSs”) and theconversion of cash dividends relating to the Shares represented by ADSs frompesos to dollars.  In addition, to theextent financial liabilities of the Company are denominated in foreigncurrencies, exchange rate fluctuations may have a significant impact onearnings.

 

The *Ley Orgánicadel Banco Central de Chile* 18,840 (the “Central Bank Act”), providesthat the Central Bank may require that certain purchases and sales of foreigncurrency be carried out in the *MercadoCambiario Formal* (the “Formal Exchange Market”), a market formed bybanks and other entities explicitly authorized by the Central Bank.  Purchases and sales of foreign currency,which can take place outside the Formal Exchange Market, can be carried out inthe *Mercado Cambiario Informal*(the “Informal Exchange Market”), which is a recognized currency market inChile.  Free market forces drive both theFormal and Informal Exchange Markets. Foreign currency for payments and distributions with respect to the ADSsmay be purchased in either the Formal or the Informal Exchange Market, but suchpayments and distributions must be remitted through the Formal ExchangeMarket.  The Central Bank publishes dailythe *dólar observado* (the “ObservedExchange Rate”), which is computed by taking the weighted average of theprevious business day’s transactions in the Formal Exchange Market.

 

Since 1993, the Observed Exchange Rate and theInformal Exchange Rate have typically been within less than 1% of eachother.  The Informal Exchange Rate meansthe average rate at which transactions are made in the Informal ExchangeMarket.  On December 31, 2008,the Informal Exchange Rate was Ch$ 638.50, or 0.3% higher than thepublished Observed Exchange Rate of Ch$ 636.45 per $ 1.00.  On May 29, 2009, the informal exchangerate was Ch$ 561.45 per $ 1.00, 0.16% higher than the Observed ExchangeRate corresponding to such date of Ch$ 560.58 per $ 1.00.  Unless otherwise indicated, amountstranslated to dollars were calculated based on the exchange rates in effect asof December 31, 2008.

 

The following table sets forth, for the periods anddates indicated, certain information concerning the Observed Exchange Ratereported by the Central Bank.

 
| ** ** | ** ** | **Observed Exchange Rate(1)  (Ch$ per $)** | ** ** |
|------------|------------|-------------------------------------------------|------------|
| **Year**   | ** ** | **Low**                                         | ** ** | **High** | ** ** | **Average(2)** | ** ** | **Period-  end** | ** ** |
| 2004       |       | 557.40                                          |       | 649.45 |   | 611.11 |   | 557.40 |   |
| 2005       |       | 509.70                                          |       | 592.75 |   | 558.06 |   | 512.50 |   |
| 2006       |       | 511.44                                          |       | 549.63 |   | 529.64 |   | 532.39 |   |
| 2007       |       | 493.14                                          |       | 548.67 |   | 521.06 |   | 496.89 |   |
| 2008       |       | 431.22                                          |       | 676.75 |   | 530.48 |   | 636.45 |   |

 
| ** **          | ** ** | **Monthly Observed Exchange Rate(1)  (Ch$ per $)** | ** ** |
|---------------------|------------|---------------------------------------------------------|------------|
| **Last six months** | ** ** | **Low**                                                 | ** ** | **High** | ** ** | **Average(2)** | ** ** | **Period-  end** | ** ** |
| 2008                |       |                                                    |       |   |   |   |   |   |   |
| December            |       | 625.59                                                  |       | 674.83 |   | — |   | 636.45 |   |

 

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| ** **          | ** ** | **Monthly Observed Exchange Rate(1)  (Ch$ per $)** | ** ** |
|---------------------|------------|---------------------------------------------------------|------------|
| **Last six months** | ** ** | **Low**                                                 | ** ** | **High** | ** ** | **Average(2)** | ** ** | **Period-  end** | ** ** |
| 2009                |       |                                                    |       |   |   |   |   |   |   |
| January             |       | 610.09                                                  |       | 643.87 |   | — |   | 617.10 |   |
| February            |       | 583.32                                                  |       | 623.87 |   | — |   | 599.04 |   |
| March               |       | 572.39                                                  |       | 614.85 |   | — |   | 583.26 |   |
| April               |       | 575.12                                                  |       | 601.04 |   | — |   | 580.10 |   |
| May                 |       | 558.95                                                  |       | 580.10 |   | — |   | 560.58 |   |

 

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*Source: Chilean Central Bank.*

(1)          Reflects pesos at historicalvalues rather than in constant pesos.

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

 

**B.            Capitalizationand indebtedness.**

** **

Not applicable.

** **

**C.            Reasonsfor the offer and use of proceeds.**

** **

Not applicable.

** **

**D.            Riskfactors.**

** **

***South Americaneconomic fluctuations are likely to affect our results from operations.***

*** ***

All of our operations are located in five SouthAmerican countries.  Accordingly, ourconsolidated revenues are sensitive to the performance of South Americaneconomies as a whole.  If local, regionalor worldwide economic trends adversely affect the economy of any of the fivecountries in which we have investments or operations, our financial condition andresults from operations could be affected adversely.

 

The South American financial and securities marketsare, to varying degrees, influenced by economic and market conditions in otheremerging market countries.  Althougheconomic conditions are different in each country, investor reaction todevelopments in one country may have a significant effect on the securities ofissuers in other countries, including Chile. Chilean financial and securities markets may be affected adversely byevents in other countries and such effects may affect the value of oursecurities.  Moreover, we havesignificant investments in relatively risky countries such as Argentina.  Generation and distribution of cash from suchsubsidiaries in these countries have proven to be volatile.

 

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***Certain SouthAmerican economies have been characterized by frequent and occasionally drasticintervention by governmental authorities, which may adversely affect ourbusiness.***

*** ***

***Governmentalauthorities have changed monetary, credit, tariff and other policies toinfluence the course of the economies of Argentina, Brazil, Colombia andPeru.  These governmental actionsintended to control inflation and affect other policies have often involvedwage, price and tariff rate controls as well as other interventionist measures,which in Argentina included freezing bank accounts and imposing capitalcontrols in 2001 and the nationalization of the private sector pension funds in2008. Changes in the policies of these governmental authorities with respect totariff rates, exchange controls, regulations and taxation could adverselyaffect our business and financial results, as could inflation, devaluation,social instability and other political, economic or diplomatic developments,including the response by governments in the region to thesecircumstances.  If governmental authoritiesintervene materially in any of the countries in which we operate, it couldcause our business to become less profitable, and our results from operationsmay be affected adversely.***

*** ***

***Theworldwide financial crisis will have a significant adverse effect on our accessto bank loans and, to a lesser degree, the capital markets and a prolongedrecession would likely affect our results of operations.***

*** ***

The worldwide credit crisis and its disruptive effecton the financial industry is likely to have an adverse impact on our ability toobtain new bank loans under the terms and conditions that have been availableto us until now.

 

Our ability to tap the capital markets in the fivecountries where we operate, as well as the international capital markets forother sources of liquidity, may also be diminished during the crisis, or suchfinancing may be available only at interest levels higher than those we haveexperienced until now, leading to an increase in interest expense and reducedcash flows.   Reduced liquidity could, inturn, affect our capital expenditures, our long-term investments andacquisitions, our growth prospects, as well as our dividend payout policy.

 

In addition, to the extent that the five countries inwhich we operate experience a prolonged recession, it is likely that ourcustomers will demand less electricity than in the past, which could affect ourresults of operations and financial condition adversely.  Furthermore, some of our customers mayexperience difficulties in paying their electricity bills, and an increase inuncollectible accounts would also affect our results adversely.

 

***We are subject to refinancing risk and to financialdebt covenants that could affect our liquidity.***

*** ***

As of December 31, 2008, our debt infinancial terms was $ 7,920 billion while, under accounting terms it totaled $7,419 billion.  These amounts differsince financial debt does not include accrued interests which accounting debtincludes, and considers other items that accounting debt does not include suchas leasings, derivatives’ spot effects and accounts payable.

 

Our financial debt had the following maturitytimetable:

 

·                  $ 1,833 million in 2009;

 

·                  $ 867 million in 2010;

 

·                  $ 2,362 million in the period 2011-2013; and

 

·                  $ 2,858 million thereafter.

 

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Of the $ 1,833 million of financial debt maturingin 2009:

 

·                  $ 868 million is in Chile;

 

·                  $ 135 million in Argentina;

 

·                  $ 358 million in Brazil;

 

·                  $ 308 million in Colombia; and

 

·                  $ 165 million in Peru.

 

Our debt agreements are subject to certain fairlystandard debt to EBITDA and debt to equity financial covenant ratios, amongothers.  They also contain commonaffirmative and negative covenants, as well as events of default, and in somecases, mandatory prepayment events.

 

A substantial portion of our indebtedness containscross payment default provisions.  In thecase of our Yankee Bond indentures, the cross payment default may bepotentially triggered by a default in any amount on our other debt, or on thatof any of our subsidiaries, as long as the principal on the debt giving rise tothe cross payment default exceeds $ 30 million. For our syndicated bank credit agreements under the laws of the State ofNew York, the materiality threshold for the principal on the debt potentiallygiving rise to the cross payment default increases to $ 50 million, and thereis an additional clause requiring that at least $ 50 million must be in defaultas well.  Furthermore, the bank debtfacilities do not apply to all subsidiaries, as is the case with the YankeeBonds.  In both the Yankee indentures andthe syndicated loan contracts, the cross default is not automatic; instead, acertain minimum quorum of debt holders need to formally requestacceleration.  Our local Chilean bonds,denominated in UF, on the other hand, have cross default clauses with muchhigher materiality thresholds than the ones detailed here.  Our non Chilean risk debt facilities normallycarry relatively low cross default materiality thresholds, in line with marketpractice in those countries.

 

In the event that any of our cross-default provisionsare triggered and our existing creditors demand immediate repayment, asignificant portion of our indebtedness could become due and payable.  For more information on covenants andrelevant provisions for these credit facilities, see “Item 5.  Operating and Financial Review and Prospects— B. Liquidity and Capital Resources”.

 

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

 

As of the date of this Report, Argentina is thecountry with the highest refinancing risk. As of December 31, 2008, the third-party financial debt of ourArgentine subsidiaries amounted to $ 400 million.  As a matter of policy for all of ourArgentine subsidiaries as long as fundamental issues concerning the electricitysector remain unresolved, we are rolling over most of our Argentine outstandingdebt.  If our creditors do not continueto accept rolling over debt principal when it becomes due, we may be unable torefinance such indebtedness on terms otherwise acceptable to us.

 

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***Since ourgeneration business depends heavily on hydrological conditions, droughtconditions may hurt our profitability.***

*** ***

Approximately 65% of ourconsolidated installed generation capacity is hydroelectric.  Accordingly, extreme hydrological conditionsaffect our business and may have a substantial influence over our results.

 

During periods of drought, thermal plants, such asours that use natural gas, fuel oil or coal as a fuel are dispatched morefrequently.  Our operating expensesincrease during these periods, and depending on the size of our commitments, wemay have to buy electricity from other generators in order to comply with ourcontractual supply obligations.  The costof these electricity purchases in the spot market may exceed the price at whichwe sell contracted electricity, thus producing losses from those contracts.

 

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

 

***Governmentalregulations may impose additional operating costs which may reduce our profits.***

*** ***

We are subject to extensive regulation of tariffs andother aspects of our business in the five countries in which we operate, andthese regulations may adversely affect our profitability.  In addition, changes in the regulatoryframework, including changes that if adopted would significantly affect ouroperations, are often submitted to the legislators and administrativeauthorities in the countries in which we operate and could have a materialadverse impact on our business.  Forinstance, in 2005 there was a change in Water Rights Law in Chile that requiresus to pay for all the unused water rights.

 

The Chilean government can impose electricityrationing during drought conditions or prolonged failures in powerfacilities.  If, during rationing, we areunable to generate enough electricity to comply with our contractualobligations, we may be forced to buy electricity in the pool market at the spotprice, since even a severe drought does not constitute a *force majeure* event.  The spot price may be significantly higherthan our costs to generate the electricity and can be as high as the “cost offailure” set by the National Energy Commission, or the CNE.  The “cost of failure” is determinedsemiannually by the CNE’s economic models as the highest cost of electricityduring periods of electricity deficit. If we are unable to buy enough electricity in the pool market to complywith all of our contractual obligations, then we would have to compensate ourregulated customers for the electricity we failed to provide at the rationed price.  If material rationing policies are imposed byregulatory authorities in Chile, our business, financial condition and resultsfrom operations may be affected adversely in a material way.

 

Similarly, if material rationing policies are imposedby any regulatory authority as a result of adverse hydrological conditions inthe other countries in which we operate, our business, financial condition andresults from operations may be affected adversely in a material way.  Rationing periods may occur in the future andconsequently, our generation subsidiaries may be required to pay regulatorypenalties if such subsidiaries fail to provide adequate service under suchconditions.

 

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***Regulatoryauthorities may impose fines on our subsidiaries.***

*** ***

In Chile, our electricity businesses may be subject toregulatory fines for any breach of current regulations, including energy supplyfailure.  Such fines may range from 1 *Unidad Tributaria Mensual*(“UTM”), or$ 59, to 10,000 *Unidades TributariasAnuales* (“UTA”), or $ 7.1 million, in each case using theUTM, UTA and foreign exchange rate as of December 31, 2008.  Any electricity company supervised by theChilean Superintendence of Electricity and Fuels, or SEF, may be subject tothese fines in cases where, in the opinion of the SEF, operational failuresthat affect the regular energy supply to the system are the fault of thecompany; for instance, when the coordination duty of the system agents is notfulfilled, even when it is not within the company’s control to prevent suchfailures.

 

Our generation and distribution subsidiaries may berequired to pay fines or to compensate customers if those subsidiaries areunable to deliver electricity to them even if such failure is due to forcesoutside of our control.

 

In 2003, the SEF imposed fines on some of our Chileangeneration subsidiaries in an aggregate amount of UTA 5,330, or$ 3.8 million, because of their failure to transmit energy in 2002.

 

In 2004, the SEF imposed fines on Chilectra and EndesaChile in the amount of UTA 1,830, or $ 1.3 million and UTA 2,030, or$ 1.4 million, respectively, due to a blackout that occurred in theMetropolitan Region in 2003.

 

In 2005, the SEF imposedfines of UTA 1,260, or $ 0.9 million, on Endesa Chile due to ablackout that occurred in the Metropolitan Region in 2003.

 

In February 17, 2009,the SEF imposed fines on Endesa Chile, Pehuenche and San Isidro for UTA 200,UTA 200 and UTA 100, respectively, or $ 0.3 million in total.  Also in 2009, the SEF fined Chilectra for UTA700, or $ 0.5 million, due to billing management procedures challenged byour customers.

 

We are currently appealing all these fines, butthese appeals may be unsuccessful.

 

***We depend in parton payments from our subsidiaries and affiliates to meet our paymentobligations.***

*** ***

We have no significant assets other than the stock ofour subsidiaries.  In order to pay ourobligations, we rely on cash from dividends, loans, interest payments, capitalreductions and other distributions from our subsidiaries and equity affiliates,as well as cash from proceeds of the issuance of new securities.  Our ability to pay our obligations willdepend on the receipt of distributions from our subsidiaries.  The ability of our subsidiaries and equityaffiliates to pay dividends, interest payments, loans and other distributionsto us is subject to legal constraints such as dividend restrictions, fiduciaryduties, contractual limitations and foreign exchange controls that may beimposed in any of the five countries where they operate.

 

Historically, we have been able to access the cashflows of our Chilean subsidiaries, but we have not been similarly able to accessat all times the cash flows of our non-Chilean operating subsidiaries due togovernment regulations, strategic considerations, economic conditions andcredit restrictions.

 

Our future results from operations outside Chile maycontinue to be subject to greater economic and political uncertainties thanwhat we have experienced in Chile, thereby reducing the likelihood that we willbe able to rely on cash flows from operations in those entities to repay ourdebt.

 

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*Dividend Limits and Other LegalRestrictions. *Some of our non-Chilean subsidiaries aresubject to legal reserve requirements and other restrictions on dividendpayments.  In addition, the ability ofany of our subsidiaries which are not wholly owned to distribute cash to us maybe limited by the fiduciary duties of the directors of such subsidiaries totheir minority shareholders.  As aconsequence of such duties, our subsidiaries could, under certaincircumstances, be prevented from distributing cash to us.

* *

*Contractual Constraints. *Distribution restrictions in our subsidiaries’contractual agreements include the following: prohibitions against dividend distributions by many companies in thecase of default, and in the case of *EmpresaEléctrica Pangue S.A.*, orPangue, one of our Chilean generation subsidiaries, if it is not incompliance with certain debt-to-equity ratio and debt coverage ratio requirements(in each case, as defined in Pangue’scredit agreements that mature in January 2010); and prohibitions againstdividend distributions, capital reductions, intercompany interest payments anddebt repayment by Ampla and Coelce in Brazil, and EndesaCostanera and El Chocón in Argentina, inthe case of default and if not in compliance with certain financial ratios.

* *

*Operating Results of OurSubsidiaries. *The ability of our subsidiaries andequity affiliates to pay dividends or make loan payments or other distributionsto us is limited by their operating results. To the extent that the cash requirements at any of our subsidiariesexceed available cash, such subsidiary will not be able to make cash availableto us.

* *

*Foreign Currency Controls.*  The ability of our non-Chilean subsidiariesand equity affiliates to pay dividends and make loan payments or otherdistributions to us may be subject to restrictions that may be imposed byCentral Banks or other governmental authorities in the various jurisdictions inwhich we operate.  For example, duringthe economic crisis of 2001, the Central Bank of Argentina imposed restrictionson the transfer of funds outside Argentina.

* *

***Foreign exchange risks may adversely affect our results, andthe dollar value of dividends payable to ADS holders***

*** ***

The South Americancurrencies in which we and our subsidiaries operate have been subject to largedevaluations and appreciations against the dollar and may be subject tosignificant fluctuations in the future.

 

Historically, a significantportion of our consolidated indebtedness has been denominated in dollars and,although a substantial portion of our revenues are linked to dollars, wegenerally have been and will continue to be materially exposed to fluctuationsof our local currencies against the dollar because of time lags and otherlimitations in the indexation of our tariffs to the dollar.

 

Because of this exposurethe cash generated by our subsidiaries can be diminished materially when thelocal currencies devalue against the dollar.  Future volatility in theexchange rate of the currencies in which we receive revenues or incurexpenditures, may affect our financial condition and results fromoperations.  For more information on the risks associated with foreignexchange rates, see “Item 11(a) and 11(b). Quantitative and QualitativeDisclosures About Market Risk.”

 

As of December 31, 2008,using financial instead of accounting conventions, Enersis’ total consolidatedfinancial debt was $ 7,920 million (net of currency hedging instruments). Of this amount $ 3,091 million, or 39%, was denominated in dollarsand $ 1,537 million in pesos.  In addition to the dollar and thepeso, our foreign currency denominated consolidated indebtedness included theequivalent of:

 

·                  $ 97 million in Argentine pesos;

·                  $ 1,352 million in Brazilian *reais*;

·                  $ 1,420 million in Colombian pesos; and

 

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·                  $ 423 million in soles.

 

for an aggregate of$ 3,292 million in currencies other than dollars or pesos.

 

For the twelve-monthperiod ended December 31, 2008, our operating revenues amounted to$ 11,566 million (before consolidation adjustments) of which:

 

·                  $ 744 million, or 6%, was denominated indollars; and

·                  $ 2,079 million, or 18%, was linked in someway to the dollar.

 

In the aggregate, 24% ofour operating revenues (before consolidation adjustments) was either in dollarsor tied to dollars through some form of indexation, while 17% were in pesos.

 

Revenues, beforeconsolidation adjustments, in other currencies for the twelve-month periodended December 31, 2008, included the equivalent of:

 

·                  $ 1,224 million in Argentine pesos;

·                  $ 2,970 million in Brazilian *reais*;

·                  $ 1,904 million in Colombian pesos; and

·                  $ 621 million in soles.

 

Despite the fact that wegenerate revenues and incur debt in these same currencies, we believe that weare subject to risk in terms of our foreign exchange exposure to these fourcurrencies.  The most material case is that of Argentina, where most ofour debt is denominated in dollars while our revenues are mostly in Argentinepesos.

 

Furthermore, trading in the shares of our common stockunderlying American Depositary Shares (ADSs) is conducted in pesos.  Ourdepositary bank will receive cash distributions that we make with respect tothe shares underlying the ADSs in pesos.  The depositary bank will convertsuch pesos to dollars at the then-prevailing exchange rate to make dividend andother distribution payments in respect of ADSs.  If the peso depreciatesagainst the dollar, the value of the ADSs and any dollar distributions ADSholders receive from the depositary bank will decrease.

 

***Construction ofnew facilities may be adversely affected by factors associated with theseprojects.***

*** ***

Factors that may adversely affect our ability to buildnew facilities include: delays in obtaining regulatory approvals, includingenvironmental permits;  shortages orincreases in the price of equipment, materials or labor; opposition by local orinternational political, environmental and ethnic groups; strikes; adversechanges in the political and regulatory environment in the five countries wherewe operate; adverse weather conditions, natural disasters, accidents or otherunforeseen events; and the inability to obtain financing at affordable rates.

 

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

*** ***

***We are involved in litigation proceedings.***

*** ***

We are currentlyinvolved in various litigation proceedings, which could result in unfavorabledecisions or financial penalties against us, and we will continue to be subjectto future litigation proceedings, which could have material adverseconsequences to our business.

 

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We are a party toa number of legal proceedings, some of which have been pending for severalyears.  Some of these claims may beresolved against us.  Our financialcondition or results from operations could be adversely affected in a materialway if certain of these material claims are resolved against us.  See Note 30 of our audited consolidatedfinancial statements.

*** ***

***The values of oursubsidiaries’ long-term energy supply contracts are subject to fluctuations inthe market prices of certain commodities.***

*** ***

We have economic exposure to fluctuations in themarket prices of certain commodities as a result of the long-term energy salescontracts we have entered into.  Oursubsidiaries have material obligations under long-term fixed-price electricitysales contracts, the values of which fluctuate with the market price ofelectricity.  In addition, we havematerial obligations as selling parties under long-term energy supply contractswith prices that vary in accordance with the market price of electricity, which,in turn, depend on water levels in reservoirs, the market prices of commoditiessuch as natural gas, oil, coal and other energy-related products, as well asthe dollar exchange rate. Changes in the market price of these commodities andin the dollar exchange rate do not always correlate with changes in the marketprice of electricity or with our cost of production of electricity.  Accordingly, there may be times when theprice paid to us under these contracts is less than our cost of production oracquisition of electricity.  We do notcarry out transactions in commodity derivative instruments to manage ourexposure to commodity price fluctuations. Under Chilean GAAP, our income statement does not reflect fluctuationsin the fair value of our long-term energy contracts, although we are requiredto do so under U.S. GAAP.  For furtherdiscussion, please refer to “Item 11(a) and 11(b) - Quantitative andQualitative Disclosures about Market Risk - Commodity Price Risk”.

 

***Our controlling shareholders may have conflicts of interestrelating to our business.***

*** ***

Enel SpA (“Enel”) and ACCIONA, S.A. (“Acciona”)jointly hold 92.1% of Endesa, S.A. (“Endesa Spain”) which owns 60.6% of Enersis’share capital (Enel, Acciona and Endesa Spain, collectively, the “Controllers”).  The Controllers have the power to determinethe outcome of most material matters that require shareholder’ votes, such asthe election of the majority of our board members and, subject to contractualand legal restrictions, the distribution of dividends.  The Controllers also can exercise influenceover our operations and business strategies. Our Controllers’ interests may in some cases differ from those of ourother shareholders.  The Controllersconduct their business in South America primarily through us and also throughentities not consolidated by us or in which we have no interest.

 

***Environmentalregulations in the countries in which we operate may increase our costs ofoperations.***

*** ***

Our operating subsidiaries are also subject toenvironmental regulations which, among other things, require us to performenvironmental impact studies for future projects and obtain permits from bothlocal and national regulators.  Approvalof these environmental impact studies may be withheld by governmentalauthorities.  In addition, publicopposition may cause delays or modifications to any proposed project and lawsor regulations may change or be interpreted in a manner that could adverselyaffect our operations or our plans for companies in which we holdinvestments.  See “Item 4.  Information on the Company — B. BusinessOverview — Electricity Industry Regulatory Framework”.

 

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*** ***

***TheArgentine natural gas crisis has increased the vulnerability of electricitygeneration in Chile.***

*** ***

In Argentina, thelow price imposed by regulators on natural gas has directly affected productionand investment in natural gas fields, which has impacted the short andmedium-term availability of natural gas, both in Chile and in Argentina.  The low price has also induced Argentinecustomers to increase their demand.  Anatural gas shortage has forced electricity generation companies, includingours, to use more expensive fuel oil, thus substantially increasing productioncosts.  Energy demand in Chile’s centralregion decreased by 0.9% in 2008 but it is expected to increase in the longterm.  Increasing demand, combined with alow level of mid-term investment in the electricity sector, particularlyexposes the Chilean electricity sector to the adverse effects of the Argentinenatural gas crisis.  Since 2004, Chile hasbeen affected by increasing restrictions in the supply of natural gas fromArgentina despite the existence of long-term contracts.

 

***Our combined cycle plant, San Isidro, and both units inTal-Tal operate with natural gas and diesel oil.  Our related company, GasAtacama S.A. (“GasAtacama”),also operates with natural gas and diesel oil. Each company has gas contracts with Argentine suppliers and has beenaffected adversely by restrictions of natural gas from Argentina.  The materiality of the impact in the futurewill depend on the level of natural gas restrictions, the contractualcommitments of each company and the availability of alternative sources such asLNG.  Currently a 9.6 million m3/d (2.5mtpa) LNG regasification terminal is being developed in Chile and is expectedby its promoters to start operations during the second half of 2009; however,no assurances can be given as to when the LNG plant will come on line, thelevel of its actual production, or whether it will have a material positive effectour operating costs.  One of thepromoters of this project is Endesa Chile. For additional information, please see “Item 4. Information on theCompany —  History and Development of theCompany — Investments, Capital Expenditures and Divestitures.”***

*** ***

***The relativeilliquidity and volatility of Chilean securities markets could adversely affectthe price of our common stock and ADSs.***

*** ***

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

 

***We haveoutstanding credit facilities with “change of control” provisions which couldresult in some acceleration rights on such indebtedness.***

*** ***

Approximately 32% of our consolidated debt outstandingobligations have “change of control” contractual provisions.  As of December 31, 2008,$ 1,397 million of Enersis’ consolidated indebtedness (excludingEndesa Chile on a consolidated basis) and $ 1,145 million of Endesa Chile’s consolidated indebtednessfeatured some kind of “change of control” provision either in the form of anegative covenant, a mandatory prepayment or otherwise.  However, in contracts of Enersis’subsidiaries, totaling $ 174 million in debt, certain previousconditions must be met, typically a merger or spin-off, that would then resultin a change of control before triggering a change of control provision.  Similarly, $ 378 million in EndesaChile’s subsidiaries’ contracts either (a) require a preliminary merger orspin-off prior to triggering such change of control provision or (b) thechange of control does not apply to Endesa Spain but to other companiesinstead.

 

A total of $ 183 million in Enersis’ and itsconsolidated subsidiaries’ indebtedness, other than Endesa Chile, and a totalof  $ 766 million in bankindebtedness incurred by Endesa Chile have “change of control” provisions whichspecifically refer to Endesa Spain, directly or indirectly, as the controllingentity.  If a change 

 

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of control were to occur,and  we are not successful in obtainingcertain waivers or amendments, then the lenders under these facilities wouldhave the ability to accelerate such debt and make it immediately due andpayable.

 

As of December 31, 2008, $ 650 million ofEndesa Chile debt and $ 150 million of Enersis debt are to be found inrevolving and term credit facilities governed by laws of the State of NewYork.  Lenders under such facilities, onan individual basis, have rights to accelerate payment if Endesa Spain is nolonger, directly or indirectly, in the chain of control, provided that the newcontrolling entity does not satisfy certain minimum risk rating standards,which vary among the different debt facilities. Enersis’ subsidiaries in Brazil have credit facilities for an aggregateof $ 1,228 million with some kind of “change of control” language,some of them involving standard *BancoNacional de Desenvolvimento Econômico e Social* (BNDES) clauses.  BNDES is a state-owned development bank.

 

If a tender offer for Endesa Spain were to occur, andif another change of control were to take place, we would not be able to giveassurances that our lenders and relevant governmental entities such as BNDES inBrazil would waive any acceleration rights that they might otherwise have undersuch credit agreements.  For moredetailed information on Enersis and Endesa Chile contractual provisions, see “Item5.  Operating and Financial Review andProspects — B. Liquidity and Capital Resources”.

 

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

 

All of our assets are located outside of the UnitedStates.  All of our directors andofficers reside outside of the United States and most of their assets arelocated outside the United States as well. If any shareholder were to bring a lawsuit against our directors, officersor experts in the United States, it may be difficult for them to effect serviceof legal process within the United States upon these persons or to enforceagainst them, in United States courts or Chilean courts, judgments obtained inUnited States courts based upon the civil liability provisions of the federalsecurities laws of the United States.  Inaddition, there is doubt as to whether an action could be brought successfullyin Chile on the basis of liability based solely upon the civil liability provisionsof the United States federal securities laws.

 

***New shares issuances may not have the rights granted by former ChapterXXVI***

*** ***

TheChilean Central Bank Decision 1333-01-070510 adopted on May 10, 2007extended the effects of the former Chapter XXVI to capital increases approvedafter April 18, 2001.  Under theformer Chapter XXVI and the Foreign Investment Contracts, the Chilean CentralBank agreed to grant access to the formal exchange market to convert pesos intodollars (See “Item 10. Additional Information. D — Exchange Rate Controls” forfurther detail).

 

Enersisformally requested to the Central Bank for permission to enter into a newForeign Investment Contract to include its capital increase approved by Enersis’shareholders’ meeting held on March 31, 2003, which was granted by theCentral Bank on September 7, 2007, subject to the execution and deliveryof a new Foreign Investment Contract, dated September 24, 2008.Nevertheless, the Central Bank’s approval, aimed at extending the effects ofthe former Chapter XXVI to the last capital increase of Enersis, is subject tothe condition that Enersis previously inform the Central Bank with respect tothe measures adopted in the issuance of new shares of a future capital increasein order to sufficiently differentiate new shares from the shares issuedpreviously, under the former Chapter XXVI, so that the shareholders would havethe necessary information to learn about such difference.  If Enersis does not comply with thiscondition, the Central Bank could revoke its approval and the benefits grantedto the shares issued in the last capital increase of Enersis by the former 

 

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Chapter XXVI. Furthermore, it is not certain, thatadditional Chilean restrictions applicable to the holders of ADRs, thedisposition of underlying shares of common stock or the repatriation of theproceeds from such disposition will not be imposed in the future, nor can therebe any assessment of the duration or impact of such restrictions if imposed.

 

**Item 4.   Informationon the Company**

** **

**A.            Historyand Development of the Company.**

** **

**History**

** **

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

 
| Main  office: | Santa Rosa 76,  Santiago, CP 833-0099, Chile. |
|---------------|-----------------------------------------------|
| Telephone:    | (562) 353-4400                                |
| Fax:          | (562) 378-4789                                |
| Web  Site:    | www.enersis.cl                                |

 

The Company’s authorized representative in the UnitedStates of America is Puglisi & Associates, whose contact informationis:

 
| Main office: | 850 Library Avenue, Suite 204, Newark, Delaware |
|--------------|------------------------------------------------------|
| Telephone:   | (302) 738-6680                                       |
| Fax:         | (302) 738-7210                                       |

 

We are an electricutility company primarily engaged, through our subsidiaries and affiliates, inthe generation, transmission and distribution of electricity in Chile,Argentina, Brazil, Colombia and Peru.

 

We are one of the largestprivate sector companies in the electricity sector in South America.

 

We trace our origin to *Compañía Chilena de Electricidad Ltda.*, or CCE, which wasformed in 1921 as a result of the merger of Chilean Electric Tramway and LightCo., founded in 1889, and *Compañía Nacionalde Fuerza Eléctrica*, with operations dating back to 1919.  In 1970, the Chilean government nationalizedCCE.  In 1981, CCE’s operations weredivided into one generation company, the current *AES Gener S.A.*(“Gener”), and two distribution companies,one with a concession in the Fifth Region, the current *Chilquinta S.A.*, and the other with aconcession in the Santiago Metropolitan Region, *Compañía Chilena Metropolitana de Distribución Eléctrica S.A. *From 1982 to 1987, the Chileanelectric utility sector went through a process of re-privatization.  On August 1, 1988, *Compañía Chilena Metropolitana de DistribuciónEléctrica S.A.* changed its name to Enersis S.A. and became the newparent company of *Distribuidora ChilectraMetropolitana S.A.*, later renamed Chilectra S.A*. *In the 1990s, wediversified into electricity generation and transmission through our increasingequity stakes in Endesa Chile.  We beganour international operations with the 1992 investment in Edesur, an 

 

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Argentine electricitydistribution company.  We then expandedprimarily into electricity generation, transmission and distribution businessesin four South American countries: Argentina, Brazil, Colombia and Peru.  We remain focused on the electricity sector,although we also have small operations in other businesses.

 

In 2005, Endesa Brasil was formed as a company tomanage all generation, transmission and distribution assets that EndesaLatinoamérica (formerly known as Endesa Internacional), Enersis, Endesa Chileand Chilectra held in Brazil, namely, through Ampla, Endesa Fortaleza,Investluz, CIEN, Cachoeira Dourada and Coelce. Enersis began consolidating Endesa Brasil in October 2005.  In 2006, the International FinanceCorporation (“IFC”) became a new shareholder in Endesa Brasil, contributing$ 50 million or 2.7% of share of capital of Endesa Brasil.  As of December 31, 2008, Enersisdirectly and indirectly controlled 53.6% of Endesa Brasil’s share capital.

 

In order to optimize taxes, simplify theorganizational structure and diminish corporate costs, on April 2006,Enersis decided to merge Elesur and Chilectra in Chile.  As a consequence of this merger, Elesurabsorbed Chilectra; the surviving company retained the name of Chilectra.

 

In order to achieve synergies in Peru, in 2006, weconducted the merger of Edegel and Etevensa (60% owned by Endesa Spain), whichhad a 457 MW thermoelectric generation company.

 

In September 2007, we merged our subsidiaries inColombia, Emgesa and Betania, resulting in a new company which retained thename Emgesa.  Following the merger, as ofDecember 31, 2008, Enersis controlled 16.1% of Emgesa’s share capital.

 

As of December 31, 2008we had 13,893 MW of installed capacity with 53 power plants in the fivecountries in which we operate, 12.4 million distribution customersrepresenting 45 million persons, consolidated assets of$ 22.6 billion and our operating revenues were$ 10.4 billion.

 

**Recent Developments**

** **

Since October 10,2007, the Italian energy company, Enel, and the Spanish construction company,Acciona, jointly hold 92.1% of the share capital of Endesa Spain, which inturns owns 60.6% interest in Enersis.

 

On February 20,2009, Acciona and Enel, announced that they had reached an agreement pursuantto which Acciona, directly and indirectly, will transfer to Enel Energy EuropeSrl, a wholly owned subsidiary of Enel, a 25.0% equity interest in EndesaSpain.  The transfer is subject toapproval by relevant authorities and various other conditions.  Assuming the conditions are satisfied, EnelEnergy Europe Srl will hold a 92.1% equity interest in Endesa Spain.

 

Under the agreement, Enelcommitted to pay Acciona € 11,107 million for the equity interest.  Additionally, Endesa Spain agreed to transferto Acciona wind and hydroelectric energy assets located in Spain and Portugalvalued at € 2,890 million.  The transferof shares and assets is expected to be completed by the end of August,2009.  The agreement between Enel andAcciona was filed with the Spanish CNMV (*Comisión Nacional delMercado de Valores*) as an “essential fact” on February 20,2009, and may be found on the CNMV web site (www.cnmv.es).

 

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**Capital Investment Program**

** **

We coordinate the overall financing strategy of oursubsidiaries and intercompany advances to optimize debt management as well asthe terms and conditions of our financing. Our operating subsidiaries independently plan capital expenditurefinanced by internally generated funds or direct financings.  One of our goals is to focus on investmentsthat will provide long-term benefits, such as energy loss reduction projects.  Additionally, by focusing on Enersis as awhole and seeking to provide services across the group of companies, we areaiming to reduce the level of investment necessary at the individual subsidiarylevel in items such as procurement, telecommunication and information systems.Although we have considered how these investments will be financed as part ofthe Company’s budget process, we have not committed to any particular financialstructure, and investments will depend on the market conditions at the time thecash flows are needed.

 

For the period between2009 and 2013, we expect to make capital expenditures of Ch$ 3,365 billion(or $ 5.3 billion) in our majority-owned subsidiaries.  The table below sets forth the capitalexpenditures made by our subsidiaries between 2006 and 2008 and the expectedcapital expenditures for the period 2009-2013.

 
| ** **                           | ** ** | **Capital Expenditure (1)** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|
| ** **                           | ** ** | **(in billions of Ch$)**    | ** ** |
| ** **                           | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** | **2009-2013** | ** ** |
| Electricity  Generation/Transmission |       | 219                         |       | 217 |   | 363 |   | 1,698 |   |
| Electricity  Distribution            |       | 360                         |       | 385 |   | 563 |   | 1,613 |   |
| Other Businesses                     |       | 6                           |       | 5 |   | 9 |   | 55 |   |
| Total                                |       | 586                         |       | 608 |   | 936 |   | 3,365 |   |

 

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***(1) Capex figures represent accrued investments for each year.***

*** ***

***Electricity Generation***

*** ***

*Investments in Chile*

* *

Aspart of its strategy for ensuring reliable and diversified energy sources,Endesa Chile is actively taking part in the Chilean government-promotedinitiative to diversify the energy matrix through GNL Quintero S.A., or “GNLQ”,with a 20% holding in the ownership of the re-gasification terminal, togetherwith Empresa Nacional del Petróleo (“ENAP”), Metrogas and British Gas as gassupplier.  Its estimated investment costis approximately $ 1.1 billion and commercial operations arescheduled to start by mid 2009.

 

In midJanuary 2008, two months ahead of schedule, the San Isidro II plantcompleted the construction of the combined cycle and achieved a total capacityof 353 MW.  Taking into account boththe open and combined cycle stages, the project required a total investment of$ 233 million.  Once liquefiednatural gas (LNG) is available in Chile, the plant will reach its full capacityof 377 MW by mid 2009.  The earlystart-up of this plant helped provide support for the complex energy supplysituation experienced in Chile in early 2008 as a result of the Argentinenatural gas crisis.

 

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EndesaChile began the operation of unit 1 of the Tal-Tal plant, with an additionalinstalled capacity of 120 MW operating with diesel, obtained from a unitthat was originally designed to operate with Argentine natural gas.

 

On June 27, 2008,Endesa Eco, a subsidiary of Endesa Chile, started operating its Ojos de Aguapass through hydroelectric plant, located close to the Cipreses powerstation, downstream from La Invernada reservoir.  The investment cost of this 9 MW plantwas $ 28 million.

 

ReinforcingEndesa Chile’s commitment to sustainability and non-conventional renewableenergy (“NCRE”) development initiatives, following the commercial start-up in December 2007of the Canela 18 MW wind farm, our subsidiary, Endesa Eco, acquiredadjoining land and entered into a supply agreement with ACCIONA Windpower for40 wind-generators that will produce an additional 60 MW with an estimatedinvestment of $ 150 million. The environmental impact declaration (“EID”) received favorablequalification resolution from Corema, the regional environmentalauthority.  We expect the wind farmshould start operations in the last quarter of 2009.

 

Constructionworks have continued on the Bocamina II coal-fired plant in the town of Coronelin Chile’s Eighth Region.  With acapacity of 370 MW, this plant will have the latest technologies forreducing emissions and is expected to commence operations in the second half of2010.  The estimated investment is$ 700 million.

 

On April 16, 2008, the Maule regionalenvironmental authority approved the environmental impact assessment of the LosCóndores pass through hydroelectric project, with a capacity of approximately150 MW and an average annual generation of 560 GWh.  This plant will use the waters of the Maulereservoir and will be located to the east of Cipreses and Isla power stations,in San Clemente, Talca.  The estimatedinvestment is approximately $ 400 million and its start up is plannedfor the first quarter of 2013. Construction work began in the first quarter of 2009.

 

*Investments in Argentina*

* *

In Argentina, Endesa Chile has been taking part since2005 in the Argentine fund created to increase electricity supply, or “Foninvemem”,in the wholesale electricity market in Argentina or “MEM”, that is building twothermal plants of 800 MW each. Endesa Chile will hold a 21% equity interest through EndesaCostanera and El Chocón.  At the end of 2008, 1,125 MW wereoperating in open cycle.  The project isexpected to start operations in combined cycle during 2009.

 

*Investments in Colombia*

* *

TheColombian Ministry of Mines and Energy selected the assignment of El Quimbohydroelectric project to Emgesa.  With anestimated investment of over $ 650 million, El Quimbo project willhave an installed capacity of 400 MW and will be built in Huila on theriver Magdalena, upstream from the Betania plant, and should start operationsby December 2014.

 

*Investments in Peru*

* *

In Peru,a turnkey contract was signed in January 2008 with Siemens PowerGeneration for the installation of a 188 MW turbine at the Santa Rosaplant, which will operate with gas from Camisea.  The project will require an investment ofapproximately $ 90 million and is planned to come into service by theend of 2009**. **Theproject will increase Edegel’s installed capacity from 1,467 MW to1,654 MW.

 

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***ElectricityDistribution***

*** ***

Our distribution business in Chile, Argentina, Brazil,Colombia and Peru is carried out by our distribution subsidiaries listed in thetable below.  In 2008, we incurred totalcapital expenditures of Ch$ 563 billion in order to serve new clients,reduce energy losses, maintain equipment and lines and improve service.  The capital expenditures incurred by oursubsidiaries in 2008 are shown in the table below:

 
| **Distribution company** | ** ** | **2008 CAPEX (Ch$ billion)** | ** ** |
|--------------------------|------------|-----------------------------------|------------|
| Chilectra  (Chile)       |       | 68.1                              |       |
| Edesur  (Argentina)      |       | 81.0                              |       |
| Ampla (Brazil)           |       | 124.8                             |       |
| Coelce (Brazil)          |       | 165.1                             |       |
| Codensa  (Colombia)      |       | 80.2                              |       |
| Edelnor (Peru)           |       | 44.2                              |       |
| Total                    |       | 563.0                             |       |

 

In **Chile**,Chilectra allocated a considerable portion of investments to projects relatedto quality service, environment, safety, and information and remote controlsystems.  Significant progress has beenmade with the Intelligent Network plan which aims to integrate electric powerinfrastructure with new technology.

 

In terms of quality service and ISO Certification,Chilectra engaged in developing several projects in the area of environmentalcare and public health.  It also plantedtrees and green areas at several substations. Equipment was purchased to measure the potential radio interferencedeveloped by the high and medium-tension lines. Noise measurements were carried out as a cautionary measure and tocomply with current legislation.  Threeoil collection centers were built at the El Manzano substation in order tomitigate pollution in the event of a spill.

 

The SDAC project (Load Release System), aimed to keeppotential failures on Chilectra’s sub-transmission system from spreading to theCentral Interconnected System (SIC), was completed in 2008.  The capacity of the sub-transmission lineswas increased and the supply safety improved along several sections.  In addition numerous projects were carriedout on the power transformers in order to meet growing demand.  New feeders were built at several substationson the medium-tension networks. Furthermore, new 50 Million Volt-Amperes (MVA) units were added to the110/23 KV system as part of the project to change the tension level.

 

In **Argentina**,****Edesur sought to maintain quality service and protectpublic safety.  To this end, the followingprojects were undertaken:

 

The capacity of the Héroes de Malvinas substation wasincreased from 36 MVA to 80 MVA and the substation was modernized.  A new substation, called Glew, with 80 MVA ofinstalled capacity—one of our most important investments in 2008.  The installed capacity of the Monte Chingolosubstation was increased from 80 MVA to 160 MVA to satisfy increasing demandfor electricity in the south of Buenos Aires. New high- and medium-tension switches were installed at substations to maintainthe network’s operational safety. Medium- and low-tension networks were expanded and renovated.

 

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Edesur kept its certification from *Instituto Argentino de Normalización y Certificación*, theArgentine Certification Institute, or IRAM, for its “General Contingency Plan” and the “Public Safety ManagementSystem.”  The audit did not reveal any “noncompliance.” The “Plans” module was launched, allowing for schedulingmaintenance strategies for low- and medium-tension activities and therebyimproving data quality.

 

Edesur also launched a project called “PTE_Map” whichis a web application with geo-referenced representations of the high-, medium-and low-tension networks.  It provides areal-time geographical view of the service problems and streamlines theanalysis of complaints received through the Emergency Service System (SAE).

 

In **Brazil**, Amplainvested in the improvement of its distribution network and obtained an 8.7%rating in 2008 (up from 5.5% in 2007) in terms of quality of energysupply.  The Equivalent Duration ofInterruptions per Consumption Unit (DEC) in 2008 was 13.21 hours, compared to14.47 hours in 2007.  The EquivalentFrequency of Interruptions per Consumption Unit (FEC) in 2008 was 10.06compared to 10.64 in 2007.

 

Since 2003, the DEC and FEC indicators had improvedsignificantly by 40.6% and 41.3%, respectively. As a consequence of investments aimed to improve the quality of itsservices.  As a result, the level ofcustomer satisfaction recorded by the Satisfaction of Perceived Quality Index(ISQP) reported by Abradee (the Brazilian Association of Electric PowerDistributors) increased by 21% since 2003 to 72.5% in 2008.

 

Coelce, another Brazilian subsidiary of Enersis,connected approximately 148,000 new customers to the low-tension electric powernetwork.  To make ongoing improvements tothe quality of its service and the reliability of the system, the company madeseveral investments in its low-, medium- and high-tension networks in order toreinforce expansion of the electric power system.  In 2008, the company pursued the *Light for All* project with the federal and state governmentunder which the parties seek to provide service and energy to customers inrural areas.  This project is financed inpart by the federal and state governments.

 

In **Colombia**,our subsidiary Codensa made several investments to improve the reliability ofdistribution systems in *Bogotá*, *Cundinamarca* and the National Interconnected System. Itprovides service to the areas with increased demand for electricity and  improves the quality of service.  A total of1,145 projects were carried out for new customers in order to meet the energydemand of 44,949 industrial, commercial, and residential customers with anaggregated annual consumption estimated at 95.5 GWh.  Some of the projects include services tolarge customers such as the connection of 115 kV to the steel company Diaco,shopping centers, industrial parks and large residential areas.

 

In 2008, Codensa:

 

·                  completed the expansion of four substations with 141 MVA in installedcapacity;

 

·                  replaced two 30 MVA transformers with 40 MVA transformers, therebyincreasing their capacity by 20 MVA;

 

·                  modernized one of its substations by installing geographical informationsystem (“GIS”) technology to increase reliability and meet the growing demandin the central part of Bogotá;

 

·                  completed 75% of a total project aimed to modernize a substation in theinstitutional and governmental sector;

 

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·                  installed 180 Mega Volt Ampere Reactive (MVAR) static converters infour stages in order to comply with regulatory requirements, reduce losses andraise the 115 kV voltage;

 

·                  invested in standardizing its high-tension infrastructure so as toprovide a reliable and safe technical environment and improve the quality ofelectric power service as well as limit the rationing-based output from theBogotá capacity system;

 

·                  reinforced control house and enclosing walls surrounding threesubstations were reinforced to comply with Law 400 of 1997;

 

·                  remodeled and/or built 123 kilometers of a medium-tension network tomeet increased demand in the areas of significant commercial, industrial andresidential growth increase;

 

·                  modernized 88 kilometers of network and installed protective equipment,primarily along the circuits located in the southern sector of Bogotá under thestandardization and quality improvement project for the medium-tension network;

 

·                  continued expansion of public lighting in the capital district andinstalled 4,832 light poles.  Additional1,274 light poles were installed in other municipalities;

 

·                  launched a project to enhance the brown sugarloaf production processand to modernize dairy production process, resulting in the identification of30 new possible projects in order to promote the socioeconomic development ofthe rural population;

 

·                  improved the precision and timing of the execution of technicalcustomer service operations and commercial operations for reading meters,distribution, and other commercial processes the first phase in the RuralOperations Optimization System, which considers purchasing 100 GPS for establishinggeoreference positions of its rural customers; and

 

·                  replaced 1,147 distribution transformers in rural areas and 706transformers in urban sectors.

 

In**Peru**,our subsidiary Edelnor****investedprimarily in expanding and reinforcing its medium- and low-tension  networks. It also increased its medium- and low-tension feeders to satisfy demandfor electricity that increased by 7.8% compared to 2007.

 

The company alsocompleted and commissioned the Chillón substation, its most important projectundertaken in Lima in the last 30 years. Edelnor modernized and expanded electric power system to meet growingdemand in the areas north of Lima. Edelnor also invested in expanding the electricity networks to areas notconnected, allowing more than 15,000 families to gain access to electricity.

 

Capacity expansion on the*Chavarría*, *Infantas*and *Mirones* substations reduced the trafficand overloading of the transformers.

 

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** **

**B.            BusinessOverview.**

** **

***Generation and Distribution Strategies***

*** ***

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

 

·                  enhance earnings through expansion of our unregulated client base;

 

·                  reduce our exposure to hydrological risk with commercial policies thatdetermine a volume of contracts for each generation company by reducing thehydrological risk to a degree of statistical reliability of 95%; and

 

·                  improve our operating margins by reducing operating costs of ourexisting businesses.

 

We also believe that we have considerable expertise in managingutilities, including:

 

·                  operating under a range of tariff and regulatory frameworks that rewardefficient operations;

 

·                  building and operating efficient generation facilities;

 

·                  reducing energy losses associated with distribution businesses over thelong term;

 

·                  increasing workforce productivity while maintaining good laborrelations; and

 

·                  implementing proprietary billing and accounts receivable managementsystems.

 

***Electricity Generation BusinessSegment***

*** ***

As of December 31, 2008, electricitygeneration represented 38% of our operating revenues and 53% of our operating income,in both cases before consolidation adjustments.

 

Our consolidated physical sales for 2008 were62,828 GWh and production was 54,673 GWh, each 0.4% higher than in2007.  Total installed capacity in 2008was 13,893 MW as compared to 13,707 MW in 2007.

 

Our electricity generation business is conductedprimarily through Endesa Chile, which has operating subsidiaries in Chile,Argentina, Colombia and Peru.  Since October 2005,the generation, transmission and distribution business in Brazil has been managedthrough our subsidiary, Endesa Brasil. Endesa Chile holds an equity interest in Endesa Brasil.

 

The following tables summarize information relating toEnersis’ electricity generation:

 

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| ** **                           | ** ** | **As of December 31, each year** | ** ** |
|--------------------------------------|------------|---------------------------------------|------------|
| ** **                           | ** ** | **2006**                              | ** ** | **2007** | ** ** | **2008** | ** ** |
| **Chile**                            |       |                                  |       |   |   |   |   |
| Number of  generating facilities (1) |       | 22                                    |       | 25 |   | 26 |   |
| Installed  capacity (MW) (2)         |       | 4,477                                 |       | 4,779 |   | 4,893 |   |
| Energy generated  (GWh) (3)          |       | 19,973                                |       | 18,773 |   | 19,807 |   |
| Energy sales  (GWh)                  |       | 20,923                                |       | 19,212 |   | 19,808 |   |
| **Argentina**                        |       |                                  |       |   |   |   |   |
| Number of  generating facilities (1) |       | 5                                     |       | 5 |   | 5 |   |
| Installed  capacity (MW) (2)         |       | 3,639                                 |       | 3,644 |   | 3,652 |   |
| Energy generated  (GWh) (3)          |       | 13,750                                |       | 12,117 |   | 10,480 |   |
| Energy sales  (GWh)                  |       | 13,926                                |       | 12,406 |   | 11,098 |   |
| **Brazil**                           |       |                                  |       |   |   |   |   |
| Number of  generating facilities (1) |       | 2                                     |       | 2 |   | 2 |   |
| Installed  capacity (MW) (2)         |       | 980                                   |       | 987 |   | 987 |   |
| Energy generated  (GWh) (3)          |       | 4,489                                 |       | 3,954 |   | 3,379 |   |
| Energy sales  (GWh)                  |       | 6,867                                 |       | 7,349 |   | 7,093 |   |
| **Colombia**                         |       |                                  |       |   |   |   |   |
| Number of  generating facilities (1) |       | 11                                    |       | 11 |   | 11 |   |
| Installed  capacity (MW) (2)         |       | 2,779                                 |       | 2,829 |   | 2,895 |   |
| Energy generated  (GWh) (3)          |       | 12,564                                |       | 11,942 |   | 12,905 |   |
| Energy sales  (GWh)                  |       | 15,327                                |       | 15,613 |   | 16,368 |   |
| **Peru**                             |       |                                  |       |   |   |   |   |
| Number of  generating facilities (1) |       | 9                                     |       | 9 |   | 9 |   |
| Installed  capacity (MW) (2)         |       | 1,426                                 |       | 1,468 |   | 1,467 |   |
| Energy generated  (GWh) (3)          |       | 6,662                                 |       | 7,654 |   | 8,102 |   |
| Energy sales  (GWh)                  |       | 6,767                                 |       | 7,994 |   | 8,461 |   |
| **Total**                            | ** ** | ** **                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Number of  generating facilities (1) |       | 49                                    |       | 52 |   | 53 |   |
| Installed  capacity (MW) (2)         |       | 13,301                                |       | 13,707 |   | 13,894 |   |
| Energy generated  (GWh) (3)          |       | 57,438                                |       | 54,440 |   | 54,673 |   |
| Energy sales  (GWh)                  |       | 63,810                                |       | 62,574 |   | 62,828 |   |

 

----

(1)        For details on generationfacilities, see “ —D. Property Plants and Equipment.”

(2)        Total installed capacity isdefined as the maximum MW capacity of generation units, under specifictechnical conditions and characteristics, in most cases confirmed bysatisfaction guarantee tests performed by equipment suppliers certified byBureau Veritas, an international independent certification company.  Figures may differ from installed capacitydeclared to regulating authorities and customers in each country, according tocriteria defined by each authority and corresponding contractual frameworks. Wehave decided not to make a restatement of capacities based on thiscertification.

(3)        Energy generated defined astotal generation minus own power plant consumption and technical losses.

 

In the electricity industry, it is common to segmentthe business into hydroelectric and thermoelectric generation, because eachmethod of generation has different variable costs.  Thermoelectric generation requires thepurchase of fuel rather than the use of water from reservoirs or rivers,thereby increasing the variable costs of generation.  Of our total consolidated generation, 65% wasfrom hydroelectric sources while the remaining 35% came from thermal sources,wind energy represented less than 1%.

 

The following table summarizes Enersis’ consolidatedgeneration by type of energy:

 

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| ** **            | ** ** | **Year ended December 31,** | ** ** |
|-----------------------|------------|----------------------------------|------------|
| ** **            | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **            | ** ** | **(GWh)**                        | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** | **GWh** | ** ** | **%** | ** ** |
| Hydroelectric         |       | 42,858                           |       | 75.0 |   | 36,575 |   | 67.0 |   | 35,623 |   | 65.0 |   |
| Thermal               |       | 14,581                           |       | 25.0 |   | 17,862 |   | 33.0 |   | 19,020 |   | 35.0 |   |
| Wind                  |       | 0                                |       | 0.0 |   | 3 |   | 0 |   | 30 |   | 0.1 |   |
| **Total  generation** |       | 57,439                           |       | 100.0 |   | 54,440 |   | 100.0 |   | 54,673 |   | 100.0 |   |

*** ***

***Generation in Chile***

* *

We accounted for 38% ofChile’s physical sales, 35% of generation and 36% of total installed capacity, as of December 31, 2008,measured by the maximum capacity calculated by the SIC’s CDEC. CDEC is theelectricity dispatch center in the corresponding electric system (See “ElectricityIndustry Regulatory Framework — Chile- Industry Structure”).  Our hydroelectric installed capacityrepresents 70% of our total installed capacity in Chile.

 

We own andoperate, through our subsidiary, Endesa Chile, 26 generation facilities inChile with an aggregate installed capacity of 4,893 MW as of December 31,2008, compared to 4,779 MW in 2007. The increase in our total installed capacity in Chile is due toadditional 105 MW generated at San Isidro II.  The first stage of this project had startedoperations in April 2007, in open cycle using diesel and the second stagestarted operations in January 2008, in combined cycle. The increase isalso due to the incorporation of Ojos de Agua (9 MW, mini-hydro) in June 27, 2008.

 

The followingtable sets forth the installed generation capacity for each of the Company’s Chileansubsidiaries:

 

**INSTALLED CAPACITYPER SUBSIDIARY IN CHILE (MW) (1)**

 
| ** **   | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** |
|--------------|------------|----------|------------|----------|------------|----------|------------|
| Endesa Chile |       | 2,754    |       | 3,034    |       | 3,139    |       |
| Pehuenche    |       | 695      |       | 699      |       | 699      |       |
| Pangue       |       | 467      |       | 467      |       | 467      |       |
| San Isidro   |       | 379      |       | 379      |       | 379      |       |
| Celta        |       | 182      |       | 182      |       | 182      |       |
| Endesa Eco   |       | —   |       | 18       |       | 27       |       |
| **Total**    |       | 4,477    |       | 4,779    |       | 4,893    |       |

 

----

(1)          The installed capacity wascertified during 2006, 2007 and 2008 by Bureau Veritas.

 

Our total electricity generation in Chile (in both theSIC and the SING) reached 19,807 GWh in 2008, 5.5% higher than in 2007,and accounted for approximately 35% of total electricity production in Chile in2008.

 

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

 

**OUR ELECTRICITYGENERATION IN CHILE (GWh)**

 
| ** **   | ** ** | **Year ended December 31,** | ** ** |
|--------------|------------|----------------------------------|------------|
| ** **   | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| Endesa Chile |       | 11,642                           |       | 11,093 |   | 12,204 |   |
| Pehuenche    |       | 4,345                            |       | 3,437 |   | 3,589 |   |
| Pangue       |       | 2,432                            |       | 1,351 |   | 1,763 |   |
| San Isidro   |       | 802                              |       | 1,956 |   | 1,289 |   |
| Celta        |       | 751                              |       | 933 |   | 912 |   |
| Endesa Eco   |       | —                           |       | 3 |   | 49 |   |
| **Total**    |       | 19,973                           |       | 18,773 |   | 19,807 |   |

 

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Hydroelectric generation in 2008 was 5% higher than in 2007.  The potential energy in reservoirs at December 31, 2008was 12% higher than at December 31, 2007, as shown in the followingtable:

 
| ** **    | ** ** | **Year ended December 31,** | ** ** |
|---------------|------------|----------------------------------|------------|
| ** **    | ** ** | **2007**                         | ** ** | **2008** | ** ** | ** ** | ** ** |
| ** **    | ** ** | **(GWh)**                        | ** ** | **(GWh)** | ** ** | **%****Change** | ** ** |
| **Reservoir** |       |                             |       |   |   |   |   |
| Laja          |       | 3,028                            |       | 3,107 |   | 3 |   |
| Maule         |       | 1,307                            |       | 1,111 |   | -15 |   |
| Chapo         |       | 119                              |       | 266 |   | 123 |   |
| Colbún   |       | 283                              |       | 406 |   | 43 |   |
| Invernada     |       | 116                              |       | 296 |   | 156 |   |
| Rapel         |       | 53                               |       | 60 |   | 12 |   |
| Melado        |       | 6                                |       | 9 |   | 54 |   |
| Ralco         |       | 147                              |       | 398 |   | 172 |   |
| **Total**     |       | 5,059                            |       | 5,652 |   | 12 |   |

 

Hydroelectricgeneration accounted for 69.6% of our total electricity generation in 2008compared to 70.2% in 2007.  Generation bytype in Chile is shown in the following table:

 

**OUR GENERATION INCHILE (GWh)**

 
| ** **            | ** ** | **Year ended December 31,** | ** ** |
|-----------------------|------------|----------------------------------|------------|
| ** **            | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **            | ** ** | **Generation  (GWh)**            | ** ** | **%** | ** ** | **Generation  (GWh)** | ** ** | **%** | ** ** | **Generation  (GWh)** | ** ** | **%** | ** ** |
| Hydroelectric         |       | 17,148                           |       | 85.9 |   | 13,179 |   | 70.2 |   | 13,784 |   | 69.6 |   |
| Thermal               |       | 2,825                            |       | 14.1 |   | 5,591 |   | 29.8 |   | 5,993 |   | 30.3 |   |
| Wind                  |       |                             |       |   |   | 3 |   | 0.0 |   | 30 |   | 0.2 |   |
| **Total  generation** |       | 19,973                           |       | 100.0 |   | 18,773 |   | 100.0 |   | 19,807 |   | 99.8 |   |

 

Our thermal electricgeneration facilities are either gas, coal or oil-fired.  In order to satisfy our natural gas andtransportation requirements, we enter into long-term gas contracts withsuppliers that establish maximum supply amounts and prices and long-term gastransportation agreements with the pipeline companies, currently *Gas Andes* and *Electrogas*(the latter a related company of Endesa Chile). Since March 2008, all natural gas units of Endesa Chile can operatewith natural gas and diesel.  We obtainour coal and fuel oil requirements through competitive auctions with majordomestic and international suppliers.

 

Since 2006, Endesa Chileincreased the use of diesel from 23,000 tons in 2006 to 591,000 tonsin 2007 and to 728,000 tons in 2008. The use of coal increased from 438,000 tons in 2006 to851,000 tons in 2007 and to 

 

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774,000 tons in2008.  In 2005, 2006 and 2007, San Isidroentered into swap contracts with EndesaCostanera, which allowed San Isidro to temporarilygenerate electricity with natural gas, using EndesaCostanera’s share, by paying EndesaCostanera the additional cost incurredthrough generation with fuel oil, plus a fee.

 

In May 2007,as part of a consortium with ENAP, Metrogas and British Gas, in which EndesaChile’s participation is 20%, we agreed to build a liquefied natural gas (“LNG”)regasification facility in Quintero Bay. Partial commercial operations of the plant are expected to begin by July 2009while full commercial operations should occur in April 2010.

 

In July 2008,we started construction of a pipeline that will supply the gas obtained at theregasification plant in Quintero to Quillota and further to San Isidro andother off takers.  The pipeline is28 kilometer long and has a capacity of 19 million of cubic metersper day. It was finished in February 2009 and commercial operations areexpected to start on July 2009.

 

**TOTAL ELECTRICITY SALESPER SYSTEM IN CHILE (GWh)**

 
| ** **                     | ** ** | **Year ended December 31,** | ** ** |
|--------------------------------|------------|----------------------------------|------------|
| ** **                     | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                     | ** ** | **Sales  (GWh)**                 | ** ** | **Sales  (GWh)** | ** ** | **Sales  (GWh)** | ** ** |
| Electricity  sales in the SIC  |       | 38,259                           |       | 39,982 |   | 39,594 |   |
| Electricity  sales in the SING |       | 12,027                           |       | 12,674 |   | 13,219 |   |
| Total  Electricity sales       |       | 50,286                           |       | 52,656 |   | 52,813 |   |

 

Our physical energy sales in Chile reached20,923 GWh in 2006, 19,212 GWh in 2007 and 19,808 GWh in 2008which represent a 41.6%, 36.5% and 37.5% market share, respectively.  The percentage of the energy purchases tosatisfy our contractual obligations to third parties has declined from 6.2% in2006 to 2.0% in 2008 as a result of our commercial strategy to reducecontracted sales.  This commercialstrategy is primarily influenced by our decision to reduce hydrologicalexposure because of current regulations (See “— B. Business Overview —Electricity Industry and Regulatory Framework”).

 

We attempt to minimize the effect of poor hydrologicalconditions on our operations, in any given year, primarily by limitingcontractual commitments to an amount below the estimated production in a dryyear.  Governmental regulations have hadthe direct effect of increasing failure costs, which is the cost that we haveto pay when we are unable to satisfy our contractual commitments and theindirect effect of discouraging investment in generation assets.  Given the effect of the governmentregulations, energy supply has not increased as much as energy demand, whichhas the effect of increasing the spot price in the electricity pool market andmaking it a relatively more attractive commercial alternative.

 

The following table setsforth our electricity purchases and production in Chile:

 

**OUR PHYSICAL GENERATIONAND PURCHASES IN CHILE (GWh)**

 
| ** **              | ** ** | **Year ended December 31,** | ** ** |
|-------------------------|------------|----------------------------------|------------|
| ** **              | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **              | ** ** | **Sales  (GWh)**                 | ** ** | **%  of Volume** | ** ** | **Sales  (GWh)** | ** ** | **%  of Volume** | ** ** | **Sales  (GWh)** | ** ** | **%  of Volume** | ** ** |
| Electricity  generation |       | 19,973                           |       | 93.8 |   | 18,773 |   | 94.7 |   | 19,807 |   | 98.0 |   |
| Electricity  purchases  |       | 1,317                            |       | 6.2 |   | 1,042 |   | 5.3 |   | 403 |   | 2.0 |   |
| **Total  (1)**          |       | 21,290                           |       | 100.0 |   | 19,815 |   | 100.0 |   | 20,210 |   | 100.0 |   |

 

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----

(1)          Total GWh generation pluspurchases differs from GWh sales due to transmission losses, as power plantconsumption and technical losses have already been deducted.

 

Endesa Chile supplies electricity to the majorregulated electricity distribution companies, large unregulated industrialfirms (primarily in the mining, pulp and steel sectors) and the poolmarket.  Commercial relationships withcustomers are usually governed by contracts. Supply contracts with distribution companies must be auctioned inbidding processes, are generally standardized and have an average term of tenyears.  Supply contracts with unregulatedcustomers (large industrial customers) are specific to the needs of each clientand the conditions are agreed upon between both parties and reflect competitivemarket conditions.

 

In 2006, 2007 and 2008, Endesa Chile had forty-six,thirty-five and thirty-three customers with contracts, respectively, includingseven main distribution companies in the SIC and twenty-six unregulatedindustrial customers during 2008.  Therewere nineteen distribution companies without contracts which presented energywithdrawals, under the provisions of Resolution 88, accounting for 14.0% oftotal sales.  (See “ — B. BusinessOverview—Electricity Industry Regulatory Framework”).  *Sociedad Austral deElectricidad S.A.*, or Saesa, a non-related Chilean distributioncompany, was the largest withdrawal representing purchases of 766 GWh peryear.

 

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

 

**OUR PHYSICAL SALES PER CUSTOMER PRICE SEGMENTIN CHILE (GWh)**

 
| ** **                     | ** ** | **Year ended December 31,** | ** ** |
|--------------------------------|------------|----------------------------------|------------|
| ** **                     | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                     | ** ** | **Sales  (GWh)**                 | ** ** | **% of   Sales  Volume** | ** ** | **Sales  (GWh)** | ** ** | **% of   Sales  Volume** | ** ** | **Sales  (GWh)** | ** ** | **% of   Sales  Volume** | ** ** |
| Regulated  customers (1)       |       | 10,756                           |       | 51.4 |   | 11,502 |   | 59.9 |   | 11,466 |   | 57.9 |   |
| Non-regulated  customers       |       | 5,176                            |       | 24.7 |   | 5,281 |   | 27.5 |   | 5,025 |   | 25.4 |   |
| Electricity pool  market sales |       | 4,991                            |       | 23.9 |   | 2,430 |   | 12.6 |   | 3,317 |   | 16.7 |   |
| **Total electricity  sales**   |       | 20,923                           |       | 100.0 |   | 19,212 |   | 100.0 |   | 19,808 |   | 100.0 |   |

 

----

(1)          Includes sales todistribution companies pursuant to Resolution 88.

 

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Endesa Chile’s most significant supply contracts withregulated customers are with our subsidiary Chilectra S.A. (“Chilectra”), and *Compañía General de Electricidad S.A.*(“CGE”),the two largest distribution companies in Chile in terms of sales.  Its current contracts with Chilectra and CGEexpire in December 2010 and December 2009, respectively.

 

In March 2008, Chilectra and other distributorsallocated the third long-term energy bid for 1,800 GWh for the period2011-2021 and 1,500 GWh for the period 2022-2023, in both cases to Gener.In January 2009,  Chilquinta, Saesaand CGE were allocated 8,010 GWh, divided in four blocks (BB1, BB2, BB3and BB4) to be delivered from January 2010 for fourteen, twelve, fourteenand fifteen years respectively.  Theenergy allocated was 7,110 GWh and represented 88.7% of the bidders’demand.  The energy allocation percompany and per block was as follows:

 
| ** **           | ** ** | **BB1 -  Chilquinta  (GWh)** | ** ** | **BB2 - Saesa  (GWh)** | ** ** | **BB3 — CGE  (GWh)** | ** ** | **BB4 - CGE  (GWh)** | ** ** | **Total per  company  (GWh)** | ** ** |
|----------------------|------------|------------------------------|------------|------------------------|------------|---------------------------|------------|----------------------|------------|-------------------------------|------------|
| Gener                |       | 1,100                        |       | —                 |       | —                    |       | —               |       | 1,100                         |       |
| Endesa Chile         |       | 660                          |       | —                 |       | —                    |       | 2,000                |       | 2,660                         |       |
| Campanario           |       | —                       |       | 850                    |       | 900                       |       | —               |       | 1,750                         |       |
| Monte Redondo        |       | —                       |       | —                 |       | 100                       |       | —               |       | 100                           |       |
| Colbún          |       | —                       |       | —                 |       | 1,500                     |       | —               |       | 1,500                         |       |
|                 |       |                         |       |                   |       |                      |       |                 |       |                          |       |
| **Total  allocated** |       | 1,760                        |       | 850                    |       | 2,500                     |       | 2,000                |       | 7,110                         |       |
| **Total  required**  |       | 1,760                        |       | 850                    |       | 2,700                     |       | 2,700                |       | 8,010                         |       |
| **%  allocated**     |       | 100.0                        | %          | 100.0                  | %          | 92.6                      | %          | 74.1                 | %          | 88.7                          | %          |

 

Endesa Chile’s contracts with unregulated customersare generally long term and typically range from five to fifteen years.  Such contracts are usually automaticallyextended at the end of the applicable term unless terminated by either partyupon prior notice.  Some of them includea price adjustment mechanism in the case of high marginal costs, which alsoreduces the hydrological risk.  Contractswith unregulated customers may also include specifications regarding powersources and equipment, which may be provided at special rates, as well asprovisions for technical assistance to the customer.  Endesa Chile has not experienced any supplyinterruptions under its contracts.  Incase of *force majeure*, ascontractually defined with non-regulated customers, Endesa Chile is alsoallowed to reject purchases and is required to supply electricity.  Disputes are typically subject to bindingarbitration between the parties, subject to limited exceptions.

 

The following table sets forth our sales by volume toour five largest distribution and unregulated customers in Chile for each ofthe periods indicated:

 

**MAIN CUSTOMERS INCHILE (GWh)**

 
| ** **                                              | ** ** | **Year ended December 31,** | ** ** |
|---------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                              | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008 (3)** | ** ** |
| ** **                                              | ** ** | **Sales  (GWh)**                 | ** ** | **% of  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales** | ** ** |
| **Five  largest distribution companies:**               |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Chilectra                                               |       | 4,190                            |       | 20.0 |   | 4,017 |   | 20.9 |   | 3,727 |   | 18.8 |   |
| CGE                                                     |       | 4,449                            |       | 21.3 |   | 4,835 |   | 25.2 |   | 4,800 |   | 24.2 |   |
| Saesa(1)                                                |       | 665                              |       | 3.2 |   | 746 |   | 3.9 |   | 766 |   | 3.9 |   |
| Empresa Eléctrica de la Frontera S.A.(2)           |       | 717                              |       | 3.4 |   | 756 |   | 3.9 |   | 1 |   | 0.0 |   |
| Empresa  Eléctrica de Atacama S.A.                 |       | 417                              |       | 2.0 |   | 195 |   | 1.0 |   | 173 |   | 0.9 |   |
| **Total  sales to five largest distribution companies** |       | 10,438                           |       | 49.9 |   | 10,548 |   | 54.9 |   | 9,467 |   | 47.8 |   |

 

 

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| ** **                                                   | ** ** | **Year ended December 31,** | ** ** |
|--------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                   | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008 (3)** | ** ** |
| ** **                                                   | ** ** | **Sales  (GWh)**                 | ** ** | **% of  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales** | ** ** |
| **Unregulated  customers:**                                  |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Codelco                                                      |       | 548                              |       | 2.6 |   | 494 |   | 2.6 |   | 482 |   | 2.4 |   |
| CMPC                                                         |       | 937                              |       | 4.5 |   | 1,103 |   | 5.7 |   | 973 |   | 4.9 |   |
| Compañía Minera  Los Pelambres                     |       | 738                              |       | 3.5 |   | 871 |   | 4.5 |   | 874 |   | 4.4 |   |
| Compañía Minera  Collahuasi                        |       | 867                              |       | 4.1 |   | 869 |   | 4.5 |   | 857 |   | 4.3 |   |
| Compañía Acero del Pacífico (“CAP”) |       | 546                              |       | 2.6 |   | 588 |   | 3.1 |   | 568 |   | 2.9 |   |
| **Total  sales to five largest unregulated customers**       |       | 3,635                            |       | 17.4 |   | 3,925 |   | 20.4 |   | 3,753 |   | 18.9 |   |

** **

----

(1)          We do not have a contractwith *Sociedad Austral de Electricidad S.A.* (“Saesa”).  Sales are the result of government Resolution88 that forces the generators of the CDEC-SIC system to supply distributioncompanies without contracts.  Thissituation will remain until December 2009, when this Resolution is set toexpire.

(2)          Until December 2007,Empresa Eléctrica de la Frontera S.A., Frontel, was a party to two contracts,one with Endesa Chile and one with Pangue. In 2008 the contract with Endesa Chile expired.

(3)          In 2008 we agreed on areduction of energy consumption with some costumers, including CMPC andCodelco.

 

Endesa Chile competes in the SIC primarily with twogeneration companies, Gener and *Colbún S.A.*(“Colbún”).  According to the maximumpower considered by CDEC-SIC in the calculation of firm power in 2008, Generand its subsidiaries in the SIC counted on an installed capacity of1,587 MW, of which 82% was thermal, and Colbún on 2,018 MW, of which59% was thermal.  In addition to thesetwo large competitors, there are a number of smaller entities that generateelectricity in the SIC.

 

Endesa Chile’s primary competitors in the SING are *Electroandina, Empresa Eléctrica del Norte GrandeS.A.* and Gener, which have 1,000 MW, 693 MW and643 MW of installed capacity, respectively.  Endesa Chile’s direct participation in theSING, includes a 182 MW Tarapacá thermal plant, owned by its subsidiaryCelta and our indirect participation through our affiliate company, GasAtacama,whose power plant has 781 MW of installed capacity (See “— C.Organizational Structure” for details on related companies”).

 

Electricity generation companies compete largely onthe basis of technical experience and reliability; and, in the case ofunregulated customers, on price.  Inaddition, because 73.5% of our installed capacity in the SIC derives fromhydroelectric power plants, we have lower production costs than companiesgenerating electricity with thermal plants. During periods of extended droughts, however, we may be forced to buymore expensive electricity from thermoelectric generators at spot prices inorder to satisfy our contractual obligations.

 

We have equity investments in GasAtacama andElectrogas.  GasAtacama has the abilityto transport up to 8.5 million cubic meters of gas daily and has agas-fired combined cycle plant with a total installed capacity of approximately781 MW in Mejillones.  Electrogasproduces transportation income derived from the pipeline supplying San Isidroand Nehuenco combined-cycle plants at Quillota.

 

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We, directly and through our subsidiaries Pehuenche,Pangue, San Isidro and Endesa Eco, are the principal operators in the SIC, with48.0% of the total installed capacity and 47.3% of the physical energy sales ofthis system in 2008.

 

Celta, our subsidiary, has a two-turbine 182 MWthermal power plant connected to the SING, which represents 5% of the totalcapacity of the SING.  Through ouraffiliated company, GasAtacama, we have an additional 781 MW participationin the SING.  The following table setsout information relating to Endesa Chile’s electricity generation capacity inChile:

 

**POWER PLANTS IN CHILE(MW) (1)**

 
| ** **               | ** ** | **Type (2)**                                      | ** ** | **System** | ** ** | **Installed  Capacity  (MW)** | ** ** |
|--------------------------|------------|---------------------------------------------------|------------|------------|------------|-------------------------------|------------|
| **Hydroelectric**        | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** **                    | ** ** |
| Rapel                    |       | Reservoir                                         |       | SIC        |       | 377                           |       |
| Ralco                    |       | Reservoir                                         |       | SIC        |       | 690                           |       |
| Cipreses                 |       | Reservoir                                         |       | SIC        |       | 106                           |       |
| El Toro                  |       | Reservoir                                         |       | SIC        |       | 450                           |       |
| Pehuenche                |       | Reservoir                                         |       | SIC        |       | 570                           |       |
| Pangue                   |       | Reservoir                                         |       | SIC        |       | 467                           |       |
| Los Molles               |       | Pass through                                      |       | SIC        |       | 18                            |       |
| Sauzal                   |       | Pass through                                      |       | SIC        |       | 77                            |       |
| Sauzalito                |       | Pass through                                      |       | SIC        |       | 12                            |       |
| Isla                     |       | Pass through                                      |       | SIC        |       | 68                            |       |
| Antuco                   |       | Pass through                                      |       | SIC        |       | 320                           |       |
| Abanico                  |       | Pass through                                      |       | SIC        |       | 136                           |       |
| Curillinque              |       | Pass through                                      |       | SIC        |       | 89                            |       |
| Loma Alta                |       | Pass through                                      |       | SIC        |       | 40                            |       |
| Palmucho                 |       | Pass through                                      |       | SIC        |       | 32                            |       |
| Ojos de Agua             |       | Pass through                                      |       | SIC        |       | 9                             |       |
| **Total  Hydroelectric** | ** ** | ** **                                        | ** ** | ** ** | ** ** | **3,461**                     | ** ** |
| ** **               | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** **                    | ** ** |
| **Thermal**              |       |                                              |       |       |       |                          |       |
| Huasco ST                |       | Steam  Turbine/Coal                               |       | SIC        |       | 16                            |       |
| Bocamina                 |       | Steam  Turbine/Coal                               |       | SIC        |       | 128                           |       |
| Tarapacá GT         |       | Steam  Turbine/Diesel Oil                         |       | SING       |       | 24                            |       |
| Tarapacá coal       |       | Steam Turbine  /Coal                              |       | SING       |       | 158                           |       |
| Diego de Almagro         |       | Gas  Turbine/Diesel Oil                           |       | SIC        |       | 47                            |       |
| Huasco GT                |       | Gas Turbine/IFO  180 Oil                          |       | SIC        |       | 64                            |       |
| San Isidro               |       | Combined  Cycle/Natural Gas & Diesel Oil |       | SIC        |       | 379                           |       |
| Tal-Tal                  |       | Gas  Turbine/Natural Gas & Diesel Oil    |       | SIC        |       | 245                           |       |
| San Isidro II            |       | Combined  Cycle/Gas & Diesel Oil         |       | SIC        |       | 353                           |       |
| **Total  Thermal**       | ** ** | ** **                                        | ** ** | ** ** | ** ** | **1,414**                     | ** ** |
| ** **               | ** ** | ** **                                        | ** ** | ** ** | ** ** | ** **                    | ** ** |
| **Wind**                 |       |                                              |       |       |       |                          |       |
| Canela                   |       | Wind                                              |       | SIC        |       | 18                            |       |
|                     |       |                                              |       |       |       |                          |       |
| **Total  Capacity**      | ** ** | ** **                                        | ** ** | ** ** | ** ** | **4,893**                     | ** ** |

 

(1)          Total installed capacity isdefined as the maximum capacity, under specific technical conditions andcharacteristics.

(2)          “Reservoir” and “pass through”refer to a hydroelectric plant that uses a dam or a river, respectively, tomove the turbines which generate electricity. “Steam Turbine” refers to a thermal power plant that uses natural gas,coal, diesel 

 

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orfuel oil to produce steam, which moves the turbines to generate theelectricity.  “Gas Turbine” (“GT”) or “opencycle” refers to a thermal power plant that uses diesel oil, fuel oil, naturalgas or other fuels to produce gas that moves the turbines to generate theelectricity.  “Combined Cycle” refers toa thermal power plant that uses natural gas, diesel oil or fuel oil to generategas that moves the turbines to generate electricity, and then recovers the gasthat escapes from that process to generate steam to move another turbine.

 

***Generation in Argentina***

* *

We participate in electricity generation in Argentinathrough our subsidiaries EndesaCostanera and El Chocón, with a total of five powerplants.  El Chocón owns two hydroelectricpower plants, with total installed capacity of 1,328 MW and EndesaCostanera owns three thermal plants, witha total installed capacity of 2,324 MW. In 2008, our hydro and thermal generation plants in Argentinarepresented 13.9% of the MEM’s generation capacity in 2008.

 

Our Argentine subsidiaries participate in two newcompanies, *Termoeléctrica Manuel Belgrano S.A.* (“*Manuel Belgrano”*) and *Termoeléctrica José de SanMartin S.A.* (“*San Martín”*).  These companies were formed to undertake theconstruction of two new generation facilities under Foninvemem.  This fund was created by the Secretary ofEnergy to allow the financing and management of all investment aimed atincreasing the electric power supply within the MEM.  These power plants started up operationsusing gas turbines in 2008, with 1,125 MW of aggregate capacity, andoperation as combined cycles is expected to be launched by the second half of2009, with and additional 600 MW of total aggregate capacity.  Since 2002, government intervention andenergy industry authority actions, including limiting the spot price ofelectricity by considering the variable cost of generating electricity withnatural gas without the hydrological conditions of rivers and reservoirs or theuse of more expensive liquid oil, have led to the lack of investment in theelectric power sector.  (See “— ElectricityIndustry Regulatory Framework” and “ — A. History and Development of theCompany” for further detail).

 

As of December 31, 2008, EndesaCostanera’s installed capacity accountedfor 8.9% of the total installed capacity in the *SistemaInterconectado Nacional* (the “Argentine MEM”).  EndesaCostanera’s second combined cycle plant can operatewith natural gas and diesel.  Our1,138 MW steam turbine power plant can operate with either natural gas orfuel oil.

 

El Chocón accounted for5.1% of the installed capacity in the Argentine MEM as of December 31, 2008.  El Chocón has a 30-year concession, ending in2023, for two hydroelectric generation facilities with an aggregate of1,328 MW of installed capacity.  Thelarger of the two facilities for which El Chocón has a concession has1,200 MW of installed capacity and is the primary flood controlinstallation on the Limay River.  Thefacility’s large reservoir, Ezequiel Ramos Mejía, enables El Chocón to be oneof the Argentine MEM’s major peak suppliers. Variations in El Chocón’s waterdischarge are moderated by El Chocón’s Arroyito facility, a downstream dam with128 MW of installed capacity.  In November 2008we finished construction works for the Arroyito dam increasing the reservoirwater level, and allowing us to release 3,750 cubic meters of water persecond, 1,150 cubic meters of water per second more than before.  The additional energy (69 GWh per year)will be sold on the spot market until April 2009 and on the “Energy Plus”market thereafter.  For more informationabout the Energy Plus Service please see “Item 4.  A - Electricity Industry Regulatory Framework- Argentina - IncentivePrograms”.

 

The following table sets forth the installed capacityof our Argentine subsidiaries:

 

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**OUR INSTALLED CAPACITYPER SUBSIDIARY IN ARGENTINA (MW)**

 
| ** **                                                   | ** **   | **As of December 31,** | ** **   |
|--------------------------------------------------------------|--------------|-----------------------------|--------------|
| ** **                                                   | ** **   | **2006**                    | ** **   | **2007** | ** ** | **2008** | ** ** |
| **Endesa********Costanera**                                  | *** *** | *** ***                | *** *** | *** *** | *** *** | *** *** | *** *** |
| Costanera (steam  turbine)                                   |         | 1,138                       |         | 1,138 |   | 1,138 |   |
| Costanera  (combined cycle II)                               |         | 859                         |         | 859 |   | 859 |   |
| Central  Termoélectrica Buenos Aires (combined cycle I) |         | 322                         |         | 327 |   | 327 |   |
| **El  Chócon**                                          |         |                        |         |   |   |   |   |
| El Chócon  (hydroelectric)                              |         | 1,200                       |         | 1,200 |   | 1,200 |   |
| Arroyito  (hydroelectric)                                    |         | 120                         |         | 120 |   | 128 |   |
| **Total**                                                    |         | 3,639                       |         | 3,644 |   | 3,652 |   |

 

Our total generation in Argentina reached10,480 GWh in 2008, 13.5% lower than 12,117 GWh generated in2007.  Our generation market share wasapproximately 9.3% of total electricity production in Argentina during 2008.

 

The following table sets forth the electricitygeneration of our Argentine subsidiaries:

 

**OUR ELECTRICITYGENERATION PER SUBSIDIARY IN ARGENTINA (GWh)**

 
| ** **      | ** ** | **Year ended December 31,** | ** ** |
|-----------------|------------|----------------------------------|------------|
| ** **      | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| EndesaCostanera |       | 8,709                            |       | 8,421 |   | 8,540 |   |
| El Chocón  |       | 5,041                            |       | 3,696 |   | 1,940 |   |
| **Total**       |       | 13,750                           |       | 12,117 |   | 10,480 |   |

 

Hydroelectric generation accounted for nearly 18.5% oftotal generation in 2008, lower than in 2007 due to the restrictions of theoperation of El Chocón imposed by Cammesa and the low level of the reservoirduring the first half of the year.  Thelevel of El Chocón measured biannually in 2007 and 2008, in terms of GWh, isshown in the following table:

 
| ** **                    | ** ** | **2007**  | ** ** | **2008**  | ** ** |
|-------------------------------|------------|-----------|------------|-----------|------------|
| ** **                    | ** ** | **(GWh)** | ** ** | **(GWh)** | ** ** |
| **Reservoir  El Chocón** |       |      |       |      |       |
| June 30,                 |       | 1,000     |       | 100       |       |
| December 31,             |       | 200       |       | 1,400     |       |

 

The percentage of hydroelectric and thermal generationis shown in the following table:

 

**OUR HYDRO/THERMALGENERATION IN ARGENTINA (GWh) (1)**

 
| ** **               | ** ** | **Year ended December 31,** | ** ** |
|--------------------------|------------|----------------------------------|------------|
| ** **               | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **               | ** ** | **(GWh)**                        | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** |
| Hydroelectric generation |       | 5,041                            |       | 36.7 |   | 3,696 |   | 30.5 |   | 1,940 |   | 18.5 |   |
| Thermal  generation      |       | 8,709                            |       | 63.3 |   | 8,421 |   | 69.5 |   | 8,540 |   | 81.5 |   |
| **Total  generation**    |       | 13,750                           |       | 100.0 |   | 12,117 |   | 100.0 |   | 10,480 |   | 100.0 |   |

 

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(1)          Generation minus our ownpower plant consumption and technical losses.

 

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

 

**OUR PHYSICAL GENERATION ANDPURCHASES IN ARGENTINA (GWh)**

 
| ** **              | ** ** | **2006**  | ** ** | **2007** | ** ** | **2008**  | ** ** |
|-------------------------|------------|-----------|------------|----------|------------|-----------|------------|
| ** **              | ** ** | **(GWh)** | ** ** | **%**    | ** ** | **(GWh)** | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** |
| Electricity  generation |       | 13,750    |       | 98.2     |       | 12,117    |       | 97.1 |   | 10,480 |   | 93.8 |   |
| Electricity  purchases  |       | 256       |       | 1.8      |       | 367       |       | 2.9 |   | 694 |   | 6.2 |   |
| **Total(1)**            |       | 14,006    |       | 100.0    |       | 12,484    |       | 100.0 |   | 11,174 |   | 100.0 |   |

 

(1)          Energy generation plus energypurchases differs from electricity sales due to power plant consumption ofelectricity that had been uploaded to the grid, referred to as non-billedelectricity consumption.

 

The distribution ofphysical sales in Argentina, in terms of customer segment, is shown in thefollowing table:

 

**OURPHYSICAL SALES PER CUSTOMER SEGMENT IN ARGENTINA (GWh)**

 
| ** **                   | ** ** | **Year ended December 31,** | ** ** |
|------------------------------|------------|----------------------------------|------------|
| ** **                   | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                   | ** ** | **(GWh)**                        | ** ** | **% of  Sales  Volume** | ** ** | **(GWh)** | ** ** | **% of Sales  Volume** | ** ** | **(GWh)** | ** ** | **% of Sales  Volume** | ** ** |
| Contracted sales             |       | 2,116                            |       | 15.2 |   | 2,364 |   | 19.1 |   | 2,397 |   | 21.6 |   |
| Regulated sales              |       | 11,810                           |       | 84.8 |   | 10,042 |   | 80.9 |   | 8,701 |   | 78.4 |   |
| **Total  electricity sales** |       | 13,926                           |       | 100.0 |   | 12,406 |   | 100.0 |   | 11,098 |   | 100.0 |   |

** **

**OUR PHYSICAL SALES PERSUBSIDIARY IN ARGENTINA (GWh)**

 
| ** **      | ** ** | **Year ended December 31,** | ** ** |
|-----------------|------------|--------------------------------------------|------------|
| ** **      | ** ** | **2006**                                   | ** ** | **2007** | ** ** | **2008** | ** ** |
| EndesaCostanera |       | 8,736                                      |       | 8,450 |   | 8,543 |   |
| El Chocón  |       | 5,191                                      |       | 3,956 |   | 2,554 |   |
| **Total**       |       | 13,926                                     |       | 12,406 |   | 11,098 |   |

 

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During 2008,EndesaCostaneraserved an average of 42 non-regulated customers.  EndesaCostanera has no contract with distributioncompanies.  Given the regulatory measuresadopted since 2003, the current Argentine electricity industry price scenariomakes sales to distribution companies less attractive than sales to thewholesale market.

 

The following table setsforth EndesaCostanera’s sales to its largest non-regulated customers for each ofthe periods indicated:

 

**ENDESA COSTANERA’S MAINCUSTOMERS (GWh)**

 
| ** **                                                               | ** ** | **Year ended December 31,** | ** ** |
|--------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                               | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                               | ** ** | **Sales  (GWh)**                 | ** ** | **% of  Endesa  Costanera’s  contract  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  Endesa  Costanera’s  contract  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  Endesa  Costanera’s  contract  Sales** | ** ** |
| YPF                                                                      |       | —                           |       | — |   | 159 |   | 15.5 |   | 233 |   | 22.5 |   |
| Acindar (Cemsa)  (1)                                                     |       | 102                              |       | 13.4 |   | 88 |   | 8.6 |   | 88 |   | 8.5 |   |
| Solvay                                                                   |       | —                           |       | — |   | 87 |   | 8.5 |   | 130 |   | 12.5 |   |
| Transclor                                                                |       | 86                               |       | 11.3 |   | 81 |   | 7.9 |   | 63 |   | 6.1 |   |
| Peugeot                                                                  |       | 79                               |       | 10.4 |   | 79 |   | 7.7 |   | 63 |   | 6.1 |   |
| Cencosud                                                                 |       | 62                               |       | 8.2 |   | 119 |   | 11.6 |   | 59 |   | 5.7 |   |
| Papelera de la  Plata                                                    |       | 45                               |       | 5.9 |   | — |   | — |   |   |   |   |   |
| Indupa (Cemsa)  (1)                                                      |       | —                           |       | — |   | — |   | — |   |   |   |   |   |
| **Total  sales to Endesa Costanera’s largest contracted customers** |       | 373                              |       | 49.2 |   | 611 |   | 59.7 |   | 635 |   | 61.5 |   |

 

 (1)                   During 2006, Acindar and Indupa did not havecontracts with Endesa Costanera, but served them through Cemsa, an Endesa Chile’saffiliate.  Since 2007, Acindar has beena Endesa Costanera customer and Indupa is no longer a customer.

 

Sales to the pool market increased from 7,427 GWhin 2007 to 7,511 GWh in 2008.

 

The Argentine energy crisis, which began in 2004, continues as of thedate of this Report, but the effects of the restrictions on export of gasabroad were reduced during 2008. In accordance with the open seasonregulations, in 2008 the Argentine government expanded capacity of gastransportation by 3.7 million cubic meters per day.  In June 2008, LNG ships injectedincremental capacity of 8 million cubic meters per day.  On average, the new injections into thesystem amounted to 4.2 million cubic meters per day.

 

During2008, Endesa Costanera, through its subsidiary Cemsa, negotiated with a numberof gas producers which allowed Endesa Costanera to diversify and increase theavailability of gas supply to Endesa Costanera’s units and to trade with othergenerators.

 

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Therelatively dry conditions during the first half of 2008 explain the decrease of35.4% in physical sales of El Chocón, when compared to 2007.  Contracted sales increased from1,342 GWh in 2007 to 1,364 GWh in 2008 and spot sales decreased from2,615 GWh in 2007 to 1,190 GWh in 2008.

 

 During 2008, El Chocón served an average of 18 non-regulatedcustomers.  El Chocón has no contractwith distribution companies.

 

The following table setsforth sales by volume to the largest non-regulated customers of El Chocón foreach of the periods indicated:

 

**EL CHOCON’S MAINCUSTOMERS (GWh)**

 
| ** **                                                             | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                             | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                             | ** ** | **Sales  (GWh)**                 | ** ** | **% of El  Chocón’s  contract  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of El  Chocón’s  contract  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of El  Chocón’s  contract  Sales** | ** ** |
| Minera Alumbrera                                                       |       | 496                              |       | 36.5 |   | 569 |   | 42.4 |   | 571 |   | 41.9 |   |
| Profertil  (Cemsa) (1)                                                 |       | 242                              |       | 17.8 |   | 145 |   | 10.8 |   | 94 |   | 6.9 |   |
| Massuh                                                                 |       | 127                              |       | 9.3 |   | 109 |   | 8.1 |   | 85 |   | 6.2 |   |
| Chevron                                                                |       | 107                              |       | 7.9 |   | 112 |   | 8.3 |   | 136 |   | 10.0 |   |
| Acindar (Cemsa)  (1)                                                   |       | 88                               |       | 6.4 |   | 88 |   | 6.5 |   | 88 |   | 6.4 |   |
| Praxair                                                                |       | —                           |       | 0.0 |   | — |   | 0.0 |   | 89 |   | 6.5 |   |
| Ensi S.E.                                                              |       | 40                               |       | 2.9 |   | — |   | 0.0 |   | 0 |   | 0.0 |   |
| **Total  sales to El Chocón’s largest contracted customers** |       | 1,100                            |       | 80.9 |   | 1,022 |   | 76.2 |   | 1,063 |   | 77.9 |   |

 

----

(1)          Profertil and Acindar do nothave contracts with El Chocón, but are served through Cemsa, an Endesa Chile’saffiliate.

 

Our subsidiary Endesa Chile operates El Chocón pursuantto an operating agreement with a term equal to the duration of the concessionthat expires in 2023.  El Chocón does nothave the right to terminate the operating agreement, unless we fail to performour obligations under the agreement. Under the terms of the operating agreement, we are entitled to a feepayable in dollars based on El Chocón’s annual gross revenues, payable inmonthly installments.

 

Our Argentine subsidiaries compete with all the majorpower plants connected to the MEM, According to the installed capacity reported by Cammesa in the monthlyreport for December 2008, our major competitors in Argentina are AESGroup, *Sociedad Argentina de Energía*(“Sadesa, Bemberg Group”) and *Pampa Energía.*  The AES Group has nine power plants connectedto the MEM with a total capacity of 2,866 MW and one plant not connectedto the MEM that delivers energy to the Chilean SING, Termo Andes, with a totalcapacity of 411 MW; Sadesa Grupo Bemberg owns two plants, *Piedra del Aguila* (hydro 1,400 MW)and *Central Puerto* (thermal1,777 MW); and *Pampa Energía*competeswith us through five power plants,  *Diamante* and *Nihuiles* (bothhydro, 612 MW in total); and *Güemes, Loma de la Lata*and *Piedra Buena* (thermal, 1,365 MW intotal).

 

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***Generation in Brazil***

* *

Endesa Brasil consolidates operations of generationcompanies Endesa Fortaleza and Cachoeira Dourada; CIEN, which transmits electricityfrom two transmission lines between Argentina and Brazil; CTM and TESA,subsidiaries of CIEN, which are owners of the Argentine side of the lines; adistribution company, Ampla, which is the second largest electricitydistribution company in the State of Rio de Janeiro; and Coelce, which is thesole electricity distributor in the State of Ceará.

 

As of December 2008, we had total installedcapacity of 987 MW in Brazil.  Ofthis amount, 665 MW corresponds to Cachoeira Dourada and 322 MW toEndesa Fortaleza.

 

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

** **

**OUR INSTALLED GENERATIONCAPACITY IN BRAZIL (MW) (1)**

 
| ** **         | ** ** | **(MW)** | ** ** |
|--------------------|------------|----------|------------|
| ** **         | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** |
| Cachoeira  Dourada |       | 658      |       | 665 |   | 665 |   |
| Fortaleza          |       | 322      |       | 322 |   | 322 |   |
| Total              |       | 980      |       | 987 |   | 987 |   |

 

(1)          Total installed capacity isdefined as the maximum MW capacity of generation units, under specifictechnical conditions and characteristics.

 

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

 

**OUR****PHYSICAL PRODUCTION IN BRAZIL (GWh)**

 
| ** **         | ** ** | **Year ended December 31,** | ** ** |
|--------------------|------------|----------------------------------|------------|
| ** **         | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **         | ** ** | **(GWh)**                        | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** |
| Cachoeira  Dourada |       | 4,241                            |       | 94.5 |   | 3,888 |   | 98.3 |   | 3,308 |   | 97.9 |   |
| Endesa Fortaleza   |       | 248                              |       | 5.5 |   | 66 |   | 1.7 |   | 71 |   | 2.1 |   |
| Total              |       | 4,489                            |       | 100.0 |   | 3,954 |   | 100.0 |   | 3,379 |   | 100.0 |   |

 

Cachoeira Dourada has a long-term take-or-pay contractwith *Companhia Elétrica de Estado de GoiásS.A.* (“CELG”), a regional state-owned distribution company.  The contract was executed in September 1997when Endesa Chile acquired the concession for Cachoeira Dourada.  The contract originally had a term of 15years.  During the first five years, CELGpurchased all of the contracted capacity of Cachoeira Dourada(415 MW).  During 2008, Cachoeirasold 195 GWh to CELG and 1,168 GWh to other regulated clients as well as2,398 GWh to non-regulated clients and 186 GWh to EndesaFortaleza.  Cachoeira Dourada’s expectsthat the remaining energy can be sold at higher prices in the future.

 

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

 

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| ** **               | ** ** | **Year ended December 31,** | ** ** |
|--------------------------|------------|----------------------------------|------------|
| ** **               | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **               | ** ** | **(GWh)**                        | ** ** | **% of  Sales  Volume** | ** ** | **(GWh)** | ** ** | **% of  Sales  Volume** | ** ** | **(GWh)** | ** ** | **% of  Sales  Volume** | ** ** |
| Contracted sales         |       | 3,285                            |       | 78.6 |   | 3,884 |   | 83.6 |   | 3,947 |   | 89.8 |   |
| Non-contracted  sales    |       | 892                              |       | 21.4 |   | 760 |   | 16.4 |   | 457 |   | 10.2 |   |
| Total  electricity sales |       | 4,177                            |       | 100.0 |   | 4,644 |   | 100.0 |   | 4,403 |   | 100.0 |   |

 

Endesa Fortaleza is wholly owned by Endesa Brasil, inwhich Enersis holds a 53.6% interest. Endesa Fortaleza owns a combined cycle plant which uses natural gas ordiesel oil.  The plant is located 50kilometers from the capital of the Brazilian state of Ceará, and begancommercial operations in 2003.

 

The following table sets forth certain statisticalinformation regarding Endesa Fortaleza’s installed capacity and electricitysales:

 
| ** **               | ** ** | **Year ended December 31,** | ** ** |
|--------------------------|------------|----------------------------------|------------|
| ** **               | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| Installed  capacity (MW) |       | 322                              |       | 322 |   | 322 |   |
| Electricity  sales (GWh) |       | 2,690                            |       | 2,705 |   | 2,690 |   |

 

Endesa Fortaleza’s market share is 0.3% of the totalinstalled capacity of the Brazilian system and 1.4% of the thermoelectricgenerators.

 

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

 
| ** **               | ** ** | **Year ended December 31,** | ** ** |
|--------------------------|------------|----------------------------------|------------|
| ** **               | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **               | ** ** | **(GWh)**                        | ** ** | **% of  Sales  Volume** | ** ** | **(GWh)** | ** ** | **% of  Sales**

**Volume** | ** ** | **(GWh)** | ** ** | **% of  Sales  Volume** | ** ** |
| Contracted sales         |       | 2,690                            |       | 100.0 |   | 2,690 |   | 99.4 |   | 2,690 |   | 100.0 |   |
| Non-contracted  sales    |       | 0                                |       | 0.0 |   | 15 |   | 0.6 |   | 0 |   | 0.0 |   |
| Total  electricity sales |       | 2,690                            |       | 100.0 |   | 2,705 |   | 100.0 |   | 2,690 |   | 100.0 |   |

* *

***Generation in Colombia***

*** ***

Until August 2007, we controlled two electricitygeneration companies in Colombia, Betania and Emgesa.  Thereafter they were merged into Betania,which then changed its name to Emgesa S.A. E.S.P. (“Emgesa”).  As of December 31, 2008, we had a 16.1%economic interest in Emgesa, which we control pursuant a shareholders’agreement.

 

As of December 31, 2008, our Colombiansubsidiary operated eleven generation plants in Colombia, with a totalinstalled capacity of 2,895 MW. Emgesa has 2,451 MW in hydroelectric plants and 444 MW inthermoelectric plants. In April 2008, Emgesa launched commercialoperations of the second unit of Cartagena

 

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that has aninstalled capacity of 66 MW.  Theunit has been out of service since 2006 for maintenance works.

 

Our hydroelectric and thermal generation plants inColombia represent 21.4% of the country’s total electricity generation capacityas of December 2008.

 

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

 

**INSTALLED CAPACITY PERSUBSIDIARY IN COLOMBIA (MW)(1)(2)**

 
| ** **                        | ** ** | **Year ended December 31,** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|
| ** **                        | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                        | ** ** | **(MW)**                         | ** ** |
| ** **                        | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Emgesa**                        |       |                             |       |   |   |   |   |
| Guavio  (hydroelectric)           |       | 1,163                            |       | 1,213 |   | 1,213 |   |
| Paraíso  (hydroelectric)     |       | 277                              |       | 277 |   | 277 |   |
| Guaca  (hydroelectric)            |       | 325                              |       | 325 |   | 325 |   |
| Betania  (hydroelectric)          |       | 541                              |       | 541 |   | 541 |   |
| Termozipa  (thermal)              |       | 236                              |       | 236 |   | 236 |   |
| Cartagena  (thermal)              |       | 142                              |       | 142 |   | 208 |   |
| Minor Plants  (hydroelectric) (3) |       | 96                               |       | 96 |   | 96 |   |
| **Total**                         |       | 2,779                            |       | 2,829 |   | 2,895 |   |

 

(1)          Figures include the capacity used for power plant consumption.

(2)          Installed capacity was certified during 2006, 2007 and 2008 by BureauVeritas.

(3)          As of December 31, 2008,Emgesa owned and operated five minor plants: *Charquito*,*Limonar*, *La Tinta*, *Tequendama*and*La Junca*.

 

Approximately 84.7% of our installed capacity inColombia is hydroelectric.  As a result,our physical generation depends on the reservoir levels and rainfalls.  Our generation market share in Colombia was24% in 2006, 22% in 2007 and 24% in 2008. In addition to hydrological conditions, the amount of generation dependson our commercial strategy.  Colombia’selectricity market is less regulated than the markets of the other countries inwhich we operate.  Companies are free tooffer their electricity at prices driven by market conditions, as opposed tobeing dispatched by a centralized operating entity.

 

The following table sets forth the energy generationfor each of our Colombian subsidiaries:

 

**ENERGY GENERATION PERSUBSIDIARY IN COLOMBIA (GWh)(1)**

 
| ** ** | ** ** | **Year ended December 31,** | ** ** |
|------------|------------|----------------------------------|------------|
| ** ** | ** ** | **(GWh)**                        | ** ** |
| ** ** | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| Emgesa     |       | 10,360                           |       | 11,942 |   | 12,905 |   |
| Betania(2) |       | 2,204                            |       | — |   | — |   |
| **Total**  |       | 12,564                           |       | 11,942 |   | 12,905 |   |

 

(1)          Generation minus power plantown consumption and technical losses.

(2)          Since September 2007,Betania and Emgesa were merged into Betania, which then changed its name toEmgesa S.A. E.S.P.  Emgesa has beenconsolidating the total generation in Colombia since 2007.

 

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Hydrological conditions in 2008 translated into highergeneration for Emgesa when compared to 2007. The main increases were in Cadena Nueva and in Betania, two pass throughunits.  During 2008, thermal generationrepresented 3.9% of total generation and hydroelectric generation the remaining96.1% of our generation in Colombia. However, the two thermal facilities, Termozipa and Cartagena represent15.3% of our total installed capacity in Colombia.  The variable cost of generation for thoseplants was higher than the average spot market price, given the level of supplyand demand of electricity during the year.

 

The following table sets forth the levels ofelectricity production and purchases for our Colombian subsidiaries for thepast three years:

 

**PHYSICAL PRODUCTION ANDPURCHASES IN COLOMBIA (GWh)**

** **
| ** **              | ** ** | **Year ended December 31,** | ** ** |
|-------------------------|------------|----------------------------------|------------|
| ** **              | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **              | ** ** | **(GWh)**                        | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** |
| Electricity  production |       | 12,564                           |       | 81.3 |   | 11,942 |   | 75.8 |   | 12,905 |   | 78.1 |   |
| Electricity  purchases  |       | 2,883                            |       | 18.7 |   | 3,814 |   | 24.2 |   | 3,611 |   | 21.9 |   |
| **Total**               |       | 15,447                           |       | 100.0 |   | 15,756 |   | 100.0 |   | 16,517 |   | 100.0 |   |

 

The sole interconnected electricity system in Colombiais the Colombian National Interconnected System the “Colombian NIS”.  Electricity demand in the Colombian NISincreased 1.9% during 2008.  The totalelectricity consumption was 50,813 GWh in 2006, 52,851 GWh in 2007and 53,870 GWh in 2008.

 

The demand in Colombia’s electricity market has beenaffected by the agreement on International Transactions of Energy governing theinterconnection with Ecuador’s electric system, which began operations in2003.  During 2008, physical sales toEcuador reached 510 GWh, 58% less than the 877 GWh reached in 2007.

 

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

 

**PHYSICAL SALES PERCUSTOMER SEGMENT IN COLOMBIA (GWh)**

 
| ** **                   | ** ** | **Year ended December 31,** | ** ** |
|------------------------------|------------|----------------------------------|------------|
| ** **                   | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                   | ** ** | **Sales  (GWh)**                 | ** ** | **% of  Sales  Volume** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales  Volume** | ** ** | **Sales  (GWh)** | ** ** | **% of Sales  Volume** | ** ** |
| Contracted sales             |       | 9,687                            |       | 63.2 |   | 10,539 |   | 67.5 |   | 11,169 |   | 68.2 |   |
| Non-contracted  sales        |       | 5,640                            |       | 36.8 |   | 5,074 |   | 32.5 |   | 5,199 |   | 31.8 |   |
| **Total  electricity sales** |       | 15,327                           |       | 100.0 |   | 15,613 |   | 100.0 |   | 16,368 |   | 100.0 |   |

 

During 2008, Emgesa served an average of698 contracts with non-regulated customers and 20 distribution and tradingcompanies.  Our sales to the distributioncompany Codensa accounted for 33.9% of our total contract sales in 2008.  Physical sales to the five largestnon-regulated customers altogether reached 3.4% of total contracted sales.

 

The following table sets forth our sales by volume toour five largest distribution customers in Colombia for the last three years:

 

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**MAIN DISTRIBUTION AND TRADINGCUSTOMERS IN COLOMBIA (GWh)**

 
| ** **                                             | ** ** | **Year ended December 31,** | ** ** |
|--------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                             | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                             | ** ** | **Sales  (GWh)**                 | ** ** | **% of  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales** | ** ** |
|                                                   |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Codensa (1)                                            |       | 2,959                            |       | 30.5 |   | 3,036 |   | 28.8 |   | 3,784 |   | 33.9 |   |
| Enertolima                                             |       | 811                              |       | 8.4 |   | 437 |   | 4.1 |   | 150 |   | 1.3 |   |
| Electrocosta                                           |       | 610                              |       | 6.3 |   | 652 |   | 6.2 |   | 79 |   | 0.7 |   |
| Electricaribe                                          |       | 469                              |       | 4.8 |   | 479 |   | 4.5 |   | 1,194 |   | 10.7 |   |
| EPM                                                    |       | 436                              |       | 4.5 |   | 1,102 |   | 10.5 |   | 1,455 |   | 13.0 |   |
| Dicel                                                  |       | 225                              |       | 2.3 |   | — |   | — |   | — |   | — |   |
| Essa                                                   |       | 7                                |       | 0.1 |   | — |   | — |   | — |   | — |   |
| Cens                                                   |       | 5                                |       | 0.0 |   | — |   | — |   | — |   | — |   |
| Meta                                                   |       |                             |       |   |   | 649 |   | 6.2 |   | 624 |   | 5.6 |   |
| **Total  sales to our largest distribution customers** |       | 5,521                            |       | 57.0 |   | 6,355 |   | 60.3 |   | 7,286 |   | 65.2 |   |

 

----

(1)   Our distribution subsidiary inColombia.

 

Our most importantcompetitors in Colombia, as of December 2008 in terms of installedcapacity, include the following state-owned companies: Empresas Públicas deMedellín with 2,601 MW, Isagen with 2,106 MW, and Gecelca with1,178 MW.  We also compete with thefollowing privately owned companies: EPSA (Unión Fenosa) with 832 MW andChivor, which is owned by Gener, with 1,000 MW.

 

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***Generationin Peru***

*** ***

Through our subsidiaryEdegel, we operate a total of nine generation plants in Peru, with a totalinstalled capacity as of December 2008, of 1,467 MW.  Edegel owns seven hydroelectric power plants,with a total installed capacity of 745 MW, two of which are located280 kilometers from Lima and five of which are located approximately50 kilometers from Lima.  Thecompany has two thermal plants which represent the remaining 722 MW oftotal installed capacity.  Ourhydroelectric and thermal generation plants in Peru represent 28.5% of thecountry’s total electricity generation capacity according to the informationreported in December 2008 by the *Organismo Supervisor de laInversión en Energía y Minería*(“Osinergmin”).

 

The following chart setsforth the installed capacity of Edegel:

 

**INSTALLED CAPACITY INPERU (MW)(1)**

 
| ** **                   | ** ** | **Year ended December 31,** | ** ** |
|------------------------------|------------|----------------------------------|------------|
| ** **                   | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                   | ** ** | **(MW)**                         | ** ** |
| **Edegel  S.A.**             |       |                             |       |   |   |   |   |
| Huinco  (hydroelectric)      |       | 247                              |       | 247 |   | 247 |   |
| Matucana  (hydroelectric)    |       | 129                              |       | 129 |   | 129 |   |
| Callahuanca  (hydroelectric) |       | 75                               |       | 80 |   | 80 |   |
| Moyopampa  (hydroelectric)   |       | 65                               |       | 65 |   | 65 |   |
| Huampani  (hydroelectric)    |       | 30                               |       | 30 |   | 30 |   |
| Yanango  (hydroelectric)     |       | 43                               |       | 43 |   | 43 |   |
| Chimay  (hydroelectric)      |       | 151                              |       | 151 |   | 151 |   |
| Santa Rosa  (thermal) (2)    |       | 229                              |       | 231 |   | 229 |   |
| Ventanilla  (thermal) (3)    |       | 457                              |       | 493 |   | 493 |   |
| **Total**                    |       | 1,426                            |       | 1,469 |   | 1,467 |   |

 

----

(1)   Theinstalled capacity was certified during 2006, 2007 and 2008 by Bureau Veritas.

(2)   During 2008the installed capacity of Santa Rosa was redefined as required by the relevantauthority.

(3)   During 2007Ventanilla increased its installed capacity by 36 MW due to the control ofenergy losses.

 

Some of our thermal units had unplanned maintenance inApril and March 2007.  Thermalgeneration in 2008 increased by 643 GWh.

 

Our generation market share has been 27% of totalelectricity production in Peru for 2008 and 28% for 2007.

 

**HYDRO/THERMAL GENERATION IN PERU(GWh)(1)**

 
| ** **                | ** ** | **Year ended December 31,** | ** ** |
|---------------------------|------------|----------------------------------|------------|
| ** **                | ** ** | **2006(2)**                      | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                | ** ** | **(GWh)**                        | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** |
| Hydroelectric  generation |       | 4,197                            |       | 63.0 |   | 4,385 |   | 57.3 |   | 4,189 |   | 51.7 |   |
| Thermal  generation (2)   |       | 2,465                            |       | 37.0 |   | 3,270 |   | 42.7 |   | 3,913 |   | 48.3 |   |
| **Total  generation**     |       | 6,662                            |       | 100.0 |   | 7,654 |   | 100.0 |   | 8,102 |   | 100.0 |   |

 

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----

(1) Generation minus power plant own consumptionand technical losses.

(2) Thermal generation includes Ventanilla’sgeneration since January 2006.

 

Hydrological generation represented 51.7% of Edegel’stotal production in 2008.  The portion ofelectricity supplied by Edegel’s own generation was 93.9% of total physicalsales, requiring only a small amount of purchases to satisfy contractualobligations to customers.

 

For the gas supply for Ventanilla and Santa Rosa,Edegel has supply, transportation and distribution contracts.  During 2007, the gas pipeline Camisea-Lima,owned by *Transportadora de Gas del Perú*, or TGP,reached its full capacity.  However,since May 2008, TGP started restrictions on the gas transferred throughthe pipeline.  In order to guarantee thetransportation capacity for its natural gas demand, Edegel modified itsagreements in the Open Season during 2007 and 2008, shifting from interruptibleto firm mode, with a capacity of 1.5 million cubic meters daily (from August 2008to July 2009) and 2.7 million cubic meters daily (from August 2009to July 2019).

 

**PHYSICAL GENERATION AND PURCHASESIN PERU (GWh) (1)**

 
| ** **              | ** ** | **Year ended December 31,** | ** ** |
|-------------------------|------------|----------------------------------|------------|
| ** **              | ** ** | **2006(2)**                      | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **              | ** ** | **(GWh)**                        | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** | **(GWh)** | ** ** | **%** | ** ** |
| Electricity  generation |       | 6,662                            |       | 96.1 |   | 7,654 |   | 93.9 |   | 8,102 |   | 93.9 |   |
| Electricity  purchases  |       | 274                              |       | 3.9 |   | 499 |   | 6.1 |   | 525 |   | 6.1 |   |
| **Total(1)**            |       | 6,935                            |       | 100.0 |   | 8,153 |   | 100.0 |   | 8,627 |   | 100.0 |   |

 

----

(1)          Total GWh productionplus purchases differs from GWh sales due to transmission losses, given thatour own power plant consumption and technical losses have already beendeducted.

(2)          Figures for 2006 includeVentanilla’s generation and purchases since January 2006.

 

*SistemaEléctrico Interconectado Nacional*, or the SINAC, is the onlyinterconnected system in Peru. Electricity generation in the SINAC increased 8.5% during 2008 whencompared to 2007, reaching a total yearly generation of 29,559 GWh.  Increased demand in Peru is partially aconsequence of larger electricity demand by the mining industry whose growth inelectricity demand was driven by increasing copper and gold production due tohigher international prices for these products.

 

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

** **

**PHYSICAL SALES PER CUSTOMERSEGMENT IN PERU (GWh)**

** **
| ** **                   | ** ** | **Year ended December 31,** | ** ** |
|------------------------------|------------|----------------------------------|------------|
| ** **                   | ** ** | **2006 (2)**                     | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                   | ** ** | **Sales  (GWh)**                 | ** ** | **% of  Sales  Volume** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales  Volume** | ** ** | **Sales  (GWh)** | ** ** | **% of  Sales  Volume** | ** ** |
| Contracted sales  (1)        |       | 6,145                            |       | 90.8 |   | 7,569 |   | 94.7 |   | 8,225 |   | 97.2 |   |
| Regulated sales              |       | 621                              |       | 9.2 |   | 424 |   | 5.3 |   | 235 |   | 2.8 |   |
| **Total  electricity sales** |       | 6,766                            |       | 100.0 |   | 7,994 |   | 100.0 |   | 8,461 |   | 100.0 |   |

 

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----

(1) Includes the sales to distributors withoutcontracts.

(2) Figures for 2006 include Ventanilla’s salessince January 2006.

 

Edegel’s physical sales in 2008 increased 5.8%compared to sales in 2007.  Sales in thespot market decreased 44% and contracted sales increased 9%.  The increase in contracted sales is primarilydue to the increase in Ventanilla’s generation which is sold to ElectroPerú,and the increase in sales to distributors for the bids realized during 2006 and2007.  During 2008, Edegel had sevenregulated customers.  Edegel has hadcontracts since 1997 with *Luz del Sur* andEdelnor, our distribution company in Peru. Edegel also won the bids launched by other distributors during 2006 and2007.  The company has twelvenon-regulated customers.  Sales tonon-regulated customers represented 56.5% of Edegel’s total contracted sales in2008, compared to 56.0% in 2007.

 

The following table sets forth our sales by volume toour largest customers in Peru for each of the periods indicated:

 

**MAIN CUSTOMERS IN PERU (GWh)**

 
| ** **                                                       | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                       | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                       | ** ** | **Sales  (GWh)**                 | ** ** | **% of  contract  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  contract  Sales** | ** ** | **Sales  (GWh)** | ** ** | **% of  contract  Sales** | ** ** |
| **Distribution  companies:**                                     |       |                             |       |   |   |   |   |   |   |   |   |   |   |
| Edelnor  (Regulated) (1)                                         |       | 957                              |       | 15.6 |   | 1,039 |   | 13.7 |   | 1,693 |   | 20.6 |   |
| Luz del Sur  (Regulated) (1)                                     |       | 441                              |       | 7.2 |   | 1,222 |   | 16.1 |   | 1,346 |   | 16.4 |   |
| Hidrandina                                                       |       | —                           |       | — |   | 52 |   | 0.7 |   | 58 |   | 0.7 |   |
| Electronoroeste                                                  |       | —                           |       | — |   | 46 |   | 0.6 |   | 49 |   | 0.6 |   |
| Electronorte                                                     |       | —                           |       | — |   | 45 |   | 0.6 |   | 50 |   | 0.6 |   |
| Electrosur                                                       |       | —                           |       | — |   | 27 |   | 0.4 |   | 30 |   | 0.4 |   |
| **Total  sales to Edegel’s largest distribution companies** |       | 1,398                            |       | 22.8 |   | 2,431 |   | 32.1 |   | 3,226 |   | 39.2 |   |
| ** **                                                       | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Contracted  costumers:**                                       | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ElectroPerú (2)                                             |       | 1,620                            |       | 26.4 |   | 2,427 |   | 32.1 |   | 2,775 |   | 33.7 |   |
| Antamina                                                         |       | 683                              |       | 11.1 |   | 682 |   | 9.0 |   | 644 |   | 7.8 |   |
| Refinería                                                   |       | 569                              |       | 9.3 |   | 516 |   | 6.8 |   | 635 |   | 7.7 |   |
| Siderperú                                                   |       | 330                              |       | 5.4 |   | 362 |   | 4.8 |   | 334 |   | 4.1 |   |
| **Total  sales to Edegel’s contracted costumers**           |       | 3,202                            |       | 52.1 |   | 3,987 |   | 52.7 |   | 4,387 |   | 53.3 |   |
| **Total  sales to Edegel’s largest costumers**              |       | 4,600                            |       | 75.0 |   | 6,418 |   | 84.8 |   | 7,614 |   | 93.0 |   |

 

----

(1)   Thefigures for Edelnor and Luz del Sur represent sales under contracts with Edegelonly, and not withdrawals of these companies assigned to Edegel for noncontract-related consumption.  For 2007and 2008, the energy sold to these distributors includes the amount won byEdegel in the bids realized during 2006 and 2007.

(2)   Since2006, ElectroPerú has been a customer of Edegel due to a merger withEtevensa.  The increase in 2008 is due tothe increase in Ventanilla’s generation which sells the energy to ElectroPerú.

 

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Our most importantcompetitors in Peru are ElectroPerú, Enersur and Egenor, whose capacity isapproximately 908 MW, 836 MW and 507 MW, respectively.

 

**Electricity Transmission Business Segment**

** **

***CIEN***

*** ***

CIEN is wholly-owned byEndesa Brasil, and we hold a 53.6% economic interest in CIEN. CIEN consolidatesCTM and TESA, which operate the Argentine side of the interconnection line withBrazil. CIEN  represented 1.3% of our2008 operating revenues and 3.1% of our operating income, both beforeconsolidation adjustments.

 

CIEN permits the energyintegration of Mercosur and the import and export of electricity betweenArgentina, Uruguay and Brazil.  It hastwo transmission lines covering a distance of about 500 kilometers betweenRincón in Argentina and the Santa Catarina substation in Brazil, and a totalinstalled capacity of 2,100 MW.

 

During 2008, CIENreceived toll payments from Argentina for using the transmission lines from May throughNovember and we expect a similar payment in 2009.

 

**Electricity Distribution Business Segment**

** **

Electricity distributionrevenues represent 57% of our 2008 operating revenues and 44% of our operatingincome, both before consolidation adjustments. Our consolidated physical sales were 62,806 GWh in 2008, a 1.9%higher compared to 61,610 GWh in 2007. Our customer base increased by 4% to 12.4 million clients.

 

Our electricitydistribution business has been conducted in Chile through Chilectra, inArgentina through Edesur, in Brazil through Ampla and Coelce, in Colombiathrough Codensa and in Peru through Edelnor. For more information on energy sales by our distribution subsidiariesfor the past five fiscal years, see “Item 3. Key Information — A. Selected Financial Data”.  Currently, Chilectra is the technicaloperator of Edesur, Edelnor, Ampla and Coelce.

 

In the electricitydistribution business, each of our subsidiaries is a natural monopoly in itsconcession area.  There are natural,although not legal, barriers to entry, since it is not economically efficientfor more than one distribution company to operate in the same concessionarea.  However, the long-term trend inmany of our markets has been toward increased competition of trading companiescompeting with distribution companies for certain customers.  In addition, distribution companies arenormally allowed to charge trading companies a toll for the use of theirlines.  As of the date of this Report,Colombia is the only country with a trading market.  If trading companies will be allowed in othercountries through regulatory changes, we expect to compete effectively with ourown trading companies.

 

***Distribution in Chile: Chilectra***

*** ***

Chilectra is the largestelectricity distribution company in Chile as measured by the number ofregulated clients, distribution assets and energy sales.  Chilectra had consolidated operating incomeof Ch$ 171 billion for 

 

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the year ended December 31, 2008.  Our economic interest in Chilectra is99.1%.  Chilectra operates in aconcession area of 2,118 square kilometers.

 

Chilectra transmits and distributes electricity in 33municipalities of the Santiago metropolitan area.  Chilectra’s service area is defined primarilyas a high density area under the Chilean tariff regulations governing electricitydistribution companies and includes all residential, commercial, industrial,governmental and toll customers.  TheSantiago metropolitan area is Chile’s most densely populated area and has thehighest concentration of industries, industrial parks and office facilities inthe country.  As of December 31, 2008,Chilectra served more than 1.5 million customers.

 

Chilectra currently owns a 34.0% interest in Edesurand, as its operator through 2008, received management fees pursuant anoperation agreement between Chilectra and the stockholders of Edesur.  In November 2004, the agreement wasamended to change the calculation of Chilectra’s management fees. However, in2008, Chilectra’s agreement with Edesur expired and no management fees arereceived since then.  As of December 31, 2008, Chilectra had a9% interest in Endesa Brasil.  Chilectraholds a 35.6% direct and indirect interest in Ampla and a 10.8% interest inCoelce through Investluz and Endesa Brasil. Ampla and Coelce are described below. Chilectra also owns a 9.9% interest in Codensa in Colombia and a 15.6%interest in Edelnor in Peru.  There areno operator fees associated with Chilectra’s involvement in these companies.

 

For the fiscal year ended December 31, 2008,residential, commercial, industrial and other customers, who are primarilypublic and municipal, represented 26.6%, 25.6%, 24.8% and 23.0%, respectively,of Chilectra’s total energy sales of 12,535 GWh.  For the five-year period ended December 31, 2008,physical energy sales increased at a compounded annual rate of 3.2%. For theyear ended December 31, 2008, revenues from electricity sales wereCh$ 997.4 billion.

* *

In accordance with Chile’s regulatory framework forelectricity distribution, more than one concession may be granted for the sameterritory.  However, barriers to entryare high because electricity distribution requires an extensive distributionnetwork and significant capital outlays. To date, the Ministry of Economy has not granted any significantoverlapping concessions.  Nevertheless,the existing tariff system for distribution companies, which sets tariffs byapplying efficiency guidelines to a selected actual company of similar size,the model company, has the inherent effect of creating competition betweensimilarly sized electricity distribution companies to improve operatingefficiency, reduce distribution energy losses and increase operating margins.

 

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

 

·                  installing theirown lines directly from a generation company;

 

·                  arranging asupply contract with a generation company, which pays a toll to a transmissioncompany and a distribution company;

 

·                  negotiating acontract with a distribution company; and

 

·                  generating theirown electricity.

 

We are not aware of any customers in our concession area that haveinstalled their own lines from a generation company as of the date of thisReport.  There is currently nosignificant self-generation or co-generation within Chilectra’s concessionarea.

 

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***Distribution in Argentina: Edesur***

*** ***

Our electricitydistribution operations in Argentina are conducted through Edesur, which holdsa concession from the Argentine government to transmit and distributeelectricity in the southern part of Buenos Aires.  The concession agreement precludes third partiesfrom constructing distribution assets within Edesur’s territory.

 

Edesur is the secondlargest electricity distribution company in Argentina as measured by energypurchases.  Our economic interest inEdesur is 65.4%.  Edesur operates in aconcession area of 3,309 square kilometers.

 

Edesur distributeselectricity in the major business district and several residential areas of thesouthern part of Buenos Aires.  As of December 31, 2008,Edesur distributed electricity to 2.2 million customers.  Residential, commercial, industrial and othercustomers, primarily public and municipal, represented 40.2%, 32.7%, 20.1% and7.0%, respectively, of Edesur’s total energy sales.  It had energy losses of 10.6%.  For the year ended December 31, 2008,revenues from electricity sales amounted to Ch$ 382.9 billion.

 

In 2008, Edesur’sphysical energy sales increased by 2.1%, to 16,160 GWh, compared to 15,833GWh in 2007.

 

***Distribution in Brazil: Ampla & Coelce***

*** ***

Our electricitydistribution business in Brazil is conducted through Ampla and Coelce.  The concessions for Ampla and Coelce arenon-exclusive in their respective territories. Physical sales in Brazil represented 27% of our consolidated energysales in distribution and Brazilian customers represent 43% of our consolidatedcustomer base.

 

***Ampla***

*** ***

We hold a 69.9% economicinterest in Ampla as of December 31, 2008. Chilectra is the technical operator of Ampla but does not receive feesfor such role.

 

Ampla is engagedprincipally in the distribution of electricity to 66 municipalities of theState of Rio de Janeiro and serves 2.5 million customers in a concession areaof 32,054 square kilometers, where an estimated 8.0 million people live. As of December 31,2008, residential, commercial, industrial and other customers represented36.9%, 18.7%, 26.1% and 18.3%, respectively, of Ampla’s total sales of 9,119GWh. It represents a 1.5% increase compared to 2007. For the year ended December 31,2008, revenues from electricity sales amounted to Ch$ 837.6 billion.  As of December 31, 2008, Ampla’s energylosses were 20.2% compared to 21.4% in 2007.

 

***Coelce***

*** ***

We hold a 34.9% economicinterest in Coelce, the sole electricity distributor in the State of Ceará, innortheastern Brazil, through a 56.6% interest in Investluz, which owns 56.6% ofthe capital stock of Coelce.  Chilectrais Coelce’s technical operator but does not receive fees for such role.  As of December 31, 2008, Coelce servedover 2.8 million customers within a concession area of 148,825 squarekilometers.  During 2008, Coelce hadannual sales of 7,571 GWh of energy, which represents a 4.8% increase comparedto 2007.  These sales representedCh$ 626.8 billion.

 

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Coelce has a relatively stable client base withresidential clients representing 33.2% of energy sold.  In 2008, Coelce bought 33% of its energy fromEndesa Fortaleza, 24% from CCEARs, 20% from Furnas, 15% from CHESF and 8% fromother suppliers.

 

As of December 31, 2008, residential, commercial,industrial and other customers represented 33.1%, 18.7%, 25.8% and 22.4%, ofCoelce’s total energy sales.  As of December 31,2008, Coelce’s energy losses were 11.7% compared to 12.5% in 2007.

 

***Distributionin Colombia: Codensa***

** **

We distribute electricity in Colombia through oursubsidiary Codensa in which we hold a 21.7% economic interest.  Most of the other distribution companies inColombia are state owned.  On the otherhand, the possibility of trading energy in Colombia makes that country’selectricity market quite competitive.

 

Codensa serves a region of 41,740 square kilometers inthe capital, Bogotá, and 96 other municipalities in the Department of *Cundinamarca*, *Tolima* and *Boyacá*. More than 9.6 million people, or 23% of theColombian population, live in Codensa’s service area, where it servesapproximately 2.3 million customers.  Forthe year ended December 31, 2008, revenues from electricity sales amountedto Ch$ 608.5 billion.

 

During 2008, Codensa’s annual sales reached 11,822GWh, reflecting a 3.3% increase compared to 2007.  Of these sales, residential, commercial andindustrial represented 88.2%, 9.9% and 1.7%, respectively.  Codensa purchased 46% of its energy in 2008from Emgesa, a generating company controlled by Endesa Chile, and 54% fromother suppliers.  Since 2001, Codensaonly services regulated clients.  Theunregulated market is serviced directly by our generation subsidiary, Emgesa,with the exception of the public lighting in Bogotá.  Codensa’s energy losses in 2008 were 8.1%,compared to 8.7% in 2007.

 

***Distributionin Peru: Edelnor***

** **

Our electricity distribution business in Peru isconducted through Edelnor, in which we have a 33.5% economic interest through  Distrilima, in which we hold a 55.9% interest.Distrilima owns a 60% interest in Edelnor.

 

Edelnor operates in a concession area of 2,440 squarekilometers. For the year ended December 31, 2008, the company had revenuesfrom electricity sales of Ch$ 294.2 billion. Edelnor has an exclusiveconcession to distribute electricity in the northern part of the capital city,Lima, some provinces of the Lima department such as *Huaral*,*Huaura*, *Barranca*and *Oyón*, and in the adjacent province of *Callao*.  As of December 31,2008, Edelnor distributed electricity to approximately 1.0 million customers,an increase by 4.2% from December 31, 2007.

 

For the year ended December 31, 2008, Edelnor hadtotal energy sales of 5,599 GWh.  Thecompounded annual growth rate in energy sales from 2003 to 2008 was 7.7%.  Edelnor’s energy losses in 2008 were 8.2% ,compared to 8.1% in 2007.

 

Edelnor’s concession agreement is exclusive in itsterritory.  The Peruvian regulatoryauthority sets tariffs for distribution companies by using the “model company”approach, which entails applying efficiency guidelines to a selected actualcompany of comparable size.  Thisapproach to setting tariffs has the inherent effect of encouraging distributioncompanies to improve operating efficiency, reduce distribution losses andincrease operating margins. Chilectra is Edelnor’s operator but does notreceive fees for such role.

 

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***Non-Electricity Businesses***

*** ***

***Non-electricity business represented less than 5% of our2008 operating revenues and less than 1% of our 2008 operating income, both beforeconsolidation adjustments.***

*** ***

***Compañía Americana deMultiservicios (CAM)***

*** ***

*CAM is a wholly-owned subsidiary that represented less than3% of our 2008’s operating****revenues before consolidationadjustments. CAM is engaged in the electrical parts procurement business and isthe entity in charge of providing continuity to our engineering and electricalservice activities, both in Chile and abroad, and concentrates on managinglarge-scale services for public utility companies, especially in theelectricity, telecommunications, gas and w*ater distribution sectors.

*** ***

***Synapsis***

*** ***

Synapsis is a whollyowned subsidiary that represented 1.1% of our 2008’s operating******revenues before consolidationadjustments.  It is engaged in theinformation system business.  Synapsis providesIT solutions (outsourcing, hardware, data center, consulting.) to the services,energy, telecommunications and public administration markets.

 

***Inmobiliaria Manso de Velasco (IMV)***

*** ***

IMV, a wholly ownedsubsidiary, develops real estate projects in Chile and represented less than 1%of our 2008 operating revenues before consolidation adjustments.

 

**ElectricityIndustry Regulatory Framework**

** **

***Chile***

*** ***

***Industry Structure***

*** ***

The electricity industryin Chile is divided into three business segments: generation, transmission anddistribution.  The generation segmentconsists of companies that produce electricity. They sell their production to distribution companies and unregulatedcustomers through contracts or to other generation companies through the spotmarket.  The transmission segmentconsists of companies that transmit at high voltage the electricity produced bygeneration companies.  Finally, thedistribution segment is defined for regulatory purposes to include allelectricity supply to end users at a voltage no higher than 23 kV.

 

The electricity sector inChile is regulated pursuant to Decree with force of Law No.1 of 1982, asamended, and the regulations under Decree No.327 of 1998, as amended,collectively known as the Chilean Electricity Law.

 

In Chile there are fourseparate interconnected electricity systems. The main systems that cover the most populated areas of Chile are the *Sistema Interconectado Central*, or SIC, servicing thecentral and south central part of the territory, where 93% of the Chileanpopulation lives, and the *Sistema Interconectado delNorte Grande*, or SING, which operates in the northern part of thecountry.  According to the 2002 census,6.1% of 

 

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the Chilean population lives in the territory serviced by theSING.  In addition to the SIC and theSING, there are two smaller systems in southern Chile that provide electricityin remote areas.  The operation ofelectricity generation companies in each of the two major interconnectedelectricity systems is coordinated by their respective dispatch center,*Centro de Despacho Económico de Carga*, (“CDEC”),an autonomous entity that involves industry groups and transmissioncompanies.  CDECs coordinate theoperation of their system as efficient markets for the sale of electricity, inwhich the lowest marginal cost producer is used to satisfy demand.  As a result, at any specific level of demand,the appropriate supply will be provided at the lowest possible cost ofproduction available in the system at any moment.  Certain major industrial companies own andoperate generation systems to satisfy their own needs.

 

**Chilean Electricity Law**

** **

***General***

*** ***

The goal of the ChileanElectricity Law is to provide incentives to maximize efficiency and to providea simplified regulatory scheme and tariff-setting process which limits thediscretionary role of the government by establishing objective criteria for settingprices.  The expected result is aneconomically efficient allocation of resources. The regulatory system is designed to provide a competitive rate ofreturn on investment to stimulate private investment, while ensuring theavailability of electricity service to all who request it.

 

Three governmentalentities have primary responsibility for the implementation and enforcement ofthe Chilean Electricity Law.  TheNational Energy Commission, or CNE, calculates retail tariffs and wholesale, ornode prices, which require the final approval of the Ministry of Economy andprepares the indicative plan, a ten-year guide for the expansion of the systemthat must be consistent with the calculated node prices.  The**Superintendent of Energy and Fuels, orSEF, sets and enforces the technical standards of the system and the propercompliance with the law.  In addition,the Ministry of Economy grants final approval for tariffs and node prices setby the CNE and regulates the granting of concessions to electricity generation,transmission and distribution companies.

 

Generation companies mustcoordinate their operations through the CDECs to minimize the operating costsof the electricity system and monitor the quality of service provided bygeneration and transmission companies. Generation companies fulfill their contractual sales obligations withdispatched electricity, whether produced by them or purchased from othergeneration companies in the spot market. The principal purpose of a CDEC in operating the dispatch system is toensure that only the most efficiently produced electricity is dispatched tocustomers.  However, the CDEC also seeksto ensure that every generation company has enough installed capacity and canproduce enough electricity to meet the demand of its customers.  Since 70% of our generation is hydroelectricand therefore our marginal cost of production is generally the lowest, ourelectricity capacity in the SIC is generally dispatched first under normal orabundant hydrological conditions. Generation companies balance their contractual obligations with theirdispatch by buying electricity at the spot market price, which is set hourly byeach CDEC, based on the marginal cost of production of the next kWh to bedispatched.

 

***Sales byGeneration Companies***

*** ***

Sales may be made tofinal customers under contracts or to other generation companies on a spotbasis.  Generation companies may also beengaged in contracted sales among each other at negotiated prices.  Contract terms are freely determined.

 

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*** ***

***Sales toDistribution Companies and Certain Regulated Customers***

*** ***

Historically, sales todistribution companies for resale to regulated customers have been made throughcontracts at regulated prices (“node prices”) in effect at the relevantlocations (“nodes”) on the interconnected system through which such electricityis supplied. Nevertheless, since 2005 all new contracts between generation anddistribution companies for the supply to regulated customers must be the resultof international auctions which have a maximum regulated offer energy priceequal to 120% of the average price paid by the unregulated customers at the timethat the bid is made.  If the first bidis unsuccessful, authorities may increase the maximum energy price by anadditional 15%.  The bids are awarded ona minimum price basis.  The priceassociated with these bids will be transferred directly to final users,replacing the current regulated price regime. During the life of the contract, the energy and capacity prices will beindexed according to formulas set forth in the bid documentation and linked tofuel, investment and other costs of energy generation.  From 2010 onwards, under the bid system alldistribution companies will have electricity contracts.

 

Regulated customers arethose with a maximum consumption capacity not exceeding 0.5 MW.  Customers between 0.5 MW and 2 MW maychoose their status as regulated or unregulated. Customers with capacity needsover 2 MW are unregulated.  Two nodeprices are paid by distribution companies: one for capacity and the other forenergy consumption.  Node prices forcapacity are calculated based on the marginal cost of increasing the existingcapacity of the electricity system with the least expensive dispatch by anygenerating facility.  Node prices forenergy consumption are calculated based on the projected marginal cost ofsatisfying the demand for energy at a given point in the interconnected system,during the next 48 months in the SIC and during the next 24 months in theSING.  The determination of such marginalcost takes into account the principal variables in the cost of energy over theten-year period, including projected growth in demand, reservoir levels, fuelcosts for thermal electricity generation facilities, planned maintenanceschedules and other factors that could affect the availability of existinggeneration capacity and scheduled additions to generation capacity during theten-year indicative electricity development plan.  The same general principles are used todetermine marginal cost in the SING.

 

Node prices for capacityand energy consumption are established every six months, in April and October.  Although node prices are quoted in pesos, thecalculations are made in dollars.  Nodeprices may be adjusted during such period depending on the fluctuations of theaverage prices on sales by generators to their unregulated clients.

 

***International Bidsfor Supplying Regulated Customers***

*** ***

The first internationalauction for the supply to distribution companies’ regulated customers tookplace in 2006.  This auction met 100% ofthe energy needs required by participating distribution companies.

 

During 2008 Chilectralaunched a bidding process for the supply of its regulated customers andcontracted a total of 1,800 GWh from 2011 onwards.  These contracts let Chilectra meet the demandof its regulated customers until 2013.

 

***Sales toOther Generation Companies***

*** ***

Each CDEC annuallydetermines a firm capacity for each power plant.  The generation company is allowed to sellcapacity up to its ‘firm capacity’.  Firmcapacity is the highest capacity which a generator may supply to the system atcertain peak hours, taking into consideration statistical information regardingthe time it is out of service such as downtime due for maintenance.

 

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A generation company maybe required to purchase or sell energy, or capacity, in the spot market at anytime, depending upon its contractual requirements in relation to the amount ofelectricity to be dispatched from such company and to its firm capacity.

 

***Transmission***

*** ***

Since transmission assetsare built pursuant to concessions granted by the government, the law requirestransmission companies to operate on an “open access” basis, in which consumersmay obtain access to the system by contributing toward the costs of operating,maintaining and, if necessary, expanding the system.  Transmission companies recover theirinvestment in transmission assets through tolls, or “wheeling rates,” which arecharged to generation and distribution companies in the proportion 80% togenerators and 20% to distributors. Transmission tariffs are determined every four years by a decree of the Ministry of Economy.

 

***Distribution Tariff to Final Customers***

*** ***

The tariff charged bydistribution companies to final customers is determined by the sum of the costof electricity purchased by the distribution company, a transmission charge andthe “value added by the distribution network”, or VAD, which allowsdistribution companies to recover their operating costs.  The price for both generation anddistribution capacity sold to customers includes a factor which reflects thesimultaneous contribution of each customer to peak capacity demand of thesystem as a whole.  The transmissioncharge reflects the cost paid for transmitting and transformingelectricity.  The VAD includes an allowedreturn on investment.

 

***VAD Tariff***

*** ***

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

 

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

 

***Distribution Tariff-Setting Process***

*** ***

VAD is set every fouryears.  The CNE classifies companies intogroups, according to Typical Distribution Areas, based on economic factors thatgroup companies with similar distribution costs due to population density whichdetermines equipment density in the network.

 

Actual return oninvestment of a distribution company depends on its performance relative to thestandards chosen by the CNE for the model company.  The tariff system allows for a greater returnto distribution companies that are more efficient than the model company.  Tariff studies are performed by the CNE anddistribution companies.  Tariffs areestimated as a weighted average of the results of the CNE-commissioned studyand the companies’ study, with the results of the CNE’s study bearing twice theweight of the companies’ results. Preliminary tariffs are tested to ensure that they provide an averageactual annual internal rate of return between 6% and 14% on the replacementcost of electricity-related assets for the entire distribution segment.

 

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The last process forsetting distribution tariffs was held in 2008.

 

***Concessions***

*** ***

The law permitsgeneration without a concession. However, generation companies may apply for a concession to facilitate accessto third-party properties.  Third-partyproperty owners are entitled to compensation, which may be agreed to by theparties or, if there is no agreement, may be determined by an administrativeproceeding that may be appealed in the Chilean courts.

 

***Fines**and Compensations***

*** ***

If a rationing decree isenacted in response to prolonged periods of electricity shortages, severepenalties may be imposed on generation companies that violate the decree.  A severe drought is not considered a *force majeure* event.

 

Generation anddistribution companies may also be required to pay fines to the regulatoryauthorities, related to blackouts due to a generator’s operational failure,including failures related to the coordination duties of all the system’sagents as well as to make compensatory payments to final consumers affected byshortages.  If generation companiescannot meet their contractual obligations to deliver electricity during periodswhen a rationing decree is in effect and there is no energy available to purchasein the system, the generation company must compensate customers at the failurecost determined by the authority in each tariff setting.  Failure costs correspond to the average costincurred by final consumers in providing a kWh by their own means.

 

Distribution companiesmay be required to compensate final customers if there are shortages ofelectricity that exceed the authorized standards.  These compensatory payments shall be at anamount equal to double the non-supplied energy at failure cost.

 

Along with the VAD tariffprocess for 2008, the CNE published a report on associated electricalservices.  Agents, generation,transmission and distribution companies submitted their comments.  Final tariffs are expected be effective in2009.

 

***EnvironmentalRegulation***

*** ***

The Chilean Constitutiongrants all citizens the right to live in a pollution-free environment.  It establishes that other constitutionalrights may be limited in order to protect the environment.  Chile has numerous laws, regulations, decreesand municipal ordinances that may raise environmental considerations.  Among them, are regulations relating to wastedisposal (including the discharge of liquid industrial waste), theestablishment of industries in areas in which they may affect public health,and the protection of water for human consumption.

 

Environmental LawNo.19,300, was enacted in 1994 and implemented by “*Reglamento30*” issued in 1997.  This lawrequires generation and transmission companies to conduct environmental impactstudies of any future projects and to submit such studies for approval by theChilean Environmental Commission, or Conama. It also requires an environmental impact evaluation by the Chileangovernment or obtaining an environmental insurance policy insuring compliancewith standards for emissions, noise, waste and disposal and authorizes therelevant ministries to establish emission standards.  Our Chilean subsidiaries apply the guidelinesset out in *Reglamento 30* when analyzing futureprojects.

 

On April 1, 2008,Law 20,257, which is an amendment to the General Services Law*,* was enacted.  Thepurpose of this law is to promote the use of non-conventional renewable energy,or NCRE.  This law defines the different 

 

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types of technologies considered as NCRE, and establishes theobligation of generators between 2010 and 2014, to supply 5% of their totalenergy contracted from August 31, 2007, to be of such type, and toprogressively increase this percentage from 0.5% on that date up to 10% in2024.  Our power plants that meet therequirements to be considered as NCRE generators are: Palmucho (32 MW),Canela (18 MW) and Ojos de Agua (9 MW) representing 1.2% of ourinstalled capacity as of December 2008. Additionally, the law sets forth fines for the generators that do notcomply with this obligation.  Ourgeneration subsidiary Endesa Chile estimates that it will be able to fully complywith this obligation by 2010 and even generate excess NCRE energy, which couldbe sold to other generators.  Theadditional cost of generating electricity with NCRE, as compared toconventional sources, will be charged to the new contracts, thus eliminatingthe impact on revenues.

 

***Waterrights***

*** ***

Endesa Chile ownsunlimited duration, unconditional and absolute property water rights granted bythe Chilean Water Authority.  Chileangeneration companies must pay an annual fee for unused water rights.  Endesa Chile permanently analyzes which waterrights it will maintain or disregard. During 2008, we paid and recovered fees in the amount of Ch$ 2,501million ($ 3.9 million using the 2008 year-end exchange rate).  This amount may vary in the future accordingto the water rights we may hold each year. We estimate that in 2009 we will pay fees in the amount ofCh$ 1,802 million ($ 3.0 million).  We estimate that if we do not abandon anywater rights in the SIC, we will have to pay license in the amount up to $ 4.9 millionper year until 2011.    Thereafter, thisamount will be doubled and remain constant for five years, at which point thelicense fees will be doubled again.  Inthe case of water rights located in southern Chile, outside the area comprisedby the SIC, the license fees will be paid starting as of January 1, 2012.  They may be recovered through monthly taxcredits, until the license fee payments are recovered in full.

 

***Argentina***

*** ***

***Introduction***

* *

LawNo.15,336 of 1960 and Law No.24,065 of 1992 (together, the “ArgentineElectricity Act”) set the regulatory framework for the electricity sector.

 

Under the ArgentineElectricity Act the Federal Government:

 

·                  divided theindustry into three business segments: generation, transmission anddistribution to enable the electric market development under free competitionfor generation with reduced tariffs, requirements for certain qualitystandards, and to avoid ownership concentration;

 

·                  created theWholesale Power Market, or “MEM”, where four categories of agents (namely,generators, transmitters, distributors and large users) are allowed to buy andsell electricity and related products;

 

·                  decreedAdministrative Company for the Wholesale Electricity Market, or “Cammesa”,responsible for the dispatch coordination, administration of the agents’transactions in the MEM and the calculation of spot prices.  The agents participate as shareholders inCammesa through their corresponding associations with the Secretariat ofEnergy, the owner of the remaining 20% of Cammesa’s capital stock.  The Ministry of Federal Planning, PublicInvestments and Services, “*Ministerio dePlanificación Federal, Inversión Pública y Servicios”,* appoints thechairman of Cammesa’s board of directors; and

 

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·                  created theElectric Power National Regulatory Agency, or “ENRE”, empowered to regulatepublic service activities in the electricity sector and impose jurisdictionaldecisions.

 

TheSecretariat of Energy is primary responsible for the implementation of theArgentine Electricity Law. Resolution SEE No.61/1992, as amended,established the Procedures for Operation, Dispatch of Charges and PriceCalculation Program, or “Procedures”, which regulate the dispatch of the systemand the activities in the MEM. Resolution SE No.21/1997 regulates the procedure to grant theconcessions of international interconnected transmission systems.

 

***Industry structure***

*** ***

The generation sector is organized on a competitivebasis, with independent generators selling their production on the MEM’s spotmarket or through private contracts to purchasers; on the term market of theMEM.

 

Transmissionoperates under monopoly conditions by several companies to whom the FederalGovernment grants concessions.  Ourconcessionaire operates and maintains the highest voltage facilities and eightconcessionaires operate and maintain their high and medium voltage facilities,to which facilities of generation plants, distribution systems and big clientsare connected.  The internationalinterconnected transmission systems also require concessions granted by theFederal Government.  Transmissioncompanies are authorized to charge different tolls for their services.

 

Distributionis a public service that works under monopoly conditions and is provided bycompanies who have been granted concessions. Distribution companies have the obligation to make electricity availableto the final customers within a specific concession area, regardless whetherthe final customer has contracts with the distributor or a generator.  Accordingly, these companies are regulatedwith respect to tariffs and are subject to service quality standards.  Distribution companies may obtain electricityeither in MEM spot market at a price called seasonal price, or in MEM termmarket through contracts with generators. The seasonal price defined by the Secretariat of Energy is the cap forthe costs of electricity bought by distributors, and passed through toregulated customers.

 

Thereare three electricity distribution areas subject to federal concessions.  The concessionaires are Edelap, Edesur andEdenor.  The local distribution areas aresubject to concessions granted by the provincial or municipal authorities.  Nonetheless, all distribution companies actingin the MEM must operate under its rules.

 

Electricityfinal customers are regulated customers supplied by distributors at regulatedtariffs, unless they have a demand of at least 30 kW, and choose tocontract their supply from generators in MEM’s spot market, in which case theyare considered large clients.

 

Tradersare also authorized participate in the MEM. They buy and sell energy and related products from and for agents of theMEM, including such received by the provinces as payments for electricityroyalties.

 

Nogenerator, distributor, big client, nor any company controlled by some of themor controlling the same, may either be owner or major shareholder of atransmission company or of its controlling company.  Transmission companies are prohibited fromgenerating, distributing, purchasing and/or selling electricity.  Distribution companies are prohibited fromowning generation units.

 

***Dispatch and Pricing***

*** ***

The coordination of dispatch operations, fixing ofspot prices and administration of economic transactions in the MEM arecontrolled by Cammesa.  All generatorsthat are MEM agents should be connected to the Argentine Interconnected System,or “Argentine NIS”, and are obliged to comply with the dispatch order togenerate and 

 

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deliver the energy to the Argentine NIS in order to be sold either inMEM’s spot or term markets.  Distributioncompanies, traders and big clients that have entered into private supply contracts withgeneration companies pay the contractual price directly to the generator andalso pay a toll to distribution companies for the use of their systems.

 

The spot price iscalculated on an hourly basis by Cammesa according to the cost of the marginalkW to be dispatched in the Argentine NIS and is paid to generators and sellersof energy at the spot market.  TheArgentine Electricity Act sets that electricity prices in the spot market aredetermined on a marginal cost basis. Since 2002, the Secretariat of Energy started to modify several criteriaaround the spot prices and imposed, among other restrictions, caps for spotprices to be paid to generators. It also recognized the costs of natural gasaccording to the Federal Government’s estimates, even though additional costsare collected by the market and paid to the generator with such costs.

 

In order to stabilizedistribution tariffs, the market has a seasonal price as the price to be paidby distributors for their purchases of electricity traded in the spot market.  It is a fixed price determined every sixmonths by the Secretariat of Energy after Cammesa recommends the seasonal pricelevel for next period according to its estimated spot price based on itsevaluation of the expected supply, demand and available capacity as well asother factors.  The seasonal price ismaintained for at least 90 days. Since 2002, the Secretariat of Energy has been approving seasonal priceslower than those recommended by Cammesa. Effective from October 1, 2008, Resolution 1169/08 imposed an increase in the seasonal price toresidential, commercial and industrial customers with high demand.

 

***Regulatory Developments: the industry after the PublicEmergency Law***

*** ***

***General***

 

Law No.25,561, titledPublic Emergency Law, was enacted in 2002 to manage the public emergency . Itforced the renegotiation of public service contracts (such as electricitytransmission and distribution concession contracts), imposed the conversion ofdollar denominated obligations into Argentine pesos at a rate of Ar$ 1 per$ 1 and empowered the Federal Government to implement additional monetary,financial and exchange rate measures to overcome the economic crisis thataffected Argentina.  The effects of thesemeasures have been periodically extended. Law No.26,456, enacted in December 2008, extended its effects untilDecember 31, 2009.

 

Following that law, theSecretariat of Energy introduced several regulatory measures aimed to correctthe effects of the devaluation into the costs and prices in the MEM and toreduce the price to be paid by the final customers.

 

***Generation***

*** ***

The mandatory conversionof transmission and distribution tariffs in Argentine pesos from dollars at apegged rate of Ar$ 1 per $ 1 while the market exchange rate had beenapproximately Ar$ 3 per $ 1 and the regulatory measures to cap andreduce the spot and seasonal prices hindered the transfer of variable costs ofgeneration into the transmission and distribution tariffs to final customers.

 

These measures reducedrevenues of the generators since the authority — through Resolution SENo.406/2003 — only allows payments to them for the remaining amounts collectedfrom the purchasers in the spot market after the payment of other obligationsin the MEM and discouraged savings in electricity consumption as well asinvestments to satisfy the increase in demand, including the transmissioncapacity.

 

Additionally, generatorssuffered an income reduction from contracted prices because they were reducedas a 

 

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consequence of the spot price level.

 

The obligation to settlethe unpaid spot electricity with generators, led authorities to fundinvestments in new capacity within the MEM, through Foninvemem, a fund managedby Cammesa.  Funds in Foninvemem havebeen used to install two combined cycle generation plants of 800 MW each.

 

Resolution SE No.240/2003changed the way to fix spot prices with natural gas tariffs by imposing a capon generation costs and decoupling the spot price from the marginal costs ofthe generation company also operating with fuel.  The resolution also imposed additional cappedprices for hydroelectric generators. Although generation dispatch is still based on fuels used, the spotprice calculation under the resolution is defined as whether all dispatchedgeneration units did not have restrictions on their natural gas supply, eventhough they have had restrictions, additionally water value is not consideredif its opportunity cost is higher than the cost of natural gas generation.

 

Resolution SENo.724/2008 gave thermal generators the opportunity to reduce some of theeffects of Resolution SE No.406/2003 by allowing Supply CommitmentContracts or “CCAM” into the MEM. Thermal generators with CCAM can supplyenergy to the Argentine autonomous entity in charge of the MEM’s operation, or “Cammesa”,for up to 36 months, renewable only for an additional period of six month, andcharge spot prices.

 

***Transmissionand distribution***

*** ***

Transmission and distribution companies have beenrenegotiating contracts since 2005 and although tariffs were partially andtemporarily adjusted, definitive tariffs were still pending as of December 2008.

 

As a result, although theterms to define energy prices pursuant to the Argentine Electricity Act arestill in force, their implementation reflects the intervention of theauthorities to reduce compensation for all electricity companies.

 

During 2006, oursubsidiary Edesur entered into an Agreement for Renegotiation of ConcessionContract, which concluded during 2008 when the Federal Government imposed twoincreases in tariffs, one from July 2008 and one from October 2008.

 

***Naturalgas market***

*** ***

There has been a shortageof natural gas to supply power plants for several years.  In order tosecure internal demand, the Argentine government entered into an agreement withVenezuela for supply of fuel until 2010.  Although the fuel oil is used asa last recourse, the national regulatory policy supported the acquisition ofliquid fuel by the electric generators and provided financing from theStabilization Fund.  Generation companies also agreed to purchase a fixedamount of fuel oil of instant availability in order to cover any generator’s potentialstock shortages.  Generators are normally allowed to buy diesel and fuelat subsidized prices.

 

Since 2004, the FederalGovernment has been importing natural gas from Bolivia.  On June 29, 2006,Argentina and Bolivia entered into a 20-year agreement under which Argentinahas the right to receive up to 28 million cubic meters daily.

 

Oneof the measures relating to natural gas in recent years was the creation of theElectronic Gas Market (“MEG”).  Through the MEG, the regulatoryauthorities increased the transparency of physical and commercial operations inthe spot market.

 

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***ElectricityExports and Imports***

 

In order to give priorityto the internal market supply, the Secretariat of Energy adopted additionalmeasures that restricted electricity exports. Resolution SE No.949/2004 established measures that allowed agents toexport and import energy under very restricted conditions.  This resolution prevented generators fromsatisfying their export commitments.

 

***Foninvemem***

*** ***

Resolution SE No.712/2004created a fund, called Foninvemem, to increase electricity capacity/generationwithin the MEM.  Pursuant to ResolutionSE No.406/2003 the Secretariat of Energy decided to pay the generators the spotprices up to the amount available at the Stabilization Fund after collectingthe funds from the purchasers in the spot market at seasonal prices lower thanspot prices for the same period.  Cammesawas appointed to manage Foninvemem.

 

Pursuant to Resolution SENo.1,193/2005 all private generators of the MEM were called to participate inthe construction, operation and maintenance of the electric energy generationplants to be built with Foninvemem, consisting of two combined cycle generationplants of 800 MW each.

 

***Incentive programs***

*** ***

In order to provide incentives for the installation ofnew capacity in the NIS, Resolution 1,281/2006 created the Servicio EnergíaPlus, or “Energy Plus Service”, which is the offer of new electricity capacityto supply the growth in electricity demand over the “Base Demand” which was thedemand for electricity in 2005.  The Energy Plus Service, which started onNovember 1, 2006, is supplied by generators that install new capacity orthat offer existing generation capacity not connected before to the NIS. All big clients that, had a higher demand than their Base Demand can contractexcess demand with the Energy Plus Service.  The price of the contractsfor Energy Plus Service should be approved by the relevant authorities. Consumptions that cannot be secured by an Energy Plus Service contract, mayrequest Cammesa to conduct an auction to satisfy such demands.

 

***Regulation for the promotion of Energy Infrastructureprojects***

*** ***

Law No.26,095 andNational Decree No.1,216/2006 imposed charges to be paid by final customers ofelectricity and natural gas in order to finance new electricity and gasinfrastructure projects, to complete new investments in the electricity sectorand to expand natural gas and electric power transport capacity.  In addition, the Federal Government enactedsome regulations to promote the rational and efficient use of electric power.

 

***Environmental Regulation***

*** ***

Electricity facilitiesare subject to federal and local environmental laws and regulations, includingLaw No.24,051, or “Hazardous Waste Law”, and its ancillary regulations.

 

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**Certain reporting and monitoringobligations and emission standards are imposed on the electricity sector.  Failure to meet these requirements entitlesthe government to impose penalties, such as suspension of operations, which, incase of public services, could result in the cancellation of concessions.**

** **

***Brazil***

*** ***

***Industry Structure***

*** ***

Brazil’selectricity industry is organized into one large interconnected electricitysystem, which is known as the *Sistema InterligadoNacional* (the “Brazilian NIS”), which comprises most of the regionsof Brazil and several other small, isolated systems.

 

Generation,transmission and distribution are legally separated activities in Brazil.  Non-regulated customers in Brazil arecurrently those customers: (i) who demand at least 3,000 kW andchoose to contract the energy supply directly with generators or retailers; or (ii) whodemand at least 500 kW (and less than 3,000 kW) and choose tocontract the energy supply directly with the alternative generators or traders,according to the specifications set forth in Law 9,427/96.

 

Theelectricity industry in Brazil is regulated by the Federal Government, actingthrough the Ministry of Mines and Energy, or MME, which has exclusive authorityover the electricity sector and whose primary role is to establish thepolicies, guidelines and regulations for the sector.  Regulatory policies are implemented by theANEEL (National Agency of Electric Power), whose main responsibilities include,among others: (1) supervision of the concessions for electricity sale,generation, transmission and distribution activities, and approval ofelectricity tariffs; (2) enactment of regulations for the electricitysector; (3) implementation and regulation of the exploitation ofelectricity resources, including the use of hydroelectricity; (4) promotionof a bidding process for new concessions; (5) resolution of administrativedisputes between electricity sector agents; and (6) setting of thecriteria and methodology for determining distribution and transmission tariffs.

 

Otherregulatory authorities include: (i) the Brazilian Electricity SystemOperator (ONS), comprised of generation, transmission and distributioncompanies, and independent consumers, responsible for coordination and controlof the generation and transmission operations of the Brazilian NIS; (ii) theElectricity Trading Board (CCEE), a company in which Agents are gathered infour categories: Generation, Distribution, Trading and Consumers and whose mainpurpose is to carry out the wholesale transactions and trading of electricpower within the Brazilian NIS; and (iii) the Brazilian Energy PolicyCouncil (CNPE) in charge of  developing anational electricity policy.

 

***Deregulation and Privatization***

*** ***

TheConcessions Law (No.8,987) and the Power Sector Law (No.9,074), both enacted in1995,  intend to inject competition andattract private capital into the electricity sector.  Since then, several assets owned by theFederal Government of Brazil and/or states governments were privatized.

 

***Independent Power Producers and Self-Producers***

*** ***

ThePower Sector Law also introduced the concept of independent power producers, orIPPs , to open the electricity sector to private sector investment.  IPPs are individual agents or agents actingin a consortium who 

 

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receive a concession, permit or authorization from theBrazilian government to produce electricity for sale on its own account.

 

TheConcessions Law also provides that, upon receiving a concession, IPPs,self-producers, suppliers and consumers will have access to the distributionand transmission systems owned by other concessionaires, provided that they arereimbursed for their costs determined by ANEEL.

 

LawNo.9,648/98 created the Wholesale Energy Market, formed by the generation anddistribution companies.  According tothis model, the purchase and sale of electricity was freely negotiated.

 

Pursuantto Law No.10,433/2002, the Wholesale Energy Market structure changed to beclosely regulated and monitored by ANEEL. As a result, ANEEL is now responsible for setting Wholesale EnergyMarket governance rules.  Thisrestructuring seeks to reorganize the electricity system model to allow forcontinued external investment.

 

LawNo.10,848/04 seeks to maintain public service for the production anddistribution of electricity to consumers within each concession area,restructures planning system, guarantees transparency in the auction andbidding process for public projects to mitigate the systemic risks, to maintaincentralized and coordinated operations of the energy system and to grantuniversal use and access to electricity throughout Brazil and it also modifiesthe bidding process of public service concessions.

 

***Structure of the Electricity Sector***

*** ***

Themodel established pursuant to Laws No.10,847 and 10,848 seeks to providecheaper tariffs for consumers and guarantees the expansion of the system, withthe Power Research Company (EPE), a governmental body, responsible for theplanning of generation and transmission activities.  This model has defined an unregulatedcontracting environment and a regulated environment.

 

In theunregulated contracting environment, the conditions for purchasing energy arenegotiable between suppliers and their customers.  In relation to the regulated environment,where distribution companies operate, the purchase of energy must be executedpursuant to a bidding process coordinated by ANEEL.

 

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

 

Anotherchange imposed on the electricity sector is the separation of the biddingprocess for “previously existing power” and “new power project.”  Power plants that were in existence prior to2000 are considered “previously existing power” and those that were developedafter 2000 are considered “new power project.” The government believes that “previously existing power” plants are ableto provide power at more competitive prices and therefore it should givepriority in the bidding process to power generated by new power projectcompanies.  Under the new regime, thispriority will be in the form of more favorable contractual terms.  For example, a generator considered new powerproject is guaranteed a power purchase agreement with a 20-year term if it winsthe bidding process, while an existing power is not necessarily even guaranteedparticipation in the bidding process.

 

***Distribution***

*** ***

TheConcessions Law establishes three kinds of revisions to final consumer tariffswhich are annual tariff resetting, ordinary tariff revision and extraordinarytariff revisions.

 

Distributioncompanies’ pricing aims to maintain a concessionaire’s operating marginsconstant by allowing for tariff gains due to costs beyond management’s controland permitting the concessionaire to retain any efficiency 

 

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gains achieved for defined periods of time.  Tariffs to end users are also adjustedaccording to the variation of costs incurred in purchasing electricity.

 

Ordinarytariff revision takes into account the entire tariff-setting structure of thecompany, including the costs of providing services, the costs of purchasingenergy and the remuneration of the investor. Under their concessions it occurs every four years for Coelce and everyfive years for Ampla.  The asset baseconsists of the market replacement value depreciated during their useful lifefrom an accounting point of view and the rate of return for the assets is basedon the Weighted Average Cost of Capital, or WACC, of a model company.  The operating and maintenance costs reflectedin the tariff are calculated based on the model company which considers thesingular characteristics of the concession area of distributors.

 

Thelaw guarantees an economic and financial equilibrium for a company in the eventthat there is a substantial change in its operating cost.  In the event that the cost components overwhich management does not exert influence, such as energy purchases and taxes,increases significantly within the period between two annual tariffadjustments, the concessionaire may make a request to ANEEL to charge thosecosts to final customers.

 

***2008 Tariff revision***

*** ***

A tariff revisionapplicable to Ampla was introduced on March 15, 2008, with an average11.0% increase in prices for all consumers and 10.9% for residential customers.  The tariff revision for Coelce was effectiveon April 22, 2008.  The averageincrease in prices for customers was 6.7%, lower than the IGPM, the generalprice index.

 

***Recognition of investments for thereduction of non-technical losses***

*** ***

In response to a requestfrom Ampla, ANEEL determined that projects intended to combat energy theft anddecrease electrical losses, which consider the efficiency, effectiveness willbe considered in tariff revisions after auditing processes.

 

***Concessions***

*** ***

Companiesor consortia that intend to build or operate hydroelectric generationfacilities with a capacity in excess of 30 MW, or transmission networks inBrazil, have to use a public tender process. Concessions granted to the holder give the right to generate, transmitor distribute electricity, as the case may be, in a specified area for a givenperiod of time.

 

Theperiod of time is limited to 35 years for new generation concessions and to 30years for new transmission or distribution concessions.  Existing concessions may be renewed at thediscretion of the Brazilian government, for a period equal to their initialterm.

 

***Environmental Regulation***

*** ***

TheBrazilian Constitution gives both the federal and state governments power toenact laws designed to protect the environment and to issue regulations undersuch laws.  While the federal governmenthas power to enact environmental regulations, state governments have the powerto enact more stringent environmental regulations.  Most of the environmental regulations inBrazil are at the state and local level rather than at the level of the federalgovernment.

 

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Hydroelectricfacilities are required to obtain concessions for water rights andenvironmental approvals.  Thermalelectricity generation, transmission and distribution companies are required toobtain environmental approvals from environmental regulatory authorities.

 

***Electricity Sales***

*** ***

In the Regulated Environment (ACR), electricity distribution companies buy the electricitythrough auctions that are regulated by ANEEL and organized by CCEE.  Distributors must buy electricity at publicauctions.

 

Thereare two types of regulated auctions at which distributors buy electricity, oneat which existing contracts can be renewed, and one at which new contracts areentered into.  The government has alsothe right to call special auctions for renewable electricity (biomass, smallhydro, solar and wind).  ANEEL and CCEEhold the auctions annually.

 

Unregulatedcontracts*,*or ACL, include the sale ofelectricity between generation concessionaires, independent producers,self-producers, sellers of electricity, importers of electricity, unregulatedand special consumers.  The ACL alsoincludes current bilateral contracts in place between generators anddistributors until their expiration, at which point new contracts may beentered into under the terms of the new regulatory framework.

 

***Energy Bids***

*** ***

Thesale of electricity in the ACR occurs through new electricity bids, existingelectricity bids and adjustment bids. The contracting system is multilateral, with generators entering intocontracts with all distributors who submit bids.

 

***Settlement Spot Price***

*** ***

TheSettlement Price for the Differences is used to value the purchase and sale ofelectric power in the short term market. According to the New Industry Model Law, CCEE is responsible for thesetting of the electricity price in the spot market.

 

***Fines applicable to agents in the electricity industry***

*** ***

Sellingagents are responsible to the buying agent for payments if they are unable tosatisfy their delivery obligations. ANEEL regulation sets forth the fines applicable to electricity agentsbased on the nature and the materiality of the violation (including warnings,fines, temporary suspension of the right to participate in bids for newconcessions, licenses or authorizations and forfeiture).  For each violation, fines may be imposed forup to 2.0% of the concessionaire’s revenues arising from the sale ofelectricity and services provided (net of taxes) in the 12-month periodimmediately preceding any assessment notice.

 

ANEELmay also impose restrictions on the terms and conditions of agreements betweenrelated parties and, in extreme circumstances, terminate such agreements.

 

Aparty defaulting on payment of contributions to RGR (Global Reversal Reserve),Proinfa, Energy Development Account, or CDE, Fossil-fuel Consumption Account,or CCC, or any other payments due by virtue of the purchase of electricity inthe ACR or from Itaipu cannot use tariff adjustments (except for theextraordinary 

 

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revision) or any proceeds from the RGR, CDE orCCC.  CDE was created by Law No.10438 in2002 to grant subsidies to power plants using Brazilian mineral coal and tosupport the production of electricity from alternative sources.  The CCC was created in 1973 with the intentto grant subsidies to cover the cost of fuel used by thermoelectric plantslocated in isolated systems.

 

***Incentives for the Development of Alternative Sourcesof Energy***

*** ***

Law10,438/2002 created certain incentive programs for the use of alternativesources in the generation of electricity. Proinfa assures the purchase of the electricity generated by Eletrobrásfor a period of 20 years, and financial support from the BNDES.  Other programs include a discount up to 50%on the distribution or transmission tariffs and a special exception for thoseconsumers with electricity consumption volumes ranging from 500 kV to 3 MW(special consumers) who decide to migrate to ACL, provided that such consumers purchaseelectricity from generating companies using alternative sources of electricity.

 

***Industry Charges***

*** ***

ThePower Industry Law requires that holders of a concession to use water resourcespay a fee from 6.00% to 6.75%, depending on the size of the generation plant,of the amount of the electricity they produce.

 

Theelectricity service inspection fee, is an annual fee of approximately 0.5% ofthe annual benefit obtained by the company and varies according to the type ofservice and in proportion to the size of the concession, permit orauthorization.

 

Withregard to the subsidy of fuel costs to SIN-connected thermoelectric plantsusing Brazilian coal, CDE succeed the CCC (Fuel Consumption Account).  The CDE is funded by all electricityconsumers and was created to support: (1) the development of electricityproduction throughout the country; (2) production of electricity fromalternative sources (wind, mineral coal, gas and biomass); and (3) socialobjectives, such as the availability of electricity services throughout thecountry, reduction of the cost of electricity to low-income residents andpreservation of the coal industry in southern Brazil.

 

Forexisting thermoelectric plants that use coal produced in Brazil, the lawrequires that the CDE be used to subsidize up to 100% of the cost of thecoal.  In accordance with the applicablelegislation, power plants must make a minimum purchase of coal in order toguarantee certain levels of production of Brazilian coal to benefit from thesubsidy.  However, self-producingconsumers do not pay the CDE charge, which is a significant advantage for thesekinds of projects.

 

Until December 2003,all power industry agents, whether distribution companies, generation companiesor dealers, who negotiated electricity with final consumers, made monthlycontributions to the Fossil-fuel Consumption Account — CCC, an economic subsidyto cover the cost of fuel used by thermoelectric located in isolated systems,for a period of 20 years, in order to promote the generation of electricity inthese regions.

 

***Contribution for Research and Development***

*** ***

Companiesholding concessions, permits and authorizations for the distribution,generation and transmission of electricity must invest every year at least 1%of their net operating revenues in research and development of the powerindustry.  Mini-hydro power stations,solar and wind electricity and biomass projects are exempt from theserequirements.

 

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***Colombia***

*** ***

Two pieces of legislationregulate the electricity business in Colombia: Law 142 (the “Colombian PublicUtilities Law”) sets the regulatory framework for the supply of publicresidential services, including electricity, and Law 143 (the “ColombianElectricity Law”) establishes the framework for the generation, trading,transmission and distribution of electricity. Law 142 states that the provision of electricity is an essential publicservice that must be provided by government and private sector entities.

 

Utility companiesare required to ensure continuous and efficient service, facilitate the accessof low-income users to subsidies granted by the government, inform usersregarding efficient and safe use of the services, protect the environment,allow access and interconnection to other public service companies and largeusers, cooperate with the authorities in the event of an emergency to preventdamage to users, and report to the authority any commercial start-up ofoperations.

 

The Colombian Electricity Act sets out theprinciples for the electricity industry, which are implemented through theresolutions enacted by the Energy and Gas Regulatory Commission, or “CREG”.  Such principles are: efficiency - the correctallocation and use of resources and the supply of electricity at minimumcost;  quality - compliance withtechnical requirements;  continuity -continuous electricity supply without unjustified interruptions;  adaptability — the incorporation of moderntechnology and administrative systems to promote quality and efficiency;neutrality — impartial treatment to all electricity consumers;  solidarity — the provision of funds byhigher-income consumers to subsidize the subsistence consumption of lowerincome consumers; and equity — an adequate and nondiscriminatory supply ofelectricity to all regions and sectors of the country.

 

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

 

The market share forgenerators and traders is limited.  The limit for generators is 25% of theColombian system’s Firm Energy.  Firm Energy for the Reliability Chargerefers to the maximum electric energy that a generation plant is able todeliver on a continuous basis during a year, in extremely dry conditions, forinstance, in the case of the *El Niño*phenomenon.  A generator’s share in theactivity of power generation can reach up to 30%, when the Herfindahl-HirschmanIndex (HHI) is greater or equal to 1800, under overseeing of theSuperintendencia de Servicios Públicos Domiciliarios (SSPD).

 

Similarly, atrader may not account for more than 25% of the trading activity in theColombian National Interconnected System (Colombian NIS).  Limitations for traders take into accountinternational energy sales.  Market shareis calculated on a monthly basis and traders have up to six months to reducetheir share when the limit is exceeded.

 

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

 

A generator,distributor, trader or an integrated company, *i.e*.a firm combining generation, transmission and distribution activities, cannotown more than 15% of the equity in a transmission company if the latter representsmore than 2% of the national transmission business in terms of revenues.  A distribution company can have more 

 

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than 25% of anintegrated company’s equity if the market share of the last company is lessthan 2% of the national generation business. A company created before enactment of Law 143 is banned from mergingwith another company created after Law 143.

 

The Ministry ofMines and Energy defines the government’s policy for the energy sector.  Other government entities which play animportant role in the electricity industry are: *Superintendenciade Servicios Públicos Domiciliarios*, which is in charge of overseeingand inspecting the utility companies; CREG, which is in charge of regulatingthe energy and gas sectors; and the**Mining andEnergy Planning Agency, which is in charge of planning the expansion of thegeneration and transmission network.

 

CREG is empowered to issue regulations togovern technical and commercial operations and to set charges for regulatedactivities.  CREG’s main functions are toestablish conditions for gradual deregulation of the electricity sector towardan open and competitive market, approve charges for transmission anddistribution networks and charges for retailing to regulated customers,establish the methodology for calculating and establishing maximum tariffs forsupplying the regulated market, establish regulations for planning andcoordination of operations of the Colombian NIS and establish technicalrequirements for quality, reliability and security of supply and the protectionof customers’ rights.

 

***Generation***

*** ***

The generationsector is organized on a competitive basis with companies selling theirproduction on the electricity pool market, the Energy Exchange, or the *Bolsa*, at the spot price or by long-term private contractswith other participants and non-regulated users at freely negotiatedprices.  The Colombian NIS is the systemformed by generation plants, the interconnection grid, regional transmissionlines, distribution lines and consumer loads. The spot price is the price paid by the participant in the wholesalemarket for energy dispatched under the direction of the Dispatch NationalCenter (“CND”).  The hourly spot pricepaid for energy reflects prices offered by generators in the *Bolsa*and the respective supply and demandconditions.

 

Generatorsconnected to the Colombian NIS can also receive “reliability payments” whichare a result of the Firm Energy Obligation that they provide to thesystem.  The Firm Energy Obligation (OEF)is a commitment on the part of generation companies backed by its physicalresource capable of producing firm energy during scarcity periods.  The generator that acquires an OEF willreceive a fixed remuneration during the commitment period; whether or not thefulfillment of its obligation is required. To receive reliability payments, generators have to participate in firmenergy bids by declaring and certifying their firm energy.  Until November 2012, the transitionperiod, the firm energy supply for reliability purposes will be assignedproportionally to the declared firm energy of each generator.  Beyond the transition period, the additionalfirm energy required by the system will be allocated by bids.  The first auction for this period took placein May 6, 2008, where existing generators participated with newgeneration projects while meeting the established market share limits.

 

CREGrecently ordered that starting February 2009, the offer prices anddispatch information must be kept confidential for three months.

 

***Dispatch and Pricing***

*** ***

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

 

The Energy Exchangefacilitates the sale of excess energy that has not been committed undercontracts.  In the 

 

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Energy Exchange*,*an hourly spot price for all dispatchedunits is established based on the offer price of the highest priced generatingdispatched unit for that period.  The CNDreceives price bids each day from all the generators participating in theEnergy Exchange.  These bids indicateprices and the hourly available capacity for the following day.  Based on this information, the CND guided by “optimaldispatch” principle (which assumes an infinite transmission capacity throughthe network), ranks the generators according to their offer price, startingwith the lowest bid, and establishing the merit order, on an hourly basis,determining which generator will be dispatched the following day to meetexpected demand.  The price for allgenerators is set as the less expensive generator dispatched in each hourlyperiod under the optimal dispatch.  Thisprice-ranking system is intended to ensure that national demand, increased bythe total amount of energy exported to other countries will be satisfied by thelowest cost combination of available generating units in the country.  Additionally, the CND performs the “planneddispatch,” which takes into account the limitations of the network as well asevery other condition necessary to meet the energy demands expected for the followingday, in a secure, reliable and cost-efficient manner.

 

If a generatordelivers less energy than that assigned by the optimal dispatch, it is chargedwith the average of the market price and their offer prices.  On the other hand, those generators thatdeliver energy in excess are credited with the difference.  The net value of these restrictions isassigned proportionally to all the traders within the Colombian NIS, accordingto their demands of energy.  Somegenerators have initiated legal proceedings arguing that recognized prices donot cover the costs associated with these restrictions.

 

***Transmission***

*** ***

Transmissioncompanies which operate at least at 220 kV make up the NationalTransmission System, or NTS.  They arerequired to provide access to third parties on equal conditions and areauthorized to collect a tariff for their services.  The transmission tariff includes a connectioncharge that underwrites the cost of operating the facilities, and a usage charge,which applies only to traders.

 

CREG guaranteesan annual fixed income to transmission companies.  Income is determined by the new replacementvalue of the networks and equipment, and by the resulting value of biddingprocesses awarding new projects for the expansion of the NTS.  This value is allocated among the traders ofthe NTS in proportion to their energy demand.

 

The expansion ofthe NTS is conducted according to model expansion plans designed by the Miningand Energy Planning Agency and pursuant to bidding processes opened to existingtransmission companies and new companies, which are handled by the Ministry ofMines and Energy in accordance with the guidelines set by CREG.  Accordingly, the construction, operation andmaintenance of new projects is awarded to the company that offers the lowestpresent value of cash flows needed for carrying out the project.  Transmission charges are expected to beupdated by CREG in 2009.

 

***Distribution***

*** ***

Distribution is definedas the operation of local networks below 220 kV.  Any user may haveaccess to a distribution network for which it pays a connection charge. CREG regulates distribution prices that should permit distributioncompanies to recover costs, including operating, maintenance and capital costsoperating efficiently.  Distribution charges are set by CREG for eachcompany based on the replacement cost of the existing distribution assets, costof capital, as well as operational and maintenance costs that vary depending onthe voltage level.

 

A new remunerationmethodology for the distribution was defined by CREG in 2008 which set theWeighted Average Cost of Capital at 13.9% before taxes, for assets operating at34.5 kV or less, and 13% 

 

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before taxes forassets operating above 34.5 kV.  CREG also defined a new methodology forthe calculation of distribution charges, defining an incentive scheme foradministrative, operational and maintenance costs, service quality and energylosses.   CREG is expected to apply in the first semester of 2009, theresolutions to determine new distribution charges applicable to the years2009-2013.

 

***Trading***

*** ***

The retail marketis divided into regulated and unregulated customers.  Customers in the unregulated market mayfreely contract for electricity supply directly from a generator or adistributor, acting as traders, or from a pure trader.  The unregulated customer market consists ofcustomers with a peak demand of more than 0.1 MW or a minimum monthlyconsumption of 55 MWh, which currently represent about 32% of the market.

 

Trading is theresale to end users of electricity purchased in the wholesale market.  It may be conducted by generators,distributors or independent agents, which comply with certainrequirements.  Parties freely agree upontrading prices for unregulated users.

 

Trading toregulated users is subject to the “regulated regime” under which tariffs areset by each trader using a combination of general cost formulas given by CREGand individual trading costs approved by CREG for each trader.  Since CREG approves limits on costs, tradersin the regulated market may set lower tariffs for economic reasons.  Tariffs include, among other things, energyprocurement costs, transmission charges, distribution charges and a tradingmargin.  Trading charges for regulatedusers are expected to be updated in 2009.

 

The tariffformula became effective on February 1, 2008.  The main changes in the new formula are theestablishment of a fixed monthly charge, and the introduction of reductioncosts of non-technical energy losses in the trading charges.  In addition, CREG allows traders in theregulated market to offer tariff options to their users.

 

In order to improve wholesale priceformation, CREG is designing a new energy procurement scheme based on long termenergy bids.

 

***Environmental Regulation***

*** ***

Law 99 of 1993provided the framework for environmental regulation and established theMinistry of the Environment as the authority for determining environmentalpolicies.  The Ministry defines, issuesand executes, policies and regulations that focus on the recovery,conservation, protection, organization, administration and use of renewableresources.  Therefore, the use of naturalresources or any impact to them as a result of any activity or project willrequire the issuance of permits and environmental licenses and theestablishment of environmental management plans.  The law particularly seeks to preventenvironmental damage by entities in the energy sector.  Any entity planning to undertake projects oractivities relating to generation, interconnection, transmission ordistribution of electricity which may result in environmental deterioration,must first obtain an environmental license.

 

According to Law99, generators which have a total installed nominal capacity above 10 MW arerequired to contribute to the conservation of the environment through a paymentfor their activities.  Hydroelectricpower plants must pay 6% of their energy sales; thermoelectric plants must pay4% of their energy sales.  This paymentis made monthly to the municipalities and environmental corporations wherethese facilities are located.

 

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***Peru***

*** ***

***IndustryStructure***

*** ***

The main regulations ofthe Peruvian electricity industry are: the Law of Electricity Concessions(Decree Law 25,844) and its ancillary regulations, the Law to Secure theEfficient Development of Electricity Generation (Law 28,832), the TechnicalRegulation on the Quality of the Electricity Supply (Supreme Decree 020-97),the Electricity Import and Export Regulation (Supreme Decree 049-2005), theAntitrust Law on the Electricity Sector (Law 26,876), Law 26,734, whichregulates the investments in energy, in addition to the supplementary Law27,699 of the**Energy and Mining Investment SupervisorAuthority, or Osinergmin, the Peruvian regulatory electricity authority,and the regulation for resolution of controversies that arise within thisinstitution.

 

Some of thecharacteristics of the regulatory framework are (i) the separation of thethree main activities: generation, transmission and distribution; (ii) freedomof prices for the supply of energy in competitive market conditions; (iii) asystem of regulated prices based on the principle of efficiency shared with abidding regime; and (iv) private operation of the interconnectedelectricity systems subject to the principles of efficiency and quality ofservice.

 

There is oneinterconnected system, the SEIN, and several isolated regional and smallersystems that provide electricity to specific areas.

 

The Ministry of Energyand Mining, or the MINEM, defines the energy policies, regulates environmentmatters, and oversees the granting, supervision, maturity and termination oflicenses, authorizations and concessions for generation, transmission, anddistribution activities.

 

Osinergmin is an autonomouspublic regulatory entity that controls and enforces compliance with legal andtechnical regulations related to electrical and hydrocarbon activities,compliance of the obligations stated in the concession contracts, as well asthe preservation of the environment in connection with the development of theseactivities.  Osinergmin’s**TariffRegulatory Bureau**has theauthority to**publish the regulated tariffs.  The**Committee of the Economic Operation of theSystem, or the COES, coordinates the operation and dispatch ofelectricity of the SEIN and prepares the technical and financial study thatserves as a basis for the annual bus bar tariff calculations.  The COES includes as members the generation,transmission and distribution companies, as well as users with a capacity needhigher than 1 MW, the threshold for non-regulated customers.

 

Service provided byelectricity companies has to comply with technical standards, otherwisecompanies may be charged with fines imposed by Osinergmin.

 

***Dispatch and Pricing***

*** ***

Customers with a monthlydemand less than 0.2 MW are considered regulated customers, and their energysupply is defined as a public service. Nevertheless, according to Law 28,832, regulated customers whose monthlydemand is within 0.2 MW and 1.5 MW will be capable of choosing to beunregulated customers.  Customers whosedemand is greater than 1.5 MW are considered unregulated customers.

 

The access to the spotmarket is permitted to generating and distribution companies, as well as tousers with a contracted capacity in excess of 10 MW.

 

***Transmission***

*** ***

Transmission lines aredivided into principal, those for the common use and trading of all generators;or 

 

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secondary, those linesthat connect a power plant with the system or a substation with a distributioncompany or a final consumer. Law 28,832, enacted in 2006, defined alsoguaranteed and complementary systems applicable to projects commissioned afterthe enactment of that law.  Guaranteedlines are the result of a public bid and complementary lines are freelyconstructed and exploited as private projects. The principal and guaranteed system lines are accessible to allgenerators and allow electricity to be delivered to all customers.  The transmission concessionaire receives anannual fixed income and receives tariff revenues and connection tollsreflecting a charge per kW.  Thesecondary and complementary system lines are accessible to all generators, butare used to serve only certain customers who are responsible for makingpayments related to their use of the system.

 

***Distribution***

*** ***

The Efficient DevelopmentLaw establishes a bidding regime for the acquisition of energy and capacity bydistributors establishing a mechanism to determine prices during the life of acontract.  The approval of this mechanismis important to generators, because it establishes a mechanism for determiningprice for the duration of a contract that is not fixed by the regulator.

 

Sales to distributioncompanies for resale to regulated customers must be made at bus bar prices setby Osinergmin or at fixed prices determined by bids.  Bus bar prices are set annually.  Bus bar prices are the maximum prices forelectricity purchased by distribution companies that can be transferred toregulated customers, except in the case of contracts entered into as a resultof a public bid, where the prices that will be transferred to regulated customerswill be the price defined in the bid.

 

The electricity tarifffor regulated clients includes charges for capacity and energy for generationand transmission (bus bar prices) and for the VAD (value added bydistribution), which considers a regulated return over capital investments,operating and maintenance fixed charges and a standard percentage for energydistribution losses.

 

Oursubsidiary, Edelnor, submitted successfully two bids in 2008 and secured itssupply contracts until 2011.

 

***Concessions***

*** ***

A concession forelectricity generation activity is required when a power plant has an installedcapacity in excess of 500 kW.

 

A concession forelectricity generation activity is an agreement between the generator and MINEM*,* while an authorization is merely a unilateral permitgranted by the Ministry.  Authorizationsand concessions are granted by MINEM  foran unlimited period of time, although their termination is subject to the sameconsiderations and requirements as the termination of a concession under theprocedures set forth in the Law of Electrical Concessions and relatedregulations.

 

***Cogeneration Regulation***

*** ***

Supreme Decree 037/2006 establishes the basic rules forthe use of the energy produced as a result of any industrial activity, *i.e*., cogeneration plants. They are eligible to be part of the COES and trade their energy in theSEIN.  Cogeneration is the simultaneousgeneration of heat and power, in a single thermodynamic process.

 

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***Environmental Regulation***

 

The environmental legal framework applicable to energyrelated activities in Peru is set forth in the Environmental Law (Law 28,611)and in the Regulation for Environmental Protection regarding ElectricityActivities (Supreme Decree 029-94-EM). The MINEM dictates the specific environmental legal dispositions for theactivities within the electricity industry, and the Osinergmin is in charge ofsupervising their application and implementation.  According to the Environmental Law, theMinistry of Environment is in charge of (i) designing the generalenvironmental policies to every productive activity and (ii) establishingthe main guidelines of the different government authorities on their specificenvironmental sector regulations, as its principal duties.

 

***Raw Materials***

*** ***

For information regarding Enersis’ raw materials,please see “Item 11(a) and 11(b). Quantitative and Qualitative DisclosuresAbout Market Risk — Commodity Price Risk”.

 

**C.            Organizationalstructure**

** **

***Principal Subsidiaries and Affiliates***

*** ***

The subsidiaries listed in the following table wereconsolidated by us as of December 31, 2008.  Our economic interest is calculated bymultiplying our percentage economic interest in a directly held subsidiary bythe percentage economic interest of any entity in the chain of ownership ofsuch ultimate subsidiary.

 
| **Principal Subsidiaries and Country of Operations** | ** ** | **% Economic  Ownership of  Main Subsidiary  by Enersis** | ** ** | **Consolidated  Assets of Each  Main Subsidiary  on a Stand-alone  Basis** | ** ** | **Operating Income  of Each Main  Subsidiary on a  Stand-alone Basis** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                           | ** ** | **(in billions of Ch$ except percentages)**          | ** ** |
| *Electricity  Generation*                            |       |                                                      |       |                                                                       |       |                                                                   |       |
| Endesa Chile  (Chile) (1)                            |       | 60.0                                                      | %          | 7,142.4                                                                    |       | 893.4                                                                  |       |
| Cachoeira  Dourada (Brazil)                          |       | 53.4                                                      | %          | 434.7                                                                      |       | 113.4                                                                  |       |
| Endesa Fortaleza  (Brazil)                           |       | 53.6                                                      | %          | 236.9                                                                      |       | 39.7                                                                   |       |
| *Electricity  Transmission*                          |       |                                                      |       |                                                                       |       |                                                                   |       |
| CIEN (Brazil)                                        |       | 53.6                                                      | %          | 432.3                                                                      |       | 55.6                                                                   |       |
| *Electricity  Distribution*                          |       |                                                      |       |                                                                       |       |                                                                   |       |
| Chilectra  (Chile)                                   |       | 99.1                                                      | %          | 1,581.7                                                                    |       | 171.1                                                                  |       |
| Edesur  (Argentina)                                  |       | 65.4                                                      | %          | 840.5                                                                      |       | 37.2                                                                   |       |
| Ampla (Brazil)                                       |       | 69.9                                                      | %          | 1,517.8                                                                    |       | 210.6                                                                  |       |
| Coelce (Brazil)                                      |       | 34.9                                                      | %          | 1,054.4                                                                    |       | 139.9                                                                  |       |
| Codensa  (Colombia)                                  |       | 21.7                                                      | %          | 1,316.5                                                                    |       | 249.3                                                                  |       |
| Edelnor (Peru)                                       |       | 33.5                                                      | %          | 447.4                                                                      |       | 69.3                                                                   |       |
| *Other  Non-Electricity Businesses*                  |       |                                                      |       |                                                                       |       |                                                                   |       |
| CAM (Chile)                                          |       | 100.0                                                     | %          | 123.5                                                                      |       | 10.1                                                                   |       |
| Inmobiliaria M.  Velasco (Chile)                     |       | 100.0                                                     | %          | 67.6                                                                       |       | 1.0                                                                    |       |
| Synapsis (Chile)                                     |       | 100.0                                                     | %          | 39.4                                                                       |       | 10.8                                                                   |       |

 

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----

(1) EndesaChile consolidated all generation facilities in Chile, Argentina, Colombia andPeru.  Brazilian facilities areconsolidated by Endesa Brasil.

 

***Business andSubsidiaries Description***

*** ***

Enersis controlssubsidiaries engaged in the electricity generation and distribution businessesin South America and has wholly-owned subsidiaries that provide supportservices to related and unrelated companies. The following chart represents Enersis’ economic ownership participationin its main operating subsidiaries and affiliates as of December 31, 2008.

 

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(*) Only principaloperating subsidiaries are presented here. Percentage ownership includesEnersis’ direct and indirect equity interests as of December 31, 2008.

 

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**D.            Property, Plants and Equipment**

** **

A significant damage toone or more of the main electricity generation facilities or interruption inthe production of electricity, would have a material adverse effect on Enersis’operations.  Enersis insures all of itselectricity generation facilities against damage from earthquakes, fires,floods and other similar occurrences and third-party actions, based on theappraised value of the facilities as determined from time to time by anindependent appraiser.  Based ongeological, hydrological and engineering studies, however, we believe that therisk of such an event is remote.  Claimsunder Enersis’ insurance policies are subject to customary deductibles andother conditions.  Enersis also maintainsbusiness interruption insurance which provides up to 18 months’ coverage forfailure of any of its facilities, starting after the deductible period.

 

We also have significantinterests or investments in electricity distribution.  The description of each distribution companyis included in this “Item 4.  Informationon the Company”.  The table set forthhereunder describes Enersis’ main equipment used for its distributionbusinesses, such as transmission lines, substations, distribution networks andtransformers. Our distribution facilities are insured against damage tosubstations and administration buildings. Risks covered include losses caused by fires, explosions, earthquakes,floods, lightning, damage to machinery and others.  Insurance policies include third-partyliability clauses, which protect our companies from complaints made by thirdparties.  Transmission lines and theequipment attached to them do not qualify as insurable assets in the standardmarket.

 

All insurance policiesare purchased from reputable international insurers.  The Company continuously monitors theinsurance industry to obtain what we believe to be the most commerciallyreasonable coverage and premiums available on the market.

 

***Property,Plants and Equipment of Generating Companies***

*** ***

The following tableidentifies the power plants owned by Enersis, at the end of each year, andtheir basic characteristics:

 
| ** **              | ** ** | ** **              | ** ** | ** **               | ** ** | **Installed Capacity (MW)(1)** | ** ** |
|-------------------------|------------|-------------------------|------------|--------------------------|------------|--------------------------------|------------|
| **Country and Company** | ** ** | **Power Plant Name**    | ** ** | **Power Plant Type (2)** | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **              |       |                    |       |                     |       |                           |       |   |   |   |   |
| **Chile**               |       |                    |       |                     |       |                           |       |   |   |   |   |
| Endesa Chile            | ** ** | **Total**               | ** ** | ** **               | ** ** | **2,754**                      | ** ** | **3,034** | ** ** | **3,139** | ** ** |
| ** **              | ** ** | **Total Hydroelectric** | ** ** | ** **               | ** ** | **2,254**                      | ** ** | **2,286** | ** ** | **2,286** | ** ** |
| ** **              |       | Rapel                   |       | Reservoir                |       | 377                            |       | 377 |   | 377 |   |
|                    |       | Cipreses                |       | Reservoir                |       | 106                            |       | 106 |   | 106 |   |
|                    |       | El Toro                 |       | Reservoir                |       | 450                            |       | 450 |   | 450 |   |
|                    |       | Los Molles              |       | Pass Through             |       | 18                             |       | 18 |   | 18 |   |
|                    |       | Sauzal                  |       | Pass Through             |       | 77                             |       | 77 |   | 77 |   |
|                    |       | Sauzalito               |       | Pass Through             |       | 12                             |       | 12 |   | 12 |   |
|                    |       | Isla                    |       | Pass Through             |       | 68                             |       | 68 |   | 68 |   |
|                    |       | Antuco                  |       | Pass Through             |       | 320                            |       | 320 |   | 320 |   |
|                    |       | Abanico                 |       | Pass Through             |       | 136                            |       | 136 |   | 136 |   |
|                    |       | Ralco                   |       | Reservoir                |       | 690                            |       | 690 |   | 690 |   |
|                    |       | Palmucho                |       | Pass Through             |       | —                         |       | 32 | (4) | 32 |   |
|                    | ** ** | **Total Thermal**       | ** ** | ** **               | ** ** | **500**                        | ** ** | **748** | ** ** | **853** | ** ** |
| ** **              |       | Huasco                  |       | Steam Turbine/Coal       |       | 16                             |       | 16 |   | 16 |   |
|                    |       | Bocamina                |       | Steam Turbine/Coal       |       | 128                            |       | 128 |   | 128 |   |
|                    |       | Diego de Almagro (5)    |       | Gas Turbine/ Diesel Oil  |       | 47                             |       | 47 |   | 47 |   |
|                    |       | Huasco                  |       | Gas Turbine/IFO  180 Oil |       | 64                             |       | 64 |   | 64 |   |

 

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| ** **                       | ** ** | ** **                             | ** ** | ** **                              | ** ** | **Installed Capacity (MW)(1)** | ** ** |
|----------------------------------|------------|----------------------------------------|------------|-----------------------------------------|------------|--------------------------------|------------|
| **Country and Company**          | ** ** | **Power Plant Name**                   | ** ** | **Power Plant Type (2)**                | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
|                             |       | Tal-Tal                                |       | Gas  Turbine/Natural Gas+Diesel Oil (6) |       | 245                            |       | 245 |   | 245 |   |
|                             |       | San Isidro II                          |       | Combined Cycle/Diesel  Oil (7)          |       | —                         |       | 248 |   | 353 |   |
| Pehuenche                        | ** ** | **Total**                              | ** ** | ** **                              | ** ** | **695**                        | ** ** | **699** | ** ** | **699** | ** ** |
|                             |       | Pehuenche                              |       | Reservoir                               |       | 566                            |       | 570 | (3) | 570 |   |
|                             |       | Curillinque                            |       | Pass Through                            |       | 89                             |       | 89 |   | 89 |   |
|                             |       | Loma Alta                              |       | Pass Through                            |       | 40                             |       | 40 |   | 40 |   |
| Pangue                           |       | Pangue                                 |       | Reservoir                               |       | 467                            |       | 467 |   | 467 | (3) |
| San Isidro                       |       | San Isidro                             |       | Combined Cycle/Natural  Gas+Diesel Oil  |       | 379                            |       | 379 |   | 379 |   |
| Celta                            | ** ** | **Total**                              | ** ** | ** **                              | ** ** | **182**                        | ** ** | **182** | ** ** | **182** | ** ** |
|                             |       | Tarapacá                          |       | Steam Turbine/Coal                      |       | 158                            |       | 158 |   | 158 |   |
|                             |       | Tarapacá                          |       | Gas Turbine/Diesel Oil                  |       | 24                             |       | 24 |   | 24 |   |
| Endesa Eco                       | ** ** | **Total**                              | ** ** | ** **                              | ** ** | **—**                     | ** ** | **18** | ** ** | **27** | ** ** |
|                             |       | Canela                                 |       | Wind Farm                               |       | —                         |       | 18 | (8) | 18 |   |
|                             |       | Ojos de Agua                           |       | Pass Through                            |       | —                         |       | — |   | 9 |   |
| **Total  Capacity in Chile**     | ** ** | ** **                             | ** ** | ** **                              | ** ** | **4,477**                      | ** ** | **4,779** | ** ** | **4,893** | ** ** |
| ** **                       | ** ** | ** **                             | ** ** | ** **                              | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Argentina**                    |       |                                   |       |                                    |       |                           |       |   |   |   |   |
| Endesa Costanera                 | ** ** | **Total**                              | ** ** | ** **                              | ** ** | **2,319**                      | ** ** | **2,324** | ** ** | **2,324** | ** ** |
| ** **                       |       | Costanera Steam Turbine                |       | Steam  Turbine/Natural Gas+ Fuel Oil    |       | 1,138                          | (3)        | 1,138 |   | 1,138 |   |
|                             |       | Costanera  Combined Cycle II           |       | Combined Cycle/Natural  Gas+Diesel Oil  |       | 859                            | (3)        | 859 |   | 859 |   |
|                             |       | Central Buenos  Aires Combined Cycle I |       | Combined  Cycle/Natural Gas             |       | 322                            | ** ** | 327 | (3) | 327 |   |
|                             |       |                                   |       |                                    |       |                           |       |   |   |   |   |
| El Chocón                   | ** ** | **Total**                              | ** ** | ** **                              | ** ** | **1,320**                      | ** ** | **1,320** | ** ** | **1,328** | ** ** |
|                             |       | El Chocón                         |       | Reservoir                               |       | 1,200                          |       | 1,200 |   | 1,200 |   |
|                             |       | Arroyito                               |       | Pass Through                            |       | 120                            |       | 120 |   | 128 | (17) |
| **Total  Capacity in Argentina** | ** ** | ** **                             | ** ** | ** **                              | ** ** | **3,639**                      | ** ** | **3,644** | ** ** | **3,652** | ** ** |
| ** **                       |       |                                   |       |                                    |       |                           |       |   |   |   |   |
| **Brazil**                       |       |                                   |       |                                    |       |                           |       |   |   |   |   |
| Cachoeira  Dourada               |       | Cachoeira Dourada                      |       | Pass Through                            |       | 658                            |       | 665 |   | 665 |   |
| Endesa Fortaleza                 |       | Endesa Fortaleza                       |       | Combined  Cycle/Natural Gas             |       | 322                            |       | 322 |   | 322 |   |
| **Total  Capacity in Brazil**    |       |                                   |       |                                    | ** ** | **980**                        | ** ** | **987** | ** ** | **987** | ** ** |
| ** **                       |       |                                   |       |                                    |       |                           |       |   |   |   |   |
| **Colombia**                     |       |                                   |       |                                    |       |                           |       |   |   |   |   |
| Emgesa                           | ** ** | **Total**                              | ** ** | ** **                              | ** ** | **2,238**                      | ** ** | **2,829** | (9) | **2,895** | (9) |
| ** **                       |       | Guavio                                 |       | Reservoir                               |       | 1,163                          |       | 1,213 | (10) | 1,213 |   |
|                             |       | Paraíso                           |       | Reservoir                               |       | 276                            |       | 276 |   | 276 |   |
|                             |       | La Guaca                               |       | Pass Through                            |       | 325                            |       | 325 |   | 325 | (3) |
|                             |       | Termozipa                              |       | Steam Turbine/Coal                      |       | 236                            |       | 236 |   | 236 |   |

 

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| ** **                      | ** ** | ** **           | ** ** | ** **                             | ** ** | **Installed Capacity (MW)(1)** | ** ** |
|---------------------------------|------------|----------------------|------------|----------------------------------------|------------|--------------------------------|------------|
| **Country and Company**         | ** ** | **Power Plant Name** | ** ** | **Power Plant Type (2)**               | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2008** | ** ** |
|                            |       | Cartagena (11)       |       | Steam Turbine/Natural  Gas+ Diesel Oil |       | 142                            |       | 142 |   | 208 |   |
|                            |       | Minor plants (12)    |       | Pass Through                           |       | 96                             |       | 96 |   | 96 |   |
|                            |       | Betania (9)          |       | Reservoir                              |       |                           |       | 541 |   | 541 |   |
| Betania (9)                     |       | Betania              |       | Reservoir                              |       | 541                            |       |   |   |   |   |
| **Total  Capacity in Colombia** | ** ** | ** **           | ** ** | ** **                             | ** ** | **2,779**                      | ** ** | **2,829** | ** ** | **2,895** | ** ** |
| ** **                      |       |                 |       |                                   |       |                           |       |   |   |   |   |
| **Peru**                        |       |                 |       |                                   |       |                           |       |   |   |   |   |
| Edegel                          | ** ** | **Total**            | ** ** | ** **                             | ** ** | **1,426**                      | ** ** | **1,469** | ** ** | **1,467** | ** ** |
| ** **                      |       | Huinco               |       | Pass Through                           |       | 247                            |       | 247 |   | 247 |   |
|                            |       | Matucana             |       | Pass Through                           |       | 129                            |       | 129 |   | 129 |   |
|                            |       | Callahuanca          |       | Pass Through                           |       | 75                             |       | 80 | (13) | 80 |   |
|                            |       | Moyopampa            |       | Pass Through                           |       | 65                             |       | 65 |   | 65 |   |
|                            |       | Huampani             |       | Pass Through                           |       | 30                             |       | 30 |   | 30 |   |
|                            |       | Yanango              |       | Pass Through                           |       | 43                             |       | 43 |   | 43 |   |
|                            |       | Chimay               |       | Pass Through                           |       | 151                            |       | 151 |   | 151 | (3) |
|                            |       | Santa Rosa           |       | Gas Turbine/Diesel Oil                 |       | 229                            |       | 231 | (3) | 229 | (14) |
|                            |       | Ventanilla (15)      |       | Combined Cycle/Natural  Gas            |       | 457                            |       | 493 | (16) | 493 |   |
| **Total  Capacity in Peru**     | ** ** | ** **           | ** ** | ** **                             | ** ** | **1,426**                      | ** ** | **1,469** | ** ** | **1,467** | ** ** |
| ** **                      |       |                 |       |                                   | ** ** | ** **                     | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Consolidated  Capacity**      | ** ** | ** **           | ** ** | ** **                             | ** ** | **13,300**                     | ** ** | **13,708** | ** ** | **13,893** | ** ** |

 

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| (1)    |   | Total installed capacity is defined as the maximum  capacity, under specific technical conditions and characteristics.                                                                                                                                                                               |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                 |
| (2)    |   | “Reservoir” and “pass through” refer to a  hydroelectric plant that uses a dam or a river, respectively, to move the  turbines which generate electricity.                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                 |
|   |   | “Steam” refers to the technology of a thermal power  plant that uses natural gas, coal, diesel or fuel oil to produce steam which  moves the turbines to generate electricity.                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                 |
|   |   | “Gas Turbine” (GT) or “Open Cycle” refers to the  technology of a thermal power plant that uses either diesel or natural gas to  produce gas that moves the turbines to generate the electricity.                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                 |
|   |   | “Combined Cycle” refers to the technology of a  thermal power plant that uses natural gas, diesel oil or fuel oil to generate  gas that moves the turbines to generate electricity and then recuperates the  gas that escapes from that process to generate steam to move another turbine. |
|   |   |                                                                                                                                                                                                                                                                                                 |
|   |   | “Wind Farm” refers to the technology that  transforms the kinetic energy of wind into electricity.                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (3)    |   | Installed capacities were certified by Bureau  Veritas.                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (4)    |   | The Palmucho plant began commercial operations on  November 28, 2007.                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (5)    |   | Includes one additional unit of Diego de Almagro  (23 MW), which Endesa Chile has rented from Codelco since 2001.                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (6)    |   | Until March 2008, only one of the units was  able to use diesel as fuel. Since that date, both units can operate with  natural gas and diesel oil.                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (7)    |   | San Isidro II plant began commercial operations in  open cycle on April 23, 2007. Commercial operations in combined  cycle began on January 2008.                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (8)    |   | Canela wind farm began its commercial operation on  December 27, 2007.                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                 |
| (9)    |   | During 2007, Emgesa and Betania merged and Emgesa  added Betania to its generation assets.                                                                                                                                                                                                           |

 

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| (10)   |   | On February 12, 2007, the five units of  the Guavio plant were repowered (240 MW each).                                                                                                                                                                                                                        |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                          |
| (11)   |   | Purchased in 2006. Until 2007 figure represented  capacity value for units 1 and 3. Unit 2 was added in 2008, following  overhaul and recovery of capacity.                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| (12)   |   | Minor plants are registered with a total capacity  of 96.1 MW. As of December 31, 2008 Emgesa owned and operated  five minor plants: *Charquito*, *El Limonar*, *La Tinta*, *Tequendama*and *La  Junta*. On January 1, 2006, the minor plant San  Antonio (19.5 MW) was withdrawn from the NIS. |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| (13)   |   | Callahuanca plant was repowered in 2007.                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| (14)   |   | During 2008, the installed capacity of Santa Rosa  was redefined as required by the relevant authority.                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| (15)   |   | During 2006, Edegel and Etevensa merged and Edegel  added Ventanilla to its generation assets.                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| (16)   |   | The regulator notified maximum capacity with  additional fire of the Ventanilla plant in 2007.                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                          |
| (17)   |   | In November 2008, Arroyito power plant  increased its installed capacity due to a higher dam elevation.                                                                                                                                                                                                                  |

 

***GenerationProjects Completed during 2008***

*** ***

*Chile:San Isidro Power Plant Expansion Project*

* *

This project consists ofthe installation of a combined cycle gas turbine with 379 MW located nextto San Isidro, Valparaíso Region.  TheProject has three stages of development:

 

·                  Stage 1: Operation of gas turbine as an open cycleusing diesel (248 MW).  Commercialoperations started in April 2007.

 

·                  Stage 2: Operation of gas turbine as a combined cycleusing diesel, reaching 353 MW.  In December 2007San Isidro II synchronized as combined-cycle. The steam unit began commercial operations in January 2008.

 

·                  Stage 3: Operation of gas turbine as a combined-cycleusing LNG in 2009 (subject to LNG availability), expecting to have a377 MW capacity.

 

*Chile:Tal-Tal Gas Turbine, Conversion to Diesel*

* *

Tal-Tal power plant wasoriginally designed to use natural gas but later was converted to also usediesel oil.  The unit started usingdiesel in March 2008.

 

*Chile:Ojos de Agua*

* *

This project consists ofa mini-hydro plant in the Maule region, which benefits from water flows from LaInvernada reservoir that power a 9 MW turbo generator.  This project was developed by Endesa Eco andcommercial operations started in June 2008.

 

***Projects under Construction***

*** ***

*Chile: Canela II Wind FarmProject*

 

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Canela II wind farmincludes the expansion of the existing 18 MW wind farm with theinstallation of additional 60 MW on an adjoining site.  Commercial operations are planned to begin bythe end of 2009.

 

*Chile: Quintero to QuillotaPipeline*

* *

The project was developedby Electrogas and involves the installation of a 28 kilometer pipeline totransport the natural gas that will be obtained in the LNG Receiving Terminalat Quintero.  The approval of theenvironmental authority has been obtained. In 2007, we entered two contracts with GNLQ, one for the firmtransportation of 15 million cubic meters daily from 2009 through 2029,and one for the interconnection between natural gas production and transportinstallations.  Construction was finishedin February 2009 and the pipeline is expected to start commercialoperations by mid 2009.

 

*Chile: LNG Receiving Terminal at the Quintero Bay (“GNLQ”)*

* *

GNLQ, which is owned byBritish Gas (40%), ENAP (20%), Metrogas (20%) and Endesa Chile (20%), wasincorporated in Chile on March 9, 2007.  GNLQ intends to develop, build, finance, ownand operate an LNG regasification facility at Quintero Bay whereby LNG will beunloaded, stored and regasified.

 

The project is underconstruction by Chicago Bridge & Iron. The commercial operation of the facility is guaranteed by the EPCcontractor, with a first stage of 6 million cubic meters daily by mid2009, and final LNG capacity of 9.6 million cubic meters daily (2.5million tons per year), and two 160,000 cubic meters full containment LNGtanks, in 2010.

 

*Chile: Bocamina Plant Expansion, Second Unit*

* *

Located in the districtof Coronel, Bío-Bío Region, the project benefits from the existing harborservices, as well as some ancillary facilities of the first unit, built forcoal storing and disposal of ashes.  Thissecond unit will use pulverized coal and the latest technology for reduction ofemissions.  Its installed capacity isestimated to be 370 MW.  Start-up ofthe project is planned for 2010.

 

*Argentina:  Manuel Belgrano and José de San Martín PowerPlant Projects*

* *

Two power plant projectsare being developed by Termoeléctrica Manuel Belgrano S.A. and TermoeléctricaJosé de San Martín S.A, both related to Endesa Chile through its subsidiaries,Endesa Costanera and El Chocón.  Eachproject consists of the installation of a combined cycle gas turbine of 823 MW,the first located next to Campana (80 kilometers north from Buenos Aires),and the second, in Timbúes (35 kilometers north of Rosario).  During 2008, both gas turbines startedcommercial operation in open cycle with natural gas.  A couple of months later they were alsoenabled to use gas oil as alternative fuel. During 2008, Manuel Belgrano produced 435.9 GWh and TermoeléctricaJosé de San Martín S.A. 568.3 GWh. Commercial operations under combined cycle are expected for the secondhalf of 2009.

 

*Peru: Santa Rosa Thermal PlantExpansion Project*

* *

This project consists ofthe expansion of the Santa Rosa 227 MW thermal plant by the constructionof a gas turbine in open cycle. The new unit will have a capacity ofapproximately 188 MW and will use natural gas 

 

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fromCamisea as fuel.  In January 2008, aturn-key contract was signed with Siemens Power Generation for itsinstallation.  Start-up is planned for December 2009.

 

***Projects under Development***

*** ***

*Chile:Los Cóndores*

* *

The project is located inthe Maule river’s basin, and consists of a hydroelectric power station of150 MW that will use the water flows from the Maule reservoir, with a4 kilometer long concrete pipe and 9 kilometer long tunnel.  During 2008, civil work and electromechanicalequipment supply bidding processes were held.

 

*Chile: Piruquina Mini-Hydro*

* *

Developed by Endesa Eco,the project is located in the island of Chiloé. It consists of a run-of-river hydro plant which will use water flow fromthe Carihueico river. According to the feasibility study, the installedcapacity will be 7.6 MW.  During2008, we continued the preparation of Environmental Impact Study and basicengineering documentation, necessary to call for civil work and equipment bids.

 

*Chile: Neltume and Choshuenco*

* *

The Neltume andChoshuenco projects are located in Los Ríos region, on the upper part of theValdivia river’s basin.  The Neltumeproject consists of a 473 MW hydro plant with regulation in LakePirihueico.  The Choshuenco project usesthe flows of the Llanquihue river at its source, at the junction with the Fuyand Neltume rivers, with the possibility of building a run-of-river hydro plantof 128 MW.

 

During 2008 there wasprogress in the preparation of an Environmental Impact Study and basicengineering necessary to call for civil works and equipment bids.

 

*Chile: HidroAysén*

* *

The HidroAysén hydropowerproject consists of five hydroelectric power stations, with an aggregatecapacity of 2,750 MW, two stations in the Baker river (660 MW and360 MW) and the other three in the Pascua river (500 MW, 770 MWand 460 MW).  Connection to the SICelectric grid consists of a nearly 2,000 kilometer, 500 kVhigh-voltage direct current transmission line, or “HVDC”.

 

On August 14, 2008,HidroAysén presented its Environmental Impact Assessment (EIA) to the AysénRegion’s Corema, beginning the formal evaluation process, which permittedcertain work to start.  In October 2008,public hearings started, introducing the project in the relevant communities.

 

In November, HidroAysénreceived from Corema the consolidated report of requests for clarifications,and amendments for its EIA which includes extensive comments from publicservices and the community; subsequently HidroAysén requested a nine monthextension of the deadline to answer such report.

 

Works at HidroAysén havebeen mainly concentrated in engineering and environmental studies.  The company developed direct contact withlocal communities through round table meetings, attended by residents and theirrepresentatives.

 

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HidroAysén commissionedthe design and route studies for the HVDC line that will carry the energy tothe SIC, to Transelec, an unrelated transmission company.

 

*Colombia: El Quimbo HydroelectricProject*

* *

El Quimbo hydroelectricproject will be located in the department of Huila, on the river Magdalena,upstream of the Betania power plant.  Itsinstalled capacity will be 400 MW through two generator units.  Emgesa presented this project to the auction “*subasta del cargo por confiabilidad*”, or GPPS, and wasawarded the right to offer firm energy from El Quimbo starting December 2014.

 

**During 2008, the Ministry of theEnvironment made it possible to start the Environmental Impact Study.  Besides this, definitive pre-feasibilitystudies were completed and the basic design began.  The award of the contract for deviation worksis expected for 2009, once the environmental license and building permissionare approved.**

** **

***Property,Plants and Equipment of Distributing Companies***

*** ***

**TABLEOF DISTRIBUTION FACILITIES**

** **

**General Characteristics**

 
| ** ** | ** ** | ** **   | ** ** | **Concession**      | ** ** | **Transmission  Lines (km) (1)** | ** ** |
|------------|------------|--------------|------------|---------------------|------------|--------------------------------------------|------------|
| ** ** | ** ** | **Location** | ** ** | **Area (km2)** | ** ** | **2007**                                   | ** ** | **2008** | ** ** |
| Chilectra  |       | Chile        |       | 2,118               |       | 355                                        |       | 355 |   |
| Edesur     |       | Argentina    |       | 3,309               |       | 1,185                                      |       | 1,160 |   |
| Edelnor    |       | Peru         |       | 2,440               |       | 419                                        |       | 425 |   |
| Ampla      |       | Brazil       |       | 32,615              |       | 2,303                                      |       | 2,333 |   |
| Coelce     |       | Brazil       |       | 146,817             |       | 3,979                                      |       | 4,244 |   |
| Codensa    |       | Colombia     |       | 14,087              |       | 1,227                                      |       | 1,227 |   |
| **Total**  | ** ** | ** **   | ** ** | **201,386**         | ** ** | **9,468**                                  | ** ** | **9,744** | ** ** |

 

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(1) The transmissionlines consist of circuits with voltages in the range of 27 kV - 220 kV.

 

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** **

**Power and InterconnectionSub-Stations and Transformers (1)**

 
| ** ** | ** ** | **2007**                      | ** ** | **2008**                     | ** ** |
|------------|------------|-------------------------------|------------|------------------------------|------------|
| ** ** | ** ** | **Number  of Sub-  stations** | ** ** | **Number  of  Transformers** | ** ** | **Capacity (MVA)** | ** ** | **Number  of Sub-  stations** | ** ** | **Number  of  Transformers** | ** ** | **Capacity  (MVA)** | ** ** |
| Chilectra  |       | 53                            |       | 143                          |       | 6,402 |   | 53 |   | 148 |   | 6,652 |   |
| Edesur     |       | 64                            |       | 170                          |       | 11,222 |   | 66 |   | 171 |   | 11,406 |   |
| Edelnor    |       | 28                            |       | 60                           |       | 2,197 |   | 29 |   | 64 |   | 2,452 |   |
| Ampla      |       | 115                           |       | 227                          |       | 4,349 |   | 116 |   | 226 |   | 4,376 |   |
| Coelce     |       | 94                            |       | 150                          |       | 2,101 |   | 95 |   | 151 |   | 2,145 |   |
| Codensa    |       | 61                            |       | 206                          |       | 7,347 |   | 61 |   | 206 |   | 7,460 |   |
| **Total**  | ** ** | **415**                       | ** ** | **956**                      | ** ** | **33,618** | ** ** | **420** | ** ** | **966** | ** ** | **34,491** | ** ** |

 

----

(1) Voltage of thesetransformers is in the range of 7 kV (low voltage) and 500 kV (high voltage).

 

**Distribution Network -Medium and Low Voltage Lines (1)**

 
| ** ** | ** ** | **2007**                  | ** ** | **2008**               | ** ** |
|------------|------------|---------------------------|------------|------------------------|------------|
| ** ** | ** ** | **Medium  Voltage  (km)** | ** ** | **Low  Voltage  (km)** | ** ** | **Medium  Voltage  (km)** | ** ** | **Low  Voltage  (km)** | ** ** |
| Chilectra  |       | 4,681                     |       | 9,637                  |       | 4,745 |   | 9,817 |   |
| Edesur     |       | 6,841                     |       | 15,639                 |       | 7,118 |   | 15,760 |   |
| Edelnor    |       | 3,355                     |       | 17,611                 |       | 3,480 |   | 18,053 |   |
| Ampla      |       | 30,097                    |       | 16,526                 |       | 31,238 |   | 16,901 |   |
| Coelce     |       | 62,597                    |       | 39,564                 |       | 68,435 |   | 42,281 |   |
| Codensa    |       | 18,013                    |       | 21,987                 |       | 18,417 |   | 22,096 |   |
| **Total**  | ** ** | **125,584**               | ** ** | **120,964**            | ** ** | **133,433** | ** ** | **124,908** | ** ** |

 

----

**(1) Low voltage lines:380/110 V.  Medium voltage lines: 7,000 V— 34,500 V.**

** **

**Transformers forDistribution (1)**

 
| ** ** | ** ** | **2007**                    | ** ** | **2008**            | ** ** |
|------------|------------|-----------------------------|------------|---------------------|------------|
| ** ** | ** ** | **Number of  Transformers** | ** ** | **Capacity  (MVA)** | ** ** | **Number of   Transformers** | ** ** | **Capacity  (MVA)** | ** ** |
| Chilectra  |       | 27,315                      |       | 5,627               |       | 27,768 |   | 6,062 |   |
| Edesur     |       | 23,587                      |       | 4,935               |       | 23,834 |   | 5,110 |   |
| Edelnor    |       | 9,326                       |       | 1,226               |       | 9,481 |   | 1,252 |   |
| Ampla      |       | 98,001                      |       | 3,390               |       | 102,878 |   | 3,561 |   |
| Coelce     |       | 105,887                     |       | 3,736               |       | 115,086 |   | 3,825 |   |
| Codensa    |       | 61,339                      |       | 7,323               |       | 62,952 |   | 7,559 |   |
| **Total**  | ** ** | **325,455**                 | ** ** | **26,236**          | ** ** | **341,999** | ** ** | **27,369** | ** ** |

 

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----

(1)  Voltage of these transformers is in the range of 110 V (low voltage) to34,500 V (high voltage).

 

**ClimateChange**

** **

The Company has beeninvolved for a long time in efforts to develop non-conventional renewableenergy (NCRE) projects and committed to the reduction of carbon dioxide (“CO2”) emissions. These projects in Chile include the Canela I (in operation) and II(in construction) wind farms, and mini-hydro units, such as Ojos de Agua (inoperation) and Piruquina (in evaluation by the environmental authorities).  These power stations and projects are thefirst step to develop similar environmentally-friendly power plants in the restof the countries in which we operate.

 

NCRE power stations andprojects not only provide clean energy, but also allow the Company to tradeso-called “carbon bonds” in the international market, associated withgreenhouse gases (“GHG”).  The Ojos deAgua mini-hydro power station was registered as a Clean Development Mechanism (“CDM”)in April 2007 in the United Nations Framework Convention on Climate Change(UNFCCC) and the Canela I wind farm was registered in April 2009.  As of the date of this Report, an independentconsultant is verifying the amount of tons of CO2 equivalent associated with the Ojos de Aguaplant for its initial period during the second semester of 2008, in order toallow the Company to trade those emissions. The estimated amount for thisperiod is 8,000 tons of CO2 equivalent; however, going forward, weestimate 20,870 tons of CO2 equivalent per year.  Since Canela I was not registered as CDMin 2008, it is in the process of verifying and then trading the tons of CO2 equivalent for2008 in the open market.  The estimatedamount for Canela I in 2008 is 18,000 tons of CO2 equivalent.

 

The Company is also awarethat hydroelectric generation is the cleanest source of electricity for theenvironment in Chile.  Approximately 62%of the Company’s consolidated installed capacity is hydroelectric while inChile hydroelectricity represents 71% of our installed capacity.  Additionally, the Company is actively involvedin developing new power stations based on hydroelectric capacity, such as Chile’sHidroAysén, that will have an installed capacity of 2,750 MW and Colombia’sEl Quimbo, with a projected installed capacity of 400 MW.

 

The CO2 (GHG) emissions of the Company for the three yearsended December 31, 2008, were 7.6 million tons in 2006,11.5 million tons in 2007 and 11.6 million tons in 2008.

 

**MajorEncumbrances**

** **

*Chile*

* *

Pangueexecuted a firstmortgage on the property where its power plant is located, including the waterrights and the concession to establish the power plant.  There is also a lien on the electricitylines, machinery and equipment of the power plant.  Both include the prohibition to sell,transfer or further encumber such assets. The value of the pledged assets was Ch$ 107 billion as of December 31, 2008.  These encumbrances and prohibitions guaranteethe obligations of Pangue withits lenders: Export Development Canada and Kreditanstalt für Wiederaufbau.

 

The GNLQ project requiredthe sponsors, including Endesa Chile, to pledge their GNLQ’s shares asguarantee for the lenders.

 

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* *

*Argentina*

* *

Endesa Costanera’s debtwith Mitsubishi Corporation corresponds to the balance of payments in thepurchase of equipment.  As of December 31, 2008,the value of the assets pledged as a guarantee for thisCh$ 49 billion debt, was Ch$ 74 billion.  Additionally, Endesa Costanera has executedliens in favor of Credit Suisse First Boston in order to guarantee aCh$ 25 billion loan, for assets pledged as guarantee valued at Ch$ 27 billion.

* *

*Peru*

* *

Edegel has a debtoriginated in the financing of the Ventanilla power plant.  As of December 31, 2008, the valueof the assets pledged as a guarantee of this debt wasCh$ 135 billion.

 

**Item 4A.  Unresolved Staff Comments**

** **

There are no unresolved staff comments as of December 31, 2008.

 

**Item 5.   Operating and Financial Review and Prospects**

** **

**A.            Operating Results**

** **

**Introduction**

** **

We own and operateelectric power generation, transmission, and distribution companies in Chile,Argentina, Brazil, Colombia, and Peru. Most of our revenues, income, and cash flow come from the operations ofour subsidiaries and equity affiliates in these five countries.

 

Factors such asregulatory developments, economic conditions and hydrologic conditions in eachcountry in which we operate are important in determining our financialresults.  In addition, the results fromoperations and financial condition are affected by variations in exchange ratesbetween the dollar and the peso and the currencies of the other four countriesin which we operate.  Such exchange ratevariations may have a significant non-cash effect due to Chilean GAAP’sTechnical Bulletin No.64, or BT 64, “Accounting for Permanent ForeignInvestments” as it relates to the consolidation of the results of our companiesoutside of Chile.  Lastly, our other criticalaccounting policies also have an effect on our consolidated results fromoperations.

 

*RegulatoryDevelopments*

 

The regulatory structure governing our business has a material effecton our results from operations.  Inparticular, regulators in the countries where we operate set (i) distributiontariffs taking into account the costs of energy purchases paid by distributioncompanies (which distribution companies pass on to their customers) and the “ValueAdded from Distribution,” or VAD, and (ii) generation tariffs taking intoconsideration principally 

 

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the costs offuels, reservoir levels, exchange rates, future investments in installedcapacity and growth in demand, all of which is intended to reflect investmentand operating costs incurred by distribution and generation companies and ismeant to allow such companies to earn a level of return on their investments.  Accordingly, the earnings of our electricitysubsidiaries are determined in significant part by the actions of governmentregulators.  For additional informationon the regulatory frameworks in the countries where we operate, see “Item 4.Information on the Company — B. Business Overview — Electricity IndustryRegulatory Framework”.

 

*EconomicConditions*

* *

Macroeconomic conditions have a significant effect on our results fromoperations.  For example, when a countryexperiences sustained economic growth, consumption of electricity by industrialand individual consumers of electricity increases while electricity lossesdecrease.  Other macroeconomic factorssuch as devaluation of the local currency may have a negative impact on ourresults from operations because although most of our revenues are denominatedin the currency of the countries in which we operate, our financing costs andother important costs such as depreciation are denominated in dollars.  As a result, devaluation of local currenciesagainst the dollar shrinks our operating margins and increases the cost ofcapital expenditure plans.  Foradditional information, see “Item 3.  KeyInformation—D. Risk Factors—Exchange rate risks may have a negative impact onour results from operations and financial situation” and—“Fluctuations in SouthAmerican economies may affect our operating results.”

 

*HydrologicConditions: Generation Business*

 

In 2008, 65% ofour generation business depended upon the hydrologic conditions prevailing inthe countries where we operate.  Ourthermal generators, which are fueled with natural gas, coal or diesel, aredispatched to cover peaks in energy demand and to cover any shortfallsexperienced by our hydroelectric plants due to insufficient waterresources.  In our generation business,we are in a position to offset, through thermal generation and purchases, theimpact of physical and monetary sales resulting from poor hydrologic conditions(low reservoirs levels, rain and snowfall) in the geographical areas where ourgenerating plants operate.  Our thermalgeneration capacity and its ability to purchase electricity from othergenerating companies enable us to boost thermal generation and/or electricitypurchases from the competition in order to satisfy our commitments.  Additionally, given the industry structureand the percentage of hydroelectric power generation capacity in the countrieswhere we operate, when hydrologic conditions are poor, the market price ofelectricity generally increases, which could potentially lead to greaterrevenue for the company.

 

***Operating costs of thermal generation and electricitypurchases are greater than the variable cost incurred by the company forhydroelectric generation.  The cost ofthermal generation does not depend directly on water levels, but the cost ofelectricity purchases on the spot market does. For additional information regarding the effects of hydrologicconditions on our results from operations, please see “Item 3. Key Information— D. Risk Factors — “Risk Relating to Our Operations.”***

*** ***

***Chilean GAAP: Technical Bulletin No. 64 (BT 64)***

*** ***

Consolidation of theresults of our non-Chilean subsidiaries was governed by BT 64 through the yearended December 31, 2008.  BT 64establishes a mechanism to consolidate the financial results of a non-Chileancompany prepared in its local non-Chilean GAAP and denominated in its localcurrency into the financial results of its Chilean parent company, which areprepared in Chilean GAAP and denominated in pesos.  BT 64 

 

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affectsthe reporting of our results from operations. In particular, exchange rate variations, if significant, can materiallyaffect the operating revenues and expenses reported in our consolidatedfinancial statements in Chilean GAAP and may trigger non-operating gains andlosses.  As of January 1, 2009 weare adopting International Financial Reporting Standards (IFRS). As a resultthe accounting effect of BT 64 will no longer be recorded as an adjustment toour results from operations.

 

*BT64—Conversion Effect*

 

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

 

In addition, BT 64requires income and expense accounts (except for expenses incurred inconnection with depreciation and amortization) of foreign subsidiaries to beconverted into dollars at the average exchange rate of the month during whichsuch results or expenses were booked. All amounts converted from local currency into dollars are thenconverted from dollars into pesos at the exchange rate applicable at the end ofthe reporting period.  When both localcurrencies and the peso depreciate or appreciate against the dollar, the BT 64conversion effect is inversely related to such respective movements and willhave a lesser net effect than it would if it were expressed in theaggregate.  If the local currency and thepeso diverge in their appreciation or depreciation against the dollar, as thecase might be, application of BT 64 to each movement under Chilean GAAP isdirectly related and will have a greater effect than it would otherwise have.

 

BT 64 may cause toexclude, from our reported financial condition, the effect devaluation has onnon-monetary assets in the countries in which our subsidiaries and investmentsare located.

 

The currency conversionfrom local currencies to dollars can have different effects depending on thestructure of monetary and non-monetary assets and liabilities of foreignsubsidiaries.  For example, when aforeign subsidiary has more monetary assets than monetary liabilities,devaluation of the applicable local currency against the dollar may result in aloss due to the effects of currency conversion. On the other hand, appreciation of the applicable local currency resultsin a gain.  The opposite is true forforeign subsidiaries with more monetary liabilities than monetary assets, wherea devaluation of the applicable local currency against the dollar may result ina gain and an appreciation may result in a loss.  Fluctuations in the exchange rates betweendollar and local currencies of the countries where we operate, as well as inthe dollar/peso exchange rate, have materially affected the comparability ofour results from operations during the periods discussed below due to thisconversion effect.

 

*BT64—Equity Hedge*

 

BT 64 permits a companyto hedge dollar-denominated debt incurred in connection with the acquisition ofequity in non-Chilean subsidiaries located in unstable countries, against thebook value of such equity investments. For purposes of BT 64, all the countries where we haveinvestments—Argentina, Brazil, Colombia and Peru—are considered unstablecountries.  This hedge eliminates theeffects of exchange rate variations on the debt incurred in connection withsuch investments.  If the book value ofan equity investment is lower than the dollar-denominated debt, the results ofthe exchange rate fluctuations affecting the amount of 

 

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dollar-denominateddebt that is not hedged are included in determining net income.  On the other hand, if the book value of anequity investment is higher than the dollar denominated debt, then the resultsof the exchange rate fluctuations affecting the book value of the equity thatis not hedged are recorded in cumulative translation adjustment in a reserveaccount as part of shareholders’ equity.

 

**Critical AccountingPolicies**

** **

Financial ReportingRelease FR-60 encourages all companies to include a discussion of criticalaccounting policies or methods used in the preparation of financial statements. Critical accounting policies are definedas those that are reflective of significant judgments and uncertainties, whichwould potentially result in materially different results under differentassumptions and conditions.  We believethat our critical accounting policies in the preparation of our Chilean GAAPfinancial statements are limited to the policies described below.  In many cases, Chilean GAAP specificallydictates the accounting treatment of a particular transaction and does notallow for management’s judgment to enter into its application.  For a summary of significant accountingpolicies and methods used in the preparation of financial statements, see Note2 to our consolidated financial statements.

 

*Impairmentof Long-Lived Assets*

* *

In accordance withChilean GAAP, the company evaluates the recoverability of the carrying amountof property, plants and equipment and other long-lived assets to determineimpairment in relation to the recoverable value (calculated on the basis ofoperating performance and future non-discounted cash flows of the underlyingbusiness), assessed individually for each entity to determine the possibilityof an impairment.  These standardsrequire that an impairment loss be recognized in the event that facts andcircumstances indicate that the carrying amount of an asset may not be fullyrecoverable.  An impairment is recordedbased on a “useful value,” which is the present value of future cash flows asthey compare to current carrying amounts. The most relevant estimates made in determining the recoverability oflong-lived assets depend on expectations surrounding the company’s businessplan, including macroeconomic framework and assumptions regarding GDP growth,inflation and interest rates, growth estimates for energy demand, estimatedinstalled capacity, hydrology, regulations and frameworks governing tariffs,fixed and variable costs, etc, all of which have an important impact on thecalculations.

 

Impairment of ourproperty, plants and equipment and other long-lived assets may have a materialnegative impact on our operating profit in any period, depending on the outcomeof impairment tests.  For years ending onDecember 31st, 2008, 2007 and 2006, management concluded that the bookvalue of our assets did not exceed their carrying value.  Given certain key economic factors subject tofluctuations, climatic conditions and global prices of fuels used in energyproduction, it is likely that the expected operating conditions may change significantlyfrom period to period.

 

*Impairmentof Goodwill*

* *

Under Chilean GAAP,accounting treatment of goodwill requires management to estimate an adequategoodwill amortization period and assess recoverability of the carrying value ofgoodwill in situations where there may be a loss.  The maximum amortization period permitted forgoodwill under Chilean GAAP is 20 years. The following factors are taken into account when estimating theappropriate goodwill amortization period:

 

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·                  Expected useful life of the business and expectationsregarding future benefits associated with the business or unidentifiableassets;

 

·                  Expected actions to be taken by existing andprospective competitors; and

 

·                  Legal, regulatory or contractual provisions that mayhave an impact on useful life.

 

An assessment on therecoverability of goodwill is conducted systematically at the end of each yearor more frequently if deemed necessary after the initial assessment.

 

We have used the “usefulvalue” when calculating recoverability of goodwill.  Forecasts of future cash flows before taxesare determined on the basis of macroeconomic frameworks that take into accountGDP growth estimates, inflation, interest and exchange rates, anticipatedgrowth in energy demand, forecasts of installed capacity, hydrology, regulatoryand tariff frameworks, variable and fixed costs, etc., all of which have amaterial impact on the calculation. Accordingly, calculations include the best possible cost and revenueestimates for the various companies, using industrial forecasts, pastexperience and future expectations for upcoming years, in addition toreasonable growth rates for those years.

 

Based on the outcome ofthese estimates for the various cash generating units, management believes thatas of December 31, 2008, the goodwill recorded will be entirelyrecoverable in the future.

 

*Litigationand Contingencies*

* *

The company is currentlyinvolved in certain legal and tax proceedings. As discussed in Note 30 of ourConsolidated Financial Statements, as of December 31, 2008, we havecome to an estimate of the likely costs for the resolution of theseclaims.  We arrived at this estimate inconsultation with legal and tax counsel handling our defense in these mattersand an analysis on potential results, assuming a combination of litigation andsettlement strategies.

 

Except for the case ofthe material proceedings described in Note 30 of our Consolidated FinancialStatements, as of December 31, 2008 we do not know when these legal or taxproceedings will come to an end.

 

*Pensionand Post-Retirement Benefits Liabilities*

* *

We sponsor severalbenefit plans for our employees.  Theseplans pay benefits to employees at retirement using formulas based on employeeyears of service and compensation.  Weprovide certain additional benefits for certain retired employees as well.

 

Recorded pensions andother post-retirement benefit liabilities reflect our best estimate of thefuture cost of honoring our obligations under these benefit plans.  The accounting applied to these benefit plansinvolves actuarial calculations, which contain key assumptions, including:employee turnover, life expectancy and retirement ages, discount rates,expected returns on assets, future salary and benefit level, claim rates undermedical plans and future medical cost. These assumptions change as market and economic conditions change andany change in any of these assumptions could have a material effect on ourreported results from operations.  Onceevery three years we review the key assumptions used in the determination ofthe pension obligation plan assets and net periodic pension cost as prescribedby Technical Bulletin No. 8.

 

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

 

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| ** **                    | ** ** | **Year ended December 31,**   | ** ** |
|-------------------------------|------------|------------------------------------|------------|
| ** **                    | ** ** | **2007**                           | ** ** | **2008** | ** ** |
|                          | ** ** | **(increase  in millions of Ch$)** | ** ** |
| Projected  benefit obligation |       | 40,055                             |       | 36,228 |   |

 

The following table showsthe effect of a 1% change in the discount rate on our accumulatedpost-retirement benefit obligation for the periods indicated.

 
| ** **                                          | ** ** | **Year ended December 31,**        | ** ** |
|-----------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                          | ** ** | **2007**                                | ** ** | **2008** | ** ** |
| ** **                                          | ** ** | **(increase in millions of Ch$ )** | ** ** |
| Accumulated  post-retirement benefit obligation (1) |       | 5,466                                   |       | 5,142 |   |

 

----

(1) Post-retirementbenefit obligation in this table is comprised of indemnifications for employeeservice years and AMPLA health benefits.

 

***Introduction of International Financial ReportingStandards***

*** ***

*On August 28,2007, the SVS announced the adoption of International Financial ReportingStandards (IFRS) in Chile beginning on January 1, 2009, in keeping withwhich Enersis voluntarily adopted these standards as of that date.  Pursuant to the convergence plan set forth bythe company, at present Enersis is studying the impact IFRS application will haveon its financial standards.*

* *

***SAB 74 Disclosures***

*** ***

***RecentAccounting Pronouncements. See Note 37-2r.***

 

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**Enersis’ Results from Operations for the Years ended December 31, 2007and December 31, 2008**

** **

**Overview**

 

As of December 31,2008, the company’s net income was Ch$ 570,883 million, representing a 178.3%increase compared to 2007.  The followingis a summary of the most important events leading to this increase:

 

·                  Operating revenues increased by 35.3% or Ch$ 1,734,666 million for atotal of Ch$ 6,650,287 million.

 

·                  Operating Income increased by 44.6%, or Ch$ 610,040million, for a total of Ch$ 1,978,797 million, given greater contributions byour main lines of business:

 
| Distribution                 |   | 42.8 | % |
|------------------------------|--------|------|---|
| Generation and  Transmission |   | 47.6 | % |

 

·                  An increase in non-operating income byCh$ 343,915 million, primarily due to the effect of applying BT 64 to exchangerate variations in several countries, especially Brazil and Colombia.

 

**OperatingIncome**

 
| ** **                             | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------|------------|----------------------------------|------------|
| ** **                             | ** ** | **2007**                         | ** ** | **2008** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                             | ** ** | **(in millions of Ch$)**         | ** ** | ** ** | ** ** |
| **Generation  Business**               | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Endesa Chile and  subsidiaries (Chile) |       | 363,843                          |       | 550,712 |   | 186,869 |   | 51.4 | % |
| Costanera  (Argentina)                 |       | 422                              |       | 6,284 |   | 5,862 |   | 1.389.1 | % |
| El Chocón  (Argentina)            |       | 27,556                           |       | 11,918 |   | (15,638 | ) | (56.7 | )% |
| Cachoeira  Dourada (Brazil)            |       | 55,338                           |       | 113,389 |   | 58,051 |   | 104.9 | % |
| Endesa Fortaleza  (Brazil)             |       | 48,378                           |       | 39,694 |   | (8,684 | ) | (18.0 | )% |
| Emgesa  (Colombia)                     |       | 174,535                          |       | 262,971 |   | 88,436 |   | 50.7 | % |
| Edegel (Peru)                          |       | 50,261                           |       | 54,545 |   | 4,284 |   | 8.5 | % |
| **Total**                              | ** ** | **720,333**                      | ** ** | **1,039,513** | ** ** | **319,180** | ** ** | **44.3** | **%** |
| **Transmission  Business**             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| CIEN (Brazil)                          |       | 25,244                           |       | 60,405 |   | 35,161 |   | 139.3 | % |
| **Total**                              | ** ** | **25,244**                       | ** ** | **60,405** | ** ** | **35,161** | ** ** | **139.3** | **%** |
| **Distribution  Business**             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Chilectra and  subsidiaries (Chile)    |       | 134,419                          |       | 171,064 |   | 36,646 |   | 27.3 | % |
| Edesur  (Argentina)                    |       | 31,776                           |       | 37,231 |   | 5,455 |   | 17.2 | % |
| Distrilima/Edelnor  (Peru)             |       | 46,263                           |       | 69,255 |   | 22,992 |   | 49.7 | % |
| Ampla (Brazil)                         |       | 147,599                          |       | 210,552 |   | 62,953 |   | 42.7 | % |
| Investluz/Coelce  (Brazil)             |       | 84,586                           |       | 139,906 |   | 55,320 |   | 65.4 | % |
| Codensa  (Colombia)                    |       | 169,688                          |       | 249,279 |   | 79,591 |   | 46.9 | % |
| **Total**                              | ** ** | **614,331**                      | ** ** | **877,287** | ** ** | **262,957** | ** ** | **42.8** | **%** |

 

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| ** **                        | ** ** | **Year ended December 31,** | ** ** |
|-----------------------------------|------------|----------------------------------|------------|
| ** **                        | ** ** | **2007**                         | ** ** | **2008** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                        | ** ** | **(in millions of Ch$)**         | ** ** | ** ** | ** ** |
| Non-electricity  subsidiaries (1) |       | 3,774                            |       | (3,949 | ) | (7,723 | ) | n.a. |   |
| **Total**                         | ** ** | **3,774**                        | ** ** | **(3,949** | **)** | **(7,723** | **)** | **n.a.** | ** ** |
| ** **                        | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Less:  intercompany transactions  |       | 5,075                            |       | 15,190 |   | 10,115 |   | 199.3 | % |
|                              |       |                             |       |   |   |   |   |   |   |
| **Total**                         | ** ** | **1,368,757**                    | ** ** | **1,978,797** | ** ** | **610,040** | ** ** | **44.6** | **%** |

 

----

***(1) ***Includes operating income forCAM, Synapsis, Inmobiliria Manso de Velasco (IMV), Túnel El Melón, Ingendesa,Enigesa, Enersis, and investment vehicles.

 

The table below breaks down operating income by segment for years endedDecember 31, 2007 and 2008.

 
| ** **                           | ** ** | **Years  ended December 31,** | ** ** |
|--------------------------------------|------------|------------------------------------|------------|
| ** **                           | ** ** | **(in  millions of Ch$)**          | ** ** |
| ** **                           | ** ** | **Generation**                     | ** ** | **Transmission** | ** ** | **Distribution** | ** ** | **Other** | ** ** | **Intercompany  Transactions** | ** ** | **Total** | ** ** |
| ** **                           | ** ** | **2007**                           | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** |
|                                 |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating  revenues                  |       | 2,087,585                          |       | 2,774,112 |   | 95,019 |   | 84,391 |   | 3,075,285 |   | 4,165,118 |   | 280,482 |   | 331,141 |   | (622,750 | ) | (704,475 | ) | 4,915,621 |   | 6,650,287 |   |
| Operating costs                      |       | (1,323,928                         | )          | (1,681,554 | ) | (65,012 | ) | (24,083 | ) | (2,234,457 | ) | (3,013,311 | ) | (222,027 | ) | (267,470 | ) | 589,588 |   | 680,514 |   | (3,255,836 | ) | (4,305,904 | ) |
| Selling and  administrative expenses |       | (43,324                            | )          | (53,045 | ) | (4,763 | ) | (4,728 | ) | (226,497 | ) | (274,519 | ) | (54,681 | ) | (67,620 | ) | 38,237 |   | 34,326 |   | (291,028 |   | (365,586 | ) |
|                                 |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating  income**                | ** ** | **720,333**                        | ** ** | **1,039,513** | ** ** | **25,244** | ** ** | **55,580** | ** ** | **614,331** | ** ** | **877,288** | ** ** | **3,774** | ** ** | **(3,949** | **)** | **5,075** | ** ** | **10,365** | ** ** | **1,368,757** | ** ** | **1,978,797** | ** ** |

 

**Operating Revenues**

 

***Generation Business Segment***

 

Thefollowing table below sets forth the physical sales of electricity by oursubsidiaries, arranged by country and their corresponding changes for thetwelve-month periods ended December 31, 2007 and 2008.

 
| ** **                  | ** ** | **Physical sales during**         | ** ** |
|-----------------------------|------------|-----------------------------------|------------|
| ** **                  | ** ** | **Years ended December 31,** | ** ** |
| ** **                  | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | **%** | ** ** |
| ** **                  | ** ** | **2007**                          | ** ** | **2008** | ** ** | **Change** | ** ** | **Change** | ** ** |
| ** **                  | ** ** | **(GWh)**                         | ** ** | ** ** | ** ** |
| ** **                  | ** ** | ** **                        | ** ** | ** ** | ** ** |
| Endesa Chile  (Chile)       |       | 19,212                            |       | 19,808 |   | 596 |   | 3.1 | % |
| Costanera  (Argentina)      |       | 8,450                             |       | 8,543 |   | 93 |   | 1.1 | % |
| El Chocón  (Argentina) |       | 3,956                             |       | 2,554 |   | (1,402 | ) | (35.4 | )% |
| Edegel (Peru)               |       | 7,994                             |       | 8,461 |   | 467 |   | 5.8 | % |
| Emgesa  (Colombia)          |       | 15,613                            |       | 16,368 |   | 755 |   | 4.8 | % |
| Cachoeira  Dourada (Brazil) |       | 4,643                             |       | 4,403 |   | (240 | ) | (5.2 | )% |
| Endesa Fortaleza  (Brazil)  |       | 2,705                             |       | 2,690 |   | (15 | ) | (0.6 | )% |
| **Total**                   | ** ** | **62,573**                        | ** ** | **62,827** | ** ** | **254** | ** ** | **0.4** | **%** |

 

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***Distribution Business Segment***

*** ***

Distribution revenues are derived primarily from theresale of electricity purchased from generating companies.  Distribution business revenues consists ofrevenues related to the recovery of the cost of electricity purchased wholesalefrom electricity generation companies and Value Added from Distribution, or VADrevenues, which are related to the recovery of costs and return on investmentregarding distribution assets as well as losses allowed under tariffregulations.  Other revenues from ourdistribution services consist of charges related to new connections and metermaintenance and leasing.

 

The table below forests forth the physical sales ofelectricity by our subsidiaries, arranged by country, and their correspondingchanges for the twelve-month periods ended December 31, 2007 and2008.

 
| ** **          | ** ** | **Physical sales during  Years ended December 31,** | ** ** |
|---------------------|------------|----------------------------------------------------------|------------|
| ** **          | ** ** | **2007**                                                 | ** ** | **2008** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **          | ** ** | **(GWh)**                                                | ** ** | ** ** | ** ** |
| Chilectra  (Chile)  |       | 12,923                                                   |       | 12,535 |   | (388 | ) | (3.0 | )% |
| Edesur  (Argentina) |       | 15,833                                                   |       | 16,160 |   | 327 |   | 2.1 | % |
| Edelnor (Peru)      |       | 5,201                                                    |       | 5,599 |   | 398 |   | 7.7 | % |
| Ampla (Brazil)      |       | 8,985                                                    |       | 9,119 |   | 134 |   | 1.5 | % |
| Coelce (Brazil)     |       | 7,227                                                    |       | 7,571 |   | 344 |   | 4.8 | % |
| Codensa  (Colombia) |       | 11,441                                                   |       | 11,822 |   | 381 |   | 3.3 | % |
| **Total**           | ** ** | **61,610**                                               | ** ** | **62,806** | ** ** | **1,196** | ** ** | **1.9** | **%** |

 

**Operating Revenues by Business Segment**

 

Thetable below presents our operating revenue for 2007 and 2008:

 
| ** **                             | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------|------------|----------------------------------|------------|
| ** **                             | ** ** | **2007**                         | ** ** | **2008** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                             | ** ** | **(in millions of Ch$)**         | ** ** | ** ** | ** ** |
| **Generation  Business Segment**       | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Endesa Chile and  subsidiaries (Chile) |       | 1,032,187                        |       | 1,360,684 |   | 328,497 |   | 31.8 | % |
| Costanera  (Argentina)                 |       | 227,845                          |       | 298,913 |   | 71,068 |   | 31.2 | % |
| El Chocón  (Argentina)            |       | 60,675                           |       | 54,030 |   | (6,645 | ) | (11.0 | )% |
| Cachoeira  Dourada (Brazil)            |       | 125,589                          |       | 181,685 |   | 56,096 |   | 44.7 | % |
| Endesa Fortaleza  (Brazil)             |       | 112,618                          |       | 138,504 |   | 25,886 |   | 23.0 | % |
| Emgesa  (Colombia)                     |       | 346,395                          |       | 493,221 |   | 146,826 |   | 42.4 | % |
| Edegel (Peru)                          |       | 182,276                          |       | 247,075 |   | 64,799 |   | 35.5 | % |
| **Total**                              | ** ** | **2,087,585**                    | ** ** | **2,774,112** | ** ** | **686,527** | ** ** | **32.9** | **%** |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Transmission  Business**             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| CIEN (Brazil)                          |       | 95,019                           |       | 93,228 |   | (1,791 | ) | (1.9 | )% |
| **Total**                              | ** ** | **95,019**                       | ** ** | **93,228** | ** ** | **(1,791** | **)** | **(1.9** | **)%** |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Distribution  Business Segment**     | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Chilectra and  subsidiaries (Chile)    |       | 874,624                          |       | 1,081,028 |   | 206,404 |   | 23.6 | % |
| Edesur  (Argentina)                    |       | 319,484                          |       | 416,413 |   | 96,929 |   | 30.3 | % |
| Distrilima/Edelnor  (Peru)             |       | 233,623                          |       | 313,236 |   | 79,613 |   | 34.1 | % |
| Ampla (Brazil)                         |       | 600,468                          |       | 863,638 |   | 263,170 |   | 43.8 | % |
| Investluz/Coelce  (Brazil)             |       | 478,926                          |       | 662,957 |   | 184,031 |   | 38.4 | % |
| Codensa  (Colombia)                    |       | 568,160                          |       | 827,845 |   | 259,685 |   | 45.7 | % |
| **Total**                              | ** ** | **3,075,285**                    | ** ** | **4,165,118** | ** ** | **1,089,833** | ** ** | **35.4** | **%** |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Non-electricity  subsidiaries (1)      |       | 280,482                          |       | 331,141 |   | 50,659 |   | 18.1 | % |
| **Total**                              | ** ** | **280,482**                      | ** ** | **331,141** | ** ** | **50,659** | ** ** | **18.1** | **%** |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Less:  intercompany transactions       |       | (622,750                         | )          | (713,312 | ) | (90,562 | ) | 14.5 | % |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total**                              | ** ** | **4,915,621**                    | ** ** | **6,650,287** | ** ** | **1,734,666** | ** ** | **35.3** | **%** |

 

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----

***(1) ***Includes operating income forCAM, Synapsis, Inmobiliria Manso de Velasco (IMV), Túnel El Melón, Ingendesa,Enigesa, Enersis, and investment vehicles.

 

***GenerationBusiness: Operating Revenues***

 

Total2008 revenues in Chile increased by 31.8% in 2008 to Ch$ 1,360.7 billion as aresult of greater average sales prices (both regulated and non-regulated)compared to 2007.  These improved resultsreflect the Chilean system’s higher generating costs.  In addition, physical sales increased by 3.1%to 19,808 GWh, triggered by a 36.5% increase of the spot market for a total of3,317 GWh.  Endesa Chile’s averagesales price in Chile increased by 41.9% as measured in pesos, from Ch$ 49.9 perkWh in 2007 to Ch$ 70.9 per kWh in 2008.

 

InArgentina, Costanera’s revenues increased by Ch$ 71.1 billion, or 31.2%,primarily due to the BT 64 conversion effect, which resulted from the netimpact of a 2.1% depreciation of the Argentine peso and a 21.9% depreciation ofthe Chilean peso vis-à-vis the dollar, which resulted in an additional Ch$34.6 billion in revenues. In 2008, average sales prices, as measured inlocal currency, rose by 11.4% and physical sales grew by 1.1%, for a total of8,543.4 GWh.

 

InArgentina, El Chocón’s revenues fell by 11.0%, or of Ch$ 6.6 billion, primarilydue to a 35.4% drop in physical sales as a result of lower reservoir levels andpoor hydrologic conditions in the Comahue region, which was offset in part by a22.0% increase in the average sales price in local currency.  The BT 64 conversion effect increasedrevenues in Chilean pesos by Ch$ 9.2 billion.

 

InColombia, Emgesa’s revenues increased by Ch$ 146.8 billion, or 42.4%, primarilydue to the BT 64 conversion effect, which increased revenues by Ch$ 83.9billion due a 5.6% appreciation of the average Colombian peso in 2008 and a21.9% depreciation of the Chilean peso. Furthermore, there was a 755 GWh increase (4.8% compared to 2007) inphysical sales during the period along with an 11.0% increase in average salesprices as expressed in local currency.

 

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InBrazil, Cachoeira Dourada’s revenue increased by Ch$ 56.1 billion or 44.7%. The change is primarily due to the effectof converting to Chilean GAAP under BT 64 because of average Brazilianreais/dollar exchange rates and the devaluation of the Chilean peso, whichresulted in an additional Ch$ 31.2 billion in revenue and a 23.6% increase inthe average sales price during the period. The latter is offset in part by a 5.2% drop in physical sales for atotal of 4,403 GWh sold.

 

InBrazil, Endesa Fortaleza’s revenues grew by Ch$ 25.9 billion or 23.0% mainlydue to the effect of converting to Chilean GAAP under BT 64, which resulted inCh$ 28.0 billion in additional revenue, partially offset by a 3.8%decrease in the average sales price in local currency.  Physical sales dropped 0.6 % to2,690.1 GWh.

 

InPeru, Edegel revenues increased by Ch$ 64.8 billion, or 35.5%, primarily due tothe BT 64 conversion effect as a result of a 7.0% appreciation of the Peruviansol against the dollar, in addition to a 21.9% devaluation of the Chilean pesoagainst the dollar, resulting in Ch$ 47.2 billion in additional revenue.  Physical energy sales increased by 5.8%totaling 8,461 GWh, and the average sales price in local currency dropped 4.7%

 

***Transmission Business:Operating Revenues***

*** ***

Revenuefrom CIEN in 2008 were Ch$ 93.2 billion, a 1.9% decrease from 2007.  In 2008, CIEN signed an agreement withCammesa to supply energy to Argentina, and is currently waiting for theMinistry of Mining and Energy and ANEEL to define the directives concerningfixed compensation.

 

***DistributionBusiness: Operating Revenues***

*** ***

InChile, Chilectra’s 2008 operating revenues increased 23.6%, primarily due togreater average prices related with increases in the node price.  Energy demand decreased by 2.9% compared to2007.  The decrease in demand, comparedto a 4.9% increase in demand in 2007, was triggered by measures taken by theChilean government in the first quarter 2008 to prevent a potential energyshortage in Chile.  These actionsincluded the reduction in voltage until August 2008, which encouragedgenerators and regulated customers to limit consumption and mediacampaigns.  Physical sales amounted to12,535 GWh with a 3% decrease from the previous fiscal year and a 3.4% increasein the number of customers (50,626 additional customers).  On January 9, 2008, the governmentissued Decree 320 setting forth sub transmission tariffs and indexationformulas, effective as of January 13, 2009.  These tariffs were not retroactive andtherefore resulted in a Ch$ 25.1 billion reversal in the provision held byChilectra during fiscal year 2008.

 

Incomefrom non-energy related sources, related services, and electrical equipmentsales increased by Ch$ 10.4 billion or 14.2%, to Ch$ 83.7 billion in 2008,compared to Ch$ 73.3 billion in 2007, primarily due to more network transfersand the construction of underground connections.

 

InArgentina, Edesur’s  operating revenuesincreased by Ch$ 96.9 billion or 30.3% compared to 2007, primarily due to aincrease in the VAD adopted in July 2008 and a 2.1% increase in physicalsales.  Average per capita consumptionincreased by 0.5% and the total number of customers rose by 1.6% (an additional34,489 customers).  Furthermore, the BT64 conversion effect added Ch$ 48.6 billion in revenues in Chilean pesos.

 

InBrazil, Ampla’s revenues increased by Ch$ 263.2 billion or 43.8%, primarily dueto the BT 64 conversion effect which resulted in Ch$ 149.4 billion in additionalrevenue.  Physical sales increased by1.5% to 9,119 GWh, as did the number of customers, which increased by 87,878 or3.7%, to 2.5 million, along with a 9.7% increase in the average sales price inlocal currency. Income from ancillary services and electricity equipment salesincreased by Ch$ 12.7 billion or 94.6%, to Ch$ 26.1 billion in 2008,primarily due to new grid connections and meter sales.

 

In Brazil, Coelce’s revenues increased by 38.4%primarily as a result of the BT 64 conversion effect which resulted in anincrease in revenues by Ch$ 119.2 billion. Average sales prices in local currency and physical 

 

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sales increased  2.0% and 4.8%, respectively.  Other revenues increased by Ch$ 12.3 billionprimarily as a result of higher electricity and non-electricity equipment salescarried out by Coelce Plus, a division which develop services such as energy efficiency,maintenance and installations for corporate customers.  The number of Coelce’s clients increased by5.7%, from 2.7 million customers in 2007 to 2.8 million in 2008.

 

In Colombia, Codensa’s 2008 revenues increased by45.7%, or Ch$ 259.7 billion, due to a 3.3% rise in physical sales to11,822 GWh, a 12.3% increase in the average sales price in local currency,and the effect of BT 64 conversion, which led to Ch$ 137.6 billion inadditional revenues as a result of the appreciation of the Colombian peso and a21.9% devaluation of the Chilean peso. An additional Ch$ 67.6 billion in other operating income was mainlygenerated by Codensa Hogar, Codensa’s insurance and credit division.  The number of Codensa’s clients increased by3.4% to 2.3 million in 2008 while average per capita electricity consumptionremained stable at 5,200 kWh per year.

 

InPeru, operating revenues of our subsidiary Distrilima, which consolidatesEdelnor, increased 34.1% in 2008 compared to 2007, primarily due to a 7.7%increase in physical sales, which totaled 5,599 GWh and to the BT 64conversion effect, resulting in Ch$ 60.5 billion in additional revenues.  The total number of customers increased to41,289 (a 4.2% increase) and average per capita consumption increased by3.3%.  Income from ancillary services,increased by Ch$ 2.6 billion or 15.5%, to Ch$ 19.1 billion in 2008,compared to Ch$ 16.5 billion in 2007, primarily due to increased maintenanceand improvement of the electric network.

 

***Non-ElectricitySubsidiaries: Operating Revenues***

*** ***

Revenuesfrom non-electricity subsidiaries grew by Ch$ 50.7 billion or 18.1% compared to2007, due to an additional Ch$ 42.4 billion in revenues from CAM, due tohigher sales of materials and services by Ch$ 37.6 billion, and Ch$ 14.3billion in additional revenues booked by Synapsis, partially offset by a Ch$12.6~~~~billion decrease in IMV’s results, due to a decrease in propertysales related with the ENEA project.

 

***OperatingCosts***

*** ***

Operating costs consist primarily of purchases ofelectricity from third parties, depreciation and amortization, fuel purchases,maintenance expenses, tolls paid to transmission companies and salaries.

 

The table below sets forth the breakdown of ouroperational costs for the years ended December 2007 and 2008.

 
| ** **                      | ** ** | **Years ended December 31**               | ** ** |
|---------------------------------|------------|------------------------------------------------|------------|
| ** **                      | ** ** | **2007**                                       | ** ** | **2008** | ** ** |
| ** **                      | ** ** | **(percentage of total costs of  operations)** | ** ** |
| Electricity  purchases          |       | 43.5                                           | %          | 45.0 | % |
| Depreciation and  amortization  |       | 13.7                                           | %          | 12.6 | % |
| Fuel purchases                  |       | 18.5                                           | %          | 19.5 | % |
| Operating cost  and maintenance |       | 6.4                                            | %          | 6.4 | % |
| Transmission  tolls             |       | 5.8                                            | %          | 4.8 | % |
| Salaries                        |       | 5.2                                            | %          | 5.1 | % |
| Other expenses                  |       | 6.9                                            | %          | 6.5 | % |
|                            |       | 100.0                                          | %          | 100.0 | % |

 

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The table below setsforth the breakdown of operational costs for the years ending on December 31, 2007and 2008:

 
| ** **                             | ** ** | **Years ended December 31,** | ** ** |
|----------------------------------------|------------|------------------------------|------------|
| ** **                             | ** ** | **2007**                     | ** ** | **2008** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                             | ** ** | **(in millions of Ch$)**     | ** ** | ** ** | ** ** |
| **Generation  Business**               |       |                         |       |   |   |   |   |   |   |
| Endesa Chile and  subsidiaries (Chile) |       | 648,765                      |       | 786,692 |   | 137,927 |   | 21.3 | % |
| Costanera  (Argentina)                 |       | 224,694                      |       | 288,472 |   | 63,778 |   | 28.4 | % |
| El Chocón  (Argentina)            |       | 31,787                       |       | 40,445 |   | 8,658 |   | 27.2 | % |
| Cachoeira  Dourada (Brazil)            |       | 67,474                       |       | 65,202 |   | (2,272 | ) | (3.4 | )% |
| Endesa Fortaleza  (Brazil)             |       | 62,491                       |       | 96,219 |   | 33,728 |   | 54.0 | % |
| Emgesa  (Colombia)                     |       | 166,392                      |       | 223,279 |   | 56,887 |   | 34.2 | % |
| Edegel (Peru)                          |       | 122,325                      |       | 181,245 |   | 58,920 |   | 48.2 | % |
| **Total**                              | ** ** | **1,323,928**                | ** ** | **1,681,554** | ** ** | **357,626** | ** ** | **27.0** | **%** |
| **Transmission  business**             | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| CIEN (Brazil)                          |       | 65,012                       |       | 27,584 |   | (37,428 | ) | (57.6 | )% |
| **Total**                              | ** ** | **65,012**                   | ** ** | **27,584** | ** ** | **(37,428** | **)** | **(57.6** | **)%** |
| **Distribution  Business**             |       |                         |       |   |   |   |   |   |   |
| Chilectra and  Subsidiaries (Chile)    |       | 686,693                      |       | 856,618 |   | 169,925 |   | 24.7 | % |
| Edesur (Argentina)                     |       | 242,900                      |       | 311,126 |   | 68,226 |   | 28.1 | % |
| Distrilima/Edelnor (Peru)              |       | 165,649                      |       | 216,553 |   | 50,904 |   | 30.7 | % |
| Ampla (Brazil)                         |       | 414,480                      |       | 606,270 |   | 191,790 |   | 46.3 | % |
| Investluz/Coelce (Brazil)              |       | 343,283                      |       | 477,035 |   | 133,752 |   | 39.0 | % |
| Codensa (Colombia)                     |       | 381,452                      |       | 545,709 |   | 164,257 |   | 43.1 | % |
| **Total**                              | ** ** | **2,234,457**                | ** ** | **3,013,311** | ** ** | **778,854** | ** ** | **34.9** | **%** |
| Non-electricity  subsidiaries (1)      |       | 222,027                      |       | 267,470 |   | 45,443 |   | 20.5 | % |
| **Total**                              | ** ** | **222,027**                  | ** ** | **267,470** | ** ** | **45,443** | ** ** | **20.5** | **%** |
| Less:  intercompany transactions       |       | (589,589                     | )          | (684,015 | ) | (94,426 | ) | 16.0 | % |
| **Total**                              | ** ** | **3,255,835**                | ** ** | **4,305,904** | ** ** | **1,050,069** | ** ** | **32.3** | **%** |

 

----

***(1) ***Includesoperating cost for CAM, Synapsis, Inmobiliria Manso de Velasco (IMV), Túnel ElMelón, Ingendesa, Enigesa, Enersis, and investment vehicles.

*** ***

***Generation Business:Operating Costs***

*** ***

Operatingcosts in Chile rose 21.3% in 2008 compared to 2007 totaling Ch$ 786.7 billion,in great part due to a Ch$ 144.4 billion increase in fuel costs given increaseduse of oil-fired thermal generation and the high market prices for this fuel in2008.  The latter was partially offset byCh$ 10.1 billion lower toll costs and Ch$ 8.3 billion lower in energy purchasesdue to a 647 GWh decrease in physical purchases triggered by a 982 GWh increasein production during the period.  Thelatter was offset in part by higher prices for energy purchases.

 

Operatingcosts in our subsidiary Costanera in Argentina increased by Ch$ 63.8 billion,or 28.4%.   This is largely due to the BT64 conversion effect, resulting from the net effect of a 2.1% depreciation ofthe Argentine peso and a 21.9% depreciation of the Chilean peso vis-à-vis thedollar, which resulted in  Ch$34.6 billion in 

 

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higher costs, plus additional fuel purchases duringthe period.  El Chocón’s operating costsincreased by Ch$ 8.7 billion, or 27.2%, mostly due to the effect of convertingCh$ 5.1 billion to Chilean GAAP under BT 64 and additional physical purchasesof 354 GWh, due to low reservoirs levels from March to August 2008.

 

InColombia, Emgesa’s operating costs increased by Ch$ 56.9 billion, or 34.2%,mainly due to the effect of BT 64 conversion resulting of a 5.6% appreciationof the average Colombian peso in 2008 and a 21.9% devaluation of the Chileanpeso, which resulted in Ch$ 38.0 billion in additional costs.  Emgesa also had Ch$ 6.4 billion in additionalfuel costs, due to increased levels of thermal generation and the high price ofoil, as well as a Ch$ 17.7 billion increase in tolls and energy transportation.

 

Operatingcosts of Cachoeira Dourada in Brazil decreased by 3.4% to Ch$ 2.3 billionin 2008.  The decrease is due to Ch$ 18.9billion less expenses for energy purchases given the lower purchase price,which was partially offset by the effect of converting to Chilean GAAP under BT64 because of the appreciation of the reais against the dollar and thedevaluation of the Chilean peso, which meant an additional Ch$ 15.8 billion incosts.

 

Operatingcosts of Endesa Fortaleza  in Brazilincreased by Ch$ 33.7 billion, or 54.0%, mostly due to the effect ofconverting to Chilean GAAP under BT 64 due to the appreciation of the reaisagainst the dollar and the devaluation of the Chilean peso, which meant anadditional Ch$ 15.2 billion in costs, as well as higher expenses in energypurchases given the higher average purchasing price, which grew 48.9% in 2008.

 

Operatingcosts in Peru increased by Ch$ 58.9 billion, or 48.2%, largely due to theconversion effect to Chilean GAAP under BT 64, which resulted in Ch$28.8 billion in higher costs, in addition to an increase in the cost ofenergy purchases and higher fuel expenses, given the increase in using thermalgeneration during the period, for a total of Ch$ 29.3 billion.

 

***Transmission Business: Operating Costs***

 

InBrazil, CIEN’s operating costs for 2008 were Ch$ 27.6 billion, down 57.6% from 2007, primarily due to Ch$ 43.6billion less in energy purchase costs resulting from a change in the line ofbusiness, from trading to transportation. The latter was partially offset by the BT 64 conversion effect on CIENas a result of the appreciation of the reais against the dollar and thedevaluation of the Chilean peso vis-à-vis the dollar, which resulted inadditional Ch$ 15.2 billion in costs.

 

***DistributionBusiness: Operating Costs***

*** ***

Operatingcosts in Chile increased by Ch$ 169.9 billion, or 24.7%, in 2008,primarily due to an increase in costs associated with energy purchases thatrose by Ch$ 162.2 billion. The rise in energy purchase costs can beexplained by an increase in the average price of purchases of 48.2% due to anincrease in the node price paid to generators. Furthermore, an increase in the final price of energy led to both lowerconsumption and higher energy thefts, which in turn explained an increase inthe level of physical energy losses, from 5.9% in 2007 to 6.0% in 2008, despiteefforts and investments carried out by Chilectra in 2008.

 

Operatingcosts for Edesur, in Argentina, increased by Ch$ 68.2 billion, or 28.1%.This is primarily due to the BT 64 conversion effect which led to Ch$ 37.8billion in greater costs in Chilean pesos. There was a 3.6% increase in the average energy purchase cost in localcurrency, Ch$ 10.1 billion in extra personnel expenses, and Ch$ 12.2 billionmore in third-party services.  Physicallosses declined from 10.7% in 2007 to 10.6% in 2008.

 

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Operating costs for Ampla, in Brazil, increased by Ch$191.8 billion, or 46.3%.  The BT 64conversion effect led to Ch$ 100.4 billion in higher costs in Chilean pesos,plus an additional 167 GWh in physical purchases and a 12.7% increase in theaverage energy purchase price in local currency during this period.  Physical losses declined from 21.4% in 2007to 20.2% in 2008.

 

InBrazil, Coelce’s operating costs increased by Ch$ 133.8 billion or 39.0% in2008, mainly due to the BT 64 conversion effect which resulted in Ch$ 82.4billion in additional costs in Chilean pesos, plus an additional 318 GWh inphysical energy sales amounting to 8,575 GWh in 2008, as well as a 5.3%increase in the average price of energy purchased in local currency.  Energy losses declined to 11.7% in 2008 from12.5% in 2007.

 

Operatingcosts for Codensa in Colombia increased by 43.1% in fiscal year 2008 primarilydue to the BT 64 conversion effect of Ch$ 89.4 billion in greater costs inChilean pesos.  In addition, the companyrecorded an additional 327 GWh in energy purchases in order to satisfy growingdemand, and the average purchase price in local currency increased 16.3%.  Physical energy losses amounted to 8.1% in2008, compared to 8.7% in 2006.

 

Operatingcosts for Edelnor, in Peru, increased by Ch$ 50.9 billion or 30.7%. Thisis primarily due to the BT 64 conversion effect which led to Ch$ 41.9 billionin higher operating costs in Chilean pesos. There was an increase in physical energy sales due to a 7.8% increase indemand 2008 to 6,100 GWh.  Physicallosses increased from 8.1% in 2007 to 8.2% in 2008.

 

***Non-Electricity Subsidiaries: Operating Costs***

*** ***

Operatingcosts for our non-electricity subsidiaries increased by Ch$ 45.4 billion, or20.5%, in 2008, primarily due to Ch$ 41.3 billion and Ch$ 8.3 billion in highercosts at CAM and Synapsis, respectively, resulting from a rise in the sellingcost of materials and services in 2008.

 

***Selling andAdministrative Expenses***

*** ***

Selling and administrative expenses consistprincipally of general administrative expenses, salaries, uncollectibleaccounts, depreciation, amortization, materials and office supplies.

 

The table below setsforth the breakdown of selling and administrative expenses as a percentage ofour consolidated selling and administrative expenses.

 
| ** **                       | ** ** | **Years ended December 31,**                    | ** ** |
|----------------------------------|------------|------------------------------------------------------|------------|
| ** **                       | ** ** | **2007**                                             | ** ** | **2008** | ** ** |
| ** **                       | ** ** | **(percentage of selling and administrative costs)** | ** ** |
| General  administrative expenses |       | 38.4                                                 | %          | 37.5 | % |
| Salaries                         |       | 38.1                                                 | %          | 44.8 | % |
| Uncollectible  accounts          |       | 17.3                                                 | %          | 10.7 | % |
| Depreciation and  amortization   |       | 5.6                                                  | %          | 6.3 | % |
| Materials and  office supplies   |       | 0.5                                                  | %          | 0.7 | % |
|                             |       | 100.0                                                | %          | 100.0 | % |

 

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The table below sets forth the breakdown of sellingand administrative expenses for the years ending on December 31, 2007and 2008, as well as the percentage changes from period to period.

 
| ** **                             | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------|------------|----------------------------------|------------|
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | **%** | ** ** |
| ** **                             | ** ** | **2007**                         | ** ** | **2008** | ** ** | **Change** | ** ** | **Change** | ** ** |
| ** **                             | ** ** | **(in millions of Ch$)**         | ** ** | ** ** | ** ** |
|                                   |       |                             |       |   |   |   |   |   |   |
| **Generation  Business**               |       |                             |       |   |   |   |   |   |   |
| Endesa Chile and  subsidiaries (Chile) |       | 19,579                           |       | 23,280 |   | 3,701 |   | 18.9 | % |
| Costanera  (Argentina)                 |       | 2,729                            |       | 4,157 |   | 1,428 |   | 52.3 | % |
| El Chocón  (Argentina)            |       | 1,332                            |       | 1,667 |   | 335 |   | 25.2 | % |
| Cachoeira  Dourada (Brazil)            |       | 2,777                            |       | 3,094 |   | 317 |   | 11.4 | % |
| Endesa Fortaleza  (Brazil)             |       | 1,749                            |       | 2,591 |   | 842 |   | 48.1 | % |
| Emgesa  (Colombia)                     |       | 5,468                            |       | 6,971 |   | 1,503 |   | 27.5 | % |
| Edegel (Peru)                          |       | 9,690                            |       | 11,285 |   | 1,595 |   | 16.5 | % |
| **Total**                              | ** ** | **43,324**                       | ** ** | **53,045** | ** ** | **9,721** | ** ** | **22.4** | **%** |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Transmission  Business**             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| CIEN (Brazil)                          |       | 4,763                            |       | 5,239 |   | 476 |   | 10.0 | % |
| **Total**                              | ** ** | **4,763**                        | ** ** | **5,239** | ** ** | **476** | ** ** | **10.0** | **%** |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Distribution  Business**             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Chilectra and  subsidiaries (Chile)    |       | 53,512                           |       | 53,346 |   | (166 | ) | (0.3 | )% |
| Edesur  (Argentina)                    |       | 44,808                           |       | 68,056 |   | 23,248 |   | 51.9 | % |
| Distrilima/Edelnor  (Peru)             |       | 21,711                           |       | 27,428 |   | 5,717 |   | 26.3 | % |
| Ampla (Brazil)                         |       | 38,389                           |       | 46,816 |   | 8,427 |   | 22.0 | % |
| Investluz/Coelce  (Brazil)             |       | 51,057                           |       | 46,016 |   | (5,041 | ) | (9.9 | )% |
| Codensa  (Colombia)                    |       | 17,020                           |       | 32,857 |   | 15,837 |   | 93.0 | % |
| **Total**                              | ** ** | **226,497**                      | ** ** | **274,519** | ** ** | **48,022** | ** ** | **21.2** | **%** |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Non-electricity  subsidiaries (1)      |       | 54,681                           |       | 67,620 |   | 12,939 |   | 23.7 | % |
| **Total**                              | ** ** | **54,681**                       | ** ** | **67,620** | ** ** | **12,939** | ** ** | **23.7** | **%** |
| ** **                             | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Less:  intercompany transactions       |       | (38,236                          | )          | (34,837 | ) | 3,399 |   | (8.9 | )% |
|                                   |       |                             |       |   |   |   |   |   |   |
| **Total**                              | ** ** | **291,029**                      | ** ** | **365,586** | ** ** | **74,557** | ** ** | **25.6** | **%** |

 

----

***(1) ***Includes selling andadministrative expenses for CAM, Synapsis, Inmobiliria Manso de Velasco (IMV),Túnel El Melón, Ingendesa, Enigesa, Enersis, and investment vehicles.

*** ***

Sellingand administrative expenses increased by 25.6% mainly due to:

 

·                  a Ch$ 23.2 billion increase at Edesur (Argentina) dueto additional personnel benefits and third-party general expenses;

 

·                  a Ch$ 15.8 billion increase at Codensa (Colombia) dueto a higher provision for unrecoverable 

 

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debt;

 

·                  a Ch$ 8.4 billion increase at Ampla (Brazil) due tohigher pension expenses; and

 

·                  a Ch$ 4.2 billion increase at CAM (Chile) due toadditional contractor expenses.

 

**Non-operating income**

** **

The table below sets forth non-operating income(expense) for the years ended December 31, 2007 and 2008 and thepercentage change from period to period.

 
| ** **                                | ** ** | **Years ended December 31,** | ** ** |
|-------------------------------------------|------------|-----------------------------------|------------|
| ** **                                | ** ** | **2007**                          | ** ** | **2008** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                                | ** ** | **(in millions of Ch$)**          | ** ** | ** ** | ** ** |
|                                      |       |                              |       |   |   |   |   |   |   |
| Net interest  expense                     |       | (318,211                          | )          | (319,339 | ) | (1,128 | ) | 0.4 | % |
| Net income from  related companies        |       | (59,635                           | )          | (2,371 | ) | 57,264 |   | (96.0 | )% |
| Net other non-operating  income (expense) |       | (162,684                          | )          | 128,901 |   | 291,585 |   | N.A |   |
| Net monetary  exposure                    |       | (4,375                            | )          | (7,823 | ) | (3,448 | ) | 78.8 | % |
| Goodwill  amortization                    |       | (65,138                           | )          | (65,496 | ) | (358 | ) | 0.5 | % |
| **Non-operating  income (expense)**       | ** ** | **(610,043**                      | **)**      | **(266,128** | **)** | **343,915** | ** ** | **56.4** | **%** |

 

Interestexpense, net of interest income, increased by 0.4% as a result of the higherlevel of debt during the year, primarily at our Colombian subsidiary Codensa,and also due to higher interest rates affecting at our Brazilian subsidiariesAmpla, Coelce and CIEN—partially offset by Ch$ 5.4 billion in lower interestexpenses at Edesur (Argentina), resulting of revaluation of service quality fines’ , and also due to higher interestincomes resulting from an increase in short-term deposits and financialinstruments.

 

Relatedcompanies’ income increased by Ch$ 57.3 billion, primarily due to Ch$ 58.3billion less in losses at GasAtacama, which included a non-recurring impairmentprovision for Ch$ 53.2 billion in 2007 resulting of the shortage of natural gasfrom Argentina and the higher generation costs experienced in 2007, partiallyoffset by Ch$ 0.8 billion higher losses incurred by HidroAysén and Ch$ 0.5billion incurred by GNLQ.

 

Othernon-operating income (expense) decreased by Ch$ 291.6 billion mostly due to:

 

·                  An additional Ch$ 362.1 billion in net income (Ch$ 136.0 billion, netof minority interest) resulting from the conversion to Chilean standards, as aresult of applying BT 64, primarily at our Brazilian and Colombiansubsidiaries.

·                  A reversal of Ch$ 40.6 billion in sub-transmission provision.

·                  Ch$ 10.0 billion fewer expenses related to the Colombian tax on equity,due to the equity decrease and significant dividend payments.

 

Theaforementioned was partially offset by:

 

·                  A non-recurrence of Ch$ 43.6 billion in higher non-operating income in2007 derived from that same year’s reversal of provisions for contingencies andlitigation, among others, primarily at CIEN and Ampla.

·                  A non-recurring tariff adjustments in previous fiscal years in Edesurfor a total amount of Ch$ 30.3 billion, booked in first quarter 2007.

 

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·                  Higher tax expenses in Chile (stamp taxes) and in Peru (capital gainstax) for closing of our Cayman Islands’ branches and the dissolution ofConoSur, for a total amount of Ch$ 23.1 billion.

·                  Fewer revenues at CIEN for having liquidated its contract with CEMSAfor Ch$ 8.9 billion, recorded in 2007.

·                  Higher expenses for energy and capacity adjustments for Ch$ 6.2billion.

 

Monetarycorrection restatement recorded a negative change of Ch$ 12.3 billion, mainlydue to the effect of higher inflation rate in Chile of 8.9% compared to 7.4% in2007.  This change also has an impact onboth monetary and non-monetary assets and liabilities (primarily UF denominatedbonds), as well as impacting updated income accounts.

 

Exchangerate difference for the period ending on December 31, 2008 increased byCh$ 8.9 billion, from a positive Ch$ 7.4 billion in 2007 to a positive Ch$ 16.3billion in 2008, as a result of an active mismatch in dollars in both periodsand a derivatives-based hedge policy, in addition to variations in thedollar/peso parity.  In the previous period,the exchange rate dropped Ch$ 35.5, from Ch$ 532.39 to Ch$ 496.89, while in2008 increased Ch$ 139.56 from Ch$ 496.89 to Ch$ 636.45.

 

**Net Income**

*** ***

The following table sets forth our net income for theperiods indicated.

 
| ** **                                                                         | ** ** | **Years ended December 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                          | ** ** | **2008** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                                                                         | ** ** | **(in millions of Ch$)**          | ** ** | ** ** | ** ** |
| Operating income                                                                   |       | 1,368,758                         |       | 1,978,797 |   | 610,039 |   | 44.6 | % |
| Non-operating  income                                                              |       | (610,043                          | )          | (266,128 | ) | 343,915 |   | (56.4 | )% |
| **Net  income before taxes, minority interest and negative goodwill amortization** | ** ** | **758,715**                       | ** ** | **1,712,669** | ** ** | **953,954** | ** ** | **125.7** | **%** |
| Current tax  (expense) credit                                                      |       | (275,678                          | )          | (450,974 | ) | (175,296 | ) | 63.6 | % |
| Minority  interest                                                                 |       | (282,710                          | )          | (697,031 | ) | (414,321 | ) | (146.6 | )% |
| Amortization of  negative goodwill                                                 |       | 4,815                             |       | 6,219 |   | 1,404 |   | 29.2 | % |
| **Net  income**                                                                    | ** ** | **205,142**                       | ** ** | **570,883** | ** ** | **365,741** | ** ** | **178.3** | **%** |

 

Incometaxes in 2008 increased by Ch$ 175.3 billion, from Ch$  275.7 billion in 2007 to Ch$ 451.0 billion in2008.

 

Thetable below sets forth our net income taxes:

 
| ** **                     | ** ** | **Years ended December 31,** | ** ** |
|--------------------------------|------------|-----------------------------------|------------|
| ** **                     | ** ** | **2007**                          | ** ** | **2008** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                     | ** ** | **(in millions of Ch$)**          | ** ** | ** ** | ** ** |
| Income tax  (expense) credit   |       | (224,930                          | )          | (352,977 | ) | (128,047 | ) | 56.9 | % |
| Deferred tax  (expense) credit |       | (50,748                           | )          | (97,997 | ) | (47,249 | ) | 93.1 | % |
| **Net  Income tax (expense)**  | ** ** | **(275,678**                      | **)**      | **(450,974** | **)** | **(175,296** | **)** | **63.6** | **%** |

 

Incometax expense increased by Ch$ 128.0 billion, which is primarily explained by thehigher income tax provisions of our subsidiaries Emgesa (Ch$ 42.2 billion),Codensa (Ch$ 24.5 billion), Ampla (Ch$ 20.3 billion), Endesa Chile (Ch$15.3 billion), Pehuenche (Ch$ 13.9 billion), Pangue (Ch$ 6.5 billion),Chilectra (Ch$ 6.0 billion), Edelnor (Ch$ 3.9 billion) and Edesur (Ch$ 3.7billion).  This was partially compensatedby fewer taxes at CIEN (Ch$ 6.7 billion), El Chocón (Ch$ 6.1 billion) and Enersis(individual basis) (Ch$ 3.0 billion).

 

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NonCash deferred tax expense, increased by Ch$ 47.2 billion primarily due to theeffect booked by Enersis on a stand alone basis of (Ch$ 27.8 billion),Chilectra (Ch$ 24.9 billion), Coelce (Ch$ 13.2 billion), CIEN (Ch$ 11.6billion), San Isidro (Ch$ 6.0 billion), and Edelnor (Ch$ 3.7 billion).  This was partially compensated by thenegative variation in Edegel (Ch$ 9.4 billion), Ampla Investimento (Ch$ 9.2billion), Codensa (Ch$ 5.9 billion) and Edesur (Ch$ 5.6 billion).

 

Minorityinterest increased by Ch$ 414.3 billion for a total of Ch$ 697.0 billion, dueto a significant increase in the results of some of our subsidiaries that arenot wholly-owned, including: Ch$ 93.3 billion in Endesa Chile; Ch$ 85.0 billionin Emgesa; Ch$ 75.3 billion in Codensa; Ch$ 48.0 billion in Endesa Brasil; Ch$49.6 billion in Coelce; Ch$ 17.8 billion in Edegel, and Ch$ 13.5 billion inAmpla.  The increase was partially offsetby a Ch$ 3.8 billion decrease in El Chocón and a Ch$ 3.1 billion decrease inEdesur.  See Note 21.b of our financialstatements for additional information.

 

Thegain from amortization of negative goodwill increased by Ch$ 1.4 billion2008.  The amortization gain is primarilydue to the effect of a higher dollar/peso exchange rate.  The dollar constitutes the currency in whichnegative goodwill is carried in foreign companies.

 

As a result of the foregoing, our consolidated netincome increased by Ch$ 365.7 billion, or 178.3%, for a total amount ofCh$ 570.8 billion in 2008.

 

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**Enersis’ Resultsof Operations for the Years Ended**

**December 31, 2006and December 31, 2007**

** **

**Overview**

** **

Thefollowing are the most important aspects of our results for 2007, as comparedto 2006:

 

·                  Operating income rose byCh$135.7 billion, or 11.0%, to Ch$1,368.8 billion in 2007.

 

·                  Energydemand increased in 2007 by the following percentages in the countries whereour subsidiaries operate:

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

 

·                  Physical sales and the number ofcustomers continued to increase in the distribution business, by 5.7% and 3.4%,respectively, in 2007.  Aggregate energylosses remained at 11.2%.

 

**Operating results**

 
| ** **                          | ** ** | **Years ended December 31,** | ** ** |
|-------------------------------------|------------|-----------------------------------|------------|
| ** **                          | ** ** | **2006**                          | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                          | ** ** | **(in millions of Ch$)**          | ** ** | ** ** | ** ** |
| **Distribution  Business**          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Chilectra and  Subsidiaries (Chile) |       | 137,746                           |       | 134,419 |   | (3,327 | ) | (2.4 | )% |
| Edesur  (Argentina)                 |       | (4,767                            | )          | 31,776 |   | 36,543 |   | (766.6 | )% |
| Distrilima/Edelnor  (Peru)          |       | 45,122                            |       | 46,263 |   | 1,141 |   | 2.5 | % |
| Ampla (Brazil)                      |       | 111,842                           |       | 147,599 |   | 35,757 |   | 32.0 | % |
| Investluz/Coelce  (Brazil)          |       | 101,227                           |       | 84,586 |   | (16,641 | ) | (16.4 | )% |
| Codensa  (Colombia)                 |       | 158,306                           |       | 169,688 |   | 11,382 |   | 7.2 | % |
| **Total**                           | ** ** | **549,476**                       | ** ** | **614,331** | ** ** | **64,855** | ** ** | **11.8** | **%** |
| **Generation  Business**            | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Endesa and  subsidiaries (Chile)    |       | 337,379                           |       | 363,843 |   | 26,464 |   | 7.8 | % |
| Costanera  (Argentina)              |       | 5,721                             |       | 422 |   | (5,299 | ) | (92.6 | )% |
| El Chocón  (Argentina)         |       | 35,449                            |       | 27,556 |   | (7,893 | ) | (22.3 | )% |
| Cachoeira  Dourada (Brazil)         |       | 34,558                            |       | 55,338 |   | 20,780 |   | 60.1 | % |
| Endesa Fortaleza  (Brazil)          |       | 61,439                            |       | 48,378 |   | (13,061 | ) | (21.3 | )% |
| Emgesa  (Colombia)                  |       | 141,907                           |       | 174,535 |   | 32,628 |   | 23.0 | % |
| Edegel (Peru)                       |       | 64,955                            |       | 50,261 |   | (14,694 | ) | (22.6 | )% |
| **Total**                           | ** ** | **681,408**                       | ** ** | **720,333** | ** ** | **38,925** | ** ** | **5.7** | **%** |
| **Transmission  Business**          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| CIEN (Brazil)                       |       | (886                              | )          | 25,244 |   | 26,130 |   | (2,949.2 | )% |
| **Total**                           | ** ** | **(886**                          | **)**      | **25,244** | ** ** | **26,130** | ** ** | **(2,949.2** | **)%** |

 

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| ** **                       | ** ** | **Years ended December 31,** | ** ** |
|----------------------------------|------------|-----------------------------------|------------|
| ** **                       | ** ** | **2006**                          | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
|                             |       | **(in millions of Ch$)**          |       |   |   |
| Non-electricity  subsidiaries(1) |       | 198                               |       | 3,774 |   | 3,576 |   | 1,806.1 | % |
| **Total**                        | ** ** | **198**                           | ** ** | **3,774** | ** ** | **3,576** | ** ** | **1,806.1** | **%** |
| ** **                       | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Less:  intercompany transactions |       | 2,895                             |       | 5,075 |   | 2,180 |   | 75.3 | % |
|                             |       |                              |       |   |   |   |   |   |   |
| **Total**                        | ** ** | **1,233,091**                     | ** ** | **1,368,757** | ** ** | **135,666** | ** ** | **11.0** | **%** |

 

----

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

 

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

 
| ** **                           | ** ** | **Years  ended December 31,** | ** ** |
|--------------------------------------|------------|------------------------------------|------------|
| ** **                           | ** ** | **(in  millions of Ch$)**          | ** ** |
| ** **                           | ** ** | **Generation**                     | ** ** | **Transmission** | ** ** | **Distribution** | ** ** | **Other** | ** ** | **Interc.  Transactions** | ** ** | **Total** | ** ** |
| ** **                           | ** ** | **2006**                           | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** | **2006** | ** ** | **2007** | ** ** |
|                                 |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating revenues                   |       | 1,721,421                          |       | 2,085,220 |   | 168,304 |   | 95,019 |   | 2,959,839 |   | 3,075,285 |   | 292,177 |   | 280,482 |   | (615,282 | ) | (620,385 | ) | 4,526,459 |   | 4,915,621 |   |
| Operating costs                      |       | (990,892                           | )          | (1,321,809 | ) | (162,656 | ) | (65,012 | ) | (2,214,798 | ) | (2,234,458 | ) | (240,310 | ) | (222,027 | ) | 578,310 |   | 587,471 |   | (3,030,346 | ) | (3,255,835 | ) |
| Selling and  administrative expenses |       | (49,121                            | )          | (43,584 | ) | (6,534 | ) | (4,763 | ) | (195,565 | ) | (226,497 | ) | (51,669 | ) | (54,681 | ) | 39,867 |   | 38,497 |   | (263,022 | ) | (291,028 | ) |
| **Operating  income**                | ** ** | **681,408**                        | ** ** | **719,827** | ** ** | **(886** | **)** | **25,244** | ** ** | **549,476** | ** ** | **614,330** | ** ** | **198** | ** ** | **3,774** | ** ** | **2,895** | ** ** | **5,583** | ** ** | **1,233,091** | ** ** | **1,368,758** | ** ** |

** **

**Revenues**

** **

**Generation/transmission business**

** **

Thefollowing table details the physical sales of the generation business bycountry, and their changes, for the years ended December 31, 2006 and2007.

 
| ** **                  | ** ** | **Physical sales during**         | ** ** |
|-----------------------------|------------|-----------------------------------|------------|
| ** **                  | ** ** | **Years ended December 31,** | ** ** |
| ** **                  | ** ** | **2006**                          | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                  | ** ** | **(GWh)**                         | ** ** | ** ** | ** ** |
| Endesa Chile  (Chile)       |       | 20,923                            |       | 19,212 |   | (1,711 | ) | (8.2 | )% |
| Costanera  (Argentina)      |       | 8,736                             |       | 8,450 |   | (286 | ) | (3.3 | )% |
| El Chocón  (Argentina) |       | 5,191                             |       | 3,956 |   | (1,235 | ) | (23.8 | )% |
| Edegel (Peru)               |       | 6,766                             |       | 7,994 |   | 1,228 |   | 18.1 | % |
| Emgesa  (Colombia)          |       | 15,327                            |       | 15,613 |   | 286 |   | 1.9 | % |
| Cachoeira  Dourada (Brazil) |       | 4,177                             |       | 4,643 |   | 466 |   | 11.2 | % |
| Endesa Fortaleza  (Brazil)  |       | 2,690                             |       | 2,705 |   | 15 |   | 0.6 | % |
| CIEN (Brazil)               |       | 6,394                             |       | 6,232 |   | (162 | ) | (2.5 | )% |
| **Total**                   | ** ** | **70,204**                        | ** ** | **68,805** | ** ** | **(1,399** | **)** | **(2.0** | **)%** |

** **

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** **

**Distribution business**

** **

Ourdistribution operating revenues mainly arise from the sale of the electricitythat we buy from generators.  Revenuesassociated with distribution include the recovery of the cost of electricitybought wholesale from generating companies and revenues generated by the *Valor Agregado de Distribución*(Added Value fromDistribution), or VAD, which corresponds to the recovery of the costs and thereturn on the investment with respect to the distribution assets, plus thelosses allowed under tariff regulations. Other revenues generated by our distribution services consist of chargesrelated to new connections and the maintenance and rental of meters.

 

Thefollowing table details the distribution of physical electricity sales by oursubsidiaries, for the years ended December 31, 2006 and 2007.

 
| ** **             | ** ** | **Physical sales during  Years ended December 31,** | ** ** |
|------------------------|------------|----------------------------------------------------------|------------|
| ** **             | ** ** | **2006**                                                 | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **             | ** ** | **(GWh)**                                                | ** ** | ** ** | ** ** |
| Chilectra  (Chile)     |       | 12,377                                                   |       | 12,923 |   | 546 |   | 4.4 | % |
| Edesur  (Argentina)(1) |       | 14,837                                                   |       | 15,833 |   | 996 |   | 6.7 | % |
| Edelnor (Peru)         |       | 4,874                                                    |       | 5,201 |   | 327 |   | 6.7 | % |
| Ampla (Brazil)         |       | 8,668                                                    |       | 8,985 |   | 317 |   | 3.7 | % |
| Coelce (Brazil)        |       | 6,769                                                    |       | 7,227 |   | 458 |   | 6.8 | % |
| Codensa  (Colombia)(1) |       | 10,755                                                   |       | 11,441 |   | 686 |   | 6.4 | % |
| **Total**              | ** ** | **58,280**                                               | ** ** | **61,610** | ** ** | **3,330** | ** ** | **5.7** | **%** |

 

----

(1)          Includes tollrevenues.

 

Thefollowing table shows our operating revenues for 2006 and 2007:

 
| ** **                          | ** ** | **Year ended December 31,** | ** ** |
|-------------------------------------|------------|----------------------------------|------------|
| ** **                          | ** ** | **2006**                         | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                          | ** ** | **(in millions of Ch$)**         | ** ** | ** ** | ** ** |
| **Distribution  Business**          | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Chilectra and  Subsidiaries (Chile) |       | 778,468                          |       | 874,624 |   | 96,156 |   | 12.4 | % |
| Edesur  (Argentina)                 |       | 290,518                          |       | 319,484 |   | 28,966 |   | 10.0 | % |
| Distrilima/Edelnor  (Peru)          |       | 250,608                          |       | 233,623 |   | (16,985 | ) | (6.8 | )% |
| Ampla (Brazil)                      |       | 624,898                          |       | 600,468 |   | (24,430 | ) | (3.9 | )% |
| Investluz/Coelce  (Brazil)          |       | 489,254                          |       | 478,926 |   | (10,328 | ) | (2.1 | )% |
| Codensa  (Colombia)                 |       | 526,093                          |       | 568,160 |   | 42,067 |   | 8.0 | % |
| **Total**                           | ** ** | **2,959,839**                    | ** ** | **3,075,285** | ** ** | **115,446** | ** ** | **3.9** | **%** |
| **Generation  Business**            | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Endesa and  subsidiaries (Chile)    |       | 738,689                          |       | 1,032,187 |   | 293,498 |   | 39.7 | % |
| Costanera  (Argentina)              |       | 203,194                          |       | 227,845 |   | 24,651 |   | 12.1 | % |
| El Chocón  (Argentina)         |       | 72,144                           |       | 60,675 |   | (11,469 | ) | (15.9 | )% |
| Cachoeira  Dourada (Brazil)         |       | 73,244                           |       | 125,589 |   | 52,345 |   | 71.5 | % |
| Endesa Fortaleza  (Brazil)          |       | 117,184                          |       | 112,618 |   | (4,566 | ) | (3.9 | )% |
| Emgesa  (Colombia)                  |       | 320,262                          |       | 346,395 |   | 26,133 |   | 8.2 | % |
| Edegel (Peru)                       |       | 196,704                          |       | 182,276 |   | (14,428 | ) | (7.3 | )% |
| **Total**                           | ** ** | **1,721,421**                    | ** ** | **2,087,585** | ** ** | **366,164** | ** ** | **21.3** | **%** |
| ** **                          | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Transmission  Business**          | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| CIEN (Brazil)                       |       | 168,304                          |       | 95,019 |   | (73,285 | ) | (43.5 | )% |
| **Total**                           | ** ** | **168,304**                      | ** ** | **95,019** | ** ** | **(73,285** | **)** | **(43.5** | **)%** |
| ** **                          | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Non-electricity  subsidiaries(1)    |       | 292,177                          |       | 280,482 |   | (11,695 | ) | (4.0 | )% |
| **Total**                           | ** ** | **292,177**                      | ** ** | **280,482** | ** ** | **(11,695** | **)** | **(4.0** | **)%** |
| ** **                          | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Less:  intercompany transactions    |       | (615,282                         | )          | (622,750 | ) | (7,468 | ) | 1.2 | % |
| ** **                          | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total**                           | ** ** | **4,526,459**                    | ** ** | **4,915,621** | ** ** | **389,162** | ** ** | **8.6** | **%** |

 

 

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----

(1)          Includes operating revenuesfor CAM, Synapsis, IMV, Túnel El Melón, Ingendesa, Enigesa, Enersis holding andinvestment vehicles.

 

***Operating revenuesof the generation business***

*** ***

Totalrevenues in Chile in 2007 increased by 39.7% from Ch$738.7 billion in 2006to Ch$1,032.2 billion in 2007, as a result of higher regulated prices andspot prices, on average.  Endesa Chileand its Chilean subsidiaries sold 2,430 GWh on the spot market, where theaverage energy market price was $187.9 per MWh. The decline in physical sales was 8.2%, mainly resulting from a 51.3%decrease in energy sales to the spot market, partially compensated by a 6.9%increase of energy sales to regulated customers to 11,502 GWh, at a nodeprice which is the result of a price-setting system that reflects the newenergy matrix in Chile.  The prices fornon-regulated customers, during 2007 compared with 2006, showed an increase invalue, which positively affected the company’s revenues, reflecting the highercosts of generation of the system.  Thetotal average sales price of Endesa Chile’s in Chile increased by 58.3%, fromCh$33.3 per kWh in 2006 to Ch$52.8 per kWh in 2007.

 

InArgentina, operating revenues for Costanera rose by 12.1%.  This was mainly due to a 35.5% increase insales prices in local currency terms as a result of the recognition of highercosts related to fuel prices.  This waspartially offset by a fall in physical energy sales of Costanera, whichdeclined by 3.3% in 2007.  The effect ofthe BT64 conversion, as a result of a 1.3% depreciation of the Argentine peso,increased further by the 7.1% appreciation of the peso against the dollar inreal terms in 2007, resulted in Ch$29.5 billion of reduced revenues.

 

Therevenues for El Chocón decreased by 15.9%, mainly due to the 23.8% reduction inphysical sales because of the dryer hydrology in the Comahue region, partlycompensated by a 28.9% increase in the average sales price.  The effect of the BT64 conversion decreasedrevenues by Ch$10.2 billion.

 

Totalrevenues in Colombia (Emgesa) increased by 8.2%, primarily due to the newreliability charge which became effective in 2007 and positively affectedrevenues by approximately $43.6 million. The sales mix in 2007 at regulated, non-regulated and spot prices was51.5%, 16.0% and 32.5%, respectively. Our Colombian subsidiaries average price rose by 6.2%, from Ch$20.8 perkWh in 2006 to Ch$22.1 per kWh in 2007, expressed in pesos, in accordance withBT 64.  When expressed in local currency,the nominal average sales price increase was 13.8% in 2007.

 

InBrazil, the revenues for Cachoeira Dourada increased by 71.5%, mainly due to anincrease of 11.2% in physical sales which reached 4,643 GWh, and 15.1%higher sales prices, in local currency terms. The effect of the application of the BT64 conversion, which used anaverage exchange rate for the Reais against the dollar, which was thenconverted into Chilean pesos based on the year-end exchange rate as a result ofthe 7.1% appreciation of the peso against the dollar in real terms in 2007,compensated partly by the 11.7% appreciation of the real, resulted inCh$3.6 billion of increased revenue.

 

Operatingrevenues of Endesa Fortaleza in 2007 declined by 3.9%, mainly because of a 2.1%fall in the average sales price in local currency, partially offset by the 0.6%increase in physical sales, to 2,705 GWh. The

 

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effect of BT64 was Ch$3.5 billion of reducedrevenues.

 

Revenuesof Edegel, our electricity generator in Peru, decreased by 7.3% in 2007, primarily due to a 21.6% lower average salesprice, which offset the 18.1% increase of physical energy sales.  The drop in average prices was a consequenceof the good hydrology and the reduction of the regulated price due to theindexation to the exchange and to the lower price of natural gas.  The sales mix at regulated, non-regulated andspot prices was 41.7%, 53% and 5.3%, respectively.  The company’s average sales price declinedfrom Ch$28.9 per kWh in 2006 to Ch$22.7 per kWh in 2007, expressed in pesosaccording to the convention of BT 64. The effect of the BT64 conversion, using the average exchange rate forthe Peruvian sol against the dollar and then converting to pesos at theyear-end exchange rate, as a result of the 7.1% appreciation of the Chileanpeso against the dollar in real terms, partly compensated by the 4.7%appreciation of the Peruvian sol against the dollar, resulted in Ch$17.6 billionof reduced revenues.  When expressed inlocal currency, the nominal average sales price decreased by 13.1% in 2007.

 

***Operating revenuesof the transmission business***

*** ***

Therevenues for CIEN in 2007 were Ch$95.0 billion, showing a rise of 43.5%compared to 2006.  The previous isproduct of the change of business from trading energy to transport of energy.There were additional energy sales from Brazil to Argentina, and consequently,our new toll fee reached Ch$38.6 billion.

 

***Operating revenuesof the distribution business***

*** ***

InChile, operating revenues of Chilectra in 2007 increased by 12.4% in relationto 2006, mainly because average energy-related prices increased by 24.3% due tosuccessive rises in the node price. There was also a 4.4% rise in physical sales, to 12,923 GWh.  Revenues from non-energy sources, related toancillary services and sales of electrical appliances, increased byCh$15.9 billion, or 27.7%, to Ch$73.3 billion in 2007, compared to Ch$57.4 billionin 2006, mainly the result of more network transfers and construction ofunderground junctions.  The increase inphysical sales is attributed to the 1.2% increase in average per capitaconsumption in Chilectra’s concession area, and to the increase of 45,859, or3.2%, in the total number of customers.

 

InArgentina, operating revenues of Edesur increased in 2007 by 10.0% in relationto 2006, mainly due to the 34.2% increase in the average sales price in localcurrency, as a result of the increase in the VAD approved in February 2007and a 6.7% increase in physical sales. Average per capita consumption increased by 5.2% and the total number ofcustomers increased by 31,828, or 1.4%. This is partially compensated for by the effect of the BT64 conversionin 2007 that represents Ch$41.6 billion of reduced revenues in Chileanpesos.

 

InPeru, the operating revenues for our subsidiary Distrilima, which isconsolidated with Edelnor, declined by 6.8% in 2007 compared to 2006, mainlydue to a 2.8% reduction in the average sales price in local currency and theeffect of the BT64 conversion in 2007, leading to Ch$22.4 billion ofreduced revenue.  This is partiallyoffset by a 6.7% increase in physical sales, which reached 5,201 GWh in2007 and the 2.9% rise in average per capita consumption.  The total number of customers rose by 34,901,or 3.7%.

 

InBrazil, Ampla’s revenues declined by Ch$24.4 billion (3.9%) in 2007,mainly due to the effect of the BT64 conversion resulting inCh$18.8 billion of reduced revenue. On the other hand, physical sales increased by 3.7% to 8,985 GWh in2007, the number of customers rose by 62,339, or 2.7%, to 2.4 million in 2007and the average sales price increased by 8.2% in local currency.

 

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Therevenues for Coelce declined by 2.1%, principally due to the BT64 effect ofchanges in the exchange rates of the Reais and Chilean peso against the dollarin the conversion to Chilean GAAP which meant reduced operating revenues ofCh$13.8 billion.  This was offset bya 0.6% rise in the average sales price in local currency and a 6.8% rise inphysical sales, plus an increase in other revenues of Ch$11.7 billion derivedmainly from selling electric and non-electric appliances (Coelce Plus).  Coelce’s customers rose by 5.7%, from2.5 million in 2006 to 2.7 million in 2007.

 

InColombia, the revenues for Codensa in 2007 increased by 8.0%, mainly due to a6.4% increase in physical sales to 11,441 GWh, and a 0.6% rise in theaverage sales price in local currency, plus an increase of Ch$18.4 billionmainly from Codensa Hogar.  The effect ofBT64 in 2007 with respect to the 13.5% appreciation of the Colombian pesoand the 15.1% appreciation of the Chilean peso, in real terms, had a net impactof Ch$1.2 billion of reduced operating revenue.  The number of customers of Codensa increasedby 3.2% to 2.21 million in 2007, while the average per capita electricityconsumption rose by 3.0%, from 5.03 MWh in 2006 to 5.18 MWh.

 

***Revenues ofnon-electrical subsidiaries***

*** ***

Therevenues earned by our non-electrical subsidiaries declined by 4.0% compared to2006, mainly explained by the Ch$14.0 billion of reduced revenues by CAMdue to lower sales of Ch$11.8 billion because of the conclusion of projectswith Empresa de los Ferrocarriles del Estado (EFE) (state railway) and Metro(urban subway).  This is partially offsetby the higher revenues from Synapsis of Ch$1.1 billion and IMV of Ch$0.7 billion,the latter, explained by the increase in sales of real estate of the ENEAproject.

 

***Operating costs***

*** ***

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

 

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

 
| ** **                      | ** ** | **Years ended December 31,**              | ** ** |
|---------------------------------|------------|------------------------------------------------|------------|
| ** **                      | ** ** | **2006**                                       | ** ** | **2007** | ** ** |
| ** **                      | ** ** | **(percentage of total costs of  operations)** | ** ** |
| Electricity  purchases          |       | 45.6                                           | %          | 43.5 | % |
| Depreciation and  amortization  |       | 15.7                                           | %          | 13.7 | % |
| Fuel purchases                  |       | 10.9                                           | %          | 18.5 | % |
| Operating cost  and maintenance |       | 8.7                                            | %          | 6.4 | % |
| Transmission  tolls             |       | 5.9                                            | %          | 5.8 | % |
| Salaries                        |       | 5.4                                            | %          | 5.2 | % |
| Other expenses                  |       | 7.8                                            | %          | 6.9 | % |
|                            |       | 100                                            | %          | 100.00 | % |

 

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

 
| ** **                          | ** ** | **Years ended December 31,** | ** ** |
|-------------------------------------|------------|-----------------------------------|------------|
| ** **                          | ** ** | **2006**                          | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                          | ** ** | **(in millions of Ch$)**          | ** ** | ** ** | ** ** |
| **Distribution  Business**          |       |                              |       |   |   |   |   |   |   |
| Chilectra and  subsidiaries (Chile) |       | 585,745                           |       | 686,693 |   | 100,948 |   | 17.2 | % |
| Edesur  (Argentina)                 |       | 253,679                           |       | 242,900 |   | (10,779 | ) | (4.2 | )% |
| Distrilima/Edelnor  (Peru)          |       | 182,136                           |       | 165,649 |   | (16,487 | ) | (9.1 | )% |
| Ampla (Brazil)                      |       | 492,952                           |       | 414,480 |   | (78,472 | ) | (15.9 | )% |
| Investluz/Coelce  (Brazil)          |       | 347,939                           |       | 343,283 |   | (4,656 | ) | (1.3 | )% |
| Codensa  (Colombia)                 |       | 352,347                           |       | 381,452 |   | 29,105 |   | 8.3 | % |
| **Total**                           | ** ** | **2,214,798**                     | ** ** | **2,234,457** | ** ** | **19,661** | ** ** | **0.9** | **%** |
|                                |       |                              |       |   |   |   |   |   |   |
| **Generation  Business**            |       |                              |       |   |   |   |   |   |   |
| Endesa and  subsidiaries (Chile)    |       | 379,508                           |       | 648,765 |   | 269,257 |   | 70.9 | % |
| Costanera  (Argentina)              |       | 194,872                           |       | 224,694 |   | 29,822 |   | 15.3 | % |
| El Chocón  (Argentina)         |       | 35,467                            |       | 31,787 |   | (3,680 | ) | (10.4 | )% |
| Cachoeira  Dourada (Brazil)         |       | 36,247                            |       | 67,474 |   | 31,227 |   | 86.2 | % |
| Endesa Fortaleza  (Brazil)          |       | 53,908                            |       | 62,491 |   | 8,583 |   | 15.9 | % |
| Emgesa  (Colombia)                  |       | 172,992                           |       | 166,392 |   | (6,600 | ) | (3.8 | )% |
| Edegel (Peru)                       |       | 117,898                           |       | 122,325 |   | 4,427 |   | 3.8 | % |
| **Total**                           | ** ** | **990,892**                       | ** ** | **1,323,928** | ** ** | **333,036** | ** ** | **33.6** | **%** |
| ** **                          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Transmission  Business**          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| CIEN (Brazil)                       |       | 162,656                           |       | 65,012 |   | (97,644 | ) | (60.0 | )% |
| **Total**                           | ** ** | **162,656**                       | ** ** | **65,012** | ** ** | **(97,644** | **)** | **(60.0** | **)%** |
| ** **                          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Non-electricity  subsidiaries(1)    |       | 240,310                           |       | 222,027 |   | (18,283 | ) | (7.6 | )% |
| **Total**                           | ** ** | **240,310**                       | ** ** | **222,027** | ** ** | **(18,283** | **)** | **(7.6** | **)%** |
| ** **                          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Less:  intercompany transactions    |       | (578,310                          | )          | (589,589 | ) | (11,279 | ) | 1.9 | % |
|                                |       |                              |       |   |   |   |   |   |   |
| **Total**                           | ** ** | **3,030,346**                     | ** ** | **3,255,835** | ** ** | **225,489** | ** ** | **7.4** | **%** |

 

----

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

 

***Operating costs ofthe generation business***

*** ***

Operatingcosts in Chile increased by 70.9% in 2007 compared to 2006, given lowerhydroelectric generation and higher thermal generation using diesel instead ofnatural gas, as natural gas restrictions from Argentina continued during 2007.  Fuel costs increased by Ch$243.2 billionduring the year.  The average variablecost of generation, excluding the cost of electricity purchases, rose by139.4%, from Ch$10.2 per kWh in 2006 to Ch$24.5 per kWh in 2007, as a result ofthe 97.9% increase in thermoelectric generation.  The cost of electricity purchases, includingenergy and capacity, increased from Ch$62.9 billion in 2006 toCh$65.1 billion in 2007, despite a 20.9% decrease in physical energypurchases.  The average price ofpurchases increased from Ch$47.8 per kWh in 2006 to Ch$62.5 per kWh in 2007.

 

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Operatingexpenses in Argentina increased by Ch$26.1 billion, from Ch$230.3 billionin 2006 to Ch$256.5 billion in 2007. Hydro and thermoelectric generation decreased by 26.7% and 3.3%,respectively.  The cost of fuel increasedby Ch$26.1 billion in 2007, due to higher prices of fuel in the generationof electricity when compared to the price of fuels in 2006.  The average variable generating costincreased from Ch$12.4 per kWh in 2006 to Ch$16.0 per kWh in 2007.  Electricity purchases, including energy andcapacity, rose by Ch$771.0 million in 2007, due to an increase in physicalenergy purchases in the spot market, while the average purchase price decreasedfrom Ch$25.3 per kWh in 2006 to Ch$19.7 per kWh in 2007.  The combination of the appreciation of thepeso against the dollar and the depreciation of the Ar$ against the dollardecreased total operating expenses in 2007 when compared to 2006 by Ch$33.0billion.

 

Colombia’soperating expenses decreased by 3.8%. The average variable generation cost, excluding the cost of electricitypurchases, raised from Ch$4.5 per kWh in 2006 to Ch$10.0 per kWh in 2007.  Tolls and energy transportation costsincreased by Ch$9.5 billion.  The 54.2%increase in thermal generation caused fuel costs to increase by Ch$2.9billion.  Electricity purchases,including energy and capacity, decreased by Ch$15.0 billion in 2007, due tolower energy costs and energy trading operations.  Average purchase price dropped from Ch$21.2per kWh in 2006 to Ch$12.1 per kWh in 2007. The combination of the appreciation of the peso and the appreciation ofthe Colombian Peso appreciations against the dollar led to a net decrease ofCh$7.0 billion.

 

Theoperating costs of Cachoeira Dourada in Brazil increased by 86.2% toCh$67.5 billion in 2007.  This wasmainly due to higher energy-purchase costs of Ch$32.9 billion to satisfydemand.  Production declined by 8.3% to3,888 GWh in 2007.

 

Theoperating costs of Endesa Fortaleza in Brazil increased by Ch$8.6 billion(15.9%) from Ch$53.9 billion in 2006 to Ch$62.5 billion in 2007,mainly due to higher energy-purchase costs of Ch$13.4 billion, werepartially offset by reduced fuel purchases of Ch$2.8 billion.  Production fell by 73.4% to 66 GWh in2007.

 

Operatingexpenses in Peru increased by 3.8%.  Thiswas primarily due to an increase of Ch$8.2 billion of energy purchases as aconsequence of higher physical energy purchases in the spot market due to acapacity constraint in the transmission line in the northern region of thecountry.  This was offset by lower fuelcosts of Ch$7.0 billion due to lower cost of natural gas, despite the fact thatthermal generation increased by 32.7% in 2007. The average variable generating cost, excluding the cost of electricitypurchases, was Ch$8.9 per kWh in 2006 compared to Ch$6.8 per kWh in 2007.  The combination of the appreciation of thepeso and the appreciation of the Sol against the dollar led to a net decreasein operating expenses of Ch$11.5 billion.

 

***Operating costs ofthe transmission business***

*** ***

Theoperating costs for CIEN in 2007 were Ch$65.0 billion, 60.0% less than in2006.  The diminution reflects the changeof business from trading energy to transport of energy..  The BT64 effect on CIEN of the appreciationof the Reais and the appreciation of the Chilean peso against the dollarresulted in Ch$4.0 billion in higher costs.

 

***Operating costs ofthe distribution business***

*** ***

Operatingcosts in Chile increased by 17.2%, mainly due to an increase related to energypurchases that rose by Ch$95.7 billion. The rise in energy-purchase costs is explained by (i) an increasein physical purchases of 641 GWh (4.9%) and (ii) a 31.9% increase inthe average price of purchases following the rise in the node price.  Physical losses in Chile rose from 5.4% in2006 to 5.9%, mainly because of the sharp increase in energy prices that ledmore customers to resort to illicit practices such as theft.

 

Theoperating costs for Edesur in Argentina declined by 4.2%.  This is mainly explained by the effect of theBT64 conversion that provided Ch$35.8 billion of lower costs in Chileanpesos.  This causes costs to fall despitethe 2.7% rise in the average price of purchases in local currency and the 7.0%increase in physical 

 

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energy purchases, amounting to 17,739 GWh in2007.  Energy losses attributable totheft and vandalism rose slightly from 10.5% in 2006 to 10.7% in 2007.

 

Theoperating costs for Edelnor in Peru fell by 9.1%, mainly due to a 7.2% fall inthe average price of energy bought, in local currency terms, and the effect ofthe BT64 conversion which represents a decrease in operating costs of Ch$17.1billion in Chilean pesos.  This waspartially offset by the 6.5% increase in physical energy purchases whichamounted to 5,657 GWh in 2007. Physical losses declined from 8.2% in 2006 to 8.1% in 2007.

 

Theoperating costs for Ampla in Brazil decreased by Ch$78.5 billion (15.9%).  The BT64 effect produced Ch$25.2 billionof reduced costs.  The charge fordepreciation of fixed assets declined by Ch$11.8 billion in 2007 and thecost of services provided to third parties decreased by Ch$52.4 billion as,according to a resolution by ANEEL, the accounts of CCC, CDE and PROINFA(specific taxes applicable to the electric sector in Brazil), which in 2006were classified as costs, are deducted from income effective from 2007.  This is partially offset by larger physicalpurchases of 339 GWh and a 1.9% rise in the average purchase price in localcurrency.  Physical energy losses fellfrom 21.9% in 2006 to 21.4% in 2007 as a result of various projects that theCompany is promoting to reduce such losses.

 

Theoperating costs for Coelce decreased by 1.3%, in 2007, mainly due to the BT64effect which represents a fall of Ch$13.9 billion, partially offset by anincrease in energy purchases of Ch$14.9 billion due to a 6.2% rise inphysical purchases, amounting to 8,257 GWh, and a 5.2% rise in the averageprice of bought energy in local currency. Physical energy losses were 12.5% in 2007, down from 13.0% in 2006.

 

Theoperating costs of Codensa in Colombia increased by 8.3% in 2007, mainly due toa rise of Ch$25.3 billion in the cost of energy because of the 6.2%increase in purchases of energy and the 7.8% increase in the average purchaseprice in local currency, and an increase in other operating costs ofCh$8.6 billion.  The effect of BT64was a net Ch$6.0 billion of lower costs. Physical energy losses were 8.7% in 2007, compared to 8.9% in 2006.

 

***Operating costs ofnon-electrical subsidiaries***

*** ***

Theoperating costs of our non-electrical subsidiaries declined by 7.6% in 2007,mainly due to the reduction in costs of Ch$17.1 and Ch$4.5 billionrespectively by CAM and Synapsis, following the termination of projects carriedout in 2006.

 

***Selling andadministrative expenses***

*** ***

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

 

Thefollowing table details selling and administrative expenses as a percentage ofour consolidated selling and administrative expenses:

 
|                             |   | **Years ended December 31,**                                       |       |
|----------------------------------|--------|-------------------------------------------------------------------------|------------|
|                             |   | **2006**                                                                |       | **2007** |   |
|                             |   | **(percentage  of total costs of selling and administrative expenses)** | ** ** |
| General  administrative expenses |   | 43.3                                                                    | %          | 38.4 | % |
| Salaries                         |   | 40.9                                                                    | %          | 38.1 | % |
| Uncollectible  accounts          |   | 7.7                                                                     | %          | 17.3 | % |
| Depreciation and  amortization   |   | 7.5                                                                     | %          | 5.6 | % |
| Materials and  office supplies   |   | 0.6                                                                     | %          | 0.5 | % |
|                             |   | 100.0                                                                   | %          | 100.0 | % |

 

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The following table details selling and administrativeexpenses for the years 2006 and 2007, and the percentage changes between oneyear and the other:

 
| ** **                          | ** ** | **Years ended December 31,** | ** ** |
|-------------------------------------|------------|-----------------------------------|------------|
| ** **                          | ** ** | **2006**                          | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                          | ** ** | **(in millions of Ch$)**          | ** ** | ** ** | ** ** |
| **Distribution  Business**          |       |                              |       |   |   |   |   |   |   |
| Chilectra and  subsidiaries (Chile) |       | 54,977                            |       | 53,512 |   | (1,465 | ) | (2.7 | )% |
| Edesur  (Argentina)                 |       | 41,606                            |       | 44,808 |   | 3,202 |   | 7.7 | % |
| Distrilima/Edelnor  (Peru)          |       | 23,350                            |       | 21,711 |   | (1,639 | ) | (7.0 | )% |
| Ampla (Brazil)                      |       | 20,104                            |       | 38,389 |   | 18,285 |   | 91.0 | % |
| Investluz/Coelce  (Brazil)          |       | 40,088                            |       | 51,057 |   | 10,969 |   | 27.4 | % |
| Codensa  (Colombia)                 |       | 15,440                            |       | 17,020 |   | 1,580 |   | 10.2 | % |
| **Total**                           | ** ** | **195,565**                       | ** ** | **226,497** | ** ** | **30,932** | ** ** | **15.8** | **%** |
|                                |       |                              |       |   |   |   |   |   |   |
| **Generation  Business**            |       |                              |       |   |   |   |   |   |   |
| Endesa and  subsidiaries (Chile)    |       | 21,802                            |       | 19,579 |   | (2,223 | ) | (10.2 | )% |
| Costanera  (Argentina)              |       | 2,601                             |       | 2,729 |   | 128 |   | 4.9 | % |
| El Chocón  (Argentina)         |       | 1,228                             |       | 1,332 |   | 104 |   | 8.5 | % |
| Cachoeira  Dourada (Brazil)         |       | 2,439                             |       | 2,777 |   | 338 |   | 13.9 | % |
| Endesa Fortaleza  (Brazil)          |       | 1,837                             |       | 1,749 |   | (88 | ) | (4.8 | )% |
| Emgesa  (Colombia)                  |       | 5,363                             |       | 5,468 |   | 105 |   | 2.0 | % |
| Edegel (Peru)                       |       | 13,851                            |       | 9,690 |   | (4,161 | ) | (30.0 | )% |
| **Total**                           | ** ** | **49,121**                        | ** ** | **43,324** | ** ** | **(5,797** | **)** | **(11.8** | **)%** |
| ** **                          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Transmission  Business**          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| CIEN (Brazil)                       |       | 6,534                             |       | 4,763 |   | (1,771 | ) | (27.1 | )% |
| **Total**                           | ** ** | **6,534**                         | ** ** | **4,763** | ** ** | **(1,771** | **)** | **(27.1** | **)%** |
| ** **                          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Non-electricity  subsidiaries(1)    |       | 51,669                            |       | 54,681 |   | 3,012 |   | 5.8 | % |
| **Total**                           | ** ** | **51,669**                        | ** ** | **54,681** | ** ** | **3,012** | ** ** | **5.8** | **%** |
| ** **                          | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Less:  intercompany transactions    |       | (39,867                           | )          | (38,236 | ) | 1,631 |   | (4.1 | )% |
|                                |       |                              |       |   |   |   |   |   |   |
| **Total**                           | ** ** | **263,022**                       | ** ** | **291,029** | ** ** | **28,007** | ** ** | **10.6** | **%** |

 

----

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

 

Sellingand administrative expenses increased by 10.6%, mainly due to increases forCoelce and Ampla, as a result of better estimation of the recovery of the ARTEregulatory assets and higher uncollectible debts.

 

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**Non-operating results**

** **

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

 
| ** **                                | ** ** | **Years ended December 31,** | ** ** |
|-------------------------------------------|------------|-----------------------------------|------------|
| ** **                                | ** ** | **2006**                          | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                                | ** ** | **(in millions of Ch$)**          | ** ** | ** ** | ** ** |
|                                      |       |                              |       |   |   |   |   |   |   |
| Net interest  expense                     |       | (306,029                          | )          | (318,211 | ) | (12,182 | ) | 4.0 | % |
| Net income from  related companies        |       | 5,894                             |       | (59,635 | ) | (65,529 | ) | n.a. |   |
| Net other  non-operating income (expense) |       | (120,976                          | )          | (162,684 | ) | (41,708 | ) | 34.5 | % |
| Net monetary  exposure                    |       | 7,655                             |       | (4,375 | ) | (12,030 | ) | n.a. |   |
| Goodwill  amortization                    |       | (65,389                           | )          | (65,138 | ) | 251 |   | (0.4 | )% |
| **Non-operating  expense**                | ** ** | **(478,845**                      | **)**      | **(610,043** | **)** | **(131,198** | **)** | **27.4** | **%** |

 

Theinterest expense, net of interest income, increased by 4.0% as a result of thehigher level of debt during the year, principally in our subsidiaries Ampla,Codensa and Edelnor, and lower interest income due to reduced deposits andnegative restating due to lower applicable rates in Brazil.  There was also an increase ofCh$8.1 billion of interest due to fines for quality service in oursubsidiary Edesur, which have been restated for both tariff increases andaccrued interests.

 

Theresults of our equity investments show a decrease of Ch$65.6 billion, mainlydue to the impairment provision of Ch$53.3 billion (Ch$40.0 billion net ofminority interest) plus the recognition of the loss in Inversiones Gas AtacamaHolding of Ch$11.1 billion, as a result of the non-receipt of gas fromArgentina and the high costs of generation that the company has had towithstand.

 

Other non-operatingexpenses show an increased loss of Ch$41.7 billion due to:

 

·                  Netlosses of Ch$124.7 billion from the conversion adjustment according to Chileanregulations as contained in BT 64, principally of the subsidiaries in Brazil,Colombia and Peru (Ch$39.0 billion, net of minorities); and

·                  Reducedgain on sales of fixed assets of Ch$23.0 billion, which relates to the salemade in 2006 by Ampla of former generation assets and a higher equity taxcharge in Colombia of Ch$20.3 billion.

 

Theabove was partly offset by:

 

·                  Reducedwrite-off of receivables in CIEN made in 2006 on the renegotiation of thecontract with Copel for Ch$35.7 billion;

·                  Incomefrom previous years’ tariff adjustment in Edesur for Ch$30.3 billion;

·                  Reducedprovisions for contingencies and litigation of Ch$23.0 billion, principally inAmpla, Coelce and CIEN;

·                  Reducedexpenses, related to energy efficiency programs of Brazilian subsidiaries, ofCh$13.0 billion;

·                  Gainin CIEN for settlement of contract with Cemsa for Ch$8.8 billion; and

·                  Reducedallowance for obsolescence and write-offs of fixed assets for Ch$7.1 billion.

 

Price-levelrestatements show a negative change of Ch$13,187.8 million, mainly due to theeffect of higher inflation in 2007 of 7.4%, compared to 2.1% the yearbefore.  This change has an effect on thenon-monetary assets and liabilities and those monetary items, mainly debt,denominated in U.F., plus the restatement of income statement accounts.

 

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Exchangedifferences as of December 31, 2007 show a positive change of Ch$1,158.7million, passing from Ch$6,231.3 million in 2006 to Ch$7,390.0 million in2007.  This is the result of the Company’smismatched position in Chile of dollar-denominated Assets/Liabilities in bothyears.

 

**Net income**

** **

Thefollowing table details net income for the periods indicated:

 
| ** **                                                                         | ** ** | **Years ended December 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                          | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** | ** ** |
| ** **                                                                         | ** ** | **(in millions of Ch$)**          | ** ** | ** ** | ** ** |
| Operating income                                                                   |       | 1,233,091                         |       | 1,368,757 |   | 135,666 |   | 11.0 | % |
| Non-operating  income                                                              |       | (478,845                          | )          | (610,043 | ) | (131,198 | ) | 27.4 | % |
| **Net  income before taxes, minority interest and negative goodwill amortization** | ** ** | **754,246**                       | ** ** | **758,714** | ** ** | **4,468** | ** ** | **0.6** | **%** |
| Current tax  (expense) benefit                                                     |       | (111,358                          | )          | (275,678 | ) | (164,320 | ) | 147.6 | % |
| Minority  interest                                                                 |       | (315,538                          | )          | (282,710 | ) | 32,828 |   | (10.4 | )% |
| Amortization of  negative goodwill                                                 |       | 7,108                             |       | 4,815 |   | (2,293 | ) | (32.3 | )% |
| **Net  income**                                                                    | ** ** | **334,458**                       | ** ** | **205,141** | ** ** | **(129,317** | **)** | **(38.7** | **)%** |

 

Incometaxes in 2007 increased by Ch$164.3 billion over 2006, passing fromCh$111.4 billion in 2006 to Ch$275.7 billion in 2007.

 

Thefollowing table shows the detail of income taxes:

 
|                            |       | **Years ended December 31,** |       |
|---------------------------------|------------|-----------------------------------|------------|
|                            |       | **2006**                          | ** ** | **2007** | ** ** | **Change** | ** ** | **% Change** |   |
|                            |       | **(in million of Ch$)**           |       |   |   |
| Current tax  (expense) benefit  |       | (277,531                          | )          | (224,930 | ) | 52,601 |   | (19.0 | )% |
| Deferred tax  (expense) benefit |       | 166,173                           |       | (50,748 | ) | (216,921 | ) | (130.5 | )% |
| **Income  tax expense**         | ** ** | **(111,358**                      | **)**      | **(275,678** | **)** | **(164,320** | **)** | **147.6** | **%** |

 

Incometax expense decreased by Ch$52.6 million, mainly due to reduced provisions forincome tax in Enersis on a stand-alone basis (Ch$15.1 billion), and oursubsidiaries Emgesa (Ch$21.7 billion), Endesa Chile (Ch$23.5 billion), Codensa(Ch$16.1 billion), Coelce (Ch$7.6 billion) and Ampla (Ch$7.0 billion),partially offset by increases in Edesur (Ch$16.9 billion), Pehuenche (Ch$14.7billion) and El Chocón (Ch$6.3 billion).

 

Deferredtaxes, which do not represent cash flows, show a negative change mainly derivedfrom the effect recognized in 2006 in Chilectra (formerly Elesur) for Ch$153.3billion, following the merger between Elesur and Chilectra, and the sale of theoffices of Elesur, which led to the reversal of the valuation provision for itstax losses accumulated in previous years. Other important changes were in Ampla (Ch$33.5 billion), CIEN (Ch$23.5billion), Emgesa (Ch$15.5 billion) and Codensa (Ch$14.2 billion), partiallyoffset by El Chocón (Ch$8.7 billion), Edegel (Ch$7.8 billion), Endesa Chile(Ch$3.6 billion) and Coelce (Ch$2.8 billion).

 

Thegain from the amortization of negative goodwill declined to Ch$4.8 billion asof December 31, 2007.  The reducedamortization is mainly due to the end of the negative goodwill generated on thefirst purchase of shares in Emgesa (Betania), which effect is a reducedamortization of Ch$2.0 billion.

 

**As aresult of the above, our consolidated net income declined fromCh$334.5 billion in 2006 to Ch$205.2 billion in 2007, a decrease ofCh$129.3 billion, or 38.7%.**

** **

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**B.            Liquidityand Capital Resources**

** **

We area company with no significant assets other than the stock of oursubsidiaries.  The following discussionof cash sources and uses reflects the key drivers of cash flow for Enersis, asthey are regularly described to the holders of Enersis’ debt and included inthe calculation of financial covenant ratios. The discussion is relevant to the holders of Enersis’ debt, because it presents the financial effects, which varyregarding the accounting effects as a consequence of time lag between certaincash flows and actual accounting effects. For information on cash flowsfrom an accounting rather than a financial perspective, please see “Item18.  Financial Statements — ConsolidatedFinancial Statements — Consolidated Statements of Cash Flows for the yearsended December 31, 2006, 2007 and 2008.”

 

Webelieve that cash flow generated from operations, cash balances, assets sales,borrowings from commercial banks and access to both domestic and foreigncapital markets will be sufficient to satisfy our needs for working capital,debt service, dividends and routine capital expenditures.

 

Weconsider cash flows generated by our wholly-owned subsidiaries (CAM, Synapsis,IMV and investment vehicles) as our own operating inflows and outflows, giventhat we have always had access to these wholly-owned Chilean subsidiaries’ cashflows.

 

Cashflows received from non wholly-owned subsidiaries and affiliates are consideredfinancial investments, and are included as dividends, capital reductions,interest income and intercompany debt amortization.

 
| ** **                                                    | ** ** | **2007**                         | ** ** | **2008**  | ** ** |
|---------------------------------------------------------------|------------|----------------------------------|------------|-----------|------------|
| ** **                                                    | ** ** | **(figures in $ millions)** | ** ** |
| **INITIAL  CASH      (A)**      | ** ** | **25.3**                         | ** ** | **121.6** | ** ** |
|                                                          |       |                             |       |      |       |
| **SOURCES     (B) +  (C)**      | ** ** | **809.0**                        | ** ** | **888.7** | ** ** |
|                                                          |       |                             |       |      |       |
| **Cash  Inflows from Chile  (B)**                   | ** ** | **717.5**                        | ** ** | **823.0** | ** ** |
| Cash inflows  from operations                                 |       | 327.6                            |       | 375.8     |       |
| Interest income  from Chilean subsidiaries                    |       | 39.1                             |       | 17.7      |       |
| Dividends from  Chilean subsidiaries                          |       | 258.2                            |       | 267.4     |       |
| Amortization of  intercompany loans from Chilean subsidiaries |       | 92.6                             |       | 162.1     |       |
| Other Income  from non-operating activities                   |       | —                           |       | —    |       |
|                                                          |       |                             |       |      |       |
| **Cash  Inflows from foreign subsidiaries  (C)**    | ** ** | **91.5**                         | ** ** | **65.7**  | ** ** |
| Interest income  from foreign subsidiaries                    |       | —                           |       | —    |       |
| Dividends from  foreign subsidiaries                          |       | 85.5                             |       | 65.7      |       |
| Capital  reductions                                           |       | 5.8                              |       | —    |       |
| Management fee  and others                                    |       | 0.2                              |       | 0.0       |       |
| Intercompany  debt amortizations                              |       | 0.0                              |       | 0.0       |       |

 

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| ** **                                                       | ** ** | **2007**                         | ** ** | **2008**   | ** ** |
|------------------------------------------------------------------|------------|----------------------------------|------------|------------|------------|
| ** **                                                       | ** ** | **(figures in $ millions)** | ** ** |
| **USES     (D) +  (E)**            | ** ** | **712.7**                        | ** ** | **827.3**  | ** ** |
|                                                             |       |                             |       |       |       |
| **Cash  outflows from operations  (D)**                | ** ** | **287.5**                        | ** ** | **367.0**  | ** ** |
| Cash outflows  from operations                                   |       | 259.8                            |       | 278.1      |       |
| Taxes                                                            |       | 27.7                             |       | 88.9       |       |
| ** **                                                       | ** ** | ** **                       | ** ** | ** ** | ** ** |
| **Cash  Outflows from non-Operating Activities  (E)**  | ** ** | **425.2**                        | ** ** | **460.3**  | ** ** |
| Interest  expenses and derivative contracts                      |       | 119.0                            |       | 19.7       |       |
| Dividend payment                                                 |       | 339.7                            |       | 316.5      |       |
| Debt  amortization                                               |       | (33.5                            | )          | 124.1      |       |
|                                                             |       |                             |       |       |       |
| **FINAL  CASH     (A)+(B)+(C)-(D)-(E)** | ** ** | **121.6**                        | ** ** | **183.0**  | ** ** |

 

For the twelve-monthperiod ended December 31, 2008, our principal sources of funds, expressedin dollars at the year-end exchange rate, were:

 

·                  $375.8 million of cash inflows fromoperating revenues of our wholly-owned subsidiaries;

·                  $17.7 million of interest paymentsfrom non wholly-owned Chilean subsidiaries;

·                  $267.4 million of dividends from Chileansubsidiaries, which includes $100.0 million from Chilectra and $167.4 fromEndesa Chile;

·                  $162.1 million of intercompany loanpayment from Chilectra;

·                  $65.7million from dividends of foreignsubsidiaries, which includes $30.5 million from Brazil and  $25.9 million from Colombia, among others.

 

The aggregate inflows ofcash from these sources amounted to $887.7 million.

 

For the same twelve-monthperiod ended December 31, 2008, Enersis principal cash outflows totaled$827.3 million, including:

 

·                  $278.1 million from operatingexpenses of our wholly-owned subsidiaries, including investments and capitalexpenditures;

·                  $88.9 million in taxes paid byEnersis and its wholly-owned subsidiaries;

·                  $19.7 million in net interest expense(net of derivatives contracts and interest income);

·                  $316.5 million dividend payments byEnersis; and

·                  $124.1 million of net debtamortization (discounting new debt used for refinancing purposes).

 

As of December 31,2008, Enersis had $183 million in cash.

 

Forthe twelve-month period ended December 31, 2007, our principalsources of funds, expressed in dollars at the year-end exchange rate, were:

 

·                  $327.6 million of cash inflows fromoperating revenues of our wholly-owned subsidiaries;

·                  $39.1 million of interest paymentsfrom Chilean subsidiaries not wholly-owned;

 

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·                  $258.2 million of dividends fromChilean subsidiaries, which includes $56.0 million from Chilectra;

·                  $92.6 million of intercompany loanpayment from Chilean subsidiaries, which includes $90.1 million from Chilectra;

·                  $85.5 million from dividends, whichincludes $47.4 million from our Brazilian subsidiaries and  $32.8 million from our Colombiansubsidiaries;

·                  $5.8 million from capital reductionsfrom our Colombian subsidiaries; and

·                  $0.2 million from Management Fee andOthers.

 

The aggregate inflows ofcash from these sources amounted to $809.0 million.

 

For the same twelve-monthperiod ended December 31, 2007, Enersis principal cash outflows totaled$712.7 million, including:

 

·                  $259.8 million from operatingexpenses of our wholly-owned subsidiaries, including investments and capitalexpenditures;

·                  $27.7 million in taxes paid byEnersis and its wholly-owned subsidiaries;

·                  $119.0 million in net interestexpense (net of derivatives contracts);

·                  $339.7 million dividend payments byEnersis; and

·                  ($33.5) million of net debtamortization (discounting new debt used for refinancing purposes).

 

As of December 31,2007, Enersis had $121.6 million in cash.

 

For adescription of liquidity risks related to our company status, please see “Item3.  Key Information — D. Risk Factors — We depend in part on payments from our subsidiariesand affiliates to meet our payment obligations” in this Report.

 

Wecoordinate the overall financing strategy of our majority-ownedsubsidiaries.  Our operating subsidiariesindependently develop capital expenditure plans and generally our strategy isto have the operating subsidiaries independently finance its capital expansionprograms through internally generated funds or direct financings.  We also coordinate acquisition financing withrespect to distribution operations of Chilectra.  We coordinate all generation and transmissionacquisition financing with Endesa Chile. For information regarding our commitments for capital expenditures, see “Item4.  Information on the Company — A.History and Development of the Company — Capital Investment Program” and ourcontractual obligations table set forth below.

 

On July 3,2007, Standard & Poor’s upgraded our rating and also the rating forEndesa Chile, to BBB from BBB- both with “Stable Outlook.”  . We maintained the upgrade rating throughout2008, all of them with “Stable Outlook”.

 

Wehave accessed the international equity capital markets, with threeSEC-registered ADS issuances in October 1993, February 1996 and September 2000,for Enersis, and once in 1994 for Endesa Chile. We have also frequently issued bonds in the United States, for Enersisand Endesa Chile.  Enersis issued$800 million in Yankee Bonds in November 1996, and $350 millionin November 2003.  Endesa Chile andits consolidated subsidiaries have also issued Yankee Bonds between 1996 and2003, of which $1.5 billion were outstanding as of December 31, 2008.

 

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Thefollowing table lists the Yankee Bonds issued by Enersis and its consolidatedsubsidiaries outstanding as of December 31, 2008.  The weighted average annual interest rate forYankee Bonds issued by Enersis and its consolidated subsidiaries, of which anaggregate principal amount of $2.1 billion is outstanding as of the dateof this report, is 8.0%.

 
| **Issuer**       | ** ** | **Maturity**          | ** ** | **Coupon**            | ** ** | **Aggregate Principal  Amount Outstanding** | ** ** |
|------------------|------------|-----------------------|------------|-----------------------|------------|---------------------------------------------|------------|
| ** **       | ** ** | ** **            | ** ** | **(as a percentage)** | ** ** | **(in  million $)**                         | ** ** |
| Endesa Chile     |       | April 1, 2009    |       | 8.500                 | %          | 400                                         |       |
| Endesa Chile     |       | August 1, 2013   |       | 8.350                 | %          | 400                                         |       |
| Endesa Chile     |       | August 1, 2015   |       | 8.625                 | %          | 200                                         |       |
| Endesa Chile (3) |       | February 1, 2027 |       | 7.875                 | %          | 206                                         |       |
| Endesa Chile (1) |       | February 1, 2037 |       | 7.325                 | %          | 220                                         |       |
| Endesa Chile (3) |       | February 1, 2097 |       | 8.125                 | %          | 40                                          |       |
| Enersis          |       | January 15, 2014 |       | 7.375                 | %          | 350                                         |       |
| Enersis (3)      |       | December 1, 2016 |       | 7.400                 | %          | 250                                         |       |
| Enersis (2)      |       | December 1, 2026 |       | 6.600                 | %          | 1                                           |       |

 

----

(1)          Holdersof these Yankee bonds exercised a put option with maturity in 2037 on February 1,2009, for a total amount of $149.2 million. The remaining bonds will mature in February 2037.

 

(2)          Holdersof these Yankee bonds, with maturity in 2026, exercised a put option on December 1,2003 for an aggregate principal amount of $149.1 million, leaving only$0.9 million outstanding.

 

(3)          Considerscancellation of Yankee bonds repurchased by Enersis and Endesa Chile in 2001.

 

Enersisand Endesa Chile, as well as our subsidiaries in the five countries in which weoperate, have access to domestic capital markets, where we have issued debtinstruments including commercial paper and medium- and long-term bonds that areprimarily sold to pension funds, life insurance companies and otherinstitutional investors.  As of the dateof this report, we are in compliance with our material covenants contained inour debt instruments.

 

Thefollowing table lists Chilean bonds issued by Enersis and Endesa Chile,outstanding as of December 31, 2008.

 
| **Issuer**   | ** ** | **Maturity**                | ** ** | **Coupon (inflation-  adjusted rate)** | ** ** | **Aggregate Principal  Amount Outstanding** | ** ** |
|--------------|------------|-----------------------------|------------|----------------------------------------|------------|---------------------------------------------|------------|
| ** **   | ** ** | ** **                  | ** ** | **(as a percentage)**                  | ** ** | **(in UF millions)**                        | ** ** |
| Enersis      |       | June 15, 2009          |       | 5.500                                  | %          | 0                                           |       |
| Enersis      |       | June 16, 2022          |       | 5.750                                  | %          | 1.7                                         |       |
| Endesa Chile |       | August 1, 2022    |       | 6.200                                  | %          | 1.5                                         |       |
| Endesa Chile |       | October 15, 2028  |       | 6.200                                  | %          | 4.0                                         |       |
| Endesa Chile |       | April 15, 2027    |       | 3.800                                  | %          | 4.0                                         |       |
| Endesa Chile |       | December 15, 2029 |       | 4.750                                  | %          | 10.0                                        |       |

 

For afull description of the local bonds issued by Enersis and Endesa Chile, see “ —Bonds Payable” in note 18 to our consolidated financial statements.

 

Ourcompanies frequently participate in the commercial bank markets through bothbilateral loans and syndicated loans.

 

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Between November 2004 and December 2006,Enersis entered into two senior unsecured syndicated revolving credit facilitiesthrough its former Cayman Island’s Branch. In the same period, Endesa Chile, acting through its former CaymanIsland’s Branch, entered into three senior unsecured syndicated revolvingcredit facilities.  These facilities werestructured with various banks, for an aggregate amount of $550 million forEnersis and $650 million for Endesa Chile, with maturity dates between2009 and 2010. In June 2008, Endesa Chile entered into a US$ 200 millionsenior unsecured syndicated revolving credit facility and a 6-year term loanfor $ 200 million with the same banks. Use of proceeds for the term loanfacility was to refinance the maturity of a $ 400 million Yankee bond in July 2008.

 

The lenders under these facilities may have recourseto a Mandatory Prepayment in the event there is a “Change of Control,” asdefined in the agreements.  A Change ofControl will not be triggered if Endesa Spain remains in the chain of controlover Enersis or Endesa Chile.  If EndesaSpain is no longer in the chain of control, each lender may demand prepaymentsubject to certain conditions: under the 2004 facilities, the new controllingentity must have a lower credit rating than Endesa Spain subsequent to thelaunching of a transaction that would end in an effective Change of Control.  In that facility, either the S&P or Moody’srating for the new controlling entity would have to be worse than that ofEndesa Spain.  In the 2006 and 2008facilities, however, the new controlling entity could have a rating lower thanthat of Endesa Spain before the initial announcement of the transaction, and noChange of Control Mandatory Prepayment could be triggered unless all ofS&P, Moody’s and Fitch rated the new controlling company by more than onenotch, including with respect to outlook, below Endesa Spain’s ratings at suchtime.  In all cases described in thisparagraph, a Mandatory Prepayment for Change of Control could only be triggeredif lenders representing more than 50% of the corresponding facility so request.

 

The December 2006 and June 2008 revolvingcredit facilities were amended to exclude a condition precedent requirementthat there should not have occurred any “material adverse effect” (as definedcontractually) prior to a disbursement, allowing the companies the flexibilityto draw on such revolving facilities under any circumstances.

 

The undrawn amount of Enersis’ two revolving creditfacilities is $400 million as of December 31, 2008.  The undrawn amount of Endesa Chile’s fourrevolving credit facilities is $400 million.

 

All of Enersis and Endesa Chile’s credit facilitiesinclude various financial covenants. Enersis and Endesa Chile were in compliance with such financialcovenants at the time of this report. Enersis and Endesa Chile’s Yankee Bonds, on the other hand, are notsubject to financial covenants.

 

As is customary for certain credit and capital marketdebt facilities, a significant portion of Enersis and Endesa Chile’s financialindebtedness is subject to cross default provisions.  Each of the revolving credit facilities describedabove, as well as all of Enersis and Endesa Chile’s Yankee Bonds, have crossdefault provisions with different definitions, criteria, materialitythresholds, and applicability as to the subsidiaries that could give rise to across default.

 

The cross default provision of the revolving creditfacilities for Enersis and Endesa Chile refer only to so-called “RelevantSubsidiaries,” a contractually defined term that refers to our most importantsubsidiaries.  Under all of Enersis’credit facilities, only matured defaults exceeding $ 50 millionqualify for a potential cross default when the principal exceeds$ 50 million, or its equivalent in other currencies.  The cross default provision for bank loanindebtedness for Enersis in its Chilean-risk debt refers only to so-called “RelevantSubsidiaries,” a contractually defined term that refers to the most importantsubsidiaries.  There is a complex mathematical determination to determinethe list of Relevant Subsidiaries, which vary somewhat from year to year.  As of December 2008, Enersis’ RelevantSubsidiaries are Chilectra, Endesa Chile, Endesa Brasil and Ampla, and theEndesa Chile Relevant Subsidiaries are Endesa Argentina, Generandes andEmgesa.  In the case of a matured defaultabove the materiality threshold, revolving credit facility’s lenders would havethe option to accelerate if the lenders representing more than 50% of theaggregate debt of a particular facility then outstanding choose to do so.

 

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Yankee Bonds are the most restrictive in terms ofcross default provisions, as any matured default of either Enersis, EndesaChile or any subsidiary could result in a cross default to Enersis and EndesaChile’s Yankee Bonds if the matured default, on an individual basis, has aprincipal exceeding $30 million, or its equivalent in othercurrencies.  In the case of a matureddefault above the materiality threshold, Yankee bondholders would have theoption to accelerate if either the Trustee or bondholders representing no lessthan 25% of the aggregate debt of a particular series then outstanding chooseto do so.

 

Certain other customary events of default includebankruptcy and insolvency proceedings, material adverse judgments, and certaingovernmental actions such as nationalization, seizure, or expropriation ofassets.  The general cross accelerationprovisions give rise to an event of default only when other material indebtednesshas been accelerated by the required lenders there under or otherwise pursuantto its terms, after expiration of grace periods if applicable, and after formalnotices have been granted.

 

At thetime of this report, our Argentine subsidiary, Costanera, had not paid theinstallment due  March 2009 for itssupplier credit with MC dating back to 1996. However, on March 31, 2009 MC sent a waiver of the payment due toCostanera. The waiver also states MC’s willingness to discuss a new paymentdate for the amount past due.

 

Most of our companies have access to existing creditlines sufficient to satisfy all of our present working capital needs.

 

Payment of dividends and distributions by oursubsidiaries and affiliates represent an important source of funds for us.  The payment of dividends and distributions bycertain subsidiaries and affiliates are subject to legal and contractualrestrictions, such as legal reserve requirements, capital and retained earningscriteria and other restrictions.  We havebeen advised by legal counsel in the various geographical locations where oursubsidiaries and affiliates operate that there currently are no other legalrestrictions on the payment to Enersis of dividends or distributions to us inthe jurisdictions where such subsidiaries or affiliates are incorporated.  Certain credit facilities and investmentagreements of our subsidiaries restrict the payment of dividends ordistributions in certain circumstances. For a description of liquidity risks resulting from our company status,please see “Item 3. Key Information — D. Risk factors —We depend in part onpayments from our subsidiaries and affiliates to meet our payment obligations.”in this Report.

 

In addition to available cash and the undrawn amountof revolving credit facilities mentioned above, as of  the date of this Report, currently we candraw up to $257 million from unused lines of credit granted by Chileanbanks, and Endesa Chile can draw up to another $196 million from similarsources.  Our level of consolidatedindebtedness decreased by 6%, from $8.4 billion as of December 31, 2007,to $7.9 billion as of December 31, 2008.  This decrease is primarily due to thedepreciation during the year of most of the South American exchange ratesagainst the dollar and a growth in cash generation on a consolidated basis.

 

We do not currently anticipate liquidity shortfallsaffecting our ability to satisfy the obligations described in this report.  We expect to refinance our indebtedness as itbecomes due, fund our purchase obligations outlined previously with internallygenerated cash, and fund capital expenditures with a mixture of internallygenerated cash and borrowings.

 

Transactions that mostsignificantly affected Enersis foreign subsidiaries’ liquidity in 2008 included:

 

·                  Edegel: leasing agreement for $ 90 million to finance SantaRosa project. Edegel also made bond issuances in the Peruvian market forapproximately $ 29 million. Finally, the company obtained loans for $96 million, which were used to refinance and prepay debt.

 

·                  Edelnor: local bonds for approximately $ 63 million withmaturities between 3 years and 5 years, which were used to refinance and prepaydebt.

 

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·                  Costanera: debt refinancing for $ 60 million with bank loans with shortand medium-term maturities and supplier financing with maturity of 5 years.

 

·                  El Chocón: debt refinancing for $ 12 million with bank loans in localcurrency, extending its debt maturity and having a natural hedge in terms ofcurrency risk.

 

·                  Edesur: debt refinancing for $ 3 million with bank loans.

 

·                  Ampla: debt refinancing for $ 60 million with bank loans, increasingmaturity from 2 to 5 years and also improving financial conditions.

 

·                  Coelce: financing of the 2008-2009 investment plan, for $ 203 million,through semi-public loans, taking advantage of the lower interest rates forthese financings.

 

·                  Emgesa: bank loans for $ 147 million with short term maturity.

 

·                  Codensa: short term debt refinancing through local bonds issuances forapproximately $ 214 million.

 

Transactions that most significantly affected Enersisforeign subsidiaries’ liquidity in 2007 included:

 

·                  Edegel: loan agreements for$50 million for the short and the long term.  Edegel also made bond issuances in thePeruvian market for approximately $71 million, with maturities rangingfrom 4 to 15 years, which were used to refinance and prepay debt, improvingcontractual conditions and debt maturity.

 

·                  Edelnor: local bonds forapproximately $53 million equivalent in local currency with maturitiesbetween 5 years and 8 years, which were used to refinance debt.  Also, Edelnor signed short-term loans for$195 million, including renovations and new debt, taking advantage of lowinterest rates.

 

·                  Costanera: debt refinancing for $70million with bank loans with medium-term maturity and supplier financing withmaturity of 5 years.

 

·                  Edesur: debt prepayment for $65million with a local bond issuance for approximately $50 million withmaturity of 5 years and a medium-term bilateral loan for $15 million.  Edesur extended its debt duration andimproved interest rate terms.  Likewise,in November the company signed an interest rate swap for $15 million tofix the rate of the medium-term bilateral loan.

 

·                  Ampla: 3-year bank loans for $135million and debt refinancing for $40 million, extending debt maturity from 2 to5 years and lowering interest rate by 15 basis points.  In December, Ampla signed bank loans torefinance bonds due in March 2008, for $163 million with maturities of5 and 6 years.

 

·                  Endesa Fortaleza: cross currency swapfor $25 million, redenominating part of its debt from dollars to reais,reducing currency mismatch between debt and revenues generation.

 

·                  Coelce: bank loans for a total ofapproximately $71 million and swaps to hedge the interest and exchangerate risks of these debts for approximately $60 million.

 

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·                  Emgesa: bank loans for $57 millionwith short-term maturity and debt refinancing in February 2007 with localbond issuances for $77 million with a maturity of 10 years.

 

·                  Codensa: bank loans for $511 millionwith short-term maturity and short term debt refinancing with local bondissuances for approximately $323 million with maturities of 3 and 10 years.

 

**C.            Researchand development, patents and licenses, etc.**

** **

**None.**

** **

**D.            TrendInformation.**

** **

Enersis is a company withsubsidiaries engaged in the generation, transmission and distribution ofelectricity in five different countries. Therefore, our businesses are subjectto a wide variety of conditions that may result in variability in our earningsand cash flows from year to year. In general, our net income is a product ofour operating income from our generation and distribution businesses and otherfactors such as income from unconsolidated related companies, foreign currencyexchange rate fluctuations and taxes.

 

Regarding our generationbusiness, our operating income for 2008 increased by 44.3% as compared to 2007.This increase in the generation segment operating income from 2007 to 2008varies in each of the five countries where we operate and is due to numerousfactors, including hydrological conditions, the price of fuel used to generateelectricity and the prevailing spot market and regulated prices for electricityin each of the countries in which we operate. Our generation operations in thefive different countries allow us to somewhat offset and counterbalancevariations with respect to these factors, but in light of the variability ofthese factors over time and across the countries in which we operate, we cannotascertain the likelihood or the extent to which past performance will beindicative of future performance with respect to our generation business. Asignificant change with respect to hydrological conditions, fuel price or theprice of electricity could affect our operating income.

 

With respect to ourdistribution business, our operating income for 2008 increased by 42.8% ascompared to 2007. This increase in the distribution segment operating incomefrom 2007 to 2008 varies in each of the five countries where we operate due tonumerous factors, including improved operational efficiency and growth inpopulation and gross domestic product (“GDP”) in the countries in which weoperate. Technological advances have enabled us to reduce the amount ofelectricity lost in our distribution operations, while increases in populationand GDP in the countries in which we operate have resulted in increased demandfor electricity, all of which have had a positive effect on our operatingincome.

 

While GDP and populationgrowth have trended upward in Latin America, future decreases in each of suchvariables could negatively affect our operating income. Also, while theregulatory regimes in the countries in which we operate remain fairly stable, additionalregulation, especially regulations concerning the price at which we may sellelectricity, could affect our operating income. Variability in our earnings and cash flows can also arise fromnon-operating factors as well, such as foreign currency exchange rates.  For further information regarding 2008’results of the Company compared with those recorded on previous periods, pleasesee “ — A. Operating Results - Enersis’ Results of Operations for the YearsEnded December 31, 2007 and December 31, 2008” and “— A.Operating Results - Enersis’ Results of Operations for the Years Ended December 31, 2006and December 31, 2007” above.

 

Investors should not lookat our past performance as indicative of future performance.

 

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** **

**E.            Off-balance Sheet Arrangements.**

** **

Enersisis not a party to any off-balance sheet arrangements.

 

**F.            Tabular Disclosure of Contractual Obligations.**

** **

The table below sets forth the Company’s cash paymentobligations as of December 31, 2008:

 

**Enersis on a consolidated basis**

 
| **Ch$ billion**                        | ** ** | **Total**  | ** ** | **2009**  | ** ** | **2010- 2011** | ** ** | **2012- 2013** | ** ** | **After  2013** | ** ** |
|---------------------------------------------|------------|------------|------------|-----------|------------|----------------|------------|----------------|------------|-----------------|------------|
| Bank debt                                   |       | 1,535      |       | 535       |       | 563            |       | 278            |       | 158             |       |
| Local bonds(1)                              |       | 1,298      |       | 59        |       | 334            |       | 204            |       | 702             |       |
| Yankee bonds(2)                             |       | 1,410      |       | 395       |       | —         |       | 255            |       | 760             |       |
| Other debt(3)                               |       | 798        |       | 178       |       | 306            |       | 116            |       | 199             |       |
| Interest expense                            |       | 2,469      |       | 487       |       | 993            |       | 989            |       | —          |       |
| Pension and  post-retirement obligations(4) |       | 242        |       | 5         |       | 73             |       | 66             |       | 98              |       |
| Purchase  obligations(5)                    |       | 39,346     |       | 2,360     |       | 4,414          |       | 4,181          |       | 28,391          |       |
| Financial leases                            |       | 143        |       | 12        |       | 34             |       | 41             |       | 57              |       |
| **Total  contractual obligations**          | ** ** | **47,240** | ** ** | **4,031** | ** ** | **6,716**      | ** ** | **6,128**      | ** ** | **30,365**      | ** ** |

 

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(1)          Includes net payment fromEndesa Chile’s currency swap of Ch$ 4.9 billion.

 

(2)          Includes net payment ofEnersis’ currency swaps for a total of Ch$ 8.5 billion.

 

(3)          Includes Endesa Chile’s capital leaseobligations for a total of Ch$ 27.5 billion.

 

(4)          We have fundedand unfunded pension and post-retirement benefit plans.  Our funded plans have contractual annualcommitments for contributions which do not change based on funding status.  Cash flow estimates in the table are based onsuch annual contractual commitments including certain estimable variablefactors such as interest.  Cash flowestimates in the table relating to our unfunded plans are based on futureundiscounted payments necessary to meet all of our pension and post-retirementobligations.  The amount of$ 98 million in the “After 2013” column includes all of our cash flowestimates relating to our unfunded plans plus one year’s estimate of ourcontractual commitment for our funded plans (we estimate that our contractualcommitments for our funded plans are equal to $ 24,913 million perannum).  However, we have estimated thatwe will have $ 24,913  million incash flow commitments in connection with such funded plans.  We have only included one year of cash flowestimates for our funded plans in this column because such plans do not have anexpiration or settlement date and therefore the aggregate of our obligationsrelated to such plans after 2013 would not accurately represent ouryear-to-year cash commitments.

 

 (5)       Includes generation anddistribution business purchase obligations comprised mainly of energypurchases, operating and maintenance contracts and other services.

 

**G.            Safe Harbor.**

** **

This “Item5. Operating and Financial Review and Prospects”, contains information that mayconstitute forward-looking statements. See “Forward-Looking Statements” in the Introduction of this report, forsafe harbor provisions.

 

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** **

**Item6.   Directors, Senior Management andEmployees**

** **

**A.            Directors and Senior Management.**

** **

We are managed byour Ordinary Board of Directors, which consists of seven members who areelected for a three-year term at a General Stockholders’ Meeting or GSM.  If a vacancy occurs in the interim, the Boardof Directors elects a temporary director to fill the vacancy until the next GSMwhere the entire Board of Directors will be elected.  Our Executive Officers are appointed by theBoard of Directors and hold office at the discretion of the Board.  Set forth below are the members of our Boardof Directors as of December 31, 2008.

 
| **Directors**                       | ** ** | **Position**  | ** ** | **Held Since** | ** ** |
|-------------------------------------|------------|---------------|------------|----------------|------------|
|                                |       |          |       |           |       |
| Pablo  Yrarrázaval V. (1)      |       | Chairman      |       | 2002           |       |
|                                |       |          |       |           |       |
| Rafael Miranda  R.                  |       | Vice Chairman |       | 1999           |       |
|                                |       |          |       |           |       |
| Pedro Larrea P.                     |       | Director      |       | 2007           |       |
|                                |       |          |       |           |       |
| Patricio Claro  G.(1)(2)            |       | Director      |       | 2006           |       |
|                                |       |          |       |           |       |
| Juan Eduardo  Errázuriz O. (2) |       | Director      |       | 2008           |       |
|                                |       |          |       |           |       |
| Eugenio Tironi  B.                  |       | Director      |       | 2000           |       |
|                                |       |          |       |           |       |
| Hernán  Somerville S.(1)(2)    |       | Director      |       | 1999           |       |

 

----

(1)          Member of theDirectors’ Committee.

(2)          Member of theAudit Committee.

 

Set forth beloware brief biographical descriptions of our directors, five of whom reside inChile and two of whom reside in Spain, as of December 31, 2008.

 

**PabloYrarrázaval V.**became Chairman of the Board of Directors in July 2002 and has beenChairman of the Directors’ Committee since April 2003.  Mr. Yrarrázaval is a partner in thebrokerage firm *Corredora de Bolsa Yrarrázaval y CompañíaLimitada*, Vice Chairman of *Depósito Central deValores S.A*., DCV, and is also Chairman of the Santiago StockExchange, a position he has occupied since 1989.  Before Mr. Yrarrázaval became Chairmanof Enersis, he was Chairman of Endesa Chile.

 

**RafaelMiranda R.**holdsa BSc in Industrial Engineering from Comillas University (ICAI) and a Master’s Degreein Management Science from the School of Industrial Organization.  Between 1987 and 1997, Mr. Miranda wasthe Managing Director of Endesa Spain. In 1997, he was appointed as Endesa Spain’s CEO, and has held thisposition to date; since March 24, 2009, Mr. Miranda shares theposition of CEO of Endesa Spain with Mr. Andrea Brentan, formerly a topexecutive at Enel.  Mr. Miranda isalso the Vice Chairman of Enersis and Chairman of the Union of the ElectricityIndustry, Eurelectric, a professional association which represents the commoninterests of the electricity industry at a pan-European level.

 

**PedroLarrea P.** beganhis career in Endesa Spain in 1996 in the Regulatory Affairs Department.  A year later, he became Manager of Strategyand Regulatory Affairs, including the company’s energy planning activities andcountry-wide industrial strategic activities. In 1999, he became Deputy Managing Director of Energy Management, and in2001, Managing Director of Energy Management for Spain and Portugal.  In October 2006, he was appointedManaging Director of Endesa Spain for Latin America, Managing Director andBoard Member of Endesa Internacional, and Vice Chairman of Endesa Chile. In June 2008,Mr. Larrea was appointed as Chairman of Endesa Latinoamérica S.A. During his twelve years in Endesa Spain, Mr. Larrea has 

 

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been member of theboard of Nuclenor, Apx, and Endesa Trading. He is a member of the Directors Committee of UNESA.  Before joining Endesa Spain, he worked as aconsultant at McKinsey for electricity companies, both in Spain and the UnitedStates of America.  Mr. Larrea holdsa degree in Mining Engineering (MSc Equivalent) from the UniversidadPolitécnica de Madrid and an M.B.A. from INSEAD (Fontainebleau, France).  Mr. Larrea has been an Enersis boardmember since August 2007.

 

**PatricioClaro G.** is aCivil Industrial Engineer from *Universidad de Chile*.  Mr. Claro is a board member of *Industrias Forestales S.A., Cía. de Seguros BiceVida S.A., ParqueArauco S.A.* and *Banco Bice*.   Additionally, he serves as a board member of*Cámara de Compensación Interbancaria de Pagos deAlto Valor*, Combanc S.A., and has been a board member of *Cristalerías de Chile, Cía. Sudamericana de Vapores,* Gener,Pilmaiquén, CTC, *Cía. Chilena de Fósforos* and *Banco de Santiago*.  Mr. Clarohas been an Enersis board member and a member of the Directors’ Committee sinceApril 2006 and a member of Enersis’ Audit Committee since October 2007.

 

**JuanEduardo Errázuriz O.**is a Civil Industrial Engineer from *Universidad Católica deChile*. He is a Co-Founder and Executive Vice Chairman of SigdoKoppers S.A., and board member of subsidiaries, Chairman of Grupo *Automotriz SK Berge* (Argentina, Chile, Peru), Chairman of *Caja de Compensación Los Andes*, board member of *Compañía Chilena de Fósforos*and a member of the CounselBoard to Sofofa.

 

**Eugenio Tironi B.** received a Ph.D. insociology from L’Ecole des Hautes Ëtudes en Sciences Sociales (Paris,France).  He is currently Chairman of CIEPLAN, a Professor ofthe Sociology Department at *Pontificia UniversidadCatólica de Chile*, board member of the NGOs *PazCiudadana* and *Un Techo Para Chile*,and a member of the Board of Trustees of *Universidad AlbertoHurtado*.  Mr. Tironi haspublished seventeen books in Chile and abroad. Mr. Tironi has been a consultant to international organizationsand, between 1990 and 1994, was a Director of the Secretary for Communicationand Culture of the Chilean Government.  Mr. Tironiwas also a visiting professor at Notre Dame University (USA) in 2002, andSorbonne-Nouvelle (France) in 2006.  Inaddition, since 1994, Mr. Tironi has been the Chairman of *Tironi Asociados*, a strategic communications firm, which hasadvised many Chilean and international firms in a number of Latin Americancountries.  Mr. Tironi has been aDirector of Enersis since July 2000.

 

**HernánSomerville S.** hasa law degree from Universidad de Chile and an M.C.J. degree from New YorkUniversity Law School.  Since 1989, Mr. Somervillehas been the Managing Director and Partner of Fintec, an investment, advisoryand management company which led the bank debt-to-equity conversion programsponsored by the Chilean Central Bank in the 1980’s.  Prior to his involvement with Fintec, andfrom 1983 to 1988, Mr. Somerville was Director of the Chilean CentralBank, serving as Chief Debt Negotiator for Chilean public debt and privatecommercial bank debt.  Mr. Somervillewas the former Chairman of the Confederation of Production & Commercein Chile.  He is also the non-executiveChairman of the Chilean Association of Banks and Financial Institutions, formerChairman of the Latin American Federation of Banks and Chairman of *Transbank S.A*., which manages credit and debit cards inChile.  He is also a Board Member of *Corp Banca*, *Viña Santa Rita*,*INACAP*, and has been a Director ofEnersis since 1999.  Mr. Somervilleis one of the three Chilean representatives at the Asia Pacific EconomicCouncil’s Business Advisory Committee, and is Chairman of the Chilean Pacific Foundation.

 

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** **

**Executive Officers(as of December 31, 2008)**

 
| ** **                        | ** ** | **Position**                 | ** ** | **Current Position Held Since** | ** ** |
|-----------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| Ignacio Antoñanzas  A.       |       | Chief Executive Officer      |       | 2006                            |       |
|                              |       |                         |       |                            |       |
| José Luis  Domínguez C. |       | Communications Officer       |       | 2003                            |       |
|                              |       |                         |       |                            |       |
| Alfredo Ergas S.                  |       | Chief Financial Officer      |       | 2003                            |       |
|                              |       |                         |       |                            |       |
| Antonio Zorrilla  O.              |       | Auditing Officer             |       | 2007                            |       |
|                              |       |                         |       |                            |       |
| Fernando Isac C.                  |       | Accounting Officer           |       | 2003                            |       |
|                              |       |                         |       |                            |       |
| Ramiro Alfonsín  B.          |       | Planning and Control Officer |       | 2007                            |       |
|                              |       |                         |       |                            |       |
| Francisco Silva  B.               |       | Human Resources Officer      |       | 2003                            |       |
|                              |       |                         |       |                            |       |
| Domingo Valdés  P.           |       | General Counsel              |       | 1999                            |       |

 

Set forth beloware brief biographical descriptions of our Executive Officers, all of whomreside in Chile:

** **

**IgnacioAntoñanzas A.**wasappointed CEO of Enersis in October 2006. Mr. Antoñanzas holds a degree in Mining Engineering with a major inenergy and fuels from the *UniversidadPolitécnica de Madrid*.  Hestarted his career as a commodities trader. He joined Endesa Spain in 1994, having worked mainly during hisprofessional career in generation and corporate strategy areas.  He has been the CEO of Endesa Net Factory andDirector of Endesa Italia.  Untilassuming his current position, he served as Deputy General Manager ofStrategy for Endesa Spain.

 

**JoséLuis Domínguez C.**was appointed Communications Officer in July 2003.He is a civil engineer from *Pontificia**Universidad Católica de Chile*.  Mr. Domínguez joined the Enersis Groupin May 1987 and has held many positions in Endesa Chile and its Chileansubsidiaries until 2000, when he assumed the position of Public AffairsDirector of Enersis, until his current position.

** **

**AlfredoErgas S**. is acommercial engineer from *Universidad de Chile*,and has an MBA degree from Trium Global Executive MBA, an alliance between NYU,HEC and LSE.  Mr. Ergas has been theCFO of Enersis since July 2003, after having held a similar position atEndesa Chile.  Before that, Mr. Ergasserved as CFO and Chief Controlling Officer of the Chilean telecommunicationscompany, Smartcom, from 2000 to 2002. Prior to that, Mr. Ergas served as Deputy Chief Financial Officerof Endesa Chile and later in Enersis as Planning and Control Director. Mr. Ergasjoined the Enersis Group in April 1993.

 

**AntonioZorrilla O.**was appointed Auditing Officer in August 2007**. **Mr. Zorrillaholds a degree inMining Engineering from the *Universidad Politécnica de Madrid* and the *Rheinisch-Westfälische Technische Hochschule Aachen*(RWTH)and holds a joint MSc. in Natural Resources Management from the HelsinkiUniversity of Technology (HUT), the Royal School of Mines, the *Technische Universiteit Delft* and the RWTH.  Prior to joining the Enersis Group, Mr. Zorrillaserved as Auditing Team Chief at the Auditing Corporate Direction at EndesaSpain.  Prior to that, Mr. Zorrillaserved as Consultant at PriceWaterhouseCoopers as well as for IBM Spain.

 

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** **

**Fernando Isac C.**,****aneconomist, is a graduate of *Universidad deZaragoza*.  Mr. Isacworked in several accounting and finance positions in *Eléctricas Reunidas de Zaragoza* (“ERZ”), asubsidiary of Endesa Spain, between 1977 and 1996.  Subsequently, he was a Director of *Electricidad de Caracas*(Venezuela) until1998.  Between 1998 and September 2000,he was Deputy CFO of ERZ, a subsidiary of Endesa Spain.  In September 2000, Mr. Isac joinedEnersis as Accounting Director.

** **

**RamiroAlfonsín B.** holds a degree in Business Administration from the *Pontificia Universidad Católica de Argentina*.  He joined the Endesa group in June 2000,having worked in Endesa Net Factory as Investment and Risk Capital Manager andlater as Planning and Control Manager. Subsequently, he worked in Endesa Italia as a Planning and InvestmentDeputy Director and in Endesa Europa as Investment and Corporate RelationsDeputy Director.  In March 2007, hejoined the Enersis Group as Planning and Control Officer. Currently, Mr. Alfonsínis a board member of several companies of the Enersis Group in Argentina,Brazil and Peru.  Before joining theEndesa Group, Mr. Alfonsín worked as Senior Financial Advisor at *Banco Urquijo KBL Group*, as Management Advisor of theCorporate Development and Institutional Relations Departmentat Alcatel, and also as Corporate Banking Associate at ABN AMRO BankN.V.

 

**FranciscoSilva B.**holds a degree in public administration from *Universidad de Chile*, and received a D.P.A. from *Universidad Adolfo Ibáñez* in 1986.  Mr. Silva joined Chilectra in 1987 andhas worked primarily in human resources and general management positions inseveral subsidiaries and affiliates of Enersis. Between 1998 and 2000, and since July 2003, he has been the EnersisHuman Resources Officer.  From January 2001to June 2003, he worked as Adjunct Director of an Endesa Spain subsidiaryin Spain.

 

**Domingo Valdés****P.** has been General Counsel since May 1999. Mr. Valdésis a lawyer from *Universidad de Chile* with aMaster of Laws Degree from the University of Chicago.  He joined the Enersis Group as a corporateattorney at law for Chilectra in 1993 and became Legal Counselor at Enersis in December 1997.  Mr. Valdés worked as an intern at theNew York City law firms of Milbank, Tweed, Hadley & McCloy andChadbourne & Parke LLP. Before joining Chilectra, Mr. Valdés wasa lawyer at Chase Manhattan Bank, N.A., Corporate Department (Chile) and anassociate at Carey & Cía., a Santiago based law firm.  Mr. Valdés is also Secretary of theEnersis Board of Directors and a Professor of Economic and Antitrust Law at *Universidad de Chile* Law School.

 

**B.  Compensation.**

** **

Directorsare paid a variable annual fee, depending on net earnings of the Company and amonthly fee paid in advance, depending on their attendance to the boardmeetings and their participation as Director of any of our subsidiaries.  In 2008, the total compensation paid to eachof our directors, including fees for attendance at meetings of the DirectorsCommittee and of the Audit Committee, was as follows:

 
| ** **                      | ** ** | **Year Ended December 31, 2008** | ** ** |
|---------------------------------|------------|---------------------------------------|------------|
| ** **                      | ** ** | **(in thousands of Ch$)**             | ** ** |
| Pablo  Yrarrázaval V.      |       | 62,384                                |       |
| Rafael Miranda  R.              |       | 40,335                                |       |
| Pedro Larrea P.                 |       | 25,951                                |       |
| Hernán  Somerville S.      |       | 41,524                                |       |
| Patricio Claro  G.              |       | 41,524                                |       |
| Juan Ignacio de la Mata G.(1)   |       | 8,613                                 |       |
| Juan Eduardo  Errázuriz O. |       | 22,522                                |       |
| Eugenio Tironi  B.              |       | 26,722                                |       |
| Total                           |       | 269,575                               |       |

 

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(1)           Mr. De la Mata ceased to be a Director of Enersis in March 2008.

 

We donot disclose, to our shareholders or otherwise, information on individualexecutive officers’ compensation.  Forthe year ended December 31, 2008, the aggregate gross compensation paid oraccrued (including performance-based bonuses) of the Executive Officers ofEnersis, was Ch$2.198 million.  Enersis’ ExecutiveOfficers are eligible for variable compensation under a bonus plan for meetingcompany-wide objectives and for their individual contribution to the Company’sresults.  The annual bonus plan providesfor a range of bonus amounts according to seniority level.  The bonuses eventually paid to executivesconsist of a certain number of gross monthly salaries.  The total variable compensation paid in March 2009was Ch$558 million, and is included in the aggregate compensationfigure.  Of this variable compensation,Ch$312 million were deposited in pension funds, and Ch$246 millionwere paid to the Executive Officers.

 

Theamount set aside or accrued by the Company to provide severance indemnities toits executive officers amounts Ch$ 344 million, of whichCh$52 million were accrued during 2008.

 

All of our executiveofficers have severance indemnity agreements with the Company in the event ofvoluntary resignation, mutual agreement among the parties, or death.  They do not have a right to severanceindemnity if the relationship with the Company is terminated due to willful misconduct,prohibited negotiations, unjustified absences, abandonment of duties, amongother causes, as defined in article 130 of the Chilean Code of Labor.  All of the Company’s employees are entitledto legal severance pay if dismissed due to needs of the Company, as defined inarticle 161 of the Chilean Code of Labor.

 

**C.            Board Practices.**

** **

Thecurrent Board of Directors was elected for a period of three years at the GSMof April 1, 2008. For information as to the years in which each directorbegan his service at the board, please see “ — A. Directors and SeniorManagement” above.  The members of theBoard of Directors do not have service contracts with Enersis or any of itsaffiliates that provide benefits upon termination of employment.

 

***Corporate Governance***

*** ***

Enersisis managed by its Executive Officers under the direction of its Board ofDirectors which, in accordance with its bylaws, consists of seven directors whoare elected at an annual GSM.  Eachdirector serves for a three-year term and the term of each of the sevendirectors expires on the same day. The directors can be reelected indefinitely.Staggered terms are not permitted under Chilean law.  If a vacancy occurs on the board during thethree-year term, the Board of Directors may appoint a temporary director tofill the vacancy.  A vacancy will triggeran election for every seat on the board of directors at the next GSM.  The current board of directors was elected inApril 2008 and its term expires in April 2011.

 

Chileancorporate law provides that a company’s board of directors is responsible forthe management, administration and representation of a company in all mattersconcerning its corporate purpose, subject to the provisions of the company’s bylaws and the stockholders’resolutions.  In addition to the bylaws, the Board of Directors ofEnersis has adopted regulations and policies that guide our corporategovernance principles.  The InternalRegulations on Conduct in Securities Markets, approved by the Board on January 31,2002, defines the rules of conduct that must be followed by members of theBoard of Directors, senior management and other executives and employees who,due to the nature of their job responsibilities, may have access to sensitiveor confidential information, with a view to contributing to transparency and tothe protection of investors.  Theseregulations are based on the principles of impartiality and good faith, placingthe company’s interests before one’s own, and care and diligence in usinginformation when acting in the securities markets.

 

TheCharter Governing Executives, approved by the Board on May 28, 2003, andthe Employee Code of Conduct, explain our principles and ethical values,establish the rules governing dealing with customers and 

 

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suppliers, and establish the principles that should befollowed by employees, including ethical conduct, professionalism andconfidentiality.  They also imposelimitations on the activities that our senior executives and other employeesmay undertake outside the scope of their employment with us.

 

Inorder to ensure compliance with the provisions of the Securities Market Law18,045 and other legal rules, imposed by the SVS and the instructions containedin *Norma de Carácter General No. 211,*issuedby the SVS, on May 28, 2008*,*the Board ofDirectors of the Company approved a document denominated “*Manual deManejo de Información de Interés para el Mercado*”, or Manual,  which among others, addresses the followingissues:  applicable standards to theinformation of transactions of the Company’s securities or those of itsaffiliates by directors, principal executives and other related parties;existence of blackout periods for such transactions by directors, principalexecutives and other related parties; existence of mechanisms for thecontinuous revelation of information that is of interest to the market; andmechanisms that provide protection for confidential information.  Such Manual was informed to the market on May 30,2008 and posted on the company’s website www.enersis.cl.

 

Theprovisions of this Manual shall be applied to the members of the board, as wellas executives and employees of Enersis who have access to privileged informationor are able to access it and especially those who work in areas related to thesecurities markets.

 

Theregulations and rules mentioned above reflect our core principles oftransparency, respect for stockholders’ rights, and the duty of care and loyaltyof the directors imposed by Chilean law.

 

***Compliance with NYSEListing Standards on Corporate Governance***

*** ***

Thefollowing is a summary of the significant differences between our corporategovernance practices and those applicable to domestic issuers under thecorporate governance rules of the New York Stock Exchange.  Because we are a “controlled company” underNYSE rules (a company of which more than 50% of the voting power is heldby an individual, a group or another company), we would not, were we to be aU.S. company, be subject to the requirement that we have a majority ofindependent directors, or nomination and compensation committees.

 

***Independence and Functions of theAudit Committee***

*** ***

Underthe NYSE corporate governance rules, all members of the Audit Committee must beindependent.  We have been subject tothis requirement since July 31, 2005.

 

Underthe NYSE corporate governance rules, the audit committee of a U.S. company mustperform the functions detailed in, and otherwise comply with the requirementsof NYSE Listed Company Manual Rules 303A.06 and 303A.07.  Non-U.S. companies have been required tocomply with Rule 303A.06 beginning July 31, 2005, but are notrequired to comply with Rule 303A.07. We do not currently comply with Rule 303A.07, but as of July 31,2005, we did comply with the independence and the functional requirements of Rule 303A.06.  As required by the Sarbanes-Oxley Act and theNYSE corporate governance rules, on June 29, 2005, the Board of Directorsof Enersis created an Audit Committee. The current members of this Committee, who satisfy the requirements ofindependence of NYSE, are: Messrs. Juan Eduardo Errázuriz, Patricio Claroand Hernán Somerville. As required by Chilean Law, Enersis also has a Directors’ Committee composed ofthree directors.  Although Chilean Lawrequires that the majority of the Directors’Committee (two out of three members) be composed of directors who werenot nominated by the votes of the controlling shareholder or, if excluding thevotes from the controlling shareholders would have been elected nevertheless (a“non-control director”), it permits the Directors’Committee to be composed of a majority or even a unanimity of controldirectors, if there are not sufficient non-control directors on the Board toserve on the committee.  Currently, our 

 

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Directors’ Committee is composed of one non-control director andtwo directors nominated with the votes of the controlling shareholder.

 

OurDirectors’ Committee performs the following functions:

 

·             examination of Annual Report, Financial Statements andthe Reports of the External Auditors and Inspectors of the Accounts;

 

·             formulation of the proposal to the Board of Directorsfor the selection of external auditors and private rating agencies;

 

·             examination of information related to operations bythe Company with related parties and/or related to operations in which theCompany board members or relevant executive officers may have personalinterest;

 

·             examination of the compensation framework and plansfor managers and executive officers; and

 

·             any other function mandated to the committee by the bylaws, the Board of Directors or theshareholders of the Company.

 

PabloYrarrázaval, Chairman of the Board, has also served as chairman of thiscommittee since July 31, 2002.  The othermembers are Hernán Somerville and Patricio Claro.

 

TheAudit Committee is composed of three independent members who also serve asdirectors of the Company.  It performsthe following functions:

 

·             submits a proposal for the appointment andcompensation of independent auditors at GSM;

 

·             oversees the work of independent auditors;

 

·             pre-approves audit and non-audit services provided bythe independent auditors; and

 

·             establishes procedures for receiving and dealing withcomplaints regarding accounting, internal control and auditing matters.

 

***Corporate Governance Guidelines***

*** ***

TheNYSE’s corporate governance rules require U.S.-listed companies to adoptand disclose corporate governance guidelines. Although Chilean law does not contemplate this practice (except for theManual), the Company has adopted the codes of conduct described above, and itsGSM held on March 2006, approved the inclusion of articles in its bylawsthat govern the creation, composition, attributions, functions and retributionof the Directors’ Committee and the Audit Committee.

 

**D.**            Employees

** **

Thefollowing table provides the total number of full time employees of the Companyand its subsidiaries for the past three fiscal years:

 

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| ** **            | ** ** | **Years ended December 31,** | ** ** |
|-----------------------|------------|-----------------------------------|------------|
| ** **            | ** ** | **2006**                          | ** ** | **2007** | ** ** | **2008** | ** ** |
| Enersis (Chile)       |       | 220                               |       | 222 |   | 232 |   |
| Endesa Chile(1)       |       | 2,028                             |       | 2,230 |   | 2,442 |   |
| Endesa Brasil(2)      |       | 2,938                             |       | 2,905 |   | 2,806 |   |
| Chilectra  (Chile)    |       | 708                               |       | 728 |   | 717 |   |
| Edesur  (Argentina)   |       | 2,407                             |       | 2,534 |   | 2,590 |   |
| Edelnor (Perú)   |       | 548                               |       | 544 |   | 571 |   |
| Codensa  (Colombia)   |       | 934                               |       | 931 |   | 932 |   |
| Other Businesses  (3) |       | 2,001                             |       | 2,035 |   | 2,443 |   |
| Total                 | ** ** | **11,784**                        | ** ** | **12,129** | ** ** | **12,733** | ** ** |

 

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(1)          Includes Chileanoperations and subsidiaries in Argentina, Colombia and Peru.

(2)          Endesa Brasil includes Ampla, Coelce, CachoeiraDourada, Fortaleza and CIEN.

(3)          Includes CAM,Synapsis and IMV.

 

As of December 31, 2008,Enersis, on a consolidated basis, had 323 temporary employees of which 294 arefrom Ingendesa, Endesa Chile’s subsidiary, and the rest are distributed amongother companies.  For the past two years,the total number of temporary employees has not changed materially.

 

*Chile*

* *

As of December 31, 2008,we and our principal subsidiaries and affiliates in Chile had 3,185 employees,including employees of Enersis and of all Chilean majority-owned subsidiaries,which in turn includes 559 employees of Endesa Chile employed in Chile.  During 2007, we entered into two collectivebargaining agreements with our employees, that expire in 2011.  Five collective bargaining agreements withemployees of Chilectra took effect in December 2008 and expire in December 2012.  In Endesa Chile, there are six worker unions,one of which was created in 2008. This new union signed a collective bargainingagreement that expires in June 2011. Endesa Chile signed three othercollective agreements, two of which will expire in December 2011 and onein June 2012. The remaining two agreements will expire in December 2009.At CAM, a new executives’ union signed a collective bargaining agreement thatexpires in June 2011. Two new collective agreements were renewed until December 2010.Synapsis entered into a new collective bargaining agreement with its employees,expiring in August of 2012. At Ingendesa, three worker unions exists, witha collective bargaining agreement expiring in December of 2011.

 

*Argentina*

* *

As of December 31, 2008,Edesur had 2,590, Costanera 274 and El Chocón 51 employees.  Five collective bargaining agreements arestill valid, and during 2008 no new agreements were signed because theaforementioned agreements are currently valid until a new agreement is signed,despite having expired.

 

*Brazil*

* *

As of December 31, 2008,Ampla had 1,298, Cachoeira Dourada 63, Coelce 1,278 , CIEN 67 and Fortaleza 63employees. Ten collective bargaining agreements are in force. In 2008 two newagreements were signed at Cachoeira Dourada and in Coelce.  Such agreements establish salaries,productivity bonuses, individual performance evaluations and general workingconditions.  Brazilian law stipulatesthat collective bargaining agreements cannot last for more than two years.

 

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* *

*Colombia*

* *

As of December 31, 2008,Codensa had 932 and Emgesa 404 employees as of December 31, 2008.  In 2008 no new collective bargainingagreements were signed.  Typically,collective bargaining agreements have two-year terms.  However, there are no legal restrictions onthe maximum duration of such agreements.

 

*Perú*

* *

As of December 31, 2008,Edelnor had 571 and Endesa Chile’s affiliate Edegel 242 employees.  Five collective bargaining agreements arestill in force. During 2008, a new collective bargaining agreement was signedat EEPSA.

 

Theemployees indicated by country correspond to the number of workers withtemporary or indefinite contracts.

 

**E.            Share Ownership.**

** **

To thebest of the Company’s knowledge, none of Enersis’ directors or officers ownsmore than 0.1% of the shares of the Company. None of Enersis’ directors and officers has any stock options, which arenot permitted under Chilean securities laws and regulations. It is not possibleto confirm whether any of our directors or officers has a beneficial, ratherthan direct, interest in the shares of Enersis. To the best of our knowledge,any shareholding by all of the directors and officers of Enersis, in theaggregate, amount to significantly less than 10% of our outstanding shares.

 

**Item 7.    MajorShareholders and Related Party Transactions**

** **

**A.            MajorShareholders.**

** **

Enersis’only outstanding voting securities are shares of common stock.  As of March 31, 2009, our32,651,166,465 shares of common stock outstanding were held by8,194 stockholders of record.

 

Endesa Spain beneficiallyowns 60.62% of the shares of Enersis. Chilean private pension funds, *Administradorade Fondos de Pensiones*, or AFPs, owned 17.05% in the aggregate.Chilean stockbrokers, mutual funds, insurance companies, foreign equity funds,and other Chilean institutional investors collectively owned 7.62 % of ourequity.  ADR holders own 11.72% of theequity.  The remaining 2.99% is held by8,052 minority shareholders.

 

AFP Provida owns Enersiscommon stock held exclusively on behalf of personal pension fund contributions.The shares are managed through four investment funds (the legal names of suchfunds being Fund Type A, Fund Type B, Fund Type C, and Fund Type D) which havedifferent risk profiles. Under Chilean Pension Law, each fund is a separatelegal entity from AFP Provida, and such fiduciary funds are not affected by AFPProvida’s financial situation as a fund management company.  AFP Providaholds a 5.39% ownership interest in Enersis through these funds with each fund’sownership, as of March 31, 2009, as follows: Fund Type A (1.10%), FundType B (1.13%), Fund Type C (2.66%) and Fund Type D (0.51%).

 

As of December 31, 2008,six out of seven members of our Board of Directors were elected with sharesvoted by of Endesa Spain.  Endesa Spainhas exerted majority control over Enersis since April 1999.  However, Endesa Spain does not have differentvoting rights than the other shareholders of Enersis.

 

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The followingtable sets forth certain information concerning ownership of the common stockas of March 31, 2009, with respect to each stockholder known to us toown more than 5% of the outstanding shares of common stock:

 
| ** **      | ** ** | **Number of  Shares Owned** | ** ** | **Percentage of Shares  Outstanding** | ** ** |
|-----------------|------------|-----------------------------|------------|---------------------------------------|------------|
| Endesa Spain(1) |       | 19,794,583,473              |       | 60.62                                 | %          |
| AFP Provida(2)  |       | 1,760,744,624               |       | 5.39                                  | %          |

 

----

(1)          Endesa Spain’s60.6% interest is held through *EndesaLatinoamérica, S.A.*

(2)          The interest ofAFP Provida is held through four different investment funds.

 

On February 20, 2009,Acciona and Enel announced that they had reached an agreement through whichAcciona, directly and indirectly, will transfer to Enel Energy Group Srl, awholly-owned Enel subsidiary, 25.01% of Endesa Spain’s share capital.  The transfer is subject to legalauthorizations and approval by relevant authorities.  As a result, Enel Energy Group Srl will hold92.06% of Endesa Spain’s share capital. Enel’s 25.01% additional stake in Endesa Spain will be exchanged forapproximately € 11.1 billion in cash, as well as wind andhydroelectric assets located in Spain and Portugal which are valued atapproximately € 2.9 billion. The transfer of shares and assets is expected to take place by August 31, 2009.When the transaction is completed, Enel will hold a 55.8% beneficial interestin Enersis.

 

**B.           Related Party Transactions.**

** **

Article 89of the Chilean Companies Act requires that our transactions with our parentcompany, subsidiaries and/or their related parties be on equitable conditions,similar to those customarily prevailing in the market.

 

Directorsand executive officers of companies who violate Article 89 are liable forlosses resulting from such violation.  Inaddition, Article 44 of the Chilean Companies Act, as amended, providesthat a corporation may only execute transactions in which one or more directorshave a personal interest or an interest as a representative of another person,when such transactions are previously examined and reported to the Board ofDirectors by the Directors’ Committee and then approved by the Board ofDirectors prior to execution by the Company, and the terms of such transactionsare adjusted to equitable conditions similar to those customarily prevailing inthe market.  Resolutions approvingtransactions under Article 44 must be reported to our stockholders in thenext stockholders’ meeting.  If thetransactions involve a material amount, the Board of Directors must determinein advance if the transactions are adjusted to equitable conditions similar tothose customarily prevailing in the market or not.  If the board decides that it is not possibleto ascertain such conditions, the Board of Directors, with the exclusion ofinterested directors, may approve or reject the transaction, or appoint twoindependent appraisers.  The appraisers’report will be available to the shareholders and the Board of Directors for aperiod of 20 business days.  Once suchterm has expired, the Board of Directors with the abstention of interesteddirectors may approve or reject the transaction.  If shareholders representing 5% or more ofthe voting shares consider that the terms and conditions of the transactionsare not favorable to the interests of the Company, or that the appraisers’reports are substantially different, they may request that the board convene aSpecial Shareholders’ meeting to approve or reject the transaction with amajority of two-thirds of the voting shares. Violation of Article 44 may result in administrative and criminalsanctions and civil liability to us, our shareholders or interested thirdparties who suffer losses as a result of such violation.  We, our shareholders and interested thirdparties, however, may ask the interested director to reimburse the Company inan amount equivalent to the benefits that the transaction in violation of Article 44represented to the interested director, relatives and/or representatives.

 

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It isour policy that all cash inflows and outflows of our Chilean subsidiaries aremanaged through our centralized cash management policy. It is a common practicein Chile to transfer surplus funds from one company to another affiliate thathas a cash deficit.  These operations arecarried out through either short-term loans or through structured inter-companyloans.  Under Chilean law and regulation,such transactions must be carried out on an arm’s-length basis.  Our centralized cash management is moreefficient for both financial and tax reasons. All of these operations are subject to the supervision of our Directors’ Committee. As of December 2008,then operations were priced at TIP (Chilean variable interest rate) + 0.05% permonth.

 

Inother countries in which we do business, these inter-company transactions arepermitted but they have adverse tax consequences.  Accordingly, we do not similarly manage thecash flows of our non-Chilean subsidiaries.

 

Enersishas also made structured loans to its Chilean subsidiaries, at the same cost offunds for Enersis, primarily to finance foreign investments.  As of December 31, 2008, the outstandingnet balance for such loans was $504 million, and the largest amountoutstanding during 2008 and 2007 was $674 million and $723 million,respectively.  Additionally, there wereno outstanding loans granted by Enersis to its foreign subsidiaries as of December 31,2008.  The largest net amount outstandingduring 2008 and 2007 for such loans was $27 million.

 

Thecurrency denomination of the structured loans granted by Enersis to its Chileansubsidiaries as of December 31, 2008 is the US dollar.  The interest rate on these intercompany loansto Enersis’ Chilean subsidiaries ranges from Libor plus 0.5% to Libor plus5.35%, with a nominal weighted average interest rate of Libor plus 3.7%.  The interest rate on the intercompanyloans to Enersis’ foreign subsidiaries ranges during 2008 from Libor plus 5% toLibor plus 8.5%, with a nominal weighted average interest rate of Libor plus6.9%.

 

Endesa Chile has also made structured loans to itssubsidiaries in Chile, primarily to finance projects and refinance existingindebtedness. As of December 31, 2008, the outstanding net balancefor such loans was US$ 302 million. The largest amount outstanding during 2008and 2007 was US$ 521 million and US$ 519 million respectively.  EndesaChile has only one outstanding loan granted to a foreign subsidiary. Theoutstanding net balance of this loan was of US$ 7.1 million as of December 31,2008.  The largest net amount outstanding during 2008 and 2007 for suchloans was US$ 7.1 million and US$ 165 million, respectively*.*

* *

Theinterest rates on these intercompany loans to Endesa-Chile’s Chileansubsidiaries range from Libor plus 0.75 % to Libor plus 5.7%, with a weightedaverage interest rate of approximately Libor plus 3.88%.  The interest rates on these intercompanyloans to Endesa-Chile’s foreign subsidiaries were during 2008 Libor plus 4.9%.

 

As of the date of this report, the above-mentionedtransactions have not suffered material changes.  For more information regarding transactionswith affiliates, refer to note 6 of our consolidated financial statements.

 

**C.**            Interests of Experts and Counsel.

** **

Not applicable.

 

**Item 8.**         Financial Information

** **

**Consolidated Statementsand Other Financial Information.**

** **

See “Item18.  Financial Statements” for ourconsolidated financial statements.

 

**Legal Proceedings**

** **

We andour subsidiaries are parties to legal proceedings arising in the ordinarycourse of business that are not material to our consolidated results ofoperations.  Management considers that itis unlikely that any loss 

 

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associated with pending lawsuits will significantlyaffect the normal development of our business. For more information on all ofour material legal proceedings please refer to Note 28 of our consolidatedfinancial statements.

 

***DividendPolicy***

*** ***

TheBoard generally establishes a definitive dividend payable each year, andattributable to the prior year, which cannot be less than the legal minimum of30% of annual net income before negative goodwill amortization. As agreed at ameeting held on March 25, 2009, the Board of Directors informed at the GSMheld on April 15, 2009 the payment of a definitive dividend of Ch$6.1 pershare for fiscal year 2008, equal to a payout ratio of 35.27% (based on annualnet income before negative goodwill amortization).  The provisional dividend of Ch $1.5391 pershare paid on December 2008 was deducted from the definitive dividend paidon April 30, 2009, as agreed by the GSM.

 

TheBoard of Directors also approved a dividend policy for fiscal year 2009according to which a provisional dividend will be paid to stockholders equal to15% of the net income accumulated up to September 30, 2009 and willpropose a definitive dividend payout equal to 60% of the annual net income offiscal year 2009.  Actual dividendpayments will be subject to net profits obtained in each period, as well as toexpectations of future profit levels and other conditions that may exist at thetime of such dividend declaration.

 

The fulfillment of theaforementioned dividend policy will depend on actual 2009 net income. The proposed dividend policy is subject to the Board ofDirector’s prerrogative to change the amount and timing of the dividend underthe circumstances at the time of the payment. Currently, there are no restrictions on the ability of Enersis or any ofits subsidiaries to pay dividends, other than the customary legal restrictionof limiting the amount of dividends to net income and retained earnings and inthe event of specific circumstances given the conditions of certain creditagreements, except for the following: Pangue may not pay dividends unless it complieswith certain financial covenants relating to leverage and debt service coverageratios; Costanera is prohibited from paying dividends while certain debt isoutstanding; and dividend payments by El Chocón are limited by a creditagreement executed in 2006.  In generalterms companies may noy pay dividends in case of default on credit agreements.(See. “Item 5. Operating and Financial Review and Prospects — B. Liquidity and capital resources” for further detailon Enersis debt instruments).

 

Stockholdersset dividend policies at each subsidiary and affiliate.  There are currently no material currencycontrols which prohibit Enersis from repatriating the dividend payments fromits non-Chilean principal subsidiaries and affiliates.

 

The Company pays dividends to shareholders of record as offive business days before the payment date. Holders of ADSs on the applicable record dates will be entitled toparticipate in all future dividends.

 

**Dividends**

** **

The table below sets forth, for each of the years indicated,the per share amounts of dividends distributed by the Company and the amount ofdividends distributed per 50 common shares (one ADS represents 50 commonshares) in dollars.  See “Item 10.Additional Information — D. Exchange Controls.”

* *
| **Year**   | ** ** | **Nominal  Ch$(1)**      | ** ** | **$ per   ADS(2)** | ** ** |
|------------|------------|--------------------------|------------|-------------------------|------------|
| ** ** | ** ** | **(Ch$ per share)** | ** ** |
| 2004       |       | —                   |       | —                  |       |
| 2005       |       | 0.42                     |       | 0.03                    |       |
| 2006       |       | 2.11                     |       | 0.17                    |       |

 

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| **Year**   | ** ** | **Nominal  Ch$(1)**           | ** ** | **$ per   ADS(2)** | ** ** |
|------------|------------|-------------------------------|------------|------------------------------|------------|
| ** ** | ** ** | **(Ch$ per share)** | ** ** |
| 2007       |       | 5.42                          |       | 0.43                         |       |
| 2008       |       | 4.95                          |       | 0.39                         |       |

 

----

(1)   Amounts shown are inhistorical pesos and reflect all the dividends paid in a given year.  These dividends may have been accrued theprior year, or the same year in which they were paid.

(2)   The dollar perADS amount has been calculated by applying the exchange rate of Ch$ 636,45 =$1.00, the Observed Exchange Rate prevailing on December 31, 2008, tothe constant peso amount.

 

For adiscussion of Chilean Withholding Taxes and access to the formal currencymarket in Chile in connection with the payment of dividends and sales of ADSsand the underlying Common Stock, see “Item 10. Additional Information — E. Taxation,” and “Item 10.  Additional Information — D. Exchange Controls.”

 

**B.            Significant Changes.**

** **

None.

** **

**Item 9.    TheOffer and Listing**

** **

**A.            Offer and Listing Details.**

** **

**Market Price and VolumeInformation**

** **

Theshares of our common stock currently trade on the Chilean, United States andSpanish exchanges.  Transactions in Chiletake place on three exchanges: the Santiago Stock Exchange, the ElectronicStock Exchange and the Valparaíso Stock Exchange.

 

Sharesof our common stock have traded in the United States on the New York StockExchange (NYSE) since October 19, 1993 in the form of ADSs under theticker symbol “ENI.”  Each ADS represents50 shares of common stock, with the ADSs in turn evidenced by AmericanDepositary Receipts (“ADRs”).  The ADRsare outstanding under a Deposit Agreement dated as of October 18, 1993,among us, Citibank, N.A., as Depositary, and the holders from time to time ofADRs issued there under.  Only persons inwhose names ADRs are registered on the books of the Depositary are treated bythe Depositary as owners of ADRs.

 

As of December 31, 2008,there were 71,267,055 ADSs (equivalent to 3,563,352,750 common shares)outstanding of Enersis.  Such ADSsrepresented at such date 10.9% of the total number of outstanding shares.  It is not practicable for us to determine theproportion of ADRs beneficially owned by U.S. persons.

 

During 2008, volume traded on the Santiago Stock Exchangeamounted to 9,609,067,583 shares.

 

The table below shows, for the periods indicated high and lowclosing prices in pesos for the Shares on the Santiago Stock Exchange and highand low closing prices of the ADSs in dollars as reported by the New York StockExchange.

 

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| ** **       | ** ** | **Chilean Pesos Per share(1)** | ** ** | **U.S.$ per ADS(2)** | ** ** |
|------------------|------------|--------------------------------|------------|---------------------------|------------|
| ** **       | ** ** | **High**                       | ** ** | **Low**                   | ** ** | **High** | ** ** | **Low** | ** ** |
| 2009             |       |                           |       |                      |       |   |   |   |   |
| May              |       | 193.50                         |       | 174.43                    |       | 17 1/9 |   | 15 |   |
| April            |       | 181.00                         |       | 169.00                    |       | 15 5/8 |   | 14 1/3 |   |
| March            |       | 185.20                         |       | 165.00                    |       | 16 1/6 |   | 13 5/9 |   |
| February         |       | 188.71                         |       | 171.00                    |       | 15 4/7 |   | 14 1/6 |   |
| January          |       | 184.00                         |       | 162.50                    |       | 15 1/6 |   | 12 3/4 |   |
|             |       |                           |       |                      |       |   |   |   |   |
| 2008             |       |                           |       |                      |       |   |   |   |   |
| December         |       | 180.00                         |       | 162.60                    |       | 14 |   | 12 |   |
| 4th quarter |       | 194.80                         |       | 129.00                    |       | 17 |   | 10 1/8 |   |
| 3rd quarter |       | 190.00                         |       | 149.90                    |       | 18 1/2 |   | 14 6/7 |   |
| 2nd quarter |       | 189.00                         |       | 156.50                    |       | 20 1/4 |   | 15 5/9 |   |
| 1st quarter |       | 161.89                         |       | 110.00                    |       | 17 7/8 |   | 11 5/6 |   |
|             |       |                           |       |                      |       |   |   |   |   |
| 2007             |       |                           |       |                      |       |   |   |   |   |
| 4th quarter |       | 199.00                         |       | 157.00                    |       | 20 1/5 |   | 15 5/6 |   |
| 3rd quarter |       | 213.80                         |       | 159.00                    |       | 20 1/2 |   | 15 |   |
| 2nd quarter |       | 215.00                         |       | 175.50                    |       | 20 2/5 |   | 16 1/5 |   |
| 1st quarter |       | 185.50                         |       | 163.00                    |       | 17 2/7 |   | 14 1/3 |   |
|             |       |                           |       |                      |       |   |   |   |   |
| 2006             |       | 173.00                         |       | 108.50                    |       | 16 2/5 |   | 10 1/7 |   |
|             |       |                           |       |                      |       |   |   |   |   |
| 2005             |       | 130.00                         |       | 87.00                     |       | 12 1/3 |   | 7 1/3 |   |
|             |       |                           |       |                      |       |   |   |   |   |
| 2004             |       | 97.00                          |       | 70.00                     |       | 8 5/8 |   | 5 1/2 |   |

 

----

(1)          As reported bythe Santiago Stock Exchange.  Pesos pershare reflect the nominal price as of the trade date.  The price has not been restated in constant pesos.

(2)          As reported by the NYSE.  One ADS = 50 shares

 

**B.           Plan of Distribution.**

** **

Notapplicable.

 

**C.           Markets.**

** **

InChile, the Company’s stock is traded on three stock exchanges.  The largest exchange in the country, theSantiago Stock Exchange, was established in 1893 as a private company.  Its equity consists of 48 shares held by 45stockholders as of the date of this Report. As of December 31, 2008, 235 companies had shares listed onthe Santiago Stock Exchange. For the year ended 2008, the Santiago StockExchange accounted for 87.6% of Enersis’ total equity traded in Chile.  In addition, approximately 11.9% of Enersis’equity trading was conducted on the Electronic Exchange, an electronic tradingmarket that was created by banks and non-member brokerage houses, and 0.5% wastraded on the Valparaíso Exchange. Equities, closed-end funds, fixed-incomesecurities, short-term and money market securities, gold and dollars are tradedon the Santiago Stock Exchange.  In 1990,the Santiago Stock Exchange initiated a futures market with two instruments,dollar futures and Selective Shares Price Index, or IPSA, futures.  Securities are traded primarily through anopen-voice auctions system, a firm offers system or the daily auction.  Trading through the open voice system occurson each business day from 9:30 a.m. to 4:30 p.m., from April toOctober, and from 9:30 a.m. to 5:30 p.m. from

 

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November to March, Santiago time, which differsfrom New York City time up to two hours, depending on the season.   The Santiago Stock Exchange has anelectronic trading system called *Telepregón*,which operates continuously from 9:30 a.m. to 4:30 p.m. on eachbusiness day.  For days on which auctionsare scheduled, there are three times available for such auctions: 9:15 a.m.,12:30 p.m. and 4:30 p.m.

 

Thereare two share price indices on the Santiago Stock Exchange, the General Index,or IGPA, and the Selective Index, or IPSA. The IPSA is calculated using the prices of the 40 most actively tradedshares. The IGPA is calculated using the prices of all shares that are publiclytraded. The shares included in the IPSA are weighted according to the value ofthe shares traded.  As of December 31, 2008,Enersis and Endesa Chile has been included in the IPSA. Enersis has beenincluded in the IPSA since the last quarter of 1988, while Endesa Chile hasbeen included since its privatization in the 1980’s.

 

Sharesof Enersis were first listed and began trading on the *Bolsa de Valores Latinoamericanos de la Bolsa deMadrid*, or Latibex, as of December 17, 2001.  One trading unit is the equivalent of 50common shares (the same unit conversion of 50:1 as an ADS) and the tradingticker symbol is “XENI.” Banco Santander Central Hispano Bolsa S.A. S.V.B. actsas the liaison entity, and the Banco Santander as the depositary in Chile.  Trading of our shares in the Latibex amountedto approximately 1.5 million units in 2008, which in turn was equivalentto €16 million.  The stock closed at€ 9.11 on the last day of trading in Latibex in 2008. For further informationsee “ — A. Offer and Listing Details — Market Price and Volume Information”above.

 

**D.           Selling Shareholders.**

** **

Notapplicable.

 

**E.            Dilution.**

** **

Notapplicable.

 

**F.            Expense of the Issue.**

** **

Notapplicable.

** **

**Item 10.     AdditionalInformation**

** **

**A.           Share Capital.**

** **

Notapplicable.

 

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**B.            Memorandumand Articles of Association.**

** **

**Description of Share Capital**

** **

Set forth below is certain information concerning ourshare capital and a brief summary of certain significant provisions of ourby-laws and Chilean law.

 

**General**

** **

Shareholders’ rights in Chilean companies are governedby company’s by-laws, which effectively serve the purpose of either thearticles or certificate of incorporation and the by-laws of a companyincorporated in the United States, and by the Law 18,046, or Chilean Companies Act.  In accordance with the Chilean Companies Act,legal actions by shareholders against us to enforce their rights asshareholders must be brought in Chile in arbitration proceedings or at theoption of the plaintiff before the ordinary courts of Chile.

 

The Chilean securities markets are principallyregulated by the Superintendence of Securities and Insurance*,* or SVS, under the Law 18,045, or the Securities MarketLaw, and the Chilean Companies Act. These two laws provide for disclosure requirements, restrictions oninsider trading and price manipulation, and protection of minority investors.  The Securities Market Law sets forthrequirements for public offerings, stock exchanges and brokers, and outlinesdisclosure requirements for companies that issue publicly offeredsecurities.  Law 19,705 introducedimportant amendments to the Chilean Companies Act and the Securities MarketLaw.  Among other things, it provides anew definition for publicly held limited liability stock companies and new rules regardingtakeovers, tender offers, transactions with directors, qualified majorities,share repurchase, directors’ committee, stock options and derivativeactions.  Publicly held limited liabilitystock companies are those with 500 or more shareholders, or companies in which100 or more shareholders own at least 10% of the subscribed capital, excludingthose whose individual holdings directly or indirectly exceed such percentage,and all other companies whose shares are registered voluntarily with the SVS,regardless of the number of their shareholders. Enersis is a publicly held limited liability stock company (*sociedad anónima abierta*).

 

**Reporting Requirements Regarding Acquisition or Saleof Shares**

** **

Under Article 12 of the Securities Market Law andSection II of Circular 585 of the SVS, certain information regardingtransactions in shares of publicly held limited liability stock companies mustbe reported to the SVS and the Chilean stock exchanges.  Since ADSs are deemed to represent the sharesof common stock underlying the ADRs, transactions in ADRs will be subject tothese reporting requirements and those established in Circular 1,375 of theSVS.  Shareholders of publicly heldlimited liability stock companies are required to report to the SVS and theChilean stock exchanges:

 
| · | any direct or indirect  acquisition or sale of shares or options to buy or sell shares that results  in the holder’s acquiring or disposing, directly or indirectly, of 10% or  more of a publicly held limited liability stock company’s subscribed capital;  and                                                                                |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                        |
| · | any direct or indirect  acquisition or sale of shares or options to buy or sell shares, in any  amount, if made by a holder of 10% or more of a publicly held limited  liability stock company’s subscribed capital.                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                        |
| · | any direct or indirect  acquisition or sale of shares or options to buy or sell shares, in any  amount, made by a director, liquidator, principal executive, chief executive  officer or officer of a publicly held limited liability stock company whose  shares are registered with the SVS must be reported to the SVS and the  Chilean stock exchanges. |

 

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In addition, the majority shareholders must inform theSVS and the Chilean stock exchanges if the aforementioned acquisitions are donewith the intention to obtain control of the Company or only as passiveinvestment.

 

Under Article 54 of the Securities Market Law and*Norma de Carácter General**104* enacted by the SVS in 2001, any person who directly orindirectly intends to take control of a publicly held limited liability stockcompany must disclose his intent to the market at least 10 business days inadvance of the change of control and, in any event, as soon as the negotiationsfor the change of control have started. If the change of control shall occur by means of a tender offer, theprovisions on tender offers will apply.

 

Law 19,705 introduced a chapter to the SecuritiesMarket Law, establishing a comprehensive regulation on tender offers.  The law defines a tender offer as an offer topurchase shares of corporations which publicly offer their shares or securitiesconvertible into shares and which offer is made to shareholders to purchasetheir shares on conditions which allow the bidder to reach a certain percentageof ownership of the corporation within a fixed period of time.  These provisions apply to both voluntary andmandatory tender offers.

 

**Register**

** **

Enersis is registered with the SVS and its entrynumber is 0175.

 

**Corporate Objective and Purpose**

** **

Article 4 of our by-laws states that ourcorporate objective and purpose are, among other things, to conduct theexploration, development, operation, generation, distribution, transmission,transformation, or sale of energy in any form, directly or through othercompanies, as well as to provide engineering-consultancy services related to theseobjectives, in Chile and abroad and to participate in the telecommunicationsbusiness.

** **

**Board of Directors**

** **

Our Board of Directors is made up of seven members whomay or may not be shareholders of Enersis. Members of the Board are elected at the GSM for a period of three yearsat the end of which they will be re-elected or replaced.

 

The seven directors elected at the GSM are those sevenindividual nominees who receive the most votes. Each shareholder may vote his shares in favor of one nominee or mayapportion his shares among any number of nominees.  These voting provisions ensure that ashareholder owning more than 12.5% of our shares is able to elect a member ofthe Board of Directors.

 

The compensation of the directors is set annually atthe general ordinary meeting of shareholders. The Chairman is entitled to receive twice the compensation paid to eachdirector, and the Vice Chairman 50% more than that paid, to each director.  Thus, the Board of Directors does not havepower to vote compensation for themselves or any members of their body.

 

Our by-laws do not contain provisions relating toborrowing powers exercisable by the directors and how such borrowing powers canbe varied; or retirement or non-retirement of directors under an age limit requirement.

 

**Certain Provisions Regarding Shareholder Rights**

** **

As of the date of thefiling of this Report, Enersis’ capital is comprised of only one class ofshares, all of which are ordinary shares and have the same rights.

 

Our bylaws do notcontain any provisions relating to redemption provisions, sinking funds orliability to further capital calls by the Company.

 

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Under Chilean law, the rights of holders of stock mayonly be changed by an amendment to the by-laws of the company that complieswith the requirements explained below under “ — Shareholders’ Meetings andVoting Rights.”

 

**Capitalization**

** **

Under Chilean law, the shareholders of a company,acting at a general extraordinary shareholders’ meeting, have the power toauthorize an increase in its capital. When an investor subscribes for shares, the shares are officially issuedand registered in his name, and the subscriber is treated as a shareholder forall purposes except receipt of dividends and for return of capital in the eventthat the subscribed shares have not been paid for.  The subscriber becomes eligible to receivedividends once he has paid for the shares, or, if he has paid for only aportion of such shares, the *pro rata*portion of the dividends declared with respect to such shares unless thecompany’s by-laws provide otherwise. If a subscriber does not fully pay for shares for which he has subscribedon or prior to the date agreed, the company is entitled to auction the shareson the stock exchange where such shares are traded and has a cause of actionagainst the subscriber for the difference, if any, between the subscriptionprice and the price received at auction. However, until such shares are sold at the auction, the subscribercontinues to have all the rights of a shareholder, except the right to receivedividends and return of capital. Authorized and issued shares, for which full payment has not been madewithin the period fixed by the general extraordinary shareholders’ meeting atwhich their subscription was authorized, which may not exceed three years fromthe date of such meeting, are canceled and are no longer available forissuance.

 

In 1999, our shareholders approved a capital increaseof 2.58 billion shares.  In 2000,the Company issued a Pre-Emptive Rights’ Offering, including an ADS Offering,in which approximately 1.49 billion common shares were fully subscribedand paid for under this capital increase. In 2002, the three-year period granted by the Company’s shareholders inorder to carry out the remainder of the authorized capital increase,expired.  Therefore, the shares of theCompany were reduced to the number which until now have been fully subscribedand paid.

 

In 2003, at a General Extraordinary Shareholders’Meeting, Enersis’ shareholders approved the issuance of 24,382,994,488 shares,at a market value of approximately $2 billion.  The capital increase allowed Endesa Spain, actingthrough a subsidiary, to exercise a portion of its pre-emptive optionscorresponding to 14,406,840,511 new shares, which were paid by the cancellationof a Ch$1.0 trillion (approximately $1.4 billion at the exchange rateapplicable at that time) inter-company loan that had previously been granted toEnersis.  As required by Chilean law, anindependent appraiser valued the loan exclusively for purposes of the capitalincrease at 86.8% of its par value. Endesa Spain, acting through a subsidiary, subscribed for 59.1% of thenew shares at a value of Ch$870.5 billion, the appraised value of theloan.  Additionally, the capital increaseallowed the subscription for 3.7% of the new shares as part of the local bondexchange offer, which took place between the first and the second pre-emptiverights periods of the capital increase. The total amount of local bonds exchanged was equivalent toapproximately Ch$54 billion.

 

The shareholders also approved in that meeting, theelimination of the 65% by-laws’ restriction on the maximum shareholding by anyparty.  In 2004, our shareholdersapproved a new amendment to our by-laws to reinstate, among other things, the65% maximum shareholding restriction set forth above.

 

**Preemptive Rights and Increases of Share Capital**

** **

The Chilean Companies Act requires Chilean companiesto grant shareholders preemptive rights to purchase a number of sharessufficient to maintain their existing ownership percentage of such companywhenever such company issues new shares.

 

Under Chilean law, preemptive rights are exercisableor freely transferable by shareholders during the 30-day period following thegranting of such rights.  During such30-day period, and for an additional 30-day period, Chilean publicly heldlimited liability stock companies are not permitted to offer any unsubscribed

 

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shares to third partieson terms which are more favorable than those offered to their shareholders, butthey may be freely sold after the 30-day period following the granting of suchrights to third parties on terms less favorable for the purchaser than thoseoffered to shareholders.  At the end ofsuch additional 30-day period, a Chilean publicly held limited liability stockcompany is authorized to sell non-subscribed shares to third parties on anyterms, provided they are sold on one of the Chilean stock exchanges.

 

Under the last capital increase, the first preemptiverights period ended on June 30, 2003 and the second period was from November 20to December 20, 2003.  Between thetwo preemptive rights periods, there was also a preferred opportunity forEnersis’ local bondholders to tender their bonds in exchange for shares ofcommon stock.

 

**Shareholders’ Meetings and Voting Rights**

** **

An amendment to our by-laws requires the affirmativevote of shareholders holding not less than two-thirds of the shares eligible tovote.

 

A GSM is held within the first four months followingthe end of our fiscal year, generally in March or April.  The last ordinary annual meeting was held on April 15,2009.  Extraordinary shareholders’meetings may be called by the Board of Directors when deemed appropriate orwhen requested by shareholders representing at least 10% of the issued votingshares or by the SVS.  To convene anextraordinary shareholders’ meeting, or a GSM, notice must be given in threeopportunities in a prescribed manner in a newspaper of our corporatedomicile.  The newspaper designated byour shareholders is the Santiago edition of *ElMercurio*.  The first noticemust be published not less than 15 days nor more than 20 days in advance of thescheduled meeting.  Notice must also bemailed to each shareholder and given to the SVS and the Chilean stockexchanges.  The last extraordinarymeeting of Enersis’ shareholders was held on March 21, 2006.

 

Under Chilean law, a quorum for a shareholders’meeting is established by the presence, in person or by proxy, of shareholdersrepresenting at least a majority of the issued voting shares of a company.  If a quorum is not present at the firstmeeting, a reconvened meeting can take place at which the shareholders presentare deemed to constitute a quorum regardless of the percentage of the sharesrepresented.  The second meeting musttake place within 45 days following the scheduled date of the firstmeeting.  Shareholders’ meetings adoptresolutions by the affirmative vote of an absolute majority of those sharespresent, or represented, at the meeting. Additionally, if a shareholders’ meeting is called for the purpose ofconsidering the following list, regardless of the quorum present, then the voterequired for the action is a two-thirds majority of the outstanding shares withvoting rights:

 
| · | a transformation of the  company into a different form of entity, a merger or division of the company;          |
|--------|-----------------------------------------------------------------------------------------------------------------|
|   |                                                                                                            |
| · | an amendment to the  term of duration or early dissolution;                                                     |
|   |                                                                                                            |
| · | a change in the  corporation’s domicile;                                                                   |
|   |                                                                                                            |
| · | a decrease of corporate  capital;                                                                               |
|   |                                                                                                            |
| · | approval of capital  contributions in kind and assessment of such assets;                                       |
|   |                                                                                                            |
| · | modification of the  authority reserved to shareholders or limitations on the Board of Directors’  powers; |
|   |                                                                                                            |
| · | reduction in the number  of members of the Board of Directors;                                                  |

 

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| · | disposition of 50% or  more of the assets of the corporation, whether it includes disposition of  liabilities or not, as well as the approval or the amendment of the business  plan which contemplates the disposition of assets for such amount; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                               |
| · | the form of  distributing corporate benefits;                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                               |
| · | issue of guarantees for  third-party liabilities which exceed 50% of the assets, but if the third  party is a subsidiary of the company, the approval of the Board of Directors  is sufficient;                                                    |
|   |                                                                                                                                                                                                                                               |
| · | the purchase of the  corporation’s own shares;                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                               |
| · | certain remedies for  the nullification of the corporate by-laws.                                                                                                                                                                                  |

 

Bylaw amendments for the creation of a new class ofshares, or an amendment to or an elimination of those classes of shares thatalready exist, must be approved by two-thirds majority of the outstandingshares of the affected series.

 

Shareholders are entitled to examine the books of theCompany within the 15-day period before the scheduled shareholders’meeting.  Under Chilean law, a notice ofa shareholders’ meeting listing matters to be addressed at the meeting must bemailed at least 15 days prior to the date of such meeting, and, in cases of aGSM, the annual report of the Company’s activities which includes auditedfinancial statements, must be made available to shareholders and published onthe Company’s website: www.enersis.cl. In addition to these requirements, we regularly provide, and managementcurrently intends to continue to provide, together with the notice of the GSM,a proposal for the final dividend and an explanation of the dividend policy forinterim dividends for that current year, previously approved by the Board ofDirectors, as well as a proposal of the Investment and Financing Policy to beapproved by the shareholders for the current year.

 

The Chilean Companies Act provides that, upon therequest by shareholders representing 10% or more of the issued voting shares, aChilean company’s annual report must include, in addition to the materialsprovided by the Board of Directors to shareholders, such shareholders’ commentsand proposals in relation to the company’s affairs.  Similarly, the Chilean Companies Act providesthat whenever the Board of Directors of a publicly held limited liability stockcompany convenes an ordinary meeting of shareholders and solicits proxies forthe meeting, or circulates information supporting its decisions or othersimilar material, it is obligated to include the pertinent comments andproposals that may have been made by shareholders owning 10% or more of thecompany’s voting shares who request that such comments and proposals be soincluded.

 

Only shareholders registered as such with Enersis fivebusiness days prior to the date of a meeting are entitled to attend and votetheir shares.  A shareholder may appointanother individual, who need not be a shareholder, as his proxy to attend andvote on his behalf.  Proxies for suchrepresentation shall be given in writing for all the shares held by theowner.  Every shareholder entitled toattend and vote at a shareholders’ meeting shall have one vote for every sharesubscribed.

 

**Dividends and Liquidation Rights**

** **

According to the Chilean CompaniesAct, unless otherwise decided by unanimous vote of its issued shares eligibleto vote, all companies must distribute a cash dividend in an amount equal to atleast 30% of their consolidated net income, before amortization and negativegoodwill for each year (on a Chilean GAAP basis), except to the extent thecompany has carried forward losses.  Thelaw provides that the Board of Directors has to propose the dividend policy tothe shareholders at the GSM.

 

Any dividend in excess of 30% of such net income maybe paid, at the election of the shareholder, in cash, in Enersis’ shares or inshares of publicly held limited liability stock corporations held by Enersis.

 

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Shareholders who donot expressly elect to receive a dividend other than in cash are legallypresumed to have decided to receive the dividend in cash.

 

Dividends which are declared but not paid or madeavailable to shareholders within the appropriate time period set forth in theChilean Companies Act — as to minimum dividends, 30 days after declaration; asto additional dividends, the date set for payment at the time of declaration —are adjusted to reflect the change in the value of UF, a Chilean inflationadjusted currency, from the date set for payment to the date such dividends areactually paid.  Such dividends alsoaccrue interest at the then prevailing rate for UF-denominated deposits duringsuch period.  The right to receive adividend lapses if it is not claimed within five years from the date suchdividend is payable; payments not collected in such period are transferred forthe benefit of firemen, who are volunteers.

 

In the event of a liquidation of Enersis, the holdersof shares would participate in the assets available in proportion to the numberof paid-in shares held by them, after payment to all creditors.

 

**Approval of Financial Statements**

** **

The Board of Directors is required to submit Enersis’financial statements to the shareholders annually for their approval.  If the shareholders by a vote of a majorityof shares present (in person or by proxy) at the shareholders’ meeting rejectthe financial statements, the Board of Directors must submit new financialstatements no later than 60 days from the date of such meeting.  If the shareholders reject the new financialstatements, the entire Board of Directors is deemed removed from office and anew board is elected at the same meeting. Directors who individually approved such financial statements aredisqualified for re-election for the following period.  Our shareholders have never rejected thefinancial statements presented by the Board of Directors.

** **

**Change of Control**

** **

Law 19,705, enacted in 2000 establishes acomprehensive regulation for tender offers. The law defines a tender offer as the intent to purchase shares orconvertible bonds of publicly traded companies and which offer is made toinvestors to purchase their securities in conditions which allow the bidder toreach a certain percentage of ownership of the corporation within a fixedperiod of time.  These provisions applyto both friendly and hostile takeovers.

 

**Acquisition of Shares**

** **

There are no provisions in our by-laws thatdiscriminate against any existing or prospective holder of shares as a resultof such shareholder owning a substantial number of shares, except for themaximum concentration limit of shares to be held or voted, which currently isset at 65%, and provided for in our by-laws.

 

**Right of Dissenting Shareholders to Tender TheirShares**

** **

The Chilean Companies Act provides that upon theadoption of any of the resolutions enumerated below at an extraordinary meetingof shareholders, dissenting shareholders acquire the right to withdraw from thecompany and to compel the company to repurchase their shares, subject to thefulfillment of certain terms and conditions. In order to exercise such rights, holders of ADRs must first withdrawthe shares represented by their ADRs pursuant to the terms of the depositagreement.

 

“Dissenting” shareholders are defined as those whovote against a resolution that results in the withdrawal right, or who, ifabsent from such meeting, state in writing their opposition to the respectiveresolution, within 30 days following the shareholders’ meeting, where theresolution giving rise to the withdrawal right was approved.  The price paid to a dissenting shareholder ofa publicly held limited liability stock company, the shares of which are quotedand actively traded on one of the Chilean stock exchanges, is the greatestamong

 

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(i) the weightedaverage of the sales prices for the shares as reported on the Chilean stockexchanges on which the shares are quoted for the two-month period preceding theshareholders’ meeting giving rise to the withdrawal right, and (ii) themarket price resulting from the average price of transactions on such day.  If, because of the volume, frequency,number and diversity of the buyers and sellers, the SVS determined that theshares are not actively traded on a stock exchange, the price paid to thedissenting shareholder shall be the book value. Book value for this purpose shall equal paid capital plus reserves andprofits, less losses, divided by the total number of subscribed shares, whetherentirely or partially paid.  For thepurpose of making this calculation, the last annual balance sheet is used, asadjusted to reflect inflation up to date of the shareholders’ meeting whichgave rise to the withdrawal right.

 

The resolutions that result in a shareholder’s rightto withdraw include, among others, the following:

 
| · | the transformation of  the company into an entity which is not a publicly held limited liability  stock company governed;                                                                                                                           |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                |
| · | the merger of the  company with another company;                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                |
| · | the disposition of at  least 50% of the company’s assets, whether it includes disposition of  liabilities or not, as well as the approval or the amendment of the business  plan which contemplates the disposition of assets for such amount; |
|   |                                                                                                                                                                                                                                                |
| · | issue of guarantees for  third parties’ liabilities which exceed 50% of the assets, but if the third  party is a subsidiary of the company, the approval of the Board of Directors  is sufficient;                                             |
|   |                                                                                                                                                                                                                                                |
| · | the creation of  preferential rights for a class of shares or an amendment to the existing  ones. In this case the right to withdraw only accrues to the dissenting  shareholders of the class or classes of shares adversely affected;             |
|   |                                                                                                                                                                                                                                                |
| · | certain remedies for  the nullification of the corporate by-laws;                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                |
| · | such other causes as  may be established by a company’s by-laws.                                                                                                                                                                               |

** **

**Investments by AFPs**

** **

Title XII of DL-3500 permits AFPs to invest theirfunds in companies that are subject to Title XII and, subject to greaterrestrictions, in other companies.  Thedetermination of which stocks may be purchased by AFPs is made by the *Comisión Clasificadora de Riesgo*, or theCCR.  The CCR establishes investmentguidelines and is empowered to approve or disapprove those companies that areeligible for AFP investments.  Except forthe period from March 2003 to March 2004, Enersis has been a Title XIICompany since 1985 and is approved by the CCR.

 

**Registrations and Transfers**

** **

Enersis’ shares are currently registered through anAdministrative Agent named *DCV RegistrosS.A. *This entity isresponsible for Enersis’ shareholders registry as well.

 

**C.            Materialcontracts.**

** **

None.

 

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**D.            Exchangecontrols**

** **

The Chilean Central Bank has a series of operatingfunctions and attributes regarding the following areas: the issue of bank notesand coins, the regulation of the amount of money in circulation and credit, theregulation of the financial system and the capital market, faculties topreserve financial system stability, functions as part of its role as fiscalagent, attributes in terms of international questions, attributes regardingforeign currency operations and statistical functions.

 

**a)            ForeignInvestments Contracts and Chapter XXVI**

** **

In connection with Enersis initial offering of ADSs in1993, on October 15, 1993, Enersis entered into a foreign investmentcontract (the “Foreign Investment Contract”) with the Central Bank and CitibankN.A., New York, the Depositary, pursuant to Article 47 of the Central BankAct and Chapter XXVI of the Compendium of Foreign Exchange Regulations of theCentral Bank (“Chapter XXVI”), which governed the issuance of ADSs by a Chileancompany. After the Enersis capital increase approved in the shareholders’meeting of April 30, 1999, Enersis and the Central Bank agreed to amendthe Foreign Investment Contract on September 7, 2000, and subsequentlyentered into a new Foreign Investment Contract on October 12, 2000.

 

In November 1995, the Central Bank amended theformer Chapter XXVI to regulate secondary offerings of ADSs by companies thathave previously entered into a foreign investment contract.  In accordance with these new regulations,Enersis entered into an amendment to the Foreign Investment Contract inconnection with its offering of ADSs completed in February 1996 to complywith the rules in effect on the date of Central Bank approval of the newissuance of ADSs.

 

On November 16, 1999, the Central Bank issued newregulations which amended Chapter XXVI. Among the amendments, the formerChapter XXVI required that foreign currency that entered into Chile pursuant tothe former Chapter XXVI be converted into Chilean pesos through the FormalExchange Market, and the shares evidencing ADRs only be paid in Chileanpesos.  In addition, foreign currencyrequired to remit the proceeds of the sale of the underlying shares be acquiredalternatively in the Formal Exchange Market or in the Informal Exchange Market,although remittance of such amounts necessarily was to be made through theFormal Exchange Market (i.e., through a local bank).  On May 12, 2000, the rule that requiredthat the invested capital remain in the country for at least one year beforebeing repatriated was eliminated.

 

The Chapter XXVI was abrogated on April 19, 2001.However, the Foreign Investment Contracts cannot be modified or terminatedwithout the consent of all parties. Notwithstanding the foregoing, foreigninvestors who did not deposit their shares of common stock into Enersis ADSfacility will not have the benefits of Enersis’ Foreign Investment Contractswith the Central Bank, being subject to the normal foreign investment rules.

 

The following is a summary of certain provisions ofthe former Chapter XXVI and the Foreign Investment Contracts. This summary doesnot purport to be complete and is qualified in its entirety by reference to theformer Chapter XXVI, the Foreign Investment Contracts, the Central BankDecision 1333-01-070510 adopted on May 10th, 2007 and the Central Bank Rule 1228issued on May 23, 2007.

 

Under the former Chapter XXVI and the ForeignInvestment Contracts, the Central Bank agreed to grant to the Depositary, onbehalf of ADR holders, and to any investor not residing or domiciled in Chilewho withdraws common stock under Foreign Investment Contracts pursuant to theformer Chapter XXVI, upon delivery of ADRs (such shares of common stock beingreferred to herein as “Withdrawn Shares”), access to the Formal Exchange Marketto convert pesos into dollars (and to remit such dollars outside Chile, butnecessarily through the Formal Exchange Market),  including amounts received as:

 

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| · | cash dividends;                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | proceeds from the sale  in Chile of Withdrawn Shares subject to receipt by the Central Bank of a  certificate from the holder of the Withdrawn Shares (or from an institution  authorized by the Central Bank) that such holder’s residence and domicile are  outside Chile and a certificate from a Chilean stock exchange (or from a  brokerage or securities firm established in Chile) that such Withdrawn Shares  were sold on a Chilean stock exchange; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | proceeds from the sale  in Chile of rights to subscribe for additional shares of common stock;                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | proceeds from the  liquidation, merger or consolidation of our Company; and                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · | other distributions,  including, without limitation, those resulting from any recapitalization, as  a result of holding shares of common stock represented by ADSs or Withdrawn  Shares.                                                                                                                                                                                                                                                                           |

 

Transferees of Withdrawn Shares were not entitled toany of the foregoing rights under the former Chapter XXVI.  Investors receiving Withdrawn Shares inexchange for ADRs have the right to redeposit such shares in exchange for ADRs,provided that certain conditions relating to redeposit are satisfied.

 

Chapter XXVI provided that access to the FormalExchange Market in connection with dividend payments was conditioned uponcertification by Enersis to the Central Bank that a dividend payment had beenmade and any applicable tax has been withheld. Chapter XXVI also provided that the access to the Formal Exchange Marketin connection with the sale of Withdrawn Shares or distributions thereon wasconditioned upon receipt by the Central Bank of certification by the Depositary(or the Custodian on its behalf) that such Shares had been withdrawn inexchange for ADRs and receipt of a waiver of the benefit of the ForeignInvestment Contract with respect thereto until such Withdrawn Shares wereredeposit.

 

The Foreign Investment Contract provides that a personwho brings foreign currency into Chile to purchase shares of common stock withthe benefit of the Foreign Investment Contract must convert it into pesos onthe same day and has five banking business days within which to invest inshares of common stock in order to receive the benefits of the ForeignInvestment Contract.  If such persondecides within such period not to acquire shares of common stock, such personcan access the Formal Exchange Market to reacquire dollars provided that theapplicable request is presented to the Central Bank within seven bankingbusiness days of the initial conversion into pesos.  Shares acquired as described above may bedeposited for ADRs and receive the benefits of the Foreign Investment Contract,subject to receipt by the Central Bank of a certificate from the Depositary (orthe Custodian on its behalf) that such deposit has been effected and that therelated ADRs have been issued and receipt of a declaration from the personmaking such deposit waiving the benefits of the Foreign Investment Contractwith respect to the deposited shares of common stock.

 

Access to the Formal Exchange Market under any of thecircumstances described above is not automatic. Pursuant to the former Chapter XXVI, such access required approval of theCentral Bank based on a request therefore presented through a bankinginstitution established in Chile. The Foreign Investment Contracts provide thatif the Central Bank does not answer on such request within seven banking days,the request will be deemed approved.

 

**b)**            **Central Bank Decision 1333-01-070510 and New Foreign InvestmentContract**

*** ***

The Central Bank Decision 1333-01-070510 adopted on May 10th,2007 agreed to extend the effects of the former Chapter XXVI to capitalincreases approved after April 18, 2001. As a consequence of such Central Bank’s decision, Enersis formallyrequested to the Central Bank to be allowed to enter into a new ForeignInvestment Contract to include its capital increase approved by Enersis’shareholders’ meeting held on March 31, 2003, 

 

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which was granted by theCentral Bank on September 7, 2007, subject to the execution and deliveryof a new Foreign Investment Contract, dated September 24, 2008.Nevertheless, the Central Bank’s approval aimed to extend the effects of theformer Chapter XXVI to the last capital increase of Enersis, is subject to thecondition that Enersis previously inform the Central Bank with respect to themeasures adopted in the issuance of new shares of a future capital increase inorder to sufficiently differentiate said new shares from those shares under theumbrella of the former Chapter XXVI, thus the shareholders would have thenecessary information to learn about such difference.  If Enersis does not comply with the abovementioned condition, the Central Bank could revoke its approval, depriving theshares of said capital increase of the rights granted by the former ChapterXXVI. Furthermore, it is not certain, however, that additional Chileanrestrictions applicable to the holders of ADRs, the disposition of underlyingshares of Common Stock or the repatriation of the proceeds from suchdisposition could not be imposed in the future, nor can there be any assessmentof the duration or impact of such restrictions if imposed.

 

**c)            NewCompendium**

** **

On January 23, 2002, the Chilean Central Bankapproved a new Compendium of Foreign Exchange Regulations that replaced theexisting one. The new Compendium has been in effect since March 1, 2002.With these new rules, the Central Bank effectively concluded a process ofgradual deregulation of the foreign exchange market.

 

This new Compendiumenhances the information gathered by the Central Bank and the quality of suchinformation.  In addition, this newCompendium includes the main rules that modified the Compendium of ForeignExchange Regulations in April 1991. In other words, new cross-border investing and financing decisions willno longer be subject to any restrictions set forth in both Articles 42 and 49of the Central Bank Law such as:

 
| · | the prior Central  Bank’s authorization requirement for the entry of capital associated with  foreign loans, investments, capital contributions, bonds and ADRs;                                                   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                    |
| · | the prior Central  Bank’s authorization for capital remittances associated with returns of  capital, dividends, and other benefits related to capital contributions,  investments and prepayment of foreign loans; |
|   |                                                                                                                                                                                                                    |
| · | the prior Central  Bank’s authorization for the return of capital, profits and other benefits  associated with investments made by Chilean residents abroad;                                                       |
|   |                                                                                                                                                                                                                    |
| · | the limitations to the  special prepayment and acceleration clauses contained in foreign loan  documents;                                                                                                               |
|   |                                                                                                                                                                                                                    |
| · | the restrictions of  minimum risk rating and the weighted duration for the issuance of bonds;                                                                                                                           |
|   |                                                                                                                                                                                                                    |
| · | the limitations with  respect to currencies in which external debt can be issued or contracted;                                                                                                                         |
|   |                                                                                                                                                                                                                    |
| · | the restrictions to the  issue of ADRs; and                                                                                                                                                                             |
|   |                                                                                                                                                                                                                    |
| · | the reserve requirement  on funds coming from abroad (which was already 0%).                                                                                                                                            |

 

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**d)            TheCompendium and International Bond Issuances**

** **

Chilean issuers may offer bonds internationally underChapter XIV, as amended, of the Compendium issued by the Central Bank.

 

Prior to September 17, 1998, foreign loans(including international bond offerings) granted to individuals or companies inChile were subject to a mandatory deposit (“*encaje*”)of an amount equal to 10% (reduced from a prior level of 30%) of the proceedsof the loan (or bond offering) in a one-year, non-interest-bearing dollaraccount with the Central Bank (or to payment of a charge to the Central Bank onthe next working day after the date of conversion of foreign currency intopesos in an amount equal to interest on such deposit at the rate of thetwelve-month LIBOR for dollar deposits plus a market spread).  On September 17, 1998, the *encaje* deposit requirement was reduced to0%, and on April 19, 2001, the *encaje*was eliminated. Despite this elimination, the Central Bank may at any timereinstate the *encaje*.

 

**E.            Taxation**

** **

**Chilean Tax Considerations**

** **

The following discussion summarizes material Chileanincome and withholding tax consequences to beneficial owners arising from theownership and disposition of the shares and ADSs.  The summary which follows does not purport tobe a comprehensive description of all of the tax considerations that may berelevant to a decision to purchase, own or dispose of shares or ADSs and doesnot purport to deal with the tax consequences applicable to all categories ofinvestors, some of which may be subject to special rules.  Holders of shares and ADSs are advised toconsult their own tax advisors concerning the Chilean and other taxconsequences of the ownership of shares or ADSs.

 

The summary that follows is based on Chilean law, asin effect on the date hereof, and is subject to any changes in these or otherlaws occurring after such date, possibly with retroactive effect.  Under Chilean law, provisions contained instatutes such as tax rates applicable to foreign investors, the computation oftaxable income for Chilean purposes and the manner in which Chilean taxes areimposed and collected may be amended only by another law.  In addition, the Chilean tax authoritiesenact rulings and regulations of either general or specific application andinterpret the provisions of Chilean tax law. Chilean tax may not be assessed retroactively against taxpayers who actin good faith relying on such rulings, regulations and interpretations, butChilean tax authorities may change their rulings, regulations andinterpretations in the future.  Thediscussion that follows is also based, in part, on representations of theDepositary, and assumes that each obligation in the deposit agreement and anyrelated agreements will be performed in accordance with its terms.  There is no income tax treaty in forcebetween Chile and the United States.

 

As used in this annualreport, the term “foreign holder” means either:

 
| · | in the case of an  individual, a person who is not a resident of Chile; for purposes of Chilean  taxation, an individual holder is resident of Chile if he or she has resided  in Chile for more than six months in one calendar year, or a total of more  than six months in two consecutive fiscal years; or |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                           |
| · | in the case of a legal  entity, an entity that is not organized under the laws of Chile, unless the  shares or ADSs are assigned to a branch, agent, representative or permanent  establishment of such entity in Chile.                                                                                       |

 

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**Taxation of Shares and ADSs**

** **

***Taxation of Cash Dividends andProperty Distributions***

*** ***

***General Rule****:*Cash dividends paid with respect to the shares or ADSsheld by a foreign holder will be subject to a 35% Chilean withholding tax,which is withheld and paid by the company. A credit against the Chilean withholding tax is available based on thelevel of corporate income tax actually paid by the company on the income to bedistributed; however, this credit does not reduce the Chilean withholding taxon a one-for-one basis because it also increases the base on which the Chileanwithholding tax is imposed.  In addition,if the company distributes less than all of its distributable income, thecredit for the Chilean corporate income tax paid by the company isproportionately reduced.  As of January 1, 2004,the Chilean corporate tax rate is 17%. The example below illustrates the effective Chilean withholding taxburden on a cash dividend received by a foreign holder, assuming a Chileanwithholding tax rate of 35%, an effective Chilean corporate income tax rate of17% and a distribution of 50% of the net income of the company distributableafter payment of the Chilean corporate income tax:

 
| Company taxable  income                                                       |   | 100.0 |   |
|-------------------------------------------------------------------------------|--------|-------|--------|
| Chilean  corporate income tax (17% of Ch$ 100)                           |   | (17   | )      |
| Net  distributable income                                                     |   | 83    |   |
| Dividend  distributed (50% of net distributable income)                       |   | 41.5  |   |
| Withholding tax  (35% of the sum of Ch$ 41.5 dividend plus Ch$ 8.5) |   | (17.5 | )      |
| Credit for 50%  of Chilean corporate income tax                               |   | 8.5   |   |
| Net withholding  tax                                                          |   | (9    | )      |
| Net dividend  received                                                        |   | 32.5  |   |
| Effective  dividend withholding rate                                          |   | 21.69 | %      |

 

In general, the effective dividend Chilean withholdingtax rate, after giving effect to the credit for the Chilean corporate incometax paid by the company, can be computed using the following formula:

 
| Effective  Dividend   |   | =      |   | (Withholding tax rate) – (Chilean corporate income  tax rate) |   |
|-----------------------|--------|--------|--------|--------------------------------------------------------------------|--------|
| Withholding Tax  Rate |   |   |   | 1 – (Chilean corporate income tax rate)                       |   |

 

Dividends are generally assumed to have been paid outof the Company’s oldest retained profits for purposes of determining the levelof Chilean corporate income tax that was paid by the Company.  For information as to the retained earningsof the Company for tax purposes and the tax credit available on the distributionof such retained earnings, see Note 8 to our consolidated financial statements.

 

Under Chilean income tax law, dividend distributionsmade in property are subject to the same Chilean tax rules as cashdividends.  Stock dividends are notsubject to Chilean taxation.

 

***Exceptions****:* Despite the general rule previously examined,there are special circumstances under which a different tax treatment wouldapply depending on the source of the income or due to special circumstancesexisting at the date of the dividend distribution.  The special cases of most common occurrenceare briefly described below:

 

1)                                     Circumstances where there is no creditagainst the Chilean withholding tax: Dividends distributed by the company to foreign holders may not receivea credit against the Chilean withholding tax. Such is the case, for instance, when dividend distributions exceed thecompany’s taxable income or when the income was not subject to corporate incometax due to an exemption.  In these cases,the foreign holder will be subject to the Chilean withholding tax rate of 35%,without any credit whatsoever.

 

2)                                     Circumstances where dividends have beenimputed to income exempted of all Chilean income taxes: In

 

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these cases, dividendsdistributed by the company to the foreign holder will not be subject to Chileanwithholding tax.  Income exempted of allChilean income taxes is expressly listed in the Chilean Income Tax Law.

 

3)                                     Circumstances where dividends are subjectto a provisional withholding tax: In the event that on the date of the dividenddistribution there are no earnings on which income tax has been paid and notax-exempt earnings, a provisional withholding must be made on the dividends atthe time of payment to the foreign holders. This provisional withholding is calculated as if the dividends were paidfrom taxable income with corporate tax credit. In other words, dividends will be subject to a 35% Chilean withholdingtax rate, but they will provide a general corporate tax credit of 17%, whichresults in an effective dividend withholding rate of 21.69%.

 

Theprovisional withholding tax must be confirmed by December 31 of the yearin which the dividend was paid.  Thisconfirmation must be based on the company’s effective income up to December 31.  As a result of such confirmation thefollowing circumstances may arise:

 

a)              That part or the total amount of the dividend correspondsto taxable income without tax credit, in which case the excess credit must tobe refunded to the Chilean Treasury by April of the year following thedividend payment date.  The excess creditwill be deducted from the next dividend to be paid to the foreign holder.

 

b)             That part or the total amount of the dividendcorresponds to tax-exempted earnings.  Insuch cases, a refund of the excess taxes paid must be requested from theChilean treasury by April of the year following the dividend payment.

 

a.                                       Circumstances when it is possible to usein Chile credit against income taxes paid abroad or “tax credit”:  This occurs when dividends distributed by theChilean company have as their source income generated by companies resident inthird countries.  If that income wassubject to withholding tax or corporate income tax in those third countries,such income will have a credit or “tax credit” against corresponding Chileantaxes, which can be proportionally transferred to the shareholders of theChilean company.

 

***Taxation on Sale or Exchange ofADSs***

*** ***

Gains obtained by a foreign holder from the sale orexchange of ADSs outside Chile will not be subject to Chilean taxation.

 

***Taxation on sale or exchange ofShares where shares or ADSs were acquired on or before April 19, 2001***

*** ***

Gainrecognized on a sale or exchange of shares (as distinguished from sales orexchanges of ADSs representing such common shares) will be subject to both a17% Chilean income tax and the 35% Chilean withholding tax (the former beingcreditable against the latter) if the foreign holder acquired and disposed ofthe shares in the ordinary course of its business or as a trader.  In all other cases, gain on the dispositionof shares will be subject to a 17% Chilean income tax but will not be subject tothe 35% Chilean withholding tax.  Thedate of acquisition of the ADSs is considered to be the date of acquisition ofthe shares for which the ADSs are exchanged.

 

***Taxation on sale or exchange ofShares where shares or ADSs were acquired after April 19, 2001***

*** ***

The income tax law includes a tax exemption on capitalgains arising from the sale of shares of listed companies traded in the stockmarkets.  Although there are certainrestrictions, in general terms, the amendment provides that to access to thecapital gain exemption: (i) the shares must be of a public stock companywith a

 

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certain minimum level oftrading on a stock exchange; (ii) the sale must be carried out in aChilean stock exchange, or on another stock exchange authorized by the SVS, orin a tender offer subject to Chapter XXV of the Chilean Securities MarketLaw; (iii) the shares which are being sold must have been acquired on astock exchange, or in a tender offer subject to Chapter XXV of the ChileanSecurities Market Law, or in an initial public offering (due to the creation ofa company or to a capital increase), or due to the exchange of convertiblebonds; and (iv) the shares must have been acquired after April 19, 2001.  If the shares do not qualify for theexemption, capital gain on their sale or exchange, if any, will be taxed inaccordance with the rules described in the preceding paragraph. Inaddition, if the exemption does not apply and the foreign holder has held theshares for less than one year, gains from the disposition of shares will besubject to both income and withholding tax as described in the precedingparagraph.  The date of acquisition ofthe ADSs is considered to be the date of acquisition of the shares for whichthe ADSs are exchanged.

 

***Taxation of Rights and ADS Rights***

*** ***

For Chilean tax purposes, the receipt of rights or ADSrights by a foreign holder of shares or ADSs pursuant to a rights offering is anontaxable event.  In addition, there areno Chilean income tax consequences to foreign holders upon the exercise or thelapse of the rights or the ADS rights. Any gain on the sale, exchange or transfer of the rights by a foreignholder is subject to a 35% Chilean withholding tax.

 

***Other Chilean Taxes***

*** ***

There is no gift, inheritance or succession taxesapplicable to the ownership, transfer or disposition of ADSs by a foreignholder, but such taxes will generally apply to the transfer at death or by giftof the shares by a foreign holder.  Thereis no Chilean stamp, issue, registration or similar taxes or duties payable byholders of shares or ADSs.

 

**Material U.S. Income Tax Considerations**

** **

This discussion is based on the Internal Revenue Code of 1986, asamended (the “Code”), administrative pronouncements, judicial decisions andfinal, temporary and proposed Treasury regulations, all as of the datehereof.  These authorities are subject tochange, possibly with retroactive effect. This discussion is also based in part on representations by theDepositary and assumes that each obligation under the Deposit Agreement and anyrelated agreement will be performed in accordance with its terms.

 

The following are the material U.S. federal income tax consequences toU.S. Holders described herein of owning and disposing of shares or ADSs, but itdoes not purport to be a comprehensive description of all of the taxconsiderations that may be relevant to a particular person’s decision to holdsuch securities.  The discussion appliesonly if you hold shares or ADSs as capital assets for U.S. federal income taxpurposes and it does not describe all of the tax consequences that may berelevant in light of your particular circumstances, such as:

 
| · | certain financial  institutions;                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------|
| · | insurance companies;                                                                                                      |
| · | dealers and traders in  securities who use a mark-to-market method of tax accounting;                                     |
| · | persons holding shares  or ADSs as part of a hedge, “straddle,” integrated transaction or similar  transaction; |
| · | persons whose  functional currency for U.S. federal income tax purposes is not the U.S.  dollar;                          |
| · | partnerships or other  entities classified as partnerships for U.S. federal income tax purposes;                          |
| · | persons liable for the  alternative minimum tax;                                                                          |
| · | tax-exempt  organizations;                                                                                                |
| · | persons holding shares  or ADSs that own or are deemed to own ten percent or more of our voting  stock;                   |

 

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| · | persons who acquired  our shares or ADSs pursuant to the exercise of any employee stock option or  otherwise as compensation; or |
|--------|----------------------------------------------------------------------------------------------------------------------------------|
| · | persons holding shares  or ADSs in connection with a trade or business conducted outside of the  United States.                  |

 

If an entity is classified as a partnership for U.S. federal income taxpurposes holds shares or ADSs, the U.S. federal income tax treatment of apartner will generally depend on the status of the partner and upon theactivities of the partnership.  Partnershipsholding shares or ADSs and partners in such partnerships should consult theirtax advisors as to the particular U.S. federal income tax consequences ofholding and disposing of the shares or ADSs.

 

You are a “U.S. Holder” if you are a beneficial owner of our shares orADSs and if you are, for U.S. federal tax purposes:

 
| · | a citizen or individual  resident of the United States, or,                                                                                                        |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | a corporation, or other  entity taxable as a corporation, created or organized in or under the laws of  the United States or any political subdivision thereof; or |
| · | an estate or trust the  income of which is subject to U.S. federal income taxation regardless of its  source.                                                      |

 

In general, if you own ADSs, you will be treated as the owner of theshares represented by those ADSs for U.S. federal income tax purposes.  Accordingly, no gain or loss will berecognized if you exchange ADSs for the underlying shares represented by thoseADSs.

 

The U.S. Treasury has expressed concerns that parties to whom Americandepositary shares are released before shares are delivered to the Depositary (“pre-release”)or intermediaries in the chain of ownership between holders and the issuer ofthe security underlying the American depositary shares may be taking actionsthat are inconsistent with the claiming of foreign tax credits for holders ofdepositary shares.  Such actions wouldalso be inconsistent with the claiming of the reduced tax rate, describedbelow, applicable to dividends received by certain non-corporate holders.  Accordingly, the analysis of thecreditability of Chilean taxes, and the availability of the reduced tax ratefor dividends received by certain non-corporate holders, each described below,could be affected by actions taken by such parties or intermediaries.

 

This discussion assumes that the Company is not, and will not become, apassive foreign investment company, as described below.

 

The summary of U.S. federal income tax consequences set out below isintended for general informational purposes only.  You should consult your tax advisors withrespect to the particular tax consequences to you of owning or disposing ofshares or ADSs, including the applicability and effect of state, local,non-U.S. and other tax laws and the possibility of changes in tax laws.

 

***Taxation of Distributions***

*** ***

Distributions paid on shares or ADSs other than certain pro ratadistributions of common shares will be treated as dividends to the extent paidout of our current or accumulated earnings and profits (as determined underU.S. federal income tax principles). Because we do not maintain calculations of our earnings and profitsunder U.S. federal income tax principles, it is expected that distributionsgenerally will be reported to U.S. holders as dividends.

 

Subject to applicable limitations and the discussion above regardingconcerns expressed by the U.S. Treasury, dividends paid by qualified foreigncorporations to certain non-corporate U.S. holders in taxable years beginningbefore January 1, 2011 are taxable at a maximum rate of 15%.  A foreign company is treated as a qualifiedforeign corporation with respect to dividends paid on stock that is readilytradable on a securities

 

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market in the United States, such as the New York Stock Exchange whereour ADSs are traded.  You should consultyour tax advisors to determine whether the favorable rate will apply todividends you receive and whether you are subject to any special rules thatlimit your ability to be taxed at this favorable rate.

 

The amount of a dividend will include the net amount withheld by us inrespect of Chilean withholding taxes on the distribution.  The amount of the dividend will be treated asforeign-source dividend income to you and will not be eligible for thedividends-received deduction generally allowed to U.S. corporations under theCode.  Dividends will be included in yourincome on the date of your, or in the case of ADSs, the Depositary’s, receiptof the dividend.  The amount of anydividend paid in Chilean pesos will be a dollar amount calculated by referenceto the exchange rate for converting Chilean pesos into dollars in effect on thedate of such receipt regardless of whether the payment is in fact convertedinto dollars.  If the dividend isconverted into U.S. dollars on the date of receipt, you generally should not berequired to recognize foreign currency gain or loss in respect of the dividendincome.  You may have foreign currencygain or loss if the dividend is converted into dollars on a date after the dateof receipt.

 

Subject to applicable limitations that may vary depending upon yourcircumstances and subject to the discussion above regarding concerns expressedby the U.S. Treasury, the net amount of Chilean withholding tax (afterreduction for the credit for Chilean corporate income tax, as discussed aboveunder “—Chilean Tax Considerations — Taxation of Shares and ADSs — Taxation ofCash Dividends and Property Distributions”) withheld from dividends on sharesor ADSs will be creditable against your U.S. federal income tax liability.  The rules governing foreign tax creditsare complex and, therefore, you should consult your tax advisor regarding theavailability of foreign tax credits in your particular circumstances.  Instead of claiming a credit, you may, atyour election, deduct such Chilean taxes in computing your taxable income,subject to generally applicable limitations under U.S. law.  An election to deduct foreign taxes insteadof claiming foreign tax credits must apply to all taxes paid or accrued in thetaxable year to foreign countries and possessions of the United States.

 

***Sale or Other Disposition ofShares or ADSs***

*** ***

For U.S. federal income tax purposes, the gain or loss you realize onthe sale or other disposition of shares or ADSs will be a capital gain or loss,and will be a long-term capital gain or loss if you have held the shares orADSs for more than one year.  The amountof your gain or loss will equal the difference between your tax base in theshares or ADSs disposed of and the amount realized on the disposition, in eachcase as determined in dollars.  Such gainor loss will generally be U.S.-source gain or loss for foreign tax creditpurposes.

 

In certain circumstances, Chilean taxes may be imposed upon the sale ofshares.  See “Chilean Tax Considerations— Taxation of Shares and ADSs.”  If aChilean tax is imposed on the sale or disposition of shares, and a U.S. holderdoes not receive significant foreign source income from other sources, suchU.S. holder may not be able to credit such Chilean tax against his U.S. federalincome tax liability.

 

***Passive Foreign InvestmentCompany Rules***

*** ***

We believe that we were not a “passive foreign investment company”(PFIC) for U.S. federal income tax purposes for our 2008 taxable year.  However, because PFIC status depends upon thecomposition of a company’s income and assets and the market value of its assets(including, among others, less than 25% owned equity investments) from time totime, and because it is unclear whether certain types of our income constitutepassive income for PFIC purposes, there can be no assurance that we will not beconsidered a PFIC for any taxable year. If we were a PFIC for any taxable year during which you held shares orADSs, certain adverse consequences could apply to you, including the impositionof higher amounts of tax than would otherwise apply, and additional filingrequirements.  You should consult yourtax advisors regarding the consequences to you if we were a PFIC, as well asthe availability and advisability of making any election, which may mitigatethe adverse consequences of PFIC status.

 

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***Information Reporting and BackupWithholding***

*** ***

Payments of dividends and sales proceeds that are made within theUnited States or through certain U.S.-related financial intermediaries generallyare subject to information reporting and to backup withholding unless (i) youare a corporation or other exempt recipient or (ii) in the case of backupwithholding, you provide a correct taxpayer identification number and certifythat you are not subject to backup withholding.

 

The amount of any backup withholding from a payment to you will beallowed as a credit against your U.S. federal income tax liability and mayentitle you to a refund, provided that the required information is timelyfurnished to the Internal Revenue Service.

** **

**F.             Dividendsand paying agents**

** **

Not applicable.

 

**G.            Statementby experts**

** **

Not applicable.

 

**H.             Documentson display**

** **

We are subject to the information requirements of theExchange Act, except that as a foreign issuer, we are not subject to the proxy rules orthe short-swing profit disclosure rules of the Exchange Act.  In accordance with these statutoryrequirements, we file or furnish reports and other information with theSEC.  Reports and other information filedor furnished by us with the SEC may be inspected and copied at the publicreference facilities maintained by the SEC at Room 1024, 100 FStreet, N.E., Washington, D.C. 20549, and at the SEC’s regional offices at233 Broadway, New York, New York 10279 and 475 West JacksonBoulevard, Suite 900, Chicago, Illinois 60604.  Copies of such material may also be inspectedat the offices of the New York Stock Exchange, 11 Wall Street, New York,New York 10005, on which our ADSs are listed. In addition, the SECmaintains a website that contains information filed electronically with theSEC, which can be accessed over the Internet at www.sec.gov.

 

**I.             Subsidiaryinformation**

** **

Not applicable.

 

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**Item 11(a) and11(b)           Quantitative andQualitative Disclosures about Market Risk**

** **

The Company is exposed to risks from changes ininterest rates and foreign exchange rates. These risks are monitored and managed by the Company.  The Company’s Board of Directors approvesrisk management policies at all levels.

 

The Company does not enter into financial instrumentsfor non-trading or speculative purposes. As a result, the Company’s market risk is limited to trading risks.

 

**Commodity PriceRisk**

** **

In our electricity generation business, we are exposedto market risks arising from the volatility of electricity, natural gas, dieseloil and coal prices.  In order to manage theseexposures, we enter into long-term contracts with suppliers and customers.

 

We are exposed to the volatility of natural gas pricesin the Chilean and Argentine markets.  Weseek to ensure our supply of this commodity by securing long-term contracts withour suppliers for terms that are expected to match the lifetime of ourgeneration assets.  These contractsgenerally provide for us to purchase gas at market prices prevailing at thetime the purchase occurs.  As of December 31, 2008and 2007, we did not hold any contracts classified as derivative financialinstruments, financial instruments or derivative commodity instruments relatedto natural gas.

 

We are partially exposed to the volatility of coal anddiesel oil prices.  In the countrieswhere we operate, the dispatch mechanism allows the thermal power plant tocover its variable cost.  On the otherhand, under certain circumstances, fuel price fluctuations might affectmarginal costs.  Additionally, throughadequate commercial risk mitigation policies, and a hydrothermal mix, we seekto naturally protect the commodity price volatility over our operatingmargin.  As of December 31, 2008and 2007, we did not hold any contracts classified as derivative financialinstruments, financial instruments or derivative commodity instruments relatedeither to coal or to diesel oil.

 

As of December 31, 2008, we did not holdelectricity price-sensitive instruments.

** **

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** **

**Interest Rate Risk**

** **

Of our total outstanding debt obligations as of December 31, 2008,31.7% of such debt bore interest at floating rates compared to 31.4% in 2007.

 

We manage interest rate risk by maintaining a mixtureof both variable and fixed rate debt. Additionally, we manage interest rate risk through the use of interestrate derivatives.  The above percentagesinclude the effect of interest rate derivatives (swaps or collars) that hedgepart of our debt.

 

The recorded values for accounting purposes of ourfinancial debt as of December 31, 2008, and the corresponding fairvalues of the significant financial instruments exposing us to interest raterisk are detailed below, according to the date of maturity.  Total values do not include interest ratederivatives.

 
| ** **                     | ** ** | **Contract Terms**                               | ** ** |
|--------------------------------|------------|-------------------------------------------------------|------------|
| **As of  December 31,**   | ** ** | **2009**                                              | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Fair  Value(1)** | ** ** |
| ** **                     | ** ** | **(in millions of constant Ch$)** | ** ** |
| **Long-term Debt**             | ** ** | ** **                                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Fixed rate:**                |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ch$- and UF-denominated        |       | 36,346                                                |       | 19,496 |   | 19,645 |   | 13,574 |   | 7,801 |   | 422,852 |   | 519,715 |   | 620,906 |   |
| Weighted average interest rate |       | 13.2                                                  | %          | 13.4 | % | 13.5 | % | 14.2 | % | 16.0 | % | 9.2 | % | 13.7 | % |   |   |
| $-denominated                  |       | 433,329                                               |       | 28,247 |   | 34,043 |   | 38,716 |   | 275,994 |   | 723,232 |   | 1,533,562 |   | 1,932,145 |   |
| Weighted average interest rate |       | 8.3                                                   | %          | 6.9 | % | 7.0 | % | 6.5 | % | 8.5 | % | 7.8 | % | 8.0 | % |   |   |
| Other currencies(2)            |       | 129,328                                               |       | 187,710 |   | 238,483 |   | 48,854 |   | 102,704 |   | 397,852 |   | 1,104,932 |   | 1,136,774 |   |
| Weighted average interest rate |       | 7.6                                                   | %          | 12.4 | % | 10.9 | % | 9.7 | % | 7.8 | % | 11.3 | % | 10.8 | % |   |   |
|                           |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Variable rate:**             |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ch$- and UF-denominated        |       | 13,284                                                |       | — |   | — |   | — |   | — |   | — |   | 13,284 |   | 13,284 |   |
| Weighted average interest rate |       | 15.2                                                  | %          | — |   | — |   | — |   | — |   | — |   | 15.2 | % | — |   |
| $-denominated                  |       | 199,680                                               |       | 208,170 |   | 182,021 |   | 63,328 |   | 12,900 |   | 173,174 |   | 839,274 |   | 839,159 |   |
| Weighted average interest rate |       | 3.8                                                   | %          | 4.7 | % | 4.7 | % | 5.7 | % | 5.0 | % | 4.4 | % | 4.5 | % | — |   |
| Other currencies(2)            |       | 352,322                                               |       | 105,633 |   | 174,457 |   | 256,607 |   | 41,595 |   | 7,765 |   | 938,379 |   | 942,905 |   |
| Weighted average interest rate |       | 13.1                                                  | %          | 13.8 | % | 13.2 | % | 13.0 | % | 13.0 | % | 11.0 | % | 13.1 | % | — |   |
|                           |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                          |       | 1,164,289                                             |       | 549,258 |   | 648,650 |   | 421,080 |   | 440,995 |   | 1,724,875 |   | 4,949,146 |   | 5,485,172 |   |

 

----

(1)   As of December 31, 2008,fair values were calculated based on the discounted value of future cash flowsexpected to be paid (or received), considering current discount rates thatreflect the different risks involved.

(2)          “Other currencies” includesthe Euro, the reais, the Colombian peso and the Peruvian sol, among others.

 

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By comparison, as of December 31, 2007, therecorded values for financial accounting purposes and the corresponding fairvalues of the significant financial instruments which expose the Company tointerest rate risk were as follows:

 

| ** **                            | ** ** | **Contract Terms**                               | ** ** |
|---------------------------------------|------------|-------------------------------------------------------|------------|
| **As of December 31,** | ** ** | **2008**                                              | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Fair Value(1)** | ** ** |
| ** **                            | ** ** | **(in millions of constant Ch$)** | ** ** |
| **Long-term  Debt**                   |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Fixed  rate:**                      |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ch$- and  UF-denominated              |       | 2,422                                                 |       | 2,425 |   | 6,506 |   | 6,612 |   | 6,723 |   | 197,692 |   | 222,380 |   | 237,354 |   |
| Weighted average  interest rate       |       | 5.3                                                   | %          | 5.3 | % | 5.3 | % | 5.2 | % | 5.2 | % | 5.2 | % | 5.3 | % | — |   |
| $-denominated                         |       | 246,633                                               |       | 337,500 |   | 22,028 |   | 29,505 |   | 28,741 |   | 758,026 |   | 1,422,434 |   | 1,819,835 |   |
| Weighted average  interest rate       |       | 7.7                                                   | %          | 7.8 | % | 7.8 | % | 7.8 | % | 7.8 | % | 7.9 | % | 7.7 | % |   |   |
| Other  currencies(2)                  |       | 73,716                                                |       | 107,077 |   | 100,653 |   | 192,754 |   | 44,828 |   | 360,760 |   | 879,789 |   | 963,421 |   |
| Weighted average  interest rate       |       | 6.0                                                   | %          | 6.0 | % | 6.3 | % | 6.4 | % | 6.2 | % | 6.0 | % | 6.0 | % | — |   |
|                                  |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Variable  rate:**                   |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ch$- and  UF-denominated              |       | —                                                |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Weighted average  interest rate       |       | —                                                |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| $-denominated                         |       | 48,573                                                |       | 238,861 |   | 77,209 |   | 105,876 |   | 31,298 |   | 18,946 |   | 520,763 |   | 418,817 |   |
| Weighted average  interest rate       |       | 6.9                                                   | %          | 6.9 | % | 7.3 | % | 7.4 | % | 8.0 | % | 7.5 | % | 6.9 | % | — |   |
| Other  currencies(2)                  |       | 245,455                                               |       | 141,799 |   | 150,504 |   | 153,594 |   | 228,120 |   | 35,865 |   | 955,338 |   | 848,848 |   |
| Weighted average  interest rate       |       | 13.1                                                  | %          | 12.9 | % | 12.3 | % | 11.5 | % | 11.1 | % | 11.7 | % | 13.1 | % | — |   |
| Total                                 |       | 616,799                                               |       | 827,662 |   | 356,901 |   | 488,341 |   | 339,711 |   | 1,371,289 |   | 4,000,703 |   | 4,288,275 |   |

 

----

(1)          As of December 31, 2007,fair values were calculated based on the discounted value of future cash flowsexpected to be paid (or received), considering current discount rates thatreflect the different risks involved.

(2)          “Other currencies” includesthe Euro, the reais, the Colombian peso and the Peruvian sol, among others.

 

**Foreign Currency Risk**

** **

We are exposed to foreign currency risk arising fromlong-term debt denominated in foreign currencies, the majority of which is indollar.  This risk is mitigated, as asubstantial portion of our revenues is linked to the dollar either directly orindirectly.  Additionally, we manage thisrisk through the use of dollar/UF exchange currency swaps and dollar/pesoforward foreign exchange contracts.  Asof December 31, 2008, Enersis’ total consolidated indebtednessreached $7.9 billion, which includes the effect of currency hedginginstruments.  From this amount,$3,091 million, or 39%, was denominated in dollars.  For the twelve-month period ended December 31, 2008,our revenues amounted to $10,579 million of which $661 million, or6%, were denominated in dollars, and $1,874 million, or 18%, were linkedin some way to the dollar.  In theaggregate, 24% of our revenues were either in dollars or correlated to suchcurrency through some form of indexation. On the other hand, the equivalent of $2,097 million was revenues inpesos, which represents 20% of our 2008 revenues.  The revenue figures discussed in this contextare all prior to consolidation adjustments.

 

Prior to our acquisition of a controlling interest inEndesa Chile, we did not manage foreign exchange rate risk.  This risk management became active in 1999due to the instability of the peso and the change in the trend in which the UFbegan to devaluate against the dollar. Moreover, during 2004, we changed our corporate currency risk policyfrom a pure accounting hedge to a cash flow hedge.  This policy takes the level of operatingincome of each country that is indexed to the United States dollar and seeks tohedge them with liabilities in the same currency.

 

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As of December 31, 2008, our currency risk policydetermines a maximum level of consolidated accounting mismatch.  We manage that accounting risk throughshort-term hedging instruments until the difference between assets and liabilitiesin dollars returns to levels below the maximum permitted.

 

Although the actual foreign currency exchange risk towhich we are exposed depends upon the fluctuation of foreign exchange rates inwhich monetary assets and liabilities are maintained as compared to the peso,for accounting purposes our results from operations are affected by variationsin the exchange rate between the dollar and the peso, due to the application ofBT 64.  For further detail, please see “Item5. Operating and Financial Review and Prospects — A. Operating results —Introduction — Technical Bulletin 64 (BT 64).

 

Foreign currency gains and losses are included in theresults from operations for the period together with price-level restatement.

 

As of December 31, 2008, the recorded valuesof our financial debt for accounting purposes and the corresponding fair valuesof the significant financial instruments exposing us to foreign currency riskare as follows, according to the date of maturity:

 
| ** **                                    | ** ** | **Contract Terms**                               | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------------|------------|
| **As of December 31,**         | ** ** | **2009**                                              | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **2013** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Fair  Value(1)** | ** ** |
| ** **                                    | ** ** | **(in millions of constant Ch$)** | ** ** |
| **Long-term  Debt**                           |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Fixed  rate:**                              |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ** **                                    |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $-denominated                                 |       | 433,329                                               |       | 28,247 |   | 34,043 |   | 38,716 |   | 275,994 |   | 723,232 |   | 1,533,562 |   | 1,932,145 |   |
|                                          |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other  currencies(2)                          |       | 129,328                                               |       | 187,710 |   | 238,483 |   | 48,854 |   | 102,704 |   | 820,704 |   | 1,527,784 |   | 1,136,774 |   |
| **Variable  rate:**                           |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ** **                                    |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $-denominated                                 |       | 199,680                                               |       | 208,170 |   | 182,021 |   | 63,328 |   | 12,900 |   | 173,174 |   | 839,274 |   | 839,159 |   |
|                                          |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other  currencies(2)                          |       | 352,322                                               |       | 105,633 |   | 174,457 |   | 256,607 |   | 41,595 |   | 7,765 |   | 938,379 |   | 942,905 |   |
| Other  instruments(3)                         |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $-denominated  assets                         |       | 291,793                                               |       | 107,446 |   | 2,156 |   | — |   | — |   | — |   | 401,395 |   | 291,793 |   |
| Assets in other  currencies(2)                |       | 2,281,280                                             |       | 85,575 |   | 31,273 |   | 14,268 |   | 14,347 |   | 58,882 |   | 2,485,625 |   | 2,281,280 |   |
| Forward contracts  (receive U.S.$/Pay Ch$)(1) |       | 5,119                                                 |       | — |   | — |   | — |   | — |   | — |   | 5,119 |   | -2.2 |   |
| Swap contracts  (receive U.S.$/Pay Ch$)       |       |                                                  |       |   |   |   |   |   |   |   |   | 381,870 |   | 381,870 |   | -143.2 |   |
| Other foreign  currency derivatives(2)        |       | 70,010                                                |       | 25,458 |   | 37,657 |   | 36,290 |   | 19,094 |   | 28,157 |   | 216,666 |   | -11.8 |   |

 

----

(1)   Calculated basedon the Observed Exchange Rate as of December 31, 2008, which wasCh$636,45 = $1.00.  Fair values werecalculated based on the discounted value of future cash flows expected to paid(or received), considering current discount rates that reflect the differentrisks involved.

(2)          “Other currencies” includesthe Euro, reais, the Colombian pesos, Peruvian soles, Argentine and Chileanpesos.

(3)          “Other instruments” includecash, time deposits and short-term accounts receivables.  See note 29 to financial statements.

 

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As of December 31, 2007, the recorded valuesof our financial debt for accounting purposes and the corresponding fair valuesof the significant financial instruments exposing us to foreign currency riskare as follows, according to the date of maturity:

 

| ** **                                    | ** ** | **Contract Terms**                               | ** ** |
|-----------------------------------------------|------------|-------------------------------------------------------|------------|
| **As of December 31,**         | ** ** | **2008**                                              | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Fair Value(1)** | ** ** |
| ** **                                    | ** ** | **(in millions of constant Ch$)** | ** ** |
| **Long-term  Debt**                           |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Fixed  rate:**                              |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $-denominated                                 |       | 246,633                                               |       | 337,500 |   | 22,028 |   | 29,505 |   | 28,741 |   | 758,026 |   | 1,422,434 |   | 1,819,835 |   |
| Other  currencies(2)                          |       | 73,716                                                |       | 107,077 |   | 100,653 |   | 192,754 |   | 44,828 |   | 360,760 |   | 879,789 |   | 963,421 |   |
| **Variable  rate:**                           |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $-denominated                                 |       | 48,573                                                |       | 238,861 |   | 77,209 |   | 105,876 |   | 31,298 |   | 18,946 |   | 520,763 |   | 418,817 |   |
| Other  currencies(2)                          |       | 245,455                                               |       | 141,799 |   | 150,504 |   | 153,594 |   | 228,120 |   | 35,865 |   | 955,338 |   | 848,848 |   |
| Other  instruments(3)                         |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $-denominated  assets                         |       | 229,891                                               |       | — |   | — |   | — |   | — |   | — |   | 229,891 |   | 229,891 |   |
| Assets in other  currencies(2)                |       | 1,594,747                                             |       | 58,847 |   | 31,175 |   | 16,668 |   | 12,812 |   | 76,662 |   | 1,790,911 |   | 1,790,911 |   |
| Forward contracts  (receive U.S.$/Pay Ch$)(1) |       | —                                                |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Swap contracts  (receive U.S.$/Pay Ch$)       |       | 62,111                                                |       |   |   |   |   |   |   |   |   | 298,134 |   | 360,245 |   | -196,730 |   |
| Other foreign  currency derivatives(2)        |       | 79,442                                                |       | 54,658 |   | 19,876 |   | 7,453 |   | 62,492 |   | 34,695 |   | 258,616 |   | -18,989 |   |

 

----

(1)   Calculated basedon the Observed Exchange Rate as of December 31, 2007, which wasCh$496.89 = $1.00.  Fair values werecalculated based on the discounted value of future cash flows expected to paid(or received), considering current discount rates that reflect the differentrisks involved.

(2)          “Other currencies” includesthe Euro, reais, the Colombian pesos, Peruvian soles, Argentine and Chileanpesos.

(3)          “Other instruments” includecash, time deposits and short-term accounts receivables.  See note 29 to financial statements.

 

**11.D       Safe Harbor**

** **

The information inthis “Item 11.  Quantitative andQualitative Disclosures About Market Risk,” contains information that mayconstitute forward-looking statements. See “Forward-Looking Statements” in the Introduction of this report, forsafe harbor provisions.

 

**Item 12. Description of Securities Other Than EquitySecurities**

** **

**A.            Debt Securities.**

** **

Not applicable.

 

**B.            Warrants and Rights.**

** **

Not applicable.

 

**C.            Other Securities.**

** **

Not applicable.

 

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** **

**D.            AmericanDepositary Shares.**

** **

Not applicable.

 

**PART II**

** **

**Item 13.           Defaults, Dividend Arrearages andDelinquencies**

** **

None.

 

**Item 14.           Material Modifications to the Rightsof Security Holders and Use of Proceeds**

** **

None.

 

**Item 15.           Controls and Procedures**

** **

**(a) Disclosure Controls and Procedures**

** **

The Company carried outan evaluation under the supervision and with the participation of the Company’sManagement, including the Chief Executive Officer and Chief Financial Officer,of the effectiveness of the design and operation of the Company’s “disclosurecontrols and procedures” (as defined in Rules 13 (a) - 15 (e) and15 (d) - 15 (e) under the Exchange Act) for the year ended December 31,2008.

 

There are inherentlimitations to the effectiveness of any system of disclosure controls andprocedures, including the possibility of human error, and the circumvention oroverriding of the controls and procedures. Accordingly, the Company’sdisclosure controls and procedures are designed to provide reasonable assuranceof achieving their control objectives.

 

Based upon the Company’sevaluation, the Chief Executive Officer and the Chief Financial Officerconcluded that the disclosure controls and procedures are effective inproviding reasonable assurance that information required to be disclosed in thereports the Company files and submits under the Exchange Act is recorded,processed, summarized and reported, within the time periods specified in theapplicable rules and forms, and that it is gathered and communicated tothe Company’s Management, including the Chief Executive Officer and ChiefFinancial Officer, as appropriate, to allow timely decisions regarding requireddisclosure.

 

**(b) ****Management’s Annual Report onInternal Control Over Financial Reporting**

 

As required by Section 404of the Sarbanes-Oxley Act of 2002, Enersis’ Management is responsible forestablishing and maintaining “adequate internal control over financial reporting”(as defined in Rule 13 (a)-15 (f) under the ExchangeAct).  The Company’s internal controlover financial reporting is designed to provide reasonable assurance regardingthe reliability of financial reporting and the preparation of the financial statementsfor external purposes in accordance with accounting principles generallyaccepted.

 

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Because of its inherentlimitations, internal control over financial reporting may not necessarilyprevent or detect some misstatements.  Itcan only provide reasonable assurance regarding financial statement preparationand presentation.  Also, projections ofany evaluation of effectiveness for future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions or because thedegree of compliance with the policies or procedures may deteriorate over time.

 

Management assessed theeffectiveness of its internal control over financial reporting for the yearended December 31, 2008.  Theassessment was based on criteria established in the framework “InternalControls — Integrated Framework” issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO).  Based on the assessment, Enersis’ Managementhas concluded that as of December 31, 2008, the Company’s internal controlover financial reporting was effective.

 

**(c) Attestation Report**

** **

Deloitte Auditores yConsultores Ltda., the independent registered accounting firm that has auditedour Consolidated Financial Statements, has issued an attestation report on thecompany’s internal control over financial reporting as of December 31,2008.  This attestation report appears onpage F-3.

 

**(d) Changesin internal control**

** **

There were no changes inthe Company’s internal control over financial reporting that occurred during2008 that have materially affected, or are reasonably likely to materiallyaffect, the Company’s internal control over financial reporting.

 

**Item 16.           [Reserved]**

 

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**Item 16A.        Audit Committee Financial Expert**

** **

On April 12, 2008, the Board of Directorsdetermined that Patricio Claro is an audit committee financial expert asdefined under Item 16A of Form 20-F, is serving on the audit committee andis an independent member of the Audit Committee.

 

**Item 16B.        Code of Ethics**

** **

The standards of ethical conduct at Enersis arecurrently governed by means of three corporate rulings or policies: the CharterGoverning Executives (*Estatuto del Directivo*)the Internal Regulations on Conduct in Securities Markets and the *“Manual de Manejo de Información de Interés para el Mercado”*.

 

The Charter Governing Executives, approved as acorporate statute, was adopted by the Board of Directors in May 2003 andis applicable to all managers contractually related to Enersis, including theChief Executive Officer, the Chief Financial Officer and other senior officersof the Company, and to all senior management controlled subsidiaries in whichEnersis is the majority shareholder, both in Chile and internationally.  The objective of this statute is to establishstandards for the governance of our management’s actions.

 

The Internal Regulations on Conduct in SecuritiesMarkets, adopted by Enersis’ Board of Directors in January 2002, sets thecriteria to be followed in market operations in order to make our behavior inthe market more transparent and to protect market investors.  It is applicable to members of the Board ofDirectors, the senior executives and the executives and employees of Enersisdetermined by the Chief Executive Officer, and known to the Chairman, who workin areas related to the securities market or have access to privilegedinformation.

 

The *Manual de Manejo deInformación de Interés para el Mercado,* was adopted by Enersis’Board of Directors in May 2008 and addresses the following issues:  applicable standards to the information oftransactions of the Company’s securities or those of its affiliates bydirectors, principal executives and other related parties; existence ofblackout periods for such transactions by directors, principal executives andother related parties; existence of mechanisms for the continuous revelation ofinformation that is of interest to the market; and mechanisms that provideprotection for confidential information..

 

A copy of these documents is also available uponrequest, free of charge, by writing or telephoning us at:

 

Investor Relations Department Enersis S.A. Santa Rosa 76Santiago, Chile(56-2) 353-4682

 

During fiscal year 2008, there have been no amendmentsto any provisions of the Charter Governing Executives, the Internal Regulationson Conduct in Securities Markets or the *Manual de Manejo deInformación de Interés para el Mercado*.

 

No waivers from any provisions of the CharterGoverning Executives, the Internal Regulations on Conduct in Securities Marketsor the *Manual de Manejo de Información de Interés para elMercado,* were expressly or implicitly granted to the Chief ExecutiveOfficer, the Chief Financial Officer or any other senior financial officer ofthe Company in fiscal year 2008.

 

**Item 16C.Principal Accountant Fees and Services**

 

The following tableprovides information on the aggregate fees billed by our principal accountants,Deloitte Auditores y Consultores Ltda., as well as the other member firms ofDeloitte Touche Tohmatsu and 

 

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their respectiveaffiliates (including Deloitte Consulting) by type of service rendered forperiods indicated.

 
| **Services Rendered** | ** ** | **2007**                      | ** ** | **2008** | ** ** |
|----------------------------|------------|-------------------------------|------------|----------|------------|
| ** **                 | ** ** | **(millions of $)** | ** ** |
| Audit Fees                 |       | 3.3                           |       | 2.9      |       |
| Audit-Related  Fees (1)    |       | —                        |       | 0.2      |       |
| Tax Fees(2)                |       | 0.3                           |       | 0.1      |       |
| All Other Fees             |       | —                        |       | —   |       |
| **Total**                  | ** ** | **3.6**                       | ** ** | **3.2**  | ** ** |

 

----

(1) Figurefor 2008 includes mainly fees paid for due diligence works in Chile for $ 85,535and, special requirement of the Chilean regulator for $ 48,593

(2) During2008, fees were paid for special requirement of the SVS for $ 48,593,primarily related with IFRS adoption. During 2007, fees were paid for duediligence works in Colombia for $ 36,000.

 

The amounts included inthe table above and the related footnotes have been classified in accordancewith Public Company Accounting Oversight Board (PCAOB) guidance, which aredifferent in certain respects from the classifications made under our consolidatedfinancial statements prepared for our parent company, Endesa Spain, inaccordance with IFRS.

 

*Auditcommittee Pre-Approval Policies and Procedures*

 

Enersis’ externalauditors are appointed by its shareholders at the annual shareholders’ meeting.Similarly, the shareholders of our subsidiaries located in countries whereapplicable law and regulation so establishes, appoint their own externalauditors. Enersis’ Audit Committee submits a proposal to the Board of Directorsand to the Shareholder Meeting for the appointment of its external auditors.

 

The Audit Committeemanages appointment proposals, review of engagement letters, fee negotiations,quality control in respect of the services provided, review and control ofindependence issues and other related matters.

 

The Audit Committee has apre-approval policy regarding the contracting of Enersis’ external auditor, orany affiliate of the external auditor, for professional services. Since July 2005,all professional services including audit and non-audit services provided toEnersis or any of our subsidiaries are subject to such policy.

 

Fees payable inconnection with recurring audit services are pre-approved by the AuditCommittee and then approved as part of our annual budget. Fees payable in connectionwith non-recurring audit services, once they have been analyzed by thecorporative audit department, are submitted to the Audit Committee for itspre-approval or denial.

 

The pre-approval policyestablished by the Audit Committee for non-audit services is as follows:

 
| · |   | The business unit that  has requested the service and the audit firm requested to perform the service  must request that the corporate audit manager review the nature of the  service to be provided.                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · |   | At that point, the  corporate audit department analyzes the request and requires the audit firm  that has been requested to provide the service to issue a certificate signed  by the partner responsible for the audit of our consolidated financial  statements confirming such audit firm’s independence. |
| · |   | Finally, the proposal  is submitted to the Audit Committee for approval or denial.                                                                                                                                                                                                                                |

 

All services described infootnote (1) to the table above were approved in line with the proceduredescribed immediately above.

 

In addition, due to theSEC-PCAOB release number 34-53677 (Audit Committee Pre-Approval of Certain TaxServices), the Audit Committee has designed, approved and implemented thenecessary procedures to fulfill the new requirements described by this rule.

 

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**Item 16D.**                        Exemptions from Listing Requirements forAudit Committees

** **

Not applicable.

 

**Item 16E.**                          Purchases of Equity Securities by theIssuer and Affiliated Purchasers

** **

Neither Enersis nor any affiliated purchaser acquiredany shares of Enersis during 2008.

 

**Item 16F.**                          Change in Registrant’s CertifyingAccountants

** **

Not applicable.

 

**Item 16G.**                        Corporate Governance

** **

The following is a summary of the significantdifferences between our corporate governance practices and those applicable todomestic issuers under the corporate governance rules of the New YorkStock Exchange.  Because we are a “controlledcompany” under NYSE rules (a company of which more than 50% of the votingpower is held by an individual, a group or another company), we would not, werewe to be a U.S. company, be subject to the requirement that we have a majorityof independent directors, or nomination and compensation committees.

 

***Independence and Functions of theAudit Committee***

*** ***

Under the NYSE corporate governance rules, all membersof the Audit Committee must be independent. We are subject to this requirement as of July 31, 2005.

 

Under the NYSE corporate governance rules, the auditcommittee of a U.S. company must perform the functions detailed in, andotherwise comply with the requirements of NYSE Listed Company Manual Rules 303A.06and 303A.07.  Non-U.S. companies havebeen required to comply with Rule 303A.06 beginning July 31, 2005, butare not required to comply with Rule 303A.07.  We do not currently comply with Rule 303A.07,but as of July 31, 2005, we did comply with the independence and thefunctional requirements of Rule 303A.06. As required by the Sarbanes-Oxley Act and the NYSE corporate governancerules, on June 29, 2005, the Board of Directors of Enersis created anAudit Committee.  The current members ofthis Committee, who satisfy the requirements of independence of NYSE, are: Messrs. JuanEduardo Errázuriz, Patricio Claro and Hernán Somerville. As required by ChileanLaw, Enersis also has a Directors’Committee composed of three directors. Although Chilean Law requires that the majority of the Directors’ Committee (two out ofthree members) be composed of directors who were not nominated by the votes ofthe controlling shareholder or, if excluding the votes from the controllingshareholders would have been elected nevertheless (a “non-control director”),it permits the Directors’ Committee tobe composed of a majority or even a unanimity of control directors, if thereare not sufficient non-control directors on the Board to serve on thecommittee.  Currently, our Directors’ Committee is composed ofone non-control director and two directors nominated with the votes of the controllingshareholder.

 

Our Directors’ Committee performs the followingfunctions:

 

·             examinationof Annual Report, Financial Statements and the Reports of the External Auditorsand Inspectors of the Accounts;

 

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·             formulationof the proposal to the Board of Directors for the selection of externalauditors and private rating agencies;

 

·             examinationof information related to operations by the Company with related parties and/orrelated to operations in which the Company board members or relevant executiveofficers may have personal interest;

 

·             examinationof the compensation framework and plans for managers and executive officers;and

 

·             anyother function mandated to the committee by the bylaws, the Board of Directors or the shareholders of theCompany.

 

Pablo Yrarrázaval, Chairman of the Board, has alsoserved as chairman of this committee since July 31, 2002.  The other members are Hernán Somerville andPatricio Claro.

 

The Audit Committee is composed of three independentmembers who also serve as directors of the Company.  It performs the following functions:

 

·             submitsa proposal for the appointment and compensation of independent auditors at GSM;

 

·             overseesthe work of independent auditors;

 

·             pre-approvesaudit and non-audit services provided by the independent auditors; and

 

·             establishesprocedures for receiving and dealing with complaints regarding accounting,internal control and auditing matters.

 

***CorporateGovernance Guidelines***

*** ***

The NYSE’s corporate governance rules requireU.S.-listed companies to adopt and disclose corporate governanceguidelines.  Although Chilean law doesnot contemplate this practice (except for the Manual), the Company has adoptedthe codes of conduct described above, and its GSM held on March 2006,approved the inclusion of articles in its bylaws that govern the creation,composition, attributions, functions and retribution of the Directors’Committee and the Audit Committee.

 

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**PART III**

** **

**Item 17.                 FinancialStatements**

** **

None.

** **

**Item 18.                 FinancialStatements**

** **

Since October 10, 2007,the Italian energy company, Enel SpA (“Enel”), and the Spanishconstruction company, ACCIONA, S.A. (“Acciona”), jointly hold 92.06% ofthe share capital of Endesa, S.A. (“Endesa Spain”).  As of the date of this Report, Endesa Spain ownsa 60.6% beneficial interest in Enersis, which is a Chilean publicly heldlimited liability stock company with subsidiaries engaged primarily in thegeneration, transmission and distribution of electricity in Chile, Argentina,Brazil, Colombia and Peru.

 

On February 20, 2009,Acciona and Enel announced that they had reached an agreement through whichAcciona, directly and indirectly, will transfer to Enel Energy Group Srl, awholly-owned Enel subsidiary, 25.01% of Endesa Spain’s share capital.  The transfer is subject to legalauthorizations and the approval by relevant authorities.  As a result, Enel Energy Group Srl will hold92.06% of Endesa Spain’s share capital. Enel’s 25.01% additional stake in Endesa Spain will be exchanged forapproximately € 11.1 billion in cash, as well as wind andhydroelectric assets located in Spain and Portugal which are valued atapproximately € 2.9 billion. The transfer of shares and assets is expected to take place by August 31, 2009.When the transaction is completed, Enel will hold a 55.8% beneficial interestin Enersis.

 

**ENERSIS S.A. and Subsidiaries**

** **

**Index to the Audited Consolidated Financial Statements**

** **
| **Report of Independent Accountants:**                                                                                               | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|
| Report of  Deloitte Auditores y Consultores Ltda. Independent Registered Accounting                                                  |       |
| Firm -  ENERSIS S.A. 2006, 2007 and 2008                                                                                             | F-1        |
| Report of  Deloitte Auditores y Consultores Ltda. Independent Registered Accounting                                                  |       |
| Firm -  ENERSIS S.A. Internal Control over Financial Reporting as of  December 31, 2008                                         | F-3        |
| Report of KPMG. - Endesa Chile 2008                                                                                                  | F-5        |
| Report of KPMG - Endesa Chile - Internal Control over  Financial Reporting as of December 31, 2008                              | F-7        |
| Report of Ernst & Young Ltda — Endesa Chile  2006 and 2007                                                             | F-9        |
| Report of Deloitte & Touche Ltda. — Emgesa  S.A. E.S.P. 2006, 2007 and 2008                                            | F-10       |
| Report of  Deloitte & Touche Co. S.R.L. — Endesa Argentina 2006 and 2007                                               | F-11       |
| Report of  Deloitte Auditores y Consultores Ltda. - Endesa Brasil S.A. 2006, 2007 and  2008                                          | F-12       |
| Report of  Ernst & Young Auditores Independentes S.S.- Centrais Elétricas  Cachoeira Dourada S.A. 2006 and 2007        | F-13       |
| Report of  Ernst & Young Auditores Independentes S.S.- Central Geradora  Termelétrica Fortaleza S.A. 2006 and 2007     | F-14       |
| Report of  Ernst & Young Auditores Independentes S.S.- CIEN - Companhia de  Interconexão Energética 2006 and 2007 | F-15       |
| Report of  Deloitte & Touche Co. S.R.L. - Transportadora de Energía S.A. 2006  and 2007                                | F-17       |
| Report of  Deloitte & Touche Co. S.R.L. - Compañía de Transmisión del Mercosur  S.A. 2006,and 2007           | F-18       |
| Report of KPMG. — Edesur S.A. 2008                                                                                              | F-19       |
|                                                                                                                                 |       |
| **Consolidated Financial Statements:**                                                                                               | ** ** |
| Consolidated  Balance Sheets as of December 31, 2007 and 2008                                                                   | F-20       |
| Consolidated  Statements of Income for the years ended December 31, 2006, 2007 and  2008                                        | F-22       |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2006, 2007 and  2008                                    | F-23       |
| Consolidated  Statements of Changes in Shareholder’s Equity for the years ended  December 31, 2006, 2007 and 2008          | F-24       |
| Notes to  the Consolidated Financial Statements                                                                                      | F-25       |
|                                                                                                                                 |       |
| SCHEDULE I Financial Statements of  Enersis Parent Company                                                                           | F-181      |

 

**Item 19.**                 Exhibits

 
| **Exhibit** | ** ** | **Description**                                                                                                                  |
|-------------|------------|----------------------------------------------------------------------------------------------------------------------------------|
| 1.1         |       | By-laws (Estatutos) of Enersis, as amended.*                                                                                     |
| 1.2         |       | By-laws (Estatutos) of ENERSIS S.A., as amended  (English translation).*                                                         |
| 4.1         |       | Assignment of Rights Contract, dated  January 27, 2004, between Endesa Internacional S.A. and Enersis (Spanish  version).** |
| 4.2         |       | Assignment of Rights Contract, dated  January 27, 2004, between Endesa Internacional S.A. and                               |

 

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| **Exhibit** | ** ** | **Description**                                                                                                               |
|-------------|------------|-------------------------------------------------------------------------------------------------------------------------------|
|        |       | Enersis (English version).**                                                                                                  |
| 8.1         |       | List of Subsidiaries as of December 31, 2008.                                                                            |
| 12.1        |       | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act.                             |
| 12.2        |       | Certification of Chief Financial Officer pursuant to  Section 302 of the Sarbanes-Oxley Act.                             |
| 13.1        |       | Certification of Chief Executive Officer and Chief  Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act. |

 

----

*                 Incorporated by reference to EnersisReport on Form 20-F for the year ended December 31, 2006 filed withthe Securities and Exchange Commission on May 14, 2007.

 

**          Incorporated by reference to EnersisReport on Form 20-F for the year ended December 31, 2004 filed withthe Securities and Exchange Commission on June 10, 2005.

 

Wewill furnish to the Securities and Exchange Commission, upon request, copies ofany unfiled instruments that define the rights of holders of long-term debt ofEnersis.

 

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**SIGNATURES**

** **

Theregistrant certifies that it meets all of the requirements for filing on Form 20-Fand that it has duly caused and authorized the undersigned to sign this Reporton its behalf.

 

Date:  June 8, 2009

 
| ** ** | **ENERSIS  S.A.** |
|------------|-------------------|
| ** ** | ** **        |
| ** ** | ** **        |
|       | By:               | /s/ Ignacio Antoñanzas  A. |
|       |              | Name:   Ignacio A. Antoñanzas A. |
|       |              | Title:     Chief Executive Officer |

 

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**ENERSIS S.A. and Subsidiaries**

 

**Index to the Audited Consolidated Financial Statements**

 
| **Report of Independent Accountants:**                                                                                              | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------|------------|
| Report of  Deloitte Auditores y Consultores Ltda. Independent Registered Accounting                                                 |       |
| Firm -  ENERSIS S.A. 2006, 2007 and 2008                                                                                            | F-1        |
| Report of  Deloitte Auditores y Consultores Ltda. Independent Registered Accounting                                                 |       |
| Firm - ENERSIS  S.A. Internal Control over Financial Reporting as of December 31, 2008                                         | F-3        |
| Report of KPMG. - Endesa Chile 2008                                                                                                 | F-5        |
| Report of KPMG - Endesa Chile - Internal Control over  Financial Reporting as of December 31, 2008                             | F-7        |
| Report of Ernst & Young Ltda — Endesa Chile  2006 and 2007                                                            | F-9        |
| Report of Deloitte & Touche Ltda. — Emgesa  S.A. E.S.P. 2006, 2007 and 2008                                           | F-10       |
| Report of Deloitte & Touche Co. S.R.L. —  Endesa Argentina 2006 and 2007                                              | F-11       |
| Report of Deloitte Auditores y Consultores Ltda. -  Endesa Brasil S.A. 2006, 2007 and 2008                                          | F-12       |
| Report of Ernst & Young Auditores  Independentes S.S.- Centrais Elétricas Cachoeira Dourada S.A. 2006 and 2007        | F-13       |
| Report of Ernst & Young Auditores  Independentes S.S.- Central Geradora Termelétrica Fortaleza S.A. 2006 and  2007    | F-14       |
| Report of Ernst & Young Auditores  Independentes S.S.- CIEN - Companhia de Interconexão Energética 2006 and 2007 | F-15       |
| Report of Deloitte & Touche Co. S.R.L. -  Transportadora de Energía S.A. 2006 and 2007                                | F-17       |
| Report of  Deloitte & Touche Co. S.R.L. - Compañía de Transmisión del Mercosur  S.A. 2006,and 2007          | F-18       |
| Report of KPMG. — Edesur S.A. 2008                                                                                             | F-19       |
|                                                                                                                                |       |
| **Consolidated Financial Statements:**                                                                                              | ** ** |
| Consolidated Balance Sheets as of December 31,  2007 and 2008                                                                  | F-20       |
| Consolidated  Statements of Income for the years ended December 31, 2006, 2007 and  2008                                       | F-22       |
| Consolidated  Statements of Cash Flows for the years ended December 31, 2006, 2007 and  2008                                   | F-23       |
| Consolidated  Statements of Changes in Shareholder’s Equity for the years ended  December 31, 2006, 2007 and 2008         | F-24       |
| Notes to the Consolidated Financial Statements                                                                                      | F-25       |
|                                                                                                                                |       |
| SCHEDULE I  Financial Statements of Enersis Parent Company                                                                          | F-181      |

 
| Ch$   |   | Chilean pesos                                                                                                                                                            |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| US$   |   | United States dollars                                                                                                                                                    |
| UF    |   | The UF is a Chilean inflation-indexed, peso-denominated monetary unit  that is set daily in advance based on the previous month’s inflation rate  (See Note 2 (c)). |
| ThCh$ |   | Thousand of Chilean pesos                                                                                                                                                |
| ThUS$ |   | Thousand of United States dollars                                                                                                                                        |

 

**Application of ConstantChilean Pesos**

 

Theconsolidated financial statements included herein have been restated forgeneral price-level changes and expressed in constant Chilean pesos of December 31,2008 purchasing power.

 

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|   | Deloitte  Auditores y Consultores Ltda. |
|--------|-----------------------------------------|
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|   | Av.  Providencia 1760                   |
|   | Pisos  6, 7, 8, 9 y 13                  |
|   | Providencia,  Santiago                  |
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|   | www.deloitte.cl                         |

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

Tothe Board of Directors and Stockholders of

**Enersis S. A.:**

 

Wehave audited the accompanying consolidated balance sheets of Enersis S.A. andsubsidiaries (the “Company”) as of December 31, 2007 and 2008, and therelated consolidated statements of operations, changes in shareholders’ equityand cash flows for each of the three years in the period ended December 31,2008 (expressed in constant Chilean pesos). These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits. We did not audit thefinancial statements of Empresa Nacional de Electricidad S.A., certain of itsconsolidated subsidiaries and certain of its equity method investees (hereinaftercollectively referred to as “Endesa-Chile”), which statements reflect totalassets constituting 36.78% and 34.60% of consolidated total assets at December 31,2007 and 2008, respectively, and total revenues constituting 23.04%, 33.05% and30.05% of consolidated total revenues for the years ended December 31, 2006,2007 and 2008, respectively, and Empresa Distribuidora Sur, S.A. (“Edesur”) asof and for the year ended December 31, 2008, which statements reflecttotal assets constituting 5.84% of consolidated total assets at December 31,2008, and total revenues constituting 6.26% of consolidated total revenues forthe year ended December 31, 2008. With respect to the consolidatedshareholders’ equity and net income information stated on the basis ofaccounting principles generally accepted in the United States of America (“U.S.GAAP”) in Note 37, the financial statements of Endesa-Chile’s reflect 16.88% and17.99% of the Enersis consolidated U.S. GAAP adjustments to shareholders’equity at December 31, 2007 and 2008, respectively, and 7.00%, 6.88% and21.46% of the Enersis consolidated U.S. GAAP adjustments to net income for theyears ended December 31, 2006, 2007 and 2008, respectively, while thefinancial statements of Edesur reflect 0.09% of the Enersis consolidated U.S. GAAPadjustments to shareholders’ equity at December 31, 2008, and 0.13% of theEnersis consolidated U.S. GAAP adjustments to net income for the year ended December 31,2008. Those statements were audited by other auditors whose reports have beenfurnished to us and our opinion, insofar as it relates to the amounts includedfor Endesa-Chile and Edesur, is based solely on the reports of the otherauditors.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States of America). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudits and the reports of the other auditors provide a reasonable basis for ouropinion.

 

Inour opinion, based on our audits and the reports of the other auditors, suchconsolidated financial statements present fairly, in all material respects, thefinancial position of Enersis S.A. and subsidiaries as of December 31, 2007and 2008, and the results of their operations, changes in shareholders’ equityand cash flows for each of the three years in the period ended December 31,2008, in conformity with accounting principles generally accepted in Chile.

 
|   | Una  firma miembro de

**Deloitte  Touche Tohmatsu** |
|--------|------------------------------------------------------|

 

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Accountingprinciples generally accepted in Chile vary in certain significant respectsfrom accounting principles generally accepted in the United States of America. Theapplication of the latter would have affected the determination of net incomefor each of the three years in the period ended December 31, 2008, and thedetermination of shareholders’ equity as of December 31, 2007 and 2008, tothe extent summarized in Note 37 to the consolidated financial statements.

 

Asdiscussed in Note 36 to the consolidated financial statements, the Companyadopted International Financial Reporting Standards (“IFRS”), effective January 1,2009.

 

Ouraudits also comprehended the translation of constant Chilean Peso amounts intoU.S. dollar amounts and, in our opinion, such translation has been made inconformity with the basis stated in Note 2 (c). Such U.S. dollar amounts arepresented solely for the convenience of readers in the United States ofAmerica.

 

Wehave also audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States of America), the Company’s internalcontrol over financial reporting as of December 31, 2008, based on thecriteria established in Internal Control—Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission and our reportdated May 29, 2009, expressed an unqualified opinion on the effectivenessof the Company’s internal control over financial reporting based on our auditand the report of the other auditors.

 

 

Santiago,Chile 

May 29,2009

 

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|   | Deloitte  Auditores y Consultores Ltda. |
|--------|-----------------------------------------|
|   | RUT:  80.276.200-3                      |
|   | Av.  Providencia 1760                   |
|   | Pisos  6, 7, 8, 9 y 13                  |
|   | Providencia,  Santiago                  |
|   | Chile                                   |
|   | Fono:  (56-2) 729 7000                  |
|   | Fax:  (56-2) 374 9177                   |
|   | e-mail:  deloittechile@deloitte.com     |
|   | www.deloitte.cl                         |

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

Tothe Board of Directors and Stockholders of 

**Enersis S.A.:**

 

Wehave audited the internal control over financial reporting of Enersis S.A. andsubsidiaries (the “Company”) as of December 31, 2008, based on criteriaestablished in Internal Control — Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission. The Company’s managementis responsible for maintaining effective internal control over financialreporting and for its assessment of the effectiveness of internal control overfinancial reporting, included in the accompanying Management’s Annual Report onInternal Control Over Financial Reporting. Our responsibility is to express anopinion on the Company’s internal control over financial reporting based on ouraudit. We did not examine the effectiveness of internal control over financialreporting of Empresa Nacional de Electricidad S.A. and certain subsidiaries (collectivelyhereinafter referred to as “Endesa-Chile”), whose financial statements reflecttotal assets and revenues constituting 34.60% and 30.05% percent, respectively,of the related consolidated financial statement amounts as of and for the yearended December 31, 2008. The effectiveness of Endesa-Chile’s internalcontrol over financial reporting was audited by other auditors whose report hasbeen furnished to us, and our opinion, insofar as it relates to the effectivenessof Endesa-Chile’s internal control over financial reporting, is based solely onthe report of the other auditors.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States of America). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internalcontrol over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk, and performing such otherprocedures as we considered necessary in the circumstances. We believe that ouraudit provides a reasonable basis for our opinion.

 

Acompany’s internal control over financial reporting is a process designed by, orunder the supervision of, the company’s principal executive and principalfinancial officers, or persons performing similar functions, and effected bythe company’s board of directors, management, and other personnel to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertainto the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

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Becauseof the inherent limitations of internal control over financial reporting, includingthe possibility of collusion or improper management override of controls, materialmisstatements due to error or fraud may not be prevented or detected on atimely basis. Also, projections of any evaluation of the effectiveness of theinternal control over financial reporting to future periods are subject to therisk that the controls may become inadequate because of changes in conditions, orthat the degree of compliance with the policies or procedures may deteriorate. 

 

Inour opinion, based on our audit and the report of the other auditors, theCompany maintained, in all material respects, effective internal control overfinancial reporting as of December 31, 2008, based on the criteriaestablished in Internal Control — Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission.

 

Wehave also audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States of America), the consolidatedfinancial statements as of and for the year ended December 31, 2008 of theCompany and our report dated May 29, 2009 expressed an unqualified opinionon those financial statements based on our audit and the report of the otherauditors.

 

 

Santiago,Chile

May 29,2009

 

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|        |                                         |            | ** **            |
|--------|----------------------------------------------|-----------------|-----------------------|
|   | **KPMG  Consultores Auditores Ltda.**        | Phone           | +56 (2) 798 1000 |
|   | 3520 Isidora Goyenechea Av.,  2nd floor | Fax             | +56 (2) 798 1001 |
|   | Las Condes, Santiago, Chile                  | **www.kpmg.cl** |

 

**Report of Independent RegisteredPublic Accounting Firm**

 

The Board of Directors andShareholders of

Empresa Nacional deElectricidad S.A.(Endesa-Chile):

 

We have audited theaccompanying consolidated balance sheet of Endesa-Chile and subsidiaries (theCompany) as of December 31, 2008, and the related consolidated statements ofincome, shareholders’ equity, and cash flows for the year then ended. Theseconsolidated financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audit. We did not audit the consolidatedfinancial statements of certain subsidiaries and nonsubsidiary investeescarried on the equity method of accounting, which statements reflect totalassets constituting 30.25 percent and total revenues constituting 24.46 percentof the Company’s related 2008 consolidated totals. Those financial statementswere audited by other auditors whose reports were furnished to us, and our opinion,insofar as it relates to the amounts included for those entities, is basedsolely on the reports of the other auditors.

 

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audit and the reports of the other auditors provide a reasonable basisfor our opinion.

 

In our opinion, based on ouraudit and the reports of the other auditors, the consolidated financialstatements referred to above present fairly, in all material respects, thefinancial position of Endesa-Chile and subsidiaries as of December 31, 2008, andthe results of their operations and their cash flows for the year then ended, inconformity with accounting principles generally accepted in Chile.

 

Accounting principlesgenerally accepted in Chile vary in certain significant respects fromaccounting principles generally accepted in the United States of America. Informationrelating to the nature and effect of such differences is presented in Note 36to the accompanying consolidated financial statements.

 

The accompanying consolidatedfinancial statements as of and for the year ended December 31, 2008 have beentranslated into United States dollars solely for the convenience of the reader.We have audited the translation and, in our opinion, the consolidated financialstatements expressed in thousands of Chilean pesos, as restated for generalprice-level changes, have been translated into United States dollars on thebasis set forth in note 2 b) of the notes to the consolidated financialstatements.

 

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As discussed in Note 35 tothe accompanying consolidated financial statements, the Company adoptedInternational Financial Reporting Standards (IFRS), effective January 1, 2009.

 

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), Endesa-Chile’s internal control over financial reporting as ofDecember 31, 2008, based on the criteria established in Internal Control – IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO), and our report dated May 29, 2009, expressed anunqualified opinion on the effectiveness of the Company’s internal control overfinancial reporting.

 

 

**KPMGAuditores Consultores Ltda.**

 

Santiago,Chile

May 29,2009

 

KPMG Auditores Consultores Ltda. a Chilean member firm of KPMGInternational, a Swiss cooperative. All rights reserved.

 

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|            | ** **                                  |            |                        |
|------------|---------------------------------------------|-----------------|-----------------------------|
| ** ** | **KPMG Consultores Auditores Ltda.**        |            |                        |
| ** ** | 3520 Isidora Goyenechea Av., 2nd floor | Phone           | +56 (2) 798  1000 |
|       | Las  Condes, Santiago, Chile                | Fax             | +56 (2) 798  1001 |
|       |                                        | **www.kpmg.cl** |

 

**Report of Independent RegisteredPublic Accounting Firm**

 

The Board of Directors andShareholders of

Empresa Nacional deElectricidad S.A.(Endesa-Chile):

 

We have audited Endesa-Chile’sinternal control over financial reporting as of December 31, 2008, basedon criteria established in *Internal Control- Integrated Framework* issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). Endesa-Chile’s management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting, included in the accompanying *Management’sAnnual Report on Internal Control over Financial Reporting*. Ourresponsibility is to express an opinion on Endesa-Chile’s internal control overfinancial reporting based on our audit.

 

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control overfinancial reporting was maintained in all material respects. Our audit includedobtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, and testing and evaluatingthe design and operating effectiveness of internal control based on theassessed risk. Our audit also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides areasonable basis for our opinion.

 

A company’s internal controlover financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally acceptedaccounting principles. A company’s internal control over financial reportingincludes those policies and procedures that (1) pertain to the maintenanceof records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (3) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

 

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

 

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In our opinion, Endesa-Chilemaintained, in all material respects, effective internal control over financialreporting as of December 31, 2008, based on criteria established in *Internal Control - Integrated Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated balance sheet of Endesa-Chile andsubsidiaries as of December 31, 2008, and the related consolidatedstatements of income, shareholders’ equity, and cash flows for the year thenended, and our report dated May 29, 2009 expressed an unqualified opinionon those consolidated financial statements.

 

**KPMGAuditores Consultores Ltda.**

 

Santiago,Chile May 29, 2009

 

KPMG Auditores Consultores Ltda. a Chilean member firm of KPMGInternational, a Swiss cooperative. All rights reserved.

 

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|                             | **Ernst &  Young Chile** |
|-----------------------------|-----------------------------------|
| Huérlanos  770, piso 5 |
|                        | Santiago                          |
|                        |                              |
|                        | Tel:  56 2 676 1000               |
|                        | Fax:  56 2 676 1010               |
|                        | www.ey.com/cl                     |

 

**Report of Independent Registered Public Accounting Firm**

 

To the Board of Directorsand Shareholders of 

Empresa Nacional deElectricidad S.A. (Endesa-Chile):

 

We have audited theaccompanying consolidated balance sheet of Endesa-Chile and its subsidiaries (the“Company”) as of December 31, 2007, and the related consolidatedstatements of income, changes in shareholders’ equity and cash flows for eachof the two years in the period ended December 31, 2007. These financialstatements are the responsibility of the Company’s management. Our responsibilityis to express an opinion on these financial statements based on our audits. Wedid not audit the consolidated financial statements of certain subsidiaries, whichstatements reflect total assets representing 31.39 percent as of December 31,2007 and total revenues representing of 38.08 percent and 33.76 percent foreach of the two years in the period ended December 31, 2007, respectively.We also did not audit the consolidated financial statements of certaininvestments accounted for under the equity method, which represented 6.84percent of total consolidated assets as of December 31, 2007 and theequity in their net results represented 19.6 percent and 9.5 percent of theconsolidated net income for each of the two years in the period ended December 31,2007, respectively. Those statements were audited by other auditors whosereports have been furnished to us, and our opinion, insofar as it relates tothe amounts included for those entities, is based solely on the reports of theother auditors.

 

We conducted our auditsin accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. We believe that ouraudits and the reports of other auditors provide a reasonable basis for ouropinion.

 

In our opinion, based onour audits and the reports of other auditors, the financial statements referredto above present fairly, in all material respects, the consolidated financialposition of Endesa-Chile and subsidiaries at December 31, 2007 and theresults of their operations and their cash flows for each of the two years inthe period ended December 31, 2007 in conformity with accountingprinciples generally accepted in Chile, which differ in certain respects fromaccounting principles generally accepted in the United States of America (seeNote 36 to the consolidated financial statements).

 
| ERNST & YOUNG  LTDA.

  |  |
|---------------------------------------|--|

 

Santiago, Chile

February 19, 2008

(except for Note 36 forwhich the date is April 30, 2008)

 

A member firm of Ernst & Young Global Limited

 

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|   | Deloitte &  Touche Ltda.    |
|--------|--------------------------------------|
|   | Cra.  7 N° 94 - 09              |
|   | A.A.  075874                         |
|   | Nit.  860.005.813-14                 |
|   | Bogotá  D.C.                    |
|   | Colombia                             |
|   |                                 |
|   | Tel:  +57 (1) 5461810 - 5461815 |
|   | Fax:  +57 (1) 2178088           |
|   | www.deloitte.com/co                  |

 

**Report of Independent Registered Public AccountingFirm**

 

Tothe Board of Directors and Shareholders of 

**Emgesa S.A. E.S.P.:**

 

Wehave audited the balance sheets of Emgesa S.A. E.S.P. (the “Company”) as of December 31,2008 and 2007 and the related statements of income, shareholders’ equity andcash flows for the three years in the period ended December 31, 2008, allexpressed in thousands of U.S. dollars (not separately presented herein). Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audits included considerations ofinternal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Company’s internal controlover financial reporting. Accordingly, we express no such opinion. An auditalso includes examining, on a test basis evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principlesused and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

Inour opinion, such financial statements present fairly, in all material respects,the financial position of the Company as of December 31, 2008 and 2007, andthe results of its operations and its cash flows for the three years in theperiod ended December 31, 2008 in conformity with accounting principlesgenerally accepted in Chile.

 

Asdescribed in greater detail in Note 1 to the financial statements, on August 17,2007, the Office of the Superintendent of Corporations in Colombia authorizedthe merger through absorption between Central Hidroeléctrica de Betania S.A. E.S.P.and Emgesa S.A. E.S.P.

 

Accountingprinciples generally accepted in Chile vary in certain significant respectsfrom accounting principles generally accepted in the United States of America. Theapplication of the latter would have affected the determination of net incomefor each of the three years ended December 31, 2008 and the determinationof shareholders’ equity at December 31, 2008 and 2007 to the extentsummarized in Note 28.

 

Ouraudits also comprehended the translation of U.S. dollar amounts into constantChilean Peso amounts and, in our opinion; such translation has been made inconformity with the basis stated in Note 2 c). Such constant Chilean Pesoamounts are presented solely for the convenience of readers in Chile.

 

 

DELOITTE &TOUCHE LTDA. 

Bogotá- Colombia

February 27,2009

 

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|   | Deloitte &  Co. S.R.L.   |
|--------|-----------------------------------|
|   | Florida  234, Piso 5°        |
|   | C1005AAF                          |
|   | Ciudad  Autónoma             |
|   | De  Buenos Aires                  |
|   | Argentina                         |
|   |                              |
|   | Tel:  (54-11) 4320-2700           |
|   | Fax:  (54-11) 4325-8081/4326-7340 |
|   | www.deloitte.com                  |

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

Tothe President and Board of Directors of 

**Endesa Argentina S.A.:**

 

Wehave audited the consolidated balance sheets of Endesa Argentina S.A. andsubsidiaries (the “Company”) as of December 31, 2007 and the relatedconsolidated statements of operations and cash flows for each of the two yearsin the period ended December 31, 2007 (none of which are presented herein).These financial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States of America). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal controlover financial reporting. Our audits included consideration of internal controlover financial reporting as a basis for designing audit procedures that areappropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

Inour opinion, such consolidated financial statements present fairly, in allmaterial respects, the financial position of Endesa Argentina S.A. andsubsidiaries as of December 31, 2007, and the results of their operationsand their cash flows for each of the two years in the period ended December 31,2007 in conformity with accounting principles generally accepted in Chile.

 

Accountingprinciples generally accepted in Chile vary in certain significant respectsfrom accounting principles generally accepted in the United States of America. Theapplication of the latter would have affected the determination of net incomefor each of the two years in the period ended December 31, 2007 and thedetermination of shareholders’ equity at December 31, 2007, to the extentsummarized in Note 36.

 

**DELOITTE & Co. S.R.L.**

 

 

CarlosA. Lloveras

BuenosAires, March 27, 2008

 

 

*Deloitte refers to one or more of Deloitte Touche Tohmatsu, aSwiss Verein, and its network of member firms, each of which is a legallyseparate and independent entity. Please see www.deloitte.com/about for adetailed description of the legal structure of Deloitte Touche Tohmatsu and itsMember Firms.*

 

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|   | Deloitte  Auditores y Consultores Ltda. |
|--------|-----------------------------------------|
|   | RUT:  80.276.200-3                      |
|   | Av.  Providencia 1760                   |
|   | Pisos  6, 7, 8, 9 y 13                  |
|   | Providencia,  Santiago                  |
|   | Chile                                   |
|   | Fono:  (56-2) 729 7000                  |
|   | Fax:  (56-2) 374 9177                   |
|   | e-mail:  deloittechile@deloitte.com     |
|   | www.deloitte.cl                         |

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

Tothe Board of Directors and Stockholders of 

**Endesa Brasil S.A.:**

 

Wehave audited the accompanying consolidated balance sheets of Endesa Brasil S.A.and subsidiaries (the “Company”) as of December 31, 2007 and 2008, and therelated consolidated statements of operations, changes in shareholders’ equityand cash flows for each of the three years in the period ended December 31,2008. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audits. We did not audit the financial statements ofcertain of its consolidated subsidiaries (hereinafter collectively referred toas the “Subsidiaries”), which statements reflect total assets constituting30.63% of consolidated total assets at December 31, 2007 and totalrevenues constituting 27.21% and 36.32% of consolidated total revenues for theyears ended December 31, 2006 and 2007, respectively. With respect to theconsolidated shareholders’ equity and net income information stated on thebasis of accounting principles generally accepted in the United States ofAmerica (“U.S. GAAP”) in Note 25, these financial statements reflect 54.43% ofthe Endesa Brasil consolidated U.S. GAAP adjustments to shareholders’ equity atDecember 31, 2007 and 56.77% and 55.31% of the Endesa Brasil consolidatedU.S. GAAP adjustments to net income for the years ended December 31, 2006and 2007, respectively. Those statements were audited by other auditors whosereports have been furnished to us and our opinion, insofar as it relates to theamounts included for the Companies, is based solely on the reports of the otherauditors.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States of America). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that ouraudits and the reports of the other auditors provide a reasonable basis for ouropinion.

 

Inour opinion, based on our audits and the reports of the other auditors, suchconsolidated financial statements present fairly, in all material respects, thefinancial position of Endesa Brasil S.A. and subsidiaries as of December 31,2007 and 2008, and the results of their operations, changes in shareholders’equity and cash flows for each of the three years in the period ended December 31,2008, in conformity with accounting principles generally accepted in Chile.

 

Accountingprinciples generally accepted in Chile vary in certain significant respectsfrom accounting principles generally accepted in the United States of America. Theapplication of the latter would have affected the determination of net incomefor each of the three years in the period ended December 31, 2008, and thedetermination of shareholders’ equity as of December 31, 2007 and 2008, tothe extent summarized in Note 25 to the consolidated financial statements.

 

 

Santiago,Chile 

May29, 2009

 

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|                                         | · | Praia  de Botafogo, 300 -13° andar | ·               | Fone: | (55)  (21) 2109-1400 |
|-----------------------------------------|--------|-----------------------------------------|----------------------|-------|----------------------|
| 22250-040  - Rio de Janeiro, RJ, Brasil |   | Fax:                                    | (55)  (21) 2109-1600 |
|                                    |   | www.ey.com.br                           |

 

**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

 

Tothe Board of Directors and Shareholders of 

**Centrais Elétricas Cachoeira Dourada - CDSA**

 

Wehave audited the accompanying balance sheets of Centrais Elétricas CachoeiraDourada - CDSA (the “Company”) as of December 31, 2006 and 2007, and therelated statements of income, changes in shareholders’ equity and cash flowsfor the years then ended (not presented separately herein). These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. We were not engaged toperform an audit of the Company’s internal control over financial reporting. Ouraudit included consideration of internal control over financial reporting as abasis for designing audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express nosuch opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.

 

Inour opinion, based on our audits, the financial statements referred to abovepresent fairly, in all material respects, the financial position of Centrais ElétricasCachoeira Dourada - CDSA as of December 31, 2006 and 2007, and the resultsof its operations and its cash flows for the years then ended in conformitywith accounting principles generally accepted in Chile, which differ in certainrespects from accounting principles generally accepted in the United States ofAmerica (see Note 21 to the financial statements).

 

Rio de Janeiro, Brazil, March 27, 2008

 

ERNST & YOUNGAuditores Independentes S. S.

 

Claudio CamargoPartner

 

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|                                         | · | Praia  de Botafogo, 300 - 13° andar | ·               | Fone: | (55)  (21) 2109-1400 |
|-----------------------------------------|--------|------------------------------------------|----------------------|-------|----------------------|
| 22250-040  - Rio de Janeiro, RJ, Brasil |   | Fax:                                     | (55)  (21) 2109-1600 |
|                                    |   | www.ey.com.br                            |

 

**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

 

Tothe Board of Directors and Shareholders of 

**Central Geradora Termelétrica Fortaleza - CGTF**

 

Wehave audited the accompanying balance sheets of Central Geradora TermelétricaFortaleza - CGTF (the “Company”) as of December 31, 2006 and 2007, and therelated statements of income, changes in shareholders’ equity and cash flowsfor the years then ended (not presented separately herein). These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. We were not engaged toperform an audit of the Company’s internal control over financial reporting.Our audit included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

 

Inour opinion, based on our audits, the financial statements referred to abovepresent fairly, in all material respects, the financial position of CentralGeradora Termelétrica Fortaleza - CGTF as of December 31, 2006 and 2007,and the results of its operations and its cash flows for the years then endedin conformity with accounting principles generally accepted in Chile, whichdiffer in certain respects from accounting principles generally accepted in theUnited States of America (see Note 21 to the financial statements).

 

Rio de Janeiro, Brazil, March 27, 2008

 

ERNST & YOUNG

Auditores Independentes S.S.

 

Claudio Camargo

Partner

 

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|                                         | · | Praia  de Botafogo, 300 - 13° andar | ·               | Fone: | (55)  (21) 2109-1400 |
|-----------------------------------------|--------|------------------------------------------|----------------------|-------|----------------------|
| 22250-040  - Rio de Janeiro, RJ, Brasil |   | Fax:                                     | (55)  (21) 2109-1600 |
|                                    |   | www.ey.com.br                            |

 

**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

 

Tothe Board of Directors and Shareholders of 

**CIEN - Companhia de Interconexão Energética**

 

Wehave audited the accompanying consolidated balance sheets of CIEN - Companhiade Interconexão Energética and its subsidiaries (the “Company”) as of December 31,2006 and 2007, and the related consolidated statements of income, changes inshareholders’ equity and cash flows for years then ended (not presentedseparately herein). These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audits. We did not audit the financialstatements of Transportadora de Energía S.A. - TESA and Compañía de Transmisióndel MERCOSUR S.A. - CTM, wholly-owned subsidiaries of the Company, whichstatements reflect total assets of 13 percent and 11 percent as of December 31,2006 and 2007, respectively, and total revenues representing and 6 percent and2 percent for each of the two years in the period ended December 31, 2007,respectively. Those statements were audited by other auditors whose reportshave been furnished to us, and our opinion, insofar as it relates to theamounts included for Transportadora de Energía S.A. - TESA and Compañía deTransmisión del MERCOSUR S.A. - CTM, is based solely on the reports of theother auditors.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. We were not engaged toperform an audit of the Company’s internal control over financial reporting. Ouraudit included consideration of internal control over financial reporting as abasis for designing audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express nosuch opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. We believe that ouraudits and the reports of other auditors provide a reasonable basis for ouropinion.

 

F-15

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Table ofContents

 

 

Inour opinion, based on our audits and the reports of other auditors, thefinancial statements referred to above present fairly, in all material respects,the consolidated financial position of CIEN - Companhia de Interconexão Energéticaand its subsidiaries at December 31, 2006 and 2007, and the consolidatedresults of their operations and their cash flows for the years then ended, inconformity with accounting principles generally accepted in Chile, which differin certain respects from accounting principles generally accepted in the UnitedStates of America (see Note 24 to the financial statements).

 

Rio de Janeiro, Brazil, March 27, 2008

 

ERNST & YOUNG

Auditores Independentes S.S.

 

Claudio Camargo

Partner

 

F-16

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Table of Contents

 

 
|   | Deloitte &  Co. S.R.L.        |
|--------|----------------------------------------|
|   | Florida  234, Piso 5°             |
|   | C1005AAF                               |
|   | Ciudad  Autónoma  De Buenos Aires |
|   | Argentina                              |
|   |                                   |
|   | Tel:  (54-11) 4320-2700                |
|   | Fax:  (54-11) 4325-8081/4326-7340      |
|   | www.deloitte.com                       |

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

Tothe President and Board of Directors of 

**Transportadora de Energía S.A.:**

 

Wehave audited the balance sheet of Transportadora de Energía S.A. (the “Company”)as of December 31, 2007 and the statements of operations and cash flowsfor each of the two years in the period ended December 31, 2007 (none ofwhich are presented herein). These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States of America). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

 

Inour opinion, such financial statements present fairly, in all material respects,the financial position of Transportadora de Energía S. A. as of December 31,2007, and the results of its operations and its cash flows for each of the twoyears in the period ended December 31, 2007 in conformity with accountingprinciples generally accepted in Chile.

 

Accountingprinciples generally accepted in Chile vary in certain significant respectsfrom accounting principles generally accepted in the United States of America. Theapplication of the latter would have affected the determination of net incomefor each of the two years in the period ended December 31, 2007 and thedetermination of shareholders’ equity at December 31, 2007 to the extentsummarized in Note 20.

 

**DELOITTE & Co. S.R.L.**

 

 

CarlosA. Lloveras

BuenosAires, March 27, 2008

 

*Deloitte refers to one or more of Deloitte Touche Tohmatsu, aSwiss Verein, and its network of member firms, each of which is a legallyseparate and independent entity. Please see www.deloitte.com/about for adetailed description of the legal structure of Deloitte Touche Tohmatsu and itsMember Firms.*

 

F-17

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Table of Contents

 

 
|   | Deloitte &  Co. S.R.L.   |
|--------|-----------------------------------|
|   | Florida  234, Piso 5°        |
|   | C1005AAF                          |
|   | Ciudad  Autónoma             |
|   | De  Buenos Aires                  |
|   | Argentina                         |
|   |                              |
|   | Tel:  (54-11) 4320-2700           |
|   | Fax:  (54-11) 4325-8081/4326-7340 |
|   | www.deloitte.com                  |

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

 

Tothe President and Board of Directors of 

**Compañía de Transmisión del Mercosur S.A.:**

 

Wehave audited the balance sheet of Compañía de Transmisión del Mercosur S.A. (the“Company”) as of December 31, 2007 and the statements of operations andcash flows for each of the two years in the period ended December 31, 2007(none of which are presented herein). These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States of America). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our audits provide areasonable basis for our opinion.

 

Inour opinion, such financial statements present fairly, in all material respects,the financial position of Compañía de Transmisión del Mercosur S.A. as of December 31,2007 and the results of its operations and its cash flows for each of the twoyears in the period ended December 31, 2007 in conformity with accountingprinciples generally accepted in Chile.

 

Accountingprinciples generally accepted in Chile vary in certain significant respectsfrom accounting principles generally accepted in the United States of America. Theapplication of the latter would have affected the determination of net incomefor each of the two years in the period ended December 31, 2007 and thedetermination of shareholders’ equity at December 31, 2007 to the extentsummarized in Note 19.

 

**DELOITTE & Co. S.R.L.**

 

 

CarlosA. Lloveras

BuenosAires, March 27, 2008

 

*Deloitte refers to one or more of Deloitte Touche Tohmatsu, aSwiss Verein, and its network of member firms, each of which is a legallyseparate and independent entity. Please see www.deloitte.com/about for adetailed description of the legal structure of Deloitte Touche Tohmatsu and itsMember Firms.*

 

F-18

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| ****   |   |                                                     |   |                |
|--------|--------|----------------------------------------------------------|--------|---------------------|
|   |   | **Sibille**Bouchard 710 — 1st floor (C1106ABL) |   | Phone  Fax          | +54-11 4316-5700  +54-11 4316-5800 |
|   |   | Buenos Aires, Argentina                                  |   | **www.kpmg.com.ar** |

 

**Report of Independent Registered Public Accounting Firm**

 

The Board of Directors and Shareholders ofEmpresa Distribuidora Sur S.A. (Edesur S.A.):

 

We have audited the balance sheet of Edesur S.A. (the Company) as of December 31,2008, and the related statements of income and cash flows for the year thenended (none of which are presented herein). These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audit.

 

We conducted our audit in accordance with the standards of the PublicCompany Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting. Our audit includes consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting.  Accordingly, we express nosuch opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  We believe that our audit provides areasonable basis for our opinion.

 

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of Edesur S.A. as of December 31,2008, and the results of its operations and its cash flows for the year thenended in conformity with accounting principles generally accepted in Chile.

 

Accounting principles generally accepted in Chile vary in certainsignificant respects from accounting principles generally accepted in theUnited States of America. Information relating to the nature and effect of suchdifferences is presented in Note 35 to the financial statements.

 

SIBILLE

 

(MemberFirm of KPMG International)

 

 

Ariel S. Eisenstein

Partner

Buenos Aires, Argentina

May 29, 2009

 

Sibille, a Partnership establishedunder Argentine Law and a member firm of the KPMG network of independent memberfirms affiliated with KPMG International, a Swiss cooperative. All rightsreserved.

 

F-19

----

Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

 

(Restated for general price-level changes and expressed in thousands ofconstantChilean pesos as of December 31, 2008, and thousands of US dollars)

 
| ** **                               | ** ** | **As of December 31,** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **2007**                    | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                               | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThUS$** | ** ** |
| **ASSETS**                               |       |                        |       |   |   |   |   |
|                                     |       |                        |       |   |   |   |   |
| CURRENT ASSETS                           |       |                        |       |   |   |   |   |
| Cash                                     |       | 89,275,796                  |       | 133,550,264 |   | 209,836 |   |
| Time deposits                            |       | 440,591,912                 |       | 624,749,431 |   | 981,616 |   |
| Marketable securities                    |       | 12,847,437                  |       | 105,047,106 |   | 165,052 |   |
| Accounts receivable, net                 |       | 1,075,260,601               |       | 1,138,162,639 |   | 1,788,299 |   |
| Notes receivable, net                    |       | 12,892,797                  |       | 7,749,050 |   | 12,175 |   |
| Other accounts receivable, net           |       | 108,649,553                 |       | 95,067,667 |   | 149,372 |   |
| Amounts due from related companies       |       | 165,946,198                 |       | 30,882,447 |   | 48,523 |   |
| Inventories                              |       | 114,823,653                 |       | 104,197,536 |   | 163,717 |   |
| Taxes recoverable                        |       | 157,591,461                 |       | 134,057,400 |   | 210,633 |   |
| Prepaid expenses                         |       | 54,838,422                  |       | 58,744,892 |   | 92,300 |   |
| Deferred taxes                           |       | 74,497,556                  |       | 55,606,106 |   | 87,369 |   |
| Other current assets                     |       | 154,673,276                 |       | 506,737,067 |   | 796,194 |   |
|                                     |       |                        |       |   |   |   |   |
| Total current assets                     |       | 2,461,888,662               |       | 2,994,551,605 |   | 4,705,086 |   |
|                                     |       |                        |       |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT            |       |                        |       |   |   |   |   |
| Land                                     |       | 150,430,556                 |       | 169,158,999 |   | 265,785 |   |
| Buildings and infrastructure             |       | 12,374,354,314              |       | 14,160,783,677 |   | 22,249,640 |   |
| Machinery and equipment                  |       | 2,161,441,303               |       | 2,692,490,347 |   | 4,230,482 |   |
| Other plant and equipment                |       | 580,886,985                 |       | 853,202,108 |   | 1,340,564 |   |
| Technical appraisal                      |       | 36,692,443                  |       | 36,562,001 |   | 57,447 |   |
| Accumulated depreciation                 |       | (6,583,805,680              | )          | (7,831,986,630 | ) | (12,305,737 | ) |
|                                     |       |                        |       |   |   |   |   |
| Total property, plant and equipment, net |       | 8,719,999,921               |       | 10,080,210,502 |   | 15,838,181 |   |
|                                     |       |                        |       |   |   |   |   |
| OTHER ASSETS                             |       |                        |       |   |   |   |   |
| Investments in related companies         |       | 64,464,056                  |       | 118,707,021 |   | 186,514 |   |
| Investments in other companies           |       | 25,021,876                  |       | 29,679,635 |   | 46,633 |   |
| Goodwill, net                            |       | 698,243,292                 |       | 635,693,667 |   | 998,812 |   |
| Negative goodwill, net                   |       | (40,722,414                 | )          | (41,530,494 | ) | (65,253 | ) |
| Long-term receivables                    |       | 212,940,711                 |       | 201,124,587 |   | 316,010 |   |
| Amounts due from related companies       |       | 682,310                     |       | 112,822,268 |   | 177,268 |   |
| Intangibles                              |       | 103,810,481                 |       | 132,028,655 |   | 207,445 |   |
| Accumulated amortization                 |       | (65,244,146                 | )          | (87,690,142 | ) | (137,780 | ) |
| Other assets                             |       | 274,643,129                 |       | 224,030,573 |   | 352,000 |   |
|                                     |       |                        |       |   |   |   |   |
| Total other assets                       |       | 1,273,839,295               |       | 1,324,865,770 |   | 2,081,649 |   |
|                                     |       |                        |       |   |   |   |   |
| TOTAL ASSETS                             |       | 12,455,727,878              |       | 14,399,627,877 |   | 22, 624,916 |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

F-20

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Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

**CONSOLIDATED BALANCE SHEETS**

 

(Restated for general price-level changes and expressed in thousands ofconstant

Chilean pesos as of December 31, 2008, and thousands of USdollars)

 
| ** **                                                                 | ** ** | **As of December 31,** | ** ** |
|----------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                 | ** ** | **2007**                              | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                                                                 | ** ** | **ThCh$**                             | ** ** | **ThCh$** | ** ** | **ThUS$** | ** ** |
| **LIABILITIES AND SHAREHOLDERS ́EQUITY**                               |       |                                  |       |   |   |   |   |
|                                                                       |       |                                  |       |   |   |   |   |
| CURRENT LIABILITIES:                                                       |       |                                  |       |   |   |   |   |
| Short-term debt due to banks and financial  institutions                   |       | 184,797,723                           |       | 279,225,801 |   | 438,724 |   |
| Current portion of long-term debt due to  banks and financial Institutions |       | 140,819,523                           |       | 281,710,562 |   | 442,628 |   |
| Current portion of bonds payable                                           |       | 398,611,785                           |       | 611,261,962 |   | 960,424 |   |
| Current portion of long-term notes payable                                 |       | 26,336,041                            |       | 35,570,848 |   | 55,889 |   |
| Dividends payable                                                          |       | 35,812,653                            |       | 5,832,062 |   | 9,163 |   |
| Accounts payable                                                           |       | 560,569,116                           |       | 625,017,276 |   | 982,037 |   |
| Short-term notes payable                                                   |       | 17,382,321                            |       | 16,448,180 |   | 25,844 |   |
| Miscellaneous payables                                                     |       | 115,543,608                           |       | 144,861,747 |   | 227,609 |   |
| Amounts payable to related companies                                       |       | 34,685,869                            |       | 43,097,251 |   | 67,715 |   |
| Accrued expenses                                                           |       | 81,748,068                            |       | 100,217,026 |   | 157,463 |   |
| Withholdings                                                               |       | 115,470,118                           |       | 131,803,915 |   | 207,092 |   |
| Income taxes payable                                                       |       | 19,975,609                            |       | 90,992,692 |   | 142,969 |   |
| Deferred income                                                            |       | 8,526,356                             |       | 10,274,431 |   | 16,143 |   |
| Other current liabilities                                                  |       | 143,985,590                           |       | 147,470,960 |   | 231,709 |   |
|                                                                       |       |                                  |       |   |   |   |   |
| Total current liabilities                                                  |       | 1,884,264,380                         |       | 2,523,784,713 |   | 3,965,409 |   |
|                                                                       |       |                                  |       |   |   |   |   |
| LONG-TERM LIABILITIES:                                                     |       |                                  |       |   |   |   |   |
| Due to banks and financial institutions                                    |       | 1,115,923,797                         |       | 1,158,698,622 |   | 1,820,565 |   |
| Bonds payable                                                              |       | 2,338,000,343                         |       | 2,391,113,689 |   | 3,756,954 |   |
| Long-term notes payable                                                    |       | 133,911,774                           |       | 132,784,275 |   | 208,633 |   |
| Miscellaneous payables                                                     |       | 156,760,069                           |       | 153,874,538 |   | 241,770 |   |
| Amounts payable to related companies                                       |       | 8,888,191                             |       | 8,977,789 |   | 14,106 |   |
| Accrued expenses                                                           |       | 368,396,242                           |       | 361,453,635 |   | 567,921 |   |
| Deferred taxes                                                             |       | 24,438,149                            |       | 125,201,091 |   | 196,718 |   |
| Other long-term liabilities                                                |       | 277,765,330                           |       | 169,380,922 |   | 266,134 |   |
|                                                                       |       |                                  |       |   |   |   |   |
| Total long-term liabilities                                                |       | 4,424,083,895                         |       | 4,501,484,561 |   | 7,072,801 |   |
|                                                                       |       |                                  |       |   |   |   |   |
| MINORITY INTEREST                                                          |       | 2,985,784,314                         |       | 3,677,145,791 |   | 5,777,588 |   |
|                                                                       |       |                                  |       |   |   |   |   |
| SHAREHOLDERS ́ EQUITY:                                                 |       |                                  |       |   |   |   |   |
| Paid-in capital, no par value                                              |       | 2,824,882,834                         |       | 2,824,882,834 |   | 4,438,499 |   |
| Additional paid-in capital                                                 |       | 201,314,070                           |       | 201,314,070 |   | 316,308 |   |
| Other reserves                                                             |       | (474,250,155                          | )          | (339,568,470 | ) | (533,535 | ) |
| Retained earnings                                                          |       | 423,601,980                           |       | 490,313,366 |   | 770,388 |   |
| Net income for the year                                                    |       | 205,141,910                           |       | 570,883,101 |   | 896,980 |   |
| Interim dividends                                                          |       | (19,095,350                           | )          | (50,612,089 | ) | (79,522 | ) |
|                                                                       |       |                                  |       |   |   |   |   |
| Total shareholders ́ equity                                            |       | 3,161,595,289                         |       | 3,697,212,812 |   | 5,809,118 |   |
|                                                                       |       |                                  |       |   |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS ́ EQUITY                            |       | 12,455,727,878                        |       | 14,399,627,877 |   | 22,624,916 |   |

 

The accompanying notes arean integral part of these consolidates financial statements.

 

F-21

----

Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

 

(Restated for general price-level changes and expressed in thousands ofconstant

Chilean pesos as of December 31, 2008, and thousands of USdollars)

 
| ** **                                                                           | ** ** | **For the years ended December 31,** | ** ** |
|--------------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                           | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                                                                           | ** ** | **ThCh$**                                 | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThUS$** | ** ** |
| OPERATING INCOME:                                                                    |       |                                      |       |   |   |   |   |   |   |
| SALES                                                                                |       | 4,526,458,133                             |       | 4,915,620,866 |   | 6,650,287,115 |   | 10,449,033 |   |
| COST OF SALES                                                                        |       | (3,030,346,242                            | )          | (3,255,835,469 | ) | (4,305,903,952 | ) | (6,765,502 | ) |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| GROSS PROFIT                                                                         |       | 1,496,111,891                             |       | 1,659,785,397 |   | 2,344,383,163 |   | 3,683,531 |   |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| ADMINISTRATIVE AND SELLING EXPENSES                                                  |       | (263,022,870                              | )          | (291,028,443 | ) | (365,585,705 | ) | (574,414 | ) |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| OPERATING INCOME                                                                     |       | 1,233,089,021                             |       | 1,368,756,954 |   | 1,978,797,458 |   | 3,109,117 |   |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| NON-OPERATING INCOME AND EXPENSE:                                                    |       |                                      |       |   |   |   |   |   |   |
| Interest income                                                                      |       | 150,939,621                               |       | 125,323,230 |   | 176,356,849 |   | 277,095 |   |
| Equity in income of related companies                                                |       | 6,040,084                                 |       | 2,975,493 |   | 3,600,288 |   | 5,657 |   |
| Other non-operating income                                                           |       | 123,790,418                               |       | 217,067,647 |   | 430,956,724 |   | 677,127 |   |
| Equity in loss of related companies                                                  |       | (146,610                                  | )          | (62,610,280 | ) | (5,971,152 | ) | (9,382 | ) |
| Amortization of goodwill                                                             |       | (65,389,307                               | )          | (65,137,633 | ) | (65,495,568 | ) | (102,908 | ) |
| Interest expense                                                                     |       | (456,968,534                              | )          | (443,534,445 | ) | (495,695,627 | ) | (778,845 | ) |
| Other non-operating expenses                                                         |       | (244,766,526                              | )          | (379,751,866 | ) | (302,056,294 | ) | (474,595 | ) |
| Price-level restatement, net                                                         |       | 1,423,153                                 |       | (11,765,090 | ) | (24,102,668 | ) | (37,870 | ) |
| Exchange difference, net                                                             |       | 6,230,982                                 |       | 7,390,475 |   | 16,279,237 |   | 25,576 |   |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| NON-OPERATING EXPENSE, NET                                                           |       | (478,846,719                              | )          | (610, 042,469) |   | (266,128,211 | ) | (418,145 | ) |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES, MINORITY  INTEREST AND AMORTIZATION OF NEGATIVE GOODWILL |       | 754,242,302                               |       | 758,714,485 |   | 1,712,669,247 |   | 2,690,972 |   |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| INCOME TAXES                                                                         |       | (111,357,579                              | )          | (275,677,558 | ) | (450,974,535 | ) | (708,578 | ) |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| INCOME (LOSS) BEFORE MINORITY INTEREST AND  AMORTIZATION OF NEGATIVE GOODWILL        |       | 642,884,723                               |       | 483,036,927 |   | 1,261,694,712 |   | 1,982,394 |   |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| MINORITY INTEREST                                                                    |       | (315,537,708                              | )          | (282,710,421 | ) | (697,031,109 | ) | (1,095,186 | ) |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| INCOME (LOSS) BEFORE AMORTIZATION OF  NEGATIVE GOODWILL                              |       | 327,347,015                               |       | 200,326,506 |   | 564,663,603 |   | 887,208 |   |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| AMORTIZATION OF NEGATIVE GOODWILL                                                    |       | 7,108,225                                 |       | 4,815,404 |   | 6,219,498 |   | 9,772 |   |
|                                                                                 |       |                                      |       |   |   |   |   |   |   |
| NET INCOME FOR THE YEAR                                                              |       | 334,455,240                               |       | 205,141,910 |   | 570,883,101 |   | 896,980 |   |

 

The accompanying notes arean integral part of these consolidated financial statements.

 

F-22

----

Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 

(Restated for general price-level changes and expressed in thousands ofconstant

Chilean pesos as of December 31, 2008, and thousands of US dollars)

 
| ** **                                                                       | ** ** | **For the years ended December 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                                       | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                                                                       | ** ** | **ThCh$**                                 | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThUS$** | ** ** |
| ** **                                                                       | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income for the year                                                          |       | 334,455,240                               |       | 205,141,910 |   | 570,883,101 |   | 896,980 |   |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| GAIN FROM SALES OF ASSETS:                                                       |       |                                      |       |   |   |   |   |   |   |
| Gain on sale of property, plant and  equipment                                   |       | (21,722,482                               | )          | (612,814 | ) | (4,832,649 | ) | (7,593 | ) |
| Gain on sale of investments                                                      |       | —                                    |       | (3,351,925 | ) | — |   | — |   |
| Gain on sale of other assets                                                     |       | (316,863                                  | )          | (619,636 | ) | (606,067 | ) | (952 | ) |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| Charges (credits) to income which do not  represent cash flows:                  |       |                                      |       |   |   |   |   |   |   |
| Depreciation                                                                     |       | 484,929,952                               |       | 453,778,547 |   | 553,586,380 |   | 869,803 |   |
| Amortization of intangibles                                                      |       | 9,192,229                                 |       | 9,511,163 |   | 12,540,978 |   | 19,705 |   |
| Write-offs and accrued expenses                                                  |       | 30,484,137                                |       | 57,098,278 |   | 48,862,444 |   | 76,773 |   |
| Equity in income of related companies                                            |       | (6,040,084                                | )          | (2,975,493 | ) | (3,600,288 | ) | (5,657 | ) |
| Equity in loss of related companies                                              |       | 146,610                                   |       | 62,610,280 |   | 5,971,152 |   | 9,382 |   |
| Amortization of goodwill                                                         |       | 65,389,307                                |       | 65,137,633 |   | 65,495,568 |   | 102,908 |   |
| Amortization of negative goodwill                                                |       | (7,108,225                                | )          | (4,815,404 | ) | (6,219,498 | ) | (9,772 | ) |
| Price-level restatement, net                                                     |       | (1,423,153                                | )          | 11,765,090 |   | 24,102,668 |   | 37,870 |   |
| Exchange difference, net                                                         |       | (6,230,982                                | )          | (7,390,475 | ) | (16,279,237 | ) | (25,578 | ) |
| Other credits to income which do not  represent cash flows                       |       | (17,767,519                               | )          | (58,512,517 | ) | (337,564,456 | ) | (530,386 | ) |
| Other charges to income which do not  represent cash flows                       |       | 80,479,966                                |       | 222,166,759 |   | 108,237,899 |   | 170,065 |   |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| Changes in assets which affect operating  cash flows:                            |       |                                      |       |   |   |   |   |   |   |
| Decrease (increase) in trade receivables                                         |       | (211,218,280                              | )          | (235,279,055 | ) | (18,622,255 | ) | (29,260 | ) |
| Decrease (increase) in inventory                                                 |       | 5,457,942                                 |       | (33,307,433 | ) | 7,535,054 |   | 11,839 |   |
| Decrease (increase) in other assets                                              |       | (113,651,111                              | )          | (72,891,642 | ) | 16,720,531 |   | 26,272 |   |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| Changes in liabilities which affect  operating cash flows:                       |       |                                      |       |   |   |   |   |   |   |
| Increase (decrease) in accounts payable  associated with operating results       |       | 170,914,612                               |       | 254,498,869 |   | (9,966,658 | ) | (15,660 | ) |
| Increase (decrease) in interest payable                                          |       | 32,660,987                                |       | 32,767,978 |   | (49,257,603 | ) | (77,394 | ) |
| Increase (decrease) in income tax payable                                        |       | (35,805,478                               | )          | (105,383,445 | ) | 171,364,293 |   | 269,250 |   |
| Increase (decrease) in other accounts  payable associated with operating results |       | (43,194,035                               | )          | (17,123,301 | ) | 44,260,688 |   | 69,543 |   |
| Net (increase) in value added tax and other  similar taxes payable               |       | (56,509,755                               | )          | (75,544,827 | ) | 42,484,839 |   | 66,753 |   |
| Income attributable to minority interest                                         |       | 315,537,708                               |       | 282,710,421 |   | 697,031,109 |   | 1,095,186 |   |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| Net cash flows provided by operating  activities                                 |       | 1,008,660,723                             |       | 1,039,378,961 |   | 1,922,127,993 |   | 3,020,077 |   |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                            |       |                                      |       |   |   |   |   |   |   |
| Share issuance                                                                   |       | —                                    |       | 3,071,186 |   | — |   | — |   |
| Proceeds from the issuance of debt                                               |       | 1,490,295,843                             |       | 946,952,913 |   | 1,224,190,888 |   | 1,923,467 |   |
| Proceeds from bond issuances                                                     |       | 194,905,633                               |       | 395,431,922 |   | 338,110,915 |   | 531,245 |   |
| Other receipts from financing                                                    |       | —                                    |       | — |   | 2,240,142 |   | 3,520 |   |
| Distribution of capital in subsidiary                                            |       | (100,026,329                              | )          | (15,616,246 | ) | — |   | — |   |
| Dividends paid                                                                   |       | (208,897,947                              | )          | (602,343,993 | ) | (524,771,104 | ) | (824,528 | ) |
| Payment of debt                                                                  |       | (1,156,833,515                            | )          | (776,642,547 | ) | (1,024,994,172 | ) | (1,610,487 | ) |
| Payment of bonds                                                                 |       | (548,364,306                              | )          | (141,130,787 | ) | (342,535,816 | ) | (538,198 | ) |
| Payment of loans obtained from related  companies                                |       | (9,447,806                                | )          | (2,586,069 | ) | (3,027,339 | ) | (4,757 | ) |
| Payment of bond issuance costs                                                   |       | (584,862                                  | )          | — |   | — |   | — |   |
| Other disbursements for financing                                                |       | (8,518,857                                | )          | (1,503,688 | ) | (15,566,113 | ) | (24,458 | ) |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| Net cash used in financing activities                                            |       | (347,472,146                              | )          | (194,367,309 | ) | (346,352,599 | ) | (544,196 | ) |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                            |       |                                      |       |   |   |   |   |   |   |
| Proceeds from sales of property, plant and  equipment                            |       | 52,105,704                                |       | 4,089,831 |   | 9,557,491 |   | 15,017 |   |
| Sales of investment in related companies                                         |       | 57,770                                    |       | 9,118,784 |   | 7,730,911 |   | 12,147 |   |
| Payments received from notes receivable  from related companies                  |       | 3,264,007                                 |       | — |   | 62,399,934 |   | 98,044 |   |
| Other receipts from investments                                                  |       | 2,236,704                                 |       | 48,028,164 |   | 32,763,944 |   | 51,479 |   |
| Liquidation of subsidiary                                                        |       | (4,819,794                                | )          | — |   | — |   | — |   |
| Additions to property, plant and equipment                                       |       | (605,574,609                              | )          | (646,926,245 | ) | (826,764,955 | ) | (1,299,026 | ) |
| Long-term investments in related companies                                       |       | (26,374,671                               | )          | (41,580,361 | ) | (19,864,710 | ) | (31,212 | ) |
| Documented loans to related companies                                            |       | —                                    |       | (4,836,766 | ) | — |   | — |   |
| Other loans to related companies                                                 |       | —                                    |       | (42,177,525 | ) | (29,257,957 | ) | (45,971 | ) |
| Other investment disbursements                                                   |       | (14,671,375                               | )          | (78,800,066 | ) | (16,913,258 | ) | (26,574 | ) |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| Net cash used in investing activities                                            |       | (593,776,264                              | )          | (753,084,184 | ) | (780,348,600 | ) | (1,226,096 | ) |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| POSITIVE (NEGATIVE) NET CASH FLOW FOR THE  PERIOD                                |       | 67,412,313                                |       | 91,927,468 |   | 795,426,794 |   | 1,249,785 |   |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| EFFECT OF PRICE-LEVEL RESTATEMENT ON CASH  AND CASH EQUIVALENTS                  |       | 17,051,071                                |       | 21,180,785 |   | (121,532,317 | ) | (190,952 | ) |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                            |       | 84,463,384                                |       | 113,108,253 |   | 673,894,477 |   | 1,058,833 |   |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF  THE YEAR                              |       | 430,260,166                               |       | 514,723,550 |   | 627,831,803 |   | 986,459 |   |
|                                                                             |       |                                      |       |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT END OF THE  YEAR                                    |       | 514,723,550                               |       | 627,831,803 |   | 1,301,726,280 |   | 2,045,292 |   |

 

The accompanying notes are an integral partof these consolidated financial statements.

 

F-23

----

Table ofContents

 

**ENERSIS S.A. AND SUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

 

(Expressed in thousands of historical Chilean pesos, except as stated)

 
| ** **                                                | ** ** | ** **    | ** ** | **Additional** | ** ** | ** **   | ** ** | ** **   | ** ** | **Deficit of**        | ** ** | ** **    | ** ** | ** **                 | ** ** | ** **    | ** ** |
|-----------------------------------------------------------|------------|---------------|------------|----------------|------------|--------------|------------|--------------|------------|----------------------------|------------|---------------|------------|----------------------------|------------|---------------|------------|
| ** **                                                | ** ** | **Paid-in**   | ** ** | **paid-in**    | ** ** | **Other**    | ** ** | **Retained** | ** ** | **subsidiaries in**   | ** ** | **Interim**   | ** ** | **Net income**        | ** ** | ** **    | ** ** |
| ** **                                                | ** ** | **capital**   | ** ** | **capital**    | ** ** | **reserves** | ** ** | **earnings** | ** ** | **development stage** | ** ** | **dividends** | ** ** | **for the year** | ** ** | **Total**     | ** ** |
| ** **                                                | ** ** | **ThCh$**     | ** ** | **ThCh$**      | ** ** | **ThCh$**    | ** ** | **ThCh$**    | ** ** | **ThCh$**                  | ** ** | **ThCh$**     | ** ** | **ThCh$**                  | ** ** | **ThCh$**     | ** ** |
|                                                      |       |          |       |           |       |         |       |         |       |                       |       |          |       |                       |       |          |       |
| As of  January 1, 2006                               |       | 2,365,606,672 |       | 168,583,950    |       | (236,727,351 | )          | 230,391,292  |       | —                     |       | —        |       | 68,016,865                 |       | 2,595,871,428 |       |
| Transfer of prior  year income to retained earnings       |       | —        |       | —         |       | —       |       | 68,016,865   |       | —                     |       | —        |       | (68,016,865                | )          | —        |       |
| Investment equity  variations                             |       | —        |       | —         |       | (10,585,093  | )          | —       |       | —                     |       | —        |       | —                     |       | (10,585,093   | )          |
| Accumulated  deficit of subsidiaries in development stage |       | —        |       | —         |       | —       |       | —       |       | (181,751                   | )          | —        |       | —                     |       | (181,751      | )          |
| Final dividend N°  73                                |       | —        |       | —         |       | —       |       | (32,651,166  | )          | —                     |       | —        |       | —                     |       | (32,651,166   | )          |
| Cumulative  translation adjustment                        |       | —        |       | —         |       | 14,766,794   |       | —       |       | —                     |       | —        |       | —                     |       | 14,766,794    |       |
| Reserve Technical  Bulletin No. 72                   |       | —        |       | —         |       | (825,381     | )          | —       |       | —                     |       | —        |       | —                     |       | (825,381      | )          |
| Price-level  restatement                                  |       | 49,677,740    |       | 3,540,263      |       | (4,971,274   | )          | 5,522,778    |       | —                     |       | —        |       | —                     |       | 53,769,507    |       |
| Interim dividend                                          |       | —        |       | —         |       | —       |       | —       |       | —                     |       | (36,242,795   | )          | —                     |       | (36,242,795   | )          |
| Net income for  the year                                  |       | —        |       | —         |       | —       |       | —       |       | —                     |       | —        |       | 285,960,366                |       | 285,960,366   |       |
|                                                      |       |          |       |           |       |         |       |         |       |                       |       |          |       |                       |       |          |       |
| As of  December 31, 2006                             |       | 2,415,284,412 |       | 172,124,213    |       | (238,342,305 | )          | 271,279,769  |       | (181,751                   | )          | (36,242,795   | )          | 285,960,366                |       | 2,869,881,909 |       |
|                                                      |       |          |       |           |       |         |       |         |       |                       |       |          |       |                       |       |          |       |
| As of  December 31, 2006 (1)                         |       | 2,824,882,834 |       | 201,314,070    |       | (278,761,824 | )          | 317,285,020  |       | (212,574                   | )          | (42,389,065   | )          | 334,455,240                |       | 3,356,573,701 |       |
|                                                      |       |          |       |           |       |         |       |         |       |                       |       |          |       |                       |       |          |       |
| As of  January 1, 2007                               |       | 2,415,284,412 |       | 172,124,213    |       | (238,342,305 | )          | 271,279,769  |       | (181,751                   | )          | (36,242,795   | )          | 285,960,366                |       | 2,869,881,909 |       |
| Transfer of prior  year income to retained earnings       |       | —        |       | —         |       | —       |       | 249,535,820  |       | 181,751                    |       | 36,242,795    |       | (285,960,366               | )          | —        |       |
| Investment equity  variations                             |       | —        |       | —         |       | (7,702,898   | )          | —       |       | —                     |       | —        |       | —                     |       | (7,702,898    | )          |
| Final dividend N°  75                                |       | —        |       | —         |       | —       |       | (159,675,172 | )          | —                     |       | —        |       | —                     |       | (159,675,172  | )          |
| Reserve Technical  Bulletin No. 72                   |       | —        |       | —         |       | (56,695,443  | )          | —       |       | —                     |       | —        |       | —                     |       | (56,695,443   | )          |
| Cumulative  translation adjustment                        |       | —        |       | —         |       | (115,113,442 | )          | —       |       | —                     |       | —        |       | —                     |       | (115,113,442  | )          |
| Price-level  restatement                                  |       | 178,731,046   |       | 12,737,192     |       | (17,637,331  | )          | 27,842,117   |       | —                     |       | (190,784      | )          | —                     |       | 201,482,240   |       |
| Interim dividend                                          |       | —        |       | —         |       | —       |       | —       |       | —                     |       | (17,343,973   | )          | —                     |       | (17,343,973   | )          |
| Net income for  the year                                  |       | —        |       | —         |       | —       |       | —       |       | —                     |       | —        |       | 188,376,410                |       | 188,376,410   |       |
|                                                      |       |          |       |           |       |         |       |         |       |                       |       |          |       |                       |       |          |       |
| As of  December 31, 2007                             |       | 2,594,015,458 |       | 184,861,405    |       | (435,491,419 | )          | 388,982,534  |       | —                     |       | (17,534,757   | )          | 188,376,410                |       | 2,903,209,631 |       |
|                                                      |       |          |       |           |       |         |       |         |       |                       |       |          |       |                       |       |          |       |
| As of  December 31, 2007 (1)                         |       | 2,824,882,834 |       | 201,314,070    |       | (474,250,155 | )          | 423,601,980  |       | —                     |       | (19,095,350   | )          | 205,141,910                |       | 3,161,595,289 |       |
| As of January 1,  2008                               |       | 2,594,015,458 |       | 184,861,405    |       | (435,491,419 | )          | 388,982,534  |       | —                     |       | (17,534,757   | )          | 188,376,410                |       | 2,903,209,631 |       |
| Transfer of prior  year income to retained earnings       |       | —        |       | —         |       | —       |       | 170,841,653  |       | —                     |       | 17,534,757    |       | (188,376,410               | )          | —        |       |
| Investment equity  variations                             |       | —        |       | —         |       | 11,489,022   |       | —       |       | —                     |       | —        |       | —                     |       | 11,489,022    |       |
| Final dividend N°  77                                |       | —        |       | —         |       | —       |       | (111,424,065 | )          | —                     |       | —        |       | —                     |       | (111,424,065  | )          |
| Reserve Technical  Bulletin No. 72                   |       | —        |       | —         |       | 13,374       |       | —       |       | —                     |       | —        |       | —                     |       | 13,374        |       |
| Cumulative  translation adjustment                        |       | —        |       | —         |       | 123,179,289  |       | —       |       | —                     |       | —        |       | —                     |       | 123,179,289   |       |
| Price-level  restatement                                  |       | 230,867,376   |       | 16,452,665     |       | (38,758,736  | )          | 41,913,244   |       | —                     |       | (351,822      | )          | —                     |       | 250,122,727   |       |
| Interim dividend                                          |       | —        |       | —         |       | —       |       | —       |       | —                     |       | (50,260,267   | )          | —                     |       | (50,260,267   | )          |
| Net income for  the year                                  |       | —        |       | —         |       | —       |       | —       |       | —                     |       | —        |       | 570,883,101                |       | 570,883,101   |       |
|                                                      |       |          |       |           |       |         |       |         |       |                       |       |          |       |                       |       |          |       |
| As of  December 31, 2008                             |       | 2,824,882,834 |       | 201,314,070    |       | (339,568,470 | )          | 490,313,366  |       | —                     |       | (50,612,089   | )          | 570,883,101                |       | 3,697,212,812 |       |
|                                                      |       |          |       |           |       |         |       |         |       |                       |       |          |       |                       |       |          |       |
| As of  December 31, 2008 (2)                         |       | 4,438,499     |       | 316,308        |       | (533,535     | )          | 770,388      |       | —                     |       | (79,522       | )          | 896,980                    |       | 5,809,117     |       |

 

----

(1) Restatedin thousands of constant Chilean pesos as of December 31, 2008.

(2) Expressedin thousands of US$ as of December 31, 2008

 

The accompanyingnotes are an integral part of these consolidated financial statements.

 

F-24

----

 

 

Table of Contents

** **

**ENERSISS.A. AND SUBSIDIARIES**

** **

**NOTES TO THE CONSOLIDATED FINANCIALSTATEMENTS**

 

(Restated forgeneral price-level changes and expressed in thousands of constant

Chilean pesos of December 31,2007, except as stated)

As of and for theyears ended December 31, 2006, 2007 and 2008

 

**Note 1.**      Description of Business

 

ENERSIS S.A., “Enersis”or the “Company” is registered in the Securities Register under No.0175 and isregulated by the Chilean Superintendence of Securities and Insurance (the“SVS”). The Company issued publicly registered American Depositary Receiptswith the U.S. Securities and Exchange Commission (“SEC”) in 1993 and 1996.Enersis  is a reporting company under theUnited States Securities and Exchange Act of 1934.

 

The Company’ssubsidiaries, Chilectra S.A. (formerly Elesur S.A.), Empresa Nacional deElectricidad S.A. (“Endesa Chile”), Pehuenche S.A. and Aguas Santiago PonienteS.A., are registered in the Securities Register under No. 0931, 0114, 0293and 0972, respectively.

 

**Note 2.**      Summary of Significant Accounting Policies

** **

**a)****    ****General**

 

(i)    The consolidated financial statements ofthe Company have been prepared in accordance with generally accepted accountingprinciples in Chile and the regulations established by the SVS (collectively“Chilean GAAP”), and the specific corporate regulations of Law No.18,046,related to the formation, registration and liquidation of Chilean corporations,among others. Certain amounts in the prior year’s financial statements havebeen reclassified to conform to the current year’s presentation.

 

The preparation offinancial statements in conformity with Chilean GAAP requires management tomake estimates and assumptions that affect the reported amounts of assets andliabilities, disclosures of contingent assets and liabilities as of the date ofthe financial statements, and the reported amounts of revenues and expensesduring the reporting year.  Actualresults could differ from those estimates.

 

In certain casesgenerally accepted accounting principles in Chile require that assets orliabilities be recorded or disclosed at their fair values.

 

(ii)   **Reclassifications -**For purposes of comparison, the followingreclassifications were made in the 2006 and 2007 financial statements:

 

**2007  Balance sheet reclassifications**

 
| ** **                  | ** ** | **Charges** | ** ** | ** **                   | ** ** | **Credits** | ** ** |
|-----------------------------|------------|-------------|------------|------------------------------|------------|-------------|------------|
| ** **                  | ** ** | **ThCh$**   | ** ** | ** **                   | ** ** | **ThCh$**   | ** ** |
|                        |       |        |       |                         |       |        |       |
| Building and infrastructure |       | 101,456,022 |       | Technical appraisals         |       | 101,456,022 |       |
| Long term Accrued expenses  |       | 10,877,864  |       | Short term accrued  expenses |       | 10,877,864  |       |

 

**2007  Statement of operations reclassifications**

 
| ** **       | ** ** | **Charges** | ** ** | ** **    | ** ** | **Credits** | ** ** |
|------------------|------------|-------------|------------|---------------|------------|-------------|------------|
| ** **       | ** ** | **ThCh$**   | ** ** | ** **    | ** ** | **ThCh$**   | ** ** |
|             |       |        |       |          |       |        |       |
| Financial Income |       | 1,444,829   |       | Cost of sales |       | 189,613,645 |       |
| Sales            |       | 188,168,816 |       |          |       |        |       |

 

F-25

----

Table of Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

**2006  Statement of operations reclassifications**

 
| ** **       | ** ** | **Charges** | ** ** | ** ** | ** ** | **Credits** | ** ** |
|------------------|------------|-------------|------------|------------|------------|-------------|------------|
| ** **       | ** ** | **ThCh$**   | ** ** | ** ** | ** ** | **ThCh$**   | ** ** |
|             |       |        |       |       |       |        |       |
| Financial Income |       | 743,251     |       | Sales      |       | 743,251     |       |

 

(iii)   Theaccompanying financial statements reflect the consolidated results ofoperations of Enersis S.A. and its subsidiaries. All significant intercompanytransactions have been eliminated in consolidation. Investments in companies inthe development stage are accounted for using the equity method, except thatincome or losses are included directly in equity instead of being reflected inthe Company’s consolidated statement of operations. The Company consolidatesthe financial statements of companies in which it controls over 50% of thevoting shares, provided there are no substantive minority participating rightsthat prevent control, as detailed as follows:

 
| ** **                                                                | ** ** | **Percentage participation in voting rights as of December 31,** | ** ** |
|---------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                                | ** ** | **2006**                                                              | ** ** | **2007** | ** ** | **2008** | ** ** |
| **Company**                                                               | ** ** | **Economic**                                                          | ** ** | **Voting** | ** ** | **Economic** | ** ** | **Voting** | ** ** | **Economic** | ** ** | **Voting** | ** ** |
|                                                                      |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |
| Synapsis Soluciones y  Servicios IT Ltda.                                 |       | 100.00                                                                |       | 100.00 |   | 100.00 |   | 100.00 |   | 100.00 |   | 100.00 |   |
| Inmobiliaria Manso de Velasco Ltda.                                       |       | 100.00                                                                |       | 100.00 |   | 100.00 |   | 100.00 |   | 100.00 |   | 100.00 |   |
| Cía. Americana de  Multiservicios Ltda.                              |       | 100.00                                                                |       | 100.00 |   | 100.00 |   | 100.00 |   | 100.00 |   | 100.00 |   |
| Endesa Chile                                                              |       | 59.98                                                                 |       | 59.98 |   | 59.98 |   | 59.98 |   | 59.98 |   | 59.98 |   |
| Chilectra S.A. (former Elesur) (1)                                        |       | 99.08                                                                 |       | 99.08 |   | 99.08 |   | 99.08 |   | 99.08 |   | 99.08 |   |
| Inversiones Distrilima S.A.                                               |       | 55.90                                                                 |       | 68.39 |   | 55.90 |   | 68.39 |   | 55.90 |   | 68.39 |   |
| Empresa Distribuidora Sur  S.A. (Edesur)                                  |       | 65.39                                                                 |       | 65.89 |   | 65.39 |   | 65.89 |   | 65.39 |   | 65.89 |   |
| Codensa S.A. (2)                                                          |       | 21.73                                                                 |       | 25.71 |   | 21.73 |   | 25.71 |   | 21.73 |   | 25.71 |   |
| Investluz (3)                                                             |       | 59.51                                                                 |       | 100.00 |   | 59.51 |   | 100.00 |   | 59.51 |   | 100.00 |   |
| Ampla Energía e Serviços  S.A.                                  |       | 69.88                                                                 |       | 91.93 |   | 69.88 |   | 91.93 |   | 69.88 |   | 91.93 |   |
| Ampla Investimentos e  Serviços S.A.                                 |       | 69.88                                                                 |       | 91.93 |   | 69.88 |   | 91.93 |   | 69.88 |   | 91.93 |   |
| Compañía de Interconexión  Energética S.A. (Cien) (4) |       | 53.57                                                                 |       | 100.00 |   | 53.57 |   | 100.00 |   | 53.57 |   | 100.00 |   |
| Central Geradora  Termeléctrica Fortaleza S.A. (4)                   |       | 53.57                                                                 |       | 100.00 |   | 53.57 |   | 100.00 |   | 53.57 |   | 100.00 |   |
| Endesa Brasil S.A. (4)                                                    |       | 53.57                                                                 |       | 71.52 |   | 53.57 |   | 71.52 |   | 53.57 |   | 71.52 |   |
| Cachoeira Dourada S.A.                                                    |       | 53.36                                                                 |       | 99.61 |   | 53.36 |   | 99.61 |   | 53.36 |   | 99.61 |   |

 

----

| (1)    | In the extraordinary  meeting of Elesur S.A., held on March 31, 2006, shareholders approved  the name change. The merger of Chilectra (formerly Elesur) and Chilectra  S.A., approved in general meetings of their shareholders held on  March 31, 2006, became effective on April 1, 2006. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                       |
|   | On May 27, 2004,  99.9989% of Elesur S.A. was purchased, therefore, as from that date it is  consolidated into Enersis S.A. financial statements.                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                       |
| (2)    | Codensa S.A. is  consolidated because of the majority presence on the board of directors,  obtained through the shareholders’ agreement of January 27, 2004,  between Endesa Latinoamérica and Enersis S.A.                                                                                 |
|   |                                                                                                                                                                                                                                                                                                       |
| (3)    | Investluz is Parent Company of Companhia Energética do Céará S.A.  Coelce.                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                       |
| (4)    | As a result of the  creation of the Brazilian holding company, Endesa Brasil S.A. (“Endesa  Brasil”) (see Note 11 (f) i, this company and its subsidiaries were  included in the consolidated financial statements of Enersis S.A.                                                          |

 

F-26

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Table of Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

(iv)          Consolidated subsidiaries of Endesa Chile are detailedas follows:

 

The table below setsforth the percentage participation of Endesa Chile in its consolidatedcompanies:

 
| ** **                                                        | ** ** | **Percentage participation in  voting rights as of December 31,** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| ** **                                                        | ** ** | **2006**                                                               | ** ** | **2007** | ** ** | **2008** | ** ** |
| **Company name**                                                  | ** ** | **Total**                                                              | ** ** | **Total** | ** ** | **Direct** | ** ** | **Indirect** | ** ** | **Total** | ** ** |
| Enigesa S.A.  (Chile)                                             |       | 100.00                                                                 |       | 100.00 |   | 99.51 |   | 0.49 |   | 100.00 |   |
| Ingendesa S.A. (Chile)                                            |       | 100.00                                                                 |       | 100.00 |   | 98.75 |   | 1.25 |   | 100.00 |   |
| Pehuenche S.A. (Chile)                                            |       | 92.65                                                                  |       | 92.65 |   | 92.65 |   | — |   | 92.65 |   |
| Endesa Argentina S.A. (Argentina)                                 |       | 99.99                                                                  |       | 99.99 |   | 99.66 |   | 0.33 |   | 99.99 |   |
| Pangue S.A.(1) (Chile                                        |       | 94.99                                                                  |       | 94.99 |   | 94.98 |   | 0.01 |   | 94.99 |   |
| Hidroinvest S.A. (Argentina) (2)                                  |       | 69.93                                                                  |       | 96.09 |   | 41.94 |   | 54.15 |   | 96.09 |   |
| Hidroeléctrica El Chocón S.A. (Argentina) (2)           |       | 65.19                                                                  |       | 67.67 |   | 2.48 |   | 65.19 |   | 67.67 |   |
| Endesa Costanera S.A. (Argentina) (2) (3)                    |       | 64.26                                                                  |       | 69.77 |   | 12.33 |   | 57.43 |   | 69.77 |   |
| Endesa Brasil Participacoes Ltda. (Brazil)(4)                     |       | 100.00                                                                 |       | 100.00 |   | — |   | — |   | — |   |
| Sociedad Concesionaria Túnel El Melón S.A.(Chile) (5)   |       | 99.96                                                                  |       | 100.00 |   | 99.99 |   | 0.01 |   | 100.00 |   |
| Compañía Eléctrica Cono Sur S.A. (Pánama) (6) |       | 100.00                                                                 |       | 100.00 |   | — |   | — |   | — |   |
| Emgesa S.A. (Colombia) (7) (8)                               |       | 23.45                                                                  |       | 26.87 |   | 26.87 |   | — |   | 26.87 |   |
| Central Eólica Canela S.A.  (Chile) (9)                      |       | —                                                                 |       | 75.00 |   | — |   | 75.00 |   | 75.00 |   |
| Edegel S.A. (Peru) (10)                                           |       | 55.44                                                                  |       | 55.44 |   | — |   | 54.20 |   | 54.20 |   |
| Generandes Perú S.A. (Peru) (10) (11)                   |       | 59.63                                                                  |       | 59.63 |   | — |   | 61.00 |   | 61.00 |   |
| Southern Cone Power  Argentina S.A. (Argentina) (3)               |       | —                                                                 |       | 100.00 |   | 98.00 |   | 2.00 |   | 100.00 |   |
| Compañía Eléctrica San Isidro S.A. (Chile)         |       | 100.00                                                                 |       | 100.00 |   | 100.00 |   | — |   | 100.00 |   |
| Compañía Eléctrica Tarapacá S.A. (Chile)      |       | 100.00                                                                 |       | 100.00 |   | 99.94 |   | 0.06 |   | 100.00 |   |
| Inversiones Endesa Norte S.A. (Chile)                             |       | 100.00                                                                 |       | 100.00 |   | 99.99 |   | 0.01 |   | 100.00 |   |
| Ingendesa Do Brasil Limitada (Brazil)                             |       | 100.00                                                                 |       | 100.00 |   | 1.00 |   | 99.00 |   | 100.00 |   |
| Endesa Eco S.A. (Chile)  (9)                                      |       | 100.00                                                                 |       | 100.00 |   | 99.99 |   | 0.01 |   | 100.00 |   |

 

----

(1)     See Note 11 (g) (i).

(2)     See Note 11 (g) (v).

(3)     See Note 11 (g) (iv).

(4)     See Note 11 (h) (iii).

(5)     See Note 11 (g) (vi).

(6)     See Notes 11 (h) (ii) and 11 (f) (ii).

(7)     Endesa Chile exercisescontrol over this company pursuant to a shareholders’ agreement datedAugust 30, 2007 held between the Company and Endesa Latinoamérica S.A.

(8)     See Notes 11 (f) (iii), 11(g) (iii) and 11 (h) (i)

(9)     See Note 11 (e) (iii).

(10)   See Notes 11 (g) (ii)

(11)  On June 1, 2008, the Scotiabank interest group,which owned 2.27% in Generandes Perú S.A., withdrew its participation inexchangefor 1.24% of Edegel S.A. Therefore, Endesa group participation inGenerandes Perú S.A. increased from 59.63% to 61%.

 

F-27

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

The participation invoting rights is equal to economic participation in all subsidiaries except forthose presented as follows:

 
| ** **                                  | ** ** | **Percentage of economic**                | ** ** |
|---------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                  | ** ** | **participation as of December 31,** | ** ** |
| ** **                                  | ** ** | **2006**                                  | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                  | ** ** | **%**                                     | ** ** | **%** | ** ** | **%** | ** ** |
|                                        |       |                                      |       |   |   |   |   |
| Edegel S.A. (1)                             |       | 33.06                                     |       | 33.06 |   | 33.06 |   |
| Hidroeléctrica El Chocón S.A. (2) |       | 47.45                                     |       | 65.37 |   | 65,37 |   |

 

----

(1)     See Notes 11 (g) (ii)

(2)     See Note 11 (g) (v).

 

**b)****    ****Years covered**

** **

These financialstatements reflect the Company’s financial position as of December 31,2007 and 2008, and the results of its operations, the changes in itsshareholders’ equity and its cash flows for the years ended December 31,2006, 2007 and 2008.

 

**c)****    ****Constant currency restatement**

** **

The cumulative inflationrate in Chile as measured by the Chilean Consumer Price Index (“CPI”) for thethree-year period ended December 31, 2008 was approximately 18.4%.

 

Chilean GAAP requiresthat the financial statements be restated to reflect the full effects of gainor loss in the purchasing power of the Chilean peso in the financial positionand results of operations of reporting entities. The method described below isbased on a model that enables calculation of net inflation gains or lossescaused by monetary assets and liabilities exposed to changes in the purchasingpower of local currency. The model prescribes that the historical cost of allnon-monetary accounts be restated for general price-level changes between thedate of origin of each item and the year-end.

 

The financial statementsof the Company have been price-level restated in order to reflect the effectsof the changes in the purchasing power of the Chilean currency during eachyear. All non-monetary assets and liabilities, equity and income statementaccounts have been restated to reflect the changes in the CPI from the datethey were acquired or incurred to year-end (see also Note 24).

 

The price levelrestatement gain or loss included in net income reflects the effects of Chileaninflation on the assets and liabilities held by the Company.

 

The restatements werecalculated using the official consumer price index of the National Institute ofStatistics and based on the “prior month rule,” in which the inflationadjustments are based on the CPI at the close of the month preceding the closeof the respective year or transaction. This index is considered by the businesscommunity, the accounting profession and the Chilean government to be the indexthat most closely complies with the technical requirement to reflect thevariation in the general level of prices in Chile, and consequently it iswidely used for financial reporting purposes.

 

The values of the Chileanconsumer price indices used to reflect the effects of the changes in thepurchasing power of the Chilean peso (“price-level restatement”)for accountingpurposes are as follows:

 
| ** **             | ** ** | ** ** | ** ** | **Change over**      | ** ** |
|------------------------|------------|------------|------------|----------------------|------------|
| ** **             | ** ** | ** ** | ** ** | **Previous**         | ** ** |
| ** **             | ** ** | **Index**  | ** ** | **November 30** | ** ** |
|                   |       |       |       |                 |       |
| November 30, 2006 |       | 100.00     |       | 2.1                  | %          |
| November 30, 2007 |       | 107.40     |       | 7.4                  | %          |
| November 30, 2008 |       | 116.96     |       | 8.9                  | %          |

 

F-28

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

By way of comparison, theactual values of the Chilean consumer price indices as of the balance sheetdates are as follows:

 
| ** **             | ** ** | ** ** | ** ** | **Change over**      | ** ** |
|------------------------|------------|------------|------------|----------------------|------------|
| ** **             | ** ** | ** ** | ** ** | **Previous**         | ** ** |
| ** **             | ** ** | **Index**  | ** ** | **December 31** | ** ** |
|                   |       |       |       |                 |       |
| December 31, 2006 |       | 100.00     |       | 2.6                  | %          |
| December 31, 2007 |       | 107.80     |       | 7.8                  | %          |
| December 31, 2008 |       | 115.45     |       | 7.1                  | %          |

 

The above-mentionedprice-level restatements do not purport to represent appraisal or replacementvalues and are only intended to restate all non-monetary financial statementcomponents in terms of local currency of a single purchasing power and toinclude in net income or loss for each year the gain or loss in purchasingpower arising from the holding of monetary assets and liabilities exposed tothe effects of inflation.

 

**Index-linkedassets and liabilities**

 

Assets and liabilitiesthat are denominated in index-linked units of account are stated at theyear-end values of the respective units of account. The principal index-linkedunit used in Chile is the Unidad de Fomento (“UF”), which is adjusted daily toreflect the changes in Chile’s CPI. Certain of the Company’s investments arelinked to the UF. When the Company’s indexed liabilities exceed its indexedassets, the increase (decrease) in the index results in a net loss (gain) onindexation. Values for the UF are as follows (historical Chilean pesos per UF):

 
| ** **             | ** ** | **Ch$**   | ** ** |
|------------------------|------------|-----------|------------|
|                   |       |      |       |
| December 31, 2006 |       | 18,336.38 |       |
| December 31, 2007 |       | 19,622.66 |       |
| December 31, 2008 |       | 21,452.57 |       |

 

**Comparativefinancial statements**

 

For comparative purposes,the 2006 and 2007 consolidated financial statements and the amounts disclosedin the related Notes have been restated in terms of the purchasing power ofChilean pesos as of December 31, 2008.

 

This updating does notchange the prior years’ statements or information in any way except to updatethe amounts to constant Chilean pesos of similar purchasing power.

 

**Conveniencetranslation to U.S. dollars**

** **

The financial statementsare stated in Chilean pesos. The translations of Chilean pesos into dollars areincluded solely for the convenience of the reader, using the observed exchangerate reported by the Chilean Central Bank as of December 31, 2008 ofCh$636.45 to $1.00. The convenience translations should not be construed asrepresentations that the Chilean peso amounts have been, could have been, orcould in the future be, converted into dollars at this or any other rate ofexchange.

 

F-29

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

**d)****    ****Assets and liabilities in foreigncurrencies**

** **

Assets and liabilitiesdenominated in foreign currencies are detailed in Note 32. These amounts havebeen stated at the observed exchange rates reported by the Central Bank ofChile as of each December 31, as follows:

 
| ** **             | ** ** | **Symbol** | ** ** | **As of December 31,** | ** ** |
|------------------------|------------|------------|------------|-----------------------------|------------|
| **Currency**           | ** ** | **Used**   | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **             | ** ** | ** ** | ** ** | **Ch$**                     | ** ** | **Ch$** | ** ** | **Ch$** | ** ** |
|                   |       |       |       |                        |       |   |   |   |   |
| United States dollar   |       | US$        |       | 532.39                      |       | 496.89 |   | 636.45 |   |
| British pound sterling |       | £     |       | 1,041.86                    |       | 989.43 |   | 918.27 |   |
| Colombian peso         |       | $Col       |       | 0.24                        |       | 0.25 |   | 0.28 |   |
| New Peruvian sol       |       | Soles      |       | 166.58                      |       | 165.96 |   | 202.69 |   |
| Brazilian real         |       | Rs         |       | 249.01                      |       | 280.52 |   | 272.34 |   |
| Japanese yen           |       | ¥     |       | 4.47                        |       | 4.41 |   | 7.05 |   |
| Euro                   |       | €     |       | 702.08                      |       | 730.94 |   | 865.80 |   |
| Unidad de Fomento (UF) |       | UF         |       | 18,336.38                   |       | 19,622.66 |   | 21,452.57 |   |
| Argentine peso         |       | $Arg       |       | 173.87                      |       | 157.79 |   | 184.32 |   |

 

**e)****    ****Time deposits and marketablesecurities**

** **

Time deposits arepresented at cost plus accrued interest and UF indexation adjustments, asapplicable. Marketable securities include investments in quoted shares that arevalued at the lower of cost or market value. The investments are in bothshort-term highly liquid fixed rate investment shares and mutual fund unitsvalued at cost plus interest and indexation or redemption value, as appropriate(Note 4).

 

**f)****    ****Allowance for doubtful accounts**

** **

The estimates for theallowance for doubtful accounts have been made considering the aging and natureof the accounts receivable. Accounts receivable are classified as current orlong-term, depending on their collection terms. Current and long-term tradeaccounts receivable, notes receivable and other receivables are presented netof allowances for doubtful accounts (see Note 5). The allowance for doubtfulaccounts amounted to ThCh$157,729,911, ThCh$203,685,907 and ThCh$179,623,370 asof December 31, 2006, 2007 and 2008, respectively. In addition, the totalsum owed by companies that have gone into bankruptcy amounting toThCh$1,471,479 in 2006, ThCh$ 1,512,322 in 2007 and ThCh$1,478,461 in 2008 isincluded in the bad debt allowance estimation.

 

**g)****   ****Inventories**

** **

Inventory of materials intransit and operation and maintenance materials on hand are valued at the lowerof price-level restated cost or net realizable value.

 

In the case of realestate projects under development, inventory includes the cost of land,demolition, urbanization, payments to contractors and other direct costs.

 

The costs and revenues ofconstruction in progress are accounted for under the completed contract methodin accordance with Technical Bulletin No. 39 of the Chilean Institute ofAccountants and are included in current assets as their realization is expectedin the short-term.

 

F-30

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Table of Contents

** **

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

** **

**h)****            ****Property, plant and equipment**

** **

Property, plant andequipment are valued at net replacement cost as determined by the formerSuperintendence of Electric and Gas Services (SEG) adjusted for price-levelrestatement in accordance with D.F.L. No.4 of 1959. The latest valuation underthe D.F.L. 4 was in 1980.

 

Property, plant andequipment acquired after the latest valuation of net replacement cost are shownat cost, plus price-level restatement. Interest on debt directly obtained tofinance construction of power generation projects is capitalized during theterm of construction.

 

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

 

Under Technical BulletinBulletin No. 33, the Company is required to evaluate the recoverability ofits property, plant and equipment when certain indicators of impairment exist.The Company has not identified any impairment to property, plant and equipmentas a result of applying Technical Bulletin No. 33.

 

**i)****               ****Depreciation**

** **

Depreciation expense is generally calculated on the price-levelrestated balances using the straight-line method over the estimated usefullives of the assets (see note 10). Certain property, plant and equipment aredepreciated using the unit-of-production method when this method betterreflects the depreciation expenses of these assets.

 

**j)****               ****Leased assets**

** **

Leased assets, whosecontracts have financial lease characteristics, are accounted for as anacquisition of property, plant and equipment, recognizing the total obligationand the unaccrued interest. Said assets do not legally belong to theCompany.  For this reason, as long as thepurchase option is not exercised, it will not be able to freely dispose ofthem.

 

**k)****           ****Power installations financed by thirdparties**

** **

As established by D.F.L.1 of the Ministry of Mines dated September 13, 1982, power facilitiessubsidized by third parties are treated as reimbursable contributions as suchfacilities form part of the Company’s plant and equipment.

 

Contributions completedprior to D.F.L. 1 are deducted from Plant and equipment and their depreciationis charged to Power facilities financed by third parties.

 

**l)****               ****Investments in relatedcompanies**

** **

The Company classifies an investment as an investment in a relatedcompany when it has the ability to exercise significant influence over theoperations of such company. Investments in related companies are included in“Other assets” using the equity method. This accounting method recognizes theCompany’s proportionate share in the net income or loss of each investee on anaccrual basis in income****(Note 11).

 

Investments in foreignaffiliates are recorded in accordance with Technical Bulletin No.64 of theChilean Association of Accountants. Under Technical Bulletin No.64 of theChilean Association of Accountants, investments in foreign subsidiaries areprice-level restated, the effects of which are reflected in income, while theeffects of the foreign exchange gains or losses between the Chilean peso andthe US dollar on the foreign investment measured in US dollars, are reflectedin equity in the account “Cumulative Translation Adjustment”.

 

F-31

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

The Company evaluates the recoverability of its investments in relatedcompanies whenever events or changes in circumstances indicate that thecarrying amount of the investments may not be recoverable. Such assessmentrequires determining the fair values of the equity method investments. Fairvalue is determined using valuation methodologies, including discounted cashflows and the ability of the investee to sustain an earnings capacity thatjustifies the carrying amount of the investment. In the case the fair value isless than the carrying value and such decline in value is considered to beother than temporary, a write down is recorded. As indicated in Note 11, duringthe year ended December 31, 2007 the Company recorded an impairment of itsinvestment in Inversiones Gas Atacama Holding Limitada amounting to ThCh$48,890,387(historical Chilean pesos)  as a resultof an other-than-temporary impairment of the investment. The impairment chargeincludes a write down of the investment to its recoverable value and animpairment of goodwill which was recorded over the investment.

 

**m)****         ****Intangibles, other than goodwill**

** **

Intangible assets arerecorded at acquisition cost and are subsequently price-level restated. Suchassets are amortized over their estimated useful lives, not to exceed twentyyears. Intangibles other than goodwill correspond mainly to easements, rightsof way and water rights.

 

**n)****            ****Severance indemnities**

** **

The Company is obliged topay its employees severance indemnities under collective bargaining agreementsin Chile. Such indemnity is stated at the present value of the benefit underthe vested cost method, discounted at 6.5% . See Note 37 II l.

 

**o)****             ****Revenue recognition**

** **

The Company’s revenuesare primarily derived from electric power generation and distribution servicesand include energy supplied and unbilled at each year-end. Revenues are valuedusing rates in effect when services are provided to customers. Accrued unbilledrevenues are presented in current assets as trade receivables and thecorresponding cost is included in cost of sales.

 

The Company also recognizesrevenues for amounts received from highway tolls for motorized vehicles, incomerelated to computer advisory services, engineering services, and sale ofmaterials.

 

**p)****             ****Cost of sales and Administrative andselling expenses**

** **

Thecost of sales line item includes: purchased energy and power, materials, fuel,tolls and energy transportation cost, direct production salaries, productiveassets’ depreciation, amortization, and maintenance and operational costs. Thepurchase of power amounted to ThCh$1,381,025,723, ThCh$1,415,814,999 and ThCh$1,937,510,480 for the years ended December 31, 2006, 2007 and 2008,respectively. The administrative and selling expense line item includes:general and administrative expenses, materials and office supplies, overhead salaries,bad debt expense, non-productive assets’ amortization and depreciation.

 

**q)****             ****Income tax and deferred income taxes**

** **

For the years ended December 31,2006, 2007 and 2008, the Company recorded current tax expense (net) determinedin accordance with the laws and regulations in each country in which itoperates of ThCh$279,379,996, ThCh$236,069,385 and ThCh$368,213,415, respectively.  Additionally, it recorded a deferred taxexpense of ThCh$(168,022,416) in 2006, deferred tax expense ThCh$39,608,173 in2007 and ThCh$82,761,120 in 2008.The Company records deferred income taxes in accordance with Technical BulletinNo.60 of the Chilean Association of Accountants, and with Circular No.1466issued on January 27, 2000 by the SVS, using the liability method, recordingdeferred income taxes for effects of 

 

F-32

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

temporary differencesbetween the book and tax bases of assets and liabilities. Deferred income taxesare calculated using  tax rates estimatedto be in effect at the time of reversal of the temporary differences that gaverise to them.

 

**r)****             ****Accrued vacation expense**

** **

In accordance withTechnical Bulletin No.47 issued by the Chilean Association of Accountants,employee vacation expense is recorded on an accrual basis.

 

**s)****             ****Purchase with resale agreements**

** **

Purchase with resale agreementsare included in “Other current assets” and are stated at cost plus interest andindexation accrued at year-end, in conformity with the related contracts.

 

**t)****               ****Statements of cash flows**

** **

The ConsolidatedStatements of Cash Flows have been prepared in accordance with the indirectmethod.

 

Investments considered ascash equivalents, as indicated in point 6.2 of Technical Bulletin No.50 issuedby the Chilean Association of Accountants, include time deposits, investmentsin fixed income securities classified as marketable securities, repurchaseagreements classified as other current assets, and other cash balancesclassified as other accounts receivable with maturities less than 90 days.

 

For classificationpurposes, cash flows from operations include collections from clients andpayments to suppliers, payroll and taxes.

 

**u)****            ****Financial derivative contracts**

** **

As of December 31,2006, 2007 and 2008 the Company and its subsidiaries have forward contracts,currency swaps, and interest rate swaps and collars with several financialinstitutions.  Such contracts are mainlyused by the Company to hedge against foreign currency and interest riskexposures, which are recorded according to Technical Bulletin No.57 of theChilean Association of Accountants.

 

**v)****              ****Goodwill and negativegoodwill**

** **

Prior to January 1,2004, goodwill arose from the excess of the purchase price of companiesacquired over their net book value; negative goodwill arose when net book valueexceeded the purchase price of companies acquired.

 

Beginning January 1,2004, the Company adopted Technical Bulletin No.72 of the Chilean Associationof Accountants, which changes the basis for determining accounting for goodwilland negative goodwill generated in transactions after January 1, 2004,based on an allocation of the purchase price based on the fair value of theidentifiable assets acquired and identifiable liabilities assumed. Goodwill andnegative goodwill are also generated with the purchase of equity methodinvestees. Both goodwill and negative goodwill are normally amortized over themaximum period of twenty years considering the expected period of return of theinvestments.

 

Whenever events orchanges in circumstances indicate potential impairment of recorded goodwill, agoodwill impairment test is performed by the Company. Goodwill is tested forimpairment at the level of cash generating units (“CGU”).

 

Thetesting of goodwill for impairment involves two steps:

 

F-33

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Table of Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

1.             The first step is to compareeach CGU’s fair value with its carrying amount, including goodwill. The CGU’sfair value is determined using market prices, or, if not available, valuationtechniques including discounted cash flow approaches. If a CGU’s carryingamount exceeds its fair value, an indicator for goodwill impairment exists andstep two is performed.

2.             The second stepis to compare the implied fair value of goodwill with its carrying amount. Theimplied fair value represents the excess of the CGU’s net identifiable assetsover the CGU’s net assets at fair value. Any excess of the carrying amount of goodwillover its implied fair value is recorded as an impairment loss, writing down thecarrying amount of goodwill to its implied fair value.

 

Duringthe year ended December 31, 2007, the Company recorded an impairment ofgoodwill over its equity method investment in Inversiones Gas Atacama Limitadaamounting to ThCh$53,241,631. (See Note 11)

 

Goodwill related to investments accounted for under the equity methodis tested for impairment together with the associated investment as thoughgoodwill formed part of the carrying amount of the investment. See Note 2 l).

 

**w)****           ****Pension and post-retirement benefits**

** **

Pension andpost-retirement benefits are recorded based on actuarially determined projectedbenefit obligations in accordance with the respective collective bargainingcontracts of employees.  (See Note 37 IIl.)

 

**x)****             ****Bonds**

** **

Bonds payable arerecorded at the face value of the bonds. The difference between the face valueand the issuance proceeds, equal to the premium or discount, is deferred andamortized over the term of the bonds.

 

**y)****             ****Investments in other companies**

** **

Investments in othercompanies are presented at acquisition cost adjusted for price-levelrestatement as they do not trade in an organized market and because the Companydoes not exercise significant influence.

 

**z)****             ****Research and development costs**

** **

Costs incurred by theCompany in research and development relate mainly to water-level studies,hydroelectric research, and seismic-activity surveys which are expensed asincurred. Costs incurred in performing studies related to specific constructionprojects are capitalized.

 

**aa)****       ****Cost of shares issued**

** **

Costs incurred to dateassociated with issuance and placing of shares are recorded according to theprovisions of Circular No.1370 of 1998 of the Superintendence of Securities andInsurance. The amounts are deducted from the share premium account.

 

**bb)****         ****Litigation and other legal action**

** **

The Company has notrecognized any assets for expected recoveries, through insurance or fromothers, related to litigation and other legal actions, in the periodspresented. The Company records such recoveries only in the case that it isvirtually certain such recoveries will be realized. In the case that theCompany does record expected recoveries, the Company’s policy is to record suchamounts as an asset in our consolidated balance sheet, unless a right of offsetclearly exists.

 

As of December 31,2008, and 2007, the Company has established accruals for probable losses in theaggregate amount of ThCh$181,629,175 (ThUS$285,379) and ThCh$186,923,910 (ThUS$293,698), respectively.

 

F-34

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

**Note 3. Changes inAccounting Principles**

** **

a)              On November 14, 2006 the SVS issued Circular 1819with instructions on treating organizational and start-up costs, whichsuperseded Circular 981, effective until December 31, 2006.  This change resulted in the recording ofeffects of the losses of investee companies in development and start-up phasesin income as of January 1, 2007 and absorbtion of the accumulated deficitin the period of development at subsidiary Endesa Chile. As a result ofadoption of Circular 1819, gains or losses associated with organizational andstart-up costs previously accumulated in a special component of equity werereclassified as a transition adjustment to beginning retained earnings as of January 1,2007. The amount reclassified as of January 1, 2007 amounted toThCh$325,438, before minority interest. Pursuant to the transitional provisionof Circular 1819, prior year income statement and balance sheet were notrestated.

 

Except as indicated above,there were no others changes in accounting principles during the years ended December 31,2006, 2007 and 2008 that would affect the comparison with the prior yearfinancial statements.

 

F-35

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

**Note 4.Time Deposits**

** **

Time deposits as of eachyear end are as follows:

 
| ** **           | ** ** | ** **                         | ** ** | **2007**  | ** ** | **2008**                 | ** ** |
|----------------------|------------|------------------------------------|------------|-----------|------------|--------------------------|------------|
| **Tax Payer Number** | ** ** | **Financial Institution**          | ** ** | **Rate%** | ** ** | **Scheduled   Maturity** | ** ** | **ThCh$** | ** ** | **Rate%** | ** ** | **Scheduled   Maturity** | ** ** | **ThCh$** | ** ** |
|                 |       |                               |       |      |       |                     |       |   |   |   |   |   |   |   |   |
| Foreign              |       | Alfa mix                           |       | —    |       | —                   |       | — |   | 1.14 | % | 02-01-2009 |   | 172,439 |   |
| Foreign              |       | AFIN S.A.                          |       | 9.67      | %          | 01.03.08                 |       | 4,408,103 |   | — |   | — |   | — |   |
| Foreign              |       | Abn Amro Bank                      |       | —    |       | —                   |       | — |   | 1.04 | % | 02-01-2009 |   | 1,600,206 |   |
| Foreign              |       | Banco Bilbao Vizcaya               |       | 7.50      | %          | 01.02.08                 |       | 2,158 |   | 1.70 | % | 02-01-2009 |   | 37,259,639 |   |
| Foreign              |       | Banco Colpatria                    |       | 1.26      | %          | 01.02.08                 |       | 9,895 |   | 0.80 | % | 02-01-2009 |   | 487 |   |
| Foreign              |       | Banco Continental                  |       | —    |       | —                   |       | — |   | 0.59 | % | 02-01-2009 |   | 4,054,589 |   |
| Foreign              |       | Banco Crédito                 |       | 4.83      | %          | 01.02.08                 |       | 1,995,714 |   | 6.40 | % | 02-01-2009 |   | 810,764 |   |
| Foreign              |       | Banco Davivienda                   |       | 9.71      | %          | 0114.08                  |       | 21,920,061 |   | 0.85 | % | 02-01-2009 |   | 134 |   |
| Foreign              |       | Banco de la Nación  Argentina |       | —    |       | —                   |       | — |   | 3.23 | % | 02-01-2009 |   | 3,687,668 |   |
| Foreign              |       | Banco de Galicia                   |       | 1.54      | %          | 01.02.08                 |       | 1,970,232 |   | 1.52 | % | 02-01-2009 |   | 1,308,541 |   |
| Foreign              |       | Banco Frances                      |       | 1.13      | %          | 01.02.08                 |       | 1,055,684 |   | — |   | — |   | — |   |
| Foreign              |       | Banco Hipotecario S.A.             |       | 0.00      | %          | 01.02.08                 |       | 1,872,875 |   | — |   | — |   | — |   |
| Foreign              |       | Banco Itau                         |       | 0.96      | %          | 01.02.08                 |       | 66,291,165 |   | 1.09 | % | 02-01-2009 |   | 23,187,448 |   |
| Foreign              |       | Banco JP Morgan Chase              |       | —    |       | —                   |       | — |   | 2.73 | % | 02-01-2009 |   | 7,156,625 |   |
| Foreign              |       | Banco Merrill Linch                |       | 4.83      | %          | 01.14.08                 |       | 4,022,152 |   | — |   | — |   | — |   |
| Foreign              |       | Banco Nordeste                     |       | 1.06      | %          | 01.02.08                 |       | 157,884 |   | 0.90 | % | 02-01-2009 |   | 157,817 |   |
| Foreign              |       | Banco Paribas Luxembourg           |       | 4.09      | %          | 01.02.08                 |       | 4,111,031 |   | 0.58 | % | 02-01-2009 |   | 8,209,292 |   |
| Foreign              |       | Banco Pactual                      |       | 0.93      | %          | 01.31.08                 |       | 1,646,067 |   | 1.14 | % | 02-01-2009 |   | 83,404 |   |
| Foreign              |       | Banco Popular                      |       | —    |       | —                   |       | — |   | 0.84 | % | 02-01-2009 |   | 7,075,967 |   |
| Foreign              |       | Banco Safra                        |       | 0.85      | %          | 01.02.08                 |       | 1,531,354 |   | 1.14 | % | 02-01-2009 |   | 57,249 |   |
| Foreign              |       | Banco Rio de la Plata              |       | 1.81      | %          | 01.02.08                 |       | 4,160,033 |   | 3.20 | % | 02-01-2009 |   | 14,053,032 |   |
| Foreign              |       | Banco Santander Central Hispano    |       | 2.69      | %          | 01.02.08                 |       | 19,786,529 |   | 1.22 | % | 02-01-2009 |   | 100,205,472 |   |
| Foreign              |       | Banco Sudameris                    |       | 9.65      | %          | 01.02.08                 |       | 20,163,296 |   | 0.86 | % | 02-01-2009 |   | 33,783,416 |   |
| Foreign              |       | Banco Votorantim                   |       | 0.87      | %          | 01.02.08                 |       | 27,137,141 |   | 1.14 | % | 02-01-2009 |   | 46,210,971 |   |
| Foreign              |       | Bancolombia                        |       | 8.46      | %          | 01.02.08                 |       | 87 |   | 0.87 | % | 02-01-2009 |   | 16,432,194 |   |
| Foreign              |       | Bank Boston                        |       | 0.93      | %          | 01.02.08                 |       | 119,051 |   | — |   | — |   | — |   |
| Foreign              |       | Bank of America                    |       | 2.85      | %          | 01.02.08                 |       | 3,560,526 |   | 3.23 | % | 02-01-2009 |   | 2,092,648 |   |
| Foreign              |       | Bradesco                           |       | 0.86      | %          | 01.02.08                 |       | 79,788,806 |   | 1.10 | % | 02-01-2009 |   | 117,865,231 |   |
| Foreign              |       | Caixa Economica                    |       | 0.93      | %          | 01.31.08                 |       | 1,602,383 |   | — |   | — |   | — |   |
| Foreign              |       | Citibank N.Y.                      |       | 3.59      | %          | 01.02.08                 |       | 61,653,924 |   | 0.33 | % | 02-01-2009 |   | 80,909,300 |   |
| Foreign              |       | Colmena Bcsc                       |       | 9.80      | %          | 01.02.08                 |       | 19,497,484 |   | 0.86 | % | 02-01-2009 |   | 127 |   |
| Foreign              |       | Comafi                             |       | 1.19      | %          | 01.02.08                 |       | 1,840,158 |   | 3.23 | % | 02-01-2009 |   | 885,574 |   |
| Foreign              |       | Corficolombiana                    |       | 7.45      | %          | 01.02.08                 |       | 842,201 |   | 0.92 | % | 02-01-2009 |   | 4,635,964 |   |
| Foreign              |       | Encargo Fiduciario Banco Santander |       | 6.19      | %          | 01.02.08                 |       | 1,737,835 |   | 0.66 | % | 02-01-2009 |   | 318,861 |   |
| Foreign              |       | FAM Fondo Ganadero                 |       | 7.66      | %          | 01.02.08                 |       | 95 |   | 0,77 | % | 02-01-2009 |   | 109 |   |
| Foreign              |       | Fiduciaria Helm Trust              |       | 7.85      | %          | 01.02.08                 |       | 95 |   | 0.90 | % | 02-01-2009 |   | 109 |   |
| Foreign              |       | Fiducolombia                       |       | 8.44      | %          | 01.02.08                 |       | 6,645 |   | — |   | — |   | — |   |
| Foreign              |       | Fiduoccidente                      |       | 8.07      | %          | 01.02.08                 |       | 223 |   | 0.88 | % | 02-01-2009 |   | 256 |   |
| Foreign              |       | Fiduciaria Banco de Bogotá    |       | 6.98      | %          | 01.02.08                 |       | 23,517 |   | 0.85 | % | 02-01-2009 |   | 10,548,552 |   |
| Foreign              |       | Fondo Sumar                        |       | 6.98      | %          | 01.02.08                 |       | 66 |   | — |   | — |   | — |   |
| Foreign              |       | Fondo Surgir                       |       | 7.53      | %          | 01.02.08                 |       | 129 |   | — |   | — |   | — |   |
| Foreign              |       | HSBC - Bamerindus                  |       | 0.95      | %          | 01.02.08                 |       | 49,456,752 |   | 8.16 | % | 02-01-2009 |   | 322,476 |   |
| Foreign              |       | Standard Bank London               |       | 1.16      | %          | 01.02.08                 |       | 1,127,246 |   | 2.23 | % | 02-01-2009 |   | 2,768,843 |   |
| Foreign              |       | Suvalor                            |       | —    |       | —                   |       | — |   | 0.77 | % | 02-01-2009 |   | 1,347,216 |   |
| Foreign              |       | Trento                             |       | —    |       | —                   |       | — |   | 1.01 | % | 02-01-2009 |   | 28,337,763 |   |
| Foreign              |       | Vicenza                            |       | —    |       | —                   |       | — |   | 1.03 | % | 02-01-2009 |   | 25,970,734 |   |
| Foreign              |       | Unibanco                           |       | 0.88      | %          | 01.02.08                 |       | 37,093,315 |   | 1.11 | % | 02-01-2009 |   | 43,238,314 |   |
|                 |       |                               |       |      |       |                     |       |   |   |   |   |   |   |   |   |
|                 |       | Total                              |       |      |       |                     |       | 440,591,912 |   |   |   |   |   | 624,749,431 |   |

 

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

** **

**Note 5.Accounts, Notes andOther Receivables**

 

(a)              Current accounts, notes and other receivablesand their related allowances for doubtful accounts as of respective December 31,are as follows:

 
| ** **                       | ** ** | **As of  December 31,** | ** ** |
|----------------------------------|------------|------------------------------|------------|
| ** **                       | ** ** | **Under 90  days**           | ** ** | **91 days  to 1 year** | ** ** | **Sub  total** | ** ** | **Current** | ** ** | **Long  term** | ** ** |
| **Account**                      | ** ** | **2007**                     | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                       | ** ** | **ThCh$**                    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                             |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts  receivable(1)(2)       |       | 1,123,831,962                |       | 1,178,275,522 |   | 141,834,134 |   | 124,610,901 |   | 1,302,886,423 |   | 1,265,666,096 |   | 1,138,162,639 |   | — |   | — |   |
| Allowance for  doubtful accounts |       | (102,107,531                 | )          | (109,735,159 | ) | (88,297,964 | ) | (54,988,625 | ) | (164,723,784 | ) | (190,405,495 | ) | — |   | — |   | — |   |
|                             |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes receivable                 |       | 12,462,122                   |       | 6,707,510 |   | 1,002,752 |   | 1,587,069 |   | 8,294,579 |   | 13,464,874 |   | 7,749,050 |   | — |   | — |   |
| Allowance for  doubtful accounts |       | (167,474                     | )          | (153,787 | ) | (404,603 | ) | (391,742 | ) | (545,529 | ) | (572,077 | ) | — |   | — |   | — |   |
|                             |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other receivable  (1) (3)   |       | 106,287,380                  |       | 101,330,853 |   | 13,344,492 |   | 6,555,741 |   | 107,886,594 |   | 119,631,872 |   | 95,067,667 |   | 214,666,727 |   | 202,659,717 |   |
| Allowance for  doubtful accounts |       | (1,575,586                   | )          | (12,023,396 | ) | (9,406,733 | ) | (795,531 | ) | (12,818,927 | ) | (10,982,319 | ) | — |   | (1,726,016 | ) | (1,535,130 | ) |
|                             |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                            |       |                         |       |   |   |   |   |   |   |   |   | 1,196,802,951 |   | 1,240,979,356 |   | 212,940,711 |   | 201,124,587 |   |

 

----

(1)          Includes ThCh$23,000,530, which is the balance due as a result of rateincrease pursuant to the Agreement between the Argentine government and thesubsidiary Edesur S.A. in Argentina, signed in February, 2007.  This agreement generated income ofThCh$48,049,429 (ThUS$75,496) which will be collected in equal installmentsover 55 months beginning February, 2007.

 

(2)          IncludesThCh$38,601,965, corresponding to accounts due to our subsidiary CachoeiraDourada S.A. from Compañía de Electricidade de Goiás (CELG) for years prior to2004. CELG (state-owned Company of the State of Goiás) has currently recognizedthe pending debt and is negotiating a loan from the financial institution BNDESto pay its debts. The Board of Directors of Enersis anticipates a favorableoutcome as a result of such negotiations and expects to recover at least theamount recorded.

 

(3) This includesThCh$31,955,105 and ThCh$ 10,720,714, respectively, in 2007 and 2008 relatingto other generating companies debts payable to Endesa Chile and generatingsubsidiaries, as a result of the collection of tolls associated with theapplication, since March 13, 2004, of Law No.19,940.

 

(b)             Current and long-term accounts receivable percountry as of each December 31, are as follows:

 
| ** **  | ** ** | **As of December 31,** | ** ** |
|-------------|------------|-----------------------------|------------|
| **Country** | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **  | ** ** | **ThCh$**                   | ** ** | **%** | ** ** | **ThCh$** | ** ** | **%** | ** ** |
| ** **  | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Chile       |       | 305,707,361                 |       | 21.69 | % | 365,344,835 |   | 25.33 | % |
| Peru        |       | 62,126,259                  |       | 4.41 | % | 100,383,657 |   | 6.96 | % |
| Argentina   |       | 212,856,813                 |       | 15.10 | % | 249,150,903 |   | 17.28 | % |
| Colombia    |       | 310,054,197                 |       | 21.99 | % | 323,768,119 |   | 22.45 | % |
| Brazil      |       | 507,523,947                 |       | 36.00 | % | 403,456,429 |   | 27.98 | % |
| Panama (1)  |       | 11,475,085                  |       | 0.81 | % | — |   | — |   |
|        |       | —                      |       |   |   |   |   |   |   |
| Total       |       | 1,409,743,662               |       | 100.00 | % | 1,442,103,943 |   | 100.00 | % |

 

----

(1) Country of incorporationof the wholly-owned subsidiary Compañía Eléctrica Cono Sur S.A. (See note 11 (h) (ii))

 

F-37

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

(c)              Changes in provision for accounts receivablesare as follows:

 
| ** **                                         | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------------------------|------------|----------------------------------|------------|
| ** **                                         | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                         | ** ** | **ThCh$**                        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                               |       |                             |       |   |   |   |   |
| Balance at beginning of period                     |       | 156,050,496                      |       | 157,729,911 |   | 203,685,907 |   |
| Additions charged to costs and expenses            |       | 36,156,373                       |       | 88,691,645 |   | 38,994,530 |   |
| Deductions                                         |       | (36,886,666                      | )          | (30,222,703 | ) | (50,662,953 | ) |
| Price-level restatement and  conversion adjustment |       | 2,409,708                        |       | (12,512,946 | ) | (12,394,114 | ) |
|                                               |       |                             |       |   |   |   |   |
| Balance at end of period                           |       | 157,729,911                      |       | 203,685,907 |   | 179,623,370 |   |

 

(d)    Amounts of unbilled energy sold are asfollows:

 
| ** **           | ** ** | **As of December 31,** | ** ** |
|----------------------|------------|-----------------------------|------------|
| ** **           | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **           | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                 |       |                        |       |   |   |   |   |
| Unbilled energy sold |       | 276,113,137                 |       | 331,303,143 |   | 404,072,040 |   |

 

F-38

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Note 6.**                   Balances and Transactions with RelatedCompanies

 

Thebalances of accounts receivable and payable with related companies are asfollows at December 31, 2007 and 2008:

 

**(a)****                       ****Notes and accountsreceivable due from related companies:**

 
| ** **                                        | ** ** | **As of December 31,** | ** ** |
|---------------------------------------------------|------------|-----------------------------|------------|
| ** **                                        | ** ** | **Short-term**              | ** ** | **Long-term** | ** ** |
| **Company**                                       | ** ** | **2007**                    | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                        | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                              |       |                        |       |   |   |   |   |   |   |
| Atacama Finance Co. (1)                           |       | 97,663,785                  |       | 313,383 |   | — |   | 109,601,626 |   |
| Com. de Energía del Mercosur S.A.            |       | 9,868,180                   |       | 18,124,811 |   | — |   | — |   |
| Empresa Eléctrica Piura S.A.                 |       | 161,051                     |       | 50,178 |   | — |   | — |   |
| ENDESA, S.A.                                      |       | 297,106                     |       | 17,464 |   | — |   | — |   |
| Endesa Europa                                     |       | —                      |       | 51,827 |   | — |   | — |   |
| Endesa Servicios                                  |       | 761,471                     |       | 785,210 |   | — |   | — |   |
| Endesa Latinonamérica S.A.                   |       | 245,234                     |       | 319,769 |   | — |   | — |   |
| Gas Atacama  Generación S.A.                 |       | 20,060                      |       | 39,531 |   | — |   | — |   |
| Gasoducto  Atacama Chile S.A.                     |       | 14,262                      |       | 12,459 |   | — |   | — |   |
| Gasoducto Tal Tal Ltda.                           |       | 196                         |       | 246 |   | — |   | — |   |
| Sociedad Consorcio Ara Ltda.                      |       | 787                         |       | — |   | — |   | — |   |
| Consorcio Ara-Ingendesa Ltda.                     |       | 54,911                      |       | 63,130 |   | — |   | — |   |
| Sacme                                             |       | 841                         |       | 93 |   | — |   | — |   |
| Sistemas Sec S.A.                                 |       | 8,114,817                   |       | 535,292 |   | 132,336 |   | 2,579,306 |   |
| Centrales Hidroeléctricas de Aysén S.A. |       | 846,831                     |       | 1,387,279 |   | — |   | — |   |
| GNL Quintero S.A. (2)                             |       | 43,751,232                  |       | 4,198,715 |   | — |   | — |   |
| GNL Chile S.A.                                    |       | 2,040,429                   |       | 725,127 |   | — |   | — |   |
| Konecta Chile S.A.                                |       | 84,338                      |       | 612 |   | 549,974 |   | 641,336 |   |
| Transmisora Eléctrica de Quillota Ltda.      |       | 2,020,667                   |       | 4,257,321 |   | — |   | — |   |
|                                              |       |                        |       |   |   |   |   |   |   |
| Total                                             |       | 165,946,198                 |       | 30,882,447 |   | 682,310 |   | 112,822,268 |   |

 

----

(1)     Thebalance receivable from Atacama Finance Co. corresponds to loans granted by thedissolved subsidiary, Compañía Eléctrica Cono Sur S.A. (see Note 11 (h) (ii)),to finance the construction of Gasoducto Atacama Argentina S.A. and Gas AtacamaChile S.A. The loans are expressed in US dollars and accrue interest at anaverage annual rate of 7.5%. On September 15, 2008, (date on which theloans originally matured) the loans were renegotiated and whilst conditionswere maintained, maturity was extended to March 15, 2010.  This loan also includes a guarantee.

 

(2)          Thebalance receivable from GNL Quintero S.A. relates to finance operations.  It is stated in US dollars, accrues interestat rate of 3.5% per annum and matures in 2009.

 

F-39

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated FinancialStatements – (Continued)**

 

**(b)           Notes andaccounts payable due to related companies:**

 
| ** **                                   | ** ** | **As of December 31,** | ** ** |
|----------------------------------------------|------------|-----------------------------|------------|
| ** **                                   | ** ** | **Short-term**              | ** ** | **Long-term** | ** ** |
| **Company**                                  | ** ** | **2007**                    | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                   | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| ** **                                   |       |                        |       |   |   |   |   |   |   |
| CEMSA                                        |       | 30,569,712                  |       | 38,297,895 |   | — |   | — |   |
| Consorcio Ara-Ingendesa Ltda.                |       | 363                         |       | — |   | — |   | — |   |
| Consorcio Indengesa-Minmetal Ltda            |       | —                      |       | — |   |   |   |   |   |
| Electrogas S.A.                              |       | 228,055                     |       | 1,784,801 |   | — |   | — |   |
| Endesa España                           |       | —                      |       | — |   |   |   |   |   |
| Endesa Servicios                             |       | 420,879                     |       | — |   | — |   | — |   |
| Empresa Eléctrica Piura S.A.            |       | 417,465                     |       | 828,167 |   | — |   |   |   |
| Endesa Lationoamérica S.A. (1)          |       | 2,852,736                   |       | 1,838,182 |   | 8,888,191 |   | 8,977,789 |   |
| Etevensa                                     |       | —                      |       | — |   | — |   | — |   |
| Gas Tal-Tal Ltda.                            |       | 50,731                      |       | 39,743 |   | — |   | — |   |
| Gas Atacama  Generación S.A.            |       | 34,003                      |       | 23,316 |   | — |   | — |   |
| Sacme                                        |       | 74,807                      |       | 112,398 |   | — |   | — |   |
| Transmisora Eléctrica de Quillota Ltda. |       | 35,048                      |       | 172,749 |   | — |   | — |   |
| Konecta Chile S.A.                           |       | 2,070                       |       | — |   | — |   | — |   |
|                                         |       |                        |       |   |   |   |   |   |   |
| Total                                        |       | 34,685,869                  |       | 43,097,251 |   | 8,888,191 |   | 8,977,789 |   |

 

----

(1)          Thebalance payable corresponds to a loan granted to Compañía InterconexcaoEnergética S.A. (“Cien”) to purchase machinery and equipment necessary tocomplete the construction of its second transmission line.  The loan is denominated in US dollars,accrues interest at rate 8.08% per annum, and matures in May, 2012.

 

F-40

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**(c) **Significant related company transactions andtheir effects in income (expense) for each year ended December 31 are asfollows:

 
| ** **                                         | ** ** | ** **                  | ** ** | ** **                 | ** ** | **2006**      | ** ** | **2007**      | ** ** | **2008**      | ** ** |
|----------------------------------------------------|------------|-----------------------------|------------|----------------------------|------------|---------------|------------|---------------|------------|---------------|------------|
| ** **                                         | ** ** | ** **                  | ** ** | ** **                 | ** ** | **Income**    | ** ** | **Income**    | ** ** | **Income**    | ** ** |
| **Company**                                        | ** ** | **Relationship**            | ** ** | **Nature  of transaction** | ** ** | **(Expense)** | ** ** | **(Expense)** | ** ** | **(Expense)** | ** ** |
| ** **                                         | ** ** | ** **                  | ** ** | ** **                 | ** ** | **ThCh$**     | ** ** | **ThCh$**     | ** ** | **ThCh$**     | ** ** |
| ** **                                         |       |                        |       |                       |       |          |       |          |       |          |       |
| Atacama Finance  Co.                               |       | Affiliate                   |       | Interest                   |       | 7,597,511     |       | 7,735,811     |       | 7,485,097     |       |
|                                               |       |                        |       | Price Level Restatement    |       | 2,206,193     |       | 7,374,963     |       | 7,941,887     |       |
|                                               |       |                        |       | Exchange difference        |       | 1,921,769     |       | (14,148,358   | )          | 16,639,067    |       |
| Consorcio  ARA-Ingendesa                           |       | Affiliate                   |       | Services                   |       | 935,725       |       | 32,839        |       | 505,331       |       |
| CEMSA                                              |       | Affiliate                   |       | Sale of energy             |       | 6,834,491     |       | 10,146,955    |       | 20,669,866    |       |
|                                               |       |                        |       | Purchase of energy         |       | (5,871,130    | )          | (4,876,971    | )          | (1,157,655    | )          |
|                                               |       |                        |       | Purchase of gas            |       | —        |       | (17,124,610   | )          | —        |       |
|                                               |       |                        |       | Services                   |       | 6,913,116     |       | (14,550,076   | )          | 6,587,503     |       |
| Empresa Eléctrica  Piura S.A.                 |       | Member of Controlling Group |       | Sale of energy             |       | 793,340       |       | 284,927       |       | 93,073        |       |
|                                               |       |                        |       | Purchase of energy         |       | (13,796,129   | )          | (5,673,981    | )          | (8,618,320    | )          |
|                                               |       |                        |       | Services                   |       | 240,319       |       | 214,580       |       | 249,985       |       |
| Electrogas S.A.                                    |       | Affiliate                   |       | Purchase of gas            |       | (2,300,926    | )          | (2,984,422    | )          | (4,576,224    | )          |
| Endesa España                                 |       | Parent company              |       | Interest                   |       | (3,741,241    | )          | (32,109       | )          | —        |       |
|                                               |       |                        |       | Exchange difference        |       | 54,377        |       | 1,184         |       | —        |       |
| Endesa Servicios                                   |       | Parent company              |       | Exchange difference        |       | 171           |       | (10,585       | )          | 32,166        |       |
|                                               |       |                        |       | Services                   |       | —        |       | 885,233       |       | 1,211,580     |       |
| Endesa  Latinoamerica                              |       | Parent company              |       | Interest                   |       | (2,494,488    | )          | (1,071,504    | )          | (830,093      | )          |
|                                               |       |                        |       | Services                   |       | (4,821,252    | )          | 534           |       | —        |       |
|                                               |       |                        |       | Exchange difference        |       | (14,845       | )          | (133,474      | )          | —        |       |
|                                               |       |                        |       | Price Level Restatement    |       | (70,498       | )          | (3,397,177    | )          | —        |       |
| Fundación Endesa                              |       | Member of Controlling Group |       | Services                   |       | 110,774       |       | 50,451        |       | 32,961        |       |
| Gas Atacama  Generación S.A.                  |       | Affiliate                   |       | Services                   |       | 1,134,771     |       | 384,654       |       | 100,887       |       |
| Sacme                                              |       | Affiliate                   |       | Services                   |       | (466,676      | )          | (578,211      | )          | (854,081      | )          |
| Sistema SEC S.A                                    |       | Affiliate                   |       | Services                   |       | 549,037       |       | 4,878,232     |       | 1,615,245     |       |
|                                               |       |                        |       | Interest                   |       | —        |       | 64,524        |       | 106,426       |       |
|                                               |       |                        |       | Price Level Restatement    |       | —        |       | —        |       | 218,047       |       |
| Soc. Consorcio Ingendesa ARA Ltda.                 |       | Affiliate                   |       | Services                   |       | 192,709       |       | 675,913       |       | —        |       |
| Konecta Chile  S.A.                                |       | Affiliate                   |       | Exchange difference        |       | —        |       | 25,998        |       | 169,082       |       |
|                                               |       |                        |       | Services                   |       | —        |       | 148,681       |       | 12,120        |       |
| Centrales Hidroeléctricas  de Aysén S.A. |       | Affiliate                   |       | Services                   |       | —        |       | 3,425,612     |       | 4,904,512     |       |
|                                               |       |                        |       | Price Level Restatement    |       | —        |       | 25,966        |       | —        |       |
|                                               |       |                        |       | Interest                   |       | —        |       | 6,180         |       | —        |       |
| GNL Quinteros  S.A.                                |       | Affiliate                   |       | Interest                   |       | —        |       | 873,402       |       | 1,748,868     |       |
|                                               |       |                        |       | Price Level Restatement    |       | —        |       | 1,426,636     |       | 1,744,270     |       |
|                                               |       |                        |       | Exchange difference        |       | —        |       | (3,392,004    | )          | 1,902,123     |       |
| Transmisora  Eléctrica de Quillota Ltda.      |       | Affiliate                   |       | Interest                   |       | 31,449        |       | —        |       | 21,793        |       |
|                                               |       |                        |       | Services                   |       | 5,986         |       | —        |       | (206,574      | )          |

 

Transfersof short-term funds between related companies are treated as current cashtransactions, with associated variable interest rates based on marketconditions. The resulting accounts receivable and accounts payable are usuallyat 30 day term, with automatic rollover for the same term and amortization inline with cash flows.

 

F-41

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Note 7.**                   Inventories

** **

Inventoriesinclude the following items and are presented net of allowances forobsolescence totaling ThCh$3,403,348 and ThCh$3,546,574 and as of December 31,2007 and 2008, respectively:

 
| ** **                         | ** ** | **As of December 31,** | ** ** |
|------------------------------------|------------|-----------------------------|------------|
| ** **                         | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                         | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                               |       |                        |       |   |   |
| Real estate under development      |       | 13,635,961                  |       | 15,821,978 |   |
| Materials in transit               |       | 538,751                     |       | 722,451 |   |
| Operation and maintenance material |       | 55,825,631                  |       | 60,242,737 |   |
| Fuel                               |       | 44,823,310                  |       | 27,410,370 |   |
|                               |       |                        |       |   |   |
| Total                              |       | 114,823,653                 |       | 104,197,536 |   |

 

**Note 8.**                   Deferred Income Taxes

** **

**a)****             **Income taxes (recoverable) payable as of eachyear-end are as follows:

 
| ** **                          | ** ** | **As of December 31,** | ** ** |
|-------------------------------------|------------|-----------------------------|------------|
| ** **                          | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                          | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                |       |                        |       |   |   |
| Income tax provision – current |       | 238,243,753                 |       | 369,177,614 |   |
| Recoverable tax credits             |       | (218,268,144                | )          | (278,184,922 | ) |
|                                |       |                        |       |   |   |
| Total                               |       | 19,975,609                  |       | 90,992,692 |   |

 

**b)****             **Tax losscarryforwards - As of December 31,2007 and 2008, the Company had tax loss carryforwards of ThCh$314,047,329 andThCh$194,366,201, respectively.

 

**c)****             **The net effect of recording deferred taxexpense (benefit) was ThCh$(166,173,135), ThCh$50,693,356 and ThCh$97,868,053during the years ended December 31, 2006, 2007 and 2008, respectively.

 

F-42

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**d)****             **In accordance with BT No.60 and 69 of theChilean Association of Accountants, and Circular No.1,466 of the SVS, theCompany and its subsidiaries have recorded consolidated deferred income taxesas of December 31, 2007 and 2008 as follows:

** **
| ** **                               | ** ** | **As of  December 31, 2007** | ** ** | **As of  December 31, 2008** | ** ** |
|------------------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|
| ** **                               | ** ** | **Asset**                         | ** ** | **Liability**                     | ** ** | **Asset** | ** ** | **Liability** | ** ** |
| **Description**                          | ** ** | **Short-term**                    | ** ** | **Long-term**                     | ** ** | **Short-term** | ** ** | **Long-term** | ** ** | **Short-term** | ** ** | **Long-term** | ** ** | **Short-term** | ** ** | **Long-term** | ** ** |
| ** **                               | ** ** | **ThCh$**                         | ** ** | **ThCh$**                         | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                     |       |                              |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Allowance for  doubtful accounts         |       | 33,063,975                        |       | 52,569,302                        |       | — |   | — |   | 15,921,718 |   | 40,645,656 |   | — |   | — |   |
| Deferred income                          |       | 1,377,589                         |       | 1,206,974                         |       | 2,871,931 |   | 7,541,334 |   | 1,339,066 |   | 1,041,465 |   | 3,082,174 |   | 5,286,906 |   |
| Vacation accrual                         |       | 1,358,113                         |       | 18,682                            |       | — |   | — |   | 1,440,946 |   | 45,938 |   | — |   | — |   |
| Leased assets                            |       | —                            |       | —                            |       | — |   | 1,153,164 |   | — |   | — |   | — |   | 456,417 |   |
| Fixed assets  depreciation               |       | —                            |       | 2,808,924                         |       | 743,848 |   | 462,776,825 |   | — |   | 3,303,818 |   | 759,084 |   | 477,195,866 |   |
| Severance  indemnities                   |       | —                            |       | 8,220                             |       | — |   | 1,853,016 |   | — |   | 9,562 |   | — |   | 1,415,328 |   |
| Other                                    |       | 6,406,406                         |       | 3,873,674                         |       | 1,700,491 |   | 4,824,285 |   | 6,056,114 |   | 2,491,602 |   | 367,932 |   | 1,580,003 |   |
| Contingencies                            |       | 17,470,214                        |       | 68,675,203                        |       | — |   | — |   | 20,244,809 |   | 69,131,989 |   | — |   | 1,485,474 |   |
| Bond discount                            |       | —                            |       | —                            |       | 162,608 |   | 1,265,859 |   | — |   | — |   | 159,669 |   | 3,132,712 |   |
| Cost of studies                          |       | —                            |       | —                            |       | — |   | 9,758,104 |   | — |   | — |   | — |   | 7,659,391 |   |
| Finance costs                            |       | —                            |       | 972,559                           |       | — |   | 21,156,063 |   | — |   | 2,570,686 |   | — |   | 14,612,551 |   |
| Imputed interest  on construction        |       | 1,930                             |       | —                            |       | — |   | 4,311,595 |   | 18,566 |   | — |   | — |   | 4,041,198 |   |
| Deferred charges                         |       | 695,364                           |       | —                            |       | 1,793,203 |   | 2,519,329 |   | — |   | — |   | 1,318,795 |   | 2,441,529 |   |
| Actuarial deficit  (Brazil)              |       | —                            |       | 13,392,490                        |       | — |   | — |   | — |   | 18,735,018 |   | — |   | — |   |
| Obsolescence                             |       | 640,282                           |       | 1,603,784                         |       | — |   | — |   | 646,712 |   | 1,533,367 |   | — |   | — |   |
| Materials used                           |       | —                            |       | —                            |       | — |   | 878,155 |   | — |   | — |   | — |   | 807,175 |   |
| Imputed salaries  on construction        |       | —                            |       | 4,673,362                         |       | — |   | — |   | — |   | 3,942,569 |   | — |   | — |   |
| Tax losses                               |       | 27,042,120                        |       | 186,085,639                       |       | — |   | — |   | 16,409,501 |   | 101,662,867 |   | — |   | — |   |
| Provision real  estate project           |       | 321,828                           |       | 2,324,663                         |       | — |   | — |   | 764,724 |   | 2,052,025 |   | 947,128 |   | — |   |
| Sie 2000A project                        |       | —                            |       | —                            |       | — |   | 531,274 |   | — |   | — |   | — |   | 1,376,248 |   |
| Provision for  employee benefits         |       | 2,831,386                         |       | 1,695,357                         |       | — |   | — |   | 2,672,100 |   | 1,217,357 |   | — |   | — |   |
| Accrued Expenses                         |       | —                            |       | —                            |       | — |   | — |   | — |   | — |   | — |   | 3,279,627 |   |
| Deferred assets                          |       | —                            |       | —                            |       | 18,057,744 |   | 9,919,105 |   | — |   | — |   | 4,851,162 |   | 10,512,964 |   |
| Capitalized  expenses                    |       | —                            |       | —                            |       | — |   | 2,561,451 |   | — |   | — |   | — |   | 493,812 |   |
| Allowance for  tariff decree (Chilectra) |       | 7,511,650                         |       | —                            |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Capitalized  Interest                    |       | —                            |       | —                            |       | — |   | — |   | — |   | — |   | — |   | 3,275,586 |   |
| Exchange  difference                     |       | —                            |       | —                            |       | — |   | 7,403,290 |   | — |   | — |   | — |   | 3,608,162 |   |
| Intangible                               |       | 1,106,524                         |       | —                            |       | — |   | — |   | 1,667,895 |   | — |   | 90,101 |   | 332,227 |   |
| Complementary  account-net               |       | —                            |       | (11,846,002                       | )          | — |   | (203,495,397 | ) | — |   | (11,238,052 | ) | — |   | (198,845,331 | ) |
| Valuation  allowance                     |       | —                            |       | (17,543,528                       | )          | — |   | — |   | — |   | (18,199,113 | ) | — |   | — |   |
| Total                                    |       | 99,827,381                        |       | 310,519,303                       |       | 25,329,825 |   | 334,957,452 |   | 67,182,151 |   | 218,946,754 |   | 11,576,045 |   | 344,147,845 |   |

 

**e)****             **Income tax benefit (expense) for the yearended December 31, 2006, 2007 and 2008 is as follows:

 
| ** **                                | ** ** | **As of December 31,** | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|
| **Item**                                  | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| **Current income tax (expense) benefit:** |       |                        |       |   |   |   |   |
| Income tax provision                      |       | (286,468,496                | )          | (238,243,753 | ) | (369,177,614 | ) |
| Adjustment for tax expense - prior year   |       | 7,088,500                   |       | 2,174,368 |   | 964,199 |   |
|                                      |       |                        |       |   |   |   |   |
| **Deferred tax (expense) benefit:**       |       |                        |       |   |   |   |   |
| Deferred taxes                            |       | 26,822,365                  |       | (64,121,581 | ) | (82,814,099 | ) |
| Tax-loss Benefits                         |       | 1,849,282                   |       | 11,085,183 |   | 15,106,933 |   |
| Amortization of complementary accounts    |       | (13,891,826                 | )          | (13,569,706 | ) | (14,532,214 | ) |
| Valuation allowance (*)                   |       | 153,242,596                 |       | 26,997,931 |   | (585,877 | ) |
| Other charges or credits                  |       | —                      |       | — |   | 64,137 |   |
|                                      |       |                        |       |   |   |   |   |
| Total                                     |       | (111,357,579                | )          | (275,677,558 | ) | (450,974,535 | ) |

 

----

**(*)  During2006, the valuation allowance has been reversed as a consequence of the mergerapproved in Extraordinary Shareholders’ Meetings of Chilectra S.A. (formerlyElesur S.A.) and Chilectra S.A.  In 2007,the valuation allowance has been reversed as a consequence of the merger ofEmgesa S.A. and Betania S.A.  The amountcredited to income in income tax expense was ThCh$27,609,204.**

 

F-43

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Note 9.**                   Other Current Assets

 

Othercurrent assets are as follows:

 
| ** **                               | ** ** | **As of December 31,** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                               | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                     |       |                        |       |   |   |
| Guarantees and indemnities               |       | 357,960                     |       | 33,678 |   |
| Deferred expenses                        |       | 217,075                     |       | 57,062 |   |
| Post-retirement benefits                 |       | 288,437                     |       | 289,489 |   |
| Deposits for commitments and guarantees  |       | 37,638,604                  |       | 7,333,288 |   |
| Deferred expenses for bond placement     |       | 392,023                     |       | 209,040 |   |
| Assets available for sale                |       | 1,390,386                   |       | 1,494,114 |   |
| Electricity for all project (Coelce) (*) |       | 23,740,321                  |       | 49,441,787 |   |
| Bond discounts                           |       | 1,096,633                   |       | 1,098,199 |   |
| Fair value of derivative contracts       |       | 498,124                     |       | 2,195,698 |   |
| Purchase with resale agreements (1)      |       | 84,849,225                  |       | 437,865,125 |   |
| Others                                   |       | 4,204,488                   |       | 6,719,587 |   |
|                                     |       |                        |       |   |   |
| Total                                    |       | 154,673,276                 |       | 506,737,067 |   |

 

----

(*)         Thisis a subsidy to be collected from the Brazilian Government for investments inthe rural area of the state of Ceará.

 

(1)          Thedetail of reverse repurchase agreements is as follows:

 

F-44

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Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated FinancialStatements – (Continued)**

 
| **As of December 31, 2007** |
|----------------------------------|
| ** **                       | ** ** | **Date** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Interest** | ** ** | **Current** | ** ** | ** ** | ** ** |
| **Code**                         | ** ** | **Start** | ** ** | **End** | ** ** | **Financial  institution** | ** ** | **Currency** | ** ** | **Document** | ** ** | **rate** | ** ** | **amount** | ** ** | **Nominal** | ** ** |
| ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **%** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| VRC                              |   | 12-27-2007 |   | 01-02-2008 |   | Banco Central de Chile |   | $ |   | CERO |   | 0.58 | % | 248 |   | 248 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Central de Chile |   | $ |   | CERO |   | 0.59 | % | 539 |   | 539 |   |
| VRC                              |   | 12-28-2007 |   | 01-02-2008 |   | Banco Central de Chile |   | UF |   | CERO |   | 0.46 | % | 1,877 |   | 1,877 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Central de Chile |   | UF |   | CERO |   | 0.46 | % | 2,658 |   | 2,659 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Estado |   | UF |   | L.H. |   | 0.46 | % | 3,156 |   | 3,159 |   |
| VRC                              |   | 12-27-2007 |   | 01-02-2008 |   | CorpBanca |   | $ |   | D.P.F. |   | 0.58 | % | 6,323 |   | 6,318 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Estado |   | $ |   | L.H. |   | 0.58 | % | 8,567 |   | 8,578 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Chile |   | $ |   | L.H. |   | 0.58 | % | 12,037 |   | 12,029 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | CorpBanca |   | $ |   | L.H. |   | 0.59 | % | 17,454 |   | 17,440 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | CorpBanca |   | UF |   | L.H. |   | 0.46 | % | 18,969 |   | 18,980 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Central de Chile |   | UF |   | CERO |   | 0.46 | % | 34,273 |   | 34,293 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Santander Santiago |   | UF |   | L.H. |   | 0.46 | % | 42,278 |   | 42,302 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Central de Chile |   | $ |   | CERO |   | 0.59 | % | 43,288 |   | 43,263 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | BBVA Banco BHIF |   | $ |   | L.H. |   | 0.58 | % | 111,756 |   | 111,692 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Crédito e Inversiones |   | $ |   | L.H. |   | 0.58 | % | 112,233 |   | 112,168 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Santander Santiago |   | UF |   | L.H. |   | 0.46 | % | 197,296 |   | 197,561 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Chile |   | $ |   | L.H. |   | 0.58 | % | 331,659 |   | 331,468 |   |
| VRC                              |   | 12-27-2007 |   | 01-02-2008 |   | BBVA Banco BHIF |   | $ |   | D.P.R. |   | 0.58 | % | 368,267 |   | 367,982 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Crédito e Inversiones |   | $ |   | L.H. |   | 0.58 | % | 437,890 |   | 438,483 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Itaú Chile |   | $ |   | L.H. |   | 0.59 | % | 471,019 |   | 470,741 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Crédito e Inversiones |   | UF |   | L.H. |   | 0.46 | % | 885,066 |   | 886,262 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | CorpBanca |   | UF |   | D.P.F. |   | 0.46 | % | 958,538 |   | 959,093 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Chile |   | UF |   | D.P.F. |   | 0.46 | % | 1,105,108 |   | 1,105,749 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Chile |   | UF |   | D.P.R. |   | 0.46 | % | 1,172,657 |   | 1,173,335 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | BBVA Banco BHIF |   | $ |   | L.H. |   | 0.58 | % | 1,172,543 |   | 1,174,128 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Estado |   | $ |   | L.H. |   | 0.59 | % | 1,331,639 |   | 1,330,854 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Santander Santiago |   | UF |   | D.P.F. |   | 0.46 | % | 2,155,811 |   | 2,157,060 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Crédito e Inversiones |   | UF |   | D.P.F. |   | 0.46 | % | 2,202,507 |   | 2,203,783 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | BBVA Banco BHIF |   | $ |   | L.H. |   | 0.59 | % | 2,213,102 |   | 2,211,797 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Santander Santiago |   | $ |   | L.H. |   | 0.58 | % | 2,404,830 |   | 2,403,434 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Estado |   | UF |   | L.H. |   | 0.46 | % | 2,883,540 |   | 2,885,212 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Chile |   | $ |   | L.H. |   | 0.58 | % | 2,919,196 |   | 2,923,145 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Chile |   | $ |   | L.H. |   | 0.59 | % | 3,023,628 |   | 3,021,845 |   |
| VRC                              |   | 12-28-2007 |   | 01-07-2008 |   | Banco Chile |   | UF |   | L.H. |   | 0.46 | % | 3,814,677 |   | 3,819,836 |   |
| VRC                              |   | 12-27-2007 |   | 01-02-2008 |   | BBVA Banco BHIF |   | $ |   | D.P.F. |   | 0.58 | % | 5,074,373 |   | 5,070,452 |   |
| VRC                              |   | 12-28-2007 |   | 01-02-2008 |   | Banco Central de Chile |   | UF |   | BOND |   | 0.46 | % | 5,446,335 |   | 5,448,475 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Crédito e Inversiones |   | UF |   | L.H. |   | 0.46 | % | 8,300,795 |   | 8,305,606 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | Banco Chile |   | UF |   | L.H. |   | 0.46 | % | 10,570,229 |   | 10,576,355 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | BBVA Banco BHIF |   | UF |   | D.P.F. |   | 0.46 | % | 11,094,912 |   | 11,101,451 |   |
| VRC                              |   | 12-27-2007 |   | 01-03-2008 |   | BBVA Banco BHIF |   | $ |   | D.P.F. |   | 0.59 | % | 13,897,952 |   | 13,887,026 |   |
|                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |   |   |   |   |   | Total |   |   |   |   |   | 84,849,225 |   | 84,866,678 |   |

 

F-45

----

Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 
| **As of December 31, 2008** |
|----------------------------------|
| ** **                       | ** ** | **Date** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Interest** | ** ** | **Current** | ** ** | ** ** | ** ** |
| **Code**                         | ** ** | **Start** | ** ** | **End** | ** ** | **Financial  institution** | ** ** | **Currency** | ** ** | **Document** | ** ** | **rate** | ** ** | **amount** | ** ** | **Nominal** | ** ** |
| ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **%** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| CRV                              |   | 12-19-08 |   | 01-07-09 |   | Banco Central |   | $ |   | CERO |   | 0.55 | % | 70,149,364 |   | 70,239,190 |   |
| CRV                              |   | 12-29-08 |   | 01-19-09 |   | Banco Central |   | $ |   | BONO |   | 0.41 | % | 41,991,475 |   | 42,100,483 |   |
| CRV                              |   | 12-19-08 |   | 01-05-09 |   | Banco Central |   | $ |   | BONO |   | 0.55 | % | 29,171,198 |   | 29,197,880 |   |
| CRV                              |   | 12-22-08 |   | 01-26-09 |   | Banco Central |   | $ |   | BONO |   | 0.48 | % | 23,744,696 |   | 23,843,332 |   |
| CRV                              |   | 12-19-08 |   | 01-05-09 |   | Banco Central |   | $ |   | BONO |   | 0.65 | % | 23,082,860 |   | 23,107,801 |   |
| CRV                              |   | 12-18-08 |   | 01-05-09 |   | Banco Estado |   | U.F. |   | P.D.B.C. |   | 0.55 | % | 20,321,680 |   | 20,340,264 |   |
| CRV                              |   | 12-19-08 |   | 01-12-09 |   | Banco Central |   | $ |   | BONO |   | 0.55 | % | 19,056,225 |   | 19,098,057 |   |
| CRV                              |   | 12-30-08 |   | 01-19-09 |   | BBVA |   | U.F. |   | P.D.B.C. |   | 0.55 | % | 18,299,107 |   | 18,362,837 |   |
| CRV                              |   | 12-29-08 |   | 01-19-09 |   | Banco Central |   | $ |   | P.D.B.C. |   | 0.54 | % | 15,837,094 |   | 15,891,238 |   |
| CRV                              |   | 12-23-08 |   | 01-14-09 |   | Banco Central |   | $ |   | BONO |   | 0.40 | % | 15,115,090 |   | 15,143,276 |   |
| CRV                              |   | 12-30-08 |   | 01-28-09 |   | Banco Central |   | $ |   | BONO |   | 0.40 | % | 14,575,529 |   | 14,629,938 |   |
| CRV                              |   | 12-19-08 |   | 01-12-09 |   | Banco Central |   | $ |   | P.D.B.C. |   | 0.55 | % | 14,341,878 |   | 14,373,360 |   |
| CRV                              |   | 12-29-08 |   | 01-13-09 |   | Banco Estado |   | U.F. |   | P.D.B.C. |   | 0.55 | % | 13,599,116 |   | 13,631,514 |   |
| CRV                              |   | 11-27-08 |   | 01-14-09 |   | Banco Central |   | US$ |   | P.D.B.C. |   | 0.17 | % | 12,577,675 |   | 12,587,439 |   |
| CRV                              |   | 12-26-08 |   | 01-06-09 |   | Banco Central |   | $ |   | BONO |   | 0.55 | % | 12,059,047 |   | 12,072,300 |   |
| CRV                              |   | 12-19-08 |   | 01-05-09 |   | Banco Central |   | $ |   | P.D.B.C. |   | 0.55 | % | 10,916,802 |   | 10,926,787 |   |
| CRV                              |   | 12-17-08 |   | 01-06-09 |   | Banco Central |   | $ |   | P.D.B.C. |   | 0.55 | % | 10,093,010 |   | 10,104,084 |   |
| CRV                              |   | 12-16-08 |   | 01-05-09 |   | Banco Central |   | $ |   | BONO |   | 0.60 | % | 10,086,645 |   | 10,096,703 |   |
| CRV                              |   | 12-16-08 |   | 01-05-09 |   | Banco Central |   | $ |   | P.D.B.C. |   | 0.55 | % | 10,068,806 |   | 10,078,010 |   |
| CRV                              |   | 11-27-08 |   | 01-14-09 |   | Banco Central |   | US$ |   | BONO |   | 0.17 | % | 9,549,861 |   | 9,557,276 |   |
| CRV                              |   | 11-27-08 |   | 01-14-09 |   | Tesorerìa |   | US$ |   | BONO |   | 0.17 | % | 7,892,676 |   | 7,898,803 |   |
| CRV                              |   | 12-17-08 |   | 01-29-09 |   | Banco Central |   | US$ |   | BONO |   | 0.17 | % | 7,006,396 |   | 7,017,674 |   |
| CRV                              |   | 12-19-08 |   | 01-12-09 |   | Banco Central |   | $ |   | CERO |   | 0.55 | % | 6,689,898 |   | 6,704,583 |   |
| CRV                              |   | 12-16-08 |   | 01-05-09 |   | Banco Itaú |   | U.F. |   | BONO |   | 0.60 | % | 5,742,297 |   | 5,748,023 |   |
| CRV                              |   | 12-30-08 |   | 01-28-09 |   | Banco Central |   | $ |   | BONO |   | 0.54 | % | 4,237,163 |   | 4,258,514 |   |
| CRV                              |   | 12-26-08 |   | 01-06-09 |   | Banco Central |   | $ |   | P.D.B.C. |   | 0.55 | % | 2,893,833 |   | 2,897,013 |   |
| CRV                              |   | 12-30-08 |   | 01-19-09 |   | BBVA |   | U.F. |   | BONO |   | 0.55 | % | 2,514,959 |   | 2,523,717 |   |
| CRV                              |   | 11-27-08 |   | 01-14-09 |   | Banco Central |   | US$ |   | CERO |   | 0.17 | % | 1,874,796 |   | 1,876,251 |   |
| CRV                              |   | 12-26-08 |   | 01-06-09 |   | Banco Central |   | $ |   | CERO |   | 0.55 | % | 1,582,664 |   | 1,584,403 |   |
| CRV                              |   | 12-30-08 |   | 01-07-09 |   | Banchile C. de B. |   | $ |   | BONO |   | 0.46 | % | 1,449,817 |   | 1,450,832 |   |
| CRV                              |   | 12-30-08 |   | 01-07-09 |   | Banco Chile |   | $ |   | BONO |   | 0.46 | % | 970,168 |   | 971,345 |   |
| CRV                              |   | 12-30-08 |   | 01-07-09 |   | Banchile C. de B. |   | $ |   | BONO |   | 0.46 | % | 234,059 |   | 234,223 |   |
| CRV                              |   | 12-30-08 |   | 01-07-09 |   | Banchile C. de B. |   | $ |   | CERO |   | 0.46 | % | 106,703 |   | 106,778 |   |
| CRV                              |   | 12-19-08 |   | 01-07-09 |   | Banco Central |   | $ |   | CERO |   | 0.55 | % | 4,638 |   | 4,644 |   |
| CRV                              |   | 12-29-08 |   | 01-13-09 |   | Banco Estado |   | U.F. |   | CERO |   | 0.55 | % | 4,271 |   | 4,281 |   |
| CRV                              |   | 12-17-08 |   | 01-06-09 |   | Banco Central |   | $ |   | CERO |   | 0.55 | % | 4,039 |   | 4,044 |   |
| CRV                              |   | 12-29-08 |   | 01-19-09 |   | Banco Central |   | $ |   | CERO |   | 0.54 | % | 4,006 |   | 4,020 |   |
| CRV                              |   | 12-30-08 |   | 01-28-09 |   | Banco Central |   | $ |   | BONO |   | 0.40 | % | 3,714 |   | 3,728 |   |
| CRV                              |   | 12-22-08 |   | 01-26-09 |   | Banco Central |   | $ |   | BONO |   | 0.48 | % | 3,652 |   | 3,667 |   |
| CRV                              |   | 12-23-08 |   | 01-14-09 |   | I.N.P. |   | $ |   | BONO |   | 0.40 | % | 3,118 |   | 3,124 |   |
| CRV                              |   | 12-30-08 |   | 01-19-09 |   | BBVA |   | U.F. |   | CERO |   | 0.55 | % | 2,951 |   | 2,961 |   |
| CRV                              |   | 12-18-08 |   | 01-05-09 |   | Banco Estado |   | U.F. |   | CERO |   | 0.55 | % | 1,440 |   | 1,442 |   |
| CRV                              |   | 12-16-08 |   | 01-05-09 |   | Banco Central |   | $ |   | CERO |   | 0.55 | % | 709 |   | 710 |   |
|                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |   |   |   |   |   |   | Total |   |   |   |   |   | 437,865,125 |   | 438,686,549 |   |

 

F-46

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Table ofContents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

**Note 10.**            Property, Plant and Equipment

** **

Property, plant andequipment balances by major functional categories is as follows:

 
| ** **                                                               | ** ** | **As of December 31,** | ** ** | **Useful life** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------|------------|
| ** **                                                               | ** ** | **2007**                    | ** ** | **2008**        | ** ** | **range** | ** ** |
| ** **                                                               | ** ** | **ThCh$**                   | ** ** | **ThCh$**       | ** ** | **Years** | ** ** |
|                                                                     |       |                        |       |            |       |   |   |
| Land                                                                     |       | 150,430,556                 |       | 169,158,999     |       |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Buildings and infrastructure                                             |       | 7,510,420,114               |       | 8,347,990,500   |       | 20-65 |   |
| Distribution and transmission lines and public lighting                  |       | 5,014,813,294               |       | 6,012,517,521   |       | 20-60 |   |
| Less: third party contributions                                          |       | (150,879,094                | )          | (199,724,344    | )          | 20-60 |   |
|                                                                     |       |                        |       |            |       |   |   |
| Sub-total                                                                |       | 12,374,354,314              |       | 14,160,783,677  |       |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Machinery and equipment                                                  |       | 2,161,441,303               |       | 2,692,490,347   |       | 4-25 |   |
|                                                                     |       |                        |       |            |       |   |   |
| Work in progress                                                         |       | 268,991,805                 |       | 440,071,534     |       | — |   |
| Construction materials                                                   |       | 37,870,566                  |       | 57,424,794      |       | 4-10 |   |
| Leased assets (1)                                                        |       | 87,271,401                  |       | 121,114,983     |       | 4-10 |   |
| Furniture and fixtures, tools, and computing equipment                   |       | 84,632,971                  |       | 100,541,146     |       | 4-10 |   |
| Vehicles                                                                 |       | 7,345,108                   |       | 8,688,174       |       | 4-10 |   |
| Equipment in transit                                                     |       | 7,795,561                   |       | 10,840,227      |       | 4-10 |   |
| Other assets                                                             |       | 86,979,573                  |       | 114,521,250     |       | 4-25 |   |
|                                                                     |       |                        |       |            |       |   |   |
| Sub-total                                                                |       | 580,886,985                 |       | 853,202,108     |       |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Technical appraisal                                                      |       |                        |       |            |       |   |   |
| Buildings and infrastructure                                             |       | 36,342,462                  |       | 36,212,020      |       | 20-60 |   |
| Machinery and equipment                                                  |       | 349,981                     |       | 349,981         |       | 4-25 |   |
|                                                                     |       |                        |       |            |       |   |   |
| Total technical appraisa                                                 |       | 36,692,443                  |       | 36,562,001      |       |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Total property plant and equipment                                       |       | 15,303,805,601              |       | 17,912,197,132  |       |   |   |
| ** **                                                               |       |                        |       |            |       |   |   |
| Accumulated depreciation at beginning of year                            |       |                        |       |            |       |   |   |
| Buildings and infrastructure                                             |       | (5,133,280,624              | )          | (6,002,753,855  | )          |   |   |
| Machinery and equipment                                                  |       | (894,005,809                | )          | (1,153,720,365  | )          |   |   |
| Other assets                                                             |       | (76,430,322                 | )          | (94,540,633     | )          |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Accumulated depreciation at beginning of year                            |       | (6,103,716,755              | )          | (7,251,014,853  | )          |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Accumulated depreciation at beginning of year technical appraisal        |       |                        |       |            |       |   |   |
| Buildings and infrastructure                                             |       | (25,643,437                 | )          | (26,650,964     | )          |   |   |
| Machinery and equipment                                                  |       | (343,778                    | )          | (345,089        | )          |   |   |
| Other assets                                                             |       | (323,163                    | )          | (389,344        | )          |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Total accumulated depreciation at beginning of year technical  appraisal |       | (26,310,378                 | )          | (27,385,397     | )          |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Depreciation expense for the year                                        |       | (453,778,547                | )          | (553,586,380    | )          |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Total accumulated depreciation at end of year                            |       | (6,583,805,680              | )          | (7,831,986,630  | )          |   |   |
|                                                                     |       |                        |       |            |       |   |   |
| Total property, plant and equipment, net                                 |       | 8,719,999,921               |       | 10,080,210,502  |       |   |   |

 

----

(1) Leased assets:

 

**a.****              **At Endesa Chile an amount ofThCh$34,343,714 (ThCh$ 34,343,714 in 2007) corresponds to a lease agreement forthe 2x220KV Ralco-Charrúa transmission lines and installations between EndesaChile and Huepil S.A. This agreement has a 20-year maturity and earns interestat an annual rate of 6.5%.

 

F-47

----

Table ofContents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements –(Continued)**

 

**b.****              **At our Peruvian subsidiary Edegel S.A. anamount of ThCh$84,284,437 (ThCh$50,813,370 in 2007) relates to leasingagreements to finance the project of converting the Ventanilla thermo-electricplant to combined cycle ,  carried out bythe Company and the financial institutions Banco de Crédito del Perú and BBVA -Banco Continental. These agreements have an 8 year maturity and accrue interestat an annual rate of Libor +3.0% and Libor +2.5%, respectively.

 

The Company and itsforeign subsidiaries have all carry risk, earthquake and machinerybreakdown insurancepolicies with a US$200,000,000 limit; including losses for businessinterruption. Premiums prepaid associated with these policies are recorded inprepaid expenses and charged to income over the life of the policy.

 

**Note 11.**            Investment in Related Companies

** **

**a)****                 ****Investments in relatedcompanies of December 31, 2007 and 2008 are as follows:**

 
| ** **                                                    | ** ** | ** **    | ** ** | **Percentage** | ** ** | **Shareholders’ equity** | ** ** | **Net income**   | ** ** | ** **           | ** ** | ** **                | ** ** | ** ** | ** ** | ** ** | ** ** | ** **  | ** ** |
|---------------------------------------------------------------|------------|---------------|------------|----------------|------------|-------------------------------|------------|------------------|------------|----------------------|------------|---------------------------|------------|------------|------------|------------|------------|-------------|------------|
| **Related**                                                   | ** ** | **Number**    | ** ** | **owned**      | ** ** | **of investee**               | ** ** | **of investees** | ** ** | **Equity in income** | ** ** | **Investment book value** | ** ** |
| **Companies**                                                 | ** ** | **of shares** | ** ** | **2007**       | ** ** | **2008**                      | ** ** | **2007**         | ** ** | **2008**             | ** ** | **2007**                  | ** ** | **2008**   | ** ** | **2006**   | ** ** | **2007**    | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                    | ** ** | ** **    | ** ** | **%**          | ** ** | **%**                         | ** ** | **ThCh$**        | ** ** | **ThCh$**            | ** ** | **ThCh$**                 | ** ** | **ThCh$**  | ** ** | **ThCh$**  | ** ** | **ThCh$**   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                          |       |          |       |           |       |                          |       |             |       |                 |       |                      |       |       |       |       |       |        |       |   |   |   |   |   |   |
| Gas Atacama Generación S.A.                              |       | —        |       | 0.05           | %          | 0                             | %          | (5,452,494       | )          | —               |       | (31,871,213               | )          | —     |       | (9,016     | )          | (15,935     | )          | — |   | (2,727 | ) | — |   |
| Gasoducto Atacama Argentina S.A.                              |       | 5             |       | 0.03           | %          | 0.03                          | %          | 128,459,641      |       | 149,546,537          |       | (1,585,730                | )          | (1,545,946 | )          | 6,167      |       | (476        | )          | (464 | ) | 38,549 |   | 44,877 |   |
| Gasoducto Atacama Chile S.A.                                  |       | 50            |       | 0.05           | %          | 0.05                          | %          | 102,065,119      |       | 113,785,208          |       | 20,546,222                |       | 733,371    |       | 6,611      |       | 10,274      |       | 367 |   | 51,033 |   | 56,893 |   |
| Inversiones Electrogas S.A.                                   |       | 425           |       | 42.5           | %          | 42.5                          | %          | 18,796,497       |       | 21,330,980           |       | 5,757,187                 |       | 6,347,624  |       | 2,183,805  |       | 2,446,804   |       | 2,697,740 |   | 7,988,511 |   | 9,065,667 |   |
| Cía. de Energía del Mercosur S.A. (2)               |       | 6,305,400     |       | 45             | %          | 45                            | %          | 8,264,059        |       | 9,632,067            |       | (128,881                  | )          | (88,009    | )          | 920        |       | (57,997     | )          | (39,604 | ) | 3,718,827 |   | 4,334,430 |   |
| Transmisora Eléctrica de Quillota Ltda.                  |       | —        |       | 50             | %          | 50                            | %          | 8,793,766        |       | 9,332,138            |       | 722,347                   |       | 538,372    |       | 250,422    |       | 361,173     |       | 269,186 |   | 4,396,883 |   | 4,666,069 |   |
| Sacme                                                         |       | 12,000        |       | 50             | %          | 50                            | %          | 79,682           |       | 87,946               |       | 4,341                     |       | 4,208      |       | 2,076      |       | 2,170       |       | 2,104 |   | 39,841 |   | 43,973 |   |
| Electrogas S.A.                                               |       | 85            |       | 0.021          | %          | 0.021                         | %          | 17,455,369       |       | 20,118,448           |       | 5,947,971                 |       | 6,583,604  |       | 1,126      |       | 1,264       |       | 1,399 |   | 3,709 |   | 4,275 |   |
| Consorcio ARA- Ingendesa                                      |       | —        |       | 50             | %          | 50                            | %          | 231,165          |       | 624,116              |       | 305,989                   |       | 692,650    |       | 108,854    |       | 152,995     |       | 346,325 |   | 115,583 |   | 312,058 |   |
| Sociedad Consorcio Ingendesa Ara Ltda (1) |       | —        |       | 50             | %          | 50                            | %          | 25,940           |       | 1,276                |       | (30,417                   | )          | 2,821      |       | 68,631     |       | (15,209     | )          | 1,411 |   | 12,970 |   | 638 |   |
| Consorcio Ingendesa - Minmetal Limited  (1)                   |       | —        |       | 50             | %          | 50                            | %          | 35,719           |       | 32,028               |       | 1,625                     |       | (3,694     | )          | 85,966     |       | 812         |       | (1,847 | ) | 17,860 |   | 16,014 |   |
| Gas Atacama S.A.                                              |       | 1,147         |       | 0.00115        | %          | 0.00115                       | %          | 171,619,879      |       | 201,085,532          |       | (10,683,051               | )          | (189,395   | )          | 86         |       | (123        | )          | (2 | ) | 1,969 |   | 2,306 |   |
| Inversiones Gas Atacama Holding Ltda. (7)                     |       | —        |       | 50             | %          | 50                            | %          | 165,846,327      |       | 188,984,690          |       | (15,584,044               | )          | (5,494,589 | )          | 3,325,420  |       | (61,033,654 | )          | (2,747,294 | ) | 29,681,532 |   | 41,250,713 |   |
| Konecta Chile S.A. (6)                                        |       | 262           |       | 26.2           | %          | 26.2                          | %          | 1,150            |       | 1,145                |       | —                    |       | —     |       | —     |       | —      |       | — |   | 302 |   | 300 |   |
| Sistemas SEC S.A. (3)                                         |       | 56,350        |       | 49             | %          | 49                            | %          | 2,049,608        |       | 2,621,991            |       | 207,636                   |       | 572,383    |       | (137,594   | )          | (101,742    | )          | 280,468 |   | 1,004,307 |   | 1,284,776 |   |
| Termoeléctrica José de San Martín S.A. (4)     |       | 104,300       |       | 20.86          | %          | 20.86                         | %          | 77,305           |       | 93,290               |       | —                    |       | —     |       | —     |       | —      |       | — |   | 17,857 |   | 19,412 |   |
| Termoeléctrica Manuel Belgrano S.A. (4)                  |       | 104,300       |       | 20.86          | %          | 20.86                         | %          | 77,300           |       | 93,290               |       | —                    |       | —     |       | —     |       | —      |       | — |   | 17,856 |   | 19,411 |   |
| GNL Chile S.A. (5)                                            |       | 3,023,642     |       | 33.33          | %          | 33.33                         | %          | (1,860,945       | )          | (2,244,975           | )          | (449,199                  | )          | (1,965,505 | )          | —     |       | (149,733    | )          | (655,168 | ) | (620,315 | ) | (748,325 | ) |
| Centrales Hidroeléctricas de Aysén S.A. (5)         |       | 3,369,824     |       | 51             | %          | 51                            | %          | 31,862,523       |       | 67,071,658           |       | (2,103,735                | )          | (3,741,273 | )          | —     |       | (1,072,903  | )          | (1,908,047 | ) | 16,249,871 |   | 34,206,512 |   |
| GNL Quintero S.A. (5)                                         |       | 200           |       | 20             | %          | 20                            | %          | 8,657,779        |       | 120,633,413          |       | (801,134                  | )          | (3,093,628 | )          | —     |       | (160,227    | )          | (618,726 | ) | 1,731,556 |   | 24,126,683 |   |
| Consorcio Ara- Ingendesa Sener (1)                            |       | —        |       | 33.33          | %          | 33.33                         | %          | (5,753           | )          | 675                  |       | (6,841                    | )          | 3,863      |       | —     |       | (2,280      | )          | 1,288 |   | (1,918 | ) | 225 |   |
| Hidroaysén Transmisión S.A.(5)                      |       | 51            |       | —         |       | 0.51                          | %          | —           |       | 22,368               |       | —                    |       | —     |       | —     |       | —      |       | — |   | — |   | 114 |   |
|                                                          |       |          |       |           |       |                          |       |             |       |                 |       |                      |       |       |       |       |       |        |       |   |   |   |   |   |   |
| Total                                                         |       |          |       |           |       |                          |       |             |       |                 |       |                      |       |       |       | 5,893,474  |       | (59,634,787 | )          | (2,370,864 | ) | 64,464,056 |   | 118,707,021 |   |

 

----

(1)               Non consolidated relatedcompanies of subsidiary Ingendesa Ltda.

(2)               Non consolidated relatedcompany of subsidiary Endesa Argentina S.A.

(3)               Non consolidated related companyof subsidiary of CAM Chile Ltda.

(4)               Non consolidated related companiesof subsidiaries Endesa Costanera S.A. and Hidroeléctrica El Chocón S.A.

(5)               Non consolidated Companies ofEndesa Chile (in organization).

(6)               Non consolidated relatedcompany of subsidiary Synapsis Ltda.

(7)               Included an allowance forimpairment ascending ThCh$53,241,631in 2007 (See Note 2 l).

 

**b)**                  Income and (losses)recognized by Enersis S.A. based on the participation in the related companiesas of December 31, 2006, amounted to ThCh$6,040,083 (ThCh$(146,610)),ThCh$2,975,492 (ThCh$(62,610,279)) in 2007 and ThCh$3,600,288(ThCh$(5,971,152)) in 2008.

** **

**c)**                  In accordance withTechnical Bulletin No.64 of the Chilean Association of Accountants,  the Company has recorded for the years ended December 31,2006, 2007 and 2008, foreign exchange gains and losses on liabilities relatedto net investments in foreign countries that are denominated in the samecurrency as the functional currency of those foreign investments. Such gainsand losses are included in the cumulative translation adjustment account inshareholders’ equity, and in this way, act as a hedge for the exchange riskaffecting the investments. As of December 31, 2007 and 2008 thecorresponding amounts are as follows:

 

F-48

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**2008:**

 
| ** **                              | ** ** | **Country**   | ** ** | ** **     | ** ** | **Reporting** | ** ** | ** **    | ** ** |
|-----------------------------------------|------------|---------------|------------|----------------|------------|---------------|------------|---------------|------------|
| **Company**                             | ** ** | **of origin** | ** ** | **Investment** | ** ** | **currency**  | ** ** | **Liability** | ** ** |
| ** **                              | ** ** | ** **    | ** ** | **ThCh$**      | ** ** | ** **    | ** ** | **ThCh$**     | ** ** |
|                                    |       |          |       |           |       |          |       | ** **    |       |
| Edesur S.A.                             |       | Argentina     |       | 202,983,593    |       | US$           |       | 68,238,448    |       |
| Ampla Energía e Servicos S.A.      |       | Brazil        |       | 229,117,881    |       | US$           |       | 166,797,109   |       |
| Emgesa S.A.                             |       | Colombia      |       | 246,295,371    |       | US$           |       | 291,989,846   |       |
| Edegel S.A.                             |       | Peru          |       | 166,512,773    |       | US$           |       | 134,553,414   |       |
| Hidroeléctrica El Chocón S.A. |       | Argentina     |       | 260,039,949    |       | US$           |       | 90,445,806    |       |
| CEMSA                                   |       | Argentina     |       | 4,334,430      |       | US$           |       | 3,040,052     |       |
| Endesa Brasil S.A.                      |       | Brazil        |       | 509,753,175    |       | US$           |       | 442,980,964   |       |
| Endesa Costanera S.A.                   |       | Argentina     |       | 97,040,474     |       | US$           |       | 53,349,910    |       |
|                                    |       |          |       |           |       |          |       |          |       |
| Total                                   |       |          |       | 1,716,077,646  |       |          |       | 1,251,395,549 |       |

 

**2007:**

 
| ** **                              | ** ** | **Country**   | ** ** | ** **     | ** ** | **Reporting** | ** ** | ** **    | ** ** |
|-----------------------------------------|------------|---------------|------------|----------------|------------|---------------|------------|---------------|------------|
| **Company**                             | ** ** | **of origin** | ** ** | **Investment** | ** ** | **currency**  | ** ** | **Liability** | ** ** |
| ** **                              | ** ** | ** **    | ** ** | **ThCh$**      | ** ** | ** **    | ** ** | **ThCh$**     | ** ** |
|                                    |       |          |       |           |       |          |       |          |       |
| Edesur S.A.                             |       | Argentina     |       | 168,661,919    |       | US$           |       | 58,016,694    |       |
| Ampla Energia e Serviços  S.A.     |       | Brasil        |       | 151,974,683    |       | US$           |       | 141,811,798   |       |
| Emgesa S.A.                             |       | Colombia      |       | 194,015,987    |       | US$           |       | 248,251,337   |       |
| Edegel S.A.                             |       | Peru          |       | 134,515,725    |       | US$           |       | 114,398,035   |       |
| Hidroeléctrica El Chocón S.A. |       | Argentina     |       | 228,069,515    |       | US$           |       | 76,304,626    |       |
| CEMSA                                   |       | Argentina     |       | 3,718,827      |       | US$           |       | 2,535,385     |       |
| Endesa Brasil S.A.                      |       | Brasil        |       | 487,000,626    |       | US$           |       | 412,329,709   |       |
| Endesa Costanera S.A.                   |       | Argentina     |       | 83,461,096     |       | US$           |       | 46,000,548    |       |
|                                    |       |          |       |           |       |          |       |          |       |
| Total                                   |       |          |       | 1,451,418,378  |       |          |       | 1,099,648,132 |       |

** **

**d)**     The investments in relatedcompanies made by Enersis S.A. and its affiliates for the years ended December 31,2007 and 2008, are detailed as follows:

** **
| ** **                                                        | ** ** | **As of December 31,** | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------|------------|
| **Company**                                                       | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                                                        | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                                              |       |                        |       |   |   |
| Centrales Hidroeléctricas  de Aysén S.A. (Endesa Chile) |       | 4,190,569                   |       | 19,864,710 |   |
| Endesa Costanera S.A.                                             |       | 5,995,273                   |       | — |   |
| Central Hidroeléctrica El Chocón S.A.                   |       | 31,394,519                  |       | — |   |
|                                                              |       |                        |       |   |   |
| Total                                                             |       | 41,580,361                  |       | 19,864,710 |   |

 

**e)**     Constitutionof companies

** **

**i.**      On September 4, 2006,Endesa Chile and its subsidiary Endesa Inversiones Generales S.A. executed theincorporation deed that gave birth to a new subsidiary, whose name is CentralesHidroeléctricas de Aysén S.A. and whose objective is the development,financing, ownership and operation of a hydroelectric project in the 11thRegion (Aysén). The capital of the company is ThCh$1,169 divided into 100ordinary, single-series, nominal, equivalent, no par-value shares. Endesa Chilesubscribed 99 shares, representing 99% of the capital,

 

F-49

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

** **

**and paid the total amount, a sum ofThCh$1,169, while Endesa Inversiones Generales S.A. subscribed one share,representing 1% of the capital, and paid in ThCh$$12 for it.**

** **

**On September 21, 2006 the First GeneralExtraordinary Shareholders’ Meeting of Centrales Hidroeléctricas de Aysén S.A.was held and in it the increase in the paid-in capital of the Company to thenew sum of ThCh$23,391,720 divided into 2 million nominal, single-series, nopar value shares, was approved. This will be subscribed to and paid in withinthree years of the date of the above mentioned First Extraordinary GeneralShareholders’ Meeting. In this way, of the 1,999,900 shares corresponding tothe increase in paid-in capital, Endesa Chile would subscribe to 1,019,900shares, representing 51% of the increase in capital and 50.99995% of the newcapital of the Company, while the new shareholder Colbún S.A. would subscribeto 980,000 shares, representing 49% of the increase in paid-in capital and 49%of the new paid-in capital. Endesa Inversiones Generales S.A. will not exerciseits preferential subscription right, and therefore its interest in the paid-incapital of the Company will be 0.00005%.**

** **

**On October 10, 2006, Endesa Chilesubscribed to 1,019,899 shares, paying in a total of ThCh$11,880,881 for them,or Ch$11,650 per share, a sum equivalent to the placement value agreed to inthe First General Shareholders’ Meeting of Centrales Hidroeléctricas de AysénS.A.. At the same time, it subscribed to an additional 1 share, paying in atotal of Ch$11,650 for it, equivalent to the placement value agreed to in theFirst General Extraordinary Shareholders’ Meeting of Centrales Hidroeléctricasde Aysén S.A. However, the payment for this share was made in accordance withthe terms set out in the public deed of “Payment of Shares Subscribed to forTransfer of Title and the Constitution of Usufruct on the Rights to Use theWater”, which was executed by the parties as of the same date, and according towhich Ch$11,650 were paid in cash, plus a contribution for the ownership of thetitle to the rights to use the water that are identified in the above deed.**

** **

**On October 16, 2007, the ExtraordinaryShareholders’ Meeting of Centrales Hidroeléctricas de Aysén S.A. was held. Theshareholders increased its capital by ThCh$14,565,375 representing 1,337,500single series, no par value shares, which shall be subscribed and paid inwithin 3 years after the date of the Shareholders’ Meeting. At the same time,Empresa Nacional de Electricidad S.A. subscribed 682,125 shares for a total ofThCh$7,428,341, of which it paid ThCh$1,219,136 by capitalizing credits andThCh$2,106,746  in cash. On December 17,2007, Empresa Nacional de Electricidad S.A. paid in ThCh$2,083,823 by means ofa cash payment to the account of this capital increase.**

** **

**ii.**     On March 9, 2007,Empresa Nacional de Electricidad S.A. subscribed 200 of the 1,000 registeredshares issued by public deed of the Company GNL Quintero S.A.. It paid for themby assigning, transferring and capitalizing in the Company accounts receivableof ThCh$2,190,919 from its investee GNL Chile S.A.. The ownership interest ofEndesa Chile in GNL Quintero S.A. is 20%. On May 31, 2007 the pendingcontribution of ThCh$771 in GNL Chile S.A. was paid by capitalizing the accountreceivable.

** **

**iii.**    On October 29, 2007,the company Central Eólica Canela S.A. was incorporated. Its shareholders arethe subsidiary Endesa Eco S.A., which owns 75%, and Centinela S.A., which owns25%. As of this date, this subsidiary forms part of the consolidated financialstatements of the company.

** **

**By means of a shareholders’ agreement of November 23,2007, Endesa Eco S.A. and Centinela S.A. stipulated the terms and conditionsfor the latter’s withdrawal 5 years after signing such agreement. The aboveagreement stipulates that Centinela S.A. will have the option of withdrawingfrom the company by selling its ownership interest to Endesa Eco S.A.. As aresult of the above, minority interest has been recorded in sundry long-termcreditors.**

** **

**iv.**    On April 15, 2008,the Company paid capital contributions of ThCh$2,108,778 in Centrales Hidroeléctricasde Aysén S.A., whose subscription was pending. This transaction served to payoff all the 682,125 shares subscribed on October 16, 2007.

** **

**v.**     On April 30, 2008,the company purchased 1,667,700 shares of Centrales Hidroeléctricas de AysénS.A., paying ThCh$7,236,710 for 685,950 shares on June 5, 2008. Thebalance of 981,750 shares will be paid within a period of three years.

 

**F-50**

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**Table of Contents**

** **

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements –(Continued)**

** **

**vi.**    On July 15, 2008, theCompany made a capital contribution of US$35,680,377 in GNL Quintero S.A.,equivalent to ThCh$18,472,192, by capitalizing credits, while maintaining its20% ownership interest.

** **

**vii.**   On August 20, 2008,the Company made a partial payment of capital subscribed to CentralesHidroeléctricas de Aysén S.A. on April 30, 2008, by contributingThCh$5,044,622, equivalent to 490,722 shares.

** **

**viii.**  On August 20, 2008,the Company subscribed a capital contribution of US$1,000,000 in GNL ChileS.A., equivalent to ThCh$538,137, maintaining its 33.33% ownership interest inthat company.

** **

**ix.**    On September 22,2008, the company made a full payment of capital subscribed to CentralesHidroeléctricas de Aysén S.A. on April 30, 2008, by contributingThCh$5,474,600, equivalent to 491,028 shares.

** **

**f)**                Reorganization ofentities under common control

** **

**i.**      On April 1, 2006, thesubsidiaries Chilectra S.A. (formerly Elesur S.A.) and Chilectra S.A. merged,as was approved in a Meeting of Shareholders held on March 31, 2006. As aresult of the merger and according to Technical Bulletin N°72 of the ChileanInstitute of Accountants, this business combination subject to common controlwas recorded under the pooling of interests methodology, causing an increase ofThCh$3,531,613 in shareholders’ equity

** **

**ii.**     On August 3, 2007,Endesa Chile Internacional S.A. was subject to a takeover merger by SociedadCompañía Eléctrica Cono Sur S.A., with the latter subsisting as the companymaking the takeover. This merger was approved and ratified in the ExtraordinaryShareholders’ Meetings of both companies on August 7, 2007.

** **

**This merger had no effect, since Endesa Chilewas the main 100% shareholder of both companies**

** **

**iii.**    On September 1, 2007,the merger of the Colombian companies Emgesa S.A. and Central HidroeléctricaBetania S.A., approved by the Shareholders’ Meetings of both companies of February 21,2007, took place by Betania taking over Emgesa, with the former subsisting asthe company making the take over and changing its name Emgesa S.A.

** **

**The above transaction has been recorded asstipulated in Technical Bulleting 72 of the Chilean Institute of Accountants asa combination of companies under common control based on the methodology of theunification of interests.**

** **

**As a result of this merger Endesa Chile andits subsidiary Compañía Eléctrica Cono Sur S.A. hold a direct 26.87% (1.45% and25.43%, respectively) share of this new company. This ownership interesteliminates the 99.99% previously held in Betania S.A.. Before the merger,Betania S.A. held a 23.45% ownership interest in Emgesa S.A.**

** **

**As a result of the above, an equity reductionof reserves of ThCh$61,741,337  has beenrecognized**

** **

**g)**    Acquisitions

** **

**i.**      On January 13, 2006,the Company purchased 5,500 shares in Empresa Eléctrica Pangue S.A. forThCh$6,594, increasing it direct ownership interest in such company to 94.97%.

** **

**On July 20, 2006, the Company acquired 3,500shares of Empresa Eléctrica Pangue S.A. for ThCh$4,110, increasing its directownership interest in that company to 94.975189%.**

** **

**ii.**     In Peru, on June 1,2006, Empresa de Generación Termoeléctrica Ventanilla S.A. (Etevensa) wasupstream merged into the subsidiary Edegel S.A.

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements –(Continued)**

 

**As a result of the merger and in accordancewith Technical Bulletin N° 72 of the Chilean Institute of Accountants, thisbusiness combination subject to common control was recorded under the poolingof interests methodology and led to decreasing the interest in Edegel S.A. to55.44% and recognizing a reduction in other reserves, under shareholders’equity, by ThCh$6,734,291 (See note 22e).**

** **

**iii.**    Through a Memorandum ofUnderstanding signed on October 5, 2004, the Corporación Financiera delValle will stop being shareholder of the Central Hidroeléctrica de Betania S.A.through an asset exchange operation which will take place between theCorfivalle Group and Endesa Group when the legal processes defined by bothparties prior to the delivery of the titles to the assets involved arecompleted. On December 29, 2006 the writ of the splitting of Betania wasprotocolized, and with that the transfer of ownership of the assets formingpart of the Corfivalle group was formalized.

** **

**With this operation, the Endesa Chile Groupgave to Corfivalle the electricity Sub-station of Betania S.A. E.S.P. and 3.81%of the ownership in Empresa de Energía de Bogotá S.A. E.S.P., in exchange for a14.3% interest in Central Hidroeléctrica de Betania S.A. E.S.P which at thatdate was owned by Corfivalle; thus Endesa Chile Group increased its interest inCentral Hidroeléctrica de Betania S.A. E.S.P from 85.62% to 99.99%.**

** **

**In accordance with Technical Bulletin N° 72of the Chilean Institute of Accountants and Circular N°1697 of the Superintendencyof Securities and Insurance, the Company evaluated the assets and liabilitiesacquired from Central Hidroeléctrica de Betania S.A. at their respective fairmarket values. As a result of this evaluation it was concluded that the fairmarket values do not differ substantially from the book values.**

** **

**As a result, the above mentioned purchase ofthe minority interest was recorded in conformity with Technical Bulletin No. 72of the Chilean Institute of Accountants and involved recognizing negative goodwillamounting to ThCh$8,554,907. (See note 13b).**

** **

**iv.**    On February 27, 2007,Empresa Nacional de Electricidad S.A. proceeded to acquire 19,574,798 ordinary,registered, non-endorsable shares of Southern Cone Power Argentina S.A. forThCh$5,995,273. These shares represent 100% of the capital of Southern ConePower Argentina S.A., which is the holder of 8,081,160 class A shares of EndesaCostanera S.A., representatives of 5.5% of this Company’s capital stock, whichis the only asset of Southern Cone Power Argentina S.A.. As a result of theabove, Endesa Chile now directly and indirectly owns 69.77% of the stock ofEndesa Costanera S.A..

** **

**v.**     On March 08, 2007,Empresa Nacional de Electricidad S.A. finalized signature of a contract topurchase all the shares of Central Hidroeléctrica El Chocón S.A., held directlyor indirectly by CMS Generation S.R.L.. Endesa Chile made use of its “firstrefusal” option giving it the preferential purchase option under ashareholders’ agreement. The operation meant acquiring 2,734,110 class R sharesand 1,733,390 class L shares equivalent to 25% of the stock capital ofHidroinvest S.A., the company which controls 59% of Hidroeléctrica El ChocónS.A., as well as 7,405,768 shares of Central Hidroeléctrica El Chocón S.A.,equivalent to 2.4803% of the stock capital of the Company, which gave it thepreferential purchase option under a shareholders’ agreement, for US$50,000,000(ThCh$31,394,520). As a result of the above, Endesa Chile now directly andindirectly owns 67.67% of the stock capital of Central Hidroeléctrica El ChocónS.A.

** **

**According to the provisions of TechnicalBulletin 72 of the Chilean Institute of Accountants and the standardsstipulated in 1.697 of the Superintendency of Securities and Insurance, theCompany evaluated the assets and liabilities acquired from Endesa CostaneraS.A. and Central Hidroeléctrica El Chocón S.A. at their respective fair values.This evaluation showed that the fair values do not differ significantly frombook values.**

** **

**As a result of the above, the above minorityinterest was recorded as stipulated in Technical Bulletin 72 of the ChileanInstitute of Accountants and a negative goodwill of ThCh$2,216,425 wasrecognized in Endesa Costanera S.A. and ThCh$5,883,599 in CentralHidroeléctrica El Chocón S.A. (See note 13b).**

** **

**vi.**    On March 27, 2007,Sociedad Concesionaria Túnel el Melón S.A. increased its paid-in capital byissuing 3,169,614,306 shares at a total amount of ThCh$34,893,978, with theCompany concurring 100%, through a

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

**cash payment of ThCh$18,433,872 and capitalizationof loans in the amount of ThCh$16,460,040, thereby increasing the Company’sparticipation in that company by 0.01% to 100%**

** **

**h)**             Dissolution ofrelated parties:

** **

**i.**      As a company restructuringin Colombia, on January 30, 2006 Capital de Energía S.A. (Cesa), owner of48.48% of Emgesa S.A. was liquidated. 51.00% of Cesa, in turn, was controlled by Central HidroeléctricaBetania S.A.

** **

**As a result of such restructuring, asstipulated in Technical Bulletin 72 of the Chilean Institute of Accountants,this transaction by companies under common control was booked using the poolingof interests methodology, which meant reducing the ownership interest of EmgesaS.A. to 23.45% and recognizing an equity increase in reserves of ThCh$2,237,266(see note 22e).**

** **

**ii.**     On September 1, 2008,Compañía Eléctrica Conosur S.A, a Panamanian subsidiary of Endesa Chile, waswound up. This winding-up was approved by the Extraordinary Shareholders’Meeting of the wound-up company on September 1, 2008.

** **

**This winding-up did not result in materialfinancial statement impact as Endesa Chile was the majority shareholder, with a100% ownership interest in the company. As a result, all related assets and liabilities were absorbed by EndesaChile.**

** **

**iii.**    On December 22, 2008,Endesa Brasil Participacoes Ltda., a Brazilian subsidiary of Endesa ArgentinaS.A. and Endesa Chile Matriz., which had 95% and 5% ownership interests,respectively, was wound up. This winding-up did not result in materialfinancial statement impact as Endesa Chile directly or indirectly had a 100%ownership interest in the company.

** **

**i)**                Business Structure

** **

CIEN sells electricity inArgentina and Brazil. Because of the reduction in the maximum availability ofthe generation and physical guarantee of energy and its associated power, theCompany is focusing its business on a different compensation structure that isnot based on the purchase and sale of energy between the countries.  Given the strategic importance of theCompany’s assets in the relations between Brazil and Argentina, the Braziliangovernment has been presented with a new business plan model changing itsselling activity to an electricity transmission activity with payment of afixed compensation, which is in the process of being approved. This presupposesintegrating its transmission lines with the Brazilian transmission gridoperated by the Brazilian Government.

 

As in 2007, this year theArgentinean government formalized payment of usage charges with the Company forconveying energy between the two countries. Management considers that thissituation further emphasizes the importance of the application made to theBrazilian government to approve the new business plan and considers that itwill probably be approved. The Company expects to have the business structuredefined in 2009.

 

**j)****               ****Impairment of investmentaccounted for under the equity-method**

 

During the year ended December 31,2007, the Company recorded an impairment charge of its investment inInversiones Gas Atacama Holding Limitada and subsidiaries, as the Companybelieves that the investment is other-than-temporary impaired.

 

Gas Atacama HoldingLimitada and its subsidiaries operate gas pipelines between Argentina andChile, as well as power generating thermoelectrical plants in the north ofChile.

 

In 2007, Gas Atacama’ssubsidiary GasAtacama Generación S.A. (GAG), has been notified of thearbitration sentence in its dispute with the electricity distribution companiesEmpresa Eléctrica de Arica S.A., Empresa

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements –(Continued)**

 

Eléctrica de Iquique S.A.and Empresa Eléctrica de Antofagasta S.A., before the arbitrator RicardoPeralta, in which GAG demanded the termination of the electricity supplycontracts signed with those distributors.

 

The result of thearbitration has been unfavorable for GAG, thus further aggravating the entities’sdelicate operative and financial situation.

 

Due to the facts andcircumstances described above, the Company believes that the impairment of itsinvestment in Gas Atacama is other-than-temporary as it is rather influenced bychanges in the economical environment, situation of raw material supply andother circumstances which are not deemed to be temporary in nature.

 

The Company performed animpairment test by comparing the fair value of the investment in Gas Atacama(determined using a discounted cash-flow approach as no market value isavailable) to the respective carrying amount (including goodwill), resulting inthe investment (including goodwill) being impaired.

 

Thus, as of December 31,2007, the Company recorded a total impairment charge of ThCh$ 48,953,062(historical Chilean pesos) in its Consolidated Statements of Income, which iscomprised of ThCh$ 62,675 (historical Chilean pesos)  of impairment charge of goodwill recordedover the investment in Inversiones Gas Atacama Holding and ThCh$ 48,890,387(historical Chilean pesos) related to the impairment of the investmentaccounted for under the equity method. These amounts were recorded within thelines “Amortization of goodwill” and “Equity participation in losses of relatedcompanies”, respectively in theConsolidated Statement of Income.

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

** **

**Note 12.**            Investments in other companies

** **

Investments in othercompanies at December 31, 2007 and 2008 are as follows:

 
| ** **                                       | ** ** | **Number**    | ** ** | **Percentage** | ** ** | **As of December 31,** | ** ** |
|--------------------------------------------------|------------|---------------|------------|----------------|------------|-----------------------------|------------|
| **Company**                                      | ** ** | **of shares** | ** ** | **owned**      | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                                       | ** ** | ** **    | ** ** | **%**          | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
| ** **                                       | ** ** | ** **    | ** ** | ** **     | ** ** | ** **                  | ** ** | ** ** | ** ** |
| CDEC-SIC Ltda.                                   |       | —        |       | 13.57          | %          | 191,485                     |       | 173,225 |   |
| CDEC-SING Ltda.                                  |       | —        |       | 7.69           | %          | 303,133                     |       | 303,133 |   |
| Club de la Banca y Comercio                      |       | 1             |       | —         |       | 2,060                       |       | 3,267 |   |
| Club Empresarial                                 |       | 1             |       | 1.00           | %          | 23,455                      |       | 26,744 |   |
| Cooperativa Eléctrica de Chillán Ltda. |       | —        |       | —         |       | 16,531                      |       | 16,531 |   |
| Electrificadora de la Costa S.A.                 |       | 6,795,148     |       | 0.14           | %          | 92,999                      |       | — |   |
| Electrificadora del Caribe                       |       | 109,353,394   |       | 0.22           | %          | 1,224,017                   |       | 1,549,119 |   |
| Empresa Eléctrica de Aysén S.A.        |       | 2,516,231     |       | 6.70           | %          | 2,533,354                   |       | 2,533,354 |   |
| Empresa Eléctrica de Bogotá S.A.       |       | 2,124,047     |       | 2.10           | %          | 20,519,723                  |       | 25,071,539 |   |
| Financiera Eléctrica Nacional S.A.          |       | 4,098         |       | 0.10           | %          | 112,064                     |       | — |   |
| Dardanelos Participaçóes S.A.          |       | —        |       | —         |       | 3,055                       |       | 2,723 |   |
|                                             |       |          |       |           |       |                        |       |   |   |
| Total                                            |       |          |       |           |       | 25,021,876                  |       | 29,679,635 |   |

 

**Note 13.**            Goodwill and Negative Goodwill

** **

**a)****    **The detail of the net balance of goodwillas of December 31, 2007 and 2008 and the amortization expense for the yearsended December 31, 2006, 2007 and 2008 are as follows:

 
| ** **                            | ** ** | **As of December 31,** | ** ** |
|---------------------------------------|------------|-----------------------------|------------|
| ** **                            | ** ** | **Amortization**            | ** ** | **Net Balance** | ** ** |
| ** **                            | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                            | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                  |       |                        |       |   |   |   |   |   |   |   |   |
| Chilectra S.A. (formerly Elesur S.A.) |       | (7,960,820                  | )          | (7,960,920 | ) | (7,961,245 | ) | 96,309,267 |   | 88,348,021 |   |
| Codensa S.A.                          |       | (1,068,666                  | )          | (928,684 | ) | (1,092,306 | ) | 9,132,057 |   | 9,648,696 |   |
| Edegel S.A.                           |       | (35,544                     | )          | (28,278 | ) | (31,897 | ) | 306,341 |   | 323,671 |   |
| Emgesa S.A.                           |       | (846,839                    | )          | (674,227 | ) | (938,764 | ) | 7,301,241 |   | 7,648,856 |   |
| Empresa Eléctrica de Colina S.A. |       | (237,178                    | )          | (237,180 | ) | (237,178 | ) | 2,075,308 |   | 1,838,131 |   |
| Empresa Eléctrica Pangue S.A.    |       | (214,218                    | )          | (214,218 | ) | (214,218 | ) | 3,124,012 |   | 2,909,794 |   |
| Empresa Nacional de Electricidad S.A. |       | (55,018,630                 | )          | (55,018,631 | ) | (55,018,631 | ) | 579,987,159 |   | 524,968,527 |   |
| Gasoducto Atacama Chile  S.A. (1)     |       | (6,113                      | )          | (74,366 | ) | — |   | — |   | — |   |
| Inversiones Distrilima S.A.           |       | (1,299                      | )          | (1,129 | ) | (1,329 | ) | 7,907 |   | 7,971 |   |
|                                  |       |                        |       |   |   |   |   |   |   |   |   |
| Total                                 |       | (65,389,307                 | )          | (65,137,633 | ) | (65,495,568 | ) | 698,243,292 | ** ** | **635,693,667** | ** ** |

 

----

(1) During the yearended December 31, 2007, in addition to ordinary annual amortization ofThCh$5,613 (historical Chilean pesos) the Company recorded goodwill impairmentamounting to ThCh$62,675 (historical Chilean pesos) resulting in a completeimpairment of goodwill recorded over this investment. See Note 11 (j) fordetails.

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**b)****    **The detail of the net balance of negativegoodwill as of December 31, 2007 and 2008 and the amortization expense forthe years ended December 31, 2006, 2007 and 2008 are as follows:

 
| ** **                               | ** ** | **As of December 31,** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **Amortization**            | ** ** | **Net Balance** | ** ** |
| **Company**                              | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                               | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| ** **                               | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Endesa Costanera S.A. (1)                |       | 3,016,162                   |       | 2,717,462 |   | 3,218,905 |   | (6,803,434 | ) | (4,783,203 | ) |
| Emgesa S.A. (2)                          |       | 2,063,958                   |       | 105,638 |   | 189,540 |   | (6,856,395 | ) | (7,847,590 | ) |
| Edegel S.A.                              |       | 1,981,209                   |       | 1,721,696 |   | 2,407,115 |   | (20,803,821 | ) | (21,956,856 | ) |
| Hidroeléctrica El Chocón (1)   |       | —                      |       | 227,284 |   | 356,437 |   | (5,833,599 | ) | (6,504,961 | ) |
| Inversiones Distrilima S.A.              |       | 27,282                      |       | 23,709 |   | 27,886 |   | (341,800 | ) | (374,135 | ) |
| Synapsis Soluciones y Servicios IT Ltda. |       | 19,614                      |       | 19,615 |   | 19,615 |   | (83,365 | ) | (63,749 | ) |
|                                     | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Total                                    |       | 7,108,225                   |       | 4,815,404 |   | 6,219,498 |   | (40,722,414 | ) | (41,530,494 | ) |

 

----

(1)              See Note 11 (g) v

(2)              See Note 11 (g) iii

 

**Note 14.**            Other Assets

** **

Other assets as of eachyear end are as follows:

 
| ** **                                   | ** ** | **As of December 31,** | ** ** |
|----------------------------------------------|------------|-----------------------------|------------|
| ** **                                   | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                                   | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                         |       |                        |       |   |   |
| Bond discount                                |       | 14,247,168                  |       | 13,776,034 |   |
| Bond issuance cost                           |       | 4,261,561                   |       | 6,066,906 |   |
| Unrealized losses from derivative contracts. |       | 61,208,045                  |       | 10,252,473 |   |
| Deferred expenses                            |       | 995,099                     |       | 1,204,000 |   |
| Bank fees and interest expense               |       | 7,178,041                   |       | 6,984,439 |   |
| Post-retirement benefits                     |       | 3,170,745                   |       | 2,607,105 |   |
| Security deposits for judicial obligations   |       | 68,284,644                  |       | 69,497,711 |   |
| Presumptive minimum earnings and taxes       |       | 45,808,941                  |       | 44,930,819 |   |
| Reimbursable contributions                   |       | 728,943                     |       | 504,407 |   |
| Deferred assets (Brazil)                     |       | 64,836,078                  |       | 62,566,704 |   |
| Others                                       |       | 3,923,864                   |       | 5,639,975 |   |
|                                         |       |                        |       |   |   |
| Total                                        |       | 274,643,129                 |       | 224,030,573 |   |

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**Note 15.**            Due to Banks and Financial Institutions

** **

**a)****             ****Short-term debt due to banks andfinancial institutions:**

 
| ** **                             | ** ** | **Foreign  currency** | ** ** | ** **                  | ** ** | ** **      | ** ** |
|----------------------------------------|------------|-----------------------|------------|-----------------------------|------------|-----------------|------------|
| ** **                             | ** ** | **US$**               | ** ** | **Other  foreign currency** | ** ** | **$Readjusted** | ** ** | **Ch$** | ** ** | **As of  December 31,** | ** ** |
| **Financial  Institution**             | ** ** | **2007**              | ** ** | **2008**                    | ** ** | **2007**        | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                             | ** ** | **ThCh$**             | ** ** | **ThCh$**                   | ** ** | **ThCh$**       | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                   |       |                  |       |                        |       |            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ABN Amro Bank                          |       | —                |       | —                      |       | 6,363,553       |       | — |   | — |   | — |   | — |   | — |   | 6,363,553 |   | — |   |
| Banco Av Villas                        |       | —                |       | —                      |       | 10,788,395      |       | — |   | — |   | — |   | — |   | — |   | 10,788,395 |   | — |   |
| Banco Bayerische  Landes               |       | 15,280                |       | —                      |       | —          |       | — |   | — |   | — |   | — |   | — |   | 15,280 |   | — |   |
| Banco BBVA                             |       | —                |       | —                      |       | 50,956,292      |       | 56,470,611 |   | — |   | — |   | — |   | — |   | 50,956,292 |   | 56,470,611 |   |
| Banco BBVA Bhif                        |       | —                |       | —                      |       | —          |       | — |   | — |   | — |   | 5 |   | 2 |   | 5 |   | 2 |   |
| Banco Continental                      |       | —                |       | —                      |       | 13,405,527      |       | — |   | — |   | — |   | — |   | — |   | 13,405,527 |   | — |   |
| Banco Crédito  Perú          |       | 4,936,278             |       | 12,827,084                  |       | 12,230,555      |       | 26,351,898 |   | — |   | — |   | — |   | — |   | 17,166,833 |   | 39,178,982 |   |
| Banco Crédito e  Inversiones      |       | —                |       | —                      |       | —          |       | — |   | — |   | — |   | 9 |   | 5,010,466 |   | 9 |   | 5,010,466 |   |
| Banco de Bogotá                   |       | —                |       | —                      |       | 4,842,201       |       | — |   | — |   | — |   | — |   | — |   | 4,842,201 |   | — |   |
| Banco de Chile                         |       | —                |       | —                      |       | —          |       | — |   | — |   | — |   | 11 |   | 10,003,231 |   | 11 |   | 10,003,231 |   |
| Banco de la Ciudad  de Buenos Aires    |       | —                |       | —                      |       | —          |       | 2,988,088 |   | — |   | — |   | — |   | — |   | — |   | 2,988,088 |   |
| Banco de la  Nación Argentina     |       | —                |       | —                      |       | 36,119          |       | 4,617,885 |   | — |   | — |   | — |   | — |   | 36,119 |   | 4,617,885 |   |
| Banco Provincia de Buenos Aires        |       | 964,512               |       | 1,046,049                   |       | —          |       | — |   | — |   | — |   | — |   | — |   | 964,512 |   | 1,046,049 |   |
| Banco do Brasil                        |       | —                |       | —                      |       | 6,921,960       |       | — |   | — |   | — |   | — |   | — |   | 6,921,960 |   | — |   |
| Banco do Nordeste do Brasil            |       | —                |       | —                      |       | 201,712         |       | — |   | — |   | — |   | — |   | — |   | 201,712 |   | — |   |
| Banco Estado                           |       | 342,088               |       | —                      |       | —          |       | — |   | — |   | — |   | 2,510 |   | 2,075,851 |   | 344,598 |   | 2,075,851 |   |
| Banco Itaú                        |       | 1,328,185             |       | 1,309,268                   |       | 1,214,202       |       | 1,789,678 |   | — |   | — |   | — |   | — |   | 2,542,387 |   | 3,098,946 |   |
| Banco Itau  (Chile)                    |       | —                |       | —                      |       | —          |       | — |   | — |   | — |   | — |   | 10,337,900 |   | — |   | 10,337,900 |   |
| Banco Real                             |       | —                |       | —                      |       | 1,178,699       |       | 1,418,233 |   | — |   | — |   | — |   | — |   | 1,178,699 |   | 1,418,233 |   |
| Banco Safra                            |       | —                |       | —                      |       | 971,731         |       | 35,526,681 |   | — |   | — |   | — |   | — |   | 971,731 |   | 35,526,681 |   |
| Banco Santander  Central Hispano       |       | —                |       | 404,811                     |       | 2,492,078       |       | 59,000,056 |   | — |   | — |   | — |   | — |   | 2,492,078 |   | 59,404,867 |   |
| Banco Santander  Santiago              |       | 8                     |       | 103,491                     |       | —          |       | — |   | 4,453 |   | 90 |   | 4,676 |   | 1,269,549 |   | 9,137 |   | 1,373,130 |   |
| Banco Security                         |       | —                |       | —                      |       | —          |       | — |   | — |   | — |   | 1 |   | 56,683 |   | 1 |   | 56,683 |   |
| Bank Votorati                          |       | —                |       | —                      |       | —          |       | 969,551 |   | — |   | — |   | — |   | — |   | — |   | 969,551 |   |
| Bladex                                 |       | 2,630,286             |       | 1,295,995                   |       | —          |       | — |   | — |   | — |   | — |   | — |   | 2,630,286 |   | 1,295,995 |   |
| Bradesco                               |       | —                |       | —                      |       | —          |       | 9,268 |   | — |   | — |   | — |   | — |   | — |   | 9,268 |   |
| Citibank N.A.                          |       | —                |       | 3,321,777                   |       | 11,241,564      |       | 14,405,765 |   | — |   | — |   | — |   | — |   | 11,241,564 |   | 17,727,542 |   |
| Citibank (Agencia  Chile)              |       | —                |       | —                      |       | —          |       | — |   | — |   | — |   | — |   | 35 |   | — |   | 35 |   |
| Colmena                                |       | —                |       | —                      |       | 5,428,547       |       | — |   | — |   | — |   | — |   | — |   | 5,428,547 |   | — |   |
| Comafi                                 |       | 172                   |       | —                      |       | —          |       | — |   | — |   | — |   | — |   | — |   | 172 |   | — |   |
| Corpbanca                              |       | —                |       | —                      |       | —          |       | — |   | — |   | — |   | — |   | 12,373,026 |   | — |   | 12,373,026 |   |
| Deutsche Bank                          |       | 7,096                 |       | —                      |       | —          |       | — |   | — |   | — |   | — |   | — |   | 7,096 |   | — |   |
| Interbank                              |       | —                |       | —                      |       | 1,484,657       |       | — |   | — |   | — |   | — |   | — |   | 1,484,657 |   | — |   |
| Scotiabank — Perú            |       | 2,213,299             |       | 2,621,179                   |       | 14,617,053      |       | 3,657,322 |   | — |   | — |   | — |   | — |   | 16,830,352 |   | 6,278,501 |   |
| Scotiabank —  Chile               |       | —                | ** ** | **—**                  |       | —          |       | — |   | — |   | — |   | 4 |   | 6,713,751 |   | 4 |   | 6,713,751 |   |
| Standard Bank                          |       | 575                   | ** ** | **—**                  |       | —          |       | — |   | — |   | — |   | — |   | — |   | 575 |   | — |   |
| Unibanco                               |       | 22,012,676            |       | —                      |       | 5,960,754       |       | 1,250,527 |   | — |   | — |   | — |   | — |   | 27,973,430 |   | 1,250,527 |   |
|                                   |       |                  |       |                        |       |            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                  |       | 34,450,455            |       | 22,929,654                  |       | 150,335,599     |       | 208,455,563 |   | 4,453 |   | 90 |   | 7,216 |   | 47,840,494 |   | 184,797,723 |   | 279,225801 |   |
|                                   |       | —                |       |                        |       |            |       |   |   |   |   |   |   |   |   |   |   | — |   |   |   |
| Total principal                        |       | 27,150,255            |       | 19,341,075                  |       | 143,102,423     |       | 203,660,563 |   | — |   | — |   | — |   | 46,570,952 |   | 170,252,678 |   | 269,572,590 |   |
|                                   |       |                  |       |                        |       |            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average  annual interest rate |       | 9.20                  | %          | 6,79                        | %          | 9.94            | %          | 13.21 | % | 0.30 | % | — |   | — |   | 3.97 | % | 9.73 | % | 11.10 | % |

 
| ** **                              | ** ** | **As of December 31,** | ** ** |
|-----------------------------------------|------------|-----------------------------|------------|
| ** **                              | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                              | ** ** | **%**                       | ** ** | **%** | ** ** |
|                                    |       |                        |       |   |   |
| Percentage of debt in foreign currency: |       | 99.99                       | %          | 82.87 | % |
| Percentage of debt in local currency:   |       | 0.01                        | %          | 17.13 | % |
|                                    |       |                        |       |   |   |
| Total                                   |       | 100.00                      | %          | 100.00 | % |

 

F-57

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Table of Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

** **

**b)****             ****Current portion of long-term debt dueto banks and financial institutions:**

 
|                                        |       | **Foreign currency** |       |        |       |                       |       |
|---------------------------------------------|------------|----------------------|------------|-------------|------------|----------------------------|------------|
|                                        |       | **US$**              |       | **Euros**   |       | **Other foreign currency** |       | **Ch$** |   | **$****no Readjusted** |   | **As of December 31** |   |
| **Financial Institution**                   | ** ** | **2007**             | ** ** | **2008**    | ** ** | **2007**                   | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** | ** ** | **2007** | ** ** | **2008** |   |
|                                        |       | **ThCh$**            | ** ** | **ThCh$**   | ** ** | **ThCh$**                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** |   |
|                                        |       | ** **           | ** ** | ** **  | ** ** | ** **                 | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |   |
| ABN Amro Bank                               |       | 38,141               |       | 3,987,270   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 38,141 |   | 3,987,270 |   |
| Banco Alfa                                  |       | —               |       | —      |       | —                     |       | — |   | 361,986 |   | 1,283,248 |   | — |   | — |   | — |   | — |   | 361,986 |   | 1,283,248 |   |
| Banco Bayerische Landes                     |       | 672,902              |       | 3,688,356   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 672,902 |   | 3,688,356 |   |
| Banco BBVA                                  |       | 120,962              |       | 12,717,897  |       | —                     |       | — |   | 2,671,550 |   | 1,076,528 |   | — |   | — |   | — |   | — |   | 2,792,512 |   | 13,794,425 |   |
| Banco Continental                           |       | 1,618,405            |       | 1,591,666   |       | —                     |       | — |   | 10,655,715 |   | — |   | — |   | — |   | — |   | — |   | 12,274,120 |   | 1,591,666 |   |
| Banco de Crédito (Perú)           |       | —               |       | 60,507      |       | —                     |       | — |   | 10,940,074 |   | — |   | — |   | — |   | — |   | — |   | 10,940,074 |   | 60,507 |   |
| Banco Davivienda                            |       | —               |       | —      |       | —                     |       | — |   | 1,021,538 |   | 771,146 |   | — |   | — |   | — |   | — |   | 1,021,538 |   | 771,146 |   |
| Banco do Brasil                             |       | —               |       | —      |       | —                     |       | — |   | 2,385,671 |   | 2,509,810 |   | — |   | — |   | — |   | — |   | 2,385,671 |   | 2,509,810 |   |
| Banco do Nordeste do Brasil                 |       | —               |       | —      |       | —                     |       | — |   | 4,325,670 |   | 5,438,284 |   | — |   | — |   | — |   | — |   | 4,325,670 |   | 5,438,284 |   |
| Banco Europeo de Investimentos              |       | 5,419,179            |       | 5,937,297   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 5,419,179 |   | 5,937,297 |   |
| Banco Itau                                  |       | —               |       | 1,911,982   |       | —                     |       | — |   | — |   | 4,012 |   | — |   | — |   | — |   | — |   | — |   | 1,915,994 |   |
| Banco Itau (Chile)                          |       | 20,923               |       | 2,187,304   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 20,923 |   | 2,187,304 |   |
| Banco Medio Crédito                    |       | —               |       | —      |       | —                     |       | — |   | 2,182,005 |   | 2,523,313 |   | — |   | — |   | — |   | — |   | 2,182,005 |   | 2,523,313 |   |
| Banco Monte Paschi                          |       | 13,077               |       | 1,367,064   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 13,077 |   | 1,367,064 |   |
| Banco Nacionale de Paris                    |       | 3,494,019            |       | 3,270,303   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 3,494,019 |   | 3,270,303 |   |
| Banco Pactual                               |       | —               |       | —      |       | —                     |       | — |   | 568,686 |   | 10,482,222 |   | — |   | — |   | — |   | — |   | 568,686 |   | 10,482,222 |   |
| Banco Santander Central Hispano             |       | 162,627              |       | 7,723,912   |       | —                     |       | — |   | 3,041,596 |   | 3,392,442 |   | — |   | — |   | — |   | — |   | 3,204,223 |   | 11,116,354 |   |
| Bancolombia                                 |       | —               |       | —      |       | —                     |       | — |   | 3,141,715 |   | 5,354,867 |   | — |   | — |   | — |   | — |   | 3,141,715 |   | 5,354,867 |   |
| Banesto                                     |       | 2,229,889            |       | —      |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 2,229,889 |   | — |   |
| Bank of Tokyo — Mitsubishi             |       | 111,541              |       | 9,581,957   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 111,541 |   | 9,581,957 |   |
| BNDES                                       |       | 1,254,831            |       | —      |       | —                     |       | — |   | 38,673,729 |   | 29,265,217 |   | — |   | — |   | — |   | — |   | 39,928,560 |   | 29,265,217 |   |
| Bradesco                                    |       | —               |       | —      |       | —                     |       | — |   | 1,175,976 |   | 21,424,394 |   | — |   | — |   | — |   | — |   | 1,175,976 |   | 21,424,394 |   |
| Caja de ahorros de Galicia                  |       | 26,153               |       | 2,734,128   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 26,153 |   | 2,734,128 |   |
| Caja de Ahorros y Monte de Piedad de Madrid |       | 120,962              |       | 12,661,640  |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 120,962 |   | 12,661,640 |   |
| Citibank N.A.                               |       | 5,536,453            |       | 19,011,159  |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 5,536,453 |   | 19,011,159 |   |
| Citibank (Agencia en Chile)                 |       | —               |       | —      |       | —                     |       | — |   | — |   | — |   | — |   | — |   | 35 |   | — |   | 35 |   | — |   |
| Credit Suisse First Boston                  |       | 4,659,830            |       | 10,921,057  |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 4,659,830 |   | 10,921,057 |   |
| Deutsche Bank A.G.                          |       | 5,540,949            |       | 18,637,341  |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 5,540,949 |   | 18,637,341 |   |
| Dresdner                                    |       | 26,153               |       | 2,734,128   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 26,153 |   | 2,734,128 |   |
| Export Develop. Corp.                       |       | 1,831,457            |       | 1,965,537   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 1,831,457 |   | 1,965,537 |   |
| HSBC                                        |       | 76,282               |       | 7,974,540   |       | —                     |       | — |   | 374,583 |   | 418,494 |   | — |   | — |   | — |   | — |   | 450,865 |   | 8,393,034 |   |
| Instituto Crédito Oficial              |       | 38,141               |       | 3,987,270   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 38,141 |   | 3,987,270 |   |
| International Finance Corporation           |       | 4,512,885            |       | 6,365,639   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 4,512,885 |   | 6,365,639 |   |
| Kreditanstal Fur Weideraubau                |       | 301,452              |       | 176,238     |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 301,452 |   | 176,238 |   |
| The Bank of Nova Scotia                     |       | 26,153               |       | 2,734,128   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 26,153 |   | 2,734,128 |   |
| Sao Paulo (USA)                             |       | 91,538               |       | 9,569,449   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 91,538 |   | 9,569,449 |   |
| Scotiabank                                  |       | 3,963,075            |       | 4,587,929   |       | —                     |       | — |   | 9,126,761 |   | — |   | — |   | — |   | — |   | — |   | 13,089,836 |   | 4,587,929 |   |
| Standard Bank                               |       | 3,252,089            |       | 7,484,652   |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 3,252,089 |   | 7,484,652 |   |
| Unibanco                                    |       | —               |       | 244,006     |       | —                     |       | — |   | 937,822 |   | 21,617,710 |   | — |   | — |   | — |   | — |   | 937,822 |   | 21,861,716 |   |
| Votorantim                                  |       | —               |       | —      |       | —                     |       | — |   | 3,931,505 |   | — |   | — |   | — |   | — |   | — |   | 3,931,505 |   | — |   |
| West LB, New York Branch                    |       | 142,838              |       | 10,334,519  |       | —                     |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   | 142,838 |   | 10,334,519 |   |
|                                        |       |                 |       |        |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                       |       | 45,302,906           |       | 176,148,875 |       | —                     |       | — |   | 95,516,582 |   | 105,561,687 |   | — |   | — |   | 35 |   | — |   | 140,819,523 |   | 281,710,562 |   |
|                                        |       |                 |       |        |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total principal                             |       | 44,102,991           |       | 168,723,490 |       | —                     |       | — |   | 87,136,214 |   | 98,391,693 |   | — |   | — |   | — |   | — |   | 131,239,205 |   | 267,115,183 |   |
|                                        |       |                 |       |        |       |                       |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average annual interest rate       |       | 8.44                 | %          | 5.10        | %          | 0.00                       | %          | 0.00 | % | 9.93 | % | 12.70 | % | 0.00 | % | — |   | 0.30 | % | — |   | 9.45 | % | 7.95 | % |

** **
| ** **                              | ** ** | **As of December 31,** | ** ** |
|-----------------------------------------|------------|-----------------------------|------------|
| ** **                              | ** ** | **2008**                    | ** ** | **2007** | ** ** |
| ** **                              | ** ** | **%**                       | ** ** | **%** | ** ** |
| ** **                              | ** ** | ** **                  | ** ** | ** ** | ** ** |
| Percentage of debt in foreign currency: |       | 100.00                      | %          | 100.00 | % |
| Percentage of debt in local currency:   |       | —                      |       | — |   |
|                                    |       |                        |       |   |   |
| Total                                   |       | 100.00                      | %          | 100.00 | % |

 

F-58

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

**Note16.    Long-Term Portion of Debt Due to Banks and FinancialInstitutions**

 
| ** **                                  | ** ** | **As of December 31, 2008** | ** ** | **Total**        | ** ** | **Annual**        | ** ** | **Total**         | ** ** |
|---------------------------------------------|------------|----------------------------------|------------|------------------|------------|-------------------|------------|-------------------|------------|
| ** **                                  | ** ** | ** **                       | ** ** | **After 1 year** | ** ** | **After 2 years** | ** ** | **After 3 years** | ** ** | **After 5 years** | ** ** | ** ** | ** ** | ** ** | ** ** | **Long-term** | ** ** | **interest** | ** ** | **long-term** | ** ** |
| **Financial**                               | ** ** | ** **                       | ** ** | **but within**   | ** ** | **but within**    | ** ** | **but within**    | ** ** | **but within** | ** ** | ** ** | ** ** | ** ** | ** ** | **Portion** | ** ** | **rate** | ** ** | **portion -** | ** ** |
| **Institution**                             | ** ** | **Currency**                     | ** ** | **2 years**      | ** ** | **3 years**       | ** ** | **5 years**       | ** ** | **10 years** | ** ** | **After 10 years** | ** ** | **2008** | ** ** | **average** | ** ** | **2007** | ** ** |
| ** **                                  | ** ** | ** **                       | ** ** | **ThCh$**        | ** ** | **ThCh$**         | ** ** | **ThCh$**         | ** ** | **ThCh$** | ** ** | **Years** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | ** ** | ** ** | **ThCh$** | ** ** |
| ** **                                  | ** ** | ** **                       | ** ** | ** **       | ** ** | ** **        | ** ** | ** **        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Banco Abn Amro Bank                         |       | US$                              |       | 6,629,688        |       | —            |       | —            |       | — |   | — |   | — |   | 6,629,688 |   | 1.96 | % | 9,807,677 |   |
| Banco Alfa                                  |       | Rs                               |       | 2,723,363        |       | 2,723,363         |       | 13,616,816        |       | — |   | — |   | — |   | 19,063,542 |   | 13.34 | % | 21,384,097 |   |
| Banco Bayerische Landes                     |       | US$                              |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 3,124,929 |   |
| Banco BBVA                                  |       | US$                              |       | 19,889,063       |       | —            |       | —            |       | 37,550,550 |   | — |   | — |   | 57,439,613 |   | 1.96 | % | 30,775,813 |   |
|                                        |       | $Col                             |       | —           |       | —            |       | 23,404,940        |       | — |   | — |   | — |   | 23,404,940 |   | 12.13 | % | 22,159,071 |   |
| Banco Continental                           |       | US$                              |       | 4,291,045        |       | 7,556,887         |       | —            |       | — |   | — |   | — |   | 11,847,932 |   | 3.97 | % | 11,426,419 |   |
|                                        |       | Soles                            |       | 11,951,162       |       | —            |       | —            |       | — |   | — |   | — |   | 11,951,162 |   | 6.50 | % | — |   |
| Banco Crédito Perú                |       | US$                              |       | 7,637,400        |       | 11,456,100        |       | —            |       | — |   | — |   | — |   | 19,093,500 |   | 5.19 | % | — |   |
|                                        |       | Soles                            |       | 14,667,575       |       | —            |       | —            |       | — |   | — |   | — |   | 14,667,575 |   | 8.34 | % | — |   |
| Banco Estado                                |       | US$                              |       | —           |       | 8,751,187         |       | —            |       | — |   | — |   | — |   | 8,751,187 |   | 1.96 | % | 4,873,401 |   |
| Banco Europeo de Investimentos              |       | US$                              |       | 5,303,750        |       | 5,303,750         |       | 5,303,750         |       | — |   | — |   | — |   | 15,911,250 |   | 18.33 | % | 18,037,107 |   |
| Banco Davivienda                            |       | $Col                             |       | —           |       | —            |       | 8,949,497         |       | — |   | — |   | — |   | 8,949,497 |   | 12.13 | % | 8,473,106 |   |
| Banco do Brasil                             |       | US$                              |       | 187,568          |       | 187,568           |       | 226,494           |       | 47,185 |   | 16 |   | 1,764,178 |   | 2,412,993 |   | 4.13 | % | 2,233,396 |   |
|                                        |       | Rs                               |       | 3,046,223        |       | 3,237,879         |       | 33,709,391        |       | 713,640 |   | — |   | — |   | 40,707,133 |   | 14.32 | % | 46,027,058 |   |
| Banco do Nordeste do Brasil                 |       | Rs                               |       | 10,380,816       |       | 10,380,816        |       | 19,736,699        |       | 5,310,558 |   | — |   | — |   | 45,808,889 |   | 7.69 | % | 48,626,821 |   |
| Banco Itau (Chile)                          |       | US$                              |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 4,328,908 |   |
| Banco Itau                                  |       | US$                              |       | 3,818,700        |       | 4,297,698         |       | —            |       | — |   | — |   | — |   | 8,116,398 |   | 7.05 | % | 8,116,698 |   |
|                                        |       | Rs                               |       | 727,138          |       | 1,454,276         |       | 1,454,276         |       | — |   | — |   | — |   | 3,635,690 |   | 13.55 | % | 4,078,253 |   |
| Banco Medio Crédito                    |       | $Arg                             |       | 2,510,735        |       | 1,255,233         |       | —            |       | — |   | — |   | — |   | 3,765,968 |   | 1.75 | % | 5,420,564 |   |
| Banco Monte Paschi                          |       | US$                              |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 2,705,566 |   |
| Banco Nacionale de Paris                    |       | US$                              |       | 1,041,278        |       | 13,770,278        |       | 2,082,556         |       | 2,082,555 |   | — |   | — |   | 18,976,667 |   | 3.29 | % | 15,066,838 |   |
| Banco Pactual                               |       | Rs                               |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 10,225,172 |   |
| Bancolombia                                 |       | $Col                             |       | —           |       | —            |       | 27,522,189        |       | — |   | — |   | — |   | 27,522,189 |   | 12.13 | % | 26,057,081 |   |
| Banco Santander Central Hispano             |       | US$                              |       | 14,374,311       |       | 21,480,187        |       | —            |       | 21,002,850 |   | — |   | — |   | 56,857,348 |   | 2.02 | % | 31,227,743 |   |
|                                        |       | $Col                             |       | —           |       | —            |       | 26,646,842        |       | — |   | — |   | — |   | 26,646,842 |   | 12.13 | % | 25,228,247 |   |
|                                        |       | Rs                               |       | 27,233,589       |       | 65,360,615        |       | 70,807,333        |       | — |   | — |   | — |   | 163,401,537 |   | 14.80 | % | 183,293,442 |   |
| Banco Votorantim                            |       | Rs                               |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 30,548,710 |   |
| Banesto N.Y. Branch                         |       | US$                              |       | —           |       | 6,364,500         |       | —            |       | 15,911,250 |   | — |   | — |   | 22,275,750 |   | 1.96 | % | 3,544,292 |   |
| Bank Tokio — Mitsubishi                |       | US$                              |       | 15,911,250       |       | 21,480,188        |       | —            |       | 21,002,850 |   | — |   | — |   | 58,394,288 |   | 1.96 | % | 35,500,408 |   |
| BNDES                                       |       | Rs                               |       | 35,476,099       |       | 28,256,636        |       | 22,251,388        |       | 7,635,429 |   | — |   | — |   | 93,619,552 |   | 14.42 | % | 71,859,534 |   |
| Bradesco                                    |       | Rs                               |       | 727,138          |       | 12,347,729        |       | 17,794,456        |       | — |   | — |   | — |   | 30,869,323 |   | 13.50 | % | 24,296,982 |   |
| Caja de Ahorros de Galicia                  |       | US$                              |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 5,411,133 |   |
| Caja de Ahorros y Monte de Piedad de Madrid |       | US$                              |       | 10,342,312       |       | —            |       | —            |       | 31,822,500 |   | — |   | — |   | 42,164,812 |   | 1.96 | % | 28,016,136 |   |
| Citibank N.Y.                               |       | US$                              |       | 19,889,062       |       | 21,480,188        |       | —            |       | — |   | — |   | — |   | 41,369,250 |   | 1.96 | % | 48,148,928 |   |
| Credit Swiss First Boston                   |       | US$                              |       | 2,727,643        |       | —            |       | —            |       | — |   | — |   | — |   | 2,727,643 |   | 8.55 | % | 11,595,282 |   |
| Deutsche Bank A.G.                          |       | US$                              |       | 12,728,894       |       | 13,259,482        |       | —            |       | — |   | — |   | — |   | 25,988,376 |   | 7.72 | % | 38,513,157 |   |
| Dresdner                                    |       | US$                              |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 5,411,132 |   |
| Export Develop. Corp.                       |       | US$                              |       | 1,373,295        |       | 16,822,458        |       | 1,822,416         |       | 911,208 |   | — |   | — |   | 20,929,377 |   | 2.47 | % | 14,687,627 |   |
| HSBC                                        |       | US$                              |       | 13,259,375       |       | —            |       | —            |       | — |   | — |   | — |   | 13,259,375 |   | 1.96 | % | 19,615,353 |   |
|                                        |       | Rs                               |       | —           |       | 20,425,225        |       | 20,425,225        |       | — |   | — |   | — |   | 40,850,450 |   | 13.25 | % | 45,823,065 |   |
| Ing Bank                                    |       | US$                              |       | 25,458,000       |       | —            |       | —            |       | — |   | — |   | — |   | 25,458,000 |   | 1.96 | % | 7,359,140 |   |
| Instituto de Crédito Oficial           |       | US$                              |       | 6,629,688        |       | 12,729,000        |       | —            |       | — |   | — |   | — |   | 19,358,688 |   | 1.96 | % | 16,896,260 |   |
| International Finance Corporation           |       | US$                              |       | 13,750,516       |       | 7,632,135         |       | 16,965,519        |       | 22,045,801 |   | — |   | — |   | 60,393,971 |   | 7.86 | % | 57,179,974 |   |
| Kreditanstalf Fur Weideraubau               |       | US$                              |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 148,004 |   |
| Sao Paulo (USA)                             |       | US$                              |       | 15,911,250       |       | —            |       | —            |       | — |   | — |   | — |   | 15,911,250 |   | 1.96 | % | 23,538,425 |   |
| Scotiabank                                  |       | US$                              |       | 9,164,880        |       | 2,291,220         |       | —            |       | — |   | — |   | — |   | 11,456,100 |   | 3.08 | % | 13,636,053 |   |
| Standard Bank                               |       | US$                              |       | 7,425,143        |       | 13,259,482        |       | —            |       | — |   | — |   | — |   | 20,684,625 |   | 9.19 | % | 23,899,076 |   |
| The Royal Bank of Scotland                  |       | US$                              |       | —           |       | 6,364,500         |       | —            |       | — |   | — |   | — |   | 6,364,500 |   | 1.96 | % | 3,544,292 |   |
| The Bank of Nova Scotia                     |       | US$                              |       | 6,364,500        |       | —            |       | —            |       | — |   | — |   | — |   | 6,364,500 |   | 1.96 | % | 7,250,917 |   |
| Unibanco                                    |       | Rs                               |       | 1,799,594        |       | 1,448,829         |       | 1,448,829         |       | — |   | — |   | — |   | 4,697,252 |   | 13.63 | % | 28,144,700 |   |
| West LB AG, New York Branch                 |       | US$                              |       | —           |       | —            |       | —            |       | — |   | — |   | — |   | — |   | — |   | 8,657,810 |   |
|                                        |       |                             |       |             |       |              |       |              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Totales                                     |       |                             |       | 335,352,043      |       | 341,377,409       |       | 314,168,616       |       | 166,036,376 |   |   |   | 1,764,178 |   | 1,158,698,622 |   |   |   | 1,115,923,797 |   |

 
| ** **                              | ** ** | **As of December 31,** | ** ** |
|-----------------------------------------|------------|-----------------------------|------------|
| ** **                              | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                              | ** ** | **%**                       | ** ** | **%** | ** ** |
|                                    |       |                        |       |   |   |
| Percentage of debt in foreign currency: |       | 100.00                      | %          | 100.00 | % |
| Percentage of debt in local currency:   |       | —                      |       | — |   |
|                                    |       |                        |       |   |   |
| Total                                   |       | 100.00                      | %          | 100.00 | % |

 

F-59

----

Table of Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

In November 2004 theCompany obtained a syndicated loan of US$350 million through a revolving creditagreement, with a maturity in November 2009. The outstanding amount at theend of 2008 was US $150 million.The spread depends on the corporate rate provided by S&P. At December 31,2008 the risk rating is BBB and the current spread is 0.375%. On December 7, 2006 Enersis signed anew revolving loan for US $200 million maturing on December 7, 2009 with aspread over Libor of 0,250%.  This secondrevolving facility has not been used.

 

On November 5, 2004,Endesa Chile entered into a revolving facility of US $250 million, whichmatures on November 11, 2010, and has a 0.375% spread over Libor, whichhad been completelydrawn as of December 31, 2008.

 

On January 26, 2006,Endesa Chile entered into a second revolving facility for US $200 million,which matures on July 26, 2011 and has a 0.300% spread over Libor. Thisfacility has also been completely drawn as of December 31, 2008.

 

On December 7,2006  Endesa Chile signed a new revolvingloan for US $200 million, due on December 7, 2009 with a spread of 0,250%over Libor.  As of December 31,2008, no withdrawals have been made from this facility.

 

On June 16, 2008,Endesa Chile subscribed a fourth loan, with 50% fixed term and 50% revolvingfacility, totaling US$400 million and maturing on June 16, 2014, with aspread of 0.750% above Libor. US $200 million of this loan had been drawn as ofDecember 31, 2008.

 

Therevolving credits of Enersis and Endesa Chile may be paid down and drawn at anymoment prior to expiration.

 

Thesetransactions were all unsecured facilities governed by the laws of the State ofNew York.

 

**Note 17.**            Other Current Liabilities

** **

Other current liabilitiesare as follows:

 
| ** **                                        | ** ** | **As of December 31,** | ** ** |
|---------------------------------------------------|------------|-----------------------------|------------|
| ** **                                        | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                                        | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                              | ** ** | ** **                  | ** ** | ** ** | ** ** |
| Advances and guarantee on construction            |       | 87,090                      |       | 100,349 |   |
| Taxes payables                                    |       | 3,248,032                   |       | 5,608,305 |   |
| Contingencies - third party claims                |       | 56,594,003                  |       | 71,368,086 |   |
| Reimbursable contributions                        |       | 1,227,055                   |       | 1,366,907 |   |
| Energy efficiency program (Brazil)                |       | 34,964,723                  |       | 34,759,803 |   |
| Azopardo provision                                |       | 915,178                     |       | 1,982,602 |   |
| Accrued employees benefits - other                |       | 2,889,173                   |       | 4,827,046 |   |
| Derivative contracts                              |       | 11,855,256                  |       | 7,747,989 |   |
| Fair value - derivative contracts                 |       | 4,847,824                   |       | 9,918 |   |
| Emergency energy provision (Brazil and Argentina) |       | 21,747,107                  |       | 15,189,951 |   |
| Obligations of payment to third parties           |       | 1,287,788                   |       | — |   |
| Advances from clients                             |       | 1,829,977                   |       | 3,465,585 |   |
| Other current liabilities                         |       | 2,492,384                   |       | 1,044,419 |   |
|                                              |       |                        |       |   |   |
| Total                                             |       | 143,985,590                 |       | 147,470,960 |   |

 

F-60

----

Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

**Note 18.**            Bonds Payable

 

**a)****             **Details of the short-term portion of bondspayable is as follows:

 
| ** **                     | ** ** | ** **            | ** ** | **Face value**  | ** ** | ** **   | ** ** | **Interest**  | ** ** | **Maturity** | ** ** | **As of December 31,** | ** ** |
|--------------------------------|------------|-----------------------|------------|-----------------|------------|--------------|------------|---------------|------------|--------------|------------|-----------------------------|------------|
| **Instrument**                 | ** ** | **Series**            | ** ** | **outstanding** | ** ** | **Currency** | ** ** | **rate**      | ** ** | **date**     | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                     | ** ** | ** **            | ** ** | ** **      | ** ** | ** **   | ** ** | **%**         | ** ** | ** **   | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
| ** **                     | ** ** | ** **            | ** ** | ** **      | ** ** | ** **   | ** ** | ** **    | ** ** | ** **   | ** ** | ** **                  | ** ** | ** ** | ** ** |
| Bond N°269 – Enersis |       | B-1                   |       | 10,026          |       | U.F.         |       | 5.50%         |       | 6-15-2009    |       | 209,293                     |       | 109,226 |   |
| Bond N°269 – Enersis |       | B-2                   |       | 1,776,703       |       | U.F.         |       | 5.75%         |       | 6-15-2022    |       | 1,879,653                   |       | 1,985,960 |   |
| Yankee Bonds – Enersis    |       | Two                   |       | 249,734,000     |       | US$          |       | 7.40%         |       | 12-1-2016    |       | 833,329                     |       | 969,422 |   |
| Yankee Bonds – Enersis    |       | Three                 |       | 858,000         |       | US$          |       | 6.60%         |       | 12-1-2026    |       | 2,554                       |       | 3,003 |   |
| Yankee Bonds II – Enersis |       | One                   |       | 350,000,000     |       | US$          |       | 7.38%         |       | 12-1-2014    |       | 6,401,764                   |       | 7,529,668 |   |
| Bonds Edelnor                  |       | One                   |       | 4,891,900       |       | Soles        |       | 9.61%         |       | 2-1-2011     |       | 7,006                       |       | 7,534 |   |
| Bonds Edelnor                  |       | I° Prog.         |       | 30,000,000      |       | Soles        |       | 5.86%         |       | 1-16-2008    |       | 5,561,057                   |       | — |   |
| Bonds Edelnor                  |       | I° Prog.         |       | 20,000,000      |       | Soles        |       | 6.25%         |       | 1-16-2012    |       | 101,305                     |       | 4,167,512 |   |
| Bonds Edelnor                  |       | I° Prog.         |       | 20,000,000      |       | Soles        |       | VAC + 5,4%    |       | 4-22-2014    |       | 39,986                      |       | 55,765 |   |
| Bonds Edelnor                  |       | I° Prog.         |       | 20,000,000      |       | Soles        |       | 8.56%         |       | 6-9-2009     |       | 18,043                      |       | 4,074,070 |   |
| Bonds Edelnor                  |       | I° Prog.         |       | 20,000,000      |       | Soles        |       | VAC + 6,5%    |       | 6-9-2014     |       | 14,731                      |       | 17,647 |   |
| Bonds Edelnor                  |       | I° Prog.         |       | 40,000,000      |       | Soles        |       | VAC + 6,5%    |       | 6-24-2014    |       | 8,403                       |       | 10,067 |   |
| Bonds Edelnor                  |       | I° Prog.         |       | 30,000,000      |       | Soles        |       | 7.38%         |       | 6-10-2010    |       | 22,200                      |       | 24,914 |   |
| Bonds Edelnor                  |       | I° Prog.         |       | 30,000,000      |       | Soles        |       | 8.75%         |       | 6-10-2015    |       | 26,340                      |       | 29,559 |   |
| Bonds Edelnor                  |       | II° Prog         |       | 20,000,000      |       | Soles        |       | 7.31%         |       | 1-5-2011     |       | 128,404                     |       | — |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 4,000,000       |       | Soles        |       | 7.84%         |       | 1-5-2013     |       | 27,546                      |       | — |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 18,000,000      |       | Soles        |       | 8.16%         |       | 1-5-2016     |       | 128,897                     |       | — |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 20,000,000      |       | Soles        |       | 7.06%         |       | 2-1-2011     |       | 105,589                     |       | 118,497 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 27,200,000      |       | Soles        |       | 8.00%         |       | 2-1-2016     |       | 162,663                     |       | 182,548 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 19,250,000      |       | Soles        |       | 6.63%         |       | 3-17-2009    |       | 65,902                      |       | 3,975,760 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 15,000,000      |       | Soles        |       | 6.75%         |       | 5-22-2009    |       | 19,304                      |       | 3,062,029 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 15,000,000      |       | Soles        |       | 7.56%         |       | 5-22-2013    |       | 21,626                      |       | 24,270 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 15,000,000      |       | Soles        |       | 6.66%         |       | 10-6-2013    |       | 42,077                      |       | 47,221 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 20,000,000      |       | Soles        |       | 5.69%         |       | 4-19-2012    |       | 40,518                      |       | 45,472 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 20,000,000      |       | Soles        |       | 5.91%         |       | 4-19-2015    |       | 42,077                      |       | 47,221 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 40,000,000      |       | Soles        |       | 5.97%         |       | 7-6-2012     |       | 208,418                     |       | 224,764 |   |
| Bonds Edelnor                  |       | II° Prog.        |       | 15,000,000      |       | Soles        |       | 7.22%         |       | 8-31-2016    |       | 65,190                      |       | 73,159 |   |
| Bonds Edelnor                  |       | III° Prog        |       | 40,000,000      |       | Soles        |       | 6.94%         |       | 8-29-2015    |       | 168,458                     |       | 189,052 |   |
| Bonds Edelnor                  |       | III° Prog        |       | 30,000,000      |       | Soles        |       | 6.56%         |       | 9-12-2012    |       | 106,674                     |       | 119,714 |   |
| Bonds Edelnor                  |       | III° Prog.       |       | 30,000,000      |       | Soles        |       | 6.84%         |       | 1-10-2013    |       | —                      |       | 196,515 |   |
| Bonds Edelnor                  |       | III° Prog.       |       | 20,000,000      |       | Soles        |       | 5.94%         |       | 3-1-2011     |       | —                      |       | 80,900 |   |
| Bonds Edelnor                  |       | III° Prog        |       | 20,000,000      |       | Soles        |       | 6.28%         |       | 3-1-2013     |       | —                      |       | 85,584 |   |
| Bonds Edelnor                  |       | III° Prog        |       | 25,000,000      |       | Soles        |       | 6.81%         |       | 6-13-2014    |       | —                      |       | 16,301 |   |
| Bonds Edelnor                  |       | III° Prog.       |       | 25,000,000      |       | Soles        |       | 7.13%         |       | 6-13-2016    |       | —                      |       | 17,049 |   |
| Bonds Edelnor                  |       | III° Prog.       |       | 20,000,000      |       | Soles        |       | 7.50%         |       | 7-11-2011    |       | —                      |       | 142,728 |   |
| Bonds Edelnor                  |       | III° Prog        |       | 30,000,000      |       | Soles        |       | 7.72%         |       | 7-11-2013    |       | —                      |       | 220,337 |   |
| Bonds Edelnor                  |       | III° Prog.       |       | 13,000,000      |       | Soles        |       | 8.31%         |       | 12-11-2012   |       | —                      |       | 11,560 |   |
| Bonds Edelnor                  |       | III° Prog.       |       | 15,465,000      |       | Soles        |       | 8.25%         |       | 12-11-2011   |       | —                      |       | 13,649 |   |
| Bonds Codensa                  |       | B3                    |       | 50,000,000,000  |       | $ Col.  |       | 12.42%        |       | 3-15-2009    |       | 77,886                      |       | 14,284,446 |   |
| Bonds Codensa                  |       | B5                    |       | 200,000,000,000 |       | $ Col.  |       | 13.63%        |       | 3-15-2011    |       | 349,146                     |       | 436,859 |   |
| Bonds Codensa                  |       | B8                    |       | 250,000,000,000 |       | $ Col.  |       | 13.82%        |       | 3-15-2014    |       | 443,148                     |       | 560,258 |   |
| Bonds Codensa                  |       | A                     |       | 224,780,000,000 |       | $ Col.  |       | 12.12%        |       | 3-14-2010    |       | 302,527                     |       | 380,180 |   |
| Bonds Codensa                  |       | B                     |       | 391,500,000,000 |       | $ Col.  |       | 12.80%        |       | 3-14-2017    |       | 548,131                     |       | 701,558 |   |
| Bonds Codensa                  |       | C                     |       | 33,720,000      |       | $ Col.  |       | 12.37%        |       | 3-14-2012    |       | 48,860                      |       | 58,350 |   |
| Bonds Codensa                  |       | D                     |       | 109,000,000,000 |       | $ Col.  |       | 12.06%        |       | 3-11-2010    |       | —                      |       | 214,558 |   |
| Bonds Codensa                  |       | E-F                   |       | 161,000,000,000 |       | $ Col.  |       | 12.56%        |       | 3-11-2013    |       | —                      |       | 341,374 |   |
| Bonds Edesur                   |       | Seven                 |       | 165,000,000     |       | $ Arg   |       | 11.75%        |       | 6-19-2012    |       | 110,926                     |       | 119,047 |   |
| Bonos Ampla                    |       | 1° Serie         |       | 290,000,000     |       | Reales       |       | CDI+1,2% aa   |       | 3-1-2028     |       | 91,912,633                  |       | — |   |
| Bonos Ampla                    |       | 2°Serie          |       | 110,000,000     |       | Reales       |       | IGP-M+11,4%   |       | 3-1-2010     |       | 3,536,648                   |       | 3,517,307 |   |
| Bonos Ampla                    |       | Unit                  |       | 370,000,000     |       | Reales       |       | DI + 0,85% aa |       | 8-1-2012     |       | 5,357,974                   |       | 5,880,379 |   |
| Bonds Endesa                   |       | F                     |       | 1,500,000       |       | U.F.         |       | 6.20%         |       | 8-1-2022     |       | 1,456,673                   |       | 1,445,988 |   |
| Bonds Endesa                   |       | H                     |       | 4,000,000       |       | U.F.         |       | 6.20%         |       | 10-15-2028   |       | 1,087,466                   |       | 1,091,714 |   |
| Bonds Endesa                   |       | K                     |       | 4,000,000       |       | U.F.         |       | 3.80%         |       | 4-15-2027    |       | 670,384                     |       | 673,003 |   |
| Bonds Endesa                   |       | M                     |       | 10,000,000      |       | U.F.         |       | 4.75%         |       | 12-15-2029   |       | —                      |       | 419,648 |   |
| Bonds Endesa                   |       | One                   |       | 205,881,000     |       | US$          |       | 7.88%         |       | 2-1-2027     |       | 3,669,749                   |       | 4,299,519 |   |
| Bonds Endesa                   |       | Two                   |       | 220,000,000     |       | US$          |       | 7.33%         |       | 2-1-2037     |       | 3,633,349                   |       | 144,292,497 |   |
| Bonds Endesa                   |       | Three                 |       | 40,416,000      |       | US$          |       | 8.13%         |       | 2-1-2097     |       | 837,824                     |       | 870,822 |   |
| Bonds Endesa                   |       | One                   |       | 400,000,000     |       | US$          |       | 7.75%         |       | 7-15-2008    |       | 224,133,600                 |       | — |   |
| Bonds Endesa                   |       | One                   |       | 400,000,000     |       | US$          |       | 8.50%         |       | 4-1-2009     |       | 4,599,462                   |       | 259,989,824 |   |
| Bonds Endesa                   |       | 144A                  |       | 400,000,000     |       | US$          |       | 8.35%         |       | 8-1-2013     |       | 7,530,493                   |       | 8,857,263 |   |
| Bonds Endesa                   |       | 144A                  |       | 200,000,000     |       | US$          |       | 8.63%         |       | 8-1-2015     |       | 3,889,251                   |       | 4,574,484 |   |
| Bonds Edegel                   |       | 5 A 2° issue     |       | 10,000,000      |       | US$          |       | 3.75%         |       | 1-26-2009    |       | 86,804                      |       | 6,466,597 |   |
| Bonds Edegel                   |       | 6 A 2° issue     |       | 30,000,000      |       | Soles        |       | 5.88%         |       | 2-27-2008    |       | 5,525,275                   |       | — |   |
| Bonds Edegel                   |       | 6 B 2° issue     |       | 20,000,000      |       | Soles        |       | 8.50%         |       | 6-18-2008    |       | 3,621,264                   |       | — |   |
| Bonds Edegel                   |       | 7 A 2° issue     |       | 10,000,000      |       | US$          |       | 4.94%         |       | 7-26-2009    |       | 165,628                     |       | 6,498,945 |   |
| Bonds Edegel                   |       | 8 A 2° issue     |       | 22,370,000      |       | Soles        |       | 6.00%         |       | 3-10-2008    |       | 4,112,986                   |       | — |   |
| Bonds Edegel                   |       | 8 B 2° issue     |       | 25,700,000      |       | Soles        |       | 6.47%         |       | 3-30-2008    |       | 4,715,218                   |       | — |   |
| Bonds Edegel                   |       | 9 A 2° issue     |       | 70,000,000      |       | Soles        |       | 6.91%         |       | 6-1-2009     |       | 72,738                      |       | 14,260,949 |   |
| Bonds Edegel                   |       | 10 A 2° issue    |       | 35,000,000      |       | Soles        |       | 6.72%         |       | 10-21-2010   |       | 81,378                      |       | 91,298 |   |
| Bonds Edegel                   |       | 11 A 2° issue    |       | 20,000,000      |       | US$          |       | 6.06%         |       | 11-18-2012   |       | 76,545                      |       | 90,031 |   |
| Bonds Edegel                   |       | 13 A 2° issue    |       | 25,000,000      |       | Soles        |       | 6.47%         |       | 10-20-2013   |       | 56,775                      |       | 63,696 |   |
| Bonds Edegel                   |       | 14 A 2° issue    |       | 25,000,000      |       | Soles        |       | 6.09%         |       | 10-21-2010   |       | 48,135                      |       | 54,003 |   |
| Bonds Edegel                   |       | 15 A 2° issue    |       | 30,000,000      |       | Soles        |       | 6.16%         |       | 11-27-2011   |       | 30,567                      |       | 34,293 |   |
| Bonds Edegel                   |       | 13 B 2° issue    |       | 25,000,000      |       | Soles        |       | 6.16%         |       | 1-15-2014    |       | 127,362                     |       | 142,888 |   |
| Bonds Edegel                   |       | 14 B 2° issue    |       | 25,000,000      |       | Soles        |       | 5.91%         |       | 2-22-2011    |       | 94,790                      |       | 106,345 |   |
| Bonds Edegel                   |       | 1° issue Serie A |       | 25,000,000      |       | Soles        |       | 6.31%         |       | 6-21-2022    |       | 7,123                       |       | 7,992 |   |
| Bonds Edegel                   |       | 2° issue Serie A |       | 8,000,000       |       | US$          |       | 5.97%         |       | 7-18-2011    |       | 116,270                     |       | 136,757 |   |
| Bonds Edegel                   |       | 3° issue Serie A |       | 25,000,000      |       | Soles        |       | 6.28%         |       | 7-3-2019     |       | 139,399                     |       | 156,392 |   |
| Bonds Edegel                   |       | 4° issue Serie A |       | 25,000,000      |       | Soles        |       | 6.75%         |       | 8-31-2014    |       | 81,248                      |       | 91,153 |   |
| Bonds Edegel                   |       | 5° issue Serie A |       | 25,000,000      |       | Soles        |       | 6.50%         |       | 3-18-2013    |       | 83,944                      |       | 93,263 |   |
| Bonds Edegel                   |       | 6° issue Serie A |       | 25,000,000      |       | Soles        |       | 6.44%         |       | 5-21-2013    |       | 32,286                      |       | 35,316 |   |
| Bonds Edegel                   |       | 7° issue Serie A |       | 25,000,000      |       | Soles        |       | 6.63%         |       | 6-13-2013    |       | 14,952                      |       | 16,775 |   |
| Bonds Edegel                   |       | 8° issue Serie A |       | 10,000,000      |       | US$          |       | 6.34%         |       | 1-25-2028    |       | —                      |       | 173,836 |   |
| Bonds Edegel                   |       | 9° issue Serie A |       | 28,300,000      |       | Soles        |       | 6.59%         |       | 3-7-2014     |       | —                      |       | 118,646 |   |
| Bonds Edegel                   |       | 10° issue SerieA |       | 9,720,000       |       | US$          |       | 9.00%         |       | 11-12-2014   |       | —                      |       | 74,237 |   |
| Bonds Emgesa                   |       | B-10 1° issue    |       | 229,825,000,000 |       | $ Col.  |       | 12.73%        |       | 10-9-2009    |       | 1,606,953                   |       | 4,840,736 |   |
| Bonds Emgesa                   |       | B-10 1° issue    |       | 60,000,000,000  |       | $ Col.  |       | 13.49%        |       | 11-10-2009   |       | 247,163                     |       | 17,332,484 |   |
| Bonds Emgesa                   |       | C-10 1° issue    |       | 9,684,517,481   |       | $ Col.  |       | 10.25%        |       | 10-9-2009    |       | 112,160                     |       | 5,491,591 |   |
| Bonds Emgesa                   |       | C-10 1° issue    |       | 17,235,158,229  |       | $ Col.  |       | 10.25%        |       | 10-9-2009    |       | 60,735                      |       | 65,264,107 |   |
| Bonds Emgesa                   |       | A-10 3° issue    |       | 210,000,000,000 |       | $ Col.  |       | 13.15%        |       | 2-23-2015    |       | 621,777                     |       | 778,697 |   |
| Bonds Emgesa                   |       | A-10 3° issue    |       | 40,000,000,000  |       | $ Col.  |       | 13.15%        |       | 2-23-2015    |       | 118,434                     |       | 148,323 |   |
| Bonds Emgesa                   |       | B-10 4° issue    |       | 170,000,000,000 |       | $ Col.  |       | 13.28%        |       | 2-20-2017    |       | 4,270,761                   |       | 5,544,669 |   |
| Bonds Emgesa                   |       | B 1° issue       |       | 400,000,000,000 |       | $ Col.  |       | 14.73%        |       | 11-10-2011   |       | 1,627,978                   |       | 2,260,188 |   |
|                           |       |                  |       |            |       |         |       |          |       |         |       |                        |       |   |   |
| Total                          |       |                  |       |            |       |         |       |          |       |         |       | 398,611,785                 |       | 611,261,962 |   |

 

F-61

----

Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

Details of the long-termportion of bonds payable is as follows:

 
| ** **                 | ** ** | ** **              | ** ** | **Face value**  | ** ** | ** **   | ** ** | **Interest**  | ** ** | **Maturity** | ** ** | **As of December 31,** |       |
|----------------------------|------------|-------------------------|------------|-----------------|------------|--------------|------------|---------------|------------|--------------|------------|-----------------------------|------------|
| **Instrument**             | ** ** | **Series**              | ** ** | **outstanding** | ** ** | **Currency** | ** ** | **rate**      | ** ** | **date**     | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                 | ** ** | ** **              | ** ** | ** **      | ** ** | ** **   | ** ** | ** **    | ** ** | ** **   | ** ** | **ThCh$**                   | ** ** | **ThCh$** |   |
|                       |       |                    |       |            |       |         |       |          |       |         |       |                        |       |   |   |
| Bond N° 269 - Enersis |       | B-1                     |       | 10,026          |       | U.F.         |       | 5.50%         |       | 6-15-2009    |       | 108,556                     |       | — |   |
| Bond N° 269 - Enersis |       | B-2                     |       | 1,776,703       |       | U.F.         |       | 5.75%         |       | 6-15-2022    |       | 37,060,075                  |       | 35,306,809 |   |
| Yankee Bonds - Enersis     |       | Two                     |       | 249,734,000     |       | US$          |       | 7.40%         |       | 12-1-2016    |       | 135,134,366                 |       | 158,943,205 |   |
| Yankee Bonds - Enersis     |       | Three                   |       | 858,000         |       | US$          |       | 6.60%         |       | 12-1-2026    |       | 464,276                     |       | 546,074 |   |
| Yankee Bonds II -  Enersis |       | One                     |       | 350,000,000     |       | US$          |       | 7.38%         |       | 12-1-2014    |       | 189,389,624                 |       | 222,757,500 |   |
| Bonds Edelnor              |       | One                     |       | 4,891,900       |       | Soles        |       | 9.61%         |       | 2-1-2011     |       | 883,535                     |       | 991,545 |   |
| Bonds Edelnor              |       | I° Prog.           |       | 20,000,000      |       | Soles        |       | 6.25%         |       | 1-16-2012    |       | 3,612,237                   |       | — |   |
| Bonds Edelnor              |       | I° Prog.           |       | 20,000,000      |       | Soles        |       | VAC + 5,4%    |       | 4-22-2014    |       | 3,893,106                   |       | 4,663,880 |   |
| Bonds Edelnor              |       | I° Prog.           |       | 20,000,000      |       | Soles        |       | 8.56%         |       | 6-9-2009     |       | 5,418,358                   |       | — |   |
| Bonds Edelnor              |       | I° Prog.           |       | 20,000,000      |       | Soles        |       | VAC + 6,5 %   |       | 6-9-2014     |       | 3,884,982                   |       | 4,654,146 |   |
| Bonds Edelnor              |       | I° Prog.           |       | 40,000,000      |       | Soles        |       | VAC + 6,5 %   |       | 6-24-2014    |       | 7,756,474                   |       | 9,292,133 |   |
| Bonds Edelnor              |       | I° Prog.           |       | 30,000,000      |       | Soles        |       | 7.38%         |       | 6-10-2010    |       | 5,418,358                   |       | 6,080,732 |   |
| Bonds Edelnor              |       | I° Prog.           |       | 30,000,000      |       | Soles        |       | 8.75%         |       | 6-10-2015    |       | 3,612,237                   |       | 6,080,732 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 20,000,000      |       | Soles        |       | 7.31%         |       | 1-5-2011     |       | 3,612,237                   |       | 4,053,822 |   |
| Bonds Edelnor              |       | II° Prog..         |       | 4,000,000       |       | Soles        |       | 7.84%         |       | 1-5-2013     |       | 722,447                     |       | 810,764 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 18,000,000      |       | Soles        |       | 8.16%         |       | 1-5-2016     |       | 3,251,015                   |       | 3,648,439 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 20,000,000      |       | Soles        |       | 7.06%         |       | 2-1-2011     |       | 3,612,237                   |       | 4,053,822 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 27,200,000      |       | Soles        |       | 8.00%         |       | 2-1-2016     |       | 4,912,643                   |       | 5,513,197 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 19,250,000      |       | Soles        |       | 6.63%         |       | 3-17-2009    |       | 3,476,780                   |       | — |   |
| Bonds Edelnor              |       | II° Prog.          |       | 15,000,000      |       | Soles        |       | 6.75%         |       | 5-22-2009    |       | 2,709,178                   |       | — |   |
| Bonds Edelnor              |       | II° Prog.          |       | 15,000,000      |       | Soles        |       | 7.56%         |       | 5-22-2013    |       | 2,709,178                   |       | 3,040,366 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 15,000,000      |       | Soles        |       | 6.66%         |       | 10-6-2013    |       | 2,709,178                   |       | 3,040,366 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 20,000,000      |       | Soles        |       | 5.69%         |       | 4-19-2012    |       | 3,612,237                   |       | 4,053,822 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 20,000,000      |       | Soles        |       | 5.91%         |       | 4-19-2015    |       | 3,612,237                   |       | 4,053,822 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 40,000,000      |       | Soles        |       | 5.97%         |       | 7-6-2012     |       | 7,224,476                   |       | 8,107,644 |   |
| Bonds Edelnor              |       | II° Prog.          |       | 15,000,000      |       | Soles        |       | 7.22%         |       | 8-31-2016    |       | 2,709,178                   |       | 3,040,366 |   |
| Bonds Edelnor              |       | III° Prog          |       | 40,000,000      |       | Soles        |       | 6.94%         |       | 8-29-2015    |       | 7,224,476                   |       | 8,107,644 |   |
| Bonds Edelnor              |       | III° Prog          |       | 30,000,000      |       | Soles        |       | 6.56%         |       | 9-12-2012    |       | 5,418,358                   |       | 6,080,732 |   |
| Bonds Edelnor              |       | III° Prog          |       | 30,000,000      |       | Soles        |       | 6.84%         |       | 1-10-2013    |       | —                      |       | 6,080,732 |   |
| Bonds Edelnor              |       | III° Prog.         |       | 20,000,000      |       | Soles        |       | 5.94%         |       | 3-1-2011     |       | —                      |       | 4,053,822 |   |
| Bonds Edelnor              |       | III° Prog.         |       | 20,000,000      |       | Soles        |       | 6.28%         |       | 3-1-2013     |       | —                      |       | 4,053,822 |   |
| Bonds Edelnor              |       | III° Prog          |       | 25,000,000      |       | Soles        |       | 6.81%         |       | 6-13-2014    |       | —                      |       | 5,067,277 |   |
| Bonds Edelnor              |       | III° Prog          |       | 25,000,000      |       | Soles        |       | 7.13%         |       | 6-13-2016    |       | —                      |       | 5,067,277 |   |
| Bonds Edelnor              |       | III° Prog.         |       | 20,000,000      |       | Soles        |       | 7.50%         |       | 7-11-2011    |       | —                      |       | 4,053,822 |   |
| Bonds Edelnor              |       | III° Prog.         |       | 30,000,000      |       | Soles        |       | 7.72%         |       | 7-11-2013    |       | —                      |       | 6,080,732 |   |
| Bonds Edelnor              |       | III° Prog          |       | 13,000,000      |       | Soles        |       | 8.31%         |       | 12-11-2012   |       | —                      |       | 2,634,984 |   |
| Bonds Edelnor              |       | III° Prog.         |       | 15,465,000      |       | Soles        |       | 8.25%         |       | 12-11-2011   |       | —                      |       | 3,134,618 |   |
| Bonds Codensa              |       | B3                      |       | 50,000,000,000  |       | $ Col.  |       | 12.42%        |       | 3-15-2009    |       | 13,428,726                  |       | — |   |
| Bonds Codensa              |       | B5                      |       | 200,000,000,000 |       | $ Col.  |       | 13.63%        |       | 3-15-2011    |       | 53,714,905                  |       | 56,734,965 |   |
| Bonds Codensa              |       | B8                      |       | 250,000,000,000 |       | $ Col.  |       | 13.82%        |       | 3-15-2014    |       | 67,143,631                  |       | 70,918,706 |   |
| Bonds Codensa              |       | A                       |       | 224,780,000,000 |       | $ Col.  |       | 12.12%        |       | 3-14-2010    |       | 60,370,182                  |       | 63,764,427 |   |
| Bonds Codensa              |       | B                       |       | 391,500,000,000 |       | $ Col.  |       | 12.80%        |       | 3-14-2017    |       | 105,146,927                 |       | 111,058,694 |   |
| Bonds Codensa              |       | C                       |       | 33,720,000      |       | $ Col.  |       | 12.37%        |       | 3-14-2012    |       | 9,056,333                   |       | 9,565,515 |   |
| Bonds Codensa              |       | D                       |       | 109,000,000,000 |       | $ Col.  |       | 12.06%        |       | 3-11-2010    |       | —                      |       | 30,920,556 |   |
| Bonds Codensa              |       | E                       |       | 85,500,000,000  |       | $ Col.  |       | 12.56%        |       | 3-11-2013    |       | —                      |       | 24,254,198 |   |
| Bonds Codensa              |       | F                       |       | 75,500,000,000  |       | $ Col.  |       | 13.48%        |       | 3-11-2013    |       | —                      |       | 21,417,450 |   |
| Bonds Edesur               |       | Seven                   |       | 165,000,000     |       | $ Arg   |       | 11.75%        |       | 6-19-2012    |       | 28,321,548                  |       | 30,394,862 |   |
| Bonds Ampla                |       | 2°Serie            |       | 110,000,000     |       | Reales       |       | IGP-M+11,4%   |       | 3-1-2010     |       | 37,757,841                  |       | 36,995,835 |   |
| Bonds Ampla                |       | Unit                    |       | 370,000,000     |       | Reales       |       | DI + 0,85% aa |       | 8-1-2012     |       | 113,031,044                 |       | 100,764,442 |   |
| Bonds Endesa               |       | F                       |       | 1,500,000       |       | U.F.         |       | 6.20%         |       | 8-1-2022     |       | 31,412,543                  |       | 30,891,701 |   |
| Bonds Endesa               |       | H                       |       | 4,000,000       |       | U.F.         |       | 6.20%         |       | 10-15-2028   |       | 85,476,307                  |       | 85,810,280 |   |
| Bonds Endesa               |       | K                       |       | 4,000,000       |       | U.F.         |       | 3.80%         |       | 4-15-2027    |       | 85,476,307                  |       | 85,810,280 |   |
| Bonds Endesa               |       | M                       |       | 10,000,000      |       | U.F.         |       | 4.75%         |       | 12-15-2029   |       | —                      |       | 214,525,700 |   |
| Bonds Endesa               |       | One                     |       | 105,881,000     |       | US$          |       | 7.88%         |       | 2-1-2027     |       | 111,404,929                 |       | 131,032,962 |   |
| Bonds Endesa               |       | Two                     |       | 220,000,000     |       | US$          |       | 7.33%         |       | 2-1-2037     |       | 119,044,906                 |       | — |   |
| Bonds Endesa               |       | Three                   |       | 40,416,000      |       | US$          |       | 8.13%         |       | 2-1-2097     |       | 21,869,630                  |       | 25,722,763 |   |
| Bonds Endesa               |       | Unit                    |       | 400,000,000     |       | US$          |       | 8.50%         |       | 4-1-2009     |       | 216,445,284                 |       | — |   |
| Bonds Endesa               |       | 144A                    |       | 400,000,000     |       | US$          |       | 8.35%         |       | 8-1-2013     |       | 216,445,284                 |       | 254,580,000 |   |
| Bonds Endesa               |       | 144A                    |       | 200,000,000     |       | US$          |       | 8.63%         |       | 8-1-2015     |       | 108,222,641                 |       | 127,290,000 |   |
| Bonds Edegel               |       | 5 A 2° issue       |       | 10,000,000      |       | US$          |       | 3.75%         |       | 1-26-2009    |       | 5,411,131                   |       | — |   |
| Bonds Edegel               |       | 7 A 2° issue       |       | 10,000,000      |       | US$          |       | 4.94%         |       | 7-26-2009    |       | 5,411,131                   |       | — |   |
| Bonds Edegel               |       | 9 A 2° issue       |       | 70,000,000      |       | Soles        |       | 6.91%         |       | 6-1-2009     |       | 12,638,614                  |       | — |   |
| Bonds Edegel               |       | 10 A 2° issue      |       | 35,000,000      |       | Soles        |       | 6.72%         |       | 10-21-2010   |       | 6,319,307                   |       | 7,089,672 |   |
| Bonds Edegel               |       | 11 A 2° issue      |       | 20,000,000      |       | US$          |       | 6.06%         |       | 11-18-2012   |       | 10,822,264                  |       | 12,729,000 |   |
| Bonds Edegel               |       | 13 A 2° issue      |       | 25,000,000      |       | Soles        |       | 6.47%         |       | 10-20-2013   |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 14 A 2° issue      |       | 25,000,000      |       | Soles        |       | 6.09%         |       | 10-21-2010   |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 15 A 2° issue      |       | 30,000,000      |       | Soles        |       | 6.16%         |       | 11-27-2011   |       | 5,416,549                   |       | 6,076,862 |   |
| Bonds Edegel               |       | 13 B 2° issue      |       | 25,000,000      |       | Soles        |       | 6.16%         |       | 1-15-2014    |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 14 B 2° issue      |       | 25,000,000      |       | Soles        |       | 5.91%         |       | 2-22-2011    |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 1° issue Serie A   |       | 25,000,000      |       | Soles        |       | 6.31%         |       | 6-21-2022    |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 2° issue Serie A   |       | 8,000,000       |       | US$          |       | 5.97%         |       | 7-18-2011    |       | 4,328,902                   |       | 5,091,600 |   |
| Bonds Edegel               |       | 3° issue Serie A   |       | 25,000,000      |       | Soles        |       | 6.28%         |       | 7-3-2019     |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 4° issue Serie A   |       | 20,000,000      |       | Soles        |       | 6.75%         |       | 8-31-2014    |       | 3,611,033                   |       | 4,051,240 |   |
| Bonds Edegel               |       | 5° issue Serie A   |       | 25,000,000      |       | Soles        |       | 6.50%         |       | 3-18-2013    |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 6° issue Serie A   |       | 25,000,000      |       | Soles        |       | 6.44%         |       | 5-21-2013    |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 7° issue Serie A   |       | 25,000,000      |       | Soles        |       | 6.63%         |       | 6-13-2013    |       | 4,513,791                   |       | 5,064,052 |   |
| Bonds Edegel               |       | 8° issue Serie A   |       | 10,000,000      |       | US$          |       | 6.34%         |       | 1-25-2028    |       | —                      |       | 6,364,500 |   |
| Bonds Edegel               |       | 9° issue Serie A   |       | 28,300,000      |       | Soles        |       | 6.59%         |       | 3-7-2014     |       | —                      |       | 5,732,505 |   |
| Bonds Edegel               |       | 10° issue SerieA A |       | 9,720,000       |       | US$          |       | 9.00%         |       | 11-12-2014   |       | —                      |       | 6,186,293 |   |
| Bonds Emgesa               |       | B-10 1° issue      |       | 229,825,000,000 |       | $ Col.  |       | 12.73%        |       | 10-9-2009    |       | 61,725,141                  |       | — |   |
| Bonds Emgesa               |       | B-10 1° issue      |       | 60,000,000,000  |       | $ Col.  |       | 13.49%        |       | 11-10-2009   |       | 16,114,471                  |       | — |   |
| Bonds Emgesa               |       | C-10 1° issue      |       | 9,684,517,481   |       | $ Col.  |       | 10.25%        |       | 10-9-2009    |       | 2,706,341                   |       | — |   |
| Bonds Emgesa               |       | C-10 1° issue      |       | 17,235,158,229  |       | $ Col.  |       | 10.25%        |       | 10-9-2009    |       | 4,719,100                   |       | — |   |
| Bonds Emgesa               |       | A-10 1° issue      |       | 210,000,000,000 |       | $ Col.  |       | 13.15%        |       | 2-23-2015    |       | 56,400,651                  |       | 59,571,713 |   |
| Bonds Emgesa               |       | A-10 3° issue      |       | 40,000,000,000  |       | $ Col.  |       | 13.15%        |       | 2-23-2015    |       | 10,742,981                  |       | 11,346,993 |   |
| Bonds Emgesa               |       | B-10 4° issue      |       | 170,000,000,000 |       | $ Col.  |       | 13.28%        |       | 2-20-2017    |       | 45,657,669                  |       | 48,224,720 |   |
| Bonds Emgesa               |       | B 1° issue         |       | 400,000,000,000 |       | $ Col.  |       | 14.73%        |       | 11-10-2011   |       | 107,429,932                 |       | 113,470,139 |   |
|                       |       |                    |       |            |       |         |       |          |       |         |       |                        |       |   |   |
| **Total**                  |       |                    |       |            |       |         |       |          |       |         | ** ** | **2,338,000,343**           | ** ** | **2,391,113,689** |   |

 

----

*              VAC (“Valor de activación constante”) is issued bythe Banco Central de Reserva del Perú and calculated based in the inflationrate (represents an inflation - indexed new Peruvian Sol).

 
| **Year** | ** ** | **%** | ** ** |
|----------|------------|-------|------------|
| 2007     |       | 6.52  |       |
| 2008     |       | 6.96  |       |

 

F-62

----

Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

**b)****             ****Bonds payable consist of thefollowing:**

 

**1.1    Domestic Bonds**

 

On September 11,2001, the Superintendence of Securities and Insurance registered the issue ofadjustable bearer bonds of Enersis dated June 14, 2001 in the SecuritiesRegister under No. 269. This placement was made in two series, as follows:

 
| ** **  | ** ** | **Total amount** | ** ** | **No. of bonds** | ** ** | **Face value** | ** ** |
|-------------|------------|------------------|------------|-----------------------|------------|----------------|------------|
| **Tranche** | ** ** | **In UF**        | ** ** | **per series**        | ** ** | **In UF**      | ** ** |
|        |       |             |       |                  |       |           |       |
| B1          |       | 1,000,000        |       | 1,000                 |       | 1,000          |       |
| B1          |       | 3,000,000        |       | 300                   |       | 10,000         |       |
| B2          |       | 1,000,000        |       | 1,000                 |       | 1,000          |       |
| B2          |       | 1,500,000        |       | 150                   |       | 10,000         |       |

 

The scheduled maturity ofthe Series B-1 bonds is 8 years, with no grace period; interest andprincipal are payable semi-annually. Annual interest is 5.5%, compoundedsemi-annually.

 

The scheduled maturity ofthe Series B-2 bonds is 21 years, principal payments beginning after 5years, interest and principal payable semi-annually. Annual interest is 5.75%,compounded semi-annually.

 

**1.2Yankee Bonds**

 

On November 21,1996, the Company, acting through its former branch in the Cayman Islands,issued  Yankee Bonds for US$800 millionregistered in the SEC. This issuance was made in three tranches, as follows:

 
| ** **  | ** ** | **Total amount** | ** ** | **Years to** | ** ** | **Stated annual** | ** ** |
|-------------|------------|------------------|------------|--------------|------------|-------------------|------------|
| **Tranche** | ** ** | **in US$**       | ** ** | **maturity** | ** ** | **interest rate** | ** ** |
|        |       |             |       |         |       |              |       |
| 1           |       | 300,000,000      |       | 10           |       | 6.90              | %          |
| 2           |       | 350,000,000      |       | 20           |       | 7.40              | %          |
| 3           |       | 150,000,000      |       | 30           |       | 6.60              | %          |

 

Interest is payable on a semi-annual basis andprincipal is due upon maturity. The tranche 3 bond holders had a put option in2003, which was exercised by nearly all holders in November 2003 forUS$149,142,000.

 

During the second quarter of 2004, UF/US$swapcontracts were entered into for US$100,000,000 associated with the series thetranche 1 bond and US$250,000,000 associated with tranche 2.

 

During November, 2006 US$300 million from series oneof the Yankee Bonds were paid off. This operation meant liquidating swap forUS$100 million associated with this bond.

 

During November, 2001, Enersis Internacional awholly-owned subsidiary of Enersis made a tender offer for total or partialcash purchase of the tranche 2 Yankee Bonds, with a par value of ThUS$350,000maturing at 20 years in 2016.

 

As a result of this offer, tranche 2 bonds with parvalue of of ThUS$100,266 were bought in the amount of ThUS$95,536.

 

As a result of the liquidation of EnersisInternacional S.A. on September 21, 2006, the parent Enersis S.A. wasallocated its assets and liabilities, which included such bonds among itsassets.

 

Given the above, as of December 31, 2008 the bonds are presented net of the repurchase.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**1.3Yankee Bonds II**

 

On November 24, 2003, the Company, through its former Cayman IslandsBranch, issued Yankee Bonds registered with the SEC for US$350 million. Thisissuance was made in a single tranche, as follows:

 
| ** ** | ** ** | **Total amount** | ** ** | **Years to** | ** ** | **Stated annual** | ** ** |
|------------|------------|------------------|------------|--------------|------------|-------------------|------------|
| **Series** | ** ** | **in US$**       | ** ** | **Maturity** | ** ** | **interest rate** | ** ** |
|       |       |             |       |         |       |              |       |
| 1          |       | 350,000,000      |       | 10           |       | 7.375             | %          |

 

Interest is paid semi-annually and amortization of capital is a singleinstallment at the end of the term.

 

During the second half of 2004, debts have been re-denominated throughUS$/UF swap contracts for the total of this issuance.

 

**1.4Chilectra S.A. Bonds**

 

On October 13,2003, Chilectra S.A. registered, in the Superintendence of Securities andInsurance, 2 tranches of bonds corresponding to No 347 and 348 for a maximumline amount of UF 4,200,000 and UF 4,000,000 respectively. This bonds have notyet been issued.

 

**1.5Edelnor Bonds (Subsidiary of Distrilima S.A.)**

 

As of December 31, 2008 the current obligations are as follows:

 
| **First  issuance**                                   |   |                                             |
|-------------------------------------------------------|--------|--------------------------------------------------|
| Date of Issuance                                      |   | : March 1, 1996                             |
| Number of bonds  subscribed                           |   | : 48,919 bonds.                                  |
| Face value                                            |   | : S/. 100 (100 new  soles) each                  |
| Redemption term                                       |   | : 15 years                                       |
| Interest rate                                         |   | : 9.61% annual                                   |
| Interest payment                                      |   | : Annually, on coupon  maturity                  |
| Principal amortization                                |   | : Amortization of total  principal upon maturity |
|                                                  |   |                                             |
| **First  program of Corporate Bonds Eighth issuance** |
| Date of issuance                                      |   | : January 16, 2004.                         |
| Number of bonds subscribed                            |   | : 4,000 bonds.                                   |
| Face value                                            |   | : 5,000 (new soles) each.                        |
| Term                                                  |   | : 8 years.                                       |
| Interest rate                                         |   | : 6.25%.                                         |
| Interest payment                                      |   | : Semi-annual.                                   |
|                                                  |   |                                             |
| **Ninth  issuance**                                   |   |                                             |
| Date of issuance                                      |   | : April 22, 2004.                           |
| Number of bonds subscribed                            |   | : 4,000 bonds.                                   |
| Face value                                            |   | : 5,000 (new soles) each.                        |
| Term                                                  |   | : 10 years.                                      |
| Interest rate                                         |   | : VAC + 5.4%.                                    |
| Interest payment                                      |   | : Semi-annual.                                   |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| **Tenth  issuance**                    |       |                      |
|----------------------------------------|------------|---------------------------|
| Date of issuance                       |       | : June 9, 2004.      |
| Number of bonds subscribed             |       | : 4,000 bonds.            |
| Face value                             |       | : 5,000 (new soles) each. |
| Term                                   |       | : 5 years.                |
| Interest rate                          |       | : 8.56%.                  |
| Interest payment                       |       | : Semi-annual.            |
| ** **                             | ** ** | ** **                |
| **Eleventh  issuance**                 |       |                      |
| Date of issuance                       |       | : June 9, 2004.      |
| Number of bonds subscribed             |       | : 4,000 bonds.            |
| Face value                             |       | : 5,000 (new soles) each. |
| Term                                   |       | : 10 years.               |
| Interest rate                          |       | : VAC + 6.50%.            |
| Interest payment                       |       | : Semi-annual.            |
|                                   |       |                      |
| **Twelfth  issuance**                  |       |                      |
| Date of issuance                       |       | : June 24, 2004.     |
| Number of bonds subscribed             |       | : 8,000 bonds.            |
| Face value                             |       | : 5,000 (new soles) each. |
| Term                                   |       | : 10 years.               |
| Interest rate                          |       | : VAC + 6.50%.            |
| Interest payment                       |       | : Semi-annual.            |
|                                   |       |                      |
| **Thirteenth  issuance**               |       |                      |
| Date of issuance                       |       | : June 10, 2005.     |
| Number of bonds subscribed             |       | : 6,000 bonds.            |
| Face value                             |       | : 5,000 (new soles) each. |
| Term                                   |       | : 5 years.                |
| Interest rate                          |       | : 7.38%.                  |
| Interest payment                       |       | : Semi-annual.            |
|                                   |       |                      |
| **Fourteenth  issuance**               |       |                      |
| Date of issuance                       |       | : June 10, 2005.     |
| Number of bonds subscribed             |       | : 6,000 bonds.            |
| Face value                             |       | : 5,000 (new soles) each. |
| Term                                   |       | : 10 years.               |
| Interest rate                          |       | : 8.75%.                  |
| Interest payment                       |       | : Semi-annual.            |
| ** **                             | ** ** | ** **                |
| **Second  program of Corporate Bonds** |
| ** **                             | ** ** | ** **                |
| **First  issuance**                    |       |                      |
| Date of Issuance                       |       | : January 5, 2006    |
| Number of bonds  subscribed            |       | : 4,000 bonds             |
| Face value                             |       | : 5,000 (new soles)  each |
| Redemption term                        |       | : 5 years                 |
| Interest rate                          |       | : 7.31%                   |
| Interest payment                       |       | : Semi-annual             |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| **Second  issuance**        |       |                       |
|-----------------------------|------------|----------------------------|
| Date of Issuance            |       | : January 5, 2006     |
| Number of bonds  subscribed |       | : 800 bonds                |
| Face value                  |       | : 5,000 (new soles)  each  |
| Redemption term             |       | : 7 years                  |
| Interest rate               |       | : 7.84%                    |
| Interest payment            |       | : Semi-annual              |
| ** **                  | ** ** | ** **                 |
| **Third  issuance**         |       |                       |
| Date of issuance            |       | : January 5, 2006     |
| Number of bonds  subscribed |       | : 3,600 bonds              |
| Face value                  |       | : 5,000 (new soles)  each  |
| Redemption term             |       | : 10 years                 |
| Interest rate               |       | : 8.16%                    |
| Interest payment            |       | : Semi-annual              |
|                        |       |                       |
| **Fourth  issuance**        |       |                       |
| Date of issuance            |       | : February 1, 2006    |
| Number of bonds  subscribed |       | : 4,000 bonds              |
| Face value                  |       | : 5,000 (new soles)  each  |
| Redemption term             |       | : 5 years                  |
| Interest rate               |       | : 7.06%                    |
| Interest payment            |       | : Semi-annual              |
|                        |       |                       |
| **Fifth  issuance**         |       |                       |
| Date of issuance            |       | : February 1,  2006.  |
| Number of bonds  subscribed |       | : 5,440 bonds.             |
| Face value                  |       | : 5,000 (new soles)  each. |
| Term                        |       | : 10 years.                |
| Interest rate               |       | : 8.00%.                   |
| Interest payment            |       | : Semi-annual.             |
|                        |       |                       |
| **Sixth  issuance**         |       |                       |
| Date of issuance            |       | : March 17, 2006.     |
| Number of bonds subscribed  |       | : 3,850 bonds.             |
| Face value                  |       | : 5,000 (new soles) each.  |
| Term                        |       | : 3 years.                 |
| Interest rate               |       | : 6.63%                    |
| Interest payment            |       | : Semi-annual.             |
| ** **                  | ** ** | ** **                 |
| **Seventh  issuance**       |       |                       |
| Date of issuance            |       | : May 22, 2006.       |
| Number of bonds subscribed  |       | : 3,000 bonds.             |
| Face value                  |       | : 5,000 (new soles) each.  |
| Term                        |       | : 3 years.                 |
| Interest rate               |       | : 6.75%.                   |
| Interest payment            |       | : Semi-annual.             |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| **Eight  issuance**                      | ** ** | ** **                                                                            |
|------------------------------------------|------------|---------------------------------------------------------------------------------------|
| Date of issuance                         |       | : May 22, 2006.                                                                  |
| Number of bonds subscribed               |       | : 3,000 bonds.                                                                        |
| Face value                               |       | : 5,000 (new soles) each.                                                             |
| Term                                     |       | : 7 years.                                                                            |
| Interest rate                            |       | : 7.56%.                                                                              |
| Interest payment                         |       | : Semi-annual.                                                                        |
| ** **                               | ** ** | ** **                                                                            |
| **Tenth  issuance - Series B**      |       |                                                                                  |
| Date of issuance                         |       | : October 6, 2006.                                                               |
| Number of bonds subscribed               |       | : 3,000 bonds.                                                                        |
| Face value                               |       | : 5,000 (new soles) each.                                                             |
| Term                                     |       | : 7 years.                                                                            |
| Interest rate                            |       | : 6.66%.                                                                              |
| Interest payment                         |       | : Semi-annual.                                                                        |
|                                     |       |                                                                                  |
| **Twelfth  Issuance - Series A**    |       |                                                                                  |
| Date of Issuance                         |       | : April 19, 2007                                                                 |
| Issuer                                   |       | : Edelnor S.A.A.                                                                      |
| Bonds issued                             |       | : Marketable Securities in thousands of new soles  (4,000 bonds of S/. 5,000.00 each) |
| Number of bonds subscribed               |       | : S/. 30,000,000                                                                      |
| Number of bonds placed                   |       | : S/. 20,000,000                                                                      |
| Principal due                            |       | : All due on April 19, 2012                                                      |
| Interest rate                            |       | : 5.69%                                                                               |
| Interest payment                         |       | : Semi-annual.                                                                        |
|                                     |       |                                                                                  |
| **Seventeenth  Issuance**                |       |                                                                                  |
| Date of issuance                         |       | : July 6, 2007                                                                   |
| Number of bonds subscribed               |       | : 8,000                                                                               |
| Face value                               |       | : 5,000 (new soles) each                                                              |
| Term                                     |       | : 5 years                                                                             |
| Interest rate                            |       | : 5.97%                                                                               |
| Interest payment                         |       | : Semi-annual                                                                         |
|                                     |       |                                                                                  |
| **Eighteenth  Issuance - Series A** |       |                                                                                  |
| Date of Issuance                         |       | : April 19, 2007                                                                 |
| Issuer                                   |       | : Edelnor S.A.A.                                                                      |
| Bonds issued                             |       | : Marketable Securities in thousands of new soles  (4,000 bonds of S/. 5,000.00 each) |
| Number of bonds subscribed               |       | : S/. 40,000,000                                                                      |
| Number of bonds placed                   |       | : S/. 20,000,000                                                                      |
| Principal due                            |       | : All due on April 19, 2015                                                      |
| Interest rate                            |       | : 5.91%                                                                               |
| Interest payment                         |       | : Semi-annual.                                                                        |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| **Nineteenth  Issuance**              |       |                       |
|---------------------------------------|------------|----------------------------|
| Date of issuance                      |       | : August 31, 2008     |
| Number of bonds subscribed            |       | : 3,000                    |
| Face value                            |       | : 5,000 (new soles) each   |
| Term                                  |       | : 8 years                  |
| Interest rate                         |       | : 7.22%                    |
| Interest payment                      |       | : Semi-annual              |
|                                  |       |                       |
| **Third  program of Corporate Bonds** |       |                       |
| ** **                            | ** ** | ** **                 |
| **First  Issuance**                   |       |                       |
| Date of issuance                      |       | : August 29, 2007     |
| Number of bonds subscribed            |       | : 8,000                    |
| Face value                            |       | : 5,000 (new soles) each   |
| Term                                  |       | : 8 years                  |
| Interest rate                         |       | : 6.94%                    |
| Interest payment                      |       | : Semi-annual              |
|                                  |       |                       |
| **Second  Issuance**                  |       |                       |
| Date of issuance                      |       | : September 12, 2007  |
| Number of bonds subscribed            |       | : 6,000                    |
| Face value                            |       | : 5,000 (new soles) each   |
| Term                                  |       | : 5 years                  |
| Interest rate                         |       | : 6.56%                    |
| Interest payment                      |       | : Semi-annual              |
|                                  |       |                       |
| **Third  issuance**                   |       |                       |
| Date of issuance                      |       | : January 10, 2008    |
| Number of bonds  subscribed           |       | : 6,000 bonds              |
| Face value                            |       | : 5,000 (new soles)  each  |
| Redemption term                       |       | : 5 years                  |
| Interest rate                         |       | : 6.84%                    |
| Interest payment                      |       | : Semi-annual              |
|                                  |       |                       |
| **Fourth  issuance**                  |       |                       |
| Date of issuance                      |       | : March 1, 2008       |
| Number of bonds  subscribed           |       | : 4,000 bonds              |
| Face value                            |       | : 5,000 (new soles)  each  |
| Redemption term                       |       | : 3 years                  |
| Interest rate                         |       | : 5.94%                    |
| Interest payment                      |       | : Semi-annual              |
|                                  |       |                       |
| **Fifth  issuance**                   |       |                       |
| Date of issuance                      |       | : March 1, 2008.      |
| Number of bonds  subscribed           |       | : 4,000 bonds.             |
| Face value                            |       | : 5,000 (new soles)  each. |
| Term                                  |       | : 5 years.                 |
| Interest rate                         |       | : 6.28%.                   |
| Interest payment                      |       | : Semi-annual.             |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| **Sixth  issuance**        |       |                      |
|----------------------------|------------|---------------------------|
| Date of issuance           |       | : June 13, 2008.     |
| Number of bonds subscribed |       | : 5,000 bonds.            |
| Face value                 |       | : 5,000 (new soles) each. |
| Term                       |       | : 6 years.                |
| Interest rate              |       | : 6.81%                   |
| Interest payment           |       | : Semi-annual.            |
| ** **                 | ** ** | ** **                |
| **Seventh  issuance**      |       |                      |
| Date of issuance           |       | : June 13, 2008.     |
| Number of bonds subscribed |       | : 5,000 bonds.            |
| Face value                 |       | : 5,000 (new soles) each. |
| Term                       |       | : 8 years.                |
| Interest rate              |       | : 7.13%.                  |
| Interest payment           |       | : Semi-annual.            |
| ** **                 | ** ** | ** **                |
| **Eight  issuance**        |       |                      |
| Date of issuance           |       | : July 11, 2008.     |
| Number of bonds subscribed |       | : 4,000 bonds.            |
| Face value                 |       | : 5,000 (new soles) each. |
| Term                       |       | : 3 years.                |
| Interest rate              |       | : 7.50%.                  |
| Interest payment           |       | : Semi-annual.            |
|                       |       |                      |
| **Nineth  issuance**       |       |                      |
| Date of issuance           |       | : July 11, 2008.     |
| Number of bonds subscribed |       | : 6,000 bonds.            |
| Face value                 |       | : 5,000 (new soles) each. |
| Term                       |       | : 8 years.                |
| Interest rate              |       | : 7.72%.                  |
| Interest payment           |       | : Semi-annual.            |
| ** **                 | ** ** | ** **                |
| **Tenth  issuance**        |       |                      |
| Date of issuance           |       | : December 11, 2008. |
| Number of bonds subscribed |       | : 2,600 bonds.            |
| Face value                 |       | : 5,000 (new soles) each. |
| Term                       |       | : 4 years.                |
| Interest rate              |       | : 8.31%.                  |
| Interest payment           |       | : Semi-annual.            |
|                       |       |                      |
| **Eleventh  issuance**     |       |                      |
| Date of issuance           |       | : December 11, 2008. |
| Number of bonds subscribed |       | : 3,093 bonds.            |
| Face value                 |       | : 5,000 (new soles) each. |
| Term                       |       | : 3 years.                |
| Interest rate              |       | : 8.25%.                  |
| Interest payment           |       | : Semi-annual.            |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**1.6Codensa S.A. issued bonds on March 11, 2004.**

 
| **First  Issuance**   |   |                                                                                                                        |
|-----------------------|--------|-----------------------------------------------------------------------------------------------------------------------------|
| Issuer                |   | : Codensa.                                                                                                                  |
| Issued securities     |   | : Securities negotiable in Colombian pesos.                                                                                 |
| Amount issued         |   | : 500,000,000,000 Colombian pesos.                                                                                          |
|                  |   |                                                                                                                        |
| 1st principal payment |   | : Maturity in 2009 for 50,000,000,000 Colombian pesos.                                                                      |
| Nominal interest rate |   | : 12.24% average annual rate.                                                                                               |
| Interest payment      |   | : Quarterly.                                                                                                                |
|                  |   |  Interest accrued at year end is ThCh$100,705  (ThCh$77,866 in 2007), and it  is presented in current liabilities.     |
|                  |   |                                                                                                                        |
| 2nd principal payment |   | : Maturity in 2011 for 200,000,000,000 Colombian pesos.                                                                     |
| Nominal interest rate |   | : 13.63% average annual rate.                                                                                               |
| Interest payment      |   | : Quarterly.                                                                                                                |
|                  |   |  Interest accrued at year end is ThCh$436,859 (ThCh$349,146 in  2007), and it is presented in current liabilities.     |
|                  |   |                                                                                                                        |
| 3rd principal payment |   | : Maturity in 2014 for 250,000,000,000 Colombian pesos.                                                                     |
| Nominal interest rate |   | : 13.82% average annual rate.                                                                                               |
| Interest payment      |   | : Quarterly.                                                                                                                |
|                  |   |  Interest accrued at year-end is ThCh$560,258 (ThCh$443,148 in  2007), and it is presented in the current liabilities. |

 

**SecondIssuance**

 

The first and second issues, which were distributed in two series, withterms of three and ten years, have been issued. These were placed at CPI +4.60% and CPI + 5.30% respectively. A third issue was made, distributed in twoseries, with terms of three and five years. These were placed at DTF TA + 2.09%and DTF TA + 2.40%. Payment is quarterly in arrears.

 
| 1st principal payment |   | : Maturity in 2010 for 224,780,000,000 Colombian pesos.                                                      |
|----------------------------|--------|--------------------------------------------------------------------------------------------------------------|
| Nominal interest rate      |   | : 12.12% average annual rate                                                                                 |
| Interest payment           |   | : Quarterly.                                                                                                 |
|                       |   | Year-end interest is ThCh$380,180 (ThCh$302,527 in 2007), and it is  presented in current liabilities.       |
| 2nd principal payment |   | : Maturity in 2017 for 391,500,000,000 Colombian pesos.                                                      |
| Nominal interest rate      |   | : 12.80°/o average annual interest rate                                                                 |
| Interest payment           |   | : Quarterly.                                                                                                 |
|                       |   | Year-end interest is ThCh$701,558 (ThCh$ 548,131 in 2007), and it is  presented in current liabilities. |
| 3rd principal payment |   | : Maturity in 2012 for 33,720,000 Colombian pesos                                                            |
| Nominal interest rate      |   | : 12.37% average annual interest rate                                                                        |
| Interest payment           |   | : Quarterly.                                                                                                 |
|                       |   | Year-end interest is ThCh$58,350 (ThCh$48,860 in 2007), and it is  presented in current liabilities          |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**Third Issuance**

 

On December 11, 2008 the issue of the first lotdistributed in three series, two series with a 5 year period and one serieswith a 2 year period placed at CPI (consumer price index) rates + 5.99%, DTF TA+ 2.58% and DTF TA + 2.11%. The payment of interest is made when the quarter isfinished.

 
| 1st Capital amortization |   | : Maturities in 2010 for  Col$109,000,000,000 (Colombian pesos).                   |
|-------------------------------|--------|------------------------------------------------------------------------------------|
| Nominal interest rate         |   | : 12.06% annual average rate                                                       |
| Interest payment              |   | : Payment of interest will  be on a quarterly basis.                               |
|                          |   | Interest accrued at year-end  is ThCh$214,558 and is shown in current liabilities. |
| 2nd Capital amortization |   | : Maturities in 2013 for  Col$85,500,000,000 (Colombian pesos).                    |
| Nominal interest rate         |   | : 12.56% annual average rate                                                       |
| Interest payment              |   | : Payment of interest will  be on a quarterly basis.                               |
| Capital amortization          |   | : Maturities in 2013 for  Col$75,500,000,000 (Colombian pesos).                    |
| Nominal interest rate         |   | : 13.48% annual average rate                                                       |
| Interest payment              |   | : Payment of interest will  be on a quarterly basis.                               |
|                          |   | Interest accrued at  year-end is ThCh$341,374 and is shown in current liabilities. |

 

**1.7Edesur S.A.**

 

On October 5, 2004, under its medium-term certificate ofindebtedness issuance program, the Company issued negotiable bonds inArgentinean pesos for a total of ThUS$58,803 in two series - 18 month (class 5)and 3 years (class 6), respectively.

 
| Issued Bonds on 31th, December: |   |                                     |
|---------------------------------|--------|------------------------------------------|
| Issuer                          |   | : Edesur S.A.                            |
| Issued securities               |   | : Negotiable bonds in Argentinean pesos. |
| Amount issued                   |   | : ThUS$52,339.                           |
| Principal due                   |   | : Maturity in 2012.                      |
| Nominal interest rate           |   | : 11.75% average annual rate.            |
| Interest payment                |   | : Quartely.                              |

 

**1.8Ampla Energía e Servicos S.A.**

 

On March 1, 2005, the Company issued bonds in reales for a totalamount of R$400,000,000 in two series, at December 31, 2008 thecurrent obligations are as follows:

 
| **Second Series**     |   |                                    |
|-----------------------|--------|-----------------------------------------|
| Issuer                |   | : Ampla Energía e Servicos S.A.    |
| Issued securities     |   | : Negotiable bonds in Brazilian reales. |
| Amount issued         |   | : R$110,000,000.                        |
| Principal due         |   | : Maturity in 2010.                     |
| Nominal interest rate |   | : IGP - M + 11.4% per annum             |
| Interest payment      |   | : Annual.                               |
| Principal due         |   | : Maturity in 2010                      |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

On August 1, 2006, the Company issued bonds in reales forR$370,000,000.00 in a single series.

 
| Issuer                |   | : Ampla Energía e Servicos S.A.    |
|-----------------------|--------|-----------------------------------------|
| Issued securities     |   | : Negotiable bonds in Brazilian reales. |
| Amount issued         |   | : R$370,000,000.                        |
| Principal due         |   | : Maturity in 2012                      |
| Nominal interest rate |   | : DI + 0.85% per annum                  |
| Interest  payment     |   | : Semi-annual.                          |

 

**1.9 Endesa Chile Individual**

 

**a.-**At December 31,2008 the following  bonds were issued inChile:

 

·                  On August 9,2001, it registered the fourth bond issuance of U.F. 7,500,000 under No.264;this was totally placed at December 31, 2001.

 

Series E-1 andE-2 were totally redeemed through payment at July 31, 2006.

 

·                  On November 26,2002, it registered the fifth bond issue of U.F. 8,000,000 under Nos. 317 and318 and then amended it on October 2, 2003; this issuance was totallyplaced at December 31, 2003.

 

·                  On April 15, 2007, it redeemed series Gfor U.F. 4,000,0000 (U.F. = Inflation index-linked unit of account) in advance,refinancing it by placing series K for the same amount; both series wereregistered under No.318 of November 26, 2002.

 

On December 26, 2007 the sixth issuance of bondswas registered under No.522 for U.F.10,000,000 (inflation index-linked units ofaccount). This issue was fully placed at December 18, 2008.

 

- At December 31, 2008 the following installmentsof series F bonds in UF are paid:

 
| Installment 1 paid on  January 29, 2008: | UF15,000 |
|-----------------------------------------------|----------|
| Installment 2 paid on  July 31, 2008:    | UF15,000 |

 

Riskrating of the last two bond issuance is as follows at the date of thesefinancial statements is as follows:

 
| ** **                                   | ** ** | **Category** |
|----------------------------------------------|------------|--------------|
|                                         |       |         |
| - Feller-Rate  Clasificadora de Riesgo Ltda. |       | AA-          |
| - Fitch Chile  Clasificadora de Riesgo Ltda. |       | AA-          |

 

**IssuanceTerms**

 

**FourthIssuance**

 
| Issuer                |   | : Empresa Nacional de  Electricidad S.A.                                                                                                                                   |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Securities issued     |   | : Bonds in U.F.                                                                                                                                                            |
| Issuance Value        |   | : Up to seven and a  half million (UF7,500,000) divided into:                                                                                                              |
|                  |   | Series F: 150  bonds at UF10,000 each.                                                                                                                                |
| Adjustment base       |   | : Variation in the U.F.                                                                                                                                                    |
| Amortization period   |   | : Series F:  August 1, 2022.                                                                                                                                     |
| Early redemption      |   | : Beginning  February 1, 2012.                                                                                                                                        |
| Nominal interest rate |   | :  6.20% annually, compounded semi-annually and effective on the outstanding principal  adjusted for the value of the U.F. The semi-annual interest rate will be  3.0534%. |

 

F-72

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| Placement period      |   | : 36  months from the registration date in the Chilean Securities Register of the  Superintendence of Securities and Insurance                                                                                                                        |
|-----------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Security              |   | :  There is no specific security, other than the general security of all the  issuer’s properties                                                                                                                                                |
| Interest payment      |   | :  Interest will be paid semi-annually each August 1 and February 1,  starting August 1, 2001. Accrued interest at year end is ThCh$802,411  (ThCh$815,600 in 2007) and it is presented in current liabilities.                        |
|                  |   |                                                                                                                                                                                                                                                  |
| **Fifth Issuance**    |   |                                                                                                                                                                                                                                                  |
| Issuer                |   | : Empresa Nacional de Electricidad S.A.                                                                                                                                                                                                               |
| Securities issued     |   | : Bonds in U.F.                                                                                                                                                                                                                                       |
| Amount of issue       |   | : Eight million Unidades de Fomento (U.F. 8,000,000) divided into:                                                                                                                                                                                    |
|                  |   | - Series H: 4,000 bonds U.F. 1,000 each.                                                                                                                                                                                                         |
|                  |   | - Series K: 4,000 bonds U.F. 1,000 each.                                                                                                                                                                                                         |
| Adjustment base       |   | : Variation in U.F.                                                                                                                                                                                                                                   |
| Amortization period   |   | : Series H: Semi-annually and successively as of April 15,  2010.                                                                                                                                                                           |
|                  |   | Series K: As of April 15, 2027.                                                                                                                                                                                                             |
| Early redemption      |   | : Only for series K bonds, as of October 16, 2011.                                                                                                                                                                                               |
| Nominal interest rate |   | : Series H: 6.2% per year, compounded every  six months and effective on the principal not fully paid adjusted by the  value of the Unidad de Fomento. The interest rate to be paid every six months  will be 3.0534%.                           |
|                  |   | : Series K: 3.8% per year, compounded every  six months and effective on the principal not fully paid adjusted by the  value of the Unidad de Fomento. The interest rate to be applied every six  months will be 1.8823%.                        |
| Interest payment      |   | : Interest will be paid semi-annually, due on April 15 and  October 15 of each year starting from April 15, 2007. Interest  accrued at year-end is ThCh$1,764,717 (ThCh$1,757,850 in 2007) an it is  presented in current liabilities. |
| Security              |   | : No specific security, except for general security of all the issuer’s  properties.                                                                                                                                                             |
| Placement deadline    |   | : 36 months as of date of registration in Securities Register of the  Superintendence of Securities and Insurance.                                                                                                                                    |

 
| **Sixth  Issuance**    |   |                                                                                                                                         |
|------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
| Issuer                 |   | :  Empresa Nacional de Electricidad S.A.                                                                                                     |
| Issued  securities     |   | :  Bonds in U.F.                                                                                                                             |
| Issue  amount          |   | :  Ten million inflation index-linked units of account (U.F.10,000,000) divided  into:                                                       |
|                   |   | - M Series: 10,000  instruments of U.F.1,000 each.                                                                                           |
| Indexation             |   | :  Changes in U.F.                                                                                                                           |
| Amortization  period   |   | :  Semi-annual and successive from June 15, 2019.                                                                                       |
| Early  redemption      |   | :  From December 15, 2011.                                                                                                              |
| Nominal  interest rate |   | :  4.75% annual (finished year), semi-annually compounded and effective on  unpaid capital indexed by U.F. value.                            |
|                   |   | The  interest rate to be applied on a semi-annual basis will be equal to 2.34740%.                                                           |
| Interest  payment      |   | :  Interest payment will be on a semi-annually basis maturing on every  June 15 and December 15, starting from June 15, 2009. |
|                   |   | Interest  accrued at year-end is ThCh$419,648 and is shown in current liabilities.                                                           |
| Guarantee              |   | :  There is no specific guarantee, except for the general guarantee of all the  issuer’s assets.                                        |
| Placement  period      |   | :  36 months from the date of registration at the Register of Securities of the  Superintendency of Securities and Insurance.                |

 

F-73

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**b.** The Company has issuance four public offeringsof bonds in the international market as follows:

 

Therisk ratings of these bond issuance at the date of these financial statementsare as follows:

 
| **Rating entity**                 | ** ** | **Category** |
|-----------------------------------|------------|--------------|
|                              |       |         |
| -Standard &  Poor’s |       | BBB          |
| -Moodys Investors  Services       |       | Baa3         |
| -Fitch                            |       | BBB          |

 

**FirstIssuance**

 
| Issuer                                                       | :      |   | Empresa Nacional de  Electricidad S.A.                                                                                                                                                                                                       |
|--------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Securities issued                                            | :      |   | Yankee bonds registered  in the SEC.                                                                                                                                                                                                         |
| Issuance Value                                               | :      |   | Six hundred and fifty  million US Dollars (US$650,000,000) divided into:                                                                                                                                                                     |
|                                                         |   |   | Tranche 1:  US$230,000,000                                                                                                                                                                                                                   |
|                                                         |   |   | Tranche 2:  US$220,000,000                                                                                                                                                                                                                   |
|                                                         |   |   | Tranche 3:  US$200,000,000                                                                                                                                                                                                                   |
| Adjustment                                                   | :      |   | Variation in the US  Dollar in relation to the Chilean peso                                                                                                                                                                                  |
| Amortization period                                          | :      |   | Tranche 1 matures on  February 1, 2027: Tranche 2 matures on February 1, 2037 (witha put  pption on February 1, 2009, on which date the holders may redeem 100% of  bonds plus accrued interest).                             |
|                                                         |   |   | Tranches 3 matures on  February 1, 2097.                                                                                                                                                                                                |
| Nominal interest rate                                        | :      |   | Tranche 1: 7.875%  annually                                                                                                                                                                                                                  |
|                                                         |   |   | Tranche 2: 7.325%  annually                                                                                                                                                                                                                  |
|                                                         |   |   | Tranche 3: 8.125%  annually                                                                                                                                                                                                                  |
| Interest Payments                                            | :      |   | Interest will be paid  semi-annually on February 1 and August 1 every year, starting  January 27, 1997. Accrued interest at year end is ThCh$9,443,838 (ThCh$8,140,922  in 2007), and it is presented in current liabilities. |
| ** **                                                   |   |   |                                                                                                                                                                                                                                         |
| **Second  Issuance**                                         |   |   |                                                                                                                                                                                                                                         |
| Issuer                                                       | :      |   | Empresa Nacional de  Electricidad S.A.                                                                                                                                                                                                       |
| Securities issued                                            | :      |   | Yankee bonds registered  in the SEC.                                                                                                                                                                                                         |
| Issuance Value                                               | :      |   | Four hundred million US  Dollars (US$400,000,000)                                                                                                                                                                                            |
| Adjustment                                                   | :      |   | Variation in the US  Dollar in relation to the Chilean peso                                                                                                                                                                                  |
| Principal due                                                | :      |   | Series 1 matures  on July 15, 2008                                                                                                                                                                                                 |
| Nominal interest rate                                        | :      |   | Series 1: 7.75%  annually                                                                                                                                                                                                               |
| Interest Payment                                             | :      |   | Interest will be paid  semi-annually on January 15 and July 15 of each year, starting  January 15, 1999. Accrued interest at year end is ThCh$-(ThCh$7,688,316  in 2007), and it is presented in current liabilities.         |
|                                                         |   |   |                                                                                                                                                                                                                                         |
| This issuance was completely paid at December 31, 2008. |
| ** **                                                   |   |   |                                                                                                                                                                                                                                         |
| **Third  Issuance**                                          |   |   |                                                                                                                                                                                                                                         |
| Issuer                                                       | :      |   | Empresa Nacional de  Electricidad S.A.                                                                                                                                                                                                       |
| Securities issued                                            | :      |   | Yankee bonds registered  in the SEC.                                                                                                                                                                                                         |
| Issuance Value                                               | :      |   | Four hundred million US  Dollars (US$400,000,000).                                                                                                                                                                                           |
| Adjustment                                                   | :      |   | Variation in the US  Dollar in relation to the Chilean peso                                                                                                                                                                                  |
| Principal due                                                | :      |   | Series 1 matures  on April 1, 2009.                                                                                                                                                                                                |
| Nominal interest rate                                        | :      |   | Series 1: 8.50%  annually                                                                                                                                                                                                               |
| Interest Payment                                             | :      |   | Interest will be paid  semi-annually on October 1 and April 1 of each year, starting  October 1, 1999. Accrued interest at year end is ThCh$5,409,825 (ThCh$4,599,462  in 2007), and it is presented in current liabilities.  |

 

F-74

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

As of the datethis report this issuance has been completely paid off.

 
| **Fourth  Issuance**                                                                                                                                                                                                                                                                          |   |   |                                                                                                                                   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|
| Issuer                                                                                                                                                                                                                                                                                        | :      |   | Empresa Nacional de  Electricidad S.A.                                                                                                 |
| Securities issued                                                                                                                                                                                                                                                                             | :      |   | Electronic bonds  expressed in US dollars under “Rule 144A” with SEC registration rights  and “Regulation S”. |
| Amount of issue                                                                                                                                                                                                                                                                               | :      |   | Six hundred million US  dollars (US$600,000,000) divided into:                                                                         |
|                                                                                                                                                                                                                                                                                          |   |   | Tranche 1:  US$400,000,000                                                                                                             |
|                                                                                                                                                                                                                                                                                          |   |   | Tranche 2.:  US$200,000,000                                                                                                            |
| Adjustment                                                                                                                                                                                                                                                                                    | :      |   | Variation in US dollar.                                                                                                                |
| Principal due                                                                                                                                                                                                                                                                                 | :      |   | Tranch 1 of US$400  millions total maturity on August 1, 2013.                                                                    |
|                                                                                                                                                                                                                                                                                          | :      |   | Thanch 2 of US$200  millions total maturity on August 1, 2015.                                                                    |
| Nominal interest rate                                                                                                                                                                                                                                                                         | :      |   | Tranche 1 of US$400  millions 8.35% per year.                                                                                          |
|                                                                                                                                                                                                                                                                                          |   |   | Tranche 2 of US$200  millions 8.625% per year.                                                                                         |
| Payment of interest :      Interest will be paid semi-annually on February 1 and August 1 each  year starting from July 23, 2003. Interest accrued at year-end was  ThCh$13,431,747 (ThCh$11,419,744 in 2007) and it is presented in current  liabilities. |

 

**Repurchaseof Cono Sur Bonds (See note 11k)**

 

Endesa ChileInternacional, a wholly-owned subsidiary of Endesa Chile, made a tender offerin November 2001, for the total or partial purchase, in cash, of the firstissuance of the following bond tranches of Yankee Bonds.

 

·                  Tranch   1: US$230 million at 30 years, maturing in 2027.

·                  Tranche 3: US$200 million at 100 years, maturing in 2097.

 

As a result of the offerwhich expired on November 21, 2001, series 1 and series 3 bonds, forThUS$21,324 and ThUS$134,828, respectively, were purchased, whose nominalvalues amounted to ThUS$24,119 and ThUS$159,584 for each series.

 

As a result of the winding—up of Compañía EléctricaCono Sur S.A. on September 1, 2008, Endesa Chile S.A. was awarded theassets and liabilities, including such repurchase of bonds in its assets.

 

On December 31, 2008 the repurchased bonds werepaid. As a result of the above, at December 31, 2008 bonds and debenturesare shown net of the repurchase.

 

**18.1.10              Subsidiaries of Endesa Chile**

 

Edegel S.A. has madetwenty eight bond issues as of December 31, 2008.

 

Current issues are asfollows:

 
| **Terms of Issuance** |   |   |                                                                                                                                                   |
|-----------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |
| Issuer                | :      |   | Edegel S.A.                                                                                                                                            |
| Securities issued     | :      |   | Marketable bonds in  dollars (10,000 bonds).                                                                                                           |
| Issuance value        | :      |   | Ten million dollars  (US$10,000,000)                                                                                                                   |
| Principal due         | :      |   | Full expiration as of  January 26, 2009                                                                                                           |
| Nominal interest rate | :      |   | 3.75%, per year                                                                                                                                        |
| Interest payment      | :      |   | Interest will be paid  semi-annually. Accrued interest at year end is ThCh$102,097 (ThCh$86,804 in  2007), and it is presented in current liabilities. |

 

F-75

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| Issuer                | :      |   | Edegel S.A.                                                                                                                                                                       |
|-----------------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Securities issued     | :      |   | Marketable bonds in  dollars (10,000 bonds).                                                                                                                                      |
| Issuance value        | :      |   | Ten million US dollars  (US$10,000,000)                                                                                                                                           |
| Principal due         | :      |   | Full expiration as of  July 26, 2009.                                                                                                                                        |
| Nominal interest rate | :      |   | 4.94%, per year                                                                                                                                                                   |
| Interest payment      | :      |   | Interest will be paid  semi-annually. Accrued interest at year end is ThCh$134,445 (ThCh$165,628 in  2007), and it is presented in current liabilities.                           |
|                  |   |   |                                                                                                                                                                              |
| Issuer                | :      |   | Edegel S.A.                                                                                                                                                                       |
| Securities issued     | :      |   | Marketable securities  denominated Peruvian Soles (14,000 bonds).                                                                                                                 |
| Issuance Value        | :      |   | Seventy million  Peruvian Soles (Peruvian Soles 70,000,000)                                                                                                                       |
| Capital amortization  | :      |   | Full expiration as of  June 1, 2009.                                                                                                                                         |
| Nominal interest rate | :      |   | 6.91%                                                                                                                                                                             |
| Interest Payments     | :      |   | Interest will be paid  semi-annually. Accrued interest as of December 31, 2008 amounts to ThCh$ 81,605 (ThCh$72,738 in 2007) and it is presented in current liabilities |
|                  |   |   |                                                                                                                                                                              |
| Issuer                | :      |   | Edegel S.A.                                                                                                                                                                       |
| Securities issued     | :      |   | Marketable Bonds in  Soles (7,000 bonds)                                                                                                                                          |
| Amount issued         | :      |   | Thirty five million  soles (S/.35,000,000)                                                                                                                                        |
| Principal due         | :      |   | Total maturity at  October 21, 2010                                                                                                                                          |
| Nominal interest rate | :      |   | 6.72%                                                                                                                                                                             |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is                                                                                                                                     |
|                  |   |   | ThCh$91,298  (ThCh$81,378 in 2007) and it is presented in current liabilities.                                                                                                    |
|                  |   |   |                                                                                                                                                                              |
| Issuer                | :      |   | Edegel S.A.                                                                                                                                                                       |
| Securities issued     | :      |   | Marketable bonds in  dollars (20,000 bonds).                                                                                                                                      |
| Issuance value        | :      |   | Twenty million US  dollars (US$20,000,000)                                                                                                                                        |
| Principal due         | :      |   | Full expiration as of  November 18, 2012                                                                                                                                     |
| Nominal interest rate | :      |   | 6.06%, per year                                                                                                                                                                   |
| Interest payment      | :      |   | Interest will be paid  semi-annually. Accrued interest at year end is ThCh$90,031 (ThCh$76,544 in  2007), and it is presented in current liabilities.                             |
|                  |   |   |                                                                                                                                                                              |
| Issuer                | :      |   | Edegel S.A.                                                                                                                                                                       |
| Securities issued     | :      |   | Marketable Bonds in  Soles (5,000 bonds)                                                                                                                                          |
| Amount issued         | :      |   | Twenty five million  soles (S/.25,000,000)                                                                                                                                        |
| Principal due         | :      |   | Total maturity at  October 20, 2013                                                                                                                                          |
| Nominal interest rate | :      |   | 6.47%                                                                                                                                                                             |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is                                                                                                                                     |
|                  |   |   | ThCh$63,696  (ThCh$56,775 in 2007) and it is presented in current liabilities.                                                                                                    |
|                  |   |   |                                                                                                                                                                              |
| Issuer                | :      |   | Edegel S.A.                                                                                                                                                                       |
| Securities issued     | :      |   | Marketable Bonds in  Soles (5,000 bonds)                                                                                                                                          |
| Amount issued         | :      |   | Twenty five million  soles (S/.25,000,000)                                                                                                                                        |
| Principal due         | :      |   | Total maturity at  October 21, 2010                                                                                                                                          |
| Nominal interest rate | :      |   | 6.09% per year                                                                                                                                                                    |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is                                                                                                                                     |
|                  |   |   | ThCh$54,003  (ThCh$48,135 in 2007) and it is presented in current liabilities.                                                                                                    |
|                  |   |   |                                                                                                                                                                              |
| Issuer                | :      |   | Edegel S.A.                                                                                                                                                                       |
| Securities issued     | :      |   | Marketable Bonds in  Soles (6,000 bonds)                                                                                                                                          |
| Amount issued         | :      |   | Thirty million soles  (S/.30,000,000)                                                                                                                                             |
| Principal due         | :      |   | Total maturity at  November 27, 2011                                                                                                                                         |

 

F-76

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| Nominal interest rate | :      |   | 6.16% per year                                                                                                                 |
|-----------------------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------|
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is                                                                                  |
|                  |   |   | ThCh$34,293  (ThCh$30,567 in 2007) and it is presented in current liabilities.                                                 |
|                  |   |   |                                                                                                                           |
| Issuer                | :      |   | Edegel S.A.                                                                                                                    |
| Securities issued     | :      |   | Marketable Bonds in  Soles (5,000 bonds)                                                                                       |
| Amount issued         | :      |   | Twenty five million  soles (S/.25,000,000)                                                                                     |
| Principal due         | :      |   | Total maturity at Enero  15, 2014                                                                                              |
| Nominal interest rate | :      |   | 6.16% per year                                                                                                                 |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is                                                                                  |
|                  |   |   | ThCh$142,888  (ThCh$127,362 in 2007) and it is presented in current liabilities.                                               |
|                  |   |   |                                                                                                                           |
| Issuer                | :      |   | Edegel S.A.                                                                                                                    |
| Securities issued     | :      |   | Marketable Bonds in  Soles (5,000 bonds)                                                                                       |
| Amount issued         | :      |   | Twenty five million  soles (S/.25,000,000)                                                                                     |
| Principal due         | :      |   | Total maturity at  Febreary 22, 2011                                                                                           |
| Nominal interest rate | :      |   | 5.91% per year                                                                                                                 |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is                                                                                  |
|                  |   |   | ThCh$106,345  (ThCh$94,790 in 2007) and it is presented in current liabilities.                                                |
|                  |   |   |                                                                                                                           |
| Issuer                | :      |   | Edegel S.A.                                                                                                                    |
| Securities issued     | :      |   | Marketable Bonds in  Soles (5,000 bonds)                                                                                       |
| Amount issued         | :      |   | Twenty five million  soles (S/.25,000,000)                                                                                     |
| Principal due         | :      |   | Total maturity at  June 21, 2022                                                                                          |
| Nominal interest rate | :      |   | 6.31% per year                                                                                                                 |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is                                                                                  |
|                  |   |   | ThCh$7,992 (ThCh$7,123  in 2007) and it is presented in current liabilities.                                                   |
|                  |   |   |                                                                                                                           |
| Issuer                | :      |   | Edegel S.A.                                                                                                                    |
| Issued securities     | :      |   | Negotiable bonds in  dollars (8,000 bonds).                                                                                    |
| Amount issued         | :      |   | Eight million  (US$8,000,000).                                                                                                 |
| Principal due         | :      |   | Total maturity on  July 18, 2011.                                                                                         |
| Nominal interest rate | :      |   | 5.97%% per year                                                                                                                |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is ThCh$136,757 (ThCh$116,271 in 2007) and it is  presented in current liabilities. |
|                  |   |   |                                                                                                                           |
| Issuer                | :      |   | Edegel S.A.                                                                                                                    |
| Issued securities     | :      |   | Negotiable bonds in new  Peruvian soles (5,000 bonds).                                                                         |
| Amount issued         | :      |   | Twenty five million new  Peruvian soles (NS 25,000,000).                                                                       |
| Principal due         | :      |   | Total maturity on  July 03, 2019.                                                                                         |
| Nominal interest rate | :      |   | 6.28% per year                                                                                                                 |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is ThCh$156,392 (ThCh$139,399 in 2007) and it is  presented in current liabilities. |
|                  |   |   |                                                                                                                           |
| Issuer                | :      |   | Edegel S.A.                                                                                                                    |
| Issued securities     | :      |   | Negotiable bonds in new  Peruvian soles (4,000 bonds).                                                                         |
| Amount issued         | :      |   | Twenty million new  Peruvian soles (NS 20,000,000).                                                                            |
| Principal due         | :      |   | Total maturity on  August 31, 2014.                                                                                       |
| Nominal interest rate | :      |   | 6.75% per year.                                                                                                                |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is ThCh$91,153 (ThCh$81,248 in 2007) and it is presented  in current liabilities.   |

 

F-77

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| Issuer                | :      |   | Edegel S.A.                                                                                                                  |
|-----------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------|
| Issued securities     | :      |   | Negotiable bonds in  dollars (5,000 bonds).                                                                                  |
| Amount issued         | :      |   | Twenty five million  dollars (US$25,000,000).                                                                                |
| Principal due         | :      |   | Total maturity on  March 18, 2013.                                                                                      |
| Nominal interest rate | :      |   | 6.50% per year.                                                                                                              |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year end is ThCh$93,263 (ThCh$83,944 in 2007) and it is presented  in current liabilities. |
|                  |   |   |                                                                                                                         |
| Issuer                | :      |   | Edegel S.A.                                                                                                                  |
| Securities issued     | :      |   | Marketable bonds in new  Peruvian soles (5,000 bonds)                                                                        |
| Amount of issue       | :      |   | Twenty five million new  Peruvian soles (25,000,000).                                                                        |
| Principal due         | :      |   | Total maturity on  May 21, 2013.                                                                                        |
| Nominal interest rate | :      |   | 6.44% per year.                                                                                                              |
| Interest payment      | :      |   | Semi-annual. Interest  accrued at year-end is ThCh$35,316 (ThCh$32,286 in 2007) and it is presented  in current liabilities. |
|                  |   |   |                                                                                                                         |
| Issuer                | :      |   | Edegel S.A.                                                                                                                  |
| Securities issued     | :      |   | Marketable bonds in new  Peruvian soles (5,000 bonds)                                                                        |
| Amount of issue       | :      |   | Twenty five million new  Peruvian soles (NS25,000,000).                                                                      |
| Principal due         | :      |   | Total maturity on june  13, 2013.                                                                                            |
| Nominal interest rate | :      |   | 6.63%                                                                                                                        |
| Interest payment      | :      |   | Semi-annual. Interest  per year is ThCh$16,775 (ThCh$14,951 in 2007) and it is presented in current  liabilities.            |

 
| Issuer                                                                   | :      |   | Edegel S.A.                                                                                             |
|--------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------|
| Securities issued                                                        | :      |   | Marketable bonds in  dollars (10,000 bonds)                                                             |
| Amount of issue                                                          | :      |   | Ten million dollars  (US$10,000,000).                                                                   |
| Principal due                                                            | :      |   | Total maturity on  january 25, 2028.                                                                    |
| Nominal interest rate                                                    | :      |   | 6.34%                                                                                                   |
| Interest payment                                                         | :      |   | Semi-annual. Interest  per year is ThCh$173,836 and it is presented in current liabilities.             |
|                                                                     |   |   |                                                                                                    |
| Issuer                                                                   | :      |   | Edegel S.A.                                                                                             |
| Securities issued                                                        | :      |   | Marketable bonds in new  Peruvian soles (5,600 bonds)                                                   |
| Amount of issue                                                          | :      |   | Twenty eight million  and three hundred thousand new Peruvian soles (NS28,300,000).                     |
| Principal due                                                            | :      |   | Total maturity on  March 7, 2014.                                                                  |
| Nominal interest rate                                                    | :      |   | 6.59%                                                                                                   |
| Interest payment                                                         | :      |   | Semi-annual. Interest  accrued at year-end is ThCh$118,646 and it is presented in current  liabilities. |
|                                                                     |   |   |                                                                                                    |
| Issuer                                                                   | :      |   | Edegel S.A.                                                                                             |
| Securities issued                                                        | :      |   | Marketable bonds in US  dollars (9,720 bonds)                                                           |
| Amount of issue                                                          | :      |   | Ten million US dollars  (US$9,720,000).                                                                 |
| Principal due                                                            | :      |   | Total maturity on  November 12, 2014.                                                              |
| Nominal interest rate                                                    | :      |   | 9.00%                                                                                                   |
| Interest payment                                                         | :      |   | Semi-annual. Interest  accrued at year-end is ThCh$74,237 and it is presented in current  liabilities.  |
| ** **                                                               |
| **Emgesa S.A**. has made four bond issues as of  December 31, 2008: |
| ** **                                                               |   |   |                                                                                                    |
| **First  Issuance**                                                      |   |   |                                                                                                    |
| ** **                                                               |   |   |                                                                                                    |
| Issuer                                                                   | :      |   | Emgesa S.A.                                                                                             |
| Securities issued                                                        | :      |   | Marketable bonds in  Colombian pesos                                                                    |
| Issuance Value                                                           | :      |   | $Col 530,000,000,000                                                                                    |

 

F-78

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 
| Principal due                                                                                                                              | :      |   | Maturities between 2004  and 2009 amounting to Col$316,744,675,710                                                                                                            |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Interest nominal rate                                                                                                                      | :      |   | 12,55% per year average  rate                                                                                                                                                 |
| Interest payment                                                                                                                           | :      |   | Interest will be paid  on a quarterly and yearly basis. Accrued interest at year end is  ThCh$2,333,080 (ThCh$2,027,011 in 2007) and it is presented in current  liabilities. |
| ** **                                                                                                                                 |   |   |                                                                                                                                                                          |
| **Third Issuance**                                                                                                                         |   |   |                                                                                                                                                                          |
| ** **                                                                                                                                 |   |   |                                                                                                                                                                          |
| Issuer                                                                                                                                     | :      |   | Emgesa S.A.                                                                                                                                                                   |
| Securities issued                                                                                                                          | :      |   | Marketable bonds in  Colombian pesos                                                                                                                                          |
| Issuance value                                                                                                                             | :      |   | $Col 250,000,000,000                                                                                                                                                          |
| Principal due                                                                                                                              | :      |   | Maturity at  February 23, 2015.                                                                                                                                          |
| Nominal interest rate                                                                                                                      | :      |   | 13.31% trimester  vencido (10.33%)                                                                                                                                            |
| Interest payment                                                                                                                           | :      |   | Annual. Accrued  interest at year end is ThCh$927,020 (ThCh$740,211 in 2007) and it is  presented in current liabilities.                                                     |
| **Fourth Issuance**                                                                                                                        |   |   |                                                                                                                                                                          |
| ** **                                                                                                                                 |   |   |                                                                                                                                                                          |
| Issuer                                                                                                                                     | :      |   | Emgesa S.A.                                                                                                                                                                   |
| Securities issued                                                                                                                          | :      |   | Marketable bonds in  Colombian pesos                                                                                                                                          |
| Issuance value                                                                                                                             | :      |   | $Col 170,000,000,000                                                                                                                                                          |
| Principal due                                                                                                                              | :      |   | Maturity at  February 20, 2017.                                                                                                                                          |
| Nominal interest rate                                                                                                                      | :      |   | 13.42% per year                                                                                                                                                               |
| Interest payment                                                                                                                           | :      |   | Interest will be paid  annually. Accrued interest at year end is ThCh$5,544,669 (ThCh$4,270,761 in  2007) and it is presented in current liabilities.                         |
| ** **                                                                                                                                 |
| **Emgesa S.A**. **(former Central  Hidroeléctrica Betania S.A.) issued bond on November 11, 2004,  completing the first issue.** |
|                                                                                                                                       |
| **First issuance**                                                                                                                         |   |   |                                                                                                                                                                          |
| Issuer                                                                                                                                     | :      |   | Central Hidroeléctrica  Betania S.A. E.S.P.                                                                                                                              |
| Issued securities                                                                                                                          | :      |   | Bonds in Colombian  pesos.                                                                                                                                                    |
| Amount issued                                                                                                                              | :      |   | 400,000,000,000  Colombian pesos.                                                                                                                                             |
| Principal due                                                                                                                              | :      |   | Maturity between 2009  and 2011, for 400,000,000,000 Colombian pesos.                                                                                                         |
| Nominal interest rate                                                                                                                      | :      |   | 14,28% per year                                                                                                                                                               |
| Interest payment                                                                                                                           | :      |   | Quarterly. Interest  accrued at year end is ThCh$2,260,188 (ThCh$1,627,978 in 2007) and it is  presented in current liabilities.                                              |

 

Deduction of thebond issuance of Enersis and subsidiaries has been deferred in the same periodas the respective issuance. The long-term deferred value at December 31,2007 is ThCh$14,247,168 and ThCh$13,776,034 in 2008 and it is presented inOther Long Term Assets (Note 14). The balance for deductions in short term bondplacements classified under Other current assets is ThCh$1,098,199(ThCh$1,096,633 in 2007) (Note 9).

 

F-79

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**Note 19.**            Accrued Expenses

** **

**(a)****                     ****Short-term accruals:**

** **

Accrued expenses includedin current liabilities are as follows:

 
| ** **                                   | ** ** | **As of December 31,** | ** ** |
|----------------------------------------------|------------|-----------------------------|------------|
| ** **                                   | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                                   | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
| ** **                                   | ** ** | ** **                  | ** ** | ** ** | ** ** |
| Bonus and other employee benefits            |       | 45,943,090                  |       | 54,960,460 |   |
| Litigation and other contingencies           |       | 12,199,442                  |       | 26,417,549 |   |
| Post-retirement benefits- local subsidiaries |       | 1,266,118                   |       | 1,296,807 |   |
| Suppliers and services                       |       | 17,145,982                  |       | 13,367,018 |   |
| Other                                        |       | 5,193,436                   |       | 4,175,192 |   |
|                                         |       |                        |       |   |   |
| Total                                        |       | 81,748,068                  |       | 100,217,026 |   |

** **

**(b)****                     ****Long-term accruals:**

 
| ** **                                                  | ** ** | **As of December 31,** | ** ** |
|-------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                  | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                                                  | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                                        |       |                        |       |   |   |
| Post-retirement benefits -local subsidiaries                |       | 16,923,300                  |       | 15,110,559 |   |
| Employee and retired personnel benefits (Ampla-Coelce)      |       | 47,326,709                  |       | 59,628,584 |   |
| Severance indemnities                                       |       | 17,386,136                  |       | 18,249,759 |   |
| Legal, labor and tax contingencies (Ampla, Coelce and Cien) |       | 174,724,468                 |       | 155,211,626 |   |
| Post-retirement benefits-foreign subsidiaries               |       | 76,623,763                  |       | 81,651,563 |   |
| Regulatory contingencies (Brazil)(1)                        |       | 33,572,287                  |       | 29,960,946 |   |
| Other                                                       |       | 1,839,579                   |       | 1,640,598 |   |
|                                                        |       |                        |       |   |   |
| Total                                                       |       | 368,396,242                 |       | 361,453,635 |   |

 

----

(1) The provision ofBrazilian subsidiary Endesa Fortaleza (CGTF) covers the risk of a sanction bythe regulatory agency (ANEEL, Brazilian Electricity Regulatory Agency) that hasbeen calculated based on the opinion of our legal consultants and is related tothe sale of electric energy higher than the thermal energy generation capacityauthorized for Endesa Fortaleza by ANEEL in the January-December 2004period (see note 30).

 

In 2008, ThCh$1,767,324(ThCh$1,889,242 in 2007) in uncollectible debts were written off.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**Note 20.**            Severance Indemnities

** **

Long-term accrualsinclude employee severance indemnities, calculated in accordance with thepolicy described in Note 2n. An analysis of the changes in the accruals in eachyear is as follows:

 
| ** **                           | ** ** | **As of December 31,** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|
| ** **                           | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                           | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                 |       |                        |       |   |   |
| Opening balance as of January 1 |       | 17,097,674                  |       | 17,386,136 |   |
| Increase in accrual                  |       | 2,284,665                   |       | 2,065,362 |   |
| Transfer to short-term               |       | (259,905                    | )          | (180,444 | ) |
| Payments during the year             |       | (1,736,298                  | )          | (1,021,295 | ) |
|                                 |       |                        |       |   |   |
| Total                                |       | 17,386,136                  |       | 18,249,759 |   |

 

**Note 21.**            Minority Interest

** **

**(a)****                     **Minority shareholders’ participation in theshareholders’ equity of the Company’s subsidiaries is as follows:

 
| ** **                                                | ** ** | **As of  December 31, 2007** | ** ** | **As of  December 31, 2008** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|
| **Company**                                               | ** ** | **Equity**                        | ** ** | **Participation**                 | ** ** | **Total** | ** ** | **Equity** | ** ** | **Participation** | ** ** | **Total** | ** ** |
| ** **                                                | ** ** | **ThCh$**                         | ** ** | **%**                             | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **%** | ** ** | **ThCh$** | ** ** |
| ** **                                                | ** ** | ** **                        | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Soc. Agrícola  Pastos Verdes Ltda.                   |       | 83,591,397                        |       | 45.00                             | %          | 37,616,128 |   | 57,724,016 |   | 45.00 | % | 25,975,808 |   |
| Aguas Santiago Poniente S.A.                              |       | 5,288,574                         |       | 21.12                             | %          | 1,117,188 |   | 5,300,957 |   | 21.12 | % | 1,119,804 |   |
| Ampla Energía e  Servicios S.A.                      |       | 484,504,679                       |       | 8.07                              | %          | 39,084,539 |   | 730,441,961 |   | 8.07 | % | 58,924,069 |   |
| Ampla  Investimentos                                      |       | 41,969,135                        |       | 8.07                              | %          | 3,385,611 |   | 72,489,581 |   | 8.07 | % | 5,847,667 |   |
| Cam Argentina  S.A.                                       |       | 310,683                           |       | 0.001                             | %          | 4 |   | (709,381 | ) | 0.001 | % | (29,802 | ) |
| Cam Colombia S.A.                                         |       | 3,980,429                         |       | 0.0001                            | %          | 2 |   | 4,896,847 |   | 0.0001 | % | 3 |   |
| Cam Perú S.A.                                        |       | 5,713,651                         |       | 0.0001                            | %          | 4 |   | 8,282,152 |   | 0.0001 | % | 6 |   |
| Chilectra S.A. (ex Elesur S.A.)                           |       | 826,566,899                       |       | 0.92                              | %          | 7,516,626 |   | 1,067,663,787 |   | 0.92 | % | 9,714,462 |   |
| Cía. Peruana de  Electricidad S.A.                   |       | 18,270,739                        |       | 49.00                             | %          | 8,952,661 |   | 24,000,334 |   | 49.00 | % | 11,760,164 |   |
| Codensa S.A.                                              |       | 484,987,336                       |       | 78.19                             | %          | 379,189,308 |   | 608,343,311 |   | 78.19 | % | 475,635,676 |   |
| Companhia Energetica Do Ceara - Coelce                    |       | 450,340,605                       |       | 41.14                             | %          | 185,255,869 |   | 604,924,799 |   | 41.14 | % | 248,846,914 |   |
| Compañía de  Transmisión del Mercosur S.A. |       | 12,593,383                        |       | 0.01                              | %          | 1,102 |   | 14,276,200 |   | 0.01 | % | 1,482 |   |
| Constructora y  Proyectos Los Maitenes S.A.               |       | (1,657,744                        | )          | 45.00                             | %          | (745,986 | ) | (6,145 | ) | 45.00 | % | (2,765 | ) |
| Edegel S.A.                                               |       | 443,276,162                       |       | 44.56                             | %          | 197,512,656 |   | 542,604,216 |   | 45.80 | % | 248,514,901 |   |
| Edelnor S.A.                                              |       | 121,684,568                       |       | 40.00                             | %          | 48,673,827 |   | 160,493,646 |   | 40.00 | % | 64,197,458 |   |
| Edesur S.A.                                               |       | 488,261,141                       |       | 34.11                             | %          | 166,539,059 |   | 587,618,664 |   | 34.11 | % | 200,433,355 |   |
| Emgesa S.A.                                               |       | 747,460,237                       |       | 73.13                             | %          | 546,609,664 |   | 945,683,872 |   | 73.13 | % | 691,540,911 |   |
| Empresa Eléctrica  Pangue S.A.                       |       | 128,603,931                       |       | 5.02                              | %          | 6,451,030 |   | 150,796,031 |   | 5.02 | % | 7,564,231 |   |
| Endesa Argentina  S.A.                                    |       | 146,354,700                       |       | 0.01                              | %          | 14,635 |   | 167,765,147 |   | 0.01 | % | 16,777 |   |
| Endesa Brasil  S.A.                                       |       | 1,032,532,073                     |       | 28.48                             | %          | 294,090,387 |   | 1,405,498,495 |   | 28.48 | % | 400,319,856 |   |
| Endesa Cachoeira  S.A                                     |       | 368,605,777                       |       | 0.39                              | %          | 1,452,749 |   | 392,003,814 |   | 0.39 | % | 1,544,965 |   |
| Endesa. Costanera  S.A.                                   |       | 129,922,855                       |       | 30.23                             | %          | 39,282,055 |   | 146,468,784 |   | 30.23 | % | 44,284,702 |   |
| Endesa S.A.                                               |       | 2,051,922,811                     |       | 40.02                             | %          | 821,160,396 |   | 2,364,523,995 |   | 40.02 | % | 946,260,479 |   |
| Generandes Perú  S.A.                                |       | 225,066,542                       |       | 40.37                             | %          | 90,857,157 |   | 272,448,080 |   | 39.01 | % | 106,259,110 |   |
| Hidroeléctrica El  Chocón S.A.                  |       | 185,335,604                       |       | 32.33                             | %          | 59,911,588 |   | 207,232,574 |   | 32.33 | % | 66,990,002 |   |
| Hidroinvest S.A.                                          |       | 112,899,066                       |       | 3.91                              | %          | 4,409,161 |   | 131,448,184 |   | 3.91 | % | 5,133,577 |   |
| Inversiones  Distrilima S.A.                              |       | 73,033,922                        |       | 31.61                             | %          | 23,086,024 |   | 95,923,696 |   | 31.61 | % | 30,321,480 |   |
| Pehuenche S.A.                                            |       | 282,546,801                       |       | 7.35                              | %          | 20,767,190 |   | 304,930,787 |   | 7.35 | % | 22,412,413 |   |
| Soc. Agrícola de  Cameros Ltda.                      |       | 8,455,718                         |       | 42.50                             | %          | 3,593,680 |   | 8,371,967 |   | 42.50 | % | 3,558,086 |   |
|                                                      |       |                              |       |                              |       |   |   |   |   |   |   |   |   |
| Total                                                     |       |                              |       |                              |       | 2,985,784,314 |   |   |   |   |   | 3,677,145,791 |   |

 

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** **

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes tothe Consolidated Financial Statements – (Continued)**

** **

**(b)**                      Minority shareholders’ participation inthe net (income) or loss of the Company’s subsidiaries is as follows:

 
| ** **                                               | ** ** | **As of  December 31, 2006** | ** ** | **As of  December 31, 2007** | ** ** | **As of  December 31, 2008** | ** ** |
|----------------------------------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|
| **Company**                                              | ** ** | **Net  income**                   | ** ** | **Participation**                 | ** ** | **Total**                         | ** ** | **Net  income** | ** ** | **Participation** | ** ** | **Total** | ** ** | **Net  income** | ** ** | **Participation** | ** ** | **Total** | ** ** |
| ** **                                               | ** ** | **ThCh$**                         | ** ** | **%**                             | ** ** | **ThCh$**                         | ** ** | **ThCh$** | ** ** | **%** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **%** | ** ** | **ThCh$** | ** ** |
| ** **                                               | ** ** | ** **                        | ** ** | ** **                        | ** ** | ** **                        | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Soc. Agrícola  Pastos Verdes Ltda.                  |       | (5,742,067                        | )          | 45.00                             | %          | (2,583,930                        | )          | (6,781,495 | ) | 45.00 | % | (3,051,673 | ) | 69,929 |   | 45.00 | % | 31,468 |   |
| Aguas Santiago Poniente S.A.                             |       | 117,144                           |       | 41.70                             | %          | 48,850                            |       | (65,889 | ) | 21.12 | % | (13,919 | ) | (12,383 | ) | 21.12 | % | (2,616 | ) |
| Ampla Energía e  Servicios S.A.                     |       | (29,405,435                       | )          | 8.07                              | %          | (2,372,110                        | )          | (6,778,980 | ) | 8.07 | % | (546,854 | ) | (174,161,380 | ) | 8.07 | % | (14,049,436 | ) |
| Ampla  Investimentos                                     |       | (4,862,569                        | )          | 8.07                              | %          | (392,259                          | )          | (2,818,702 | ) | 8.067 | % | (227,383 | ) | (28,558,721 | ) | 8.067 | % | (2,303,805 | ) |
| Cam Argentina  S.A.                                      |       | 25,286                            |       | 0.001                             | %          | —                            |       | 12,393 |   | 0.0010 | % | — |   | 1,074,801 |   | 0.0010 | % | 28,999 |   |
| Cam Brasil S.A.                                          |       | 774,280                           |       | 0.0001                            | %          | 1                                 |       | — |   | — |   | — |   | — |   | — |   | — |   |
| Cam Colombia S.A.                                        |       | (886,065                          | )          | 0.001                             | %          | (12                               | )          | — |   | — |   | — |   | — |   | — |   | — |   |
| Cam Perú S.A.                                       |       | —                            |       | —                            |       | —                            |       | (1,312,623 | ) | 0.0001 | % | (1 | ) | (1,561,834 | ) | 0.0001 | % | (1 | ) |
| Central Hidroeléctrica Betania S.A.                 |       | (1,185,578                        | )          | 0.01                              | %          | (72                               | )          | — |   | — |   | — |   | — |   | — |   | — |   |
| Chilectra S.A. (ex Elesur S.A.)                          |       | (271,388,298                      | )          | 0.92                              | %          | (1,544,485                        | )          | (133,200,954 | ) | 0.92 | % | (1,211,301 | ) | (257,768,073 | ) | 0.92 | % | (2,351,266 | ) |
| Cía. Peruana de  Electricidad S.A.                  |       | (1,463,591                        | )          | 49.00                             | %          | (717,160                          | )          | (1,635,628 | ) | 49.00 | % | (801,457 | ) | (6,936,775 | ) | 49.00 | % | (3,399,020 | ) |
| Codensa S.A.                                             |       | (101,930,306                      | )          | 78.19                             | %          | (79,694,621                       | )          | (73,846,383 | ) | 78.19 | % | (57,737,093 | ) | (170,196,116 | ) | 78.19 | % | (133,068,521 | ) |
| Companhia Energetica Do Ceara - Coelce                   |       | (85,169,756                       | )          | 41.14                             | %          | (35,036,141                       | )          | (47,009,243 | ) | 41.14 | % | (19,338,116 | ) | (167,566,014 | ) | 41.14 | % | (68,931,354 | ) |
| Compañía de  Transmisión del Mercosur S.A |       | (2,271,647                        | )          | 0.01                              | %          | (395                              | )          | (1,342,852 | ) | 0.01 | % | (68 | ) | (535,967 | ) | 0.01 | % | (184 | ) |
| Constructora y  Proyectos Los Maitenes S.A.              |       | (338,778                          | )          | 45.00                             | %          | (152,450                          | )          | (89,811 | ) | 45.00 | % | (40,415 | ) | (1,651,600 | ) | 45.00 | % | (743,220 | ) |
| Edegel S.A.                                              |       | (10,102,858                       | )          | 44.56                             | %          | (4,501,579                        | )          | (4,141,590 | ) | 44.56 | % | (1,845,388 | ) | (42,835,262 | ) | 45.80 | % | (19,606,857 | ) |
| Edelnor S.A.                                             |       | (9,906,014                        | )          | 40.00                             | %          | (3,962,405                        | )          | (11,664,878 | ) | 40.00 | % | (4,665,951 | ) | (47,327,767 | ) | 40.00 | % | (18,931,107 | ) |
| Edesur S.A.                                              |       | 27,357,380                        |       | 34.11                             | %          | 9,329,767                         |       | (22,327,770 | ) | 34.11 | % | (7,614,210 | ) | (13,332,549 | ) | 34.11 | % | (4,549,844 | ) |
| Emgesa S.A.                                              |       | (73,270,271                       | )          | 76.55                             | %          | (56,086,121                       | )          | (55,552,308 | ) | 73.13 | % | (50,415,259 | ) | (185,177,674 | ) | 73.13 | % | (135,413,050 | ) |
| Empresa Eléctrica  Pangue S.A.                      |       | (45,553,449                       | )          | 5.01                              | %          | (2,285,052                        | )          | (37,176,490 | ) | 5.02 | % | (1,864,847 | ) | (59,061,346 | ) | 5.02 | % | (2,962,635 | ) |
| Endesa Argentina S.A                                     |       | (2,822,942                        | )          | 0.01                              | %          | 282                               |       | (41,777,734 | ) | 0.01 | % | (4,177 | ) | 2,825,294 |   | 0.01 | % | 283 |   |
| Endesa Brasil S.A..                                      |       | (107,864,793                      | )          | 28.48                             | %          | (30,722,547                       | )          | (118,756,285 | ) | 28.48 | % | (33,824,693 | ) | (287,355,211 | ) | 28.48 | % | (81,845,693 | ) |
| Endesa Cachoeira  S.A.                                   |       | (40,554,259                       | )          | 0.39                              | %          | (159,833                          | )          | (67,543,374 | ) | 0.39 | % | (266,202 | ) | (90,027,145 | ) | 0.39 | % | (354,815 | ) |
| Endesa Costanera  S.A.                                   |       | 7,236,116                         |       | 35.74                             | %          | 2,585,819                         |       | 12,125,856 |   | 30.23 | % | 3,666,242 |   | 6,344,711 |   | 30.23 | % | 1,918,318 |   |
| Endesa Chile                                             |       | (221,684,873                      | )          | 40.02                             | %          | (88,716,238                       | )          | (209,566,365 | ) | 40.02 | % | (83,866,507 | ) | (442,591,967 | ) | 40.02 | % | (177,121,183 | ) |
| Generandes Perú  S.A.                               |       | (7,453,707                        | )          | 40.37                             | %          | (3,008,988                        | )          | (3,827,262 | ) | 40.37 | % | (1,545,029 | ) | (24,148,892 | ) | 39.01 | % | (9,433,768 | ) |
| Hidroeléctrica El  Chocón S.A.                 |       | (16,161,552                       | )          | 34.81                             | %          | (5,625,836                        | )          | (9,599,349 | ) | 32.33 | % | (3,115,153 | ) | 2,137,199 |   | 32.33 | % | 690,871 |   |
| Hidroinvest S.A.                                         |       | (7,812,532                        | )          | 30.07                             | %          | (2,349,228                        | )          | (22,768,646 | ) | 3.91 | % | (1,152,299 | ) | (467,468 | ) | 3.91 | % | (18,256 | ) |
| Inversiones  Distrilima S.A.                             |       | (5,673,095                        | )          | 31.61                             | %          | (1,793,265                        | )          | (6,933,457 | ) | 31.61 | % | (2,191,666 | ) | (27,803,541 | ) | 31.61 | % | (8,788,700 | ) |
| Pehuenche S.A.                                           |       | (79,136,500                       | )          | 7.35                              | %          | (5,816,533                        | )          | (151,089,268 | ) | 7.35 | % | (11,105,062 | ) | (215,800,169 | ) | 7.35 | % | (15,861,312 | ) |
| Soc. Agrícola de  Cameros Ltda.                     |       | 46,739                            |       | 42.50                             | %          | 19,864                            |       | 160,143 |   | 42.50 | % | 68,060 |   | 83,752 |   | 42.50 | % | 35,595 |   |
| Túnel El Melón  S.A.                           |       | (2,065,788                        | )          | 0.05                              | %          | (1,031                            | )          | — |   | — |   | — |   | — |   | — |   | — |   |
|                                                     |       |                              |       |                              |       |                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                    |       |                              |       |                              |       | (315,537,708                      | )          |   |   |   |   | (282,710,421 | ) |   |   |   |   | (697,031,109 | ) |

 

F-82

----

Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**Note 22.**            Shareholders’ Equity

** **

**(a)****                     ****Dividends**

 
| **Dividend  Number** | ** ** | **Payment  Date**  | ** ** | **Historical  value ($)** | ** ** | **Type of  dividend** | ** ** |
|----------------------|------------|--------------------|------------|---------------------------|------------|-----------------------|------------|
| ** **           | ** ** | ** **         | ** ** | ** **                | ** ** | ** **            | ** ** |
| 75                   |       | May 2007      |       | 4.890                     |       | Final 2006            |       |
| 76                   |       | December 2007 |       | 0.530                     |       | Interim 2007          |       |
| 77                   |       | April 2008    |       | 3.410                     |       | Final 2008            |       |
| 78                   |       | December 2008 |       | 1.540                     |       | Interim 2008          |       |

 

**(b)****                     ****Number of shares**

 
| ** **               | ** ** | **As of December 31, 2008** | ** ** |
|--------------------------|------------|----------------------------------|------------|
| ** **               | ** ** | **2006  Shares**                 | ** ** | **2007  Shares** | ** ** | **2008  Shares** | ** ** |
|                     |       |                             |       |   |   |   |   |
| Capital stock authorized |       | 32,651,166,465                   |       | 32,651,166,465 |   | 32,651,166,465 |   |

 

**(c)****                     ****Subscribed and paid in capital is asfollows:**

 
| ** ** | ** ** | **As of December 31,** | ** ** |
|------------|------------|-----------------------------|------------|
| ** ** | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** ** | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|       |       |                        |       |   |   |
|       |       | 2,824,882,834               |       | 2,824,882,834 |   |

 

**(d)****                     ****Other reserves**

** **

Other reserves at December 31,2008 are composed of the following:

 
| ** **                                                           | ** ** | **Initial balance  at January 1,  2008** | ** ** | **Reserve for  the period** | ** ** | **Final balance at  December 31,  2008** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------|------------|-----------------------------------------------|------------|
| ** **                                                           | ** ** | **ThCh$**                                     | ** ** | **ThCh$**                   | ** ** | **ThCh$**                                     | ** ** |
|                                                                 |       |                                          |       |                        |       |                                          |       |
| Reserve for entities using remeasurement method                      |       | (46,232,634                                   | )          | 11,489,022                  |       | (34,743,612                                   | )          |
| Reserve for cumulative translation adjustment conversion differences |       | (372,746,516                                  | )          | 123,179,289                 |       | (249,567,227                                  | )          |
| Reserve for Technical Bulletin No. 72                           |       | (55,271,005                                   | )          | 13,374                      |       | (55,257,631                                   | )          |
|                                                                 |       |                                          |       |                        |       |                                          |       |
| Total                                                                |       | (474,250,155                                  | )          | 134,681,685                 |       | (339,568,470                                  | )          |

 

F-83

----

Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes tothe Consolidated Financial Statements – (Continued)**

 

Detail of changes in thereserve for cumulative translation adjustment is as follows:

 
| ** **                        | ** ** | **Initial  balance at  January 1, 2007** | ** ** | **Reserve  for assets** | ** ** | **Reserve for  liabilities** | ** ** | **Reserve for  the period** | ** ** | **Final  balance at  December 31, 2007** | ** ** |
|-----------------------------------|------------|-----------------------------------------------|------------|-------------------------|------------|------------------------------|------------|-----------------------------|------------|-----------------------------------------------|------------|
| ** **                        | ** ** | **ThCh$**                                     | ** ** | **ThCh$**               | ** ** | **ThCh$**                    | ** ** | **ThCh$**                   | ** ** | **ThCh$**                                     | ** ** |
|                              |       |                                          |       |                    |       |                         |       |                        |       |                                          |       |
| Cumulative translation adjustment |       | (247,387,977                                  | )          | (233,688,951            | )          | 108,330,413                  |       | (125,358,538                | )          | (372,746,515                                  | )          |
|                              |       |                                          |       |                    |       |                         |       |                        |       |                                          |       |
| Total                             |       | (247,387,977                                  | )          | (233,688,951            | )          | 108,330,413                  |       | (125,358,538                | )          | (372,746,515                                  | )          |

 
| ** **                        | ** ** | **Initial  balance at  January 1, 2008** | ** ** | **Reserve  for assets** | ** ** | **Reserve for  liabilities** | ** ** | **Reserve for  the period** | ** ** | **Final  balance at  December 31, 2008** | ** ** |
|-----------------------------------|------------|-----------------------------------------------|------------|-------------------------|------------|------------------------------|------------|-----------------------------|------------|-----------------------------------------------|------------|
| ** **                        | ** ** | **ThCh$**                                     | ** ** | **ThCh$**               | ** ** | **ThCh$**                    | ** ** | **ThCh$**                   | ** ** | **ThCh$**                                     | ** ** |
|                              |       |                                          |       |                    |       |                         |       |                        |       |                                          |       |
| Cumulative translation adjustment |       | (372,746,516                                  | )          | 256,845,744             |       | (133,666,455                 | )          | 123,179,289                 |       | (249,567,227                                  | )          |
|                              |       |                                          |       |                    |       |                         |       |                        |       |                                          |       |
| Total                             |       | (372,746,516                                  | )          | 256,845,744             |       | (133,666,455                 | )          | 123,179,289                 |       | (249,567,227                                  | )          |

 

The detail of the reservefor cumulative translation adjustment is as follows:

 
| ** **                                         | ** ** | **As of December 31,** | ** ** |
|----------------------------------------------------|------------|-----------------------------|------------|
| ** **                                         | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                                         | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                               |       |                        |       |   |   |
| Edesur S.A.                                        |       | (67,877,564                 | )          | (36,684,028 | ) |
| Distrilec Inversora S.A.                           |       | (42,845,410                 | )          | (27,841,345 | ) |
| Inversiones Distrilima S.A.                        |       | (17,923,190                 | )          | (13,680,347 | ) |
| Cía. Peruana de Electricidad S.A.             |       | (3,110,216                  | )          | (1,851,539 | ) |
| Ampla Energia e Serviços  S.A.                |       | (69,061,169                 | )          | (54,610,387 | ) |
| Ampla Investimentos e  Serviços S.A.          |       | 627,137                     |       | 3,393,439 |   |
| Endesa Brasil S.A.                                 |       | (62,584,495                 | )          | (39,151,307 | ) |
| Codensa S.A.                                       |       | (61,102,146                 | )          | (48,327,318 | ) |
| Investluz S.A.                                     |       | (7,322,057                  | )          | (7,322,057 | ) |
| Central Geradora  Termelétrica Fortaleza S.A. |       | (7,515,458                  | )          | (7,515,458 | ) |
| Synapsis Colombia S.A.                             |       | (2,364,226                  | )          | (1,079,915 | ) |
| Endesa Market Place, S.S.                          |       | 465,417                     |       | 465,417 |   |
| Endesa Argentina S.A.                              |       | (7,526,282                  | )          | (3,399,675 | ) |
| Ingendesa Do Brasil Ltda.                          |       | (271,393                    | )          | (231,169 | ) |
| Endesa Costanera S.A.                              |       | (1,836,514                  | )          | (627,988 | ) |
| Enigesa S.A.                                       |       | —                      |       | 63,325 |   |
| Edegel S.A.                                        |       | —                      |       | 4,900,812 |   |
| Cía. Eléctrica Cono Sur S.A.             |       | (18,907,050                 | )          | — |   |
| Emgesa S.A.                                        |       | (969,869                    | )          | (12,224,449 | ) |
| Gasatacama S.A.                                    |       | (188                        | )          | 16 |   |
| Electrogas S.A.                                    |       | (309                        | )          | (146 | ) |
| Inversiones Electrogas S.A.                        |       | (444,451                    | )          | (69,512 | ) |
| Hidroeléctrica El Chocón S.A.            |       | 117,399                     |       | (41,945 | ) |
| Hidroinvest S.A.                                   |       | (1,834,415                  | )          | (118,198 | ) |
| Southern Cone Power Arg. S.A.                      |       | (432,509                    | )          | 73,300 |   |
| Endesa Chile Internacional                         |       | —                      |       | (3,659,196 | ) |
| Synapsis Argentina Ltda.                           |       | (27,557                     | )          | (27,557 | ) |
|                                               |       |                        |       |   |   |
| Total                                              |       | (372,746,515                | )          | (249,567,227 | ) |

 

F-84

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Table ofContents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Note 23.**            Other Income and Expenses

** **

a.                   The detail of other non-operating income is asfollows:

 
| ** **                                                  | ** ** | **Year ended December 31,** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                  | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                  | ** ** | **ThCh$**                        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                        |       |                             |       |   |   |   |   |
| Gain on sale of property, plant and equipment and materials |       | 27,523,018                       |       | 3,598,306 |   | 8,564,335 |   |
| Gain on investments sales                                   |       | —                           |       | 3,351,925 |   | — |   |
| Services - projects and inspections                         |       | 590,160                          |       | 231,726 |   | 1,027,091 |   |
| Penalties charged to contractors suppliers and clients      |       | 3,655,116                        |       | 4,862,909 |   | 6,366,887 |   |
| CDEC-SING power settlement gain                             |       | 10,573,013                       |       | 7,497,512 |   | 20,927,728 |   |
| Index UFIR Brazilian subsidiaries                           |       | 6,312,098                        |       | 8,919,159 |   | — |   |
| Cost recoveries                                             |       | 5,802,200                        |       | 9,971,772 |   | 5,217,441 |   |
| Reversal of contingencies provision and other provisions    |       | 34,967,156                       |       | 83,944,730 |   | 42,450,066 |   |
| Effect of application of BT 64                              |       | 13,676,423                       |       | 42,935,004 |   | 290,530,734 |   |
| Cemsa contract liquidation                                  |       | —                           |       | 8,869,387 |   | — |   |
| Edesur ́s tariff adjustment (2)                         |       | —                           |       | 30,279,029 |   | — |   |
| Indemnities and commissions                                 |       | 10,420,315                       |       | 2,861,313 |   | 2,523,011 |   |
| Dividend from investees                                     |       | 1,078,440                        |       | 1,490,291 |   | 2,118,514 |   |
| Provisión de Subtransmisión (1)                   |       | —                           |       | — |   | 40,575,000 |   |
| Other                                                       |       | 9,192,479                        |       | 8,254,584 |   | 10,655,917 |   |
|                                                        |       |                             |       |   |   |   |   |
| Total                                                       |       | 123,790,418                      |       | 217,067,647 |   | 430,956,724 |   |

 

----

(1)              See Note 35

(2)              See Note 5 (1)

 

b.     Other non-operating expenses are as follows:

 
| ** **                                           | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                           | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                           | ** ** | **ThCh$**                        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| ** **                                           | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Loss on sale of fixed assets and materials           |       | (2,177,724                       | )          | (1,276,635 | ) | (1,649,346 | ) |
| Obsolescence provision and write-off of fixed assets |       | (15,015,183                      | )          | (7,983,195 | ) | (17,611,771 | ) |
| Effect of application of BT 64                       |       | (55,152,975                      | )          | (209,126,921 | ) | (94,613,472 | ) |
| Contingencies and litigation                         |       | (40,066,373                      | )          | (66,081,242 | ) | (68,148,184 | ) |
| SIC power settlement loss                            |       | (12,305,869                      | )          | (9,262,852 | ) | (28,883,052 | ) |
| Pension plan expense                                 |       | (5,042,613                       | )          | (6,942,890 | ) | (6,489,612 | ) |
| Index UFIR Brazilian subsidiaries                    |       | (3,816,661                       | )          | (2,423,854 | ) | (2,971,858 | ) |
| Penalties and fines                                  |       | (24,564,060                      | )          | (19,119,269 | ) | (13,091,632 | ) |
| Other taxes Colombia                                 |       | (5,792,279                       | )          | (26,021,628 | ) | (16,047,815 | ) |
| Other taxes Argentina and Brazil                     |       | (10,721,911                      | )          | (10,021,113 | ) | (9,793,947 | ) |
| Other taxes Peru                                     |       | (3,760,305                       | )          | (1,100,635 | ) | (8,073,148 | ) |
| Energy efficiency Brazilian subsidiaries             |       | (14,321,495                      | )          | — |   | — |   |
| Write-off of Copel and other contracts (Brazil)      |       | (35,693,617                      | )          | — |   | — |   |
| Other Taxes Chile                                    |       | —                           |       | — |   | (16,158,598 | ) |
| Other                                                |       | (16,335,461                      | )          | (20,391,632 | ) | (18,523,859 | ) |
|                                                 |       |                             |       |   |   |   |   |
| Total                                                |       | (244,766,526                     | )          | (379,751,866 | ) | (302,056,294 | ) |

 

F-85

----

Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Note 24.**            Price-level Restatement

** **

The (charge) credit toincome for price-level restatement is as follows:

 
| ** **                                                    | ** ** | ** ** | ** ** | **Year ended December 31,** | ** ** |
|---------------------------------------------------------------|------------|------------|------------|----------------------------------|------------|
| ** **                                                    | ** ** | **Index**  | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                    | ** ** | ** ** | ** ** | **ThCh$**                        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| **Assets**                                                    | ** ** | ** ** | ** ** | ** **                       | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                          |       |       |       |                             |       |   |   |   |   |
| Inventory                                                     |       | I.P.C.     |       | 2,795,089                        |       | 5,420,995 |   | 5,473,124 |   |
| Current assets                                                |       | I.P.C.     |       | 10,657,699                       |       | 16,326,224 |   | 23,635,727 |   |
|                                                          |       | U.F.       |       | 542,335                          |       | 196,616 |   | 197,883 |   |
| Property, plant and equipment                                 |       | I.P.C.     |       | 56,615,239                       |       | 202,567,286 |   | 249,295,009 |   |
| Accounts receivable from subsidiaries                         |       | I.P.C.     |       | 2,135,526                        |       | 5,430,388 |   | 9,904,204 |   |
| Investment in subsidiaries                                    |       | I.P.C.     |       | 2,428,901                        |       | 9,288,942 |   | 5,268,412 |   |
| Amortization of goodwill                                      |       | I.P.C.     |       | 16,239,795                       |       | 48,530,723 |   | 53,164,534 |   |
| Other assets                                                  |       | I.P.C.     |       | 62,784,954                       |       | 223,707,409 |   | 219,461,265 |   |
|                                                          |       | U.F.       |       | 5,587,619                        |       | 17,598,322 |   | 4,576,287 |   |
| Price-level restatement of the income statement               |       | I.P.C.     |       | 12,659,712                       |       | 79,891,104 |   | 102,232,182 |   |
|                                                          |       |       |       |                             |       |   |   |   |   |
| Net credits – assets                                     |       |       |       | 172,446,869                      |       | 608,958,009 |   | 673,208,627 |   |
|                                                          |       |       |       |                             |       |   |   |   |   |
| **Liabilities and Shareholders’ equity**                 |       |       |       |                             |       |   |   |   |   |
|                                                          |       |       |       |                             |       |   |   |   |   |
| Shareholders equity                                           |       | I.P.C.     |       | (62,888,063                      | )          | (219,414,159 | ) | (250,122,727 | ) |
| Current and long-term liabilities                             |       | I.P.C.     |       | (50,112,689                      | )          | (175,555,379 | ) | (172,538,447 | ) |
|                                                          |       | U.F.       |       | (23,867,564                      | )          | (63,928,534 | ) | (65,067,732 | ) |
| Minority interest                                             |       | I.P.C.     |       | (15,709,446                      | )          | (55,684,682 | ) | (77,317,869 | ) |
| Non-monetary liabilities                                      |       | I.P.C.     |       | (402,563                         | )          | (1,484,817 | ) | (28,424 | ) |
| Price-level restatement of the income statement               |       | I.P.C.     |       | (18,043,391                      | )          | (104,655,528 | ) | (132,236,096 | ) |
|                                                          |       |       |       |                             |       |   |   |   |   |
| Net charge-liabilities and shareholders’ equity accounts |       |       |       | (171,023,716                     | )          | (620,723,099 | ) | (697,311,295 | ) |
|                                                          |       |       |       |                             |       |   |   |   |   |
| **Net credits (charge) to income**                            |       |       |       | 1,423,153                        |       | (11,765,090 | ) | (24,102,668 | ) |

 

F-86

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Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Note 25.**            Exchange Differences

** **

The (charge) credit toincome for foreign currency translation is as follows:

 
|                                |   | **Currency** |   | **2006**   | ** ** | **2007**    | ** ** | **2008**   |       |
|-------------------------------------|--------|--------------|--------|------------|------------|-------------|------------|------------|------------|
|                                |   |         |   | **ThCh$**  | ** ** | **ThCh$**   | ** ** | **ThCh$**  |       |
| **Assets**                          |   |         |   |       |       |        |       |       |       |
|                                |   |         |   |       |       |        |       |       |       |
| Cash                                |   | US$          |   | 499,154    |       | 86,555      |       | (494,632   | )          |
|                                |   | Other        |   | (3,013     | )          | (54,158     | )          | 14,627     |       |
|                                |   |         |   |       |       |        |       |       |       |
| Time deposits                       |   | US$          |   | 85,336     |       | (5,981      | )          | 7,380,586  |       |
|                                |   | Other        |   |       |       |        |       | 1,766,069  |       |
| Notes  receivable,net               |   | US$          |   | 81,316     |       | (16,240     | )          | 55,847     |       |
|                                |   | Other        |   | 13,566     |       | (302,229    | )          | 388,093    |       |
| Accounts  receivable, net           |   | US$          |   | 294,675    |       | (2,289,017  | )          | (3,529,358 | )          |
|                                |   | Other        |   | (10,596    | )          | —      |       | —     |       |
|                                |   |         |   |       |       |        |       |       |       |
| Prepaid expenses                    |   | US$          |   | 671        |       | —      |       | —     |       |
| Other current  assets               |   | US$          |   | 291,637    |       | (2,405,596  | )          | 18,021,241 |       |
|                                |   | Other        |   | (2,891     | )          | (959        | )          | 79.068     |       |
| Amounts due from  related companies |   | US$          |   | 1,961,472  |       | (17,657,240 | )          | 18,742,438 |       |
|                                |   |         |   |       |       |        |       |       |       |
| **Non-current  assets**             |   |         |   |       |       |        |       |       |       |
| Long-term  receivables              |   | US$          |   | 7,277,689  |       | 11,404,659  |       | 9,962,100  |       |
| Amounts due from  related companies |   | US$          |   | —     |       | —      |       | —     |       |
| Other assets                        |   | US$          |   | 244,881    |       | —      |       | —     |       |
| Forward  contracts and swaps        |   | US$          |   | 25,766     |       | (5,115,126  | )          | 2,692,560  |       |
| ** **                          |   |         |   |       |       |        |       |       | ** ** |
| **Total  gain (loss)**              |   |         |   | 10,759,663 |       | (16,355,332 | )          | 55,078,639 | ** ** |

 
|                              |       | ** **   |       | **Year ended  December, 31** |       |
|-----------------------------------|------------|--------------|------------|------------------------------|------------|
|                              |       | **Currency** |       | **2006**                     | ** ** | **2007** | ** ** | **2008** |   |
|                              |       |         |       | **ThCh$**                    | ** ** | **ThCh$** | ** ** | **ThCh$** |   |
| **Liabilities**                   |       |         |       |                         |       |   |   |   |   |
|                              |       |         |       |                         |       |   |   |   |   |
| Short-term debt  due to banks     |       |         |       |                         |       |   |   |   |   |
| and financial  institutions       |       | US$          |       | (27,269                      | )          | 108,597 |   | (35,966 | ) |
| Current portion  of long-term     |       | US$          |       | 23,501                       |       | 1,611,972 |   | 487,306 |   |
| debt due to  banks                |       | Yen          |       | —                       |       | — |   | — |   |
| and financial  institutions       |       | Other        |       | —                       |       | — |   | — |   |
|                              |       |         |       |                         |       |   |   |   |   |
| Current portion  of bonds payable |       | Euro         |       | —                       |       | — |   | — |   |
| Current portion  of bonds payable |       | US$          |       | (2,063,810                   | )          | 2,177,963 |   | (30,691,930 | ) |
| Current portion  of notes payable |       | US$          |       | —                       |       | — |   | — |   |
| Accounts payable                  |       | US$          |       | (223,099                     | )          | 691,158 |   | (2,279,178 | ) |
|                              |       | Other        |       | 2,166                        |       | (13,881 | ) | (18,554 | ) |
| Dividends  payable                |       | US$          |       | —                       |       | (378,899 | ) | — |   |
|                              |       | Other        |       |                         |       | 27,224 |   | (19,493 | ) |
| Miscellaneous  payables           |       | US$          |       | (185,565                     | )          | 932,862 |   | (269,862 | ) |
| Accrued expenses                  |       | US$          |       | (6,348                       | )          | — |   | — |   |
|                              |       | Other        |       | —                       |       | — |   | — |   |
| Deferred income                   |       | US$          |       | (641,215                     | )          | (205 | ) | (65,264 | ) |
| Other current  liabilities        |       | US$          |       | (12,876                      | )          | (7,133 | ) | (110,371 | ) |
| Accrued expenses                  |       | US$          |       | —                       |       | — |   | 284 |   |
| Amounts due to  related companies |       | US$          |       | —                       |       | — |   |   |   |
|                              |       |         |       | —                       |       | — |   |   |   |
| **Long-term  liabilities**        |       |         |       | —                       |       | — |   |   |   |
| Due to banks and                  |       | US$          |       | 375,380                      |       | 12,921,020 |   | (49,526,378 | ) |
| financial  institutions           |       | Yen          |       | —                       |       | — |   | — |   |
|                              |       | Euro         |       | —                       |       | — |   | — |   |
| Notes payable                     |       | Other        |       | —                       |       | — |   | — |   |
| Bonds payable                     |       | US$          |       | (1,214,095                   | )          | 2,915,055 |   | 51,800,015 |   |
| Accounts payable                  |       | US$          |       | —                       |       | 1,694,939 |   | (7,625,119 | ) |
| Other long-term  liabilities      |       | US$          |       | (555,451                     | )          | 1,065,135 |   | (444,892 | ) |
| Forward                           |       | US$          |       | —                       |       | — |   | — |   |
| ** **                        | ** ** | ** **   | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Total  gain (loss)**            |       |         |       | (4,528,681                   | )          | 23,745,807 |   | (38,799,402 | ) |
|                              |       |         |       | —                       |       |   |   |   |   |
| **Exchange  difference**          |       |         |       | 6,230,982                    |       | 7,390,475 |   | 16,279,237 |   |

 

**Note 26.**            Extraordinary Items

** **

There are noextraordinary items as of 2006, 2007 and 2008.

 

**Note 27.**            Debt issuance costs

** **

Expenses incurred for issuing and placing debtinstruments incurred each year in placing bonds are as follows:

 
| ** **       | ** ** | **As of December 31** | ** ** |
|------------------|------------|----------------------------|------------|
| ** **       | ** ** | **2006**                   | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **       | ** ** | **ThCh$**                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|             |       |                       |       |   |   |   |   |
| Bank commissions |       | 584,862                    |       | — |   | — |   |

 

F-87

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Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Note 28.**            Cash flow statement

** **

**(a)**              Other disbursements for financing:

 
| ** **                      | ** ** | **As of December 31** | ** ** |
|---------------------------------|------------|----------------------------|------------|
| ** **                      | ** ** | **2006**                   | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                      | ** ** | **ThCh$**                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                            |       |                       |       |   |   |   |   |
| Commissions on debt refinancing |       | (693,093                   | )          | — |   | — |   |
| Forward contract payments       |       | (7,218,376                 | )          | (628,231 | ) | (15,258,672 | ) |
| Reimbursable contributions      |       | (553,347                   | )          | (857,665 | ) | (298,495 | ) |
| Others                          |       | (54,041                    | )          | (17,792 | ) | (8,946 | ) |
| Total                           |       | (8,518,857                 | )          | (1,503,688 | ) | (15,566,113 | ) |

 

**(b)**              Other receipts from financing:

 
| ** **                | ** ** | **As of December 31** | ** ** |
|---------------------------|------------|----------------------------|------------|
| ** **                | ** ** | **2006**                   | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                | ** ** | **ThCh$**                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                      |       |                       |       |   |   |   |   |
| Settlement of Derivatives |       | —                     |       | — |   | 456,542 |   |
| Margin call premiums      |       | —                     |       | — |   | 1,783,600 |   |
| Total                     |       | —                     |       | — |   | 2,240,142 |   |

 

**(c)**              Other receipts from investments:

 
| ** **                                                                  | ** ** | **As of December 31** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                  | ** ** | **2006**                   | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                                  | ** ** | **ThCh$**                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                                        |       |                       |       |   |   |   |   |
| Receipts from loans granted to former subsidiary                            |       | 634,900                    |       | — |   | — |   |
| Margin call premiums                                                        |       | 474,320                    |       | — |   | — |   |
| Capital reduction in  Compañía Eléctrica de Bogotá S.A. |       | 533,801                    |       | — |   | — |   |
| Sale of participation in Gas Atacama to  Southern Cross (1)                 |       | —                     |       | 47,014,775 |   | — |   |
| Guaranteed deposits                                                         |       | —                     |       | — |   | 31,849,336 |   |
| Others                                                                      |       | 593,683                    |       | 1,013,389 |   | 914,608 |   |
| Total                                                                       |       | 2,236,704                  |       | 48,028,164 |   | 32,763,944 |   |

 

**(d)**              Other investment disbursements:

 
| ** **                                             | ** ** | **As of December 31** | ** ** |
|--------------------------------------------------------|------------|----------------------------|------------|
| ** **                                             | ** ** | **2006**                   | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                             | ** ** | **ThCh$**                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                   |       |                       |       |   |   |   |   |
| Studies and projects                                   |       | —                     |       | — |   | (3,874,266 | ) |
| Payments associated with derivative contracts          |       | (12,678,677                | )          | — |   | (3,785,243 | ) |
| Payment Deutsche Bank Margin Call                      |       | —                     |       | (24,359,230 | ) | — |   |
| Intangible assets                                      |       | (1,400,012                 | )          | (1,356,818 | ) | (5,118,369 | ) |
| Purchase of participation in Gas Atacama from  CMS (1) |       | —                     |       | (47,200,351 | ) | — |   |
| License software                                       |       | —                     |       | (3,018,182 | ) | (3,563,608 | ) |
| Other                                                  |       | (592,686                   | )          | (2,865,485 | ) | (571,772 | ) |
| Total                                                  |       | (14,671,375                | )          | (78,800,066 | ) | (16,913,258 | ) |

 

F-88

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Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

----

**(1)**     On June 30, 2007,Endesa Chile notified CMS Enterprises Company (the entity controlling 50% ofInversiones Gas Atacama Holding and subsidiaries) of its decision to exerciseits right of first offer to purchase the interest held by CMS EnterprisesCompany in Inversiones Gas Atacama Holding for US$80 million. Included in thisamount was the purchase of a sponser loan that CMS had grants to InversionesGas Atacama Holding and its subsidiaries.

 

**On the same date, Endesa Chile and SouthernCross Latin America Private Equity Fund III L.P. (“Southern Cross”) subscribeda sale and purchase agreement for 50% of Endesa Chile s participation inInversiones Gas Atacama Holding S.A. and its subsidiaries and in its sponsorloans to Southern Cross for the amount of US$80 million.**

 

**Endesa Chile, by exercising its right offirst offer to purchase from CMS and selling this participation on the samedate and in a linked transaction to Southern Cross acted as an agent and thusdid not record any gains or losses related to the sale and purchase of theparticipation.**

 

F-89

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Table of Contents

** **

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notesto the Consolidated Financial Statements – (Continued)**

 

**Note 29.**            Financial Derivatives

** **

As of December 31,2008 the Company and its subsidiaries held the following financial derivativecontracts with financial institutions with the objective of decreasing exposureto interest rate and foreign currency risk, as follows:

 
| ** **     |   | ** **   |   | ** **  |   | ** **     |   | **Description  of contracts** |   |         |   |             |   | ** **  |   | ** **  |   |                             |   |        |       |         |       |
|----------------|--------|--------------|--------|-------------|--------|----------------|--------|-------------------------------|--------|--------------|--------|------------------|--------|-------------|--------|-------------|--------|----------------------------------|--------|-------------|------------|--------------|------------|
| ** **     |   | ** **   |   | ** **  |   | ** **     |   |                          |   | **Purchase** |   |             |   |        |   | **Amount**  |   | **Accounts**                     |   |
| **Type**       |   | **Type**     |   | **Nominal** |   | **Date  of**   |   |                          |   | **sale**     |   |             |   |        |   | **Hedged**  |   | **Assets  / Liabilities**        |   | **Income**  |       |
| **Derivative** |   | **Contract** |   | **Amount**  |   | **Maturity**   |   | **Item**                      |   | **position** |   | **Hedged  Item** |   | **Amount**  |   | **item**    |   | **Account**                      |   | **Amount**  |       | **Realized** |       | **Unrealized** |   |
| ** **     |   | ** **   |   | **US$**     |   |           |   |                          |   |         |   |             |   | **ThCh$**   |   | **ThCh$**   |   |                             |   | **ThCh$**   | ** ** | **ThCh$**    | ** ** | **ThCh$** | ** ** |
| ** **     |   | ** **   |   |        |   |           |   |                          |   |         |   |             |   |        |   |        |   |                             |   |        |       |         |       |   |   |
| OE             |   | CCTE         |   | 50,000,000  |   | IV quarter09   |   | Interest rate                 |   | P            |   | Bank obligations |   | 31,822,500  |   | 31,822,500  |   | Other liabilities s/t            |   | (860,219    | )          | (25,799      | )          | (56,263 | ) |
| OE             |   | CCTE         |   | 40,000,000  |   | III quarter 09 |   | Interest rate                 |   | P/S          |   | Bank obligations |   | 25,458,000  |   | 25,458,000  |   | Other assets l/t-Other liab. l/t |   | (565,544    | )          | (169,352     | )          | (3,794 | ) |
| OE             |   | CCTE         |   | 20,000,000  |   | IV quarter 09  |   | Interest rate                 |   | P/S          |   | Bank obligations |   | 12,729,000  |   | 12,729,000  |   | Other assets l/t-Other liab. l/t |   | (358,138    | )          | (79,918      | )          | (1,799 | ) |
| OE             |   | CCTE         |   | 40,000,000  |   | III quarter 10 |   | Interest rate                 |   | P/S          |   | Bank obligations |   | 25,458,000  |   | 25,458,000  |   | Other assets l/t-Other liab. l/t |   | (1,402,844  | )          | (236,306     | )          | (4,325 | ) |
| S              |   | CCPE         |   | —      |   | III quarter 08 |   | Interest rate                 |   | P            |   | Bank obligations |   | —      |   | —      |   | Other assets s/t                 |   | —      |       | (1,642,999   | )          | — |   |
| S              |   | CCPE         |   | 57,020,000  |   | IV quarter 12  |   | Interest rate                 |   | P            |   | Bank obligations |   | 36,290,380  |   | 36,290,380  |   | Other liabilities l/t            |   | (3,120,587  | )          | (515,525     | )          | (3,120,587 | ) |
| S              |   | CCPE         |   | 30,000,000  |   | I quarter 13   |   | Interest rate                 |   | P            |   | Bank obligations |   | 19,093,500  |   | 19,093,500  |   | Other liabilities l/t            |   | (843,690    | )          | (25,458      | )          | (843,690 | ) |
| S              |   | CCPE         |   | 26,527,359  |   | II quarter 14  |   | Interest rate                 |   | P            |   | Bonds            |   | 16,883,337  |   | 16,883,337  |   | Other assets l/t                 |   | 2,488,150   |       | 471,330      |       | 35,485 |   |
| S              |   | CCPE         |   | —      |   | III quarter 08 |   | Exchange rate                 |   | P            |   | Bank obligations |   | —      |   | —      |   | Other assets s/t                 |   | —      |       | (11,146,503  | )          | — |   |
| S              |   | CCPE         |   | —      |   | IV quarter 08  |   | Exchange rate                 |   | P            |   | Bank obligations |   | —      |   | —      |   | Other liabilities s/t            |   | —      |       | 11,335       |       | — |   |
| S              |   | CCPE         |   | 30,471,390  |   | II quarter 12  |   | Exchange rate                 |   | P            |   | Bank obligations |   | 19,393,516  |   | 19,393,516  |   | Other liabilities l/t            |   | (3,657,588  | )          | (4,007,363   | )          | (3,657,588 | ) |
| S              |   | CCTE         |   | 59,166,667  |   | III quarter 11 |   | Interest rate                 |   | P            |   | Bank obligations |   | 37,656,625  |   | 37,656,625  |   | Other assets l/t                 |   | (552,637    | )          | (93,044      | )          | (1,039,149 | ) |
| S              |   | CCTE         |   | 17,713,549  |   | IV quarter 15  |   | Interest rate                 |   | P            |   | Bank obligations |   | 11,273,788  |   | 11,273,788  |   | Other liabilities s/t            |   | (1,340,673  | )          | (615,563     | )          | (1,340,674 | ) |
| S              |   | CCTE         |   | —      |   | IV quarter 08  |   | Exchange rate                 |   | P            |   | Bank obligations |   | —      |   | —      |   | Other liabilities s/t            |   | —      |       | (775,913     | )          | — |   |
| S              |   | CCTE         |   | 350,000,000 |   | I quarter 14   |   | Exchange rate                 |   | P            |   | Bonds            |   | 222,757,500 |   | 222,757,500 |   | Other pas s/t y l/t              |   | (48,324,342 | )          | (2,462,327   | )          | (909,553 | ) |
| S              |   | CCTE         |   | 18,001,517  |   | IV quarter 15  |   | Exchange rate                 |   | P            |   | Bank obligations |   | 11,457,065  |   | 11,457,065  |   | Other liabilities s/t            |   | (2,113,715  | )          | (702,897     | )          | (2,113,715 | ) |
| S              |   | CCTE         |   | 250,000,000 |   | IV quarter16   |   | Exchange rate                 |   | P            |   | Bonds            |   | 159,112,500 |   | 159,112,500 |   | Other pas s/t y l/t              |   | (42,826,426 | )          | (1,797,350   | )          | (106,503 | ) |
| FR             |   | CCTE         |   | 71,643      |   | I V quarter 08 |   | Exchange rate                 |   | S            |   | Bank obligations |   | 36,266      |   | 36,266      |   | Other assets s/t-Other liab. s/t |   | —      |       | 11,538       |       | — |   |
| FR             |   | CCTE         |   | 6,842,122   |   | I quarter 09   |   | Exchange rate                 |   | S            |   | Bank obligations |   | 3,234,981   |   | 3,234,981   |   | Other assets s/t-Other liab. s/t |   | 1,220,596   |       | —       |       | — |   |
| FR             |   | CCTE         |   | 1,201,635   |   | II quarter 09  |   | Exchange rate                 |   | S            |   | Bank obligations |   | 614,636     |   | 614,636     |   | Other assets s/t-Other liab. s/t |   | 171,146     |       | —       |       | — |   |

 

F-90

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Table ofContents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

** **

**Note 30.**            Commitments and Contingencies

** **

**Collateralheld by third parties:**

 
| ** **                                              | ** ** | ** **                               | ** ** | ** **                         | ** ** | **Committed  assets**   | ** ** | **Balance  payable of related debt** | ** ** | **Release  of**    | ** ** |
|---------------------------------------------------------|------------|------------------------------------------|------------|------------------------------------|------------|-------------------------|------------|--------------------------------------|------------|--------------------|------------|
| ** **                                              | ** ** | ** **                               | ** ** | **Type**                           | ** ** | ** **              | ** ** | ** **                           | ** ** | **Book  value**    | ** ** | **at  December 31.** | ** ** | **guarantees** | ** ** |
| **Guarantee**                                           | ** ** | **Subsidiary**                           | ** ** | **guarantee**                      | ** ** | **Type**                | ** ** | **Currency**                         | ** ** | **of  collateral** | ** ** | **Currency** | ** ** | **2008** | ** ** | **2007** | ** ** | **2009** | ** ** |
| ** **                                              | ** ** | ** **                               | ** ** | ** **                         | ** ** | ** **              | ** ** | ** **                           | ** ** | ** **         | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Creditors banks                                         |       | Pangue S.A.                              |       | Mortgage and pledge                |       | Real estate, properties |       | ThCh$                                |       | 106,689,869        |       | ThCh$ |   | 1,586,879 |   | 2,469,387 |   | — |   |
| Sociedad de Energía de la República Argentina |       | Endesa Argentina - Endesa Costanera S.A. |       | Pledge                             |       | Shares                  |       | ThCh$                                |       | 76,064,958         |       | ThCh$ |   | 6,289,281 |   | 7,602,569 |   | — |   |
| Mitsubishi                                              |       | Endesa Costanera S.A.                    |       | Pledge                             |       | Combined cycle          |       | ThCh$                                |       | 74,154,534         |       | ThCh$ |   | 48,567,006 |   | 37,068,577 |   | — |   |
| Credit Suisse  First Boston                             |       | Endesa Costanera S.A.                    |       | Pledge                             |       | Combined cycle          |       | ThCh$                                |       | 26,500,305         |       | ThCh$ |   | 25,458,000 |   | 21,644,528 |   | — |   |
| Other creditors                                         |       | Endesa Chile                             |       | Bank bond                          |       |                    |       | ThCh$                                |       | —             |       | ThCh$ |   | 508,461 |   | 3,293,613 |   | — |   |
| Other creditors                                         |       | Edegel S.A.                              |       | Pledge                             |       | Real estate, properties |       | ThCh$                                |       | 134,954,554        |       | ThCh$ |   | 57,563,928 |   | 57,318,439 |   | — |   |
| Banco Santander (Agente de garantía)               |       | G.N.L. Quintero                          |       | Pledge                             |       | Shares                  |       | ThCh$                                |       | 24,126,683         |       | ThCh$ |   | 94,205,737 |   | — |   | — |   |
| Deutsche Bank (1)                                       |       | Enersis S.A.                             |       | Deposits accounts                  |       | Deposits accounts       |       | ThCh$                                |       | —             |       | ThCh$ |   | — |   | 27,542,662 |   | — |   |
| Other creditors                                         |       | Ampla S.A.                               |       | Pledge over collections and others |       |                    |       | ThCh$                                |       | 13,545,624         |       | ThCh$ |   | 141,502,755 |   | 146,714,368 |   | — |   |
| Other creditors                                         |       | Coelce S.A.                              |       | Pledge over collections and others |       |                    |       | ThCh$                                |       | 5,416,277          |       | ThCh$ |   | 90,786,197 |   | 66,423,956 |   | — |   |
| International  Finance Corporation                      |       | CGT Fortaleza S.A.                       |       | Mortgage and pledge                |       | Real estate, properties |       | ThCh$                                |       | 175,656,932        |       | ThCh$ |   | 70,262,773 |   | 61,678,291 |   | — |   |
| Bndes                                                   |       | Cachoeira Dourada S.A.                   |       | Pledge                             |       |                    |       | ThCh$                                |       | —             |       | ThCh$ |   | — |   | 672,076 |   | — |   |

 

----

(1)          See note 9

 

**Guaranteesof subsidiary obligations (1) **:

 
| ** **                             | ** ** | ** **                                  | ** ** | ** **    | ** ** | **Committed assets** | ** ** | **Balance payable of related debt** | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **  | ** ** | ** ** | ** ** |
|----------------------------------------|------------|---------------------------------------------|------------|---------------|------------|----------------------|------------|-------------------------------------|------------|-----------------------------|------------|---------------------------|------------|-------------|------------|------------|------------|
| ** **                             | ** ** | ** **                                  | ** ** | **Type**      | ** ** | ** **           | ** ** | **Book value**                      | ** ** | **as of December 31.** | ** ** | **Release of guarantees** | ** ** |
| **Guarantee**                          | ** ** | **Subsidiary**                              | ** ** | **guarantee** | ** ** | **Type**             | ** ** | **of collateral**                   | ** ** | **Currency**                | ** ** | **2008**                  | ** ** | **2007**    | ** ** | **2008**   | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** |
| ** **                             | ** ** | ** **                                  | ** ** | ** **    | ** ** | ** **           | ** ** | ** **                          | ** ** | ** **                  | ** ** | ** **                | ** ** | ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| 2nd civil court of  Quillota      |       | Cía. Eléctrica San Isidro         |       | Deposit       |       | ThCh$                |       | 10,000                              |       | ThCh$                       |       | —                    |       | 10,890      |       | —     |       | — |   | — |   | — |   |
| Vestas Eólicas  S.A.U.            |       | Endesa Eco S.A.                             |       | Guarantees    |       | ThCh$                |       | 7,923,754                           |       | ThCh$                       |       | 7,923,754                 |       | 8,133,045   |       | —     |       | — |   | — |   | — |   |
| Banco Español de  Crédito    |       | Cía. Eléctrica Tarapacá S.A. |       | Guarantees    |       | ThCh$                |       | —                              |       | ThCh$                       |       | —                    |       | 2,229,889   |       | —     |       | — |   | — |   | — |   |
| Cédulas de  crédito bancario |       | Cien                                        |       | Guarantees    |       | ThCh$                |       | 163,401,797                         |       | ThCh$                       |       | 163,401,797               |       | 183,293,442 |       | —     |       | — |   | — |   | — |   |

 

----

| (1) |   | Unless otherwise stated, the  guarantees in the table “Guarantees of Subsidiary Obligations” were provided  by the Company or a subsidiary (the “Guarantor”) to a third party creditor  that had entered into a new obligation with another subsidiary (the  “Subsidiary Debtor”). If the Subsidiary Debtor is unable to meet the  requirements of the related obligation, the Guarantor will be required to  make future payments on behalf of the Subsidiary Debtor up to the remaining  amount payable. |
|-----|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

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** **

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements —(Continued)**

** **

**a.****              ****Litigation and other legalactions**

** **

**Enersis S.A. (“Enersis”)**

** **
| Plaintiff           | : | Enersis ,  Chilectra S.A., Empresa Nacional de Electricidad S.A. (“Endesa Chile”) |
|---------------------|---|---------------------------------------------------------------------------------------------|
| Defendant           | : | The  Republic of Argentina                                                                  |
| Court               | : | CIADI  Arbitration Panel                                                                    |
| Case/Identification | : | (CIADI  Case ARB/03/21)                                                                     |

 

Summaryof proceedings: Compensation for losses caused to the Plaintiff’s investment inthe Republic of Argentina is requested in connection with the participation ofthe power distribution concessionaire Edesur S.A. (“Edesur”)on the grounds ofviolation of the Investment Protection and Promotion Agreement entered into bythe Republics of Chile and Argentina, and the Argentinean Government behaviorthrough the passing of Public Emergency Law 25,561, dated January 6, 2002.The said behavior has also seriously affected the economic and financialbalance of the Concession Contract between Edesur and the Argentinean NationalState. The said Law authorized a re-negotiation process of the ConcessionContracts with the purpose of re-composing the economic-financial equationaffected by the conversion to pesos, at US$1 = Arg$1, of tariff valuescalculated in American dollars, and the prohibition to apply biased tariffupdating. In practice, this process has not been promoted by the Government,and no measures to prevent losses for the Plaintiff have been formalized.Edesur has been deprived of receiving the tariffs indicated in the regulationsand in the said Concession Contract, therefore being harmful to the investmentthe Plaintiff companies have made. Process status: On October 18, 2004, acopy of the lack of jurisdiction petition filed by the Republic of Argentinawas received. On December 17, 2004 the said petition was answered andconfirmation of the International Center for the Settlement of Disputesregarding Investments between States and Nationals of Other States (CIADI)jurisdiction was requested. On April 6, 2005, the allegations of theparties regarding this jurisdiction issue took place. The court decided toaccept the re-petition and re-response of the parties, setting a brief term forthem. And the parties met the term. On June 15, 2005, Edesur S.A. enteredwith the UNIREN into an Understanding Letter within the framework of theprocess for renegotiating Edesur’s Concession Contract, envisaged in LawNo.25,561 and supplementary regulation. As a result of the UnderstandingLetter, on August 29, 2005, the Minutes of Agreement for the Adequacy ofthe Concession Contract for the Public Service of Distribution and Marketing ofElectric Energy were entered into. At the request of the Argentine Government,the Minutes of Agreement were executed again, on the same terms and conditions,on February 15, 2006, to include the new female Minister of Economy andProduction. The Minutes envisage a Transitional Rate Regimen, retroactivelyeffective beginning on November 1, 2005; require approval of theauthorities for paying dividends during the life of the transitional regime;and include other aspects associated with investments, quality of service,penalties applied to Edesur, and unpaid penalties. Also, it establishes a FullRate Revision, by which a new rate regime is to be set, which was scheduled tobecome effective on November 1, 2006, and for the next 5 years, under thesupervision of the ENRE, in accordance with law 24,065. In addition, theUnderstanding Letter imposes the obligation of initially suspending, andsubsequently dropping, all actions filed against the Argentinean State byEdesur and its shareholders. Such requirement would cause Enersis S.A. tosuspend the international arbitration started on April 25, 2003 with theCIADI. After publication in the Official Gazette of the Republic of Argentinaof the resolution approving the rates arising from the Full Rates Revision,Enersis and its subsidiaries Chilectra S.A., Endesa Chile and Elesur S.A.(currently, Chilectra S.A.) would drop the abovementioned internationalarbitration started with the CIADI. On September 16, 2005 the Republic ofArgentina made a filing requesting the suspension of the proceedings. It wasanswered on September 22, 2005 by the plaintiffs, who opposed thesuspension. On September 30, 2005 the court rejected the Argentineanrequest, for lack for consent. On October 7, 2005, Argentina made a newfiling on the same issue, which the court communicated to us on October 11,2005, and we answered the filing on October 18, 2005. On March 28,2006, the court ordered the suspension of the proceedings for a term of 12months, after which it will call on the parties to report on the status of thenegotiation conducted in accordance with the Minutes of Agreement for theAdequacy of the Concession Contract for the Public Service of Distribution andMarketing of Electric Energy. Subsequently, the court will decide whether ornot the proceedings should continue. The Minutes of Agreement for the Adequacyof the Concession Contract for the Public Service of Distribution and Marketingof Electric Energy, after being approved by the Congress of the ArgentineNation, were ratified by the Executive National Argentine Power through decree1959 of 2006, published on the Official Gazette on January 8, 2007, andnow their regulation by the ENRE is pending. ENRE Resolution 50/2007, of January 30,2007, published in the Official Gazette on February 5, 2007, proceeded tocomply with certain stipulations of the Minutes of Agreement for the Adequacyof the Concession Contract for the Public Service of Distribution and Marketingof Electric Energy, approving the amounts of the new

 

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**Notes to the Consolidated Financial Statements —(Continued)**

** **

EdesurRate Table that reflects the increases in cost provided for in the TransitionRate Regimen, and issuing certain rules governing predictions contained inthe Minutes of Agreement for the Adequacy of the Concession Contract for thePublic Service of Distribution and Marketing of Electric Energy. In particular,with regard to its most important effects, the ENRE adopted the followingdecisions among others: 1. Approval of the new Rate Table reflecting theTransition Rate Regimen: ENRE approved the amounts of Edesur’s Rate Tableleading to the Transition Rate Regimen provided for in the Minutes of Agreementfor the Adequacy of the Concession Contract for the Public Service ofDistribution and Marketing of Electric Energy and, therefore implements theincrease of 23% above typical distribution costs (which does not affect T1R1and T1R2 rates), above connection costs and above service restoration costsincurred by Edesur, as well as also the additional average increase of 5% abovethe above typical distribution costs earmarked for executing a works plan. 2.Date of application of the new Rate Table reflecting the Transition RateRegimen: ENRE Resolution 50/2007 decreed application of the above new RateTable starting from the invoicing of the consumption recorded after zero hoursof February 1, 2007. 3. Cost Monitoring Mechanism: ENRE Resolution No. 50/2007stipulated application of a positive variation of 9.962% of the Cost MonitoringMechanism Indices to the service costs, with such application being madestarting from May 1, 2006 (on which date the first six-month period after November 1,2005 for review of the prices provided for in the MMC ended). For invoicing theamounts of such variation, the Resolution also stipulated that it should bebroken down and charged in 55 installments. The plaintiffs petitioned the court to extend the stay of the proceedingsfor a further 12 month period. In this regard, on March 9, the Courtissued Resolution SE No. 433/2007 whereby the Minister of Energy extendedthe Contractual Transition Period, provided for in the Heads of Agreement, tothe date on which the rate table resulting from the Full Rate Annulment comesinto force, which is February 1, 2008. The Resolution also indicated thatthe stay of actions provided for in the Heads of Agreement was extended throughto the time when the above rate table comes into force, when actions could betaken again always provided that Edesur had fulfilled certain obligations. On August 1,2007, the Court decided to maintain the stay through January 8, 2008, atthe request of the parties. As the Court required the parties to inform inregard to the situation related to the process of negotiation in accordancewith the Agreement Document, on January 19, 2008 the parties described thedelay in the implementation of the Rate Review and requested the arbitrators toextend the current interruption for a 9 month period, notwithstanding that ifthere are doubts in regard to the approval of the Rate Review, they can urge tobegin the process again before the end of the extension period. The Republic ofArgentina did not have objections to the request. The decision of the Courtinformed on March 28, 2008 was to extend the interruption until November 19,2008. On that date the Court would request the parties to inform about thesituation of the process of negotiation in accordance with the AgreementDocument and then it would decide in regard to the need to continue or not withthe arbitration proceeding. After the expiration of the interruption of theproceeding that had been authorized until November 19, 2008, acommunication from ICSID was received on November 20, 2008. Suchcommunication stated a period until December 1, 2008 to inform about thestatus of the negotiations between the parties in order to solve on theinterruption of the arbitration proceeding. On December 1, 2008 theplaintiffs informed the Court about the status of the actions that gave rise tothe interruption of the arbitration proceeding and requested the extension ofthe interruption until June 30, 2009 in order to cover the period for theeffective date of the Rate Review of Edesur; notwithstanding that, if theplaintiffs have doubts about the approval of the Rate Review as agreed, theplaintiffs reserved the right to request to start the proceeding again withoutthe need for awaiting for the end of the period of extension of theinterruption that the Court may agree. On December 3, 2008 the Republic ofArgentina informed the Court that it is not opposed to continue theinterruption of the proceeding. We are waiting for the Court’s confirmation andcommunication of the interruption requested.

Amounts: Enersis, US$574.7 millions, Chilectra US$723 millions and Endesa ChileUS$9.2 millions plus interest.

 
| Plaintiff           | : | Omaira Cely  Vargas and Rosa Elvira Viracachá Tunarosa, through lawyer Martha Teresa  Briceño de Valencia                                                                                                                                                              |
|---------------------|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Demanded            | : | Cámara de  Comercio de Bogotá, Mr. Alvaro Pérez (liquidator of Luz de Bogotá),  Endesa Internacional S.A., Enersis S.A., Agencia Islas Cayman, Chilectra  S.A., Agencia Islas Caymán y Enersis Internacional (shareholders of Luz de  Bogotá) |
| Tribunal            | : | Third  Civil Court of Bogota Circuit                                                                                                                                                                                                                                             |
| Case/Identification | : | Case  file No. 2006-0315                                                                                                                                                                                                                                                    |

Summaryof proceedings: On July 15, 2004, Mr. AlvaroPérez Uz (linked to the Endesa, S.A:Group), liquidator of Luz de Bogotá S.A.,registered minutes No. 26 of July 9, 2004, containing the finalwinding up count, in the Bogotá Chamber of Commerce. Payment for suchregistration was Col$48,000. The remainder that was distributed to the partnersamounted to Col$1,764,208,721,394, which is the sum, according to theplaintiffs, making up the base to which 0.7% to be paid to the Department ofCundinamarca, should be applied, according to Ordinance  24 of 1997 and articles

 

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**Notes to the Consolidated Financial Statements —(Continued)**

 

226, 229 and 230 of Law 223 of 1995. The Chamberinitially rejected the registration so that the liquidator should include thedistribution of the surplus as a document with no value. Based on articles 89,218 and 431 of the Commercial Code, the liquidator stated that the liquidationminutes did not need to state the amounts of the surplus. The Chamber acceptedthe argument and registered the minutes. According to the plaintiffs, theDepartment of Cundinamarca lost Col$12,349,461,050 as a result. Consequently,the plaintiff petitions for the Chamber to be ordered to pay that amount, pluspenalty interest, plus a penalty of 160% for inaccurate declaration, plus 15%for the tax not paid as an incentive in affairs involving administrativemorality. Mrs. Martha Teresa Briceño de Valencia bought the litigationrights of Mrs. Omayra Cely and Rosa Elvira Viracachá Tunarosa, who filedthe original lawsuit.

Process status: The judicial decree dated May 6, 2008resolved some evidence and rejected other evidence. For this reason, therepresentative of Endesa filed a resort that was favorable. Through judicialdecree dated June 11, 2008 the Court ordered the submission of evidencefor October 15, 2008 and the proof of private documents that it hadrejected initially. On August 21, 2008 it was decided to withdraw theattestation of Dr. John Bayron Arango, who had stated that his possiblecontribution was not significant from a judicial point of view. On August 25,2008 the Court accepted that withdrawal. On October 15, 2008 theattestations of Lucy Cruz de Quiñones, Rodrigo Hernández Estrada and ÁlvaroCala Carrizosa took place. On October 22, 2008 the Court accepted thetransfer of litigious rights to be activated on behalf of Martha Teresa Briceñode Valencia to Rosa Elvira Viracacha Tunarosa and Helder Navarro Carriazo. Theproceeding is pending in regard to the end of the period allowed for producingevidence and transfer for pleadings of conclusion. At the same time on December 13,2007 the Tax Authority of Cundinamarca issued a Tax Assessment to the Chamberof Commerce of Bogotá for Col$44 billion, including a sanction for inaccuracy.The Chamber filed an appeal for reconsideration on February 13, 2008. TheDistrict of Cundinamarca has one year to solve the appeal. We do not excludethe possibility that this may result in a dispute relating to an action underadministrative law, in which Endesa Internacional, Enersis Agencia andChilectra Agencia may be involved as defendants.

Amount: US$30 millions.

 
| Plaintiff           | : | Internal  Revenue Service (“IRS”) |
|---------------------|---|---------------------------------------------|
| Defendant           | : | Enersis  S.A.                               |
| Court               | : | Tax  Court                                  |
| Case/Identification | : | 10.825-07RR                                 |

Summaryof proceedings: On April 28, 2007,Enersis was notified of Summons No. 21 of 2007 by the IRS, whereby thisAgency requests that the Income Tax returns filed for business years 2003 and2004 should be clarified, amended or confirmed. The above Summons refers toseveral operations performed in those years. On June 28, 2007, the Summonswas answered.

Process Status: On July 31,2007, the IRS notified Enersis of Resolution 151, whereby it accepted Enersis’sanswer to several points in the summons while maintaining its position withregard to others. The IRS was requested to submit the points of disagreement toan Administrative Reconsideration with the alternative of an appeal. On December 6,2007, Enersis was notified that the resolution held the appeal to have beenfiled and a report had been requested from the tax inspector. On April 4, and again on September 15,2008 the request for a Report to the Regulatory Agency that the audit made wasmade again.. To date the report has not been issued.

Amount: Ch$41,889 millions - US$66.585 million

 

**Chilectra S.A.**

** **
| Plaintiff           | : | Gladys  Calderón Rojas   |
|---------------------|---|-------------------------------|
| Defendant           | : | Chilectra  S.A.               |
| Court               | : | 19th  Civil Court of Santiago |
| Case/Identification | : | Case  No. 5540-2000      |

Summaryof proceedings: Mrs. GladysCalderón Rojas filed a claim against the appraisal by a Committee of Good Mensetting the easement for Chilectra on the plaintiff’s property in Quilicura atCh$54 millions.

Process status: On July 19, 2007, thedefinitive appealable judgment, ordering payment to the plaintiff of 118,590 UFfor the easement for Chilectra on her property, was notified. Whereas clause 36of the ruling states that, as provided for in article 68 of Statutory Decree 1of 1982 of the Ministry of Mines, compensation should only be paid for theconcepts listed, that is to say, land occupied by the towers; strip of land;protection strip; indirect influence strip; damage caused by use of accessroads to the property; and reduction of the buildable surface area as a resultof the easements. On July

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements —(Continued)**

 

31,2007, an appeal for annulment on the form and appealto a higher court for reversal, thereby challenging the resolution since thecourt of the first instance included aspects that should not be compensatedaccording the aforementioned legislation. On May 2, 2008 the Courtof Appeal rejected the appeal for annulment based on violation of procedure andissued the same final decision. The Court fixed the value of square meter ofthe plot of land of the plaintiff in UF 0.6. On May 19, 2008 an appeal forannulment was filed based on violation of procedure or violation of law.Supreme Court should be aware of this and issue a resolution.  On June 23, 2008 the aforementionedappeals were officially recognized as filed. On June 22, 2008 theproceedings started to be processed in that court. On November 18, 2008 theSupreme Court considered as admissible the appeals for annulment based onviolation of procedure or violation of law.

Amount Ch$2,006 million.

 
| Plaintiff           | : | Rosendo  Andrés Contesso Beltra and María Elena Concha Camaño |
|---------------------|---|------------------------------------------------------------------------------|
| Defendant           | : | Chilectra                                                                    |
| Court               | : | 4th  Civil Court of Santiago.                                                |
| Case/Identification | : | 2571-2007.                                                                   |

Summaryof proceedings: Legal action formaterial damages and moral prejudice non-contractual liability as a result ofserious injuries (partial amputation of both arms) suffered by Mr. RosendoAndrés Contesso Beltra, a worker of Luis Estay V. Ingeniería EléctricaConstrucción Ltda., which event occurred on October 17, 2005, while he waschanging a light-bulb on a lampost, a task commissioned to his employer by theMunicipality of Pedro Aguirre Cerda.

Process status: A plea of dilatory exception due toincompetence of the petition was filed and rejected. On June 19, the pleafor the defense against the lawsuit was raised. On June 29, the rebuttalwas made. On July 13, Chilectra lodged the rejoinder. On July 19, thecourt summoned the parties to a reconciliation hearing. On September 28,the writ of evidence was ordered.On January 30the evidence was notified and on March 12 and 13 the plaintiff producedthe evidence of witnesses. The period of evidence expired on March 24. In April 2008some resolutions were issued as a result of the measures requested within theperiod of evidence. In May 2008 a number of burdens resulting fromevidence measures required by the parties were solved. Also, the Court orderedto send notes to different institutions. At June 2008 some responses tonotes requested by the parties have been received within the period ofevidence. On July 1, 2008 the parties were notified to hear the finaljudicial judgment. On August 11, 13 and 25, 2008 the response notes fromthe Municipal Department of Works, National Institute of Social Security (INPin Spanish) and the Superintendence of Social Security (SUSESO in Spanish) werereceived. On November 18, 2008 the Court ordered a measure to solve in abetter way the inspection of the lamppost located on the corner of RamonaStreet and Yungay Street in the District of Pedro Aguirre Cerda. This measurewas taken on December 11, 2008 and both parties and the trial Judge werepresent there.

Amount: Ch$3,000 millions.

 

**Edesur S.A.**

** **
| Plaintiff           | : | Asociación  Coordinadora de Usuarios Consumidores y Contribuyentes - ENRE.                         |
|---------------------|---|---------------------------------------------------------------------------------------------------------|
| Defendant           | : | Edesur                                                                                                  |
| Court               | : | N°2  Federal Civil and Commercial First Instance Court, Registry of the Court N°  6, La Plata |
| Case/Identification | : | 38676/03                                                                                                |

Summaryof proceedings: The said institution filed a measure through which it expectsENRE and Edesur to be ordered to suspend cabling works in Quilmes, a provinceof Buenos Aires, as well as the company’s “Sobral” sub-station due to thedamage the installations may cause to the population’s health.

Processstatus: After a hearing convened by the court and another hearing at the ENRE,which were attended by the parties mentioned in the preceding paragraph, anumber of technical measures were implemented to diminish the CEM values, evenbelow the values set in the applicable norms. No new developments have occurredin this trial ever since.

Amount:Undetermined

 

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**Notes to the Consolidated Financial Statements —(Continued)**

 
| Plaintiff           | : | Users  affected by a mass power outage in Buenos Aires                         |
|---------------------|---|--------------------------------------------------------------------------------|
| Defendant           | : | Edesur                                                                         |
| Court               | : | Courts  and Civil and Commercial Courts of the Federal Capital of Buenos Aires |
| Case/Identification | : | (Various  processes)                                                           |

Summaryof proceedings: As a result of a prolonged outage in February, 1999, whichaffected 160,000 clients, a large number of claims for damages caused to suchusers began to be received as of mid 2000.

Processstatus: This involves several proceedings, started on different dates, so eachat its own procedural step depending on its degree of progress. Currently, 5,034 proceedings are being handled.

Amount involved: Arg$ 24.9millions or US $ 7.2 millions.

 
| Plaintiff           | : | Edesur                                                                     |
|---------------------|---|----------------------------------------------------------------------------|
| Defendant           | : | Transportes  Metropolitanos Gral. Roca.                                    |
| Court               | : | First  Instance National Commercial Court, Registry of the Court N° 1 |
| Case/Identification | : | 87934/03                                                                   |

Summaryof proceedings: Edesur promoted an action to declare settlements in publicproperty free-of-charge, taking into consideration that the company TransportesMetropolitanos General Roca S.A. (T.M.R.) intends to charge an annual rent forevery crossing or power line wiring along the rails (existing or future) overland designated as railroad service property.

Processstatus: Edesur obtained from the corresponding Court a precautionary measurethrough which the company is not obliged to pay rent while the procedure ispending resolution. The proceedings returned to the Federal Court of La Plataand the trial is in the status in which the judge must issue a first instancesentence.

Amount: Undetermined

 
| Plaintiff             | : | Edesur  S.A.                                                                             |
|-----------------------|---|------------------------------------------------------------------------------------------|
| Defendant             | : | Local  Government of Buenos Aires (LGBA)                                                 |
| Court                 | : | Court  of Buenos Aires No.7 for Actions under Administrative and Tax Laws, Office  No.13 |
| Number/Identification | : | 2955/00  - 6262/99                                                                       |

Summaryof proceedings: Edesur objects the regulation through which the LGBA tries tocollect an annual fixed charge for each underground transformation center setup by Edesur in the public thoroughfare and oblige Edesur to assume the coststo be incurred in the removal of such centers, if required. The objectedregulation violates the Concession Agreement.

Procces/Status:The Court of Appeal for Actions under Administrative Federal Law pronounced afinal judicial decision confirming the appealable judgment favorable to Edesur.The result of the lawsuit will depend on the possible filing of an ExtraordinaryResort by the LGBA.

Amount:Undetermined.

** **
| Plaintiff           | : | Users  and Consumers Union.                                                                          |
|---------------------|---|------------------------------------------------------------------------------------------------------|
| Defendant           | : | Edesur                                                                                               |
| Court               | : | N°  11 Federal Administrative First Instance National Court, Registry of the  Court N° 21. |
| Case/Identification | : | 142321/02                                                                                            |

Summaryof proceedings: The Users and Consumers Union want a modification of the typeof rate applied to the many condominium owners’ consortiums existing in theCity of Buenos Aires and Edesur. This would imply an important reduction of thevalues to be invoiced in the future to these consortiums, as well as theobligation for retrospective reimbursement of “unduly” received amounts.

Processstatus: The appealable judgment is in the process of being issued.

Amount:Undetermined

 

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**Notes to the Consolidated Financial Statements —(Continued)**

 
| Plaintiff           | : | Edesur                                                                                             |
|---------------------|---|----------------------------------------------------------------------------------------------------|
| Defendant           | : | National  State (Ministry of Economy)                                                              |
| Court               | : | N°  3 Federal Administrative First Instance National Court, Registry of the Court  N° 5. |
| Case/Identification | : | 1856/97                                                                                            |

Summaryof proceedings: In accordance with a provision in Power Law 24065, the powersector concessionaire companies must pay a significant rate to the ENRE withthe purpose of financing its controlling and regulating activities (the rate ispaid by Edesur, among other concessionaires.) These expenses must not exceedannually the amount of the rate paid, thus giving rise to a financial surpluswhich, instead of being allocated to the Argentinean government, must berefunded to the companies. In this regard, the action was filed to nullify aresolution of the General Agency for Management of the Economy Ministry, whichallocates to the Argentine Treasury these financial surpluses. The Companybelieves this resolution to be confiscatory in nature, because the raterepresents a payment for a service provided, and no portion of it should becomeincome for the government.

Processstatus: The Supreme Court is in the process of issuing its ruling.

Amount:Undetermined.

 
| Plaintiff           | : | Edesur                                                                                                                                               |
|---------------------|---|------------------------------------------------------------------------------------------------------------------------------------------------------|
| Defendant           | : | Municipality  of Berazategui                                                                                                                         |
| Court               | : | N°  2 Federal Administrative First Instance Court for Civil, Commercial and  Administrative Trials, Registry of the Court N° 5 in La Plata |
| Case/Identification | : | 11,859/05                                                                                                                                            |

Summaryof proceedings: Legal action was taken against the Municipality of Berazategui,to the effect of declaring the right of Edesur to continue the necessary worksto construct the “Rigolleau” Substation, located in the department ofBerazategui, which were suspended by the sued Municipality through Decree N°758/05, whose unconstitutionality and unenforceability is requested in thelawsuit.

Processstatus: The judgment is in the process of being issued.

Amount:Undetermined.

 
| Plaintiff           | : | Edesur                                                                                                                             |
|---------------------|---|------------------------------------------------------------------------------------------------------------------------------------|
| Defendant           | : | Municipalidad  de Berazategui.                                                                                                     |
| Court               | : | N°  2 Federal Civil, Commercial and Administrative First Instance National Court,  Registry of the Court N° 5, La Plata. |
| Case/Identification | : | 11.893/05                                                                                                                          |

Summaryof proceedings: A lawsuit was filed against the Municipalidad de Berazategui,so that it allows Edesur to render public services consisting in distributingelectricity, for which it must install an underground electrical line under thewestern sidewalk of street 5, between Avenida Mitre and Calle 146, inBerazategui. The installation was suspended by the defendant through DecreeNo.1207/05, of which the plaintiff is seeking that it be pronouncedunconstitutional and inapplicable. Also, an injunction was requested from thecourt. The court granted the injunction, suspending the application of Decree No. 758/05,and ordering the district authorities to refrain from stopping the developmentand/or completion of the installation of the underground 132-KV line linkingthe sub-station located there, as well as the adequacy and remodeling of theline.

Processstatus: The Court decided favorably with regard to the petition for aprecautionary measure, suspending application of the Decree and enabling Edesurto set up its facilities and then energize them with the intervention of ENRE and Universidad Nacional de La Plata.The community appealed against the precautionary measure. The Municipalityfiled a plea against the service of process. Since the above precautionarymeasure had become a self-gratifying measure, a petition was filed to have theproceeding disregarded.

Amount: Undetermined

 

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**Notes to the Consolidated Financial Statements – (Continued)**

 
| Plaintiff           | : Consumidores del Sur  Asociación Civil (non profitable organization)                            |
|---------------------|--------------------------------------------------------------------------------------------------------|
| Defendant           | : The State and Edesur                                                                                 |
| Court               | : N° 5 Administrative  and Tax Court of the City of Buenos Aires, Registry of the Court N° 9 |
| Case/Identification | : 8803/07                                                                                              |

Summaryof proceedings: This proceeding addresses the validity of retroactive collectionof the rate increase stipulated in National Executive Decree 1959/06.Consequent to the above, the petition has been made for the defendants toreturn the amounts of money received pursuant to the above regulation and to rule thatthe obligations generated by it have been abated.

Processstatus: Formalityafter the plea for the defense.

Amount: Arg$59 millionsor US $ 17.1 millions.

 
| Plaintiff           | : Edesur                                                                                                |
|---------------------|---------------------------------------------------------------------------------------------------------|
| Defendant           | : Government of the  Town of Buenos Aires (GCBA)                                                        |
| Court               | : N° 8 Administrative  and Tax Court of the City of Buenos Aires, Registry of the Court N° 15 |
| Case/Identification | : 25442/07                                                                                              |

Summaryof proceedings: Several administrative acts decreed by GCBA whereby it requiredthat documentation from the 2003 tax period should be furnished were challenged,since such petition is time-barred according to the regulations of article 34of the Edesur Concession Contract.

Ineach of the acts being challenged, the GCBA Revenue Service has institutedpreliminary proceedings and fined Edesur S.A., sustaining in its resolutionsthat the offense of failure to comply with formally ordered tax duties(Articles 89 and 91 of the Tax Code) had been constituted.  Such decision-making is inadmissible insofaras it contravenes the tax regimen of the Public Power Utility, under nationaljurisdiction.

Process status: The local government of Buenos Aries (LGBA)made its plea for the defense and raised a plea for the evidence provided byEdesur. Edesur made its plea for the transfer of the plea raised by the LGBA.

Amount:Undetermined

 
| Plaintiff           | : Edesur                                                                                                 |
|---------------------|----------------------------------------------------------------------------------------------------------|
| Defendant           | : Buenos Aires City  Government (GCBA)                                                                   |
| Court               | : N° 7 Administrative  and Tax Court of the City of Buenos Aires, Registry of the Court N° 13. |
| Case/Identification | : 2956/01                                                                                                |

Summary of Proceedings:To contest a GCBA provision through which payment of procedure expenses onpermits requested by Edesur for the installation of its lines is demanded, aswell as payment for the corresponding inspections carried out by the GCBA, inaddition to a rent for using public roads with power systems for the provisionof power distribution public utilities.

Process status: We are waiting for the decision by theSuperior Court of Buenos Aires. The LGBA filed a complaint against the judgefor refusing to allow an appeal for unconstitutionality against theunappealable judgment favorable to Edesur.

Amount:Undetermined.

 

**EdelnorS.A. (“Edelnor”)**

** **
| Plaintiff             | : Edelnor                                    |
|-----------------------|----------------------------------------------|
| Defendant             | : Municipality of San  Martín de Porres |
| Court                 | : Municipality of San  Martín de Porres |
| Number/Identification | : 945-2007                                   |

Summary of proceedings: This is a dispute relating toan action under administrative law against several resolutions of theMunicipality of the District of San Martín de Porres, which impose fines forthe works in the public thoroughfare with no municipal authorizations. Edelnoris able to carry out these works in accordance with the current electriclegislation. However, the aforementioned Municipality wants to collect a rateor tax for the use of public areas.

Process status: On August 15, 2008 a decision wasissued. The prosecuting authority considers that the claim is baseless. On October 16the trial hearing took place with the respective oral report. Due to thecreation of new courts in the basic 

 

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module of Condevilla, the file has been redistributedto the Court of Combined Jurisdiction of Condevilla, which is the same courtthat fixed the date for a new oral report for January 14, 2009 throughresolution dated October 28, 2008.

Amount: Soles 41 millions  or US$13.1 millions

 

**CodensaS.A. (“Codensa”)**

** **
| Plaintiff           | : Electroenergía S.A.                  |
|---------------------|---------------------------------------------|
| Defendant           | : Codensa.                                  |
| Court               | : 12th Civil Court of  the Bogota Circuit.  |
| Case/Identification | : Case records  No.11001310302120040037901. |

 

Summaryof proceedings: In 1997, by means of a competitive call for bids, the EEBawarded Electroenergía S.A. ESP the supply of energy to the regulated market,which today represents 14% of Codensa’s demand. The contract should have begunto be processed on January 1, 2003. In their claim, the plaintiff states, (a) thefirst 4 years of the contract were awarded to Betania and the next 11 years toElectroenergía; (b) this caused a financial imbalance for Electroenergía; (c) Inlight of this complaint, the EEB awarded the contract for 13 years; (d) thecontract was established in Codensa’s name; (e) on April 30, 1998,officers of the two companies met and stipulated the following obligations:(e.1) negotiation of a contract from 2000 to 2015; (e.2) the need to agree to arisk hedge clause; (f) Electroenergía insisted on entering into a new,additional contract, without having received any reply from Codensa to date; (g) Codensacannot seek to obtain a declaration of non-performance by Electroenergía ofobligations that are still not enforceable, because the contract has not beenregistered with the administrator of the SIC; (h)  Electroenergía made aseries of investments to set up an energy plant (Termobiblis), and signedcontracts, all of which was frustrated by the Codensa’s behavior totallycontrary to precontractual “good faith”; and (i) Codensa is liable forloss of earnings and indirect, special or consequential damages suffered byElectroenergía.

Process status: The proceeding is in the periodallowed for producing evidence.

Amount: Col$220 billion or US$ 89 millions.

 
| Plaintiff           | : Roberto Ramírez Rojas  (Class action lawsuit).                              |
|---------------------|-----------------------------------------------------------------------------------------|
| Defendant           | : Codensa, Bogotá Capital District and Alcaldía Zonal de San  Cristóbal. |
| Court               | : Cundinamarca  Administrative Court, Third Section - Sub-section “B”.   |
| Case/Identification | : Case file 03-1473.                                                                    |

Summary of proceedings:The Circo Victoria transmission lines I and II were built by Empresa Eléctricade Bogotá in 1962, when the site in which the towers holding it are located,was not populated. However, when Codensa was born as a legal entity, on October 23,1997, one of those towers (No.731) was surrounded by buildings put up after1983 but prior to 1996. The plaintiff demands protection for the followingcollective rights: a healthy environment; sanitization, security and preventionof technically foreseeable disasters; that buildings abide by statutoryregulations.

Process status: This is being processed by the Councilof State for unappealable judgment.

Amount:  Undetermined.

 
| Plaintiff           | : Conjunto Residencial  Iguazú (Class action lawsuit).                       |
|---------------------|----------------------------------------------------------------------------------------|
| Defendant           | : Codensa and Soacha  City Government.                                                 |
| Court               | : Cundinamarca  Administrative Court, Fourth Section - Sub-section “B”. |
| Case/Identification | : Case file  N°25000232700020030134201                                            |

Summary of proceedings:Codensa S.A. ESP was providing public lighting services to the Soacha districtsince the inception of the company (on October 23, 1997). The publiclighting infrastructure in the Soacha district is mostly owned by Codensa,through a contribution from Empresa Eléctrica de Bogotá (together with otherassets).

Soacha district called onbidders for the service of public lighting, the winner being Soacha Ciudad Luz(“Sociluz”), a temporary entity with which district representatives enteredinto concession contract No.004 on January 19, 1999. Codensa did not takepart in the concession contract. However, after that contract had beenexecuted, Sociluz hired Codensa to supply electricity, and rented the Codensainfrastructure, billing and collection systems. These are the conditions underwhich Codensa is related to the rendering of public lighting services inSoacha.

Process status: Procedural step / instance: On November 20,2008 the Council of State issued an unappealable judgment annulling theappealable judgment and all the petitions of the claim were rejected. Thehigher court argues that the 

 

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claims are inadmissible as the claim dealt with therights that are not collective and that class actions are not the means toobtain the discontinuance of the collection of a tax and the refund of the paidamounts. Judgment notified by edict on November 27, 2008.

Amount: Undetermined

 
| Plaintiff           | : Jorge Ernesto  Salamanca Cortés y Luis Alejandro Montero.                                |
|---------------------|-------------------------------------------------------------------------------------------------|
| Defendant           | : Codensa, Nación - Ministerio de Minas - Unidad de Planeación MineroEnergética. |
| Court               | : 3rd Administrative  Court of Bogotá Circuit                                              |
| Case/Identification | : Case file 05-2357                                                                             |

Summary of proceedings: In 14 areas of Bogotá thereare at least 35 built-up quarters more than 25 years old where the high andmedium voltage grid is “located in an anti-technical manner at several points,including in the front gardens of several houses”, so that people are seen tobe exposed to the risk of electrocution. The plantiffs consider that, as it islaid out, the grid creates a huge risk to which Codensa has not paid sufficientattention. Consequently, they are petitioning the Constitutional Judge to orderthe Company to lay the grid underground.

Process status: Period allowed for producing evidence.The Court appointed a new expert, who requested 30 days to issue a report (andhe was given those days). On December 1, 2008 the Court required theexpert to issue a report on the irregularities in construction work within 10days.

Amount:Undetermined

 
| Plaintiff           | : | Sonia Andrea Ramírez  Lamy                                                                                                                                                                                                                                   |
|---------------------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Defendant           | : | Ministry of the  Environment, Housing and Territorial Development; Autonomous Regional  Corporation of Cundinamarca — CAR; Technical Administrative Department of the  Environment — DAMA; Administrative Department of District Planning, and  others. |
| Court               | : | Administrative Court of  Cundinamarca, Section Two, Sub-section “B”.                                                                                                                                                                               |
| Case/Identification | : | Case file  No. 25000232500020050066202                                                                                                                                                                                                                       |

Summaryof proceedings: The action seeks to make the environmental authorities preservethe Eastern Hills of Bogota as a forest reserve, and also recover the resourcesaffected by illegal settlements, illicit mine workings, irregular buildingpermits, tree-felling and exploitation of flora and fauna.

Process status: On September 22, 2008 the Councilof State ordered to accept the transfer to plead the conclusion and the C.A.R.filed an appeal for reconsideration of judgment. The appeal for reconsiderationof judgment filed by C.A.R. on October 8, 2008 has not been solved. Theoffice received twenty petitions from different parties concerned in theproceeding with different petitions.

Amount: Undetermined .

 

**Ampla Energia e Serviços S.A.(“Ampla”)**

** **
| Plaintiff           | : Meridional S/A  Servicios, Emprendimientos y Participaciones |
|---------------------|----------------------------------------------------------------|
| Defendant           | : Ampla                                                        |
| Court               | : 9th Chamber of Rio de  Janeiro Public Finance                |
| Case/Identification | : 98.001.048296-8                                              |

Summary of Proceedings:Meridional - Mistral and Civel, represented by Meridional, claim they arecreditors of the former state electricity distribution company CELF, resultingfrom the existence of contracts of jobs undertaken for said company. Meridionalin its representation demands payment of invoices supposedly outstanding andthe payment of contractual fines for rescission of the contracts for the abovementioned jobs, for the sum of R$136,085,827.20

Process status: On December 18, 2007 the courtrecords returned from the prosecuting authority and were favorable to Ampla’sargument; therefore, the civil appeal of Meridional lost its purpose. On March 7,2008 the presence or absence of appeals in the three lawsuits attached wasrequested to be certified. On March 18, 2008 the appeal judge votedfavorably to Ampla, allowing Ampla to file other resorts such as infringingembargos and special resorts. The parties filed resorts (embargos ofstatement). On November 28, 2008 the court records were sent to the PublicProsecutor’s Office. This Office considered that the resorts filed by theparties should be disallowed. On November 18, 2008 the proceeding wasprocessed to issue a final decision. On November 28, 2008 a resolution wasissued. On December 2, 2008 the resolution was published so that theparties state their opinions on the resorts.

Amount:R$ 337.3 millions - US$ 142.6 millions.

 

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**Notes to the Consolidated Financial Statements – (Continued)**

 
| Plaintiff           | : Enertrade -  Comercializadora de Energía S.A                   |
|---------------------|-----------------------------------------------------------------------|
| Defendant           | : Ampla                                                               |
| Court               | : Getulio Vargas  Foundation Chamber for Conciliation and Arbitration |
| Case/Identification | : Arbitration procedure  No. 03/2005                             |

 

Summary of Proceedings:On December 22, 2002, Ampla and Enertrade signed a 20-year electric energysales contract (40MW average). This contract was sent to ANEEL for itsevaluation and resulting official approval. ANEEL approved the contract becausecertain conditions were fulfilled, among them, a 25% reduction in the price ofthe contracted energy (from R$97.4 R$72.6/MWh). Given this determination, Amplaonly paid the value authorized by ANEEL. ENERTRADE sustained that the contractwas tacitly approved by ANEEL due to the passage of time and obtained, throughjudicial demand No.2003.34.00.023785-2 against ANEEL, a provisional judicialmeasure that suspended the effects of the condition imposed by ANEEL, declaringthe contract tacitly approved by that entity. ANEEL has not yet been able tohave this provisional measure annulled. With the purpose of confirming theright assured by the provisional measure, Enertrade, in December 2005,established an arbitration procedure against Ampla, under no 3/2005 in the *Cámara de Conciliación y Arbitraje of the Fundación Getúlio Vargas*/RJ.Ampla continued to pay the reduced rate because, in addition to not being partof the process, it was not authorized to transfer the full cost to its tariffs.

Process status: On February 29, 2008 theArbitration Court delivered a judgment establishing a due date (March 24,2008) for closing the investigation. On March 17, 2008 the ArbitrationCourt extended the closing of the investigation for 30 days. On March 20,2008 the Arbitration Court delivered a judgment extending the period forcompleting the arbitration proceedings No.03/05 and No.04/06 to September 22,2008. On April 28, 2008 Ampla filed a claim against the expert’srequirements. On May 16, 2008 the Arbitration Court deferred the extensionof the period for 15 days for delivering the accounting expert’s finding. On June 10,2008 the accounting expert filed his finding at the Arbitration Court and tothe technical assistants of Ampla and Enertrade. On June 20, 2008 Amplainformed that it was opposed to some points in the expert’s finding. On June 27,2008 the Arbitration Court fixed the date for the adjudicative hearing (July 22,2008). The hearing took place on July 22, 2008. On August 29, 2008the Arbitration Court turned down the claim for partial judgment filed byEnertrade. On December 19, 2008 the Court informed the extension of theperiod to issue the judgment for 60 days.

Amount R$ 110.2 millions - US$ 46.5 millions.

 
| Plaintiff           | : Ampla                                                               |
|---------------------|-----------------------------------------------------------------------|
| Defendant           | : Enertrade -  Comercializadora de Energía S.A                   |
| Court               | : Getulio Vargas  Foundation Chamber for Conciliation and Arbitration |
| Case/Identification | : Arbitration procedure  No. 04/2006                             |

Summary of Proceedings: Counterclaim by Ampla againstEnertrade. The facts of this procedure are the same as arbitration procedure03/2005. Bearing in mind that the arbitration rules of this Chamber do notconsider counterclaims, Ampla petitioned for a new arbitration to beestablished, with a view to decreeing the nullity of the contract or,alternatively, its avoidance. In this case, the same arbitration court hasjurisdiction for hearing the case, which shall be processed together with theother proceeding. On August 28, 2006, Ampla petitioned in the arbitrationcourt for the nullity of the contract entered into with Enertrade, or,alternatively, vacating it, maintaining simply that the contract is null andvoid, since it was not ratified by ANEEL, as stipulated in the law, which wasan essential condition for entering into the contract; also null and voidbecause it infringes Law 8.884/94; it was entered into in unfair terms andconditions, typifying the abuse of the power of control; and the contract failsto comply with its business function.

Process status: Rebuttaland rejoinder presented. On January 12,2007, the parties presented graphs showing the stock ownership of the companiesinvolved in the arbitration, as well as also information about the companiesthat audited the parties and the companies linked to them. At the request ofthe Court of Arbitration, Ampla clarified the information presented, indicatingthe other auditing companies of the Endesa Spain Group. On February 12,2007, the petition for expert accounting and technical testimony required byAmpla was ordered, as well as also for expert witnesses. On March 2, 2007,the technical assistants were appointed and the legal standing and role of thewitnesses presented. Enertrade challenged the issues presented by Ampla. On March 16,2007 Ampla filed a reply to the challenge. On April 2, 2007, the Court ofArbitration notified the extension of the deadline for concluding thearbitration proceedings by 178 days. The new deadline is September 28,2007. On May 21, 2007, the experts for the technical and accounting expert

 

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testimonywere named. Theprogress of this proceeding is the same as above for the arbitration proceedingof Enertrade against Ampla.

Amount:R$ 40.2 millions - US$ 17 millions.

 
| Plantiff            | : Getec Guanabara  Química E Industrial S/A |
|---------------------|--------------------------------------------------|
| Defendant           | : Ampla                                          |
| Court               | : 3er Juzgado Civil de  Niterói             |
| Case/Identification | : 1996.002.017152-9                              |

Summary of Proceedings: Refund equal to the equivalentof 16.67% of electric energy invoices during March of 1986 through March of1991, and March 1991 going forward, twice such amount, with interestaccrued since date of litigation (September 26, 1997) and legal fees basedon 20% of the sentence.

Process Status: Execution phase, in which Ampla sustains the need for dismissal of thesentence. In a decision issued on September 4, 2008 the courts refusedspecial appeal presented by Ampla._

Amount: R$98.8 millions - US$ 41.7 millions.

 
| Plaintiff           | : Unión Federal                                |
|---------------------|-----------------------------------------------------|
| Defendant           | : Ampla                                             |
| Court               | : Organo Especial del TRF de la 2a Región |
| Case/Identification | : 2009655-3                                         |

Summaryof Proceedings: COFINS — INMUNITY. In the nineties, a large number of theBrazilian public utility companies files resorts against the tax known asCOFINS (Contribution for Financing Social Security) because they consideredthat the Brazilian Constitution exonerated them from that tax. Most of thecompanies lost the lawsuits. Ampla won the lawsuit (for the period from 1996 to2001), because the Tax Administration forgot to file an appeal against thedecision handed down by the court of appeal. However, the Prosecutor’s Officeof the Federal Union brought an exceptional action known as “an action forannulment” to attempt to annul the unappealable judgment favorable to Ampla.

Process status: In December,2003, the Regional Court of Rio de Janeiro (equivalent to the Court of Appeal)confirmed the inadmissibility of the action for annulment filed by the FederalUnion. On December 21, 2007, the Federal Union filed a Special Resortagainst the decision of the Rio de Janeiro Court rejecting unanimously all ofits previous appeals. This Special Resort is addressed to the Higher Court ofLaw (STJ), the court in Brasilia that rules on unconstitutional issues. On February 29, 2008 Ampla was notified tosubmit its reasons against the special resort filed by the Federal Union. Thespecial resort was filed without the extraordinary resort and there is judicialpractice that indicates that both resorts should be filed together. Therefore,there are arguments to consider that the extraordinary resort of the FederalUnion has become null and void. On April 30, 2008 the Regional FederalCourt (Court of Rio) decided not to accept the special resort of the FederalUnion, whose objective was to take the discussion on the admissibility of theannulment action to the Superior Court (Court of Brasilia). On June 12,2008 such decision was published. The Federal Union could still file a resortagainst this decision. The Federal Union filed a resort at the Superior Courton July 11, 2008. Ampla will be notified so that it files its pleadings withina 10 day period. The decision so that Ampla files its pleadings was publishedon September 11, 2008. Ampla filed its pleadings on September 22,2008. The judgment of the resort has not been delivered yet.

Amount:R$ 387 millions - US$ 166 millions.

 
| Plaintiff               | : *Secretaria  de Receita Federal* (“SRF”, theBrazilian IRS)                                   |
|-------------------------|----------------------------------------------------------------------------------------------------------|
| Defendant               | : Ampla                                                                                                  |
| Tribunal                | : Comisaría de la  Recaudación de Impuestos Federal de Niterói/RJ                         |
| Rol/Identificación | : Auto de Infracción No  0710200/00112/05 y Juicio Administrativo no 10730.003110/2005-55 |

Summaryof Proceedings: COFINS — Period after Immunity. In December, 2001, the articleof the Federal Constitution on which Ampla had based its discussion of immunitywith regard to the COFINS, pursuant to which Ampla did not pay this tax, wasamended. There is an article in the constitution that states that legislativechanges come into force 90 days after their publication. Based on this article,Ampla started paying the COFINS tax as of April, 2002. However, the SRF arguesthat this constitutional regulation only applies to changes to regulationsinvolving laws, but not the Constitution itself, whose amendments should comeinto force immediately. The SRF also claims that, as a result of Ampla’s change

 

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intax regimen (from earned to accrued), the taxable amount of the COFINS taxincreased during the first semester of 2002.

Process status: The actionwas notified in 2003. The decision of the 1st administrative instance wentagainst Ampla and an appeal with the second administrative instance was filed onOctober, 2004. The resort was ruled on recently in the 2nd administrativeinstance, partly favorable to the Treasury in terms of the period when changesto the Constitution come into force and partly favorable to Ampla in terms ofthe tax on income due to the change in tax regimen from earned to accrue. Taxesin question are estimated to be 35%. Once the amount owed by the SRF isdetermined, it may be enforced. The part of the Document that was accepted by the Court of Appeal isR$87,040. This will have to be confirmed by the Secretaria SRF. Once the amountdue by the SRF is calculated, this agency will be able to start the executoryprocess, when Ampla will discuss the constitutional issue. On April 8,2008 the Treasury Department filed a resort against this decision at the Courtof Appeal. On September 19, 2008 Ampla was called upon to make its pleafor the defense against the special resort filed by the Treasury Department. OnOctober 6, 2008 Ampla made its plea for the defense against theaforementioned resort and also filed a resort at the Court of Appeal to try tochange the part of the decision that was not favorable to Ampla. The judgmenthas not been delivered yet.

Amount: R$124.1 millions - US$ 53.1 millions.

 
| Plaintiff | : SRF                                                        |
|-----------|--------------------------------------------------------------|
| Defendant | : Ampla                                                      |
| Court     | : Commissariat of the  Niterói Federal Collection Tax   |
| ID Number | : Infraction Proceeding  0710200/00112/05 and Administrative |
|      |   Trial 10730.003110/2005-55 (d.38)                     |

Summary of Proceedings: FRNs — In order to finance itsinvestment in Coelce, in 1998 Ampla issued FRNs (bonds) for $350 millions  maturing in 2008, which were subscribed byCerj Overseas (an overseas subsidiary of Ampla, which former name was Cerj).The bonds have a special tax regimen consisting of no withholding tax (15% or25%) being applied on payment of interest abroad, always provided that, amongother requirements, there is no advanced amortization before the average termof 96  months. In order to acquire thesebonds, Cerj Overseas obtained financing outside Brazil consisting of a six-monthloan. At the end of the period (October, 1999) because of problems of access toother sources of financing, Cerj Overseas had to refinance with Ampla, whichgranted it a loan in reales. The Secretary of Federal Tax Collection arguesthat the tax concession had been lost in 1998, since the loans in realesgranted to Cerj Overseas by Ampla were the equivalent of an advancedamortization of the debt before the average amortization period of 96 months.Currently there remain FRNs for $ 169 R$40.2millions.   (The balance was capitalized in 2004).

Process status: The notice of infringement was notified inJuly, 2005. In August, 2005, Ampla filed a resort with the 1st administrativeinstance, and it was rejected. In April, 2006, a resort was filed with the Councilof Taxpayers (2nd administrative instance). On December 6, 2007, theCouncil of Taxpayers issued its verdict completely favorable to Ampla. Theperiod for executing the verdict and publishing the decision is estimated atabout 6 months. After the publication of the decision, the SRF will have 30days to file a resort.

Amount:R$ 557 millions - US$ 239 millions.

 
| Plaintiff           | : Secretary of Treasury                                                               |
|---------------------|---------------------------------------------------------------------------------------|
| Defendant           | : Ampla                                                                               |
| Court               | : Office of  Commissioner of Treasury                                                 |
| Case/Identification | : Infringement Document  No.03.177555-4; Administrative Proceeding No.E-34/059.193/05 |

Summary of Proceedings:ICMS FINE. In 2002, the State of Rio de Janeiro stipulated via a decree thatthe ICMS should be calculated and paid on the 10th, 20th and 30th of the samemonth accrued. Because of cash problems, Ampla continued to pay the ICMS underthe former system (payment until the 5th of the month after it accrued).

Process status:Notwithstanding an informal agreement with the State of Rio de Janeiro, and 2amnesty laws, in October, 2004, the State of Rio de Janeiro brought aproceeding against Ampla to collect the fine for late payments; Ampla appealedagainst the fine in the same year. In February, 2007, Ampla was notified of thedecision of the 1st administrative instance, which confirmed the proceedingbrought by the State of Rio de Janeiro. On March 23, 2007, an appeal waslodged with the Council of Taxpayers of the State of Rio de Janeiro (2ndadministrative instance). Ampla obtained a preliminary ruling in its favor thatenabled it to bring this resort without having to make a deposit of furnish aguarantee for 30% of the value of the updated fine. Waiting for the decision ofthe Council of Taxpayers.

Amount:R$ 135 millions - US$ 58 millions.

 

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**Notes to the Consolidated Financial Statements – (Continued)**

 
| Plaintiff             | : Companhia Brasileira de Antibióticos (CIBRAN) |
|-----------------------|------------------------------------------------------|
| Defendant             | : Ampla                                              |
| Court                 | : 1st Civil Court  of Itaboraí             |
| Number/Identification | : 2006.023.008555-6                                  |

Summary of proceedings: This is an action in which theplaintiff requires the compensation for damages as a result of loss of productsand raw materials, breaking of machinery, among other things, occurred due tothe poor service provided by Ampla between 1987 and May 1994, as well ascompensation for moral prejudice.

Process status: On June 4, 2008 a Judge’sdecision was published. The Judge partially accepted the precautionary measurefiled by Ampla to recognize the statute of limitations of the plaintiff’s claimin regard to the period from January 1993 in accordance with theregulation of the Civil Code. A resort was filed against that decision so thatin the event that the legal significance of the action is lost, it is possibleto try to recognize the statute of limitations based on the Consumer Code.CIBRAN filed a resort against that last decision on June 17, 2008. On August 27,2008 CIBRAN’s resort was rejected, as was published on September 1, 2008).

Amount R$ 69.5millions - US$ 29.3 millions.

 
| Plaintiff           | : Qualita’s Tecnología  y Servicios Ltda and Symon de Souza Coury |
|---------------------|-----------------------------------------------------------------------------|
| Defendant           | : Ampla                                                                     |
| Court               | : 4th Civil Court of  Niteroi County                                        |
| Case/Identification | : 2005.002.024695-9                                                         |

Summary of Proceedings: The plaintiff brought thissuit pleading that it had been created to serve Ampla since October, 1999 andthat this contract should be in force until March 31, 2009, being able tobe extended. The plaintiff petitioned for redress for material damages andmoral prejudice caused by an alleged unilateral annulment of the contract byAmpla, which would have caused the plaintiff damages of about R$54  millions.

Process status: On January 29, 2008 the adjudicative hearing took place. Also, thejudgment was delivered and determined a successive 10 day period for filingreports. Ampla filed its reports on February 11, 2008. On August 7,2008 the judgment was published. This judgment considered the plaintiff’s requestas inadmissible, and the issue as abated as result of the resolution of thelegal significance. The judgment also ordered the plaintiff to pay the courtcosts and the attorney’s fees amounting to 10% of the lawsuit. On November 25,2008 the resolution was published and determined the filing of argumentsagainst the resort of appeal filed by Qualita.

Amount:R$ 63.6 millions - US$ 26.7 millions.

 
| Plaintiff             | : Laboratorios B. Braun  S.A                           |
|-----------------------|--------------------------------------------------------|
| Defendant             | : Ampla                                                |
| Court                 | : Regional Federal  Court (RFC) of the 1st Region |
| Number/Identification | : 2003.002.026302-2                                    |

Summary of Proceedings: Refund of the amounts wronglycollected and the exclusion of invoices to be expired. All of this for 20%including interest and monetary correction.

Process status: Pre-trial proceedings. The producingof the expert evidence was deferred. Dr. Sylvio Batista dos Santos Filhowas appointed as an expert. He should be notified to file his finding in 20days. The parties were enabled to appoint a technical assistant and proposepoints to be considered in the investigation. Dr. Sylvio Batista did notaccept to conduct the expert’s investigation and a new expert was appointed, Dr. TavaresMoreira, who should be notified to inform whether he accepts to conduct theexpert’s investigation.

Amount: R$56.4 millions - US$ 23.8 millions.

 
| Plaintiff           | : Cibrapel S/A  Industria de Papel y Embalajes |
|---------------------|------------------------------------------------|
| Defendant           | : Ampla                                        |
| Court               | : Single Chamber of  Guapimirim County         |
| Case/Identification | : 1998.073.000018-6                            |

Summary of Proceedings:1) Plaintiff asks the court to order Ampla to indemnify the material and otherdamages caused by the poor quality of the services rendered by Ampla betweenthe years 1991 and 1998. 2) Plaintiff asks the court to order Ampla to refundthe amounts paid as a result of the price increase implemented followingadministrative resolutions 38 and 45 of 1986, which have been consideredillegal, both by the government and by the courts.

 

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Process status: On February 1, 2008 the judgmentwas published and was partially favorable to Ampla. On February 6, 2008 Amplafiled resorts requiring a change to the decision in regards to the payment ofcourt costs and attorneys’ fees. The resorts filed by Ampla were partiallyaccepted in regards to changing the judgment regarding the attorneys’ fees. On May 28,2008 the plaintiff’s resorts were rejected. The decision was published on June 16,2008. On July 1, 2008 Ampla filed a resort of appeal and so did theplaintiff. We are waiting for the opening of the period to file argumentsagainst the resort of appeal.

Amount: R$49.6 millions - US$ 20.9 millions.

 
| Plaintiff             | : Astec Assesoria de Serviço  Técnicos e Tributários Ltda. |
|-----------------------|---------------------------------------------------------------------------|
| Defendant             | : Ampla                                                                   |
| Court                 | : 4th Civil Court  of Niteroi                                        |
| Number/Identification | : 2007.002.074798-9                                                       |

Summary of proceedings: The plaintiff alleges thatAmpla has not complied with clauses of the agreement signed by the partiesregarding the rendering of consulting services.

Process status: This legal action was filed on December 19,2007. Ampla was notified to make its plea for the defense as rendered by Amplaon February 21, 2008. The plaintiff made its plea for the defense on May 26,2008. The Judge deferred the admission of additional proof of private documentsand accounting expert evidence, appointing Dr. Robson Gago as an expert.The parties were entitled to appoint technical assistants and prepare thepoints to be considered. After that, the expert will be notified so that hestates if he accepts the work and presents his fee proposal. The analysis ofthe producing of oral evidence will be performed after the filing of the expertevidence. The expert returned the proceeding with his fee proposal.

Amount: R$39.7 millions - US$ 16.8 millions.

 
| Plaintiff             | : Perma Ind de Bebidas S/A              |
|-----------------------|-----------------------------------------|
| Defendant             | : Ampla                                 |
| Court                 | : 2nd Civil Court  of Niterói |
| Number/Identification | : 2006.002.003327-9                     |

Summary of proceedings:Refund of the excessive collectionof electric energy rates.

Process status:Period for the hearing of the caseafter the redistribution of the proceeding to the Provincial Justice.

Amount:  R$ 35.4 millions - US$ 14.9 millions.

 
| Plaintiff             | : Fábrica Boechat Ltda.                           |
|-----------------------|--------------------------------------------------------|
| Defendant             | : Ampla                                                |
| Court                 | : Regional Federal  Court (RFC) of the 1st Region |
| Number/Identification | : 1999.01.00.019832-8                                  |

Summary of proceedings: Refund of the excessivecollection of the electric energy rate.

Process status: Period allowed for filing of anappeal.

Amount: R$34.4 millions - US$ 14.5 millions.

 
| Plaintiff             | : Municipality of  Itaboraí         |
|-----------------------|------------------------------------------|
| Defendant             | : Ampla                                  |
| Court                 | : 2nd Civil Court  of Itaboraí |
| Number/Identification | : 2004.023.004759-9                      |

Summary of proceedings: The claim is the review of theamount collected for the supply of electric energy to the plaintiff and doublerefund of the value paid in excess for the last ten years for the publiclighting in streets, squares and municipal public areas. The plaintiff allegesthat the collection is not consistent with the actual consumption, as theconcessionary company does not consider night time and turned off bulbscorrectly. This results in a difference in excess for 21.89% in invoices.

 

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Process status: The proceeding is in the periodallowed for the investigation. Return of court records by the expert on July 23,2008. The expert also informed his fees for R$102,000. On August 25, 2008Ampla was required to notify the expert so that he was informed of the methodof work used in the investigation.

Amount: R$23.8millions - US$ 10 millions.

 
| Plaintiff             | : Televisión Cidade  S/A.     |
|-----------------------|------------------------------------|
| Defendant             | : Ampla                            |
| Court                 | : 8th Civil Court  of Niteroi |
| Number/Identification | : 2004.002.008999-1.               |

Summary of proceedings: On May 3, 2004 the plaintifffiled an action to reduce the value of the agreement for the passing (support)of the plaintiff’s cables in the network of Ampla, alleging that the price ofthe agreement is excessively high.

Process status: On September 20, 2006 the courtrecords were sent to the expert and they are still under investigation.

Amount: R$24.1 millions - US$ 10.2 millions.

 
| Plaintiff             | : Real Veículos Com E Ser Ltda.                   |
|-----------------------|--------------------------------------------------------|
| Defendant             | : Ampla                                                |
| Court                 | : Regional Federal  Court (RFC) of the 2nd Region |
| Number/Identification | : 1997.51.01.104745-5                                  |

Summary of proceedings: Refund of the excessivecollection of electric energy rates.

Process status: Currently within appeal period.

Amount: R$18.6 millions - US$ 7.9 millions.

 
| Plaintiff           | : Electrovidro S.A                                   |
|---------------------|------------------------------------------------------|
| Defendant           | : Ampla                                              |
| Court               | : 8th Tax Court of the County of Río de Janeiro |
| Case/Identification | : 1995.001.065045-7                                  |

Summaryof proceedings: Lawsuit dated June 14, 1995 in which it is argued thatAMPLA infringed the rules of Statutory Decree 2283/86 which stipulatedfreezing of prices while the *Cruzado* Planwas in force. This plan corresponds to *Porteria* 45/86of the DNAEE which increased the rate for electrical energy for industrial useby 20%. The plaintiff petitions for the charge to be declared illegal and forrestitution of the amounts paid incorrectly with interest penalties.

Process status**:**The objection to theclaim filed by Ampla on February 20, 2008 was rejected. Against thedecision of harmonization of the expert’s finding issued on November 8,2007, both parties filed resorts (seizures of statement); however, they wererejected and so new resorts were filed (torts) by Ampla and Electrovidro (filenumbers 2008.002.02344 and 2008.002.02723). In regard to resortNo.2008.002.02344 filed by the plaintiff, the Court of Rio de Janeiro issuedthe decision to establish that the calculations of the settlement sentenceshould include the wrong increase value until the invoices of December 2005,when the expert’s finding was completed, recognizing the “cascade effect”.After that, due to the decision of its resort (tort), the plaintiff required tonotify Ampla to pay R$16,178,697.80 in accordance with Article 475-J ofCPC (Brazilian Civil Code), in regard to the improper “cascade effect” of therefund of the amounts for wrong payments, which was deferred by the judge. Therelated decision was published on May 5, 2008. A special resort was filedto change the Court’s Decision. After that, a tort was filed to give leave forthe special resort, which was distributed to the superior court and will beassessed by the Judge. Also, Ampla filed precautionary measureNo.2008.014.00082. The precautionary measure was deferred by the 3rd Vice-Presidency of the Court of Rio deJaneiro, which determined the interruption of the executory process. Afterthat, the special resort was rejected and the precautionary measure wasannulled. Also, we filed a new precautionary measure at the superior court.This measure was abated without considering the merits of the case. A tort wasfiled. This tort has not been assessed yet. In first instance Electrovidro tookup again the execution of the cascade effect in the restated amount of R$18.7millions , including the 10% fine of Article 475-J of CPC, calculated bythe Judge. Therefore, we filed a letter of bank hypothecation, which wasaccepted with guarantee of the appealable proceeding. The seizure of on lineassets required by Electrovidrio was turned down. For this reason, a tort wasfiled. In this resort of Electrovidro, on October 1, 2008 the Courtauthorized the blocking of 5% of the billing of Amplia up to 18.7 millionreales. Ampla requested the interruption 

 

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of the measure thatauthorized the seizure of 5% of the billing. This was approved by the HeadJudge. Electrovidro filed a resort whose judgment has not been delivered yet.Also, the Supreme Court has not delivered a judgment of a resort in which Amplatries to correct a material error of the final judicial decision arguing thatthis would give occasion for the execution of the cascade effect ofElectrovidro. An objection to the serving of the judicial decision was filed infirst instance in order to require the interruption of the serving until thefinal judicial decision on the incident. This was approved by the judge.Electrovidiro did not agree on the above and filed a resort. The judge approvedto continue with the serving, that is the 5% seizure of Ampla’s billing.Therefore, Ampla requested to reconsider that decision. The responsible judgeinformed that he understands that the preliminary measure is also interrupted.We are waiting for the judgment of the objection to serve the judicial decisionand the resorts at the Superior Court and Court of Rio de Janeiro.

Amount:R$ 19.5 millions - US$ 8.2 millions.

 
| Plaintiff             | : Companhia  Eletromecânica Celma                 |
|-----------------------|--------------------------------------------------------|
| Defendant             | : Ampla                                                |
| Court                 | : Regional Federal  Court (RFC) of the 2nd Region |
| Number/Identification | : 1994.002.005084-9  (2001.002.007238-8)               |

Summary of proceedings: Refund of amounts collectedand received excessively.

Process status: The final judicial decision thatsolved the settlement was published. Ampla filed a resort against such finaljudicial decision. The final judicial decision rejected the objection and fixedthe final value of the serving in R$298,853.85, plus interest and monetarycorrection that were already set from the date of the last calculation untilits actual payment. Some resorts were filed that were later rejected andresulted in the filing of an appeal. We are waiting for the plaintiff’sresponse.

Amount: R$16.5 millions - US$ 7 millions.

 
| Plaintiff             | : Engebra Empresa de Energia do Brasil Ltda. e Usina Termeléctrica de  Anápolis (UTE Daia) |
|-----------------------|------------------------------------------------------------------------------------------------------|
| Defendant             | : Ampla and other 26  concessionary companies                                                        |
| Court                 | : 6th Court of  Goiana                                                                          |
| Number/Identification | : 2008.02220430                                                                                      |

Summary of proceedings: Discussion on the value of theenergy purchase-sale contract and the value of VUC (variable unit cost ofgenerated energy) in accordance with the contract. The plaintiff requests therate recomposition and compensation.

Process status: The claim was notified on May 21,2008. An issue of jurisdiction is being processed. On July 17, 2008 Amplaand Coelce filed a resort (tort) against the decision on the jurisdictiondispute that provided a precautionary measure. The judge of the 6th CivilCourt of Goiás was appointed to process the emergency measures. On September 1,2008 the decision of the Court was published. The Court did not recognize thejurisdiction dispute unanimously. On September 10, 2008 Ampla and theother defendants filed resorts at the Superior Court. On November 10, 2008the Superior Court issued a decision, in which it rejected the resorts. As thelack of jurisdiction of the state justice of Goiânia to adjudicate the lawsuitwas determined, we are waiting for the distribution of the proceeding to theFederal Court of the Federal District so that it continues with the proceeding.

Amount: Undetermined

 
| Plaintiff             | : Usina Termeléctrica de Anápolis (UTE Daia)              |
|-----------------------|---------------------------------------------------------------------|
| Defendant             | : ANEEL, Federal Union, AMPLA and other 26  concessionary companies |
| Court                 | : 15th Court of the  Federal District                          |
| Number/Identification | : 2008.34.00.003724-2                                               |

Summary of proceedings: Discussion on the value of theenergy purchase-sale contract and the value of VUC (variable unit cost ofgenerated energy) in accordance with the contract. The plaintiff requests therate recomposition and compensation.

Process status: On August 7, 2008 the finaljudicial decision was published. This decision approved the request for thewithdrawal of the case by the plaintiff. The plaintiff and one of thedefendants (Elektro) on August 20 and 21, 2008, respectively, filed anappeal.

Amount: There is no amount (continued in lawsuitNo.2008.02220430 above)

 

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| Plaintiff             | : Fraspol Ind e Com  Ltda               |
|-----------------------|-----------------------------------------|
| Defendant             | : Ampla                                 |
| Court                 | : 7th Civil Court  of Niterói |
| Number/Identification | : 2005.002.014243-0                     |

Summary of proceedings: Refund the amount paidexcessively. The plaintiff alleges that there was an illegal increase in theelectric energy rate during the “Crossed Plan”. Process status: Ampla presentedthe expert’s fees for starting the works in progress. The findings of theexpert investigation were prepared and the parties expressed their opinionsthrough a resolution that will be published.

Amount: R$13.9 millions - US$ 5.9 millions.

 
| Plaintiff             | : Sadia Concórdia S A                 |
|-----------------------|--------------------------------------------|
| Defendant             | : Ampla                                    |
| Court                 | : 1st Civil Court  of Duque de Caxias |
| Number/Identification | : 1997.512.004615-5  (2004.001.10345)      |

Summary of proceedings: The Court ordered Ampla torefund the standing charges for electric energy rates paid in excess (20%) dueto the application of the adjustments in accordance with Resolutions 38 and 45during the period of price freeze, as well as their effects on the subsequentperiods, plus interest and monetary correction in accordance with the consumerprice index (CPI) and the attorneys’ fees fixed in 20% of the total value ofthe refund.

Process status: We are waiting that the plaintiffstarts the executory process of the court decision.

Amount: R$13.6 millions - US$ 5.8 millions.

 
| Plaintiff             | : Cerámica Marajó Ltda.  |
|-----------------------|------------------------------------|
| Defendant             | : Ampla                            |
| Court                 | : 3rd Civil Court  of Niteroi |
| Number/Identification | : 1998.002.026066-0                |

Summary of proceedings: Eliminate the illegal 20%increase in the invoices for electric energy consumption based on Resolution45/86 of DNAEE (Brazilian National Water and Electric Energy Department) andits consistent reflections on the subsequent invoices and refund all theamounts illegally received.

Process status: In executory process; we are waitingfor the preparation of the technical report by the judicial expert. Proceedingsent to the expert on March 19, 2008. Ampla filed an objection to theexpert finding.

Amount: R$ 13.2 millions - US$ 5.6 millions.

 
| Plaintiff             | : Pinto de Almeida  Engenharia S/A |
|-----------------------|------------------------------------|
| Defendant             | : Ampla                            |
| Court                 | : 7th Civil Court  of Niteroi |
| Number/Identification | : 1998.002.027241-7                |

Summary of proceedings: Absence of obligation of theplaintiff to pay the electric energy increased by Resolutions 38 and 45 andrefund of amounts wrongly paid from March 1986, plus interest and monetarycorrection; order the defendant to reduce future invoices in the sameproportion of the increases supported by those resolutions.

Process status: The lawsuit was reopened by theplaintiff to start the executory process of the court decision.

Amount: R$ 11.7 millions - US$ 6.3 millions.

 

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**Notesto the Consolidated Financial Statements – (Continued)**

 
| Plaintiff             | : Roberto Barbosa Ramos  and Almira Barbosa Ramos |
|-----------------------|---------------------------------------------------|
| Defendant             | : Ampla                                           |
| Court                 | : Court of Arraial do  Cabo                       |
| Number/Identification | : 2002.005.000034-6                               |

Summary of proceedings: Compensation for death of achild due to electrocution. The parents try to obtain compensation for moralprejudice equivalent to 20,000 minimum wages for R$ 59 millions.

Process status: Proceeding in the period allowed forpre-trial proceedings. We are waiting for the filing of the fee proposal by theexpert and the subsequent start of the expert’s investigation. The expert’sfees were proposed for R$ 4,750. That decision was objected. The objection hasnot been processed yet. After that, the expert evidence should be performed.The expert maintained the value of his fees. Therefore, there was a new requestso that the expert expresses his opinion on a possible reduction of his feesand financing of the amount required.

Amount: R$21.8 millions - US$ 9.2 millions.

 
| Plaintiff             | : Compañía Brasileña de  Antibióticos (Cibran) |
|-----------------------|--------------------------------------------------------------------|
| Defendant             | : Ampla                                                            |
| Court                 | : 11th Court of the  Treasury of Rio de Janeiro               |
| Number/Identification | : 2000.001.109379-0                                                |

Summary of proceedings: Questioning of the calculationbase of the ICMS (Brazilian VAT) as it includes the value of the same tax(“inside” calculation).

Process status: In the initial period allowed forpre-trial proceedings. On March 5, 2008 the prosecuting authority returnedthe proceeding and we are waiting for the proceeding to start being processed.

Amount: Undetermined.

 
| Plaintiff           | : Union of Workers in  the Niterói Electrical Energy Industry representing a class action suit by  2841 |
|---------------------|--------------------------------------------------------------------------------------------------------------|
| employees           |
| Defendant           | : Ampla                                                                                                      |
| Court               | : Niterói Work Chamber                                                                                  |
| Case/Identification | : Labour Complaint  884/1989                                                                                 |

Summary of Proceedings  :In April 1989, the Niterói Union, in representation of 2841 employees,launched an action claiming salary differences of 26.05% since February 1989that were related to the economic plan instituted by Decree Law 2.335/87, or“Summer Plan”.

Process status: Ordinary proceedings have finished. The currentdiscussion is focused on the compliance with the final judicial decision whereexecution motion to dismiss was filed. The main proceedings were accepted inaccordance with the execution motion to dismiss. We are waiting for thedecision on the resort filed the plaintiffs.

Amount: R$48.3millions - US$ 20.4 millions.

 
| Plaintiff | : Selma de Souza  and 122 other plaintiffs |
|-----------|--------------------------------------------|
| Defendant | : Ampla                                    |
| Court     | : 2nd Employment  Chamber of Niterói  |
| ID Number | : Work Complaint No.3142/1995              |

Summary ofProceedings  : The plaintiffs were fired by the Company and demand tobe reinstated and to have their right of employment stability recognized.

Process status: AccessoryInnominate Action for Provisional Resort filed, taking into account that theprevious Action for Provisional Resort, which kept the plaintiffs out of thecompany, was repealed by the effect of the Tort filed in the Claim proceedingssubmitted by the plaintiffs to the TST, which understood that it was competentto do justice to the suspensive effect in question. In the face of the positionadopted by the TST, this Action for Provisional Resort was filed seeking tostay the effects of the advanced tutelage and also have a suspensive effect onthe ordinary resort filed in the pleas and proceedings of the case, with suchbeing favorable to the company’s position. The court records were taken fromBrasilia to the Regional Labor Court (RLC) to consider the legal significanceof the resort; however, this will be adjudicated after the proceeding of theresort filed at the Federal Supreme Court.

 

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Amount:R$ 70.2 millions - US$ 29.6 millions.

 
| Plaintiff             | : José Reynaldo  Ferreirinha and Others |
|-----------------------|----------------------------------------------|
| Defendant             | : Ampla and Brasiletros                      |
| Court                 | : 3rd Labor Court of  Niterói           |
| Number/Identification | : Labor Claim 2422/1990                      |

Summary of proceedings: Theplaintiffs requested the jointly sentence, differences of complements andadditional of retirement pension, plots expired and to be expired withreflections and attorneys’ fees.

Process status: We arewaiting for the decision on the appeal filed by Ampla.

Amount: R$ 16.3 millions -US$ 6.9 millions.

 
| Plaintiff             | :  Ampla                                      |
|-----------------------|-----------------------------------------------|
| Defendant             | :  Instituto Nacional de Seguro Social (INSS) |
| Court                 | :  1st Federal Court of Niteroi               |
| Number/Identification | :  2005.51.01.011845-3                        |

Summary of proceedings:Ampla filed an action against INSS (National Social Security Institute)requesting the right to receive the contribution to the occupational accidentinsurance (OAI) in accordance with the level of risk of the activity mainlycarried out in every place of business (parent company and subsidiaries)legally incorporated and the level of risk of the activity carried out by thecompany.

Process status: The companyrequired the producing of proof of private documents, expert evidence andevidence of witnesses. Evidentiary stage closed and judge is considering hisruling since July 31, 2008.

Amount: R$ 0.2 millions - US$84,424

 
| Plaintiff             | :  Federal Union                       |
|-----------------------|----------------------------------------|
| Defendant             | :  Ampla and others                    |
| Court                 | :  5th Federal Court of Niterói   |
| Number/Identification | :  2008.51 of February 20001414-1 |

Summary of proceedings: Thepurpose of this executory process distributed to Ampla and its directors andformer directors is the service of dispossession of debit: 35.887.326-6 and35.887.328-2, regarding the contribution to the OAI. The legal significance wasdiscussed in proceeding No.2005.51 of February 20011845-3. Ampla filed aclaim requiring to exclude from the liabilities of this executory processAmpla’s directors and former directors, considering that this company alreadytook on the responsibility for the debit of this action when fully guaranteedthe action for provisional resort No.2008.51 of February 20001005-6. Thetransfer of the letters of hypothecation guaranteed in this action forprovisional resort to the executory process in order to file resorts againstexecutory process was required (this was granted in the trial).

Process status: On November 7,2008 we filed execution motion to dismiss regarding the current directors inorder to exclude them. On November 11, 2008 resorts against the executoryprocess were filed. On November 19, 2008 a judicial decision was issued.This decision stated the opinion of the Public Prosecutor’s Office of theTreasury on Ampla’s claim of motion to dismiss and the negative representationsof service of the legal process regarding the former directors. On November 21,2008 the court records were sent to the Public Prosecutor’s Office of theTreasury. We are waiting for the opinion of the Public Prosecutor’s Office ofthe Treasury on the claim of motion to dismiss filed by Ampla.

Amount: R$ 19 millions - US$8 millions.

 
| Plaintiff           | :  Ampla                                                            |
|---------------------|---------------------------------------------------------------------|
| Defendant           | :  Unión Federal                                               |
| Court               | :  2nd Federal Court of Niterói.                               |
| Case/Identification | :  Ordinary Proceeding 96.0035652-1 and Civil Appeal 98.02.09149-9. |

Summaryof proceedings: PIS — This is an ordinary proceeding in which AMPLA seeks toobtain tax immunity for collection of the tax known as PIS. It also seeks forthe Federal Union to be sentenced to reimbursing all the amounts collected overthe past five years since August, 1996, based on paragraph 3 of article 155 ofthe Federal Constitution.

Process status: Appealablejudgment unfavorable to Ampla. On August 5, 2008 the judicial decision waspublished and considered as admissible the resorts (seizures of statement)filed by Ampla. Ampla filed a claim to confirm what was requested and requestthat the executory process should start. On October 15, 2008 the decisionthat determined the remittance of the proceeding to the judicial accountant sothat the calculations filed by Ampla were compared was 

 

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**Notesto the Consolidated Financial Statements – (Continued)**

 

published. Ampla filed aresort (seizure of statement) against such decision so that the proceeding isnot sent to the judicial accountant as the judicial accountant alreadyexpressed his opinion that he has no technical qualifications to compare thecalculations. We are waiting for the judge’s ruling.

Amount: R$ 23.6 millions -US$ 10 millions.

 
| Plaintiff             | :  Office of Treasury                                                                     |
|-----------------------|-------------------------------------------------------------------------------------------|
| Defendant             | :  Ampla                                                                                  |
| Court                 | :  Board in Full Attendance                                                               |
| Number/Identification | :  Infringement Document No.01.082242-7 and Administrative Litigation  No.E-04/893.637/99 |

Summary of proceedings: Taxsanction due to presumptive difference in the payment of ICMS (Brazilian VAT).Ampla is an ICMS debtor for wrong VAT credits in connection with amounts ofentry of products intended for fixed assets.

Process status: On July 27,1999 Ampla filed its objection to the Infringement Document, which wasconsidered as inadmissible by the Tax Review Authority of the State of Rio deJaneiro. As a result, Ampla filed a voluntary appeal, which was no accepted bythe 3rd Chamber of the Taxpayers Council.Due to the new decision unfavorable to Ampla, Ampla filed a resort at the Boardin Full Attendance. The proceeding is in the period allowed for steps and thenwill be adjudicated by the Board in Full Attendance. The decision of the courthas not been issued since February 25, 2008

Amount:R$15.3 millions - US$ 6.5 millions.

 
| Plaintiff             | :  Municipality of Magé        |
|-----------------------|-------------------------------------|
| Defendant             | :  Ampla                            |
| Court                 | :  Municipal Office of the Treasury |
| Number/Identification | :  Infringement Document No.1056    |

Summary of proceedings: Infringement Document prepared in order tocollect the Land Use Rate between 2000 and 2005.

Process status: Ampla filed an objection to the infringement document.Waiting for the appealable decision of the Court.

Amount: R$ 12.9 millions - US$ 5.5millions.

 
| Plaintiff           | :  ASOBRAEE - Brazilian Association of Consumers of Water and Electricity |
|---------------------|---------------------------------------------------------------------------|
| Defendant           | :  Ampla                                                                  |
| Court               | :  5th Civil Court of Niteroi County                                      |
| Case/Identification | :  2006.002.002621-4                                                      |

Summary of Proceedings: The Plaintiff presented thisaction requiring that the DNAEE no 038 and 045 Resolutions of 1986 be declarednull. These resolutions established the rate adjustment, for which AMPLA may becondemned to the restitution of the improper charge, equivalent to 20% of whatit would have charged all the consumer in the period from March to November 1986,as well as to force Ampla to present the complete schedule of payments made forall of the consumers in the period from March to November 1986.

Process status: The resort filed by Ampla against the decisionthat adjudicated the incident of objection to the value of the lawsuit became aretained resort for the preliminary assessment for the appeal trial by theCourt of the State of Rio de Janeiro.

Amount: Undetermined.

 
| Plaintiff:          | :  Consumer Defence Commission of the Legislative Assembly of the State of Rio  de Janeiro |
|---------------------|--------------------------------------------------------------------------------------------|
| Defendant           | :  Ampla                                                                                   |
| Court               | :  7th Business chamber of the State of Rio de Janeiro                                     |
| Case/Identification | :  2005.001.084370-8                                                                       |

Summary of Proceedings:This is a Public Civil action launched in order to prevent the installation ofelectronic measurement meters. The plaintiff states that this modernization’sonly purpose is to prevent theft of electricity and would actually deprive consumersof their right to information. Plaintiff argues that it is Ampla’sresponsibility to detect electricity theft in other ways and not put the burdenon the consumer.

Process status: Amplasubmitted allegations against the Appeal filed by the Plaintiff and theproceedings were then remitted to the Justice Court. The Appeal entered thecourt under No. 2006.001.22785 and was distributed to the 15th 

 

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**Notesto the Consolidated Financial Statements – (Continued)**

 

civil chamber of thecourt. The court, by unanimous decision, rejected the appeal, which waspublished on August 16, 2006. The Plaintiff then filed a Special Recourse,with the proceedings being remitted to the 3rd Vice-presidency of the court. OnOctober 16, 2006 Ampla submitted its allegations. On October 25,2006, the proceedings were remitted to the “Procuraduria General de Justicia”and were returned on November 22, 2006. On January 3, 2007, thisresort was rejected. On January 16, 2007, the Plaintiff filed instrumenttort against the decision that rejected the special resort. On March 6,2007, the instrument tort was remitted to the Higher Court. On April 12,2007, the case records were remitted to the reporting clerk, where they havebeen to this date. On September 11, 2007, the decision accepting hearingof the Special Resort by the Higher Court was published. On October 16,2007 the court records were sent to the Superior Court.

Amount:Undetermined

 
| Plaintiff           | :  Macao Consumer and Worker Defense Association - AMADECONT |
|---------------------|--------------------------------------------------------------|
| Defendant           | :  Ampla                                                     |
| Court               | :  Single Chamber of the County of Río das Ostras       |
| Case/Identification | :  2004.068.001287-1                                         |

Summary of Proceedings:The plaintiff launched this action requesting partial power in advance toprevent the Defendant from charging the TMIP (“Municipal Street LightingRate”), and requesting that Ampla be required to refund the amounts wronglycharged and pay the costs of the trial.

Process status: The prosecuting authority filed a resort (atort - Proceeding 2008.002.22940) against the decision that rejected thetrusteeship. On August 15, 2008 the decision was published. This decisionaccepted the tort and determined that Ampla is refrained from collecting theTIP in the electric energy invoices of consumers in the district of Río dasOstras until the end of the lawsuit. On August 22, 2008 Ampla filedresorts (seizures of statement). On September 1, 2008 the judicialdecision was issued. This decision accepted the resorts (seizures of statement)imputing the change of the effects to such resort and rejected to follow up theresort of the prosecuting authority (tort). On September 5, 2008 Amplainformed the Judge about the decision of the appeals for reconsideration ofjudgment filed against the decision issued in the trial documents of theresort. On November 3, 2008 this was removed from the resort.

Amount: Undetermined

 
| Plaintiff           | :  General Attorney’s Office of the State of Rio do Janeiro |
|---------------------|------------------------------------------------------------------|
| Defendant           | :  Ampla and Municipality of Paraty                              |
| Court               | :  Single Court of Paraty County                                 |
| Case/Identification | :  2005.041.001008-9                                             |

Summary of Proceedings:The plaintiff brought this suit petitioning, by way of advanced tutelage,sentencing of the Municipality of Paraty to abstain from collecting theContribution for Street Lighting (CIP), under penalty of a fine of R$50,000.00(US$23,277.46) and, additionally, that Ampla should be compelled to collect theCIP separately, although on the same energy consumption bill, using differentbar codes, under penalty of a fine of R$10,000.00 (US$4,666.79).

Processstatus: On July 3, 2008 the judgment was delivered. This judgmentconsidered the proceeding as abated with no resolution of the legalsignificance. On July 11, 2008 the court records were sent to theprosecuting authority and they were returned on July 29, 2008. On August 4,2008 the court records were sent to the Treasury Department and they werereturned on August 8, 2008. The judicial decision was published on September 24,2008.

Amount:Undetermined

 
| Plaintiff           | :  Municipality of Paraty        |
|---------------------|----------------------------------|
| Defendant           | :  Ampla                         |
| Court               | :  Single Court of Paraty County |
| Case/Identification | :  2005.041.001124-0             |

Summary of Proceedings: Theplaintiff brought this suit petitioning for: 1) Acceptance of the precautionarymeasure for Ampla to abstain from shutting off the power supply services, underpenalty of a fine of R$10,000.00 (US$4,666.79) to be applied to eachnon-compliance of the delegated order, without detriment to any other possiblepenalties; 2) That Ampla should maintain the regularity of the system of supplyand maintenance of the power transmission grid in satisfactory conditions forthe users; 3) That Ampla should be sentenced to submit and execute within areasonable period of time a project to modernize the grid, consisting ofimprovements to the power transmission equipment and 

 

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**Notesto the Consolidated Financial Statements – (Continued)**

 

lines in the area of theMunicipality of Paraty; 4) the injunction for the Public Prosecutor’s Office tobe a party to or to act in the case of legal expenses; and 5) The injunction ofthe Granting Power in the case, the State of Río de Janeiro, to express aninterest in the case through its legal representative.

Process status: The court records were returned by theexpert on June 11, 2008. On June 30, 2008 the court records were sentto the Municipal Treasury and they were returned on July 31, 2008. TheMunicipal Treasury filed an objection to the expert’s fees proposal. On August 21,2008 the court orders were published. These court orders determined that theparties should express their opinion on the expert’s motion, which reduced hisfees proposal to R$60,000.

Amount: Undetermined.

 
| Plaintiff             | :  Universidade Federal Fluminense |
|-----------------------|------------------------------------|
| Defendant             | :  Ampla                           |
| Court                 | :  4th Federal Court               |
| Number/Identification | :  2000.51.020.04388-9             |

Summary of proceedings: The plaintiff filed a claim for the absence ofjudicial relationship between the plaintiff and the Province of Rio de Janeiro,in regard to the ICMS (Brazilian VAT) on the electric energy supply. Theplaintiff alleges the unconstitutionality of the ICMS on electric energyinvoices as it has tax immunity.

Process status: On June 13, 2003 the judicial decision waspublished. The decision considered the plaintiff’s request inadmissible. On July 13,2005 the appeal filed by the plaintiff was sent to the reporting clerk.

Amount: Undetermined.

 
| Plaintiff             | : |  Sindicato da Indústria de Cerâmica para  Construção de Campos (Union of the Construction Ceramics |
|-----------------------|---|-----------------------------------------------------------------------------------------------------------------------------|
| Industry  of Campos)  |
| Defendant             | : | Ampla                                                                                                                       |
| Court                 | : | 6th  Civil Court of Niterói                                                                                            |
| Number/Identification | : | 2003.002.019554-5                                                                                                           |

Summary of proceedings: The Union of the Construction Ceramics Industryof Campos filed an action against Ampla alleging that the ICMS should notaffect the demand for hired power, but the demand for power actually measured.

Process status: On June 23, 2008 the courts orders were published.These court orders determined the opinion of Ampla. On July 1, 2008 Amplasigned the claim and informed that it already completed the costs of the benchwarrant. On August 19, 2008 the positive warrant of writ of summons by theState was attached. On October 9, 2008 this was removed from the letterrogatory. The letter rogatory is expected to be attached to the court records.

Amount: Undetermined

 
| Plaintiff           | :  State Attorney General’s Office       |
|---------------------|-----------------------------------------------|
| Defendant           | :  Ampla                                      |
| Court               | :  2nd Civil Chamber of Town of Saint Gonzalo |
| Case/Identification | :  2003.004.034117-9                          |

Summary of Proceedings: Plaintiff launched the Public Civil Actionrequesting first that Ampla be ordered to supply the regular consumers of SaintGonzalo a quality electrical energy service without interruptions, and take allmeasures necessary to prevent such interruptions, even if in order to achievethis it must restructure all of its equipment; in the event it is absolutelynecessary to interrupt the supply, then the restoration of supply must beimmediate or the fine shall be R$10,000 a day.

Process status: On November 13, 2008 the court records were sentto the prosecuting authority and they were returned on November 13, 2008.

Amount: Undetermined

 
| Plaintiff             | :  Federal Prosecuting Authority        |
|-----------------------|-----------------------------------------|
| Defendant             | :  Ampla                                |
| Court                 | :  17th Federal Court of Rio de Janeiro |
| Number/Identification | :  2008.51.01.012193-3                  |

Summary of proceedings: A criminal indemnification action based onAmpla’s administrative investigation of the electronic meters. Requires as aprecautionary measure that Ampla refrains from (i) issuing an invoice orcollecting 

 

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**Notesto the Consolidated Financial Statements – (Continued)**

 

based on measurements made by electronic meters versions CS 5.0.2,6.0.1 and 6.0.2; (iI) interrupting the electric energy supply to consumers thatare in debit in connection with invoices issued based on electronic metersversions CS 5.0.2, 6.0.1 and 6.0.2; (iII) inserting in restrictive creditrecords the names of such users that are in debit. Also requires that ANEELinspects the compliance with the precautionary measure by Ampla and  that Ampla pays equity damages and moralprejudice through credit in the invoice of electric energy.

Process status: On December 4, 2008 the resolution was published.This resolution ordered to provide with the copy of the claim filed by theFederal Office of the Public Prosecutor on July 11, 2008 as it was lostor, if not possible, that both parties express their opinions (the plaintiffsfirst) within a ten successive day period.

Amount: R$ 21 millions - US$ 9 millions

 
| Plaintiff             | :  Labor Prosecuting Authority     |
|-----------------------|------------------------------------|
| Defendant             | :  Ampla                           |
| Court                 | :  3rd Labor Court of Niterói |
| Number/Identification | :  2028/2001                       |

Summary of proceedings: The purpose of this action is to order Ampla torefrain from absorbing labor through a company (subcontract); otherwise, Amplawill be imposed a daily fine for noncompliance.

Process status: The court unanimously rejected the judgment of bothresorts to maintain the judicial decision in all respects. Ampla filed resorts.

Amount: Undetermined

 
| Plaintiff                                                                          | : | Sindicato  de Trabajadores de las Industrias de Energía Eléctrica del Norte y Noroeste  Fluminense (Labor |
|------------------------------------------------------------------------------------|---|---------------------------------------------------------------------------------------------------------------------|
| Union  of Electric Energy Industries of the North and Northwest of Rio de Janeiro) |
| Defendant                                                                          | : | Ampla                                                                                                               |
| Court                                                                              | : | 2nd  Labor Court of Campos dos Goytacazes                                                                           |
| Number/Identification                                                              | : | 1388/2003                                                                                                           |

Summary of proceedings: This is a suit intended to order Ampla in theobligation of not doing (refrain from absorbing labor through a company -subcontract); otherwise, Ampla will be imposed a daily fine for noncompliance.

Process status: Waiting for the period allowed for opinion about theexpert finding.

Amount: Undetermined

 
| Plaintiff             | :  Ampla                                                                       |
|-----------------------|--------------------------------------------------------------------------------|
| Defendant             | :  Federal Union                                                               |
| Court                 | :  2nd Federal Court and 4th Group of Regional Federal Court of the 2nd Region |
| Number/Identification | :  Action No.96.0035653-0 and Civil Appeal No.98 of February 2021000-5    |

Summary of proceedings: COFINS — Action filed by Ampla requesting: 1)Decree of tax immunity of Ampla for COFINS (social security financing tax); and2) To order the Federal Union to refund the payments made on account of COFINSin the last five years duly corrected and increased in accordance with legalcharges. As a result of the decision processed in the court and announced ininjunction No.92.0113589-4, Ampla changed its requests maintaining only request2 (refund of payments).

Process status: On May 2, 1997 the final judicial decision wasissued. This decision considered as inadmissible Ampla’s request and ordered topay the fees based on 5% of the value of the lawsuit. On August 15, 2006the court rejected the judgment of Ampla’s resort and accepted the judgment ofthe supporting resort of the Federal Union so that the proceeding returns tofirst instance and the Federal Union files a new plea due to the change inAmpla’s request. On December 6, 2006 the Court’s decision was published.This decision rejected the judgment of Ampla’s resort. On December 11,2006 Ampla filed resorts so that the court explains the omission of thejudicial decision. The trial for the resorts is pending.

Amount: Undetermined

 

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**Notes to the ConsolidatedFinancial Statements – (Continued)**

 
| Plaintiff           | :  Ampla                                                                          |
|---------------------|-----------------------------------------------------------------------------------|
| Defendant           | :  Federal Union                                                                  |
| Court               | :  4th Federal Chamber of Niterói and 4th Group of the TRF of the 2nd Region |
| Case/Identification | :  Ordinary Action No.96.0035387-5 and Civil Appeal No.1999.02.01.047064-8 (d.4)  |

Summary of Proceedings: FINSOCIAL - Ampla seeks to obtain thedeclaration that the tax-legal relationship (tax immunity) does not exist asregards the payment of the tax called FINSOCIAL, which would have an impact onits gross monthly revenue. It also seeks to have the Federal Union forced torefund the total amount collected in the last five years, starting from October 1996and, if the foregoing is not possible, that the Federal Union be made to refundthe difference between the amount paid in accordance with Laws 7,787/89,7,784/89 and 8,147/90, and that due in accordance with Decree Law No.1.940/82,in the same period referred to above..

Process status: The lower court’s decision declared without grounds therequest for immunity, but accepted the petition to declare unconstitutional theincreases in the FINSOCIAL tax rate above 0.5% and the right to offset the saidexcess in current and future taxes due. The appeals of Federal Union and Amplawere filed. The proceedings were sent to Federal Regional Court where they arecurrently awaiting a judgment on the two appeals The judgment of the appealsfiled by Ampla and the Treasury was delivered on December 2, 2008. TheRegional Federal Court rejected the resorts and maintained the appealabledecision.

Amount: Undetermined

 
| Plaintiff             | :  Ampla                                                                                            |
|-----------------------|-----------------------------------------------------------------------------------------------------|
| Defendant             | :  Federal Union                                                                                    |
| Court                 | :  3rd Group of the Regional Federal Court of the 2nd Region and 1st Federal  Court of Niterói |
| Number/Identification | :InjunctionNo.98ofFebruary2002033-8andAppealagainstInjunctionNo.2000ofFebruary2001.055412-5         |

Summary of proceedings: This is an injunction against the act to beperformed by the Commissioner of the Federal Tax Collection in Niterói intendedto ensure that Ampla is fully indemnified for the tax impairment for thepurpose of clarification of the calculation base of IRPJ (Income Tax on LegalEntities), and negative calculation bases for the purpose of the CSLL (CompanyContribution on Loss of Profits) clarified until December 31, 1994(excluding 1993) not subject to the 30% limit of taxable profit.

Process status: Appealable judgment totally favorable to Ampla. TheCourt has not delivered a judgment of the resort filed by the Federal Union atthe Regional Federal Court since February 23, 2005. Due to the decisionannounced in the court proceedings 98.0207129-3, Ampla paid the infringementdocument related to such proceeding amounting to R$5,785,915.75. This amountmay be recovered in the event that the lawsuit is favorable.

Amount: Undetermined

 
| Plaintiff             | :  Ampla                                                                                            |
|-----------------------|-----------------------------------------------------------------------------------------------------|
| Defendant             | :  Federal Union                                                                                    |
| Court                 | :  3rd Group of the Regional Federal Court of the 2nd Region and 1st Federal  Court of Niterói |
| Number/Identification | :InjunctionNo.98ofFebruary2007129-3andAppealagainstInjunctionNo.1998.51ofFebruary20207129-6         |

Summary of proceedings: This is an injunction against the Commissionerof the Federal Tax Collection in Niterói intended to ensure that Ampla to befully indemnified for the tax impairment for the purpose of the calculation ofthe calculation base of IRPJ (Income Tax on Legal Entities) and the negativecalculation bases for the purpose of the CSLL (Company Contribution on Loss ofProfits ) for 1993, 1995 and 1996 with profits generated in base years 1998 andsubsequent years, not subject to the 30% limit of taxable profit.

Process status: Appealable judgment totally favorable to Ampla. TheFederal Union filed a resort at the Regional Federal Court (RFC). The decisionof the RFC was to partially accept the appeal filed by the Federal Union. Afterthe publication of the decision of the court in regard to the appeal, Amplafiled resorts to pre-question some points to be included in the resorts at thesuperior courts. The resorts were rejected and Ampla filed a resort at thesuperior court and superior federal court. On February 22, 2008 the courtorders were published. These court orders accepted the resorts. On April 11,2008 the proceeding was distributed to the superior court to deliver a judgment(number of the resort at the superior court 1041385).

Amount: Undetermined

 

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**Notes tothe Consolidated Financial Statements – (Continued)**

 
| Plaintiff             | :  Ampla                           |
|-----------------------|------------------------------------|
| Defendant             | :  State of Rio de Janeiro         |
| Court                 | :  Superior Court                  |
| Number/Identification | :  Injunction No.2002.001.110494-9 |

Summary of proceedings: Injunction issued so that the authorityrefrains from perform any act intended to collect the ICMS (Brazilian VAT)established by Decree No.31.632/02.

Process status: On October 13, 2008 the Treasury filed itsarguments against Ampla’s resorts. On December 18, 2008 the judgment ofthe resort was delivered. The judge rejected the judgment of the resort, butanother judge request to see the proceeding and interrupted the judgment.

Amount: Undetermined

 
| Plaintiff             | :  Ampla                                             |
|-----------------------|------------------------------------------------------|
| Defendant             | :  Federal Treasury — Federal Union             |
| Court                 | :  Federal Court of Niterói                     |
| Number/Identification | :  Injunction No.2008.51 of February 20004965-9 |

Summary of proceedings: The purpose of the lawsuit is to exclude theICMS (Brazilian VAT) from the taxable base of the taxes for PIS (BrazilianSocial Integration Program) and COFINS (social security financing tax).

Process status: The claim was filed on December 17, 2008.

Amount: Undetermined

 

**Coelce S.A.**

 
| Plaintiff           | : Romério Moreira de Deus             |
|---------------------|--------------------------------------------|
| Defendant           | : Coelce                                   |
| Court               | :  Court of the State of Ceará (TJCE) |
| Case/Identification | :  2000.0161.6981-7.                       |

Summary of proceedings: The Plaintiff is the owner of a plot of land inAracati/Ceará, where Coelce built several electrification networks, withouthaving compensated the client. Thus, the plaintiff intends to prevent theconstruction of new electrification networks and have the existing onesremoved. Coelce won the lawsuit in the first instance by having it dismissed.However, the sentence was revoked on appeal and Coelce was sentenced to removethe new networks in the process of being installed and pay about $3.3 millionsas compensation. As a result of the above, the plaintiff filed for enforcementof the sentence, petitioning a credit based on a compensation of nearly $3.3millions. In parallel, Coelce has appealed for the sentence by the Court ofAppeal, in terms of the compensation granted beyond what was petitioned, to bevoided. The plaintiff has already raised a plea against Coelce’s appeal andnotification of the pleading was made to the other party for the rejoinder.

Process status: The plaintiffs succeeded in the legal action filed asthey obtained a court order to make Coelce remove the posts located in theirproperties. However, instead of requiring Coelce to comply with the courtorder, the plaintiffs required a compensation for damages as a result of thesetting up of the aforementioned posts, which was in the order ofR$9,861,385.07 in accordance with their calculations at December 9, 1997.This request was considered as inadmissible by the judge. This decision wasappealed by the plaintiffs. This appeal was rejected in July 2007.

Amount: R$ 69.4 millions - US$ 29.6millions.

 
| Plaintiff            | : Cooperativa de Eletrificação Rural do Vale  do Acaraú Ltda. |
|----------------------|------------------------------------------------------------------------------|
| Defendant            | :  Coelce                                                                    |
| Court                | :  1st Federal Court of the Ceará Judicial Section                      |
| Casel/Identification | :  2001.81.00.008007-0                                                       |

Summary of the proceedings: An action was filed to review the clauseregarding the amount of the lease entered into by the parties for power gridsowned by the plaintiff.

Process status: In its defense, Coelce pleaded that the issue involvedinterests of ANEEL. Consequently, ANEEL entered the fray and the proceeding wasremitted to the Federal Court. The Federal Court granted the petition made bythe plaintiff and increased the monthly rent to R$35,000.00. Coelce deposited theamount for the first three months after the decision stipulating the increase.Coelce also appealed for the decision increasing the monthly rent to berepealed.

 

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** **

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Due to the interruption of the decision, Coelce required the identificationof the amount deposited. On September 1, 2008 a writ was issued. This writgave rise to a negative dispute of jurisdiction. The proceedings are pendinguntil the decision of the superior court.

Amount: R$ 55.6 millions - US$23.7 millions.

 
| Plaintiff           | : State Deputy Luiz Carlos Andrade Moraes and  Federal Deputy Francisco Lopes da Silva |
|---------------------|----------------------------------------------------------------------------------------|
| Defendant           | :  COELCE, CGTF, ANEEL AND UNION FEDERAL                                               |
| Court               | :  10th Federal Court of Ceará                                                    |
| Case/Identification | :  2007.81.00.006310-3                                                                 |

Summary of proceedings: Popular Lawsuit — Lawsuit brought by a StateDeputy and Federal Deputy against Coelce, CGTF, ANEEL and the Federal Union on April 23,2007. They are petitioning for immediate recalculation of Coelce’s rate reviewratio for 2007, replacing the thermal energy purchase price with the cheapestavailable energy; the avoidance of the contract signed by Coelce and CGTFbecause of its high cost (high cost of steam-electric energy compared tohydroelectric energy, which would de detrimental to the consumers of the Stateof Ceará); and for the additional income obtained by Coelce from May toOctober, 2005 to be included in the calculations of Coelce’s rate review. Thelatter refers to another lawsuit, where Coelce had a provisional precautionarymeasure limiting its rate adjustment revoked. During that proceeding, aprecautionary measure was in force from May to October, 2005 and, despiteit, Coelce charged this difference retroactively to the consumers. According tothe plaintiffs, Coelce should wait for end of the case to charge these amounts.

Process status: In regard to the main lawsuit, on November 24,2008 the judge issued a judgment which considered as inadmissible the plaintiff’sclaims. On September 1, 2008 CGTF was notified in regard to this decision.We are waiting for the publication of this decision and the resort topersonally notify the plaintiffs to file a possible resort. In regard to theresort filed against the decision that rejected the objection to the amount ofthe lawsuit and after filing arguments, the court records were sent to thejudge for analysis. We are waiting for the judgment of this resort.

Amount: R$ 516 millions - US$218 millions.

 
| Plaintiff           | :  Bar of Lawyers of Brazil and Others                              |
|---------------------|---------------------------------------------------------------------|
| Defendant           | :  Coelce.                                                          |
| Court               | :  7° Juzgado de Justicia Federal - Sección de Ceará |
| Case/Identification | :  2005.81.00.006496-2                                              |

Summary of proceedings: Civil public action launched with the objectiveof preventing the application of the rate adjustment (percentage 23.59%)authorized by ANEEL in April 2005.

Process status: The Supreme Court judge suspended on October 7,2005 the guarantee that prevented the adjustment from being applied. Thereby,the concessionaire may apply from that date on the above mentioned adjustment.Coelce had to suspend the retroactive collection of the installments generatedby the time in which the guarantee made it impossible to put the adjustmentinto effect. The guarantees are expected to be annulled and Coelce will be ableto re-begin collecting the remaining installments On September 5, 2008 thelawsuit was considered as inadmissible. We are waiting for the publication ofthe final judicial judgment

Amount: US$44 millions.

 
| Plaintiff           | :  Inácio Nunes Arruda & Others. |
|---------------------|------------------------------------------------|
| Defendant           | :  Coelce.                                     |
| Court               | :  2nd Court of Public Finance - Ceará    |
| Case/Identification | :  2000.0122.6248-0/0                          |

Summary of proceedings: Popular action whose objective is to cancel thesales process of Coelce. The plaintiffs allege that in the process ofprivatization of Coelce there was no participation of the employees of Coelce;shares were not offered to the employees in sufficient numbers, and thus theywere prevented from gaining control of the Company; that the bidding terms andconditions favored the participation of foreign companies and removed theincentive for employees of the Company; that there was insufficient publicityin the bidding; that the public stockholders’ equity of Fortaleza was damaged;etc.

Process status: Faced with the activation of the process there was noprotest of any kind by the plaintiffs. The trial awaits the judge’s verdict.

Amount: Undetermined.

 

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** **

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| Plaintiff           | :  Sindicato da Indústria de Fiação e Tecelagem |
|---------------------|----------------------------------------------------------------|
| Defendant           | :  Coelce                                                      |
| Court               | :  1st Federal Court of Ceará.                            |
| Case/Identification | :  2003.81.00.014020-7                                         |

Summary of proceedings: Action to declare the 31.29% rate adjustment determinedby ANEEL unconstitutional. An action was brought petitioning for advancedprotection, which was granted by the Judge, thereby enabling the Plaintiffs topay their electrical consumption minus the 31.29%, without Coelce being able tocut-off their power supply.

Process status: On June 17, 2003, the Judge reconsidered hisprevious decision and rejected the petition for advanced protection since suchwas in the jurisdiction of the Federal Courts. Waiting for the result of theaction brought.

Amount: Undetermined.

 
| Plaintiff           | : TBM S/A Indústria Têxtil. |
|---------------------|---------------------------------------|
| Defendant           | :  Coelce.                            |
| Court               | :  Supremo Tribunal Federal (STF)     |
| Case/Identification | :  441.392                            |

Summary of proceedings: This is a “Trial for Tarifazo”, thatcorresponds to the different trials begun as a result of the dictation of ratedecrees 38, 45 and 153 of 1986, by the National Department of Water andElectrical of Brazil (formerly ANEEL), which enabled the different electricitycompanies of Brazil to increase their rates considerably between the months of March andNovember 1996. In this case, the plaintiff seeks the devolution of amountspaid as determined by the decrees abovementioned.

Process status: The appeal against the final judicial judgment thataccepted the claim against Coelce was rejected. A special resort was filed atthe Superior Court and an extraordinary resort was filed at the superiorfederal court. Both resorts were considered as admissible by the Chief Judge ofthe Court of the State of Ceará. The fees of the plaintiff’s attorneys for R$800,000are in the period allowed for enforcement performance against Coelce. TBM’slawyer will start applying his professional fees for his work for R$550,000 inaccordance with the final judicial judgment. Coelce was opposed to this feeapplication in terms of the amount compensated and the amount of the fees ofTMB’s lawyers. The aforementioned opposition was rejected. Coelce filed a claimagainst this resolution. We are waiting for the decision of the court. At thesame time, Coelce filed a new annulment action, which was also considered asinadmissible. Coelce also filed a claim against this resolution, but it did notsucceed. The special resort was rejected. The lawsuit was remitted to theFederal Superior Court and we are waiting for the decision about theextraordinary resort.

Amount: R$26.9 millions - US$ 8.6 millions.

 
| Plaintiff             | :  State of Ceará                       |
|-----------------------|----------------------------------------------|
| Defendant             | :  Coelce                                    |
| Court                 | :  Tax Review Authority                      |
| Number/Identification | :  Administrative proceeding No.2008.03658-0 |

Summary of proceedings: On April 10, 2008 the Treasury of theState of Ceará issued a Tax Assessment against Coelce. Such assessment isrelated to the calculation of the ICMS for 2003 and 2004 based on thecomparison between monthly data of gross income for sales of electric energyfrom the financial statements and the taxable bases in the calculation documentregarding the ICMS. The amount was changed in accordance with the informationfurnished by the Office of the Treasury.

Process status: On May 12, 2008 Coelce filed an objection to the InfringementDocument. We are waiting for the resolution of the objection. On November 26,2008 the appealable decision by the Treasury of Ceará maintained the ICMSInfringement Document filed against Coelce. December 9, 2008 theaforementioned decision that the ICMS Infringement Document was maintainedagainst Coelce was notified. The company may file a voluntary appeal at theTaxpayer Council within a 20 calendar day period, which may be extended foranother 10 days, starting from the evidence of the notification in theproceeding. On January 5, 2009 the 30 day period for the filing of theaforementioned resort for an unappealable administrative decision started.

Amount: R$ 146.4 millions - US$ 62.7millions.

 

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** **

**Notes to the ConsolidatedFinancial Statements – (Continued)**

 
| Plaintiff             | :  State Office of Treasury                  |
|-----------------------|----------------------------------------------|
| Defendant             | :  Coelce                                    |
| Court                 | :  Tax Review Authority                      |
| Number/Identification | :  Administrative Proceeding No.2006.25755-6 |

Summary of proceedings: Infringement Document filed for thenon-collection of the ICMS in regard to the Difference of InterprovincialFractional Part.

Process status: The Infringement Document was filed on November 29,2006. On January 2, 2007 Coelce filed an objection. We are waiting for thejudgment of the objection.

Amount: R$ 28,9 millions - US$12.3 millions

 

**Investluz S.A.**

 
| Plaintiff             | :  Federal Union                                     |
|-----------------------|------------------------------------------------------|
| Defendant             | :  Investluz                                         |
| Court                 | :  Federal Treasury                                  |
| Number/Identification | :  Administrative Proceeding No.10380.012956/2006-84 |

Summary of proceedings: Claim filed to require COFINS (social securityfinancing tax) credits (effect of COFINS on financial income, dividends andretirement of shares).

Process status: The claim was filed on December 21, 2006. Anobjection was filed on January 22, 2007. We are waiting for the judgmentof the objection.

Amount: R$ 24.1 millions - US$ 10.3millions.

 

**Compañía de Interconexion EnergéticaS.A.**

 
| Plaintiff           | :  CIEN                                                      |
|---------------------|--------------------------------------------------------------|
| Defendant           | :  Federal Union                                             |
| Court               | :  21st Federal Court of the Rio de Janeiro Judicial Section |
| Case/Identification | :  2005.5101.011614-6                                        |

Summaryof proceedings: A lawsuit was brought challenging the declaration ofunconstitutionality of Law 9.718/98 (enlarging the base and calculation of PISand COFINS taxes) and establishing the right to credit and compensation,considering that the Constitutional Court (STF) found in favor of thetaxpayers.

Processstatus: On February 12, 2007, the decision handed down with regard to theappeal from the Treasury was published, determining that CIEN should submit adeclaration regarding the appeal. On March 12, 2007, the decisionregarding the declarations submitted by CIEN and the supplementary appeal,aimed at considering a barring by limitation after 10 years, not 5, as thelower court judge had considered, was published.  With the declaration by the Public Prosecutor’sOffice regarding the declarations and appeal filed by CIEN having been submitted,the appeals were sent to the judge for final sentencing. Waiting for thedecision regarding the appeals filed.

Amount:R$ 50.9 millions - US$ 21.8 millions. (Activecontingency — recovery of credits)

 
| Plaintiff           | : Municipality of Itá              |
|---------------------|-----------------------------------------|
| Defendant           | : CIEN                                  |
| Court               | : Single Court County  of Itá (SC) |
| Case/Identification | : 068.03.000397-8                       |

Summaryof proceedings: The Municipality of Itá (SC) filed a legal claim against CIENpetitioning advanced protection to determine that Itá was the place where theevent taxed with ICMS (VAT) in selling electrical energy imported fromArgentina, occurred, and also to determine that the invoices for such operationshould obligatorily be issued in Itá—Santa Catarina subsidiary, not inGarruchos — Rio Grande do Sul, as CIEN normally does.

Processstatus: On March 11, 2003 the claim was tried by the Municipality of Itá.On March 12, 2003 the early trusteeship required by the plaintiff wasdeferred. On April 14, 2003 Cien filed a resort (“tort”) against suchdecision. On August 16, 2005 the resort filed by Cien was consideredadmissible and the claim was abated with no resolution of the legalsignificance of the claim due to absence of the required “intention to bring anaction” by the Municipality of Itá. Due to this decision on October 10,2005 Cien filed a resort (“seizures of statement) so that the amount of thesentence of the Municipality of Itá was changed to “losing party’s cost”. On November 22,2005 our resort was considered as

 

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inadmissible.Against that decision on February 14, 2006 the parties filed “specialresorts”, which were not accepted by the court. On March 14, 2007 Cienfiled a “tort” against that decision at the Superior Court. On October 19,2007 the Superior Court considered as inadmissible the “tort” filed by Cien. OnOctober 29, 2007 Cien filed a new resort (“tort”) against that decision.The judgment of this resort has not been delivered yet. On October 31,2008 the Municipality of Itá was notified to express its opinion on the resortfiled by Cien. On November 25, 2008 the resort filed by Cien wasconsidered as inadmissible. We are waiting for the publication of thatdecision.

Amount:None

 
| Plaintiff           | : Federal Treasury of Rio de Janeiro — MF          |
|---------------------|---------------------------------------------------------|
| Defendant           | : CIEN - COMPANHIA DE INTERCONEXÃO ENERGÉTICA |
| Court               | : National Tax Court of  Rio de Janeiro                 |
| Case/Identification | : 18471.000814/2007-48                                  |

Summaryof proceedings: Fine for Lack of Import Documentation - On July 11, 2007,the Federal Tax Authorities (SRF) issued an “Infringement Proceeding” againstCIEN for imports of energy in 2002. According to the Tax inspector formalrequirements required by general regulations for tax documentation of importswere not met, so a fine equivalent to 100% of the value of the imports wasbeing imposed. However, there was no approved law whatsoever regulating taxdocumentation to be prepared when importing electrical energy until May, 2006.Since May, 2006, CIEN has all the documentation required by the law.

Process status: On August 10,2007, an appeal was filed with the first administrative instance. On September 14,2007, the Claim was judged inadmissible. On the same date, the decision of thefirst administrative instance was sent to the second administrative instance(Council of Taxpayers) for a resolution. On December 6, 2007, the SRFpublished an Interpretative Declaratory Ruling stipulating that no penalty offine whatsoever was imposed by reason of the non-existence of electrical energyimport and export records for operations performed until May 2, 2006, thedate on which Regulatory Instructions 649 of April 28, 2006 came intoforce. This ruling definitively resolves the administrative process dealingwith the lack of import records, which has already been won in the firstinstance, in CIEN’s favor. A copy of the interpretative ruling was submitted tothe Council of Taxpayers, asking for the proceeding to be closed. Waiting forthe Council of Taxpayers to declare the proceeding closed. On February 27, 2008 the claim was sent to theThird Taxpayers Council. We expect the application of the interpretationfavorable to us and that the proceeding is abated.

Amount: R$ 351.4 millions - US$ 111.9 millions.

 

**Endesa Cachoeira S.A.**

 
| Plaintiff           | : Municipality of Cachoeira Dourada                                 |
|---------------------|---------------------------------------------------------------------|
| Defendant           | : Centrais Elétricas Cachoeira Dourada S.A. (“CDSA”) |
| Court               | : Public Finance Court  of Itumbiara County                         |
| Case/Identification | : 2005.0334233-0                                                    |

Summary of proceedings: As a result of the unbundlingof CELG, one of whose successors wasCDSA, and the privatization of CDSA, the Municipality of Cachoeira Douradabrought two proceedings against the company charging the ITBI (Tax onConveyance of Real Estate).

Process status: 1. Proceeding regarding the conveyance of real estate. Arguments for thedefense: The Federal Constitution and the Labor Code stipulate word for word thatthe ITBI does not apply to conveyance of real estate in unbundling operations.CDSA’s appeal against this proceeding is still pending a decision by the secondadministrative instance (The decision was unfavorable to CDSA in the firstadministrative instance - May, 2003).  2.Proceeding regarding the transfer of shares: Arguments for the defense: TheITBI does not apply to the transfer of movable property (shares), which asrecognized by the Court of Goiás (Court of Appeal). In June, 2006, theMunicipality filed for enforcement of the amount of this claim against CDSA,despite it having been declared null and void by the Court Goiás. CDSA filed aplea of prior judgment with effect of *res judicata*,and in June, 2007, the Court of Goias declared the legal enforcement abatedsince it understood that the writ of execution of the Municipality was notenforceable. On August 21, 2007, the Municipality of Cachoeira Douradalodged an appeal against this decision. We lodged our rejoinder on October 1,2008. On November 12, 2008 the proceeding was remitted to the Court. On September 23,2008 the Court of Goiás delivered a judgment. The court unanimously maintainedthe appealable decision that had considered as abated the executory process(decision favorable to CDSA). We are waiting for the publication of thedecision. On December 2, 2008 the judgment of the Court of Goiás waspublished. We are waiting for the opinion of the Municipal Treasury.

Amount: R$ 212.3 millions - US$ 90.8 millions.

 

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**Notes to the Consolidated Financial Statements – (Continued)**

 
| Plaintiff           | : Municipality of  Cachoeira Dourada |
|---------------------|--------------------------------------|
| Defendant           | : CDSA                               |
| Court               | : Municipal Secretary  of Finance    |
| Case/Identification | : None                               |

Summary of proceedings: ISS (Services Tax)  — The municipality of Cachoeira Dourada hasnotified CDSA, through a Claim, that the Company owes the Municipality the ServicesTax (ISS) on generation of electrical energy produced between 1997 and 2000.The municipality understands that the generation of energy is a service.However, the generation of energy is not on the list of ISS taxable services(Federal legislation) and, therefore, cannot be considered a taxable eventunder that tax. The Brazilian Federal Constitution expressly prohibitsapplication of any tax on electrical energy operations other than the ICMS(VAT), II (Import Tax) or IE (Export Tax).

Process status:Administrative proceeding: Waiting for the Municipality to make a decisionregarding the appeal lodged. If lost, an appeal will be lodged with the secondadministrative process. Court proceedings: In parallel fashion, on September 12,2007, a legal action was brought to void such administrative collection anddeclare it inadmissible. On September 28, 2007, the petition was approvedprovisionally by the judge and the requirement to pay tax was stayed until theadmissibility of the administrative collection was resolved.  On February 13, 2008 the municipality madeits plea for the defense and on February 29, 2008 CDSA made its plea for the defense. On July 21,2008 there was an appealable decision favorable to CDSA. We are waiting for the opinion of the Municipality.On August 1, 2008 the decision was published. In the event of loss we willfile a resort in the second administrative instance. The Municipality did nothave an opinion (did not file a claim) against the appealable judgment and theperiod allowed for that expired. However, the judgment will be reviewed by thecourt of appeal. This review is an obligatory routine judicial procedurerequired by the Brazilian procedural law, when there is a judgment against theTreasury and the amount of the litigation is over 60 minimum wages. We arewaiting for the review of the appealable judgment by the court of appeal.

Amount: R$ 87.6 millions - US$ 37.5 millions.

 

**Endesa Fortaleza S.A. (“EndesaFortaleza”)**

 
| Plaintiff           | : Endesa Fortaleza                 |
|---------------------|------------------------------------|
| Defendant           | : Federal Union                    |
| Court               | : 1st Federal Court of  Ceará |
| Case/Identification | : 2002.81.00.020687-1              |

Summary of proceedings: Generator Set — Endesa Fortaleza filed a lawsuit against the Federal Uniontowards the end of 2002, with a view to it recognizing that the goods importedfor the turbo-generator sets are “Other Generator Sets”, so as to be able claimthe 0% Import Tax (II) and Tax on Industrialized Products (IPI). TheFederal Union argues that the imported goods are not generator sets. CGTF wonan accessory resolution in its favor allowing it to clear the goods throughcustoms at a 0% rate, subject to R$56 million (US$29 million) — updated atJune, 2007 with the court. In order to prevent the taxes from becoming null andvoid, the Federal Tax Authorities brought an action requiring the suspension ofthe tax until the proceedings pending against the Federal Union are resolved.

Process status:The lawsuit against the Federal Union is pending resolution in the lower court.In parallel fashion, the Action brought by the Federal Tax Authorities (whoseenforcement is suspended until the lawsuit against the Federal Union isresolved) was declared null and void in the first administrative instancebecause it did not comply with the requirements of form. The Tax Authoritiesmay well bring another action correcting the errors.  On February 21, 2008 the Treasuryexpressed its opinion in regard to the resort filed by Endesa Fortaleza and theexpert’s report prepared in 2005. On April 17, 2008 CGTF made itsrepresentations about the technical report filed by the Treasury. On May 12,2008 the proceeding was remitted to the Public Prosecutor’s Office of theTreasury and it was returned with no representations or opinion of theTreasury. On September 19, 2008 the appealable judgment was delivered andit was favorable to EndesaFortaleza.The aforementioned decision recognized the classification of the powergenerator in accordance with EndesaFortaleza’sclaim and determined that the judicial deposit should continue as guarantee ofthe proceeding until the final judicial decision. We are waiting for the filingof the resort by the Federal Treasury at the Regional Federal Court (RFC),which is the second judicial instance, against the appealable judgmentfavorable to Endesa Fortaleza. The period allowedfor the Federal Treasury to file the aforementioned resort is 30 days startingfrom the publication of the appealable judgement. On September 29, 2008the aforementioned judgment was issued. On November 10, 2008 the Treasurywas notified about the appealable judgment favorable to Endesa Fortaleza. Therefore, the 30 calendar day period startsfrom that date (the period expires on December 10, 2008) so that theTreasury files the resort at the Regional Federal Court. We are waiting that itis informed whether the Treasury filed the resort at the Regional Federal Courtwithin the period. We noted that the Judge’s secretary made a mistake as shesent the proceeding

 

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**Notes to the Consolidated Financial Statements – (Continued)**

 

to the Legal Department ofthe Federal Union (LDFU) instead of having sent the proceeding to the PublicProsecutor’s Office of the Treasury. On December 10, 2008 the LDFUreturned the litigation and informed the aforementioned mistake. As a result ofthe above, the notification to the Treasury dated November 10, 2008 wasnullified. We are waiting for a new notification to the Treasury, when a new 30calendar day period will start so that the Treasury files the resort at theRegional Federal Court. This new notification should be sent after the end ofthe judicial holiday due to year-end holidays, that is, January 7, 2009.We do not know the exact date of the notification.

Amount R$ 125.1 millions - US$ 53.5 millions.

 
| Plaintiff | : Treasury         |
|-----------|--------------------|
| Defendant | : Endesa Fortaleza |

Summaryof Proceedings: The Federal Tax Authorities have issued a Resolution to collectPIS/COFINS taxes allegedly owed in 2003 to 2004.

Process status: Theresolution was received on February 12, 2007. Pleas for the defense wereraised on March 14, 2007. The Resolution was judged to be partiallyadmissible on November 5, 2007. The appealable judgment considered thatthe income from the contract for the purchase and sale of energy with Coelce isnot subject to paying cumulative PIS/COFINS but is subject to non-cumulativeones. However, the resolution was judged admissible with regard to the month ofOctober, 2004. An appeal was lodged on December 5, 2007. On December 2, 2008 the decision was announced.The decision maintained the administrative appealable judgment. We are waitingfor the formalization and notification of the decision.

Amount R$ 35.8 millions - US$ 15.3 millions.

 

**Compañía de Transmisión del MercosurS.A. (“CTM”)**

 
| Plaintiff           | : CTM                                 |
|---------------------|---------------------------------------|
| Defendant           | : Province of  Corrientes (Argentina) |
| Court               | : Supreme Court of the  Nation        |
| Case/Identification | : C-222/03                            |

Summary of proceedings:CTM initiated a statement of certainty action against the Province ofCorrientes, for the Supreme Court to declare that the activity carried out bythe company in the province is under federal jurisdiction and therefore exemptfrom the Gross Income Tax that the Province of Corrientes currently demands. Italso requested an injunction, to order the General Revenue Department of theProvince of Corrientes to abstain from demanding CTM the payment of thementioned tax.

Process status: TheSupreme Court (the “Court”) on August 21, 2003, resolved
| (i)   |   | That it was competent  to see the cause;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (ii)  |   | Notify the Province of  Corrientes of proceedings;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (iii) |   | Issue the injunction  requested by CTM (to not innovate) in relation to the payment of the gross  business income tax included in the Fiscal Code of the Province of Corrientes  with regard to the activity carried our by CTM, in the following terms:  “Decree the injunction requested, and consequently, orders the Province of  Corrientes to abstain from pursuing the fiscal execution of the gross  business income tax regarding the contract signed on June 14, 2000  between the National State and CTM for the construction, operation and  maintenance of the second circuit for electric energy transport of the Nodo  Rincón de Santa María-Nodo Frontera Garabí section (Province of Corrientes).  The Province of Corrientes was notified of the demand and answered stating  that there was no current and concrete requirement for the payment of the  gross business income tax. |

Likewise, it stated that according to expressdispositions of the Provincial Fiscal Code, it corresponded that CTM pay theGross Business Income Tax and the inapplicability Federal Pact for Employment,Production and Growth by which some provinces, including Corrientes, hadcommitted to eliminate the Gross Business Income Tax. CTM rebutted each of thearguments invoked by the province in its presentation. Later, the Province ofCorrientes requested the lifting of the injunction, presentation that wasopportunely answered by CTM. On April 5, 2005, the Court rejected therequest for the lifting of the injunction. On September 9, 2005, CTMrequested the cause be opened to evidence and the CSJN set the conciliationaudience for November 9, 2005. In the mentioned audience, the partiesmanifested that it was not possible to achieve conciliation. As a result, thecase was opened to evidence. On March 13, 2006 the Court certified thatthe term for evidence was expired without any evidence pending and itinstructed the parties to present their arguments regarding the evidencepresented. Ctm argued on the evidence produced. The proceedings passed to theAttorneys Office on September 8, 2006. At December 27, 2006, theproceedings had not returned from the Attorneys Office.  The case records returned fromthe Public Prosecutor’s Office on April 30, 2004 with a negative verdicton the

 

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**Notesto the Consolidated Financial Statements – (Continued)**

 

admissibility of thelawsuit, since it considered that there was no “case”, as required by article322 of the Procedural Code, since it is understood that there was no specificrequirement from the Province. The proceedings were ready for sentencing on May 2,2007, but no sentence has so far been issued.

Amount: Undetermined

 

**EndesaChile**

 
| Plaintiffs       | :      | Inversiones M.D. Ltda. Inversiones  Facona ltda., Inversiones Huilo S.A, María Teresa Navarro Haeussler, Marcela  Correa Pero, María Cecilia Navarro Haeussler, Jaime Arrieta Correa, A.  Combeau Ingeniería Ltda., Alberto Combeau Vergara, Guillermo Villaseca  Castro, Inversiones Teigo Ltda., Inmobiliaria Santa Inés Ltda., Gregorio  Echeñique Larraín and Inmobiliaria Pirehueico S.A., and José Manuel Jordán  Barahona on behalf of 38 plaintiffs. |
|------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Defendants       | :      | Chilean Treasury, Department of Water  Resources and Endesa Chile                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Court            | :      | 24th Civil Court of Santiago                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Case No.         | :      | 7957-2005 (accumulated Case No 15279-05 Ninth  Civil Court of Santiago, Case No 1608-2005 Tenth Civil Court of Santiago)                                                                                                                                                                                                                                                                                                                                                                             |
| Cause:           |   | The Plaintiffs are suing for a public right  annulment of Dept. of Water Resolution No. 134 dated March 22,  2000, which gives Endesa non-consumptive water rights to carry out the  Central Neltume project, with indemnities for damages. Alternatively, the  plaintiffs are suing for damages allegedly suffered by the plaintiffs for the  quality loss as lakefront owners at Pirehueico and for the property  devaluation.                                                           |
| Process Status   | :      | An order for evidence was issued for the base  of the matter, with reversal proceedings against it brought by the parties.                                                                                                                                                                                                                                                                                                                                                                           |
| Amount involved  | :      | Undetermined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Plaintiffs       | :      | Endesa Chile, Pangue and PEHUENCHE S.A.  (“Pehuenche”)                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Defendant        | :      | Chilean Treasury                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| Court            | :      | 9th Civil Court of Santiago                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Case No.         | :      | 13084-04                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Cause            | :      | The annulment is sought of public right of  Ministerial Resolution No. 35 issued by the Ministry of Economy,  Development and Reconstruction on June 15, 2004, which pronounced on a  matter that was not originally a matter of dispute, by instructing the  CDEC-SIC to define the hours of greatest probability of load loss.                                                                                                                                                           |
| Process Status   | :      | The lawsuit was rejected in the first  instance. The defendants presented appeal and annulment in the form,  proceedings before the Santiago Court of Appeal, which are pending  resolution.                                                                                                                                                                                                                                                                                                         |
| Amount involved: |   | Undetermined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Plaintiff        | :      | Luis Danús Covian and  another fifteen people                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Defendant        | :      | Endesa Chile and Pangue                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Court            | :      | Civil Court of Santa Bárbara                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Case No.         | :      | 4563                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Cause            | :      | The plaintiffs are demanding that the court  declare that the plaintiffs and defendants form part of a community with  respect to the Fundo Ralco and therefore they have co-ownership rights.                                                                                                                                                                                                                                                                                                       |
| Process Status   | :      | Final sentence given in favor of the  defendants, rejecting the demand in all its parts and ordering the plaintiff  to pay costs. The plaintiffs have presented appeal and annulment proceedings  before the Appeals Court of Concepción, which are pending resolution.                                                                                                                                                                                                                         |
| Amount involved  | :      | Undetermined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

 

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**Notes to the Consolidated Financial Statements – (Continued)**

 
| Plaintiff        | :      | Endesa Chile                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Defendant        | :      | CMPC Celulosa S.A.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Court            | :      | Arbitration tribunal                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Case No.         | :      | 2144-J                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Cause            | :      | The disputes between the parties originated  from the supply contract signed by Endesa Chile and CMPC Celulosa S.A. on  May 31, 2003, relating to supplies for the defendant’s plants in the  Eighth Region and relating mainly to Endesa’s decision to dispute part of the  usage required by CMPC Celulosa S.A. as it does not consider this usage to be  covered by the contract.                                                                                                           |
| Process Status   | :      | The parties have been notified to hear  sentence.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Amount Involved  | :      | Undetermined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Plaintiff        | :      | Endesa Chile                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Defendant        | :      | Chilean Treasury                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Court            | :      | Third Civil Court of Santiago                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Case No.         | :      | 26.499-2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Cause            | :      | Endesa Chile has sued the Treasury in order  for the court to declare that Endesa Chile, as a generating company, with  respect to the operation of its power plants and artificial dams, is subject  to the General Electricity Services Law and all other legal regulations  affecting the electricity industry and the instructions issued by the SIC  CDEC of the respective interconnected system, and not by decisions and  guidelines issued by the Control Committees (regulated by the Waters Code). |
| Process status   | :      | The court did not give order for evidence and  called the parties to hear sentence. Endesa Chile appealed against the first  resolution and replacement of the second against it, proceedings are awaiting  resolution.                                                                                                                                                                                                                                                                                       |
| Amount involved  | :      | Undetermined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Plaintiff        | :      | Forestal Agrícola Industria Maderera Los  Ángeles Limitada                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Defendant        | :      | Endesa Chile                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Court            | :      | Civil Court of Santa Bárbara                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Case No.         | :      | 3.362                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Cause            | :      | The plaintiff seeks the recovery of a piece  of land of 405 hectares that it believes forms part of its “Los Prados de  Quillaileo” property, located at Santa Bárbara in Chile’s 8th Region, which  land is currently occupied by Pehuenches to whom Endesa assigned rights and  actions related to the construction of the Ralco dam.                                                                                                                                                   |
| Process status:  |   | The Concepción Court of Appeal previously  ordered the first instance tribunal to complement the definitive sentence,  resolving the peremptory exceptions; the Court of Appeal rejected them.  Endesa presented proceedings of appeal and annulment in the form against the  complementary sentence.                                                                                                                                                                                                    |
| Amount involved  | :      | Undetermined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| **Pangue  S.A.** |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Plaintiff        | :      | Endesa Chile, Pangue and  Pehuenche                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Defendant        | :      | Chilean Treasury                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Court            | :      | Ninth Civil Court of Santiago                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Case No.         |   | 13084-04                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Cause            | :      | The plaintiffs are seeking a declaration of  nullity of public right of the Ministerial Resolution No.35 issued by the  Ministry of Economy, Development and Reconstruction on June 15, 2004,  whereby this authority pronounces on a matter that was not originally one of  dispute, by instructing the CDEC-SIC to define the hours of greatest probability  of load loss.                                                                                                                             |
| Process Status   | :      | The demand was rejected in the first  instance. The plaintiffs filed proceedings of appeal and annulment before the  Santiago Appeals Court, which are currently pending resolution.                                                                                                                                                                                                                                                                                                                          |
| Amount involved  | :      | Undetermined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

 

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**Notes to the Consolidated Financial Statements – (Continued)**

 
| Plaintiffs          | :      | Luis Danús Covian and  fifteen other people                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|---------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Defendants          | :      | Endesa Chile and Pangue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Court               | :      | Civil Court of Santa Bárbara                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Case No.            | :      | 4563                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Cause               | :      | The plaintiffs have demanded that the court  declare that the plaintiffs and defendants form part of a community with respect  to the Fundo Ralco and therefore they have co-ownership rights.                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| Process Status      | :      | The court gave definitive sentence in favor  of the defendants, rejecting the demand in all its parts and ordering that  the plaintiff pay costs. The plaintiffs filed appeal and nullity proceedings  before the Concepción Appeal Court, which are currently pending resolution.                                                                                                                                                                                                                                                                                                                                             |
| Amount involved:    |   | Undetermined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Plaintiff           | :      | Municipality of Nacimiento                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Defendant           | :      | Pangue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Court               | :      | Civil Court of Nacimiento                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Case No.            | :      | 16.757-2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Cause               | :      | Based on Law 19,300 governing General  Environmental Standards, the Municipality of Nacimiento seeks the repair and  compensation for the environmental damage allegedly caused by the operation  of the Pangue power plant, particularly from spills occurring during  July 2006; these damages amount to Ch$13.2 millions. The plaintiff is  also specifically demanding that the defendant be ordered to adopt the  following protective and mitigation measures: construction of a containment  wall and a bridge that connects Nacimiento to other nearby towns and  community buildings, at a cost of Ch$4,914 millions. |
| Process status      | :      | The proceedings are in the evidence stage,  with some parts still pending.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Amount involved     | :      | Ch$ 4,927.2 millions or US$ 7.7 millions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Plaintiffs          | :      | Iris Carrasco Jara and another 418 people                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| Defendant           | :      | Pangue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| Court               | :      | Family, civil and criminal Court of Laja                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Case No.            | :      | 11.642-2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Cause               | :      | The plaintiff is suing Pangue for the repair  and damages allegedly caused by the operation of the Pangue plant due to  spillages that occurred on the river Bío Bío in July 2006, particularly  the flooding that occurred in the town of Laja in Chile’s 8th Region,  amounting to ThCh$12,570,000 plus interest.                                                                                                                                                                                                                                                                                             |
| Process status      | :      | Pangue was notified of the demand on  October 27, 2008, having opposed dilatory exceptions which have still  not been resolved by the court.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Amount involved     | :      | Ch$ 12,570 millions or US$ 19.8 millions plus interests.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Pehuenche  S.A.** |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| Plaintiff           | :      | Endesa Chile, Pangue and  Pehuenche                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Defendant           | :      | Chilean Treasury                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Court               | :      | Ninth Civil Court of Santiago                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Case No.            | :      | No.13084-04                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| Cause               | :      | The Plaintiffs are seeking the annulment in  public right of Ministerial Resolution No.35 issued by the Ministry of  Economy, Development and Reconstruction on June 15, 2004, in which this  authority pronounces on issues that were not originally matters of dispute,  by instructing the CDEC-SIC to define the hours of greatest probability of  load loss.                                                                                                                                                                                                                                                              |
| Process Status      | :      | The court ruled first instance rejecting the  demand. The plaintiffs filed appeal and annulment proceedings with the  Santiago Appeals Court which are pending resolution.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Amount involved     | :      | Undetermined.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

 

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**Notes to the ConsolidatedFinancial Statements – (Continued)**

 

**EdegelS.A.**

 
| Plaintiff/Tax Creditor | : Sunat  |
|------------------------|----------|
| Defendant/Taxpayer     | : Edegel |
| Court                  | : Sunat  |

Summary of proceedings:  EdegelRe-assessment (2000) — On September 10, 2004, the Tax Court notified afavorable resolution for Edegel confirming (i) Edegel’s right todepreciate the negative goodwill from the re-assessment because it had a legalstability agreement in force and also (ii) the non-application ofRegulation VIII of the Tax Code to the unbundling (there is no fraud orsimulation). However, the resolution stipulated that SUNAT has to check thatthe re-assessment of assets done by Edegel was not at a higher value than themarket value. Since then, Edegel has been receiving a series of resolutionsfrom SUNAT aimed at determining the excess of the re-assessment and the tax tobe paid.

Process status: The claims againstthe resolutions (in the part that was considered to have rights) have beensolved and on September 17, 2008 the first administrative instanceresolution of Sunat was notified. The resolution was partly favorable toEdegel. On October 9, 2008 an appeal was filed at the court against thepart of the resolution that did not accept our claim and that has not beenaccepted by the company. In regard to year 1999, an oral and written report ofthe pleadings was filed. We are waiting for the resolution by the court. In regardto years 2000 and 2001, on December 16, 2008 an answer was filed attachingthe information requested by Sunat so that the appeal is accepted to beprocessed. On December 31, 2008 the file (file number 16005-2008) enteredthe court.

Cuantía Sol$ 82,5 millionsor US$26,5 millions.

 
| Plaintiff             | :  Sunat         |
|-----------------------|------------------|
| Defendant             | :  Edegel S.A.   |
| Court                 | :  Sunat         |
| Number/Identification | :  0260340031172 |

Summary of proceedings: Services — Taxannotation against fine calculation resolutions for tax on sales and income tax(year 2000).

Process status: The proceeding is pending ofpronunciation by the court.

Cuantía Sol$ 47,3millions or US$ 15 millions.

 

**GenerandesPerú S.A.**

 
| Plaintiff           | : SUNAT                     |
|---------------------|-----------------------------|
| Defendant           | : Generandes Perú S.A. |
| Court               | : SUNAT                     |
| Case/Identification | : 0260340031172             |

Summaryof proceedings: Services — Tax Action against various Resolutions Determiningand Imposing Fines on Sales Tax and Income Tax — year 2000

Process status: The processis pending a determination of its merits by Tax Administration. On November 14, 2008 Sunat notified theresolution (*Resolución de Intendencia*), throughwhich the claim was solved maintaining the aforementioned objection. An appealagainst the aforementioned resolution was filed on December 5, 2008.

Cuantía Sol$ 49,9millions or US$ 16 millions.

 

**EmgesaS.A.**

 
| Plaintiff | : | Central Hidroeléctrica de  Betania S.A. ESP (now Emgesa)                                                                                                                                                                                                                                 |
|-----------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Defendant | : | Municipality of Yaguará                                                                                                                                                                                                                                                                  |
| Tribunal  | : | Administrative tribunal of  Huila                                                                                                                                                                                                                                                             |
| Case No.  | : | 2004-1328                                                                                                                                                                                                                                                                                     |
| Cause     | : | The municipality is seeking  to sanction the company for not presenting its declaration of ICA (Industrial  and Commerce Tax) under Law 14 of 1981, ignoring the payments made by Betania  under a special law that regulates electricity generation companies (Law 56  of 1981). The company |

 

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**Notes to the ConsolidatedFinancial Statements – (Continued)**

 
|                                                                                                                                             |   | presented a request to  nullify the acts that imposed the sanction (Sanction Resolutions years 1998  to 2002).                                                                                                                                                                                                                                                                                                                                                                                  |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Process Status                                                                                                                                   | :      | This case is in the evidence  stage.                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Amount Involved                                                                                                                                  | :      | Col$ 98,438 millions or US$ 43.3 millions.                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Plaintiffs                                                                                                                                       | :      | Orlando Enrique Guaqueta and Sibaté  residents (class action Miguel Ángel Chávez - Nancy Stella Martínez Pulido  and others)                                                                                                                                                                                                                                                                                                                                                |
| Defendants                                                                                                                                       | :      | Emgesa, Empresa de Energía de Bogotá  S.A. ESP (“EEB”) and Corporación Tribunal: Administrative                                                                                                                                                                                                                                                                                                                                                                        |
| Tribunal of Cundinamarca,  First Section                                                                                                         |
| Case No.                                                                                                                                         | :      | 2001-016                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Autónoma Regional (“CAR”)                                                                                                         |
| Cause                                                                                                                                            | :      | The plaintiffs seek the  joint liability of the defendants related to the damages produced in the Muña  reservoir due to contaminated water from the Bogota river pumped in by  Emgesa.                                                                                                                                                                                                                                                                                                    |
| Process Status                                                                                                                                   | :      | The case was sent to the  State Council to resolve the motions presented by the companies (among  others, Encomables, Hospital Juan N Corpas, Agrinal S.A., Líquido Carbónico  Colombiana S.A., Tinzuque, Refisal, Peldar, Incollantas), companies that do  not believe they can be considered direct defendants in the case. Once these  motions are ruled on, the first instance evidence stage should begin.                                                                       |
| Amount involved                                                                                                                                  | :      | Col$ 3,000,000 millions or US$ 1,320 millions.                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Plaintiff                                                                                                                                        | :      | Gustavo Moya                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Defendants                                                                                                                                       | :      | Emgesa, EEB, the  Capital District of Bogotá, Empresa de Acueducto y Alcantarillado                                                                                                                                                                                                                                                                                                                                                                                                        |
| Tribunal                                                                                                                                         | :      | Administrative Tribunal of  Cundinamarca, Fourth Section                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| Case No.                                                                                                                                         | :      | 2001-479                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| de Bogotá, the Municipality  of Sibaté and other industries and government entities that allegedly  contribute to the pollution of the |
|                                                                                                                                             |   | Bogotá River by action or  omission.                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Cause                                                                                                                                            | :      | Class action seeking to  declare the defendants responsible for damages caused to the environment  produced by storing contaminated water in the Muña reservoir, and thus  compensate for the collective damage caused.                                                                                                                                                                                                                                                               |
| Process Status                                                                                                                                   | :      | Appeal proceedings pending  against the first instance sentence before the State Council, which  exonerated Emgesa from responsibility and a compliance agreement was  approved. For its part, the Administrative Tribunal of Cundinamarca has held  various audiences for checking compliance with the Bogotá river  decontamination works. The audience of December 16, 2008 Emgesa  reaffirmed that the company has complied with all its commitments under the  agreement signed. |
| Amount Involved                                                                                                                                  | :      | Undetermined                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                             |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Plaintiff                                                                                                                                        | :      | Emgesa                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Defendant                                                                                                                                        | :      | CAR                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Tribunal                                                                                                                                         | :      | Administrative Tribunal of  Cundinamarca — first section                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Case No.                                                                                                                                         | :      | 2005-1476                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Cause                                                                                                                                            | :      | Action of nullity and  re-establishment of law by which it seeks to be declared invalid  administrative acts given by the CAR (Resolutions 506 of March 28, 2005  and 1189 of July 8, 2005) and reestablish the rights of Emgesa that were  violated by these resolutions because they impose the carrying out of works  at the Muña reservoir as a condition of the maintenance of the water  concession.                                                                       |
| Process status                                                                                                                                   | :      | On November 19, 2008,  an order was issued notifying CAR to pronounce with respect to the suspension  of the process requested by Emgesa.                                                                                                                                                                                                                                                                                                                                                  |
| Amount involved                                                                                                                                  | :      | Col$2,000 millions or US$ 0.9 millions.                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

 

**Endesa Costanera S.A.**

 

In July 1990, theItalian Government authorized Medio Credito Centrale to grant a loan to theArgentine Government to finance purchases of goods and services of Italianorigin, to renew four groups of the thermo-electric plant owned by

 

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**ENERSISS.A. AND SUBSIDIARIES**

** **

**Notes tothe Consolidated Financial Statements – (Continued)**

** **

Servicios Eléctricos delGran Buenos Aires (“SEGBA”).  SEGBAgranted to Endesa Costanera a mandate to administer the carrying out thecorresponding works covered by a contract between SEGBA and a consortium led byAnsaldo S.p.A., Italy.

 

In accordance with Law No. 25.561,Decree No. 214/02 and their related regulations, the obligation to pay byEndesa Costanera contained in the contract were “pesified” at the rate of onepeso to one dollar, plus a special stabilization coefficient (“CER”), with theoriginal interest rate stated for the obligation.

 

On January 10, 2003,the Executive National Power dictated Decree No.53/03 that modified DecreeNo.410/02 by including exceptions to the “pesification” of the obligation topay sums of money in foreign currency of provinces, municipalities, public andprivate sector companies to the state government arising from subsidiary orother loans and guarantees, originally financed by multilateral creditorganisms or originated in liabilities assumed by the National Treasury andrefinanced with foreign creditors.

 

Endesa Costaneraconsiders that the loan resulting from the contract does not meet any of theassumptions foreseen in Decree No.53/03, plus there are solid arguments fordetermining the unconstitutionality of that decree as it violates principles ofequity and property rights established in the National Constitution.  The maximum contingency that would beproduced by complying with the assumption mentioned would, as of December 31,2008, imply a patrimonial reduction, net of tax effects, of approximately US$19millions. To date, the Secretary of Energy has presented no complaint againstthe “pesified” payments made by Endesa Costanera.

 

**Restrictions**

 

Enersis S.A. and some ofits subsidiaries have the following restrictions:

 

**Enersis S.A.**

 

The Company must complywith financial covenants and requirements derived from loan agreements withfinancial institutions.  Some of the morerestrictive covenants are summarized as follows:

 

·                  The ratio of consolidated debt toconsolidated EBITDA for the four consecutive fiscal quarters does not exceed3.00

·                  Ratio of consolidated debt to equity plusminority interest does not exceed 100%;

·                  At least 50% of the consolidated assetsof Enersis should be regulated assets, *i.e.* companieswhose business is the generation, transmission and trade of electric energy;

·                  Minimum shareholders’ equity plusminority interest of at least equal to UF27 million.

 

The covenants dealing with Adjusted Operating Cash Flow, asdefinedwere eliminated by the amendments signed in October 2008

 

At December 31, 2008and 2007 all these obligations have been met.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Endesa Chile**

 

Endesa Chile must complywith financial covenants and requirements derived from loan agreements withfinancial institutions, among which are the following:

 

·                  The ratio of consolidated debt toconsolidated EBITDA for four conssecutive fiscal quarters does not exceed 4.20.

·                  Ratio of consolidated debt to equity plusminority interest to be not greater than105%.

·                  At least 50% of Endesa Chile’sconsolidated assets should be regulated assets, *i.e.*companies whose principal business is the generation, transmission and sellingof electric energy:

·                  Minimum shareholders’ equity of at leastequal to UF 45 million.

 

The covenants dealingwith Adjusted Operating Cash Flow, as defined, were eliminated by amendmentssigned in October 2008.

 

At December 31, 2008all of these obligations and restrictions have been met

 

As is customary in creditagreements and capital market transactions, a substantial portion of Enersis’indebtedness is subject to cross-default provisions.  If a material default is not cured byapplicable grace periods, it could result in a cross-default for Enersis and asignificant part of Enersis’ liabilities could become due and payable subjectto certain additional condictions.

 

Under the bank facilitiesentered into between 2004 and 2006, if Enersis or any of its RelevantSubsidiaries, as defined in such facilities, fails in the payment for an amountin excess of US$50 million in any indebtedness with an outstanding principalamount over US$50 million, or if any indebtedness of Enersis or any of itsRelevant Subsidiaries is declared due and payable, lenders representing morethan half of the amount outstanding would have the right to declare the loandue and payable.

 

Similarly, under theIndenture that governs Enersis’ Yankee Bonds, if Enersis or any of itsSubsidiaries, fails in a payment of any indebtedness with an outstandingprincipal amount over US$30 million, the Trustee or bondholders representing atleast 25% of any given series would have the right to declare the bonds due andpayable.

 

**Endesa Costanera S.A.**

 

The most significantrequirements in respect to financial covenants are those contained in the loan,as amended at September 30, 2005, with CSFBi, which are the following: Thelong-term debt with third parties may not exceed US$215 million (excludingshort-term debt, commercial debt, inter-company loans and balance of debt withMedioCrédito Italiano); the debt for less than 180 days may not exceed US$10million. There are, also, clauses restricting the change of control of thecompany and clauses that restrict payments to shareholders, includingsubordination of the debt associated with certain financial indicators.

 

At December 31, 2008all of these obligations have been met.

 

**El Chocón S.A.**

 

The loan dated of September 15,2006 requires the Company to comply with the following financial covenants:ratio of Ebitda to financial expenses not lower than 3.5, debt to Ebitda notgreater than 3.0; net shareholders’ equity not lower than 690 million Argentinepesos.

 

As of December 31,2008 these obligations have been met.

 

**Edegel S.A.**

 

Debt ratio of not morethan 1.50 under the second and third Bond issue.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

The loan known as theFacility Operation Contract, assumed as a result of the merger with Etevensa,has the following indicators: interest hedge greater than 1.25; shareholders’equity long-term debt ratio greater than 0.67 and debt to Ebitda of less than4.0.

 

Bank loans include a debtto Ebitda of less than 4.0; interest hedge of more than 3.25 and level ofindebtedness of less than 1.50.

 

There are no clauses inthe credit agreements through which changes in these companies corporate ordebt rating may cause an obligation to prepay the debt. However, a change inStandard & Poor (S&P) risk classification for debt denominated inforeign currencywould produce a change in the applicable margin of syndicatedcredits subscribed in 2004 and 2006.

 

At December 31,2008, all of these obligations and restrictions have been fully met.

 

**Note 31.**            Collateral Obtained from Third Parties

** **

**Enersis**

 

The Company has notreceived certificates of deposit at December 31, 2008 (ThCh$9,350 in2007).

 

**ChilectraS.A.**

 

The Company includes in thiscurrent liabilities, deposits received in cash for the use of temporaryconnections by customers of the company for ThCh$53,909 and ThCh$96,543 at December 31,2007 and 2008, respectively.

 

**Inmobiliaria Manso de Velasco Ltda.**

 

The Company has receivedguarantees from third parties to guarantee obligations incurred in theacquisition of assets of ThCh$2,335,530 as of December 31, 2008(ThCh$1,994,923 in 2007).

 

**CompañíaAmericana de Multiservicios Ltda.**

 

The Company has deliveredbank bonds for ThCh$302,926 (ThCh$5,221 in 2007) and has not received bankbonds as of December 31, 2008 (ThCh$311,119 in 2007).

 

**EndesaChile . (Parent Company)**

 

The Company has receivedperformance bonds from contractors and third parties to guarantee jobs andconstruction, for ThCh$127,753,565 as of December 31, 2008(ThCh$39,626,061 in 2007).

 

**Enigesa S.A.**

 

The Company has receivedguarantee documents amounting to ThCh$28,000 as of December 31, 2008(ThCh$30,492 in 2007).

 

**Edesur S.A.**

 

The Company has receivedpledges from contractors and third parties to guarantee construction work forThCh$13,947,165 as of December 31, 2008 (ThCh$9,232,473 in 2007).

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Note 32.**                   Foreign Currencies

** **

As of December 31,2007 and 2008, foreign currency denominated assets and liabilities are asfollows:

 

**a.**                   Current assets

** **
| ** **               | ** ** | ** **   | ** ** | **As of December 31,** | ** ** |
|--------------------------|------------|--------------|------------|-----------------------------|------------|
| **Account**              | ** ** | **Currency** | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **               | ** ** | ** **   | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                     |       |         |       |                        |       |   |   |
| Cash and banks           |       | $no  Reaj.   |       | 3,151,552                   |       | 7,328,605 |   |
|                     |       | US$          |       | 9,143,573                   |       | 53,128,893 |   |
|                     |       | Euro         |       | 3,784                       |       | 1,739 |   |
|                     |       | Yen          |       | 245                         |       | 301 |   |
|                     |       | $ Col.  |       | 23,210,461                  |       | 44,410,146 |   |
|                     |       | Soles        |       | 6,838,288                   |       | 12,482,499 |   |
|                     |       | $Arg.        |       | 3,086,104                   |       | 5,384,084 |   |
|                     |       | Real         |       | 43,841,789                  |       | 10,813,997 |   |
| Time deposits            |       | US$          |       | 78,345,065                  |       | 194,558,861 |   |
|                     |       | $Col.        |       | 70,401,029                  |       | 92,109,090 |   |
|                     |       | Soles        |       | 1,806,118                   |       | 4,865,353 |   |
|                     |       | $Arg.        |       | 16,542,277                  |       | 25,268,099 |   |
|                     |       | Real         |       | 273,497,423                 |       | 307,948,028 |   |
| Marketable securities    |       | $no  Reaj.   |       | 5,987                       |       | 6,120 |   |
|                     |       | US$          |       | 299,582                     |       | 33,724 |   |
|                     |       | $Col.        |       | 11,219,946                  |       | 101,228,071 |   |
|                     |       | $Arg.        |       | 1,321,922                   |       | 3,779,191 |   |
| Accounts receivable, net |       | $no  Reaj.   |       | 244,005,950                 |       | 317,907,883 |   |
|                     |       | US$          |       | 7,258,865                   |       | 3,637,796 |   |
|                     |       | Euro         |       | 101,244                     |       | 55,205 |   |
|                     |       | $Col.        |       | 230,355,952                 |       | 239,299,939 |   |
|                     |       | Soles        |       | 48,298,961                  |       | 88,133,560 |   |
|                     |       | $Arg.        |       | 105,186,545                 |       | 141,109,459 |   |
|                     |       | Real         |       | 440,053,084                 |       | 348,018,797 |   |
| Notes receivable         |       | $no  Reaj.   |       | 4,564,667                   |       | 4,011,745 |   |
|                     |       | US$          |       | 35,701                      |       | 32,693 |   |
|                     |       | Real         |       | 8,292,429                   |       | 3,704,612 |   |
| Other receivables        |       | $Reaj.       |       | 3,050,769                   |       | 3,088,979 |   |
|                     |       | $no  Reaj.   |       | 39,490,043                  |       | 33,818,448 |   |
|                     |       | US$          |       | 12,549,649                  |       | — |   |
|                     |       | Euro         |       | —                      |       | 13,347 |   |
|                     |       | $Col.        |       | 14,875,715                  |       | 18,340,035 |   |
|                     |       | Soles        |       | 6,390,867                   |       | 8,803,459 |   |
|                     |       | $Arg.        |       | 1,227,910                   |       | 2,495,738 |   |
|                     |       | Real         |       | 31,064,600                  |       | 28,507,661 |   |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 
| ** **                         | ** ** | ** **   | ** ** | **As of December 31,** | ** ** |
|------------------------------------|------------|--------------|------------|-----------------------------|------------|
| **Account**                        | ** ** | **Currency** | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                         | ** ** | ** **   | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                               |       |         |       |                        |       |   |   |
| Amounts due from related companies |       | $no  Reaj.   |       | 13,197,297                  |       | 11,207,253 |   |
|                               |       | US$          |       | 142,718,829                 |       | 1,500,112 |   |
|                               |       | Soles        |       | 161,051                     |       | 50,178 |   |
|                               |       | $Arg.        |       | 9,869,021                   |       | 18,124,904 |   |
| Inventories, net                   |       | $no  Reaj.   |       | 81,736,411                  |       | 57,614,074 |   |
|                               |       | US$          |       | —                      |       | 862,560 |   |
|                               |       | $Col.        |       | 13,500,793                  |       | 19,242,056 |   |
|                               |       | Soles        |       | 15,107,672                  |       | 22,849,069 |   |
|                               |       | $Arg.        |       | 2,052,779                   |       | 2,385,726 |   |
|                               |       | Real         |       | 2,425,998                   |       | 1,244,051 |   |
| Income taxes recoverable           |       | $no  Reaj.   |       | 73,408,775                  |       | 43,867,243 |   |
|                               |       | $Col.        |       | 3,057,848                   |       | — |   |
|                               |       | Soles        |       | 1,179,122                   |       | 1,629,172 |   |
|                               |       | $Arg.        |       | 3,425,014                   |       | 3,384,257 |   |
|                               |       | Real         |       | 76,520,702                  |       | 85,176,728 |   |
| Prepaid expenses and other         |       | $no  Reaj.   |       | 924,471                     |       | 1,304,202 |   |
|                               |       | US$          |       | 766,598                     |       | 1,269,073 |   |
|                               |       | $Col.        |       | 1,715,376                   |       | 2,462,509 |   |
|                               |       | Soles        |       | 2,068,258                   |       | 2,643,111 |   |
|                               |       | $Arg.        |       | 1,794,787                   |       | 2,300,856 |   |
|                               |       | Real         |       | 47,568,932                  |       | 48,765,141 |   |
| Deferred income taxes              |       | $no  Reaj.   |       | 37,590,966                  |       | 19,096,926 |   |
|                               |       | $Col.        |       | 714,811                     |       | 663,548 |   |
|                               |       | Soles        |       | —                      |       | 23,363 |   |
|                               |       | $Arg.        |       | 8,641,793                   |       | 11,369,457 |   |
|                               |       | Real         |       | 27,549,986                  |       | 24,452,812 |   |
| Other current assets               |       | $Reaj.       |       | 4,628,461                   |       | 5,093,759 |   |
|                               |       | $no  Reaj.   |       | 82,304,639                  |       | 398,195,892 |   |
|                               |       | US$          |       | 27,613,376                  |       | 40,293,145 |   |
|                               |       | $Col.        |       | 674,628                     |       | 375,351 |   |
|                               |       | Soles        |       | 190,528                     |       | 1,048,219 |   |
|                               |       | $Arg.        |       | 142,960                     |       | 1,440,218 |   |
|                               |       | Real         |       | 39,118,684                  |       | 60,290,483 |   |
|                               |       |         |       |                        |       |   |   |
| **Total current assets**           |       |         |       | 2,461,888,662               |       | 2,994,551,605 |   |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

**b.**                   Property, plant and equipment

 
| ** **                              | ** ** | ** **   | ** ** | **As of December 31,** | ** ** |
|-----------------------------------------|------------|--------------|------------|-----------------------------|------------|
| **Account**                             | ** ** | **Currency** | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                              | ** ** | ** **   | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                                    |       |         |       |                        |       |   |   |
| Land                                    |       | $no  Reaj.   |       | 64,402,269                  |       | 65,328,544 |   |
|                                    |       | $Col.        |       | 35,739,332                  |       | 32,572,227 |   |
|                                    |       | Soles        |       | 4,144,627                   |       | 15,145,019 |   |
|                                    |       | $Arg.        |       | 7,345,792                   |       | 8,640,022 |   |
|                                    |       | Real         |       | 38,798,536                  |       | 47,473,187 |   |
| Building and infrastructure             |       | $no  Reaj.   |       | 4,997,494,938               |       | 5,253,390,557 |   |
|                                    |       | $Col.        |       | 2,653,002,806               |       | 3,215,172,011 |   |
|                                    |       | Soles        |       | 1,275,224,496               |       | 1,519,689,734 |   |
|                                    |       | $Arg.        |       | 1,412,695,229               |       | 1,692,255,463 |   |
|                                    |       | Real         |       | 2,035,936,845               |       | 2,480,275,912 |   |
| Machinery and equipment                 |       | $no  Reaj.   |       | 80,397,948                  |       | 71,973,016 |   |
|                                    |       | $Col.        |       | 34,752,753                  |       | 38,817,933 |   |
|                                    |       | Soles        |       | 599,363,531                 |       | 693,041,360 |   |
|                                    |       | $Arg.        |       | 662,841,592                 |       | 814,051,916 |   |
|                                    |       | Real         |       | 784,085,479                 |       | 1,074,606,122 |   |
| Other plant and equipment               |       | $no  Reaj.   |       | 204,224,314                 |       | 273,586,177 |   |
|                                    |       | $Col.        |       | 10,484,039                  |       | 14,210,928 |   |
|                                    |       | Soles        |       | 90,819,072                  |       | 188,189,375 |   |
|                                    |       | $Arg.        |       | 104,150,576                 |       | 168,580,359 |   |
|                                    |       | Real         |       | 171,208,984                 |       | 208,635,269 |   |
| Technical appraisal                     |       | $no  Reaj.   |       | 36,692,443                  |       | 36,562,001 |   |
|                                    |       | $no  Reaj.   |       | (2,444,841,723              | )          | (2,576,936,198 | ) |
| Accumulated depreciation                |       | $Col.        |       | (920,214,310                | )          | (1,179,804,545 | ) |
|                                    |       | Soles  .     |       | (976,560,853                | )          | (1,206,797,461 | ) |
|                                    |       | $Arg         |       | (1,175,437,010              | )          | (1,479,557,559 | ) |
|                                    |       | Real.        |       | (1,066,751,784              | )          | (1,388,890,867 | ) |
|                                    |       |         |       |                        |       |   |   |
| **Total property, plant and equipment** |       |         |       | 8,719,999,921               |       | 10,080,210,502 |   |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

**c.**                   Other assets

 

**Otherassets**

 
| ** **                         | ** ** | ** **   | ** ** | **As of December 31,** | ** ** |
|------------------------------------|------------|--------------|------------|-----------------------------|------------|
| **Account**                        | ** ** | **Currency** | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                         | ** ** | ** **   | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                               |       |         |       |                        |       |   |   |
| Investments in related companies   |       | $no  Reaj.   |       | 60,582,831                  |       | 114,188,025 |   |
|                               |       | US$          |       | 3,881,225                   |       | 4,518,996 |   |
| Investments in other companies     |       | $no  Reaj.   |       | 3,044,502                   |       | 3,026,243 |   |
|                               |       | US$          |       | 20,519,724                  |       | 25,071,539 |   |
|                               |       | $Col.        |       | 1,429,079                   |       | 1,549,119 |   |
|                               |       | Soles        |       | 25,516                      |       | 30,011 |   |
|                               |       | Real         |       | 3,055                       |       | 2,723 |   |
| Goodwill, net                      |       | $no  Reaj.   |       | 681,495,746                 |       | 620,686,486 |   |
|                               |       | US$          |       | 9,446,305                   |       | 7,358,325 |   |
|                               |       | $Col.        |       | 7,301,241                   |       | 7,648,856 |   |
| Negative goodwill, net             |       | $no  Reaj.   |       | (13,087,562                 | )          | (63,749 | ) |
|                               |       | US$          |       | (6,831,031                  | )          | (19,509,889 | ) |
|                               |       | Soles        |       | (20,803,821                 | )          | (21,956,856 | ) |
| Long-term accounts receivable      |       | $Reaj.       |       | 6,491,441                   |       | 3,908,736 |   |
|                               |       | $no  Reaj.   |       | 797,657                     |       | 2,138,402 |   |
|                               |       | $Col.        |       | 64,752,231                  |       | 65,767,602 |   |
|                               |       | Soles        |       | 71,506                      |       | 528,547 |   |
|                               |       | $Arg.        |       | 108,481,872                 |       | 107,841,874 |   |
|                               |       | Real         |       | 32,346,004                  |       | 20,939,426 |   |
| Amounts due from related companies |       | $no  Reaj.   |       | 682,310                     |       | 3,220,642 |   |
|                               |       | US$          |       | —                      |       | 109,601,626 |   |
| Other long-term assets             |       | $Reaj.       |       | 1,466,224                   |       | 1,374,954 |   |
|                               |       | $no  Reaj.   |       | 32,624,137                  |       | 35,787,075 |   |
|                               |       | US$          |       | 60,135,314                  |       | 6,752,367 |   |
|                               |       | $Col.        |       | 21,125,621                  |       | 26,946,065 |   |
|                               |       | Soles        |       | 4,088,648                   |       | 6,420,161 |   |
|                               |       | $Arg         |       | 16,501,346                  |       | 20,056,810 |   |
|                               |       | Real         |       | 177,268,174                 |       | 171,031,654 |   |
|                               |       |         |       |                        |       |   |   |
| **Total other assets**             |       |         |       | 1,273,839,295               |       | 1,324,865,770 |   |
|                               |       |         |       |                        |       |   |   |
| Total assets by currency           |       | $Reaj.       |       | 15,636,895                  |       | 13,466,428 |   |
|                               |       | $no Reaj.    |       | 4,284,890,568               |       | 4,797,245,612 |   |
|                               |       | US$          |       | 365,882,775                 |       | 429,109,821 |   |
|                               |       | Euro         |       | 105,028                     |       | 70,291 |   |
|                               |       | Yen          |       | 245                         |       | 301 |   |
|                               |       | $Col.        |       | 2,278,099,351               |       | 2,741,010,941 |   |
|                               |       | Soles        |       | 1,058,413,587               |       | 1,336,817,873 |   |
|                               |       | $Arg.        |       | 1,289,870,509               |       | 1,548,910,874 |   |
|                               |       | Real         |       | 3,162,828,920               |       | 3,532,995,736 |   |
|                               |       |         |       |                        |       |   |   |
| **Total assets by currency**       |       |         |       | 12,455,727,878              |       | 14,399,627,877 |   |

 

F-134

----

**Table of Contents**

** **

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

** **

**d.**                   Current liabilities

 
|                              |       |         |       | **Within 90 days**               |       | **91 day to 1 year**             |       |
|-----------------------------------|------------|--------------|------------|----------------------------------|------------|----------------------------------|------------|
|                              |       |         |       | **As of December 31, 2007** |       | **As of December 31, 2008** |       | **As of December 31, 2007** |   | **As of December 31, 2008** |   |
|                              |       |         |       |                             |       | **Average**                      | ** ** | ** ** | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** |   |
| **Account**                       | ** ** | **Currency** | ** ** | **Amount**                       | ** ** | **Rate**                         | ** ** | **Amount** | ** ** | **Rate** | ** ** | **Amount** | ** ** | **Rate** | ** ** | **Amount** | ** ** | **Rate** |   |
| ** **                        | ** ** | ** **   | ** ** | **ThCh$**                        | ** ** | ** **                       | ** ** | **ThCh$** | ** ** | ** ** | ** ** | **ThCh$** | ** ** | ** ** | ** ** | **ThCh$** | ** ** | ** ** |   |
|                              |       |         |       |                             |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Short-term debt due to banks      |       | $Reaj.       |       | 4,453                            |       | 0.30                             | %          | 90 |   | 0.30 | % | — |   | — |   | — |   | — |   |
| and financial institutions        |       | $no Reaj.    |       | 7,216                            |       | —                           |       | 47,840,494 |   | 3.99 | % | — |   | — |   | — |   | — |   |
|                              |       | US$          |       | 8,950,274                        |       | 6.03                             | %          | 19,606,430 |   | 6.75 | % | 25,500,181 |   | 10.30 | % | 3,323,224 |   | 20.00 | % |
|                              |       | Yen          |       | 62,493                           |       | 12.75                            | %          | — |   | — |   | 6859,467 |   | 12.75 | % | — |   | — |   |
|                              |       | $Col.        |       | 91,051,256                       |       | 12.01                            | %          | 93,725,625 |   | 13.60 | % | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | 41,773,910                       |       | 5.55                             | %          | 8,129,097 |   | 8.33 | % | — |   | — |   | 7,518,009 |   | 8.74 | % |
|                              |       | $Arg.        |       | 1,214,202                        |       | 7.90                             | %          | 3,491,804 |   | 19.15 | % | — |   | — |   | 12,367,814 |   | 16.77 | % |
|                              |       | Reales       |       | 6,288,562                        |       | 8.10                             | %          | 12,563,425 |   | 8.99 | % | 3085,709 |   | 5.58 | % | 70,659,789 |   | 13.23 | % |
| Current portion of long-term debt |       | $no Reaj.    |       | 35                               |       | 0.30                             | %          | — |   | — |   | — |   | — |   | — |   | — |   |
| due to banks and financial        |       | US$          |       | 19,850,209                       |       | 7.73                             | %          | 114,374,493 |   | 4.35 | % | 25,452,697 |   | 9.41 | % | 61,774,382 |   | 6.59 | % |
| Institutions                      |       | $Col         |       | 9,876,398                        |       | 12.19                            | %          | 10,407,867 |   | 12.13 | % | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | 30,722,550                       |       | 5.96                             | %          | — |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | $Arg.        |       | —                           |       | —                           |       | 1,267,922 |   | 1.75 | % | 2,182,005 |   | 1.75 | % | 1,255,391 |   | 1.75 | % |
|                              |       | Reales       |       | 850,274                          |       | 12.75                            | %          | 511,297 |   | 11.91 | % | 51,885,352 |   | 13.53 | % | 92,119,210 |   | 13.52 | % |
| Current portion of bonds payable  |       | $Reaj.       |       | 2,088,946                        |       | 5.71                             | %          | 2,095,186 |   | 5.64 | % | 3,214,523 |   | 5.71 | % | 3,630,353 |   | 5.64 | % |
|                              |       | US$          |       |  6,847,012                  |       | 7.78                             | %          | 14,605,571 |   | 7.97 | % | 249,129,610 |   | 7.78 | % | 430,221,334 |   | 7.97 | % |
|                              |       | $Col.        |       | 10,435,659                       |       | 10.95                            | %          | 106,623,940 |   | 10.90 | % | — |   | — |   | 12,014,438 |   | 10.90 | % |
|                              |       | Soles        |       | 20,559,498                       |       | 6.07                             | %          | 3,325,251 |   | 6.95 | % | 5,418,356 |   | 6.07 | % | 29,229,156 |   | 6.95 | % |
|                              |       | $Arg.        |       | 110,926                          |       | 11.75                            | %          | 119,047 |   | 11.75 | % | — |   | — |   | — |   | — |   |
|                              |       | Reales       |       | —                           |       | —                           |       | — |   | — |   | 100,807,255 |   | 13.23 | % | 9,397,686 |   | 13.51 | % |
| Current portion of long-term      |       | US$          |       | 13,312,241                       |       | 7.42                             | %          | 21,076,678 |   | 7.42 | % | 7,847,224 |   | 7.42 | % | 5,846,348 |   | 7.42 | % |
| notes payable                     |       | $Arg.        |       | 1,158,694                        |       | 13.10                            | %          | 3,233,122 |   | 4.92 | % | 3,180,178 |   | 13.10 | % | 4,924,976 |   | 4.92 | % |
|                              |       | Reales       |       | —                           |       | —                           |       | — |   | — |   | 837,704 |   | 5.00 | % | 489,724 |   | 5.00 | % |
| Dividends payable                 |       | $no Reaj.    |       | 4,511,250                        |       | —                           |       | 5,489,435 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | $Col.        |       | 15,457,695                       |       | —                           |       | 693 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | 20,040                           |       | —                           |       | 22,369 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Reales       |       | 15,823,668                       |       | —                           |       | 319,565 |   | — |   | — |   | — |   | — |   | — |   |
| Accounts payable                  |       | $Reaj.       |       | 122,031                          |       | —                           |       | 226,005 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | $no Reaj.    |       | 182,568,904                      |       | —                           |       | 223,298,201 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | US$          |       | 36,615,596                       |       | —                           |       | 16,846,723 |   | — |   | 8,923,985 |   | — |   | 8,816,356 |   | — |   |
|                              |       | Euro         |       | 1,116,976                        |       | —                           |       | 2,491,312 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | $Col.        |       | 67,456,469                       |       | —                           |       | 92,297,699 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | 28,281,453                       |       | —                           |       | 48,185,527 |   | — |   | 1,464,624 |   | — |   | 550,014 |   | — |   |
|                              |       | $Arg.        |       | 66,829,303                       |       | —                           |       | 100,548,815 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Reales       |       | 118,836,571                      |       | —                           |       | 80,072,213 |   | — |   | 48,353,204 |   | — |   | 51,684,411 |   | — |   |
| Short-term notes payables         |       | Reales       |       | 7,107,390                        |       | —                           |       | 6,767,322 |   | — |   | 10,274,931 |   | — |   | 9,680,858 |   | — |   |
| Miscellaneous payables            |       | $no Reaj.    |       | 10,358,553                       |       | —                           |       | 10,303,336 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | US$          |       | 600,689                          |       | —                           |       | 2,705,428 |   | — |   | 7,602,819 |   | — |   | 5,590,469 |   | — |   |
|                              |       | Euro         |       | —                           |       | —                           |       | 4,476 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | $Col.        |       | 27,163,811                       |       | —                           |       | 15,844,480 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | 7,470,158                        |       | —                           |       | 5,597,147 |   | — |   | 2,378,018 |   | — |   | 5,985,977 |   | — |   |
|                              |       | $Arg.        |       | 44,733                           |       | —                           |       | 97,712 |   | — |   | 219,594 |   | — |   | 229,725 |   | — |   |
|                              |       | Reales       |       | 21,671,930                       |       | —                           |       | 63,512,785 |   | — |   | 38,033,303 |   | — |   | 34,990,212 |   | — |   |
| Amounts payable to related        |       | $no Reaj.    |       | 350,270                          |       | —                           |       | 1,997,293 |   | — |   | — |   | — |   | — |   | — |   |
| Companies                         |       | US$          |       | 3,273,615                        |       | —                           |       | 1,861,498 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | 417,465                          |       | —                           |       | 828,167 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | $Arg.        |       | 30,644,519                       |       | —                           |       | 38,410,293 |   | — |   | — |   | — |   | — |   | — |   |
| Accrued expenses                  |       | $Reaj.       |       | —                           |       | —                           |       | — |   | — |   | 2,682,230 |   | — |   | 5,514,701 |   | — |   |
|                              |       | $no Reaj.    |       | 13,232,239                       |       | —                           |       | 18,232,205 |   | — |   | 22,381,505 |   | — |   | 30,105,264 |   | — |   |
|                              |       | US$          |       | 7,220                            |       | —                           |       | — |   | — |   | 84,849 |   | — |   | 89,959 |   | — |   |
|                              |       | $Col.        |       | 17,339,693                       |       | —                           |       | 12,830,147 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | 5,627,458                        |       | —                           |       | 11,700,157 |   | — |   | 1,021,678 |   | — |   | 531,854 |   | — |   |
|                              |       | $Arg.        |       | 6,402,946                        |       | —                           |       | 8,651,423 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Reales       |       | 9,620,960                        |       | —                           |       | 9,611,868 |   | — |   | 3,347,290 |   | — |   | 2,949,448 |   | — |   |
| Withholdings                      |       | $no Reaj.    |       | 23,590,690                       |       | —                           |       | 38,201,734 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | $Col.        |       | 5,950,088                        |       | —                           |       | 4,874,809 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | 5,602,797                        |       | —                           |       | 6,698,525 |   | — |   | 247,325 |   | — |   | 327,201 |   | — |   |
|                              |       | $Arg.        |       | 18,005,201                       |       | —                           |       | 26,834,891 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Reales       |       | 27,616,757                       |       | —                           |       | 21,912,681 |   | — |   | 34,457,260 |   | — |   | 32,954,074 |   | — |   |
| Income tax payable                |       | $no Reaj.    |       | —                           |       | —                           |       | 27,006,786 |   | — |   | 132,058 |   | — |   | — |   | — |   |
|                              |       | $Col.        |       | —                           |       | —                           |       | 44,566,163 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | —                           |       | —                           |       | 3,725,216 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | $Arg.        |       | 16,033,290                       |       | —                           |       | 12,689,390 |   | — |   | 99,364 |   | — |   | — |   | — |   |
|                              |       | Reales       |       | 2,712,482                        |       | —                           |       | 3,005,137 |   | — |   | 998,415 |   | — |   | — |   | — |   |
| Deferred income                   |       | $no Reaj.    |       | 5,344,571                        |       | —                           |       | 7,796,622 |   | — |   | 2,779,929 |   | — |   | 270,565 |   | — |   |
|                              |       | $Col.        |       | 401,856                          |       | —                           |       | 728,856 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Soles        |       | —                           |       | —                           |       | 308,178 |   | — |   | — |   | — |   | — |   | — |   |
|                              |       | Reales       |       | —                           |       | —                           |       | 1,197,210 |   | — |   | — |   | — |   | — |   | — |   |
| Reimbursable financial            |       | $Reaj.       |       | 1,841                            |       | —                           |       | 2,033 |   | — |   | 5,522 |   | — |   | 6,099 |   | — |   |
| contributions                     |       | $no Reaj.    |       | 8,780                            |       | —                           |       | 8,801 |   | — |   | 1,443,203 |   | — |   | 1,349,974 |   | — |   |

 

F-135

----

Table ofContents

** **

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 
|                                  |       |         |       | **Within 90 days**               |       | **91 day to 1 year**             |       |
|---------------------------------------|------------|--------------|------------|----------------------------------|------------|----------------------------------|------------|
|                                  |       |         |       | **As of December 31, 2007** |       | **As of December 31, 2008** |       | **As of December 31, 2007** |   | **As of December 31, 2008** |   |
|                                  |       |         |       |                             |       | **Average**                      | ** ** | ** ** | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** |   |
| **Account**                           | ** ** | **Currency** | ** ** | **Amount**                       | ** ** | **Rate**                         | ** ** | **Amount** | ** ** | **Rate** | ** ** | **Amount** | ** ** | **Rate** | ** ** | **Amount** | ** ** | **Rate** |   |
| ** **                            | ** ** | ** **   | ** ** | **ThCh$**                        | ** ** | ** **                       | ** ** | **ThCh$** | ** ** | ** ** | ** ** | **ThCh$** | ** ** | ** ** | ** ** | **ThCh$** | ** ** | ** ** |   |
|                                  |       |         |       |                             |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Other current liabilities             |       | $no Reaj.    |       | 10,302                           |       | —                           |       | 90,318 |   | — |   | 117,137 |   | — |   | 134,989 |   | — |   |
|                                  |       | US$          |       | 2,341,594                        |       | —                           |       | 3,675,131 |   | — |   | 4,693,030 |   | — |   | 9,918 |   | — |   |
|                                  |       | $Col.        |       | 5,929,018                        |       | —                           |       | 6,255,162 |   | — |   | — |   | — |   | — |   | — |   |
|                                  |       | Soles        |       | 1,136,509                        |       | —                           |       | 121,490 |   | — |   | — |   | — |   | — |   | — |   |
|                                  |       | $Arg.        |       | 62,307,782                       |       | —                           |       | 81,166,362 |   | — |   | — |   | — |   | — |   | — |   |
|                                  |       | Reales       |       | 46,303,320                       |       | —                           |       | 33,482,686 |   | — |   | 19,687,555 |   | — |   | 21,167,997 |   | — |   |
|                                  |       |         |       |                             |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current liabilities by currency |       | $Reaj.       |       | 2,217,271                        |       |                             |       | 2,323,314 |   |   |   | 5,902,275 |   |   |   | 9,151,153 |   |   |   |
|                                  |       | $no Reaj.    |       | 239,982,810                      |       |                             |       | 380,238,225 |   |   |   | 26,853,832 |   |   |   | 31,860,792 |   |   |   |
|                                  |       | US$          |       | 91,798,450                       |       |                             |       | 194,751,952 |   |   |   | 329,234,395 |   |   |   | 515,671,990 |   |   |   |
|                                  |       | Euro         |       | 1,116,976                        |       |                             |       | 2,495,788 |   |   |   | — |   |   |   | — |   |   |   |
|                                  |       | Yen          |       | 62,493                           |       |                             |       | — |   |   |   | 6,859,467 |   |   |   | — |   |   |   |
|                                  |       | $Col.        |       | 251,061,943                      |       |                             |       | 388,155,441 |   |   |   | — |   |   |   | 12,014,438 |   |   |   |
|                                  |       | Soles        |       | 141,611,838                      |       |                             |       | 88,641,124 |   |   |   | 10,530,001 |   |   |   | 44,142,211 |   |   |   |
|                                  |       | Reales       |       | 256,831,914                      |       |                             |       | 232,956,189 |   |   |   | 311,767,978 |   |   |   | 326,093,409 |   |   |   |
|                                  |       | $Arg.        |       | 202,751,596                      |       |                             |       | 276,510,781 |   |   |   | 5,681,141 |   |   |   | 18,777,906 |   |   |   |
|                                  |       |         |       |                             |       |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current liabilities             |       |         |       | 1,187,435,291                    |       |                             |       | 1,566,072,814 |   |   |   | 696,829,089 |   |   |   | 957,711,899 |   |   |   |

 

**e.**                   Long-term liabilitiesas of December 31, 2007

 
|                                 |   |         |   | **1 to 3 years** | ** ** | **3 to 5 years** |   | **5 to 10 years** |       | **More than 10 years** |       |
|--------------------------------------|--------|--------------|--------|------------------|------------|------------------|--------|-------------------|------------|------------------------|------------|
|                                 |   |         |   |             |       | **Average**      |   | ** **        | ** ** | **Average**            | ** ** | ** ** | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** |   |
| **Account**                          |   | **Currency** |   | **Amount**       |       | **Rate**         |   | **Amount**        | ** ** | **Rate**               | ** ** | **Amount** | ** ** | **Rate** | ** ** | **Amount** | ** ** | **Rate** |   |
|                                 |   |         |   | **ThCh$**        |       |             |   | **ThCh$**         |       |                   |       | **ThCh$** |   |   |   | **ThCh$** |   |   |   |
|                                 |   |         |   |             |       |             |   |              |       |                   |       |   |   |   |   |   |   |   |   |
| Due to banks and financial           |   | US$          |   | 353,456,342      |       | 6.71             | %      | 121,833,340       |       | 6.30                   | %          | 35,387,892 |   | 8.63 | % | 3,600,320 |   | 10.43 | % |
| institutions                         |   | $Arg.        |   | 4,336,381        |       | 1.75             | %      | 1,084,183         |       | 1.75                   | %          | — |   | — |   | — |   | — |   |
|                                 |   | $Col.        |   | —           |       | —           |   | 81,917,505        |       | 12.19                  | %          | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 169,354,950      |       | 13.81            | %      | 299,697,606       |       | 13.80                  | %          | 45,255,278 |   | 13.65 | % | — |   | — |   |
| Bonds payable                        |   | $Reaj.       |   | 108,556          |       | 5.50             | %      | —            |       | —                 |       | — |   | — |   | 239,425,232 |   | 5.27 | % |
|                                 |   | US$          |   | 338,672,476      |       | 8.22             | %      | 15,151,167        |       | 4.36                   | %          | 649,191,913 |   | 7.92 | % | 141,378,812 |   | 7.45 | % |
|                                 |   | $Col.        |   | 159,063,961      |       | 10.69            | %      | 170,201,170       |       | 11.24                  | %          | 285,091,859 |   | 10.83 | % | — |   | — |   |
|                                 |   | Soles        |   | 42,300,502       |       | 6.90             | %      | 29,779,630        |       | 6.38                   | %          | 79,497,051 |   | 6.80 | % | 9,027,581 |   | 6.30 | % |
|                                 |   | $Arg.        |   | —           |       | —           |   | 28,321,548        |       | 11.75                  | %          | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 37,757,841       |       | 14.70            | %      | 113,031,044       |       | 12.80                  | %          | — |   | — |   | — |   | — |   |
| Long-term notes payable              |   | US$          |   | 31,689,213       |       | 7.42             | %      | 30,370,899        |       | 7.42                   | %          | — |   | — |   | — |   | — |   |
|                                 |   | $Arg.        |   | 6,599,038        |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 38,768,493       |       | 10.61            | %      | 16,383,144        |       | 10.61                  | %          | 10,100,987 |   | 10.61 | % | — |   | — |   |
| Miscellaneous payable                |   | $Reaj.       |   | —           |       | —           |   | —            |       | —                 |       | — |   | — |   | 171,094 |   | — |   |
|                                 |   | $no Reaj.    |   | 10,430,323       |       | —           |   | 3,084,861         |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | US$          |   | 14,007,119       |       | 11.50            | %      | 32,229,617        |       | 11.50                  | %          | 51,019,092 |   | 6.50 | % | 12,859,010 |   | 6.50 | % |
|                                 |   | $Arg.        |   | 708,051          |       | —           |   | 515,779           |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 15,183,867       |       | —           |   | 5,797,082         |       | —                 |       | 10,754,174 |   | — |   | — |   | — |   |
| Amounts payable to related companies |   | US$          |   | —           |       |             |   | 8,888,191         |       | —                 |       | — |   | — |   | — |   | — |   |
| Accrued expenses                     |   | $no Reaj.    |   | 3,843,096        |       | —           |   | 3,784,580         |       | —                 |       | 10,430,716 |   | — |   | 16,271,491 |   | — |   |
|                                 |   | $Col.        |   | 78,355,334       |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 255,629,464      |       | —           |   | —            |       | —                 |       | 81,561 |   | — |   | — |   | — |   |
| Deferred taxes                       |   | $no Reaj.    |   | —           |       | —           |   | —            |       | —                 |       | 24,438,149 |   | — |   | — |   | — |   |
| Reimbursable financial               |   | $Reaj.       |   | 8,101            |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
| contributions                        |   | $no Reaj.    |   | 2,022,418        |       | —           |   | 1,006,684         |       | —                 |       | 732,245 |   | — |   | — |   | — |   |
|                                 |   | Soles        |   | 316,186          |       | —           |   | 78,691            |       | —                 |       | — |   | — |   | — |   | — |   |
| Other long-term liabilities          |   | $Reaj.       |   | —           |       | —           |   | —            |       | —                 |       | 7,692,617 |   | — |   | — |   | — |   |
|                                 |   | US$          |   | 751,276          |       | —           |   | 782,977           |       | —                 |       | 222,659,252 |   | — |   | — |   | — |   |
|                                 |   | $Col.        |   | 5,078,922        |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Soles        |   | 292,280          |       | —           |   | 16,938            |       | —                 |       | 704,533 |   | — |   | — |   | — |   |
|                                 |   | $Arg.        |   | 20,760,122       |       | —           |   | 433,292           |       | —                 |       | 843,971 |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 13,584,825       |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   |         |   |             |       |             |   |              |       |                   |       |   |   |   |   |   |   |   |   |
| Total long-term liabilities          |   | $Reaj.       |   | 116,657          |       |             |   | —            |       |                   |       | 7,692,617 |   |   |   | 239,596,326 |   |   |   |
| by currency                          |   | $no Reaj.    |   | 16,295,837       |       |             |   | 7,876,125         |       |                   |       | 35,601,110 |   |   |   | 16,271,491 |   |   |   |
|                                 |   | US$          |   | 738,576,426      |       |             |   | 209,256,191       |       |                   |       | 958,258,149 |   |   |   | 157,838,142 |   |   |   |
|                                 |   | $Col.        |   | 242,498,217      |       |             |   | 252,118,675       |       |                   |       | 285,091,859 |   |   |   | — |   |   |   |
|                                 |   | Soles        |   | 42,908,968       |       |             |   | 29,875,259        |       |                   |       | 80,201,584 |   |   |   | 9,027,581 |   |   |   |
|                                 |   | $Arg.        |   | 32,403,592       |       |             |   | 30,354,802        |       |                   |       | 843,971 |   |   |   | — |   |   |   |
|                                 |   | Reales       |   | 530,279,440      |       |             |   | 434,908,876       |       |                   |       | 66,192,000 |   |   |   | — |   |   |   |
|                                 |   |         |   |             |       |             |   |              |       |                   |       |   |   |   |   |   |   |   |   |
| Total long-term liabilities          |   |         |   | 1,603,079,137    |       |             |   | 964,389,928       |       |                   |       | 1,433,881,290 |   |   |   | 422,733,540 |   |   |   |

 

F-136

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**f.**                     Long-term liabilitiesas of December 31, 2008

 
|                                 |   |         |   | **1 to 3 years** | ** ** | **3 to 5 years** |   | **5 to 10 years** |       | **More than 10 years** |       |
|--------------------------------------|--------|--------------|--------|------------------|------------|------------------|--------|-------------------|------------|------------------------|------------|
|                                 |   |         |   |             |       | **Average**      |   | ** **        | ** ** | **Average**            | ** ** | ** ** | ** ** | **Average** | ** ** | ** ** | ** ** | **Average** |   |
| **Account**                          |   | **Currency** |   | **Amount**       |       | **Rate**         |   | **Amount**        | ** ** | **Rate**               | ** ** | **Amount** | ** ** | **Rate** | ** ** | **Amount** | ** ** | **Rate** |   |
|                                 |   |         |   | **ThCh$**        |       |             |   | **ThCh$**         |       |                   |       | **ThCh$** |   |   |   | **ThCh$** |   |   |   |
|                                 |   |         |   |             |       |             |   |              |       |                   |       |   |   |   |   |   |   |   |   |
| Due to banks and financial           |   | US$          |   | 418,595,419      |       | 6.71             | %      | 26,400,735        |       | 8.93                   | %          | 152,376,749 |   | 4.41 | % | 1,764,178 |   | 12.42 | % |
| Institutions                         |   | $Arg.        |   | 3,765,968        |       | 1.75             | %      | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | $Col.        |   | —           |       | —           |   | 86,523,468        |       | 12.13                  | %          | — |   | — |   | — |   | — |   |
|                                 |   | Soles        |   | 26,618,737       |       | 13.81            | %      | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 227,749,328      |       | 5.50             | %      | 201,244,413       |       | 12.61                  | %          | 13,659,627 |   | 10.46 | % | — |   | — |   |
| Bonds payable                        |   | $Reaj.       |   | —           |       | 8.22             | %      | —            |       | —                 |       | — |   | — |   | 452,344,770 |   | 5.02 | % |
|                                 |   | US$          |   | 136,124,562      |       | 10.69            | %      | 267,309,000       |       | 8.13                   | %          | 515,176,998 |   | 7.71 | % | 32,633,337 |   | 7.76 | % |
|                                 |   | $Col.        |   | 264,890,087      |       | 6.90             | %      | 55,237,163        |       | 12.66                  | %          | 301,120,826 |   | 12.32 | % | — |   | — |   |
|                                 |   | Soles        |   | 49,716,821       |       | —           |   | 64,240,172        |       | 6.67                   | %          | 74,036,710 |   | 6.89 | % | 10,128,104 |   | 6.30 | % |
|                                 |   | $Arg.        |   | —           |       | 14.70            | %      | 30,394,862        |       | 11.75                  | %          | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 36,995,835       |       | 7.42             | %      | 100,764,442       |       | 12.80                  | %          | — |   | — |   | — |   | — |   |
| Long-term notes payable              |   | US$          |   | 43,506,787       |       | —           |   | 29,192,733        |       | 7.42                   | %          | — |   | — |   | — |   | — |   |
|                                 |   | $Arg.        |   | 8,389,302        |       | 10.61            | %      | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 35,691,061       |       | —           |   | 9,865,492         |       | 10.61                  | %          | 5,590,391 |   | 10.61 | % | 548,509 |   | 10.61 | % |
| Miscellaneous payable                |   | $Reaj.       |   | —           |       | —           |   | —            |       | —                 |       | — |   | — |   | 171,762 |   | — |   |
|                                 |   | $no Reaj.    |   | 65,497           |       | 11.50            | %      | 2,900,655         |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | US$          |   | 52,772,530       |       | —           |   | 18,447,573        |       | 10.47                  | %          | 37,743,026 |   | 6.50 | % | 13,261,275 |   | 6.50 | % |
|                                 |   | $Arg.        |   | 1,007,623        |       | —           |   | 153,781           |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 14,157,840       |       | —           |   | 8,302,619         |       | —                 |       | 4,890,357 |   | — |   | — |   | — |   |
| Amounts payable to related companies |   | US$          |   | 8,977,789        |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
| Accrued expenses                     |   | $no Reaj.    |   | 4,596,109        |       | —           |   | 3,055,647         |       | —                 |       | 9,785,425 |   | — |   | 15,809,575 |   | — |   |
|                                 |   | $Col.        |   | 83,012,503       |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Soles        |   | 180,642          |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 245,013,734      |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
| Deferred taxes                       |   | $no Reaj.    |   | 54,556,621       |       | —           |   | 8,036,382         |       | —                 |       | 34,998,575 |   | — |   | 27,609,513 |   | — |   |
| Reimbursable financial               |   | $no Reaj     |   | 1,992,540        |       | —           |   | 1,013,781         |       | —                 |       | 741,052 |   | — |   | — |   | — |   |
| contributions                        |   | Soles        |   | 340,589          |       | —           |   | 98,336            |       | —                 |       | — |   | — |   | — |   | — |   |
| Other long-term liabilities          |   | $Reaj.       |   | 2,827,536        |       | —           |   | 1,885,024         |       | —                 |       | 1,885,027 |   | — |   | — |   | — |   |
|                                 |   | $no Reaj     |   | —           |       | —           |   | —            |       | —                 |       | — |   | — |   | 177,836 |   | — |   |
|                                 |   | US$          |   | 3,508,725        |       | —           |   | 3,964,276         |       | —                 |       | 107,461,444 |   | — |   | — |   | — |   |
|                                 |   | $Col.        |   | 4,151,563        |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   | Soles        |   | —           |       | —           |   | —            |       | —                 |       | 2,488,151 |   | — |   | — |   | — |   |
|                                 |   | $Arg.        |   | 24,373,962       |       | —           |   | 661,680           |       | —                 |       | 1,323,361 |   | — |   | — |   | — |   |
|                                 |   | Reales       |   | 10,486,039       |       | —           |   | —            |       | —                 |       | — |   | — |   | — |   | — |   |
|                                 |   |         |   |             |       |             |   |              |       |                   |       |   |   |   |   |   |   |   |   |
| Total long-term liabilities          |   | $Reaj.       |   | 2,827,536        |       |             |   | 1,885,024         |       |                   |       | 1,885,027 |   |   |   | 452,516,532 |   |   |   |
| by currency                          |   | $no Reaj.    |   | 61,210,767       |       |             |   | 15,006,465        |       |                   |       | 45,525,052 |   |   |   | 43,596,924 |   |   |   |
|                                 |   | US$          |   | 663,485,812      |       |             |   | 345,314,317       |       |                   |       | 812,758,217 |   |   |   | 47,658,790 |   |   |   |
|                                 |   | $Col.        |   | 352,054,153      |       |             |   | 141,760,631       |       |                   |       | 301,120,826 |   |   |   | — |   |   |   |
|                                 |   | Soles        |   | 76,856,789       |       |             |   | 64,338,508        |       |                   |       | 76,524,861 |   |   |   | 10,128,104 |   |   |   |
|                                 |   | $Arg.        |   | 37,536,855       |       |             |   | 31,210,323        |       |                   |       | 1,323,361 |   |   |   | — |   |   |   |
|                                 |   | Reales       |   | 570,093,837      |       |             |   | 320,176,966       |       |                   |       | 24,140,375 |   |   |   | 548,509 |   |   |   |
|                                 |   | Other        |   | —           |       |             |   | —            |       |                   |       | — |   |   |   | — |   |   |   |
|                                 |   |         |   |             |       |             |   |              |       |                   |       |   |   |   |   |   |   |   |   |
| Total long-term liabilities          |   |         |   | 1,764,065,749    |       |             |   | 919,692,234       |       |                   |       | 1,263,277,719 |   |   |   | 554,448,859 |   |   |   |

 

F-137

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

**Note 33.**    Sanctions

 

**Chilectra.**

 

**a.****     **On April 27, 2004,the SEF penalized Chilectra for a total amount of 1,830 UTA, as a result of theblackout occurred on January 13, 2003, that affected the area between TalTal and Santiago. On May 7, 2004, the Chilectra filed an appeal. The SEFrejected the appeal and a claim petition was filed with the Santiago Court ofAppeals.  The case is waiting to bescheduled.

 

The resolutionissued by the Santiago Court of Appeal can be appealed against in the SupremeCourt.

 

To this date, theCompany cannot exactly forecast the effects the final resolution will have onits financial statements.

 

Neither Chilectranor its Board have been penalized by the SVS or any other administrativeauthorities.

 

**Note 34.**    Environment

** **

**Chilectra**

 

The Company has disbursed ThCh$369,819 during the yearmainly for the following:

 

*Investments:*

 

·              Monitoring of electromagneticfields in a substation.

·              Project preparation with SpaceCab.

·              Gathering pits and oilconnecting pools.

·              Green barriers in asubstation.

 

*Expenses:*

 

·              Associated with handing dangerous waste controlled viathe Management System.

·              Environmental to comply with current legislation.

·              Pruning and felling associated with the need to keepthe lines clear.

 

**Codensa**

 

Between January 1 and December 31, 2008Codensa S.A. has made disbursements for ThUS$669, which are mainly related to:

 

·      Environment management of PCBstransformers;Compensations for felling of trees.

·      Environmental noise impact study.

 

**EndesaChile**

 

During 2008, the Company and its subsidiaries havemade disbursements for a value of ThCh$3,330,696, which mainly correspond to:

 

Operation expenses: Laboratory studies, monitoring,follow-up and analysis, which were treated as fiscal year expenses in theammount ThCh$2,389,003 and environmental protection at Hidroeléctrica El Chocónand Endesa Costanera S.A. (environment monitoring, cleaning of hydrocarbonseparator chambers, measurement of gas emissions, nitrogen oxide and sulphurdioxide) equivalent to ThCh$426,422.

 

Investments related to the following projects, whichhave been capitalized in the amount of ThCh$ 515.271:

 

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

·      Performance of civil works considered in itsEnvironmental Management Systems;

·      Replacement and removal of condensers contaminatedwith PCBs;

·      Adaptation and certification in accordance withstandards ISO 9001, ISO 14001 and OHSAS 18001;

·      Air quality studies for compliance with RCA;

 

Study and standardizationof plumbing at Central Bocamina in accordance with its Environmental ManagementSystem.

 

**Note 35.**    Subsequent Events

 

**Chilectra**

 

On January 9, 2009 Decree No.320 issued by theMinistry of Economy, Development, and Reconstruction was published in theOfficial Gazette. This decree establishes the sub-transmission rates and statesthat such rates will be in force from January 14, 2009.

 

As a result of the effectiveness of the aforementioneddecree, the negative effects on the future income of Chilectra S.A. areestimated in 52 billion Chilean pesos before taxes on an annual basis based onthe current hard terms.

 

As a result of the entry into force of the new ratedecree, and given the fact that such effects was established prospectively asof the decree enactment date, as the net tax provisions in Chilectra S.A. forThCh$54,494 have been reversed.

 

Management is not aware of other significant eventshave occurred after year end that could materially affect the presentation ofthe financial statements.

 

**Note 36.**    Adoption of International Financial Reporting Standards (IFRS)

** **

In accordance with the instructions of CircularNo.427, issued by the Superintendency of Securities and Insurance (SVS) on December28, 2007 regarding the adoption of the International Accounting Standards (IAS)and the International Financial Reporting Standards (IFRS), and supplementingthe instructions issued through Circular No.384 dated February 6, 2007,starting from 2009 Enersis S.A. should prepare its financial statements inaccordance with the IFRS issued by the International Accounting Standards Board(IASB). The preliminary effects of this change on the Company’s financialstatements have been measured and informed to the SVS in accordance with theinstructions of Circular No.457 dated June 20, 2008.

 

**Note 37.**    Differences between Chilean and United States Generally AcceptedAccounting Principles

 

Chilean GAAP varies in certain important respects fromU.S. GAAP. Such differences involve certain methods for measuring the amountsshown in the financial statements.

 

**I.****      ****Differences in MeasurementMethods**

 

The principal differencesbetween Chilean GAAP and U.S. GAAP are described below together with anexplanation, where appropriate, of the method used in the determination of theadjustments that affect net income and total shareholders’ equity. Referencesbelow to “SFAS” are to Statements of Financial Accounting Standards issued bythe Financial Accounting Standards Board in the United States.

 

**(a)**   Inflationaccounting

 

The cumulative inflationrate in Chile as measured by the Consumer Price Index for the three-year periodended December 31, 2008, was approximately 18.4%. Pursuant to ChileanGAAP, the Company’s financial statements recognize certain effects ofinflation. As allowed pursuant to Item 17 c (iv) of Form 20-F thereconciliation included herein of consolidated net income, comprehensive incomeand shareholders’ equity, as determined in accordance with

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

U.S. GAAP, excludesadjustments attributable to the effect of differences between the accountingfor inflation under Chilean GAAP versus U.S. GAAP.

 

**(b)**   Reversal ofrevaluation of property, plant and equipment

** **

In accordance withstandards issued by the SVS, certain property, plant and equipment are recordedin the financial statements at amounts determined in accordance with atechnical appraisal. The difference between the carrying value and the revaluedamount is included in shareholders’ equity, beginning in 1989, in “Otherreserves”, and is subject to adjustments for price-level restatement anddepreciation. Revaluation of property, plant and equipment is prohibited underU.S. GAAP. The effects of the reversal of this revaluation, as well as of therelated accumulated depreciation and depreciation expense are included inparagraph (ee) below.

 

**(c)**   Depreciationof property, plant and equipment

** **

Under Chilean GAAP,certain costs related to the acquisition of Edesur S.A., at the time of theacquisitions in 1992 and 1994 by Distrilec Inversora S.A., were charged toearnings as incurred. Under U.S. GAAP, these costs have been included in thepurchase price and allocated to the net assets acquired based upon fair values.For purposes of the reconciliation to U.S. GAAP, these costs were considered tobe of part of property, plant, and equipment, the primary assets of Edesur S.A.

 

As discussed in paragraph**(i)**, under Chilean GAAP, assets acquired and liabilitiesassumed are recorded at their carrying value, and the excess of the purchaseprice over the carrying value is recorded as goodwill. Under U.S. GAAP, assetsacquired and liabilities assumed are recorded at their estimated fair values,and the excess of the purchase price over the estimated fair value of the netidentifiable assets and liabilities acquired is recorded as goodwill. As partof the purchase of the majority ownership interest in Endesa Chile, under U.S.GAAP, the cost of the purchase price would have been allocated to the fairvalue of property, plant and equipment.

 

The effect on shareholders’equity and net income for the years presented is included in paragraph (ee)below.

 

The company hasconsidered the factors which could be considered changes in circumstances whichwould trigger an impairment review and, in accordance with SFAS No. 144, “Accountingfor the Impairment or Disposa1 of Long-Lived Assets” beginning in 2002, theCompany evaluates the carrying amount of property, plant and equipment andother long-lived assets, in relation to the operating performance and futureundiscounted cash flows of the underlying grouping of assets at the lowestlevel which generates cash flow. These standards require that an impairmentloss be recognized in the event that facts and circumstances indicate that thecarrying amount of an asset may not be fully recoverable. Impairment isrecorded based on the excess carrying amounts of long-live assets (or assetgroup) over fair value.  There were noimpairment charges recorded under Chilean GAAP and U.S. GAAP.

 

**(d)**   Specialobligations

** **

At the end of 2006, theBrazilian National Electric Power Agency (“Agencia Nacional de EnergiaEléctrica” —ANEEL) published the Normative Resolution N°234 that establishedgeneral concepts, methodologies and procedures to carry out the second round ofthe periodic Tariff review for public concessionaires engaged in the electricdistribution sector services. These modifications were incorporated into theregulation issued by ANEEL during the year 2007, which contain the provisionalparameters of the fix Tariff model for the following years. According to this,for US GAAP purposes a regulatory liability has been recognized and a charge tocurrent year earnings for ThCh$140,336,629, in accordance to the provisions ofFAS No. 71, “Accounting for the Effects of Certain Types Regulation”.

 

Under Chilean GAAP,regulatory accounting described in FAS No 71, does not apply and therefore theadjustment above mentioned has not been recorded.

 

**(e)**   Deferredincome taxes

** **

Under Chilean GAAP, untilDecember 31, 1999, deferred income taxes were recorded based onnon-recurring timing differences between the recognition of income and expenseitems for financial statement and tax purposes. Accordingly,

 

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**Notes tothe Consolidated Financial Statements – (Continued)**

 

there was an orientationtoward the income statement focusing on differences in the timing ofrecognition of revenues and expenses in pre-tax accounting income and taxableincome. Chilean GAAP also permitted not providing for deferred income taxeswhere a deferred tax asset or liability was either offsetting or not expectedto be realized. Starting January 1, 2000, the Company recorded incometaxes in accordance with Technical Bulletin No. 60 and its relatedamendments issued by the Chilean Association of Accountants, recognizing, usingthe liability method, the deferred tax effects of temporary differences betweenthe financial and tax values of assets and liabilities. As a transitionalprovision, a contra (referred to as “complementary”) asset or liability hasbeen recorded against the deferred tax assets and liabilities recognized as of January 1,2000. Such complementary assets and liabilities are being amortized to incomeover the estimated average reversal periods of the underlying temporarydifferences to which the corresponding deferred tax asset or liability relates.

 

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

 

i.           A deferred tax liability or asset is recognized for the estimatedfuture tax effects attributable to temporary differences and tax losscarryforwards.

 

ii.          The measurement of deferred tax liabilities and assets is based on theprovisions of the enacted tax law. The effects of future changes in tax laws orrates are not recognized prior to the period in which such changes are enactedinto law.

 

iii.        Deferred tax assets are reduced by avaluation allowance, to the extent that, based on the weight of availableevidence, it is deemed more likely than not that the deferred tax assets willnot be realized.

 

Temporary differences aredefined as any difference between the financial reporting basis and the taxbasis of an asset and liability that at some future date will reverse, therebyresulting in taxable income or expense. Temporary differences ordinarily becometaxable or deductible when the related asset is recovered or the relatedliability is settled. A deferred tax liability or asset represents the amountof taxes payable or refundable in future years as a result of temporarydifferences at the end of the current year.

 

The principal differencebetween U.S. GAAP and Chile GAAP relates to the reversal of the complementaryassets and liabilities recorded as a transitional provision for unrecordeddeferred taxes as of January 1, 2000 and their corresponding amortizationinto income. Additionally, under U.S. GAAP, temporary differences arising inconnection with fair value adjustments on business combinations result indeferred taxes and a corresponding adjustment to goodwill. An adjustment isrequired in the reconciliation to U.S. GAAP to record goodwill arising fromdeferred tax liabilities related to past business combinations (see note 37 II(c)). When required, the income tax effects of U.S. GAAP adjustments are recordedin our reconciliations to U.S. GAAP. The effect of these differences on the netincome and shareholders’ equity of the Company is included in paragraph (ee)below.

 

**(f)**    PIS-COFIN

** **

Brazilian Tax Dispute —PIS and COFINS

 

In 1998, Brazilian Law9718/98 was enacted, which increased the base for both PIS (Contribuição aosProgramas de Integração Social — Contributions to Social Integration Programs)and COFINS (Contribuição para Financiamento da Seguridade Social —Contributions to the Financing of Social Security), which are socialcontributions taxation on revenues, beginning in 1999 to be levied onother revenue lines and not only sales, while at the same time, increasing therate for COFINS from 2% to 3%.

 

The Company’s subsidiaryin Brazil, Ampla, has decided not to pay such PIS and COFINS taxes under Law9718/98 and has filed a tax lawsuit dispute challenging that the payment of PISand COFINS on other revenues was unconstitutional.  During 2007, such subsidiary received afavorable verdict from local courts, agreeing with the Company and ruling infavor of it on the grounds of the unconstitutionality of Law 9718/98. Suchruling, however, could be appealed by the Brazilian Government and would onlyachieve a final resolution upon the final decision of the Brazilian FederalSupreme Court.   In this respect, severalother companies have filed similar lawsuits on the same basis and have obtaineda favorable ruling on the matter from the Brazilian Federal Supreme Court.  Such cases have set a

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

base jurisprudence groundthat makes virtually certain that the final verdict will be in favor of theCompany and, therefore, reducing to a remote, if any, the probability of theCompany to make any payment in relation to this tax dispute.

 

Under Chilean GAAP, afterthe favorable verdict by a local court of the Company’s dispute and consideringthe base jurisprudence, the Company considered that it is not probable that itwill have to pay any amount in relation to PIS and COFINS taxes as a result ofLaw 9718/98. As such, we have reversed the provision in 2007.

 

Under US GAAP, theprobability of payment is irrelevant if settlement of the liability is requiredby current law or by contract.  When theobligating event or transaction has occurred (in this instance, through salesor other revenues), the probability of payment is not relevant in determiningwhether a contractual or legal obligation is a liability or a losscontingency.  That is, when theobligating event or transaction has occurred, the enterprise has incurred aliability; and accordingly, there is no contingency. Therefore, until theBrazilian Federal Supreme Court announces a favorable and final ruling theamount should stay provisioned by not recording the reversal made under ChileanGAAP.

 

The effect of thisdifference on the net income and shareholder ́s equity of the Company isincluded in paragraph (ee) below.

 

**(g)**   Pension and post-retirement benefits

** **

During2006, the Company adopted FAS 158 “Employer’s Accounting for Defined Pensionand Other Postretirement Plans - an amendment of FASB Statements N°87, 88, 106and 132 (R)”. These statements required the recognition of the funded status ofa benefit plan in the statement of financial position. It also requires therecognition as a component of other comprehensive income (OCI), net of tax, ofthe gains or losses and prior service costs or credits that arise during theperiod, but are not recognized as components of net periodic benefit costpursuant to statements 87 or 106. The adoption resulted in the recognitionthrough AOCI for accumulated effect through the 2006 year - end of priorservice costs and related plan assets in the balance sheet of the certainBrazilian subsidiaries. The effects of the adoption of SFAS 158 are presentedin paragraph (ee) below.

 

Theeffects of accounting for post-retirement benefits under US GAAP have beenpresented in paragraph (ee).

 

**(h)**   Investments inrelated companies

** **

Under Chilean GAAP, untilDecember 31, 2003 for all investments accounted for by the equity method,the proportionate net book value of the investee company was recorded as aninvestment and the difference between the cost of investment and theproportionate net book value of the investee was recorded as goodwill. Thegoodwill is to be amortized to income over a maximum period of twenty years.The investment account is adjusted to recognize the investor’s share of theearnings or losses of the investee determined under Chilean GAAP subsequent tothe date of the purchase. Technical Bulletin No. 72 issued by ChileanAssociation of Accountants requires using fair value of acquired assets andliabilities assumed for the accounting for all acquisitions after January 1,2004 and recording the differential between the cost and the fair value asgoodwill/negative goodwill as well as prospectively designating all investmentsof 20% to 50% as having significant influence rather than the 10% to 50% levelpreviously defined as having significant influence in Chilean GAAP. Noretroactive changes or cumulative effects of changes in accounting principleswere required under Technical Bulletin No. 72.

 

Under US GAAP, inaccordance with Accounting Principles Board Opinion No. 18, The EquityMethod for Accounting for Investment in Common Stock” (“APB No. 18”), thecarrying amount of an investment accounted for under the equity method isinitially recorded at cost and shown as a single amount in the balance sheet ofthe investor. It is adjusted to recognize the investor’s share of the earningsor losses of the investee determined under US GAAP subsequent to the date ofinvestment. The investment reflects adjustments similar to those made inpreparing consolidated financial statements, including adjustments to eliminateinter-company gains and losses and to account for the differences, if any,between the investor’s cost and the underlying equity in net assets of theinvestee at the date of investment. The investment is also adjusted to reflectthe investor’s share of change in the investee capital accounts.

 

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**Notes tothe Consolidated Financial Statements – (Continued)**

 

The Company’s equityshare of the effect of the adjustments from Chilean GAAP to U.S. GAAP forequity method investees is included in paragraph (ee) below. The principal U.S.GAAP adjustments affecting the Company’s equity investees are as follows:

 

(i)      Reversal of capitalized foreign currency exchangedifferences related to capitalized interest.

(ii)     Reversal of complementary accounts (asset orliability) recorded as a transitional provision in connection with the adoptionof Technical Bulletin N°60 as of January 1, 2000.

(iii)    Organizational costs deferred under Chilean GAAP that,under U.S. GAAP, should have been included in income.

(iv)    The recording of derivative instruments in accordancewith SFAS No. 133.

(v)     The deferred income tax effects of adjustments (i), (iii) and(iv).

 

**(i)**    Goodwill

** **

(i)        Under Chilean GAAP, for acquisitions thatoccurred until December 31, 2003 assets acquired and liabilities assumedwere recorded at their carrying value and the excess of the purchase price overthe carrying value is recorded as goodwill. Circular No. 1358, dated December 3, 1997 issued by the SVS,extended the maximum amortization period of goodwill to 20 years from theprevious 10 years.

 

Under US GAAP, assetsacquired and liabilities assumed are recorded at their estimated fair values,and the excess of the purchase price over the estimated fair value of the netidentifiable assets and liabilities acquired are recorded as goodwill. Prior toJanuary 1, 2002 under US GAAP, the Company amortized goodwill on astraight-line basis over the estimated useful lives of the assets, ranging from20 to 40 years.

 

On January 1, 2002,the Company adopted SFAS 142 and thus ceased amortizing goodwill under US GAAP.Instead, impairment tests are preformed at least annually on the level ofreporting units.

 

Technical Bulletin No. 72issued by Chilean Association of Accountants requires using fair value ofacquired assets and liabilities assumed for the accounting for all acquisitionsafter January 1, 2004, and consequently after that date difference inaccounting treatment related to the recognition of assets acquired andliabilities assumed between Chilean GAAP and US GAAP no longer exists.

 

(ii)       Under Chilean GAAP, the Company evaluatesthe carrying amount of goodwill for impairment on the level of cash-generatingunits. The Company determines the impairment losses using a discounted cashflow approach and recent comparable transactions in the market. In order toestimate recoverable value, the Company makes assumptions about future eventsthat are highly uncertain at the time of estimation. The results of thisanalysis showed no impairment of goodwill for the years ended December 31,2007 and 2008, apart from the impairment of goodwill over the Company’s equitymethod investee Gas Atacama Holding.  SeeNote 11(j).

 

Under US GAAP, goodwillis tested for impairment at least annually on the level of reporting units,which the Company defined to be as operation units. In addition, goodwill isevaluated for impairment between these annual tests if events or changes incircumstances indicate that goodwill might be impaired. The impairment test isperformed based on a two-step approach:

 

1.     The first step is to compare eachreporting unit’s fair value with its carrying amount including goodwill. If areporting units carrying amount (including goodwill) exceeds its fair value,goodwill might be impaired and the second step is required

2.     The second step is to compare the impliedfair value of the reporting unit’s goodwill with the carrying amount ofgoodwill. The implied fair value is computed by allocating the reporting unit’sfair value to all of its assets and liabilities in a manner that is similar toa purchase price allocation in a business combination accounted for inaccordance with SFAS 141. The difference between the fair value of the reportingunit and the fair value of its net assets is the implied fair value ofgoodwill. If the implied fair value of goodwill is less than its carryingamount, the carrying amount is written-down against income to the implied fairvalue of goodwill.

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

The Company carried outthe required annual impairment test of goodwill in the fourth quarter of eachyear.

 

The followingeffects are included in the net income and shareholders’ equity reconciliationto US GAAP under paragraph (ee) below:

 

(i)            differences in the amount of goodwillunder US GAAP related to basis differences in the original determination andsubsequent amortization methodology between Chilean GAAP and US GAAP;

(ii)           the reversal of negative goodwillimpairment under Chilean GAAP, as under US GAAP negative goodwill is treated asan adjustment to the net book value of the related fixed assets to their fairvalue;

(iii)          thereversal of goodwill amortization recorded under Chilean GAAP.

 

**(j)**    Negative Goodwill

** **

Under Chilean GAAP, untilDecember 31, 2003, the excess of the carrying value of the assets assumedin a business combination over the purchase price is recorded as negativegoodwill. Circular No. 1358, dated December 3, 1997 issued by theSVS, extended the maximum amortization period of negative goodwill to 20 yearsfrom the previous 5 years. Technical Bulletin No. 72 issued by ChileanAssociation of Accountants requires using fair value accounting for allacquired assets and liabilities assumed for all acquisitions after January 1,2004. Technical Bulletin No. 72 states that whenever the negative goodwillexceeds the fair value of identified non-monetary assets, the excess must berecognized immediately as income.

 

Under U.S. GAAP, the fairvalue of the net assets acquired in excess of the purchase price is allocatedproportionately to reduce the values assigned to long-lived assets. If theallocation reduces the long-lived assets to zero, the remainder of the excessis recorded as an extraordinary gain to income.

 

The effect of reduceddepreciation expense on the long-lived assets (for which no circumstanceschanged requiring an impairment test under SFAS N°144) to which negativegoodwill had been allocated under U.S. GAAP net of reversals of bothamortization and write-offs of negative goodwill recorded in Chilean GAAP (overthe appropriate useful lives as defined in the first paragraph) are included inparagraph (ee) below.

 

Adjustments related to negative goodwillnecessary to make the consolidated financial statements conform to US GAAP areincluded in paragraph (ee) below and are as follows:

 

·      The reversal ofnegative goodwill amortization and write-offs described in paragraph (i) above,which did not meet the US GAAP impairment criteria for long-lived assets underSFAS 144 and the reversal of negative goodwill amortization recorded under ChileanGAAP;

·      The effects ofreducing depreciation expense, due to the proportionate allocation of theexcess purchase price to property, plant and equipment and other effects onincome.

 

**(k)**   Capitalized interest and exchange differences

** **

In accordance with ChileanGAAP, the Company has capitalized both interest on debt directly related toproperty, plant and equipment under construction and finance costscorresponding to exchange differences generated by the loans associated withsuch assets. The capitalization of interest costs associated with projectsunder construction is optional when incurred on debt that is not directlyrelated to such projects. The Company has optioned for not capitalizingindirect interest cost under Chilean GAAP.

 

Under U.S. GAAP, thecapitalization of interest on qualifying assets under construction is required,regardless of whether interest is associated with debt directly related to aproject to the extent that interest cost would have been avoided if the projecthad not been done. In addition, under U.S. GAAP, foreign translation exchangedifferences must not be capitalized. The accounting differences between Chileanand U.S. GAAP for financing costs and the related depreciation expense areincluded in the reconciliation to U.S. GAAP under paragraph (ee) below.

 

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**Notesto the Consolidated Financial Statements – (Continued)**

 

**(l)**    Accumulated deficit during the development stage

** **

Prior to the adoption of Circular 1819 issuedby the SVS on January 1, 2007, under Chilean GAAP, the net income (loss)incurred during the development stage of subsidiary companies are recordeddirectly in the parent company’s equity, rather than in income. Furthermore, companiesin the development stage were not consolidated even if the Company owned themajority of voting rights.

 

Under US GAAP, such results must be included inthe consolidated statement of income. As of December 31, 2005 no companywas classified as development stage company. For the year ended December 31,2007 and 2008, the effects of the adjustment are included in paragraph (ee)below.

 

On January 1, 2007 the Company adoptedCircular 1819 issued by the SVS (see note 3), requiring consolidation of subsidiariesin development stage and recording income derived from development stagecompanies in accordance with accounting principles for consolidation orinvestments in related companies, respectively. Thus, subsequent to theadoption of Circular 1819, the accounting treatment under Chilean GAAP is thesame as under US GAAP

 

**(m)**  Minimum dividend

** **

As required by the Chilean Companies Act,unless otherwise decided by the unanimous vote of the holders of issued andsubscribed shares, the Company must distribute a cash dividend in an amountequal to at least 30% of its net income for each year as determined inaccordance with Chilean GAAP, unless and except to the extent the Company hasunabsorbed prior year losses or interim dividends have been paid to shareholders.Net income related to the amortization of negative goodwill can only bedistributed as an additional dividend by the approval of the shareholders, andaccordingly, is not included in the calculation of the minimum dividend to bedistributed.  Since the payment of the30% dividend out of each year’s income is required by Chilean law, an accrualhas been made in the reconciliation in paragraph (ee) below to reflect theunrecorded dividend liability for 2007 and 2008, whenever and to the extent therecorded interim dividends do not reach the 30% minimum dividend.

 

**(n)**   Capitalized general and administrative expenses

** **

Under Chilean GAAP,Endesa Chile and certain Brazilian subsidiaries capitalize a portion of itsadministrative and selling expenses as part of the cost of construction inprogress because a substantial portion of the efforts of management wereinvolved in the administration of major projects. Under U.S. GAAP, general andadministrative expenses are charged to expense unless they can be directlyidentified with the supervision of the construction of specific projects. UnderChilean GAAP the Company has also capitalized other administrative expensesinto other long-term assets, which under US GAAP would not be allowed. Theeffects of eliminating capitalized general and administrative expenses and therelated depreciation and amortization for U.S. GAAP purposes are shown belowunder paragraph (ee).

 

**(o)**   Involuntary employee termination benefits

** **

Under Chilean GAAP, the Argentine subsidiaries,Endesa Argentina S.A., recorded an accrual of certain involuntary employeestermination benefits related to the restructuring plan announced in 1997.Additionally, during 2003 the Company increased the amount of the accrualrecorded under Chilean GAAP.  In accordancewith US GAAP, in order to recognize a liability at the balance sheet date forthe cost to terminate employees involuntarily, the following conditions have tobe met:

 

·      Management,having the authority to approve the action, commits to a plan of termination

·      The planidentifies the number of employees to be terminated, their job classificationsor functions and their locations, and the expected completion date

·      The plan establishes the termsof the benefit arrangement, including the benefits that employees will receive upontermination (including but not limited to cash payments), in sufficient detailto enable employees to determine the type and amount of benefits they willreceive if they are involuntarily terminated, and

·      Actions requiredto complete the plan indicate that it is unlikely that significant changes tothe plan will be made or that the plan will be withdrawn.

 

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**Notes tothe Consolidated Financial Statements – (Continued)**

 

As of December 31, 2006 and 2007 thisrequirement had not been met. As of December 31, 2008 the accruedliability was extinguished.

 

The effect of eliminating the accrued liabilityrecognized is presented in paragraph (ee) below.

 

**(p)**   Revenue recognition in Edesur

** **

**During 2005, Edesur reachedfinal agreement with the relevant Argentinean authorities regarding an increasein tariffs related to electricity distribution services. This increase iscurrently pending ratification via formal decree by the executive power of theArgentinean government (PEN). At December 31, 2005 the Company believedwere probable that the economic benefits associated with the tariff increasewill flow to the enterprise, and that all other revenue recognition criteriaestablished by Chilean GAAP has been met. Accordingly, the effects of the rateincrease were included in 2005 revenues under Chilean GAAP. During 2006 therehave been no ratification regarding the increase in tariffs; hence, the initialprobable belief of the Company was reassessed and is not longer considered.Therefore, under Chilean GAAP the effects of the rates tariffs recognized as ofDecember 31, 2005 has been adjusted and recognized in 2006. However, theeffects of the increase in tariffs have not been included in revenues underU.S. GAAP, because management believes that the persuasive evidence of anarrangement criterion under SAB Topic 13 is not met until the agreement isformally ratified by the PEN.**

** **

**The effect on net incomefor the years presented is included in (ee) below. Additionally, due to theadjustment recognized in 2006, there are no differences between Chilean and USGAAP in shareholders’ equity in the presented years.**

** **

**(q)**   Elimination of capitalized interest in Brazil

** **

Until 1999, under ChileanGAAP, the Company capitalized interest to property, plant and equipment as aresult of the creation of a legal reserve specifically permitted in Brazil forthe electricity industry by crediting interest expense. Under U.S. GAAP,interest capitalized must be based on actual interest incurred, and as such theeffects of the elimination of the interest capitalized to property, plant andequipment and the effects on depreciation expense are included in paragraph(ee) below.

 

**(r)**   Organizational and start-up costs

** **

Certain costs related tothe organization and creation of certain subsidiaries of the Company aredeferred, capitalized and amortized under Chilean GAAP.

 

Under U.S. GAAP, suchorganizational and start-up costs may not be deferred and must be included inincome as incurred.

 

The effects of thedifference are included in paragraph (ee) below.

 

**(s)**   Translation of Financial Statements of Investments Outside of Chile

** **

Under Chilean GAAP, inaccordance with Technical Bulletin 64 (“B.T. 64”) the financial statements offoreign subsidiaries that operate in countries exposed to significant risks (“unstable”countries), and that are not considered to be an extension of the parentcompany’s operations, are remeasured into US dollars. The Company’s foreignsubsidiaries in Argentina, Peru, Brazil, and Colombia all meet the criteria offoreign subsidiaries that operate in countries exposed to significant risksunder BT 64, and are remeasured into US dollars. The Company has remeasured itsforeign subsidiaries into US dollars under this requirement as follows:

 

·      Monetaryassets and liabilities are translated at year-end rates of exchange between theUS dollar and the local currency.

·      Allnon-monetary assets and liabilities and shareholder’s equity are translated athistorical rates of exchange between the US dollar and the local currency.

·      Incomeand expense accounts are translated at average rates of exchange between the USdollar and local currency.

 

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**Notes tothe Consolidated Financial Statements – (Continued)**

 

·      Theeffects of any exchange rate fluctuations between the local currency and the USdollar are included in the results of operations for the period.

 

Under BT 64, theinvestment in the foreign subsidiary is price-level restated, the effects ofwhich are reflected in income, while the effects of the foreign exchange gainsor losses between the Chilean Peso and the US dollar on the foreign investmentmeasured in US dollars, are reflected in equity in the account “CumulativeTranslation Adjustment”.

 

The amounts of foreignexchange gain (losses) included in income that is attributable to operations inunstable countries because these amounts have been remeasured into US dollarswere, before minority interest, ThCh$(41,476,552), ThCh$(166,191,917) and ThCh$195,917,262 for the yearsended December 31, 2006, 2007 and 2008, respectively (See Note 23).

 

Under US GAAP, thefunctional currency is determined based on criteria provided by SFAS 52,resulting in the functional currency of an entity being the currency of theprimary economic environment of operations of the entity. Differences resultingfrom fluctuation of exchange rates between foreign currencies and functionalcurrency are recorded in income, whereas translation differences fromconverting the financial statements from functional currency to the group’spresentation currency are recorded in other comprehensive income.

 

Company’s Managementbelieves that, foreign currency translation procedures described above are partof the comprehensive basis of preparation of price-level adjusted financialstatements required by Chilean GAAP. Inclusion of inflation and translationeffects in the financial statements is considered appropriate under theinflationary conditions that have historically affected the Chilean economy,and accordingly, are not eliminated in the reconciliation to U.S. GAAP aspermitted by SEC Staff.

 

**(t)**    Derivative instruments

** **

The Company engages inderivative activity for hedging purposes. These derivatives are consideredaccounting hedges under Chilean GAAP. Under Chilean GAAP the accountingtreatment of hedging activity is similar to the accounting treatment of fairvalue hedges and cash flow hedges under SFAS 133, however under Chilean GAAPthe changes in the fair value for cash flow hedges is recorded against otherassets (losses no realized) or other liabilities (gain no realized) in thebalance sheet. The documentation and hedge effectiveness requirements underChilean GAAP though are not as burdensome as under SFAS 133.

 

Under US GAAP, if thederivative is designated as a fair value hedge, changes in fair value of thederivative and of the hedged item attributable to the hedged risk arerecognized directly in earnings. If the derivative is designated as a cash flowhedge, the effective portion of changes in the fair value of the derivative arerecorded in Other Comprehensive Income (“OCI”) and are reclassified intoearnings in the same period during which the hedged item affects earnings.Ineffectiveness, if any, is reflected directly in earnings. Finally, the gainor loss on a hedging derivative instrument that is designated as, and iseffective as, an economic hedge of the net investment in a foreign operationshall be reported in the same manner as a translation adjustment to the extent itis effective as a hedge. The ineffective portion of net investment hedges shallbe reported in earnings. If the derivative is not designated as a hedge, or ifit does not meet the requirements for hedge accounting under SFAS 133, changesin fair value of the derivative instrument are recorded directly in earnings.

 

Until December 31,2004 the Company applied hedge accounting only to some derivative instrumentsunder US GAAP. All those derivative instruments where hedge accounting did notapply have been accounted at fair value with changes in fair value recognizeddirectly in earnings. However, hedge accounting was applied under Chilean GAAPto other derivative instruments in addition to those applied under US GAAP inthose periods. Starting  as of and for theyears ended December 31, 2006, 2007 and 2008, the Company applied hedgeaccounting under both Chilean and US GAAPs to a portfolio of derivativeinstruments executed in those years.

 

The Company hasdesignated under Chilean GAAP certain non-derivative financial instruments ashedges of the foreign currency exposure of net investments in foreignoperations. The gain or loss on the non-derivative financial instrument that isdesignated as a hedge is reported as a translation adjustment to the extent itis effective as a hedge, any ineffectiveness is recorded in earnings. Thisaccounting treatment is consistent with SFAS 52 and SFAS 133.

 

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**Notes tothe Consolidated Financial Statements – (Continued)**

 

SFAS 133 also requiresthat certain embedded derivatives be separated and reported on the balancesheet at fair value and be subject to the same rules as other derivativeinstruments. Current Chilean accounting rules do not consider theexistence of derivative instruments embedded in other contracts and thereforethey are not reflected in the financial statements under Chilean GAAP.

 

The effects of theadjustment with respect to financial derivatives, commodity derivatives, andembedded derivatives for the years ended December 31, 2006, 2007 and 2008are included in the net income and shareholders’ equity reconciliation to USGAAP under paragraph (ee) below.

 

**(u)**   Fair value of long-term debt assumed

** **

As part of the purchaseof the majority ownership interest in Endesa Chile, a portion of the purchaseprice was allocated to the fair value of long-term debt. As discussed inparagraph (i), up until December 31, 2003, under Chilean GAAP, assetsacquired and liabilities assumed were recorded at their carrying value, and theexcess of the purchase price over the carrying value was recorded as goodwill.Under U.S. GAAP, assets acquired and liabilities assumed are recorded at theirestimated fair values, and the excess of the purchase price over the estimatedfair value of the net identifiable assets and liabilities acquired is recordedas goodwill.

 

The effect onshareholders’ equity and net income for the years presented is included inparagraph (ee) below.

 

**(v)**    Deferred income

** **

During 2000, fiber opticcable was contributed to the Company in return for granting the contributingcompany access to the fiber optic network after installation in the Company’selectricity distribution system. Under Chilean GAAP, the contributed assetswere recorded at their fair market value, with a corresponding creditrecognized as income in 2000. Under U.S. GAAP, the amount was deferred andamortized over the life of the related service contract. This adjustmentreverses the gain under Chilean GAAP and records the amortization of thedeferred income recognized under U.S. GAAP.

 

The effect onshareholders’ equity and net income for the years presented is included in (ee)below.

 

**(w)**   Regulated assets and deferred costs

** **

The electricity sector inChile and other Latin American countries is regulated pursuant to applicablelaws. Most of the Company’s sales are subject to node price regulation, whichis designed to ensure an adequate supply of energy at reasonable, determinedprices, which considers a variety of factors. The marginal cost pricing modelis not solely based upon costs incurred by the Company, and as a result, therequirements of U.S. GAAP under SFAS No.71, “Accounting for the Effects ofCertain Types of Regulation”, related to a businesses whose rates are notregulated are not applicable, except for the Company’s operations in Brazil asdescribed below.

 

As a result of changes inBrazilian Electricity Laws and Regulations, the Company’s distributionsubsidiaries in Brazil, Ampla Energia e Serviços S.A. (AMPLA, ex CERJ) andCompanhia Energética do Ceará (Coelce), are subject to the provisions of SFAS No. 71beginning on January 1, 2001. With the new regulations issued by theNational Agency of Electric Energy (ANEEL), the rate-setting structure inBrazil is now designed to provide recovery for allowable costs incurred, whichwill be recovered through future increases in energy tariffs in order torecover losses experienced during the period of Brazilian Federal Governmentmandated energy rationing from June 1, 2001 to December 31, 2001. TheCompany estimates remaining costs will be recovered approximately over a periodof five years, from the balance date.

 

Accordingly, the Companycapitalizes incurred costs as deferred regulatory assets when it is probablethat future revenue equal to the costs incurred will be billed and collected asa direct result of the inclusion of the costs in an increased rate set by theregulator. The deferred regulatory asset is eliminated when the Companycollects the related costs through billings to customers. ANEEL perform a ratereview on an annual basis. If ANEEL excludes all or part of a cost fromrecovery, that portion of the deferred regulatory assets is impaired and isaccordingly reduced to the extent of the excluded cost. The Company hasrecorded deferred regulatory assets, which it expects to pass on to itscustomers in accordance with and subject to regulatory provisions.

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

The regulations also includedcertain fixes costs or VPA costs, which each distribution company is permittedto defer and pass on to their customers using future rate adjustments. VPAcosts are limited by concession contracts to the cost of purchased power andcertain other costs and taxes. Due to uncertainty in the Brazilian economy,ANEEL delayed the approval of such VPA rate increases. An Executive Order in October 2001created a tracking account mechanism, in order to calculate the variation inthe VPA costs for future rate adjustment calculation purposes. The Company hasnot recognized any regulatory assets for VPA costs incurred prior to 2001,because costs incurred prior to January 1, 2001, are not recoverablethrough the tracking account.

 

Under Chilean GAAP, theCompany recognized revenue and deferred costs related to those assets. UnderU.S. GAAP, in accordance with EITF 92-7, “Accounting by Rate RegulatedUtilities for the Effects of Certain Alternate Revenue Programs”, revenueamounts not expected to be collected within 24 months, have been deferred.

 

The effect of deferringrevenues expected to be collected after two years is included in (ee) below.

 

**(x)**   Reorganization of subsidiaries

** **

This adjustmentcorresponds to the following reorganizations of the Company’s subsidiaries:

 

·      Endesa Costanera S.A. and Central Buenos Aires (CBA)during 2001, in which Endesa Costanera acquired the minority interest in CBAfrom third parties and exchanged shares with Endesa Argentina S.A.

·      During 2006, the Company’s subsidiary Edegel wasmerged with Etevensa, an entity which was controlled by Endesa InternacionalS.A., the Company’s parent company. This reorganization included a purchase ofa minority interest portion in exchange for shares of Edegel and cash.

·      On April 1, 2006 the Company’s subsidiariesChilectra S.A. was merged with Elesur S.A. (currently Chilectra S.A.) which is99.09% owned by Enersis S.A. This reorganization included a purchase of aminority interest portion by cash.

·      During 2007, the Company’s subsidiaries Betania andEmgesa were merged into a new entity Emgesa (merged entity). (See note 11 (f) iii).The merger was materialized through a stock exchange where the Companyexchanged the shares it owned in Betania and Emgesa for shares issued by thenew entity Emgesa (merged entity). In addition, as a result of theshare-exchange, the Company purchased a portion of minority interest from athird party.

 

Under Chilean GAAP, theCompany recorded these transactions under the pooling of interests method,using the book values of the net assets acquired under merger accounting asprescribed by Technical Bulletin 72 for reorganizations under common control.

 

Under US GAAP, to theextent minority interest was acquired from a related party, the transactionshall be accounted for as a transaction under common control, using thepooling-of-interest method and thus book values to reflect the increase inparticipation, with any difference between purchase price consideration andbook value of net assets acquired being recorded in shareholders’ equity.However, the purchase of minority interest to the extent that this minorityinterest was purchased from an unrelated party shall be accounted for under thepurchase method pursuant to SFAS 141, measuring the assets acquired andliabilities assumed at fair values.

 

The effect of thisdifference on the net income and shareholder ́s equity of the Company isincluded in paragraph (ee) below.

 

**(y)**   Effects of minority interest on the U.S. GAAP adjustments

** **

The net income andshareholders’ equity under Chilean GAAP is adjusted in the U.S. GAAP for theimpact of the U.S. GAAP reconciling items on the allocation of income and lossto minority interests. The sum of this adjustment and the minority interestreflected in our consolidated income statement and balance sheet for eachperiod presented under Chilean GAAP represents the allocation of our resultsand shareholders’ equity to our minority shareholders under U.S. GAAP.

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

The effect of thisadjustment is included in net income and shareholders’ equity reconciliation toUS GAAP under paragraph (ee) below.

 

**(z)**   Amortization of bond discount and deferred debt issuance costs

** **

**Under Chilean GAAP thecompany amortized bond discounts and deferred debt issuance costs using thestraight line method over the estimate maturity of the related debt. Under U.S.GAAP, deferred debt issuance costs and bond discounts have to be amortizedusing the effective interest method. The effect of this adjustment included inthe net income and shareholders equity reconciliation to US GAAP underparagraph (ee) below.**

** **

**(aa)**Asset retirement obligations

** **

**UnderChilean GAAP, there is no requirement to record obligations associated with theretirement of tangible long-lived assets. Under U.S. GAAP, the Company adoptedSFAS No. 143, “Accounting for Asset Retirement Obligations” effective January 1,2003. Previously, the Company had not been recognizing amounts related to assetretirement obligations under U.S. GAAP. This standard requires the Company torecord the fair value of the legal obligation it has to make certainenvironmental restorations upon closure of its facilities. The fair value ofthe liability is estimated by discounting the future estimated expendituresrelated to the restoration. The Company then measures changes in the liability dueto passage of time by applying an interest method of allocation to the amountof the liability at the beginning of the period. The interest rate used tomeasure that change is the credit-adjusted risk-free rate that existed when theliability, or portion thereof, was initially measured.**For new liabilities, as well asfor increases in fair value due to changes in estimates that are treated likenew liabilities, the interest rate used for subsequent valuations is theinterest rate that was valid at the time the new liability was incurred or whenthe change in estimate occurred. That amount is recognized as an increase in the carryingamount of the liability and the expense is classified as an operating item inthe statement of income, referred to as accretion expense.

** **

**At the sametime the standard requires the Company to capitalize the new asset retirementobligation costs arising as the result of additional liabilities incurred, suchas the activation of a new generation facility, and subsequently allocate thatasset retirement cost to expense over the life of the plant based on the usefullife of the plant. As of December 31, 2006, 2007 and 2008, the adjustmentto US GAAP income from continuing operations represents the accreted interestexpense and depreciation of the costs capitalized for the asset retirementobligations.**

** **

**In Peru,where we have eight hydroelectric plants and one thermoelectric plant, existinglegislation includes the requirement for entities with electrical assets toconduct retirement activities when operations cease. In Chile, under certainconcession decrees governing six distribution lines, we are similarly requiredto conduct retirement activities upon cessation of operations.**

** **

**The effectsof this U.S. GAAP adjustment on net income and shareholders’ equity arepresented in note (ee) below.**

** **

**(bb)**Creation of Endesa Brasil

** **

**On September 30,2005, certain Brazilian affiliates under common control were reorganized undera newly created holding company, Endesa Brasil S.A. In connection with thisreorganization, Enersis transferred its interest in certain investees to EndesaBrasil in exchange for a 53.57% direct and indirect interest therein. TheCompany began accounting for Endesa Brasil as a consolidated subsidiary as ofthat date. The difference between net assets contributed and received generateda difference if ThCh$7,400,218 presented as reserve in equity. Although thetransaction received the same accounting treatment under both Chilean GAAP andUS GAAP, as a result of the existing adjustment to US GAAP in the subsidiarieswhich were the subject of the reorganization, an incremental charge to equityof ThCh$1,546,441 was recorded.**

** **

The effect of thisadjustment is included in the net income and shareholders’ equityreconciliation to US GAAP under paragraph (ee) below.

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**(cc)**Accounting for the Impairment or Disposal of Long-Lived Assets

** **

In accordance withSFAS 144, “Accounting for the Impairment orDisposal of Long-Lived Assets,” the Company evaluates the carryingamount of property, plant and equipment and other long-lived assets, inrelation to the operating performance and future undiscounted cash flows of theunderlying business.  This standardrequires that an impairment loss be recognized in the event that facts andcircumstances indicate that the carrying amount of an asset may not be fullyrecoverable, when compared to the estimated future undiscounted cashflows.  Impairment is recorded based onestimates of future discounted cash flows, as compared to carrying amounts. Forthe years ended December 31, 2006, 2007, and 2008 no additional amountswere recorded for impairment under US GAAP.

 

**(dd)**Exchange of non-financial assets and acquisition of minority interest

** **

Asstated in Note 11 (f) iii, during 2007, the Company’s subsidiaries inColombia were subject to a reorganization which involved the purchase of aminority interest portion. Under Chilean GAAP, the transaction was accountedfor as a transaction under common control using book valued of the involvedassets and liabilities, with any differences between net assets given up andnet assets received being recorded in other reserves within shareholders’equity. Under US GAAP, the several steps to materialize the transaction wereaccounted for as follows:

 

a.      The exchange of the participation in Betania againstparticipation of Emgesa (merged entity) was accounted for as an exchange offinancial assets, realizing a loss to the extent the transaction did notrepresent a common control transaction

b.      To the extent that minority interest was purchased fromthird parties, the transaction was accounted for under the purchase methodpursuant to SFAS 141, with any excess of the purchase price consideration overthe fair value of identifiable net assets acquired being accounted for asgoodwill.

c.      To the extent third parties were involved, the disposalof a portion of participation of Emgesa (merged entity) was accounted for as apartial disposal of investments, affecting net income of the period to theextent the fair value of consideration received exceeded the book value of theinvestment together with the pro-rata portion of goodwill, fair value incrementto net assets and accumulated other comprehensive income previously accountedfor.

 

Tothe extent the transaction was carried out among parties under common control,book values were used and differences between consideration given (step a. andb.) and consideration received (step c.) over the book value of net assetsreceived (step a. and b.) and book value of net assets given up (step c.) beingrecorded in other reserves of shareholders’ equity.

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

**(ee)**Effect of conforming to U.S. GAAP

** **

**The reconciliation of reported netincome required to conform to U.S. GAAP is as follows:**

** **
| ** **                                                                                                            | ** ** | **As of December 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                            | ** ** | **2006**                              | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                                                                            | ** ** | **ThCh$**                             | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                                                                                  |       |                                  |       |   |   |   |   |
| **Net income in accordance with Chilean GAAP**                                                                        |       | 334,455,240                           |       | 205,141,910 |   | 570,883,101 |   |
|                                                                                                                  |       |                                  |       |   |   |   |   |
| Reversal of amortization of revaluation of property, plant and  equipment (paragraph b)                               |       | 1,099,512                             |       | 1,098,707 |   | 629,124 |   |
| Depreciation of property, plant and equipment and difference in fixed  assets value at acquisition date (paragraph c) |       | (1,315,781                            | )          | (1,024,958 | ) | (1,364,147 | ) |
| Special Obligations (paragraph d)                                                                                     |       | —                                |       | (140,336,629 | ) | (5,871,889 | ) |
| Deferred income taxes (paragraph e)                                                                                   |       | 13,891,827                            |       | 13,569,706 |   | 14,532,214 |   |
| PIS - COFIN (paragraph f)                                                                                             |       | —                                |       | (14,699,882 | ) | — |   |
| Pension and post-retirement benefits (paragraph g)                                                                    |       | 181,867                               |       | 996,880 |   | 22,619,289 |   |
| Investments in related companies (paragraph h)                                                                        |       | 5,582,929                             |       | 2,331,768 |   | 14,649,030 |   |
| Amortization and impairment of goodwill (paragraph i)                                                                 |       | 64,706,396                            |       | 64,425,824 |   | 64,785,534 |   |
| Amortization of negative goodwill (paragraph j)                                                                       |       | 20,764,087                            |       | 15,285,028 |   | 13,994,300 |   |
| Capitalized interest (paragraph k)                                                                                    |       | 13,921,119                            |       | 9,041,723 |   | 5,853,958 |   |
| Depreciation capitalized interest (paragraph k)                                                                       |       | (2,383,114                            | )          | (1,591,899 | ) | (2,947,511 | ) |
| Difference foreign exchange capitalized (paragraph k)                                                                 |       | 36,737                                |       | 31,384 |   | 36,914 |   |
| Depreciation difference foreign exchange capitalized (paragraph k)                                                    |       | 579,800                               |       | 560,765 |   | 583,015 |   |
| Accumulated deficit during the development stage (paragraph l)                                                        |       | (354,402                              | )          | — |   | — |   |
| Capitalized general and administrative expenses (paragraph n)                                                         |       | (3,427,789                            | )          | (10,625,016 | ) | (9,328,252 | ) |
| Involuntary employee termination benefits (paragraph o)                                                               |       | (24,907                               | )          | (20,021 | ) | (22,912 | ) |
| Revenue recognition in Edesur (paragraph p)                                                                           |       | 4,762,461                             |       | — |   | — |   |
| Elimination of amortization of capitalized interest in Brazil  (paragraph q)                                          |       | 546,088                               |       | 475,096 |   | 558,378 |   |
| Amortization of organizational and start-up costs (paragraph r)                                                       |       | 2,789,422                             |       | 1,979,967 |   | 714,780 |   |
| Derivative instruments operating income (paragraph t)                                                                 |       | 1,238,573                             |       | 2,105,825 |   | (96,415,518 | ) |
| Derivative instruments non operating income (paragraph t)                                                             |       | (99,547                               | )          | (2,302 | ) | — |   |
| Fair value of long-term debt assumed (paragraph u)                                                                    |       | (32,012                               | )          | (32,011 | ) | (32,012 | ) |
| Deferred income (paragraph v)                                                                                         |       | 152,726                               |       | 132,623 |   | 156,567 |   |
| Regulated assets and deferred cost (paragraph w)                                                                      |       | (4,166,897                            | )          | 522,132 |   | — |   |
| Reorganization of subsidiaries (paragraph x)                                                                          |       | (277,092                              | )          | (1,019,781 | ) | (1,282,498 | ) |
| Effects of minority interest on the U.S. GAAP adjustments (paragraph  y)                                              |       | (8,434,553                            | )          | 67,624,120 |   | 4,407,041 |   |
| Deferred tax effects on the U.S. GAAP adjustments                                                                     |       | (22,012,694                           | )          | (10,593,628 | ) | 22,573,245 |   |
| Amotization of bond discount and deferred debt issuance cost  (paragraph z)                                      |       | 2,735,140                             |       | (537,978 | ) | 27,727 |   |
| Asset retirement cost - (paragraph aa)                                                                                |       | (14,141                               | )          | (27,277 | ) | (212,288 | ) |
| Asset retirement obligations  - liabilities (paragraph aa)                                                            |       | (1,333,550                            | )          | (21,659 | ) | (101,120 | ) |
|                                                                                                                  |       |                                  |       |   |   |   |   |
| **Net income in accordance with U.S. GAAP**                                                                           |       | 423,567,445                           |       | 204,790,417 |   | 619,426,070 |   |
|                                                                                                                  |       |                                  |       |   |   |   |   |
| **Net income in accordance with U.S. GAAP**                                                                           |       | 423,567,445                           |       | 204,790,417 |   | 619,426,070 |   |
| Other comprehensive income (loss):                                                                                    |       |                                  |       |   |   |   |   |
| Cumulative translation adjustment determined under Chilean GAAP net  of minority interest                             |       | 18,456,903                            |       | (133,746,994 | ) | 134,668,311 |   |
| Cumulative translation adjustment related to U.S GAAP adjustments net  of minority interest                           |       | (3,899,764                            | )          | 5,006,198 |   | (46,634,500 | ) |
| Fair value change of hedging instruments used in cash flow hedges                                                     |       | (52,334,386                           | )          | 2,164,347 |   | 50,456,128 |   |
| SFAS 158                                                                                                              |       | —                                |       | (524,630 | ) | (12,356,132 | ) |
|                                                                                                                  |       |                                  |       |   |   |   |   |
| Comprehensive income in accordance with U.S.GAAP                                                                      |       | 385,790,198                           |       | 77,689,338 |   | 745,559,877 |   |

 

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**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes tothe Consolidated Financial Statements – (Continued)**

 

The reconciliation toconform shareholders’ equity amounts to U.S. GAAP is as follows:

 
| ** **                                                                                                                                            | ** ** | **2007**      | ** ** | **2008**      | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------|------------|---------------|------------|
| ** **                                                                                                                                            | ** ** | **ThCh$**     | ** ** | **ThCh$**     | ** ** |
|                                                                                                                                                  |       |          |       |          |       |
| **Shareholders’ equity in accordance with Chilean  GAAP**                                                                                        |       | 3,161,595,289 |       | 3,697,212,812 |       |
|                                                                                                                                                  |       |          |       |          |       |
| Reversal of revaluation of property, plant and equipment net of  accumulated amortization revaluation of property, plant and equipment  (paragraph b) |       | (9,691,211    | )          | (8,735,958    | )          |
| Depreciation of property, plant and equipment and difference in fixed  asset value at acquisition date  (paragraph c)                                 |       | (13,359,441   | )          | (14,327,845   | )          |
| Special Obligations (paragraph d)                                                                                                                     |       | (140,336,629  | )          | (170,933,922  | )          |
| Deferred income taxes (paragraph e)                                                                                                                   |       | (191,649,395  | )          | (187,607,279  | )          |
| PIS - COFIN (paragraph f)                                                                                                                             |       | (14,699,882   | )          | (13,104,506   | )          |
| Pension and post-retirement benefits (paragraph g)                                                                                                    |       | 3,159,019     |       | 1,594,944     |       |
| Investments in related companies (paragraph h)                                                                                                        |       | (21,088       | )          | 5,247,490     |       |
| Goodwill (paragraph i)                                                                                                                                |       | 618,821,594   |       | 688,430,588   |       |
| Goodwill gross amount (paragraph i)                                                                                                                   |       | 103,820,980   |       | 106,287,237   |       |
| Negative goodwill (paragraph j)                                                                                                                       |       | (333,506,435  | )          | (371,394,333  | )          |
| Capitalized interest (paragraph k)                                                                                                                    |       | 87,959,033    |       | 106,362,668   |       |
| Exchange difference (paragraph k)                                                                                                                     |       | (21,783,421   | )          | (22,194,595   | )          |
| Minimum dividend (paragraph m)                                                                                                                        |       | (41,210,365   | )          | (119,138,814  | )          |
| Capitalized general and administrative expenses (paragraph n)                                                                                         |       | (42,612,941   | )          | (56,730,510   | )          |
| Involuntary employee termination benefits (paragraph o)                                                                                               |       | 19,480        |       | —        |       |
| Elimination of capitalized interest in Brazil (paragraph q)                                                                                           |       | (4,674,677    | )          | (4,939,912    | )          |
| Organizational and start-up costs (paragraph r)                                                                                                       |       | (5,975,801    | )          | (6,313,877    | )          |
| Derivative instruments (paragraph t)                                                                                                                  |       | (33,261,610   | )          | (71,541,552   | )          |
| Fair value of long-term debt assumed (paragraph u)                                                                                                    |       | 160,059       |       | 128,047       |       |
| Deferred income (paragraph v)                                                                                                                         |       | (1,858,182    | )          | (2,029,003    | )          |
| Reorganization of subsidiaries (paragraph x)                                                                                                          |       | 32,970,850    |       | 35,722,520    |       |
| Effects of minority interest on the U.S. GAAP adjustments (paragraph  y)                                                                              |       | 296,962,344   |       | 351,339,843   |       |
| Deferred tax effects on the U.S. GAAP adjustments                                                                                                     |       | (12,659,478   | )          | 1,323,185     |       |
| Amotization of bond discount and deferred debt issuance cost  (paragraph z)                                                                           |       | 2,197,158     |       | 2,224,888     |       |
| Asset retirement cost (paragraph aa)                                                                                                                  |       | 1,111,815     |       | 987,956       |       |
| Asset retirement obligations  - liabilities (paragraph aa)                                                                                            |       | (2,814,439    | )          | (3,260,350    | )          |
|                                                                                                                                                  |       |          |       |          |       |
| **Shareholders’ equity in accordance with U.S.  GAAP**                                                                                           |       | 3,438,662,626 |       | 3,944,609,722 |       |

 

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

 
| ** **                                                                              | ** ** | **As of December 31,** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                              | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                                              | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                                                    |       |                        |       |   |   |   |   |
| Shareholders equity in accordance with U.S. GAAP - January 1                       |       | 3,274,121,910               |       | 3,548,895,923 |   | 3,438,662,626 |   |
|                                                                                    |       |                        |       |   |   |   |   |
| Dividends paid during the year                                                          |       | (80,577,412                 | )          | (192,773,849 | ) | (161,684,332 | ) |
| Reversal of dividends payable as of previous balance sheet date                         |       | 18,815,091                  |       | 55,800,970 |   | 41,210,365 |   |
| Minimum dividend payable  (paragraph m)                                                 |       | (55,800,970                 | )          | (41,210,365 | ) | (119,138,814 | ) |
| Reorganization under common control (paragraph x and bb)                                |       | (5,609,099                  | )          | (9,739,392 | ) | — |   |
| Fair value change of hedging instruments used in cash flow hedges,  net of deferred tax |       | (52,334,386                 | )          | 2,164,347 |   | 50,456,128 |   |
| SFAS 158, Brazilian subsidiaries, net of deferred tax                                   |       | 12,156,208                  |       | (524,630 | ) | (12,356,132 | ) |
| Cumulative translation adjustment                                                       |       | 14,557,136                  |       | (128,740,795 | ) | 88,033,811 |   |
| Net income in accordance with U.S. GAAP for the year                                    |       | 423,567,445                 |       | 204,790,417 |   | 619,426,070 |   |
|                                                                                    |       |                        |       |   |   |   |   |
| Shareholders equity in accordance with U.S.GAAP - December 31                      |       | 3,548,895,923               |       | 3,438,662,626 |   | 3,944,609,722 |   |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements — (Continued)**

 

**II.****                          ****Additional disclosurerequirements:**

** **

**(a)**              Goodwill and negative goodwill

** **

Thefollowing is an analysis of goodwill and negative goodwill, determined onChilean GAAP basis, as of December 31, 2007 and 2008, respectively:

 
| ** **                     | ** ** | **2007**       | ** ** | **2008**       | ** ** |
|--------------------------------|------------|----------------|------------|----------------|------------|
| ** **                     | ** ** | **ThCh$**      | ** ** | **ThCh$**      | ** ** |
|                           |       |           |       |           |       |
| Goodwill                       |       | 2,104,288,287  |       | 2,107,234,230  |       |
| Less: accumulated amortization |       | (1,406,044,995 | )          | (1,471,540,563 | )          |
|                           |       |           |       |           |       |
| Goodwill, net                  |       | 698,243,292    |       | 635,693,667    |       |
|                           |       |           |       |           |       |
| Negative goodwill              |       | (558,344,747   | )          | (565,372,325   | )          |
| Less: accumulated amortization |       | 517,622,333    |       | 523,841,831    |       |
|                           |       |           |       |           |       |
| Negative goodwill, net         |       | (40,722,414    | )          | (41,530,494    | )          |

 

Amortizationexpense under Chile GAAP is disclosed in Note 13.

 

**(b)**              Basic and diluted earnings per share:

** **
| ** **                                                        | ** ** | **For the year ended December 31,** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                        | ** ** | **2006**                                 | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                        | ** ** | **Ch$**                                  | ** ** | **Ch$** | ** ** | **Ch$** | ** ** |
|                                                              |       |                                     |       |   |   |   |   |
| Chilean GAAP earnings per share                                   |       | 10.24                                    |       | 6.28 |   | 17.48 |   |
|                                                              |       |                                     |       |   |   |   |   |
| Basic and diluted U.S. GAAP earnings per share                    |       | 12.97                                    |       | 6.27 |   | 18.97 |   |
|                                                              |       |                                     |       |   |   |   |   |
| Total number of common outstanding shares at December 31,    |       | 32,651,166                               |       | 32,651,166 |   | 32,651,166 |   |
|                                                              |       |                                     |       |   |   |   |   |
| Weighted average number of common shares outstanding (000’s) |       | 32,651,166                               |       | 32,651,166 |   | 32,651,166 |   |

** **

There are no requirementsto provide earnings per share disclosures under Chilean GAAP. The earnings pershare figures disclosed above for both US GAAP and Chilean GAAP purposes havebeen calculated by dividing the respective consolidated net income inaccordance with US GAAP and Chilean GAAP, respectively, by the weighted averagenumber of common shares outstanding during the year.  The Company has not issued convertible debt orequity securities nor does it have other common stock equivalent securities orstock options outstanding.  Consequently,there are no potentially dilutive effects on the earnings per share of theCompany.

 

F-154

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**Table of Contents**

** **

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notesto the Consolidated Financial Statements — (Continued)**

** **

**(c)**              Income taxes:

** **

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

 
| ** **                                             | ** ** | **2006**     | ** ** |
|--------------------------------------------------------|------------|--------------|------------|
| ** **                                             | ** ** | **Chile**    | ** ** | **Argentina** | ** ** | **Peru** | ** ** | **Brazil** | ** ** | **Colombia** | ** ** | **Total** | ** ** |
| ** **                                             | ** ** | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Income tax provision under Chilean GAAP                |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Current income taxes as determined under Chilean GAAP  |       | (56,727,666  | )          | (5,272,313 | ) | (39,468,492 | ) | (78,253,364 | ) | (99,658,160 | ) | (279,379,995 | ) |
| Deferred income taxes as determined under Chilean GAAP |       | 97,839,061   |       | (12,725,136 | ) | (9,575,366 | ) | 65,105,489 |   | 27,378,368 |   | 168,022,416 |   |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Total income tax provision under Chilean GAAP          |       | 41,111,395   |       | (17,997,449 | ) | (49,043,858 | ) | (13,147,875 | ) | (72,279,792 | ) | (111,357,579 | ) |
| U.S. GAAP adjustments:                                 |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Deferred tax effect of applying SFAS No. 109      |       | 6,825,031    |       | 145,936 |   | 6,920,860 |   | — |   | — |   | 13,891,827 |   |
| Deferred tax effect of adjustments to U.S. GAAP        |       | (8,286,902   | )          | (4,184,291 | ) | (8,738,805 | ) | 1,993,793 |   | (2,796,489 | ) | (22,012,694 | ) |
| U.S. GAAP reclassifications (1)                        |       | 100,628      |       | — |   | — |   | — |   | 213,127 |   | 313,755 |   |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Total U.S. GAAP adjustments:                           |       | (1,361,243   | )          | (4,038,355 | ) | (1,817,945 | ) | 1,993,793 |   | (2,583,362 | ) | (7,807,112 | ) |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Total Income tax provision under U.S. GAAP             |       | 39,750,152   |       | (22,035,804 | ) | (50,861,803 | ) | (11,154,082 | ) | (74,863,154 | ) | (119,164,691 | ) |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| ** **                                             | ** ** | **2007**     | ** ** |
| ** **                                             | ** ** | **Chile**    | ** ** | **Argentina** | ** ** | **Peru** | ** ** | **Brazil** | ** ** | **Colombia** | ** ** | **Total** | ** ** |
|                                                   |       | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** |   |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Income tax provision under Chilean GAAP                |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Current income taxes as determined under Chilean GAAP  |       | (41,651,209  | )          | (28,873,512 | ) | (37,045,270 | ) | (66,634,816 | ) | (61,864,578 | ) | (236,069,385 | ) |
| Deferred income taxes as determined under Chilean GAAP |       | (36,838,668  | )          | (7,360,866 | ) | 36,260 |   | 6,816,954 |   | (2,261,853 | ) | (39,608,173 | ) |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Total income tax provision under Chilean GAAP          |       | (78,489,877  | )          | (36,234,378 | ) | (37,009,010 | ) | (59,817,862 | ) | (64,126,431 | ) | (275,677,558 | ) |
| U.S. GAAP adjustments:                                 |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Deferred tax effect of applying SFAS No. 109      |       | 6,986,500    |       | 124,944 |   | 6,458,262 |   | — |   | — |   | 13,569,706 |   |
| Deferred tax effect of adjustments to U.S. GAAP        |       | (8,894,487   | )          | 585,662 |   | (8,687,737 | ) | 6,029,906 |   | 373,028 |   | (10,593,628 | ) |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Total U.S. GAAP adjustments:                           |       | (1,907,987   | )          | 710,606 |   | (2,229,475 | ) | 6,029,906 |   | 373,028 |   | 2,976,078 |   |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Total Income tax provision under U.S. GAAP             |       | (80,397,864  | )          | (35,523,772 | ) | (39,238,485 | ) | (53,787,956 | ) | (63,753,403 | ) | (272,701,481 | ) |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| ** **                                             | ** ** | **2008**     | ** ** |
| ** **                                             | ** ** | **Chile**    | ** ** | **Argentina** | ** ** | **Peru** | ** ** | **Brazil** | ** ** | **Colombia** | ** ** | **Total** | ** ** |
|                                                   |       | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** |   |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Income tax provision under Chilean GAAP                |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Current income taxes as determined under Chilean GAAP  |       | (86,545,469  | )          | (26,526,553 | ) | (42,589,367 | ) | (84,007,833 | ) | (128,544,193 | ) | (368,213,415 | ) |
| Deferred income taxes as determined under Chilean GAAP |       | (92,907,188  | )          | 1,647,195 |   | 5,685,359 |   | (6,255,706 | ) | 9,069,220 |   | (82,761,120 | ) |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Total income tax provision under Chilean GAAP          |       | (179,452,657 | )          | (24,879,358 | ) | (36,904,008 | ) | (90,263,539 | ) | (119,474,973 | ) | (450,974,535 | ) |
| U.S. GAAP adjustments:                                 |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Deferred tax effect of applying SFAS No. 109      |       | 6,879,537    |       | 130,519 |   | 7,522,158 |   | — |   | — |   | 14,532,214 |   |
| Deferred tax effect of adjustments to U.S. GAAP        |       | 11,022,168   |       | 743,558 |   | 6,439,463 |   | 2,812,509 |   | 1,555,547 |   | 22,573,245 |   |
| Total U.S. GAAP adjustments:                           |       | 17,901,705   |       | 874,077 |   | 13,961,621 |   | 2,812,509 |   | 1,555,547 |   | 37,105,459 |   |
|                                                   |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Total Income tax provision under U.S. GAAP             |       | (161,550,952 | )          | (24,005,281 | ) | (22,942,387 | ) | (87,451,030 | ) | (117,919,426 | ) | (413,869,076 | ) |

 

----

(1)              In 2006 certain tax-related income under Chilean GAAPwere classified as non-operating, but under US GAAP would be classified asincome taxes

 

F-155

----

Table of Contents

** **

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notesto the Consolidated Financial Statements — (Continued)**

** **

**(i)            Deferred tax assets (liabilities) asof balance sheet dates are summarized as follows:**

 
| ** **                              | ** ** | **2007**                   | ** ** | **2008**                   | ** ** |
|-----------------------------------------|------------|----------------------------|------------|----------------------------|------------|
| ** **                              | ** ** | **SFAS No. 109** | ** ** | ** **                 | ** ** | ** ** | ** ** | **SFAS No. 109** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                              | ** ** | **Applied to**        | ** ** | **SFAS No.**          | ** ** | **Total** | ** ** | **Applied to** | ** ** | **SFAS No.** | ** ** | **Total** | ** ** |
| ** **                              | ** ** | **Chilean**                | ** ** | **109 applied**       | ** ** | **Deferred** | ** ** | **Chilean** | ** ** | **109 applied** | ** ** | **Deferred** | ** ** |
| ** **                              | ** ** | **GAAP**                   | ** ** | **to U.S. GAAP** | ** ** | **Taxes under** | ** ** | **GAAP** | ** ** | **to U.S. GAAP** | ** ** | **Taxes under** | ** ** |
| ** **                              | ** ** | **Balances**               | ** ** | **Adjustments**            | ** ** | **SFAS No. 109** | ** ** | **Balances** | ** ** | **Adjustments** | ** ** | **SFAS No. 109** | ** ** |
| ** **                              | ** ** | **ThCh$**                  | ** ** | **ThCh$**                  | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| **Deferred income tax assets:**         |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
| ** **                              |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
| Property, plant and equipment           |       | 2,808,924                  |       | 131,178,265                |       | 133,987,189 |   | 3,303,818 |   | 151,259,037 |   | 154,562,855 |   |
| Allowance for doubtful accounts         |       | 85,633,278                 |       | —                     |       | 85,633,278 |   | 56,567,374 |   | — |   | 56,567,374 |   |
| Actuarial deficit (companies in Brazil) |       | 13,392,490                 |       | (1,074,067                 | )          | 12,318,423 |   | 18,735,018 |   | (542,281 | ) | 18,192,737 |   |
| Deferred income                         |       | 2,584,563                  |       | —                     |       | 2,584,563 |   | 2,380,531 |   | — |   | 2,380,531 |   |
| Provision real estate projects          |       | 2,646,491                  |       | —                     |       | 2,646,491 |   | 2,816,749 |   | — |   | 2,816,749 |   |
| Derivative contracts                    |       | —                     |       | 10,141,957                 |       | 10,141,957 |   | — |   | 14,680,973 |   | 14,680,973 |   |
| Vacation accrual                        |       | 1,376,794                  |       | —                     |       | 1,376,794 |   | 1,486,884 |   | — |   | 1,486,884 |   |
| Tax loss carryforwards                  |       | 213,127,759                |       | —                     |       | 213,127,759 |   | 118,072,368 |   | — |   | 118,072,368 |   |
| Contingencies                           |       | 86,145,417                 |       | 4,997,960                  |       | 91,143,377 |   | 89,376,798 |   | 4,455,532 |   | 93,832,330 |   |
| Salaries for construction-in progress   |       | 4,673,362                  |       | —                     |       | 4,673,362 |   | 3,942,569 |   | — |   | 3,942,569 |   |
| Allowance for tariff decree             |       | 7,511,650                  |       | —                     |       | 7,511,650 |   | — |   | — |   | — |   |
| Intangible                              |       | 1,106,524                  |       | —                     |       | 1,106,524 |   | 1,667,895 |   | — |   | 1,667,895 |   |
| Valuation allowance                     |       | (17,543,528                | )          | (3,786,604                 | )          | (21,330,132 | ) | (18,199,113 | ) | (4,861,104 | ) | (23,060,217 | ) |
| Others                                  |       | 14,202,219                 |       | 801,356                    |       | 15,003,575 |   | 13,326,609 |   | 1,643,455 |   | 14,970,064 |   |
| Provision for employee benefits         |       | 4,526,743                  |       | —                     |       | 4,526,743 |   | 3,889,457 |   | — |   | 3,889,457 |   |
|                                    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
| Total deferred income tax assets        |       | 422,192,686                |       | 142,258,867                |       | 564,451,553 |   | 297,366,957 |   | 166,635,612 |   | 464,002,569 |   |
|                                    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
| **Deferred income tax liabilities:**    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
|                                    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
| Property, plant and equipment           |       | 463,520,673                |       | 120,861,863                |       | 584,382,536 |   | 477,954,950 |   | 126,134,121 |   | 604,089,071 |   |
| Severance indemnities                   |       | 1,853,016                  |       | —                     |       | 1,853,016 |   | 1,415,328 |   | — |   | 1,415,328 |   |
| Regulated assets                        |       | 27,976,849                 |       | —                     |       | 27,976,849 |   | 15,364,126 |   | — |   | 15,364,126 |   |
| Finance costs                           |       | 21,156,063                 |       | —                     |       | 21,156,063 |   | 14,612,551 |   | — |   | 14,612,551 |   |
| Derivative contracts                    |       | —                     |       | 3,751,510                  |       | 3,751,510 |   | — |   | 2,624,284 |   | 2,624,284 |   |
| Bond discount                           |       | 1,428,467                  |       | 373,517                    |       | 1,801,985 |   | 3,292,381 |   | 378,231 |   | 3,670,612 |   |
| Cost of studies                         |       | 9,758,104                  |       | —                     |       | 9,758,104 |   | 7,659,391 |   | — |   | 7,659,391 |   |
| Imputed interest on construction        |       | 4,311,595                  |       | —                     |       | 4,311,595 |   | 4,041,198 |   | — |   | 4,041,198 |   |
| Materials used                          |       | 878,155                    |       | —                     |       | 878,155 |   | 807,175 |   | — |   | 807,175 |   |
| Exchange difference                     |       | 7,403,290                  |       | —                     |       | 7,403,290 |   | 3,608,162 |   | — |   | 3,608,162 |   |
| Capitalized expenses                    |       | 2,561,451                  |       | —                     |       | 2,561,451 |   | 493,812 |   | — |   | 493,812 |   |
| Capitalized interest                    |       | —                     |       | 29,897,427                 |       | 29,897,427 |   | 3,275,586 |   | 36,154,023 |   | 39,429,609 |   |
| Accrued Expenses (Earned exigible)      |       | —                     |       | —                     |       | — |   | 3,279,627 |   | — |   | 3,279,627 |   |
| Intangible                              |       | —                     |       | —                     |       | — |   | 422,328 |   | — |   | 422,328 |   |
| Provision real estate projects          |       | —                     |       | —                     |       | — |   | 947,128 |   | — |   | 947,128 |   |
| Contingencies                           |       | —                     |       | —                     |       | — |   | 1,485,474 |   | — |   | 1,485,474 |   |
| Others                                  |       | 22,935,011                 |       | 34,028                     |       | 22,969,038 |   | 15,910,004 |   | 21,768 |   | 15,931,772 |   |
|                                    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
| Total deferred income tax liabilities   |       | 563,782,674                |       | 154,918,345                |       | 718,701,019 |   | 554,569,221 |   | 165,312,427 |   | 719,881,648 |   |
|                                    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
| Net deferred assets (liabilities)       |       | (141,589,988               | )          | (12,659,478                | )          | (154,249,466 | ) | (257,202,264 | ) | 1,323,185 |   | (255,879,079 | ) |
|                                    |       |                       |       |                       |       |   |   |   |   |   |   |   |   |
| Complementary Account                   |       | 191,649,395                |       | (191,649,395               | )          | — |   | 187,607,279 |   | (187,607,279 | ) | **—** | ** ** |
| Net deferred assets (liabilities)       |       | 50,059,407                 |       | (204,308,873               | )          | (154,249,466 | ) | (69,594,985 | ) | (186,284,094 | ) | (255,879,079 | ) |

 

**(ii) Accumulated tax losses by country as of December 31,2007 and 2008, are as follows:**

 
| ** **   | ** ** | **December 31, 2007** | ** ** | **December 31, 2008** | ** ** |
|--------------|------------|----------------------------|------------|----------------------------|------------|
| ** **   | ** ** | **Amount**                 | ** ** | **Year of expiration**     | ** ** | **Amount** | ** ** | **Year of  expiration** | ** ** |
| ** **   | ** ** | **ThCh$**                  | ** ** | ** **                 | ** ** | **ThCh$** | ** ** | ** ** | ** ** |
|         |       |                       |       |                       |       |   |   |   |   |
| Chile        |       | 1,087,220,430              |       | Do  not expire             |       | 550,422,393 |   | Do  not expire |   |
| Argentina    |       | 156,090,132                |       | 2008/2012                  |       | 3,600,370 |   | 2012/2013 |   |
| Colombia (a) |       | —                     |       | —                     | ** ** | **—** | ** ** | **—** | ** ** |
| Brazil       |       | 198,985,411                |       | Do  not expire             |       | 122,718,252 |   | Do  not expire |   |
| Total        |       | 1,442,295,973              |       |                       |       | 676,741,015 |   |   |   |

 

----

| (a) | During  the years ended December 31, 2006 and 2007, management did not expect  that the subsidiaries in Colombia will be able to recover deferred tax assets  related to tax loss carry forwards. Thus, as of December 31, 2006, a  valuation allowance has been recorded, which covered the whole amount of the  deferred tax asset related to tax loss carryforwards. However, due to the  merger of the Company’s Colombian Subsidiaries, the tax loss carryforwards  were applied against income during the year ended December 31, 2007. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

F-156

----

Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notesto the Consolidated Financial Statements – (Continued)**

** **

**(iii) A reconciliation of the U.S. GAAPStatutory Income Tax rate to the Company’s effective tax rate on net income isas follows:**

 
| ** **                                            | ** ** | **2006**     | ** ** |
|-------------------------------------------------------|------------|--------------|------------|
| ** **                                            | ** ** | **Chile**    | ** ** | **Argentina** | ** ** | **Peru** | ** ** | **Brazil** | ** ** | **Colombia** | ** ** | **Total** | ** ** |
| ** **                                            | ** ** | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                  |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Statutory US GAAP tax                                 |       | (63,386,045  | )          | (2,632,638 | ) | (12,251,056 | ) | (31,556,947 | ) | (40,335,028 | ) | (150,161,714 | ) |
| Effect of higher foreign tax rates                    |       | —       |       | (2,787,498 | ) | (11,890,730 | ) | (31,556,947 | ) | (51,011,949 | ) | (97,247,123 | ) |
| Increase (decrease) in rates resulting from:          |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Price-level restatement not accepted for tax purposes |       | (6,206,641   | )          | (7,123,287 | ) | — |   | — |   | 27,859,223 |   | 14,529,295 |   |
| Non-taxable items                                     |       | 19,343,063   |       | 6,460,901 |   | 1,876,430 |   | 63,562,331 |   | 4,557,111 |   | 95,799,836 |   |
| Non-deductible items                                  |       | (73,806,359  | )          | (15,936,865 | ) | (28,700,385 | ) | (18,077,698 | ) | (17,443,110 | ) | (153,964,417 | ) |
| Effect of change in valuation allowance               |       | 153,124,918  |       | — |   | — |   | — |   | (68,017 | ) | 153,056,901 |   |
| Prior years income tax                                |       | 7,088,500    |       | — |   | — |   | — |   | — |   | 7,088,500 |   |
| Other                                                 |       | 3,492,088    |       | (16,417 | ) | 103,938 |   | 6,475,179 |   | 1,365,489 |   | 11,420,276 |   |
| US GAAP reclassifications (1)                         |       | 100,628      |       | — |   | — |   | — |   | 213,127 |   | 313,755 |   |
|                                                  |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Tax (benefit) expense at effective tax rate           |       | 39,750,152   |       | (22,035,804 | ) | (50,861,803 | ) | (11,154,082 | ) | (74,863,154 | ) | (119,164,691 | ) |
| ** **                                            | ** ** | ** **   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | **2007**     | ** ** |
| ** **                                            | ** ** | **Chile**    | ** ** | **Argentina** | ** ** | **Peru** | ** ** | **Brazil** | ** ** | **Colombia** | ** ** | **Total** | ** ** |
| ** **                                            | ** ** | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                  |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Statutory US GAAP tax                                 |       | (45,684,376  | )          | (17,547,288 | ) | (8,467,810 | ) | (6,864,723 | ) | (33,235,648 | ) | (111,799,845 | ) |
| Effect of higher foreign tax rates                    |       | —       |       | (19,260,282 | ) | (7,408,858 | ) | (6,864,723 | ) | (33,068,337 | ) | (66,602,200 | ) |
| Increase (decrease) in rates resulting from:          |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Price-level restatement not accepted for tax purposes |       | (23,047,008  | )          | 1,195,126 |   | (15,613 | ) | — |   | — |   | (21,867,495 | ) |
| Non-taxable items                                     |       | 106,322,011  |       | 24,254,026 |   | 5,279,232 |   | 69,543,031 |   | 14,248,380 |   | 219,646,680 |   |
| Non-deductible items                                  |       | (114,139,889 | )          | (24,165,354 | ) | (27,774,379 | ) | (111,352,543 | ) | (39,753,130 | ) | (317,185,295 | ) |
| Effect of change in valuation allowance               |       | (4,397,876   | )          | — |   | — |   | — |   | 27,609,204 |   | 23,211,328 |   |
| Prior years income tax                                |       | 2,174,368    |       | — |   | — |   | — |   | — |   | 2,174,368 |   |
| Other                                                 |       | (1,625,094   | )          | — |   | (851,057 | ) | 1,751,002 |   | 446,128 |   | (279,021 | ) |
|                                                  |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Tax (benefit) expense at effective tax rate           |       | (80,397,864  | )          | (35,523,772 | ) | (39,238,485 | ) | (53,787,956 | ) | (63,753,403 | ) | (272,701,480 | ) |
|                                                  |       |         |       |   |   |   |   |   |   |   |   |   |   |
| ** **                                            | ** ** | **2008**     | ** ** |
| ** **                                            | ** ** | **Chile**    | ** ** | **Argentina** | ** ** | **Peru** | ** ** | **Brazil** | ** ** | **Colombia** | ** ** | **Total** | ** ** |
| ** **                                            | ** ** | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                  |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Statutory US GAAP tax                                 |       | (108,537,116 | )          | (4,958,072 | ) | (21,509,326 | ) | (96,743,771 | ) | (80,082,537 | ) | (311,830,822 | ) |
| Effect of higher foreign tax rates                    |       | —       |       | (5,249,721 | ) | (18,937,473 | ) | (96,743,771 | ) | (75,371,800 | ) | (196,302,765 | ) |
| Increase (decrease) in rates resulting from:          |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Price-level restatement not accepted for tax purposes |       | (34,025,325  | )          | (4,067,279 | ) | 3,884,083 |   | — |   | — |   | (34,208,521 | ) |
| Non-taxable items                                     |       | 101,131,002  |       | 1,351,755 |   | 27,588,348 |   | 144,038,318 |   | 38,913,743 |   | 313,023,166 |   |
| Non-deductible items                                  |       | (115,853,318 | )          | (11,081,964 | ) | (14,773,180 | ) | (51,381,928 | ) | (2,704,608 | ) | (195,794,998 | ) |
| Effect of change in valuation allowance               |       | (1,974,820   | )          | — |   | — |   | — |   | — |   | (1,974,820 | ) |
| Prior years income tax                                |       | (1,398,198   | )          | — |   | 1,036,621 |   | — |   | 1,325,776 |   | 964,199 |   |
| Other                                                 |       | (893,177     | )          | — |   | (231,460 | ) | 13,380,122 |   | — |   | 12,255,485 |   |
|                                                  |       |         |       |   |   |   |   |   |   |   |   |   |   |
| Tax (benefit) expense at effective tax rate           |       | (161,550,952 | )          | (24,005,281 | ) | (22,942,387 | ) | (87,451,030 | ) | (117,919,426 | ) | (413,869,076 | ) |

 

----

(1)              In 2006 US GAAP reclassifications were taxrelated income that under Chilean GAAP were classified as non-operating income,but under US GAAP would be classified as income taxes.

 

F-157

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Tableof Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notesto the Consolidated Financial Statements – (Continued)**

 

Additionally, effective January 1, 2007, theCompany adopted FASB Interpretation No. 48: “Accounting for Uncertainty inIncome Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”),which clarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with Statement of FinancialAccounting Standards No. 109: “Accounting for Income Taxes” (“FAS 109”).The Interpretation prescribes a threshold for the financial statementrecognition and measurement of a tax position taken or expected to be takenwithin an income tax return. For each tax position, the enterprise mustdetermine whether it is more likely than not that the position will besustained upon examination by taxing authorities, based on the technical meritsof the position, including resolution of any related appeals or litigation. Atax position that meets the more likely than not recognition threshold is thenmeasured to determine the amount of benefit to be recognized within thefinancial statements. No benefits may be recognized for tax positions that donot meet the more likely than not threshold. For tax positions that meet themore likely than not threshold, the benefit to be recognized is the largestamount that is greater than 50% likely of being realized upon ultimatesettlement.

 

As a result of implementing FIN 48, there was noimpact on the Company’s financial statements from the adoption of thisinterpretation. In addition, as of the date of the adoption of FIN 48, theCompany did not have any accrued interest and penalties related to unrecognizedtax benefits. The Company and its subsidiaries will recognize interest andpenalties related to unrecognized tax benefits in interest expense and otheroperating expense, respectively.

 

We are potentially subject to income tax audits innumerous jurisdictions in Chile and internationally until the applicablestatute of limitations expire. Tax audits by their nature are often complex andcan require several years to complete. The following is a summary of tax years,potentially subject to examination, in the significant tax and businessjurisdictions in which we operate.

 
| **Jurisdiction** | ** ** | **Tax Years Subject to Examination** |
|------------------|------------|----------------------------------------------------------|
|             |       |                                                     |
| Chile            |       | 2003-2008                                                |
| Argentina        |       | 2002-2008                                                |
| Brazil           |       | 2004-2008                                                |
| Colombia         |       | 2003-2008                                                |
| Peru             |       | 2004-2008                                                |

 

**(d)**              Segment disclosures

** **

TheCompany is primarily engaged in the distribution and generation of electricityin Chile, Argentina, Brazil, Colombia and Peru. Enersis provides these andother services through four business segments:

 

Generation

Distribution

Transmission

EngineeringServices and Real Estate

Corporateand other

 

Generation involves thegeneration of electricity primarily through its subsidiary Endesa Chile.Distribution involves the supply of electricity to regulated and unregulatedcustomers. Transmission involves the transmission of high voltage theelectricity produced by generation companies Engineering Services and RealEstate includes engineering services and real estate development. Corporate andother includes computer-related data processing services and the sale ofelectricity-related supplies and equipment. The Company’s reportable segmentsare strategic business units that offer different products and services and aremanaged separately. The methods of revenue recognition by segment are asfollows:

 

**Generation**

** **

Revenue is recognizedwhen energy and power output is delivered and capacity is provided at ratesspecified under contract terms or prevailing market rates.

 

F-158

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

** **

**Distribution - Operating Revenues**

 

Revenue is recognizedwhen energy and power is provided at rates specified under contract terms orprevailing market rates.

 

**Distribution - Non Operating Revenues**

 

Revenue is recognized asservices are provided, such as public light posts, telephone poles, and otherservices related to distribution services.

 

**Transmission**

 

Revenue is recognized asservices are provided, through to tolls for the transmission service of highvoltage the electricity produced by generation companies..

 

**Engineering Services and Real Estate**

 

Revenue is recognized asservices are provided, or when projects are sold.

 

**Corporate and Other**

 

Revenue is recognized asservices are provided, or when supplies or equipment are sold.

 

The following segmentinformation has been disclosed in accordance with U.S. reporting requirements;however, the information presented has been determined in accordance withChilean GAAP:

 
| ** **                                                     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** | **Engineering**   | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|-------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** | **services  and** | ** ** | **Corporate**  | ** ** | ** **       | ** ** | ** **       | ** ** |
| **2006**                                                       | ** ** | **Generation** | ** ** | **Transmission** | ** ** | **Distribution** | ** ** | **real  estate**  | ** ** | **and  other** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                     | ** ** | **ThCh$**      | ** ** | **ThCh$**        | ** ** | **ThCh$**        | ** ** | **ThCh$**         | ** ** | **ThCh$**      | ** ** | **ThCh$**        | ** ** | **ThCh$**        | ** ** |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Sales to  unaffiliated customers                               |       | 1,338,105,142  |       | 93,596,281       |       | 2,937,659,641    |       | 39,654,745        |       | 77,759,836     |       | —           |       | 4,486,775,645    |       |
| Intersegment  sales                                            |       | 386,873,098    |       | 74,707,036       |       | 22,175,934       |       | 18,562,692        |       | 156,201,906    |       | (618,838,178     | )          | 39,682,488       |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Total revenues                                                 |       | 1,724,978,240  |       | 168,303,317      |       | 2,959,835,575    |       | 58,217,437        |       | 233,961,742    |       | (618,838,178     | )          | 4,526,458,133    |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Operating income                                               |       | 682,998,832    |       | (887,149         | )          | 549,372,383      |       | 11,539,106        |       | (11,241,519    | )          | 1,307,368        |       | 1,233,089,021    |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Participation in  net income of affiliate companies            |       | 49,284,477     |       | —           |       | 24,463,756       |       | 137,511           |       | 456,730,488    |       | (524,722,758     | )          | 5,893,474        |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Depreciation and  amortization                                 |       | 221,905,972    |       | 15,854,891       |       | 241,722,213      |       | 2,637,904         |       | 70,282,282     |       | —           |       | 552,403,262      |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Identifiable  assets including investment in related companies |       | 6,804,333,249  |       | 538,777,611      |       | 6,236,802,739    |       | 138,984,012       |       | 5,703,468,614  |       | (6,483,927,201   | )          | 12,938,439,024   |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Capital  expenditures                                          |       | 202,937,282    |       | 2,214,826        |       | 392,826,085      |       | 1,908,049         |       | 5,688,368      |       | —           |       | 605,574,610      |       |

 
| ** **                                                     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** | **Engineering**  | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** | **services and** | ** ** | **Corporate**  | ** ** | ** **       | ** ** | ** **       | ** ** |
| **2007**                                                       | ** ** | **Generation** | ** ** | **Transmission** | ** ** | **Distribution** | ** ** | **real  estate** | ** ** | **and  other** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                     | ** ** | **ThCh$**      | ** ** | **ThCh$**        | ** ** | **ThCh$**        | ** ** | **ThCh$**        | ** ** | **ThCh$**      | ** ** | **ThCh$**        | ** ** | **ThCh$**        | ** ** |
|                                                           |       |           |       |             |       |             |       |             |       |           |       |             |       |             |       |
| Sales to  unaffiliated customers                               |       | 1,654,332,005  |       | 38,578,666       |       | 3,057,046,510    |       | 38,597,071       |       | 66,006,586     |       | —           |       | 4,854,560,838    |       |
| Intersegment  sales                                            |       | 430,888,027    |       | 56,439,826       |       | 18,238,148       |       | 21,019,969       |       | 154,856,469    |       | (620,382,411     | )          | 61,060,028       |       |
|                                                           |       |           |       |             |       |             |       |             |       |           |       |             |       |             |       |
| Total revenues                                                 |       | 2,085,220,032  |       | 95,018,492       |       | 3,075,284,658    |       | 59,617,040       |       | 220,863,055    |       | (620,382,411     | )          | 4,915,620,866    |       |
|                                                           |       |           |       |             |       |             |       |             |       |           |       |             |       |             |       |
| Operating income                                               |       | 720,997,105    |       | 25,243,317       |       | 614,210,449      |       | 9,205,061        |       | (4,993,387     | )          | 4,094,409        |       | 1,368,756,954    |       |
|                                                           |       |           |       |             |       |             |       |             |       |           |       |             |       |             |       |
| Participation in  net income of affiliate companies            |       | (11,652,140    | )          | —           |       | 32,659,379       |       | 285,421          |       | 316,909,065    |       | (397,836,512     | )          | (59,634,787      | )          |
|                                                           |       |           |       |             |       |             |       |             |       |           |       |             |       |             |       |
| Depreciation and  amortization                                 |       | 223,069,472    |       | 13,494,422       |       | 214,359,887      |       | 2,790,961        |       | 69,897,197     |       | —           |       | 523,611,939      |       |
|                                                           |       |           |       |             |       |             |       |             |       |           |       |             |       |             |       |
| Identifiable  assets including investment in related companies |       | 6,540,482,486  |       | 462,466,225      |       | 6,021,421,240    |       | 90,546,677       |       | 5,374,960,356  |       | (6,034,149,108   | )          | 12,455,727,876   |       |
|                                                           |       |           |       |             |       |             |       |             |       |           |       |             |       |             |       |
| Capital  expenditures                                          |       | 228,713,640    |       | 176,993          |       | 411,955,613      |       | 1,557,984        |       | 4,522,014      |       | —           |       | 646,926,244      |       |

 

F-159

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Table ofContents

 

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 
| ** **                                                     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** | **Engineering**   | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------------|------------|----------------|------------|------------------|------------|------------------|------------|-------------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** | **services  and** | ** ** | **Corporate**  | ** ** | ** **       | ** ** | ** **       | ** ** |
| **2008**                                                       | ** ** | **Generation** | ** ** | **Transmission** | ** ** | **Distribution** | ** ** | **real  estate**  | ** ** | **and  other** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| ** **                                                     | ** ** | **ThCh$**      | ** ** | **ThCh$**        | ** ** | **ThCh$**        | ** ** | **ThCh$**         | ** ** | **ThCh$**      | ** ** | **ThCh$**        | ** ** | **ThCh$**        | ** ** |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Sales to  unaffiliated customers                               |       | 563,021,742    |       | 8,837,052        |       | 23,527,572       |       | 28,145,175        |       | 166,050,944    |       | —           |       | 789,582,485      |       |
| Intersegment  sales                                            |       | 2,212,862,516  |       | 84,390,724       |       | 4,141,590,286    |       | 24,849,745        |       | 111,449,548    |       | (714,438,189     | )          | 5,860,704,630    |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Total revenues                                                 |       | 2,775,884,258  |       | 93,227,776       |       | 4,165,117,858    |       | 52,994,920        |       | 277,500,492    |       | (714,438,189     | )          | 6,650,287,115    |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Operating income                                               |       | 1,040,321,628  |       | 60,405,072       |       | 877,116,472      |       | 7,470,902         |       | (11,244,272    | )          | 4,727,656        |       | 1,978,797,458    |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Participation in  net income of affiliate companies            |       | 113,280,450    |       | —           |       | 124,986,689      |       | 402,312           |       | 645,773,723    |       | (886,814,038     | )          | (2,370,864       | )          |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Depreciation and  amortization                                 |       | 266,585,858    |       | 18,327,936       |       | 265,877,553      |       | 2,811,478         |       | 71,800,603     |       | —           |       | 625,403,428      |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Identifiable  assets including investment in related companies |       | 7,813,948,600  |       | 499,208,123      |       | 6,900,770,547    |       | 67,628,645        |       | 6,039,410,402  |       | (6,921,338,440   | )          | 14,399,627,877   |       |
|                                                           |       |           |       |             |       |             |       |              |       |           |       |             |       |             |       |
| Capital  expenditures                                          |       | 293,036,091    |       | 1,262,463        |       | 518,222,374      |       | 2,932,100         |       | 11,311,927     |       | —           |       | 826,764,955      |       |

 

Asummary of activities by geographic area is as follows:

 
| ** **                   | ** ** | **Chile**     | ** ** | **Argentina** | ** ** | **Peru**      | ** ** | **Brazil**    | ** ** | **Colombia**  | ** ** | **Total**      | ** ** |
|------------------------------|------------|---------------|------------|---------------|------------|---------------|------------|---------------|------------|---------------|------------|----------------|------------|
| ** **                   | ** ** | **ThCh$**     | ** ** | **ThCh$**     | ** ** | **ThCh$**     | ** ** | **ThCh$**     | ** ** | **ThCh$**     | ** ** | **ThCh$**      | ** ** |
| **2006**                     |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Total revenues               |       | 1,448,950,949 |       | 576,417,404   |       | 429,962,320   |       | 1,293,601,679 |       | 777,525,781   |       | 4,526,458,133  |       |
|                         |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Long lived  assets (net) (1) |       | 2,832,939,247 |       | 1,186,986,467 |       | 1,169,333,593 |       | 2,177,346,274 |       | 2,092,347,979 |       | 9,458,953,560  |       |
|                         |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Total assets                 |       | 3,980,656,398 |       | 1,534,889,069 |       | 1,303,619,143 |       | 3,504,975,385 |       | 2,617,648,958 |       | 12,941,788,953 |       |
|                         |       |          |       |          |       |          |       |          |       |          |       |           |       |
| **2007**                     |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Total revenues               |       | 1,822,253,622 |       | 615,044,354   |       | 391,800,341   |       | 1,238,218,673 |       | 848,303,876   |       | 4,915,620,866  |       |
|                         |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Long lived  assets (net) (1) |       | 2,946,114,808 |       | 1,011,238,887 |       | 1,001,183,371 |       | 1,958,581,399 |       | 1,802,881,456 |       | 8,719,999,921  |       |
|                         |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Total assets                 |       | 4,151,619,343 |       | 1,411,232,975 |       | 1,109,559,242 |       | 3,408,783,055 |       | 2,374,533,260 |       | 12,455,727,875 |       |
|                         |       |          |       |          |       |          |       |          |       |          |       |           |       |
| **2008**                     |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Total revenues               |       | 2,298,813,799 |       | 784,688,735   |       | 529,283,446   |       | 1,827,486,850 |       | 1,210,014,285 |       | 6,650,287,115  |       |
|                         |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Long lived  assets (net) (1) |       | 3,136,146,327 |       | 1,203,618,593 |       | 1,207,767,673 |       | 2,414,493,562 |       | 2,118,184,347 |       | 10,080,210,502 |       |
|                         |       |          |       |          |       |          |       |          |       |          |       |           |       |
| Total assets                 |       | 5,190,328,942 |       | 1,590,311,290 |       | 1,344,787,713 |       | 3,532,274,680 |       | 2,741,925,252 |       | 14,399,627,877 |       |

 

----

(1)          Long-livedassets include property, plant and equipment.

 

**(e)**              Concentration of risk:

** **

The Company does notbelieve that it is exposed to any unusual credit risk from any single customer.The Company’s debtors are dependent on the economy in Latin America, whichcould make them vulnerable to downturns in the economic activity in the countriesin which the Company operates.

 

No single customersaccounted for more than 10% of revenues for the years ending December 31,2006, 2007 and 2008.

 

F-160

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Table ofContents

 

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

**(f)**                Schedule of debt maturity:

** **

Following is a scheduleof debt maturity in each of the next five years and thereafter:

 
| ** ** | ** ** | **As of   December 31, 2008** | ** ** |
|------------|------------|------------------------------------|------------|
| ** ** | ** ** | **ThCh$**                          | ** ** |
| ** ** | ** ** | ** **                         | ** ** |
| 2009       |       | 1,207,769,173                      |       |
| 2010       |       | 558,831,719                        |       |
| 2011       |       | 638,324,164                        |       |
| 2012       |       | 401,082,980                        |       |
| 2013       |       | 443,309,104                        |       |
| Thereafter |       | 1,641,048,619                      |       |
|       |       |                               |       |
| Total      |       | 4,890,365,759                      |       |

 

**(g)**             Disclosure regarding interest capitalization:

** **
| ** **                              | ** ** | **Year ended December 31,** | ** ** |
|-----------------------------------------|------------|----------------------------------|------------|
| ** **                              | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                              | ** ** | **ThCh$**                        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                    |       |                             |       |   |   |   |   |
| Interest expense incurred               |       | 456,968,534                      |       | 443,534,445 |   | 495,695,627 |   |
| Interest capitalized under Chilean GAAP |       | 6,764,467                        |       | 5,684,773 |   | 8,796,529 |   |
| Interest capitalized under U.S. GAAP    |       | 20,685,585                       |       | 14,726,496 |   | 14,650,487 |   |

** **

**(h)**             Cash flow information:

** **

(i)                 The statement of cash flows under Chile GAAPdiffers in certain respects from the presentation of a statement of cash flowunder U.S. GAAP. Marketable securities under Chile GAAP qualify as cash flowequivalent, whereas under U.S. GAAP they are classified as available - for-sale securities (See note 37 II (p))

 
| ** **                                                          | ** ** | **As of December 31,** | ** ** |
|---------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                          | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                                          | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                                |       |                        |       |   |   |   |   |
| Cash flow  from operating activities - Chile GAAP and US GAAP       |       | 1,008,660,723               |       | 1,039,378,961 |   | 1,922,127,993 |   |
|                                                                |       |                        |       |   |   |   |   |
| Cash flow  from financing activities - Chile GAAP and US GAAP       |       | (347,472,146                | )          | (194,367,309 | ) | (346,352,599 | ) |
|                                                                |       |                        |       |   |   |   |   |
| Cash flow  investing activities Chile GAAP                          |       | (593,776,264                | )          | (753,084,184 | ) | (780,348,600 | ) |
|                                                                |       |                        |       |   |   |   |   |
| Differences  between Chilean GAAP and US GAAP:                      |       |                        |       |   |   |   |   |
| Purchase  of marketable securities during period                    |       | (10,549,407                 | )          | (11,215,653 | ) | — |   |
|                                                                |       |                        |       |   |   |   |   |
| Sale of  marketable securities during period                        |       | 6,341,493                   |       | 10,549,407 |   | 11,215,653 |   |
|                                                                |       |                        |       |   |   |   |   |
| Cash flow  investing activities US GAAP                             |       | (597,984,178                | )          | (753,750,430 | ) | (769,132,947 | ) |
|                                                                |       |                        |       |   |   |   |   |
| Net cash  flow                                                      |       | 63,204,399                  |       | 91,261,222 |   | 806,642,447 |   |
|                                                                |       |                        |       |   |   |   |   |
| Effect of  price-level restatement and foreign exchange differences |       | 17,051,071                  |       | 21,180,785 |   | (121,532,317 | ) |
|                                                                |       |                        |       |   |   |   |   |
| Net  increase (decrease) in cash and cash equivalent                |       | 80,255,470                  |       | 112,442,007 |   | 685,110,130 |   |
| Cash and  cash equivalent at beginning of the year                  |       | 423,918,673                 |       | 504,174,143 |   | 616,616,150 |   |
|                                                                |       |                        |       |   |   |   |   |
| Cash and  cash equivalent at end of the year                        |       | 504,174,143                 |       | 616,616,150 |   | 1,301,726,280 |   |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

(ii)             Thereconciliation of cash and cash equivalents from Chilean GAAP to U.S. GAAP asof December 31, 2006, 2007 and 2008 is as follows:

 
| ** **                                     | ** ** | **Year ended December 31,** | ** ** |
|------------------------------------------------|------------|----------------------------------|------------|
| ** **                                     | ** ** | **2006**                         | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                     | ** ** | **ThCh$**                        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                           |       |                             |       |   |   |   |   |
| Cash and  cash equivalent under Chilean GAAP   |       | 514,723,550                      |       | 627,831,803 |   | 1,301,726,280 |   |
| Elimination  of marketable securities          |       | (10,549,407                      | )          | (11,215,653 | ) | — |   |
|                                           |       |                             |       |   |   |   |   |
| Total  cash and cash equivalents under US GAAP |       | 504,174,143                      |       | 616,616,150 |   | 1,301,726,280 |   |

 

(iii)           Additional disclosures required under U.S. GAAP are as follows:

 
| ** **                        | ** ** | **Years ended December 31,** | ** ** |
|-----------------------------------|------------|-----------------------------------|------------|
| ** **                        | ** ** | **2006**                          | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                        | ** ** | **ThCh$**                         | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                              |       |                              |       |   |   |   |   |
| Interest paid during the year     |       | 349,893,746                       |       | 355,684,288 |   | 360,264,679 |   |
| Income taxes paid during the year |       | 182,356,671                       |       | 165,440,366 |   | 185,464,671 |   |

 

(iv)          Under US GAAP, cash and cash equivalents includes all highly liquiddebt instruments purchased with a maturity of three months or less:

 
| ** **                                    | ** ** | **Years ended December 31,** | ** ** |
|-----------------------------------------------|------------|-----------------------------------|------------|
| ** **                                    | ** ** | **2006**                          | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **                                    | ** ** | **ThCh$**                         | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                          |       |                              |       |   |   |   |   |
| Cash                                          |       | 116,717,921                       |       | 89,275,796 |   | 133,550,264 |   |
| Time deposits and repurchase agreements       |       | 387,456,222                       |       | 527,340,354 |   | 1,168,176,016 |   |
|                                          |       |                              |       |   |   |   |   |
| Total cash and cash equivalents under US GAAP |       | 504,174,143                       |       | 616,616,150 |   | 1,301,726,280 |   |

 

**(i)**                Fair value measurements and the fair valueoption.

** **

**a)****                         ****Disclosures about fair value of financialinstruments**

 

The following methods andassumption were used to estimate the fair value of each class of financialinstruments as of December 31, 2007 and 2008 for which it is practicableto estimate that value:

 

**Cash**

 

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

 

**Time deposits**

 

Thefair value of time deposits is equal to its carrying value due to itsrelatively short-term nature.

 

**Marketable securities**

 

Thefair value of marketable securities that the Company classifies as availablefor sale, is based on quoted market prices of the mutual money market fundsheld and is equal to its carrying value.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

**Long-term accounts receivable**

 

Thefair value of long-term accounts receivable was estimated using the interestrates that are currently offered for loans with similar terms and remainingmaturities.

 

**Long-term debt**

 

Thefair value of long-term debt was based on rates currently available to theCompany for debt with similar terms and remaining maturities.

 

**Derivative instruments**

 

Estimatesof fair values of derivative instruments for which no quoted prices orsecondary market exists have been made using valuation techniques such asforward pricing models, present value of estimated future cash flows, and othermodeling techniques. These estimates of fair value include assumptions made bythe Company about market variables that may change in the future. Changes inassumptions could have a significant impact on the estimate of fair valuesdisclosed. As a result such fair value amounts are subject to significantvolatility and are highly dependent on the quality of the assumptions used.

 

Theestimated fair values of the Company’s financial instruments compared toChilean GAAP carrying amounts are as follows:

 
| ** **                         | ** ** | **2007**       | ** ** | **2008**       | ** ** |
|------------------------------------|------------|----------------|------------|----------------|------------|
| ** **                         | ** ** | **Carrying**   | ** ** | **Fair**       | ** ** | **Carrying** | ** ** | **Fair** | ** ** |
| ** **                         | ** ** | **amount**     | ** ** | **Value**      | ** ** | **amount** | ** ** | **Value** | ** ** |
| ** **                         | ** ** | **ThCh$**      | ** ** | **ThCh$**      | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                               |       |           |       |           |       |   |   |   |   |
| Cash                               |       | 89,275,796     |       | 89,275,796     |       | 133,550,264 |   | 133,550,264 |   |
| Time deposits                      |       | 440,591,912    |       | 440,591,912    |       | 624,749,431 |   | 624,749,431 |   |
| Marketable securities              |       | 12,847,437     |       | 12,847,437     |       | 105,047,106 |   | 105,047,106 |   |
| Accounts receivable                |       | 1,075,260,601  |       | 1,075,260,601  |       | 1,138,162,639 |   | 1,138,162,639 |   |
| Notes receivable, net              |       | 12,892,797     |       | 12,892,797     |       | 7,749,050 |   | 7,749,050 |   |
| Other accounts receivable, net     |       | 108,649,553    |       | 108,649,553    |       | 95,067,667 |   | 95,067,667 |   |
| Amounts due from related companies |       | 165,946,198    |       | 165,946,198    |       | 30,882,447 |   | 30,882,447 |   |
| Long-term accounts receivable      |       | 212,940,711    |       | 212,940,711    |       | 201,124,587 |   | 201,124,587 |   |
| Accounts payable and other         |       | (616,357,378   | )          | (616,357,378   | )          | (721,842,030 | ) | (721,842,030 | ) |
| Notes payable                      |       | (196,053,782   | )          | (196,053,782   | )          | (207,016,391 | ) | (207,016,391 | ) |
| Long-term debt                     |       | (4,338,400,986 | )          | (4,545,625,575 | )          | (4,890,365,759 | ) | (5,300,189,253 | ) |
| Derivative instruments             |       | (234,918,654   | )          | (234,918,654   | )          | (105,829,571 | ) | (105,829,571 | ) |

 

**b) Fair ValueMeasurements**

** **

**Effective January 1, 2008, the Company adoptedSFAS No. 157, which defines fair value as the exchange price that would bereceived for an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderlytransaction between market participants at the measurement date. SFAS No. 157establishes a three-level fair value hierarchy that prioritizes the inputs usedto measure fair value. This hierarchy requires entities to maximize the use ofobservable inputs and minimize the use of unobservable inputs. The three levelsof inputs used to measure fair value are as follows:**

** **

**Level 1 — Quoted prices in active marketsfor identical assets or liabilities.**

** **

**Level 2 — Observable inputs other thanquoted prices included in Level 1, such as quoted prices for similarassets and liabilities in active markets; quoted prices for identical orsimilar assets and liabilities in markets that are not active; or other inputsthat are observable or can be corroborated by observable market data.**

** **

**F-163**

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**Table of Contents**

** **

**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

** **

**Level 3 — Unobservable inputs that aresupported by little or no market activity and that are significant to the fairvalue of the assets or liabilities. This includes certain pricing models,discounted cash flow methodologies and similar techniques that use significantunobservable inputs.**

** **

**The Company’s adoption of SFAS No. 157 did nothave a material impact on our consolidated financial statements. The Companyhas segregated all financial assets and liabilities that are measured at fairvalue on a recurring basis (at least annually) into the most appropriate levelwithin the fair value hierarchy based on the inputs used to determine the fairvalue at the measurement date in the table below. FSP FAS 157-2 delayedthe effective date for all nonfinancial assets and liabilities until January 1,2009, except those that are recognized or disclosed at fair value in thefinancial statements on a recurring basis.**

** **

**The following section describes the valuationmethodologies we use to measure different financial instruments at fair value.**

** **

**Derivatives**

** **

**The derivatives portfolio is entirelyover-the-counter (OTC), your measurement is estimated using industry standardvaluation models. Where applicable, these models project future cash flows anddiscount the future amounts to a present value using market-based observableinputs including interest rate curves, foreign exchange rates, and forward andspot prices for currencies. Also, these estimates consider assumptions for the Company’sown credit risk and the corresponding party’s credit risk. Level 2 derivativeassets and liabilities primarily include certain over-the-counter, collar,cross currency swap, and swap contracts.**

** **

**The Embedded derivative assets and liabilitiesincluded in Level 2 and Level 3 represent to derivative contracts correspondedto foreign currency.**

** **

**Debt and bondpayable**

** **

**Only the debt and bond payable designated as ahedged item in a fair value hedge are measurement to fair value. Themeasurement this hedged items are the following:**

** **

**When available, we use observable market data,including pricing on recent closed market transactions, to value this debt andbond payable which are included in Level 2. When this data is unobservable, weuse valuation methodologies using current market interest rate data adjustedfor inherent credit risk and such loans are included in Level 3. Whenappropriate, loans are valued using collateral values as a practical expedient.**

 
| ** **             | ** ** | ** **                 | ** ** | **Fair Value Measurements at Reporting Date Using** | ** ** |
|------------------------|------------|----------------------------|------------|-----------------------------------------------------|------------|
| **(thousands of Ch$)** | ** ** | **December 31, 2008** | ** ** | **Level 1**                                         | ** ** | **Level 2** | ** ** | **Level 3** | ** ** |
| **Assets**             |       |                       |       |                                                |       |   |   |   |   |
| Financial Derivatives  |       | 2,486,567                  |       | —                                              |       | 2,486,567 |   | — |   |
| Embedded Derivative    |       | 3,849,419                  |       | —                                              |       | — |   | 3,849,419 |   |
| **Total assets**       | ** ** | **6,335,986**              | ** ** | **—**                                          | ** ** | **2,486,567** | ** ** | **3,849,419** | ** ** |
|                   |       |                       |       |                                                |       |   |   |   |   |
| **Liabilities**        |       |                       |       |                                                |       |   |   |   |   |
| Financial Derivatives  |       | (108,316,138               | )          | —                                              |       | (108,316,138 | ) | — |   |
| Embedded Derivative    |       | (74,146,664                | )          | —                                              |       | (74,146,664 | ) | — |   |
| Debt and bond payable  |       | (33,660,400                | )          | —                                              |       | (33,660,400 | ) | — |   |
| **Total liabilities**  | ** ** | **(216,123,202**           | **)**      | **—**                                          | ** ** | **(216,123,202** | **)** | **—** | ** ** |

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 
| ** **                                    | ** ** | **Fair Value Measurement Using  Significant Unobservable Inputs  (Level 3)** | ** ** |
|-----------------------------------------------|------------|------------------------------------------------------------------------------|------------|
| **(thousands  of Ch$)**                       | ** ** | **Derivatives**                                                              | ** ** |
| Balance, beginning of period                  |       | 4,385,181                                                                    |       |
| Total realized and unrealized gains (losses): |       |                                                                         |       |
| Included in income (expense)                  |       | (1,308,371                                                                   | )          |
| Included in other comprehensive income        |       | 772,609                                                                      |       |
| Balance, end of period                        |       | 3,849,419                                                                    |       |

** **

**c) Fair ValueOption**

** **

EffectiveJanuary 1, 2008, the Company adopted SFAS No. 159, which providesentities the option to measure many financial instruments and certain otheritems at fair value. Entities that choose the fair value option will recognizeunrealized gains and losses on items for which the fair value option waselected in earnings at each subsequent reporting date. The Company hascurrently chosen not to elect the fair value option for any items that are notalready required to be measured at fair value in accordance with accountingprinciples generally accepted in the United States.

 

**(j)**                Derivative instruments

** **

The Company is exposed tothe impact of market fluctuations in the price of electricity, primarymaterials such as natural gas, petroleum, coal, and other energy-relatedproducts, interest rates, and foreign exchange rates. The Company has policiesand procedures in place to manage the risks associated with these marketfluctuations on a global basis through strategic contract selection, fixed-rateand variable-rate portfolio targets, net investment hedges, and financialderivatives. All derivatives that do not qualify for the normal purchase andsales exemption under SFAS No. 133 are recorded at their fair value. Onthe date that swaps, futures, forwards or option contracts are entered into,the Company designates the derivatives as a “hedge”, if the documentation isnot appropriate to designate as a “hedge”, the derivative’s mark-to-marketadjustment flows through the income statement.

 

The Company hasclassified its derivatives into the following general categories: commodityderivatives, embedded derivatives and financial derivatives. Certain energy andother contracts for the Company’s operations in Chile are denominated in the USdollar. According to SFAS No. 133, an embedded foreign currency derivativeshould be separated from the host contract because none of the applicableexclusions are met (See Embedded Derivative Contracts below). For purposes ofevaluating the functional currency of the Company’s subsidiaries in Argentina,Peru, Brazil, and Colombia, the Company applied BT 64, consistent with themethodology described in Note 37 I paragraph (s), thus the functional currencyof these subsidiaries was the US dollar as these subsidiaries were remeasuredinto US dollars because foreign subsidiaries operate in countries exposed tosignificant risks as determined under BT 64.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

The following is asummary of the Company’s derivative contracts as of December 31, 2007 and2008.

 
| ** **                      | ** ** | **2007**         | ** ** |
|---------------------------------|------------|------------------|------------|
| ** **                      | ** ** | **Distribution** | ** ** | **Generation** | ** ** | **Total** | ** ** |
| ** **                      | ** ** | **ThCh$**        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                            |       |             |       |   |   |   |   |
| Embedded derivatives            |       | 4,385,182        |       | 20,960,483 |   | 25,345,665 |   |
| Financial derivatives           |       | (225,285,659     | )          | (9,632,995 | ) | (234,918,654 | ) |
|                            |       |             |       |   |   |   |   |
| Derivative instruments U.S.GAAP |       | (220,900,477     | )          | 11,327,488 |   | (209,572,989 | ) |

 
| ** **                      | ** ** | **2008**         | ** ** |
|---------------------------------|------------|------------------|------------|
| ** **                      | ** ** | **Distribution** | ** ** | **Generation** | ** ** | **Total** | ** ** |
| ** **                      | ** ** | **ThCh$**        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                            |       |             |       |   |   |   |   |
| Embedded derivatives            |       | 3,849,419        |       | (74,146,664 | ) | (70,297,245 | ) |
| Financial derivatives           |       | (95,052,747      | )          | (10,776,824 | ) | (105,829,571 | ) |
|                            |       |             |       |   |   |   |   |
| Derivative instruments U.S.GAAP |       | (91,203,328      | )          | (84,923,488 | ) | (176,126,816 | ) |

 

The following is thereconciliation of the Company’s derivative contracts from Chile GAAP to USGAAP:

 
| ** **            | ** ** | **2007**     | ** ** |
|-----------------------|------------|--------------|------------|
| ** **            | ** ** | **Chile**    | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **            | ** ** | **GAAP**     | ** ** | **Adjustment** | ** ** | **US GAAP** | ** ** |
| ** **            | ** ** | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                  |       |         |       |   |   |   |   |
| Embedded derivatives  |       | —       |       | 25,345,665 |   | 25,345,665 |   |
| Financial derivatives |       | (176,311,379 | )          | (58,607,275 | ) | (234,918,654 | ) |
|                  |       |         |       |   |   |   |   |
| Total                 |       | (176,311,379 | )          | (33,261,610 | ) | (209,572,989 | ) |

 
| ** **            | ** ** | **2008**     | ** ** |
|-----------------------|------------|--------------|------------|
| ** **            | ** ** | **Chile**    | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **            | ** ** | **GAAP**     | ** ** | **Adjustment** | ** ** | **US GAAP** | ** ** |
| ** **            | ** ** | **ThCh$**    | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                  |       |         |       |   |   |   |   |
| Embedded derivatives  |       | —       |       | (70,297,245 | ) | (70,297,245 | ) |
| Financial derivatives |       | (104,585,264 | )          | (1,244,307 | ) | (105,829,571 | ) |
|                  |       |         |       |   |   |   |   |
| Total                 |       | (104,585,264 | )          | (71,541,552 | ) | (176,126,816 | ) |

 

Certain Company’sgeneration and distribution commodity contracts in 2006 could be seen ascontracts that meet the definition of a derivative under SFAS No. 133 andare required to be accounted for at fair value. These conditions are (i) havean underlying, which is the market price of power at the delivery location anda notional amount specified in the contract; (ii) have no initial paymenton entering into the contract; and (iii) have a net settlement provisionor have the characteristic of net settlement because power is readilyconvertible to cash, as it is both fungible and actively traded in the countryof generation or country of distribution.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

The Company assessed thatits commodity contracts that are requirements contracts do not meet the abovedefinition because the contracts, do not have notional amounts, as they onlyhave maximum amounts or no specified amounts, and do not include an implicit orexplicit minimum amount in a settlement or a default clause. A requirementscontract allows the purchaser to use as many units of power as required tosatisfy its actual needs for power during the period of the contract, and theparty is not permitted to buy more than its actual needs. Such assessment is inline to US GAAP Derivates Implementation Group (“DIG”) response to Issuse A6 (“DIGIssue A6”)  Additionally, note that therewere no such similar commodity contracts in 2007.

 

The Company has commoditycontracts that are unique, due to their long-term nature and complexity. Inestablishing the fair value of contracts management makes assumptions usingavailable market data and pricing models. Factors such as commodity price riskare also included in the fair value calculation. Inputs to pricing modelsinclude estimated forward prices of electricity and natural gas, interestrates, foreign exchange rates, inflation indices, transmission costs, andothers. These inputs become more difficult to predict and the estimates areless precise, the further out in time these estimates are made. As a result,fair values are highly sensitive to the assumptions being used.

 

Until December 31,2005 the Company’s Argentine generation entities had access to the Brazilianenergy market through an interconnection system between those two countries.Due to action taken by Argentine Regulation Authorities, the exportations ofenergy from Argentina to Brazil were limited, resulting in a default of mostenergy supply contracts the Company had entered into. However, during 2006 theBrazilian regulator issued a statement that allowed these interconnectioncontracts to reduce their amounts of power and energy to be delivered, and toaccelerate their maturity date to December 2007. As a result of actiontaken by Argentine and Brazilian regulation authorities, the contracts theArgentine subsidiaries had entered into ceased to exist as of the December 31,2006.

 

*Derivativeinstruments*

 

Theuse of derivative instruments is one of the Company’s tools to mitigate theserisks.  Hedging strategies applicableaccording to the terms established by our Board of Directors are as follows:

 

(a)                      Exchange raterisk hedging policy

 

Theexchange rate risk hedging policy for the Enersis Group is based on cashflow.  Its objective is to balanceforeign currency indexed flows and the assets and liability structure in suchcurrency.  In order to mitigate theexchange rate risk, the company has entered into financial derivativecontracts, such as cross currency swaps (“CCS”) and currency forwards, whichhave reduced the impact of fluctuations of the exchange rate applicable toassets and liabilities subject to foreign currency volatility.

 

(b)                     Interest rate risk hedgingpolicy

 

Theinterest rate risk hedging policy for the Enersis Group is based on maintaininga significant level of debt not subject to interest rate variations.  We have set the desired level of fixedinterest rate debt (which includes both variable rate instruments that havebeen swapped to fixed rate, as well as variable rate instruments with a hedgingoption which limits the interest variability around a desired minimum andmaximum band) at approximately 70% of total debt.  When the level of variable debt increasessignificantly above a 30% threshold, the Company uses derivative instruments,typically interest rate swaps and interest rate collars, as a tool to remainclose to the desired level of maximum unhedged variable debt.

 

Asa result of the foregoing hedging policies, the Company uses cash flow hedgesprimarily.  The exchange and interestrate hedging policies convert variable cash flows into fixed cash flows.  As of December 31, 2008, the maximumamount of time over which future cash flows are hedged is 8 yearsapproximately, which corresponds to a CCS with a notional value ofThCh$381,870,000 and a negative fair value of approximately ThCh$91,150,768.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

UnderUS GAAP, for the years ended December 31, 2006, 2007 and 2008, thederivative portfolio for the Enersis Group is the following:

 
| ** **         | ** ** | ** ** | ** ** | ** **     | ** ** | **Year  ended December 31,** | ** ** |
|--------------------|------------|------------|------------|----------------|------------|-----------------------------------|------------|
| ** **         | ** ** | ** ** | ** ** | ** **     | ** ** | **(thousands  Ch$)**              | ** ** |
| ** **         | ** ** | ** ** | ** ** | ** **     | ** ** | **2006**                          | ** ** | **2007** | ** ** | **2008** | ** ** |
| **Accounting**     | ** ** | **Risk**   | ** ** | **Derivative** | ** ** | **Notional**                      | ** ** | **Fair** | ** ** | **Notional** | ** ** | **Fair** | ** ** | **Notional** | ** ** | **Fair** | ** ** |
| **Classification** | ** ** | **Hedged** | ** ** | **Instrument** | ** ** | **Value**                         | ** ** | **Value** | ** ** | **Value** | ** ** | **Value** | ** ** | **Value** | ** ** | **Value** | ** ** |
|               |       |       |       |           |       |                              |       |   |   |   |   |   |   |   |   |   |   |
|               |       | Exchange   |       | CCS            |       | 451,440,021                       |       | (166,316,730 | ) | 392,307,077 |   | (214,226,720 | ) | 381,870,000 |   | (91,150,768 | ) |
| Cash Flow          |       | Rate       |       | Forward        |       | —                            |       | — |   | — |   | — |   | 5,119,449 |   | (1,391,742 | ) |
|               |       | Interest   |       | Collar         |       | 199,256,285                       |       | — |   | 135,278,303 |   | (1,190,449 | ) | 95,467,500 |   | (3,186,745 | ) |
|               |       | Rate       |       | Swap           |       | 91,844,694                        |       | 311,337 |   | 79,287,091 |   | (649,336 | ) | 121,197,629 |   | (4,329,014 | ) |
|               |       |       |       |           |       |                              |       |   |   |   |   |   |   |   |   |   |   |
| Fair Value Hedge   |       | Exchange   |       | CCS            |       | 31,133,795                        |       | (3,860,591 | ) | 66,492,554 |   | (18,181,404 | ) | 31,539,216 |   | (5,771,302 | ) |
|               | Rate       |       | Forward    |           | —     |                              | —     |   | — |   | — |   | — |   | — |   |
|               |       | Interest   |       | Collar         |       | —                            |       | — |   | — |   | — |   | — |   | — |   |
|               |       | Rate       |       | Swap           |       | —                            |       | — |   | — |   | — |   | — |   | — |   |
|               |       |       |       |           |       |                              |       |   |   |   |   |   |   |   |   |   |   |
|               |       | Exchange   |       | CCS            |       | 1,556,690                         |       | (1,021,254 | ) | 574,662 |   | (670,745 | ) | — |   | — |   |
| Investment         |       | Rate       |       | Forward        |       | —                            |       | — |   | — |   | — |   | — |   | — |   |
|               |       | Interest   |       | Collar         |       | —                            |       | — |   | — |   | — |   | — |   | — |   |
|               |       | Rate       |       | Swap           |       | —                            |       | — |   | — |   | — |   | — |   | — |   |
|               |       |       |       |           |       |                              |       |   |   |   |   |   |   |   |   |   |   |
|               |       |       |       | Total          |       | 775,231,485                       |       | (170,887,238 | ) | 673,939,687 |   | (234,918,654 | ) | 635,193,794 |   | (105,829,571 | ) |

 

Inorder to allow hedge accounting classification under SFAS 133, it was necessaryto fulfill strict documentation and effectiveness requirements.  Hedge accounting cannot be applied toderivatives that do not satisfy documentation requirements, and accordingly,such operations are registered according to the general treatment ofderivatives (“investment contracts”).  Asa result, fair value adjustments to investment contracts have a direct effecton the income statement. This is a significant difference when compared toChilean GAAP, which is more flexible in its documentation requirements.

 

TheCompany performs tests on a quarterly basis in order to measure theeffectiveness level of its accounting hedge, which may be either a cash flow orfair value hedge.  Test results for 2006,2007 and 2008 revealed that the ineffective portion of our hedging contractswere immaterial.

 

*NetInvestment Hedges*

 

Companyhas designated certain non-derivative instruments as hedges of net investmentsin foreign operations. Accounting classification for such operations is thesame under Chilean GAAP and under US GAAP (see Note 22 (e). The changes in thecumulative translation adjustment are shown net of foreign currency gains or lossesof debt designated as hedges for foreign net investments. Gains (Loss) relatedto debt designated as hedges of Ch$(4.4) billion, Ch$108.3 billion and Ch$133.7billion were included in the cumulative translation adjustment for the yearsended December 31, 2006, 2007 and 2008, respectively.

 

The Company is also exposed to foreign currency riskarising from long-term debt denominated in foreign currencies, the majority ofwhich is the US dollar. This risk is mitigated, as a substantial portion of theCompany’s revenues are either directly or indirectly linked to the US dollar.Additionally, the debts incurred by the Company related to net investments inforeign countries serve as a net investment hedge, as they are incurred in thesame currency as the functional currency of those foreign investments. As theyqualify as a net investment hedge, their gains and losses are included in thecumulative translation adjustment account in shareholders’ equity (see Note ll (c) andNote 22 (e) for further detail).

 

F-168

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**ENERSIS S.A. AND SUBSIDIARIES**

** **

**Notes to the Consolidated Financial Statements – (Continued)**

 

*Embedded DerivativeContracts*

* *

The Company enters intocertain contracts that have embedded features that are not clearly and closelyrelated to the host contract. As specified in SFAS No. 133, bifurcationanalysis focuses on whether the economic characteristics and risks of theembedded derivative are clearly and closely related to the economiccharacteristics and risks of the host contract. In certain identifiedcontracts, the host service contract and the embedded feature are not indexedto the same underlying and changes in the price or value of service will notalways correspond to changes in the price of the commodity to which thecontract is indexed. U.S. GAAP requires embedded features to be measured atfair value as freestanding instruments. Unless the embedded contracts areremeasured at fair value under otherwise applicable GAAP, the embedded featuremust be valued at fair value with changes in fair value reported in earnings asthey occur.

 

Embedded foreign currencyderivative instruments are not separated from the host contract and considereda derivative instrument if the host contract is not a financia1 instrument andit requires payments denominated in either: (1) the currency of anysubstantial party to the contract. (2) the local currency of anysubstantial party to the contract, (3) the currency used because theprimary economic environment is highly inflationary, or (4) the currencyin which the good or service is routinely denominated in internationalcommerce.

 

**(k)**            Presentationto U.S. GAAP

** **

Certain reclassifications and adjustment would be madeto the Chilean GAAP income statement in order to present the amounts inaccordance with U.S. GAAP. For example, certain non-operating income andexpenses under Chilean GAAP would be included in the determination of operatingincome under U.S. GAAP. Such reclassifications from non-operating to operatingincome and expense include the following:

 

·                  Losses arising from contingencies and litigation, andreversals thereof

·                  Gains and losses from disposals of fixed assets

·                  Taxes, other than income taxes

·                  Penalties and fines

 

In addition to the above, recovered taxes included inother non-operating revenues under Chilean GAAP would be recorded as part ofincome tax expense under U.S. GAAP, and equity in net income or loss of relatedcompanies included in non-operating results under Chilean GAAP would bepresented after income taxes and minority interest under U.S. GAAP.

 

F-169

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the ConsolidatedFinancial Statements – (Continued)**

 

The following reclassifications and adjustmentdisclose amounts in accordance with U.S. GAAP presentation:

 
| ** **                                               | ** ** | **2006**      | ** ** |
|----------------------------------------------------------|------------|---------------|------------|
| ** **                                               | ** ** | **Chilean**   | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** |
| ** **                                               | ** ** | **GAAP**      | ** ** | **Reclassification** | ** ** | **Sub-total** | ** ** | **Adjustments** | ** ** | **U.S. GAAP** | ** ** |
|                                                     |       | **ThCh$**     | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** |   |
|                                                     |       |          |       |   |   |   |   |   |   |   |   |
| Operating income                                         |       | 1,233,089,021 |       | (138,978,651 | ) | 1,094,110,370 |   | 97,496,073 |   | 1,191,606,443 |   |
| Non-operating expense, net                               |       | (478,846,719  | )          | 139,879,647 |   | (338,967,072 | ) | 2,943,026 |   | (336,024,046 | ) |
| Income taxes                                             |       | (111,357,579  | )          | 313,755 |   | (111,043,824 | ) | (8,120,867 | ) | (119,164,691 | ) |
| Minority interest                                        |       | (315,537,708  | )          | — |   | (315,537,708 | ) | (8,434,554 | ) | (323,972,262 | ) |
| Equity participation in income of related companies, net |       | —        |       | 5,893,474 |   | 5,893,474 |   | 5,228,527 |   | 11,122,001 |   |
| Amortization of negative goodwill                        |       | 7,108,225     |       | (7,108,225 | ) | — |   | — |   | — |   |
|                                                     |       |          |       |   |   |   |   |   |   |   |   |
| Net income                                               |       | 334,455,240   |       | — |   | 334,455,240 |   | 89,112,205 |   | 423,567,445 |   |

** **

| ** **                                               | ** ** | **2007**      | ** ** |
|----------------------------------------------------------|------------|---------------|------------|
| ** **                                               | ** ** | **Chilean**   | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** |
| ** **                                               | ** ** | **GAAP**      | ** ** | **Reclassification** | ** ** | **Sub-total** | ** ** | **Adjustments** | ** ** | **U.S. GAAP** | ** ** |
| ** **                                               | ** ** | **ThCh$**     | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                     |       |          |       |   |   |   |   |   |   |   |   |
| Operating income                                         |       | 1,368,756,954 |       | (203,007,629 | ) | 1,165,749,325 |   | (58,011,286 | ) | 1,107,738,039 |   |
| Non-operating expense, net                               |       | (610,042,469  | )          | 267,457,820 |   | (342,584,649 | ) | (15,272,173 | ) | (357,856,822 | ) |
| Income taxes                                             |       | (275,677,558  | )          | — |   | (275,677,558 | ) | 2,976,078 |   | (272,701,480 | ) |
| Minority interest                                        |       | (282,710,421  | )          | — |   | (282,710,421 | ) | 67,624,120 |   | (215,086,301 | ) |
| Equity participation in income of related companies, net |       | —        |       | (59,634,787 | ) | (59,634,787 | ) | 2,331,768 |   | (57,303,019 | ) |
| Amortization of negative goodwill                        |       | 4,815,404     |       | (4,815,404 | ) | — |   | — |   | — |   |
|                                                     |       |          |       |   |   |   |   |   |   |   |   |
| Net income                                               |       | 205,141,910   |       | — |   | 205,141,910 |   | (351,493 | ) | 204,790,417 |   |

 
| ** **                                               | ** ** | **2008**      | ** ** |
|----------------------------------------------------------|------------|---------------|------------|
| ** **                                               | ** ** | **Chilean**   | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** |
| ** **                                               | ** ** | **GAAP**      | ** ** | **Reclassification** | ** ** | **Sub-total** | ** ** | **Adjustments** | ** ** | **U.S. GAAP** | ** ** |
| ** **                                               | ** ** | **ThCh$**     | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                                     |       |          |       |   |   |   |   |   |   |   |   |
| Operating income                                         |       | 1,978,797,458 |       | (80,263,913 | ) | 1,898,533,545 |   | (7,614,276 | ) | 1,890,919,269 |   |
| Non-operating expense, net                               |       | (266,128,211  | )          | 88,854,275 |   | (177,273,936 | ) | (4,285 | ) | (177,278,221 | ) |
| Income taxes                                             |       | (450,974,535  | )          | — |   | (450,974,535 | ) | 37,105,459 |   | (413,869,076 | ) |
| Minority interest                                        |       | (697,031,109  | )          | — |   | (697,031,109 | ) | 4,407,041 |   | (692,624,068 | ) |
| Equity participation in income of related companies, net |       |          |       | (2,370,864 | ) | (2,370,864 | ) | 14,649,030 |   | 12,278,166 |   |
| Amortization of negative goodwill                        |       | 6,219,498     |       | (6,219,498 | ) | — |   | — |   | — |   |
|                                                     |       |          |       |   |   |   |   |   |   |   |   |
| Net income                                               |       | 570,883,101   |       | — |   | 570,883,101 |   | 48,542,969 |   | 619,426,070 |   |

 

Certain reclassifications and adjustments would bemade to the Chilean GAAP balance sheet in order to present Chilean GAAP amountsin accordance with U.S. GAAP. Deferred taxes from depreciation differences thatare recorded as short-term under Chilean GAAP would be recorded as long-termunder U.S. GAAP. Additionally, the regulated asset recorded during 2001 byCoelce and Ampla, Brazilian subsidiaries, has been partially recorded in tradereceivables and an additional component was recorded in current assets byCoelce under Chilean GAAP. However, under U.S. GAAP the presentation of theseregulated assets should be classified as non-current assets as the recovery ofthese assets is not expected in the short term. Assets and liabilities relatedto financial derivatives have been recorded in the balance sheet at their grossamounts for Chilean GAAP purposes, whereas under US GAAP unrealized derivativegains and losses are recorded in earnings or directly to shareholders’ equityfor qualifying cash flow hedges. Under U.S. GAAP, negative goodwill isallocated to long-lived assets instead of a separate line term in the otherassets. Until December 31, 2006, investments in subsidiaries in thedevelopment stage would be consolidated under US GAAP, as opposed to beingpresented as equity method investees, under Chilean GAAP (see also Note 3).

 

F-170

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the ConsolidatedFinancial Statements – (Continued)**

 

The effect of the reclassifications and adjustmentdiscloses amounts using a U.S. GAAP presentation:

** **
| ** **                                      | ** ** | **2007**       | ** ** |
|-------------------------------------------------|------------|----------------|------------|
| ** **                                      | ** ** | **Chilean**    | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** |
| ** **                                      | ** ** | **GAAP**       | ** ** | **Reclassification** | ** ** | **Sub-total** | ** ** | **Adjustments** | ** ** | **U.S. GAAP** | ** ** |
| ** **                                      | ** ** | **ThCh$**      | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                            |       |           |       |   |   |   |   |   |   |   |   |
| Current assets                                  |       | 2,461,888,662  |       | (56,870,012 | ) | 2,405,018,650 |   | — |   | 2,405,018,650 |   |
| Property, plant and equipment, net              |       | 8,719,999,921  |       | (40,722,414 | ) | 8,679,277,507 |   | (3,050,847 | ) | 8,676,226,660 |   |
| Other assets                                    |       | 1,273,839,295  |       | 15,169,541 |   | 1,289,008,836 |   | 416,110,099 |   | 1,705,118,935 |   |
|                                            |       |           |       |   |   |   |   |   |   |   |   |
| Total assets                                    |       | 12,455,727,878 |       | (82,422,885 | ) | 12,373,304,993 |   | 413,059,252 |   | 12,786,364,245 |   |
|                                            |       |           |       |   |   |   |   |   |   |   |   |
| Current liabilities                             |       | 1,884,254,380  |       | (1,594,757 | ) | 1,882,659,623 |   | 55,890,767 |   | 1,938,550,390 |   |
| Long-term liabilities                           |       | 4,424,093,895  |       | (80,828,128 | ) | 4,343,265,767 |   | 377,063,492 |   | 4,720,329,259 |   |
| Minority interest                               |       | 2,985,784,314  |       | — |   | 2,985,784,314 |   | (296,962,344 | ) | 2,688,821,970 |   |
| Shareholder’s equity                       |       | 3,161,595,289  |       | — |   | 3,161,595,289 |   | 277,067,337 |   | 3,438,662,626 |   |
|                                            |       |           |       |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity |       | 12,455,727,878 |       | (82,422,885 | ) | 12,373,304,993 |   | 413,059,252 |   | 12,786,364,245 |   |

 
| ** **                                      | ** ** | **2008**       | ** ** |
|-------------------------------------------------|------------|----------------|------------|
| ** **                                      | ** ** | **Chilean**    | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** | **U.S. GAAP** | ** ** | ** ** | ** ** |
| ** **                                      | ** ** | **GAAP**       | ** ** | **Reclassification** | ** ** | **Sub-total** | ** ** | **Adjustments** | ** ** | **U.S. GAAP** | ** ** |
| ** **                                      | ** ** | **ThCh$**      | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                                            |       |           |       |   |   |   |   |   |   |   |   |
| Current assets                                  |       | 2,994,551,605  |       | (33,792,581 | ) | 2,960,759,024 |   | — |   | 2,960,759,024 |   |
| Property, plant and equipment, net              |       | 10,080,210,502 |       | (41,530,494 | ) | 10,038,680,008 |   | 421,804 |   | 10,039,101,812 |   |
| Other assets                                    |       | 1,324,865,770  |       | 45,217,995 |   | 1,370,083,765 |   | 635,853,289 |   | 2,005,937,054 |   |
|                                            |       |           |       |   |   |   |   |   |   |   |   |
| Total assets                                    |       | 14,399,627,877 |       | (30,105,080 | ) | 14,369,522,797 |   | 636,275,093 |   | 15,005,797,890 |   |
|                                            |       |           |       |   |   |   |   |   |   |   |   |
| Current liabilities                             |       | 2,523,784,713  |       | (3,293,897 | ) | 2,520,490,816 |   | 132,243,320 |   | 2,652,734,136 |   |
| Long-term liabilities                           |       | 4,501,484,561  |       | (26,811,183 | ) | 4,474,673,378 |   | 607,974,706 |   | 5,082,648,084 |   |
| Minority interest                               |       | 3,677,145,791  |       | — |   | 3,677,145,791 |   | (351,339,843 | ) | 3,325,805,948 |   |
| Shareholder’s equity                       |       | 3,697,212,812  |       | — |   | 3,697,212,812 |   | 247,396,910 |   | 3,944,609,722 |   |
|                                            |       |           |       |   |   |   |   |   |   |   |   |
| Total liabilities and shareholders’ equity |       | 14,399,627,877 |       | (30,105,080 | ) | 14,369,522,797 |   | 636,275,093 |   | 15,005,797,890 |   |

** **

**(l)**                Employee Benefit Plans

** **

Enersis S.A. and its subsidiaries sponsor variousbenefit plans for its current and retired employees. A description of suchbenefits follows:

 

*Severance indemnities*

 

The provision for severance indemnities, included inthe account “Accrued expenses” short and long-term is calculated in accordancewith the policy set forth in Note 2 (n), using the current salary levels of allemployees covered under the severance indemnities agreement, an assumeddiscount rate 6.5% for the years ended December 31, 2006, 2007 and 2008,and an estimated average service period based on the years of services for theCompany.

 

*Benefits for Retired Personnel*

 

Other benefits provided to certain retired personnelof Enersis include electrical service rate subsidies, additional medicalinsurance and additional post-retirement benefits. Descriptions of thesebenefits for retired personnel are as follows:

 

***i)*****Electrical rate service**

 

This benefit is extended only to certain retiredpersonnel of Enersis. These electric rate subsidies result in the eligibleretired employees paying a percentage of their total monthly electricity costs,with Enersis paying the difference.

 

F-171

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the ConsolidatedFinancial Statements – (Continued)**

 

***ii)*******Medical benefits**

 

This benefit provides supplementary health insurance,which covers a portion of health benefits not covered under the institutionalhealth benefits maintained by employees of Enersis. This benefit expires at thetime of death of the pensioner.

 

***iii)*******Supplementary pensionbenefits**

 

Eligible employees are able to receive a monthlyamount designed to cover a portion of the difference between their salary atthe point of retirement and the theoretical pension that would have beenreceived had the employee reached the legal retirement age of the *Institución*de *Previsión Social*(Institute of Social Welfare). This benefitexpires upon the death of the pensioner for the Enersis employee, however,continues to cover the surviving-spouse in the case of employees of thesubsidiary Endesa Chile.

 

***iv)*****Worker’scompensation benefits**

 

Employees that were entitled to Worker’s compensationinsurance in prior years for work related injuries receive benefits from theCompany when that insurance expires. This benefit continues at the time ofdeath of the pensioner, to cover the surviving-spouse.

 

The Company has recognized liabilities related tocomplementary pension plan benefits and other postretirement benefits asstipulated in collective bargaining agreements. Under U.S. GAAP,post-retirement employee benefits have been accounted for in accordance withSFAS No. 87 and SFAS No. 106, with inclusion of prior-period amountsin current year’s income as the amounts are not considered significant to theoverall financial statement presentation. The effects of accounting forpost-retirement benefits under U.S. GAAP have been presented in paragraph (ee),above. The following data represents Chile GAAP amounts presented under FASN°132 Revised 2003 Employers’ Disclosures about Pensions and otherPostretirement Benefits, for Company’s post-retirement benefit plans.

 

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the ConsolidatedFinancial Statements – (Continued)**

 
| ** **                                | ** ** | **At December 31, 2007** | ** ** |
|-------------------------------------------|------------|-------------------------------|------------|
| ** **                                | ** ** | **Pension Benefits**          | ** ** | **Other Benefits** | ** ** |
| ** **                                | ** ** | **Non**                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                | ** ** | **Contributory**              | ** ** | **Contributory** | ** ** | **Total** | ** ** | **Total** | ** ** |
| ** **                                | ** ** | **ThCh$**                     | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Assets and obligations                    | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Accumulated benefit obligation            |       | (67,589,304                   | )          | (343,600,015 | ) | (411,189,319 | ) | (67,614,173 | ) |
| Plan assets at fair value                 |       | —                        |       | 338,395,440 |   | 338,395,440 |   | — |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Unfunded accumulated benefit              |       | (67,589,304                   | )          | (5,204,575 | ) | (72,793,879 | ) | (67,614,173 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Changes in benefit (obligations)          |       |                          |       |   |   |   |   |   |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Benefit (obligations) at January 1   |       | (71,296,141                   | )          | (19,690,931 | ) | (90,987,072 | ) | (69,484,019 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Foreign exchange effect                   |       | 2,636,934                     |       | (969,409 | ) | 1,667,525 |   | 2,000,823 |   |
| Net periodic expense                      |       | (6,378,745                    | )          | (10,935,198 | ) | (17,313,943 | ) | (12,811,475 | ) |
| Benefits paid                             |       | 7,315,139                     |       | — |   | 7,315,139 |   | 6,890,445 |   |
| Contributions                             |       | —                        |       | 11,458,598 |   | 11,458,598 |   | 2,042,196 |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Benefit (obligations) at December 31 |       | (67,722,813                   | )          | (20,136,940 | ) | (87,859,753 | ) | (71,362,030 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Funded Status of the Plans                |       |                          |       |   |   |   |   |   |   |
| Projected Benefit Obligation              |       | (67,722,813                   | )          | (358,532,380 | ) | (426,255,193 | ) | (71,362,030 | ) |
| Fair value of the plans assets            |       | —                        |       | 338,395,440 |   | 338,395,440 |   | — |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Funded Status                             |       | (67,722,813                   | )          | (20,136,940 | ) | (87,859,753 | ) | (71,362,030 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Net liability recorded under U.S. GAAP    |       | (67,722,813                   | )          | (20,136,940 | ) | (87,859,753 | ) | (71,362,030 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Change in the plan assets                 |       |                          |       |   |   |   |   |   |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Fair value of the plan assets, beginning  |       | —                        |       | 262,175,184 |   | 262,175,184 |   | — |   |
| Foreign exchange effect                   |       | —                        |       | 33,152,633 |   | 33,152,633 |   | — |   |
| Actual return on the plan assets          |       | —                        |       | 57,777,850 |   | 57,777,850 |   | — |   |
| Employer contributions                    |       | —                        |       | 7,027,780 |   | 7,027,780 |   | — |   |
| Plan participant contributions            |       | —                        |       | 4,430,818 |   | 4,430,818 |   | — |   |
| Benefits paid                             |       | —                        |       | (26,168,825 | ) | (26,168,825 | ) | — |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Fair value of plans assets, ending        |       | —                        |       | 338,395,440 |   | 338,395,440 |   | — |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Service cost                              |       | (433,733                      | )          | (2,325,938 | ) | (2,759,671 | ) | 117,341 |   |
| Interest cost                             |       | (6,736,515                    | )          | (35,807,698 | ) | (42,544,213 | ) | (5,123,709 | ) |
| Actual return on the plan assets          |       | —                        |       | 57,777,850 |   | 57,777,850 |   | — |   |
| Actuarial gain (loss)                     |       | 791,503                       |       | (30,579,412 | ) | (29,787,,909 | ) | (7,805,107 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Net periodic expenses                     |       | (6,378,745                    | )          | (10,935,198 | ) | (17,313,943 | ) | (12,811,475 | ) |

 
| ** **                                   | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|----------------------------------------------|------------|----------------------|------------|--------------------|------------|
| **Assumptions as of December 31, 2007** | ** ** | **Brazil**           | ** ** | **Colombia**       | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Colombia** | ** ** |
|                                         |       |                 |       |               |       |   |   |   |   |   |   |
| Weighted - discount rate (1)                 |       | 11.2                 | %          | 9.8                | %          | 6.5 | % | 12.1 | % | 9.8 | % |
| Weighted - salary increase                   |       | 6.1                  | %          | 4.8                | %          | 3.5 | % | — |   | — |   |
| Weighted - return on plan assets (1)         |       | 12.8                 | %          | —             |       | — |   | — |   | — |   |
| Weighted - long term inflation (2)           |       | 4.7                  | %          | 4.8                | %          | 3.0 | % | 5.0 | % | 4.8 | % |

 

----

(1) Includesfixed long term inflation assumption detail in (2)

 

F-173

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**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the ConsolidatedFinancial Statements – (Continued)**

 
| ** **                                | ** ** | **At December 31, 2008** | ** ** |
|-------------------------------------------|------------|-------------------------------|------------|
| ** **                                | ** ** | **Pension Benefits**          | ** ** | **Other Benefits** | ** ** |
| ** **                                | ** ** | **Non**                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                | ** ** | **Contributory**              | ** ** | **Contributory** | ** ** | **Total** | ** ** | **Total** | ** ** |
| ** **                                | ** ** | **ThCh$**                     | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| Assets and obligations                    |       |                          |       |   |   |   |   |   |   |
| ** **                                | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Accumulated benefit obligation            |       | (71,467,815                   | )          | (295,205,963 | ) | (366,673,778 | ) | (67,544,069 | ) |
| Plan assets at fair value                 | ** ** | **—**                    |       | 263,658,877 |   | 263,658,877 | ** ** | **—** | ** ** |
|                                      |       |                          |       |   |   |   |   |   |   |
| Unfunded accumulated benefit              |       | (71,467,815                   | )          | (31,547,086 | ) | (103,014,901 | ) | (67,544,069 | ) |
| ** **                                | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Changes in benefit (obligations)          | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** |   |   |   |
| ** **                                | ** ** | ** **                    | ** ** | ** ** |   |   |   |   |   |
| Benefit (obligations) at January 1   |       | (67,722,813                   | )          | (20,136,940 | ) | (87,859,753 | ) | (71,362,030 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Foreign exchange effect                   |       | (3,807,638                    | )          | 8,122,730 |   | 4,315,092 |   | 3,451,838 |   |
| Net periodic expense                      |       | (8,396,521                    | )          | (32,460,137 | ) | (40,856,658 | ) | (14,039,207 | ) |
| Benefits paid                             |       | 8,359,388                     |       | — |   | 8,359,388 |   | 7,035,043 |   |
| Contributions                             |       | —                        |       | 11,262,469 |   | 11,262,469 |   | 1,903,086 |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Benefit (obligations) at December 31 |       | (71,567,584                   | )          | (33,445,675 | ) | (105,013,259 | ) | (73,011,270 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Funded Status of the Plans                |       |                          |       |   |   |   |   |   |   |
| Projected Benefit Obligation              |       | (71,567,584                   | )          | (296,870,755 | ) | (368,438,339 | ) | (73,011,270 | ) |
| Fair value of the plans assets            |       | —                        |       | 263,658,877 |   | 263,658,877 |   | — |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Funded Status                             |       | (71,567,584                   | )          | (33,211,878 | ) | (104,779,462 | ) | (73,011,270 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Net liability recorded under U.S. GAAP    |       | (71,567,584                   | )          | (33,211,878 | ) | (104,779,462 | ) | (73,011,270 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Change in the plan assets                 | ** ** | ** **                    | ** ** | ** ** | ** ** | ** ** |   |   |   |
| ** **                                | ** ** | ** **                    | ** ** | ** ** |   |   |   |   |   |
| Fair value of the plan assets, beginning  |       | —                        |       | 338,395,440 |   | 338,395,440 |   | — |   |
| Foreign exchange effect                   |       | —                        |       | (58,336,722 | ) | (58,336,722 | ) | — |   |
| Actual return on the plan assets          |       | —                        |       | (12,322,422 | ) | (12,322,422 | ) | — |   |
| Employer contributions                    |       | —                        |       | 10,644,537 |   | 10,644,537 |   | — |   |
| Plan participant contributions            |       | —                        |       | 617,932 |   | 617,932 |   | — |   |
| Benefits paid                             |       | —                        |       | (15,339,888 | ) | (15,339,888 | ) | — |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Fair value of plans assets, ending        |       | —                        |       | 263,658,877 |   | 263,658,877 |   | — |   |
|                                      |       |                          |       |   |   |   |   |   |   |
| Service cost                              |       | (383,642                      | )          | (2,524,006 | ) | (2,907,648 | ) | (1,018,460 | ) |
| Interest cost                             |       | (6,611,581                    | )          | (34,540,519 | ) | (41,152,100 | ) | (5,933,779 | ) |
| Actual return on the plan assets          |       | —                        |       | (12,322,422 | ) | (12,322,422 | ) | — |   |
| Actuarial gain (loss)                     |       | (1,401,298                    | )          | 16,926,810 |   | 15,525,512 |   | (7,086,968 | ) |
|                                      |       |                          |       |   |   |   |   |   |   |
| Net periodic expenses                     |       | (8,396,521                    | )          | (32,627,993 | ) | (41,024,514 | ) | (14,039,207 | ) |

 
| ** **                                   | ** ** | **Pension Benefits** | ** ** | **Other Benefits** | ** ** |
|----------------------------------------------|------------|----------------------|------------|--------------------|------------|
| **Assumptions as of December 31, 2008** | ** ** | **Brazil**           | ** ** | **Colombia**       | ** ** | **Chile** | ** ** | **Brazil** | ** ** | **Colombia** | ** ** |
|                                         |       |                 |       |               |       |   |   |   |   |   |   |
| Weighted - discount rate (1)                 |       | 11.7                 | %          | 10.2               | %          | 6.5 | % | 12.1 | % | 10.2 | % |
| Weighted - salary increase                   |       | 7.3                  | %          | 5.2                | %          | 3.5 | % | — |   | — |   |
| Weighted - return on plan assets (1)         |       | 12.5                 | %          | —             |       | — |   | — |   | — |   |
| Weighted - long term inflation (2)           |       | 4.7                  | %          | 5.2                | %          | 3.0 | % | 5.0 | % | 5.2 | % |

 

----

(1)          Includes fixedlong term inflation assumption detail in (2)

 

F-174

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Table of Contents

 

**ENERSIS S.A. AND SUBSIDIARIES**

 

**Notes to the ConsolidatedFinancial Statements – (Continued)**

 

Following is a schedule of estimated pay-out ofpension benefits in each of the next five years:

 
| ** ** | ** ** | **As of December 31,** | ** ** |
|------------|------------|-----------------------------|------------|
| ** ** | ** ** | **2008**                    | ** ** |
| ** ** | ** ** | **ThCh$**                   | ** ** |
| 2009       |       | 4,878,117                   |       |
| 2010       |       | 37,245,214                  |       |
| 2011       |       | 35,546,923                  |       |
| 2012       |       | 33,692,893                  |       |
| 2013       |       | 32,456,721                  |       |
| Thereafter |       | 98,083,445                  |       |
|       |       |                        |       |
| Total      |       | 241,903,313                 |       |

 

**The following data presentsome supplementary information regarding Enersis’s pension plans in Brazil:**

** **

**Defined benefit pensionplan assets allocations at December 31, 2007 and 2008, by assets categoryare as follows:**

** **
| **Asset Category** | ** ** | **2007  Plan asset** | ** ** | **2008  Plan asset** | ** ** |
|--------------------|------------|----------------------|------------|----------------------|------------|
| ** **         | ** ** | ** **           | ** ** | ** **           | ** ** |
| Equity securities  |       | 25.84                | %          | 13.28                | %          |
| Debt securities    |       | 67.55                | %          | 77.11                | %          |
| Real estate        |       | 5.76                 | %          | 5.83                 | %          |
| Other              |       | 0.86                 | %          | 3.77                 | %          |

 

F-175

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Tableof Contents

** **

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

**(m)   Comprehensiveincome (loss)**

 

In accordance with U.S. GAAP, the Companyreports a measure of all changes in shareholders’ equity that result fromtransactions and other economic events of the period other than transactionswith owners (“comprehensive income”). Comprehensive income is the total of netincome and other non-owner equity transactions that result in changes in netshareholders’ equity.

 

The following representsaccumulated other comprehensive income balances as of December 31, 2006,2007 and 2008 (in thousands of constant Chilean pesos as of December 31,2007).

 
| ** **                     | ** ** | **2006**         | ** ** |
|--------------------------------|------------|------------------|------------|
| ** **                     | ** ** | **Chilean GAAP** | ** ** | ** ** | ** ** | **Application** | ** ** | **Fair value** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | **cumulative**   | ** ** | **Effect of U.S. GAAP** | ** ** | **of SFAS 158 in** | ** ** | **of financial** | ** ** | **Accumulated other** | ** ** |
| ** **                     | ** ** | **translation**  | ** ** | **adjustments on cumulative** | ** ** | **Ampla and Coelce** | ** ** | **instruments used** | ** ** | **comprehensive** | ** ** |
| ** **                     | ** ** | **adjustment**   | ** ** | **translation adjustment** | ** ** | **see Note 36 I g** | ** ** | **in cash flow hedge** | ** ** | **income (loss)** | ** ** |
| ** **                     | ** ** | **ThCh$**        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                           |       |             |       |   |   |   |   |   |   |   |   |
| Beginning balance              |       | (271,485,374     | )          | 86,708,526 |   | — |   | 1,540,927 |   | (183,235,921 | ) |
| Credit (charge) for the period |       | 18,456,903       |       | (3,899,766 | ) | 12,156,208 |   | (52,334,386 | ) | (25,621,041 | ) |
|                           |       |             |       |   |   |   |   |   |   |   |   |
| Ending balance                 |       | (253,028,471     | )          | 82,808,760 |   | 12,156,208 |   | (50,793,459 | ) | (208,856,962 | ) |

 
| ** **                     | ** ** | **2007**         | ** ** |
|--------------------------------|------------|------------------|------------|
| ** **                     | ** ** | **Chilean GAAP** | ** ** | ** ** | ** ** | **Application** | ** ** | **Fair value** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | **cumulative**   | ** ** | **Effect of U.S. GAAP** | ** ** | **of SFAS 158 in** | ** ** | **of financial** | ** ** | **Accumulated other** | ** ** |
| ** **                     | ** ** | **translation**  | ** ** | **adjustments on cumulative** | ** ** | **Ampla and Coelce** | ** ** | **instruments used** | ** ** | **comprehensive** | ** ** |
| ** **                     | ** ** | **adjustment**   | ** ** | **translation adjustment** | ** ** | **see Note 36 I g** | ** ** | **in cash flow hedge** | ** ** | **income (loss)** | ** ** |
| ** **                     | ** ** | **ThCh$**        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                           |       |             |       |   |   |   |   |   |   |   |   |
| Beginning balance              |       | (253,028,471     | )          | 82,808,760 |   | 12,156,208 |   | (50,793,459 | ) | (208,856,962 | ) |
| Credit (charge) for the period |       | (133,746,994     | )          | 5,006,198 |   | (524,630 | ) | 2,164,347 |   | (127,101,079 | ) |
|                           |       |             |       |   |   |   |   |   |   |   |   |
| Ending balance                 |       | (386,775,465     | )          | 87,814,958 |   | 11,631,578 |   | (48,629,112 | ) | (335,958,041 | ) |

 
| ** **                     | ** ** | **2008**         | ** ** |
|--------------------------------|------------|------------------|------------|
| ** **                     | ** ** | **Chilean GAAP** | ** ** | ** ** | ** ** | **Application** | ** ** | **Fair value** | ** ** | ** ** | ** ** |
| ** **                     | ** ** | **cumulative**   | ** ** | **Effect of U.S. GAAP** | ** ** | **of SFAS 158 in** | ** ** | **of financial** | ** ** | **Accumulated other** | ** ** |
| ** **                     | ** ** | **translation**  | ** ** | **adjustments on cumulative** | ** ** | **Ampla and Coelce** | ** ** | **instruments used** | ** ** | **comprehensive** | ** ** |
| ** **                     | ** ** | **adjustment**   | ** ** | **translation adjustment** | ** ** | **see Note 36 I g** | ** ** | **in cash flow hedge** | ** ** | **income (loss)** | ** ** |
|                           |       | **ThCh$**        | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** |   |
|                           |       |             |       |   |   |   |   |   |   |   |   |
| Beginning balance              |       | (386,775,465     | )          | 87,814,958 |   | 11,631,578 |   | (48,629,112 | ) | (335,958,041 | ) |
| Credit (charge) for the period |       | 134,668,311      |       | (46,634,501 | ) | (12,356,132 | ) | 50,456,128 |   | 126,133,806 |   |
|                           |       |             |       |   |   |   |   |   |   |   |   |
| Ending balance                 |       | (252,107,154     | )          | 41,180,458 |   | (724,554 | ) | 1,827,016 |   | (209,824,234 | ) |

 

The Company does notrecognize deferred tax assets associated with cumulative translationreclassification as the investment they are associated with is permanent innature.

 

**(n)   Goodwill andintangible assets**

 

As discussed in Note 37paragraph (i), Enersis S.A. adopted SFAS 142, which requires companies to stopamortizing goodwill and certain intangible assets with an indefinite usefullife. Instead, SFAS 142 requires that goodwill and intangible assets deemed tohave an indefinite useful life be reviewed for impairment upon adoption of SFAS142, effective January 1, 2002 and annually thereafter. Under SFAS 142,goodwill impairment is deemed to exist if the net book value of a reportingunit exceeds its estimated fair value. The Company’s reporting units are at theoperating subsidiary level. This methodology differs from Enersis’s previouspolicy, as provided under accounting standards existing at that time of usingundiscounted cash flows on an enterprise-wide basis to determine if goodwillwas recoverable. Subsequent to adoption in 2002 of SFAS No. 142, due to changesin circumstances, the Company recognized a non-cash charge of ThCh$761,320,894,to reduce the carrying value of goodwill.

 

F-176

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Tableof Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

** **

**Notesto the Consolidated Financial Statements – (Continued)**

 

In calculating the impairment charge, thefair values of the impaired reporting units’ goodwill underlying the segmentswere estimated using discounted cash flow methodology. TheThCh$761,320,894goodwill impairment is associated entirely with goodwillassociated with investments in Argentina and Brazil. The impairment reflectsthe decline in the Company’s revenues and forecasted cash flows in their Argentinaand Brazilian subsidiaries and the increase in inflation and interest rates anddecreasing expectations of the currencies in Argentina and Brazil. Prior toperforming the review for impairment, SFAS 142 required that all goodwilldeemed to be related to the entity as a whole be assigned to all of theCompany’s reporting units, including the reporting units of the acquirer.

 

A summary of the changes inthe Company’s goodwill under U.S. GAAP during the year ended December 31, 2007and 2008, by country of operation and segment is as follows:

 
| ** **              | ** ** | **2007**            | ** ** |
|-------------------------|------------|---------------------|------------|
| ** **              | ** ** | ** **          | ** ** | **Acquisitions** | ** ** | **Translation** | ** ** | **Impairment** | ** ** | ** ** | ** ** |
| **Goodwill by Country** | ** ** | **January 1,** | ** ** | **(Disposals)** | ** ** | **adjustment** | ** ** | **(i)** | ** ** | **December 31,** | ** ** |
| ** **              | ** ** | **ThCh$**           | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
| ** **              | ** ** | ** **          | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Chile                   |       | 1,362,869,882       |       | — |   | — |   | (104,928 | ) | 1,362,764,954 |   |
| Colombia                |       | 37,808,968          |       | — |   | (4,952,256 | ) | — |   | 32,856,712 |   |
| Peru                    |       | 22,195,351          |       | — |   | (2,906,894 | ) | — |   | 19,288,457 |   |
|                    |       |                |       |   |   |   |   |   |   |   |   |
| Total                   |       | 1,422,874,201       |       | — |   | (7,859,150 | ) | (104,928 | ) | 1,414,910,123 |   |

 
| ** **                        | ** ** | **2007**            | ** ** |
|-----------------------------------|------------|---------------------|------------|
| ** **                        | ** ** | ** **          | ** ** | **Acquisitions** | ** ** | **Translation** | ** ** | **Impairment** | ** ** | ** ** | ** ** |
| **Goodwill by Segment** | ** ** | **January 1,** | ** ** | **(Disposals)** | ** ** | **adjustment** | ** ** | **(i)** | ** ** | **December 31,** | ** ** |
| ** **                        | ** ** | **ThCh$**           | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                              |       |                |       |   |   |   |   |   |   |   |   |
| Generation                        |       | 1,242,537,678       |       | — |   | (4,890,808 | ) | (104,928 | ) | 1,237,541,942 |   |
| Distribution                      |       | 180,256,310         |       | — |   | (2,968,342 | ) | — |   | 177,287,968 |   |
| Other                             |       | 80,213              |       | — |   | — |   | — |   | 80,213 |   |
|                              |       |                |       |   |   |   |   |   |   |   |   |
| Total                             |       | 1,422,874,201       |       | — |   | (7,859,150 | ) | (104,928 | ) | 1,414,910,123 |   |

 
| ** **                        | ** ** | **2008**            | ** ** |
|-----------------------------------|------------|---------------------|------------|
| ** **                        | ** ** | ** **          | ** ** | **Acquisitions** | ** ** | **Translation** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Goodwill by Country** | ** ** | **January 1,** | ** ** | **(Disposals)** | ** ** | **adjustment** | ** ** | **Impairment** | ** ** | **December 31,** | ** ** |
| ** **                        | ** ** | **ThCh$**           | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                              |       |                |       |   |   |   |   |   |   |   |   |
| Chile                             |       | 1,362,764,954       |       | — |   | — |   | — |   | 1,362,764,954 |   |
| Colombia                          |       | 32,856,713          |       | — |   | 5,788,914 |   | — |   | 38,645,627 |   |
| Peru                              |       | 19,288,457          |       | — |   | 3,398,364 |   | — |   | 22,686,821 |   |
|                              |       |                |       |   |   |   |   |   |   |   |   |
| Total                             |       | 1,414,910,124       |       | — |   | 9,187,278 |   | — |   | 1,424,097,402 |   |

 
| ** **                        | ** ** | **2008**            | ** ** |
|-----------------------------------|------------|---------------------|------------|
| ** **                        | ** ** | ** **          | ** ** | **Acquisitions** | ** ** | **Translation** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Goodwill by Segment** | ** ** | **January 1,** | ** ** | **(Disposals)** | ** ** | **adjustment** | ** ** | **Impairment** | ** ** | **December 31,** | ** ** |
| ** **                        | ** ** | **ThCh$**           | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|                              |       |                |       |   |   |   |   |   |   |   |   |
| Generation                        |       | 1,237,541,942       |       | — |   | 5,717,791 |   | — |   | 1,243,259,733 |   |
| Distribution                      |       | 177,287,968         |       | — |   | 3,469,487 |   | — |   | 180,757,455 |   |
| Other                             |       | 80,214              |       | — |   | — |   | — |   | 80,214 |   |
|                              |       |                |       |   |   |   |   |   |   |   |   |
| Total                             |       | 1,414,910,124       |       | — |   | 9,187,278 |   | — |   | 1,424,097,402 |   |

 

----

(i)                         See Note 11 a) (7)

 

To perform goodwillimpairment tests, the Company determines the fair value of its reporting unitsbased on a valuation model which draws on medium-term planning data that theCompany uses for internal reporting and planning purposes. The model uses thediscounted cash flow approach and market comparables. The fair value of eachreporting unit exceeded its carrying amount as of December 31, 2007 and2008, except for the impairment recorded in 2007 over its equity methodinvestee Gas Atacama Holding (See Note 11 (j)).

 

F-177

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Table of Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notesto the Consolidated Financial Statements – (Continued)**

 

TheCompany’s intangible assets were ThCh$103,810,481 and ThCh$132,028,655 andrelated accumulated amortization were ThCh$65,244,146  and ThCh$87,690,142  as of December 31, 2007 and 2008,respectively. There is no difference between Chilean and U.S. GAAP in the amortizationof intangible assets because all of the Company’s intangible assets are subjectto amortization, since they relate to finite contracts or concessions.

 

Theestimated amortization expense for the intangible assets with definite lives,which now mainly consist of rights of way for US GAAP purposes (which isequivalent under Chile GAAP) for each of the five succeeding fiscal years is asfollows:

 
| **Year**   | ** ** | **Amortization** | ** ** |
|------------|------------|------------------|------------|
| ** ** | ** ** | **ThCh$**        | ** ** |
|       |       |             |       |
| 2009       |       | (9,963,318       | )          |
| 2010       |       | (7,537,327       | )          |
| 2011       |       | (5,235,412       | )          |
| 2012       |       | (1,892,460       | )          |
| 2013       |       | (19,709,997      | )          |

 

**(o)**              Asset retirementobligations

** **

As discussed in Note 37paragraph (aa), the Company adopted SFAS No. 143 effective January 1,2003. The following table describes all changes to the Company’s U.S. GAAPasset retirement obligation during the year ended December 31, 2007 and2008:

 
| ** **                         | ** ** | **As of December 31,** | ** ** |
|------------------------------------|------------|-----------------------------|------------|
| ** **                         | ** ** | **2007**                    | ** ** | **2008** | ** ** |
| ** **                         | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** |
|                               |       |                        |       |   |   |
| Balance as of January 1,      |       | (2,501,885                  | )          | (2,814,438 | ) |
| Cumulative Translation Adjustment  |       | 208,626                     |       | (344,791 | ) |
| Liabilities incurred in the period |       | (499,520                    | )          | — |   |
| Accretion expense                  |       | (21,659                     | )          | (101,121 | ) |
|                               |       |                        |       |   |   |
| Balance as of December 31,    |       | (2,814,438                  | )          | (3,260,350 | ) |

 

**(p)****              Capital leaseobligations**

** **

Minimum lease obligations forcapital lease are presented net of interest expense, and as of December 31,are summarized as follows:

 
| ** **                       | ** ** | **Year ended December 31,** | ** ** |
|----------------------------------|------------|----------------------------------|------------|
| ** **                       | ** ** | **2007**                         | ** ** | **2008** | ** ** |
| ** **                       | ** ** | **ThCh$**                        | ** ** | **ThCh$** | ** ** |
| Short-term:                      |       |                             |       |   |   |
| Lease obligations                |       | 12,379,761                       |       | 11,688,665 |   |
| Less: interest expense           |       | (4,502,525                       | )          | (4,249,231 | ) |
|                             |       |                             |       |   |   |
| Net short-term lease obligations |       | 7,877,236                        |       | 7,439,434 |   |
|                             |       |                             |       |   |   |
| Long-term:                       |       |                             |       |   |   |
| Lease obligations                |       | 81,388,906                       |       | 131,464,571 |   |
| Less: interest expense           |       | (18,664,074                      | )          | (26,896,160 | ) |
|                             |       |                             |       |   |   |
| Net long-term lease obligations  |       | 62,724,832                       |       | 104,568,411 |   |
| Weighted-average interest rate   |       | 7.18                             | %          | 6.21 | % |

 

F-178

----

**T**able of Content**s**

 

**ENERSISS.A. AND SUBSIDIARIES**

 

**Notes to the Consolidated Financial Statements – (Continued)**

 

Future payments under capitalleases are summarized as follows:

 
| ** **          | ** ** | **Year ended**             | ** ** |
|---------------------|------------|----------------------------|------------|
| ** **          | ** ** | **December 31, 2008** | ** ** |
| ** **          | ** ** | **ThCh$**                  | ** ** |
|                |       |                       |       |
| 2009                |       | 11,688,665                 |       |
| 2010                |       | 17,925,030                 |       |
| 2011                |       | 15,754,475                 |       |
| 2012                |       | 31,923,069                 |       |
| 2013 and thereafter |       | 65,861,997                 |       |
|                |       |                       |       |
| Total               |       | 143,153,236                |       |

 

**(q)****              Available for salesecurities**

** **

Under US GAAP, the companyclassifies certain marketable securities as available for sale securities

 

Realized gains and losses aredetermined using the proceeds from sales less the cost of the investmentidentified to be sold. Gross gains and losses realized on the sale of availablefor-sale securities for the years ended December 31, 2006 and 2007 are asfollows:

 
| ** **                                               | ** ** | ** ** | ** ** | **Gross**      | ** ** | ** ** | ** ** |
|----------------------------------------------------------|------------|------------|------------|----------------|------------|------------|------------|
| ** **                                               | ** ** | ** ** | ** ** | **unrealized** | ** ** | **Fair**   | ** ** |
| ** **                                               | ** ** | **Cost**   | ** ** | **gains**      | ** ** | **value**  | ** ** |
| ** **                                               | ** ** | **ThCh$**  | ** ** | **ThCh$**      | ** ** | **ThCh$**  | ** ** |
|                                                     |       |       |       |           |       |       |       |
| Securities available for sale at  December 31, 2006 |       | 10,549,407 |       | —         |       | 10,549,407 |       |
| Securities available for sale at  December 31, 2007 |       | 11,215,653 |       | —         |       | 11,215,653 |       |
| Securities available for sale at  December 31, 2008 |       | —     |       | —         |       | —     |       |

 

Information on sales ofavailable for sale securities during the three years in the period ended December 31,2006, 2007 and 2008 is as follows:

 
| ** **          | ** ** | **2006**  | ** ** | **2007**   | ** ** | **2008**   | ** ** |
|---------------------|------------|-----------|------------|------------|------------|------------|------------|
| ** **          | ** ** | **ThCh$** | ** ** | **ThCh$**  | ** ** | **ThCh$**  | ** ** |
|                |       |      |       |       |       |       |       |
| Proceeds from sales |       | 6,341,493 |       | 10,549,407 |       | 11,215,653 |       |

 

As of December 2006, 2007and 2008, the Company has no securities that are considered to be tradingsecurities. The cost of available for sale securities is determined using theaverage cost method.

 

**(r)****              Recent accountingpronouncements**

 

FASB StatementNo. 141 (Revised 2007), ‘Business combinations’ (“SFAS 141R”). SFAS 141Rprovides additional guidance on improving the relevance, representationalfaithfulness, and comparability of the financial information that a reportingentity provides in its financial reports about a business combination and itseffects. This Statement applies prospectively to business combinations forwhich the acquisition date is on or after the beginning of the first annualreporting period beginning on or after December 15, 2008. The impact ofimplementing this new pronouncement on the Company’s financial statements iscurrently unknown.

 

FASB StatementNo. 160, ‘Non-controlling interests in consolidated financial statements -an amendment of ARB No. 51’ (“SFAS 160”). SFAS 160 amends ARB No. 51to establish accounting and reporting standards for the non-controlling

 

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Table of Contents

 

**ENERSISS.A. AND SUBSIDIARIES**

** **

**Notesto the Consolidated Financial Statements – (Continued)**

 

interestin a subsidiary and for the deconsolidation of a subsidiary. This Statement iseffective for fiscal years and interim periods within those fiscal years,beginning on or after December 15, 2008. The impact of implementing thisnew pronouncement on the Company’s financial statements is currently unknown.

 

FASBStaff Position FAS 141(R)-1, ‘Accounting for assets acquired and liabilitiesassumed in a business combination that arise from contingencies’ (“FSP FAS141(R)-1”). FSP FAS 141(R)-1 amends and clarifies SFAS 141R to addressapplication issues raised by preparers, auditors, and members of the legalprofession on initial recognition and measurement, subsequent measurement andaccounting, and disclosure of assets and liabilities arising from contingenciesin a business combination. Under the new guidance, assets acquired andliabilities assumed in a business combination that arise from contingenciesshould be recognized at fair value on the acquisition date if fair value can bedetermined during the measurement period. If fair value cannot be determined,companies should typically account for the acquired contingencies usingexisting guidance. This FSP is effective for assets or liabilities arising fromcontingencies in business combinations for which the acquisition date is on orafter the beginning of the first annual reporting period beginning on or after December 15,2008. The impact of implementing this new pronouncement on the Company’sfinancial statements is currently unknown.

 

FASBStaff Position FAS 152-2 and FAS 124-2, ‘Recognition and presentation ofother-than-temporary impairments’ (“FSP FAS 152-2 and FAS 124-2”). FSP FAS152-2 and FAS 124-2 clarifies that in periods in which an entity determinesthat a security’s decline in fair value below its amortized cost basis as otherthan temporary, the entity shall present the total other-than-temporaryimpairment in the income statement with an offset for the amount of the totalother-than-temporary impairment that is recognized in other comprehensiveincome, if any. This FSP is effective for interim and annual reporting periodsending after June 15, 2009. The impact of implementing this newpronouncement on the Company’s financial statements is currently unknown.

 

FASBStaff Position FAS 157-2, ‘Effective date of FASB Statement No. 157’ (“FSPFAS 157-2”). FSP FAS 157-2 delays the effective date of FASB Statement No. 157,Fair Value Measurements (“SFAS 157”) for all nonfinancial assets andnonfinancial liabilities, except those that are recognized or disclosed at fairvalue in the financial statements on a recurring basis (at least annually).This FSP partially defers the effective date of SFAS 157 to fiscal yearsbeginning after November 15, 2008, and interim periods within those fiscalyears for items within the scope of this FSP. The impact of implementing thisnew pronouncement on the Company’s financial statements is currently unknown.

 

FASBStaff Position FAS 157-4, ‘Determining fair value when the volume and level ofactivity for the asset or liability have significantly decreased andidentifying transactions that are not orderly’ (“FSP FAS 157-4”). FSP FAS 157-4provides additional guidance for estimating fair value in accordance with SFAS157 when the volume and level of activity for the asset or liability havesignificantly decreased. This FSP also includes guidance on identifyingcircumstances that indicate a transaction is not orderly. This FSP is effectivefor interim and annual reporting periods ending after June 15, 2009 and isapplied prospectively. The impact of implementing this new pronouncement on theCompany’s financial statements is currently unknown.

 

Asdiscussed on Note 36, Enersis S.A. has adopted IFRS as its accounting standards beginning on January 1,2009. The Company expects that its next Annual Report on Form 20-F, forthe fiscal year ended December 31, 2009, will be filed using IFRS as the accounting principles used inpreparing its financial statements.

 

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Table of Contents

 

**SCHEDULE I**

** **

Rule 5-04of the Securities and Exchange Commission requires presentation of condensedfinancial statements of the registrant (parent company) when restricted netassets, defined as assets not to be transferred to the parent company in theform of loans, advances or cash dividends of the subsidiary without the consentof a third party.

 

Followingare the parent company Chilean GAAP balance sheets as of December 31, 2007and 2008 and results of operations and cash flows for the years ended December 31,2006, 2007 and 2008. Note that there are no differences in shareholders’ equityand net income under Chilean GAAP between the parent company and theconsolidated company in any of the presented periods.

 

**ENERSIS S.A.**

**BALANCE SHEETS**

 

(Restated for general price-level changes and expressed in thousands ofconstant

Chilean pesos as of December 31, 2008 and thousands of US dollars)

 
| ** **                               | ** ** | **As of December 31,** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|
| ** **                               | ** ** | **2007**                    | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                               | ** ** | ** **                  | ** ** | **ThCh$** | ** ** | **ThUS$** | ** ** |
| **ASSETS**                               |       |                        |       |   |   |   |   |
|                                     |       |                        |       |   |   |   |   |
| CURRENT ASSETS:                          |       |                        |       |   |   |   |   |
| Cash                                     |       | 195,303                     |       | 18,413,130 |   | 28,931 |   |
| Time deposits                            |       | 14,475,077                  |       | 37,626,269 |   | 59,119 |   |
| Notes receivable, net                    |       | —                      |       | — |   | — |   |
| Other accounts receivable, net           |       | 1,797,206                   |       | 1,457,865 |   | 2,291 |   |
| Amounts due from related companies       |       | 204,971,858                 |       | 10,214,017 |   | 16,048 |   |
| Income taxes recoverable                 |       | 13,302,323                  |       | 17,334,174 |   | 27,236 |   |
| Prepaid expenses                         |       | 7,004                       |       | 75,433 |   | 119 |   |
| Deferred income taxes                    |       | 20,943,180                  |       | 8,168,576 |   | 12,834 |   |
| Other current assets                     |       | 79,541,586                  |       | 62,282,303 |   | 97,859 |   |
|                                     |       |                        |       |   |   |   |   |
| Total current assets                     |       | 335,233,537                 |       | 155,571,767 |   | 244,437 |   |
|                                     |       |                        |       |   |   |   |   |
| PROPERTY, PLANT AND EQUIPMENT:           |       |                        |       |   |   |   |   |
| Buildings and infrastructure             |       | 26,378,649                  |       | 26,378,458 |   | 41,446 |   |
| Machinery and equipment                  |       | 3,603,558                   |       | 3,644,065 |   | 5,726 |   |
| Other assets                             |       | 938,326                     |       | 717,885 |   | 1,128 |   |
| Technical appraisal                      |       | 41,957                      |       | 41,903 |   | 66 |   |
|                                     |       |                        |       |   |   |   |   |
| Sub - total                              |       | 30,962,489                  |       | 30,782,311 |   | 48,366 |   |
|                                     |       |                        |       |   |   |   |   |
| Less: accumulated depreciation           |       | (18,918,642                 | )          | (20,096,399 | ) | (31,576 | ) |
|                                     |       |                        |       |   |   |   |   |
| Total property, plant and equipment, net |       | 12,043,847                  |       | 10,685,912 |   | 16,790 |   |
|                                     |       |                        |       |   |   |   |   |
| OTHER ASSETS:                            |       |                        |       |   |   |   |   |
| Investments in related companies         |       | 2,679,366,514               |       | 3,285,141,637 |   | 5,161,665 |   |
| Investment in other companies            |       | 12,611,945                  |       | 15,770,517 |   | 24,779 |   |
| Goodwill, net                            |       | 681,473,767                 |       | 618,796,082 |   | 972,262 |   |
| Negative goodwill, net                   |       | (425,165                    | )          | (437,884 | ) | (688 | ) |
| mounts due from related companies        |       | 356,860,601                 |       | 320,464,689 |   | 503,519 |   |
| Deferred income taxes long-term          |       | 23,148,758                  |       | — |   | — |   |
| Intangibles                              |       | 1,823,387                   |       | 1,823,387 |   | 2,865 |   |
| Accumulated amortization                 |       | (902,541                    | )          | (993,883 | ) | (1,562 | ) |
| Other assets                             |       | 64,577,561                  |       | 4,931,396 |   | 7,748 |   |
|                                     |       |                        |       |   |   |   |   |
| Total other assets                       |       | 3,818,534,827               |       | 4,245,495,941 |   | 6,670,588 |   |
|                                     |       |                        |       |   |   |   |   |
| TOTAL ASSETS                             |       | 4,165,812,211               |       | 4,411,753,620 |   | 6,931,815 |   |

 

F-181

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Table of Contents

** **

**SCHEDULE I**

 

**ENERSIS S.A.**

**BALANCE SHEETS**

 

(Restated for general price-level changes and expressed in thousands ofconstant

Chilean pesos as of December 31, 2008 and thousands of US dollars)

 
| ** **                                                                 | ** ** | **As of December 31,** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                 | ** ** | **2007**                    | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                                                                 | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThUS$** | ** ** |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                              | ** ** | ** **                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                 |       |                        |       |   |   |   |   |
| CURRENT LIABILITIES:                                                       |       |                        |       |   |   |   |   |
| Obligations with benches and short-term  financial institutions            |       | —                      |       | 34,136,613 |   | 53,636 |   |
| Current portion of long-term debt due to  banks and financial institutions |       | 915,418                     |       | 95,694,484 |   | 150,356 |   |
| Current portion of bonds payable                                           |       | 9,326,592                   |       | 10,597,279 |   | 16,650 |   |
| Dividends payable                                                          |       | 421,964                     |       | 387,478 |   | 609 |   |
| Accounts payable                                                           |       | 223,558                     |       | 252,397 |   | 397 |   |
| Miscellaneous payables                                                     |       | 379,238                     |       | 471,578 |   | 741 |   |
| Amounts payable to related companies                                       |       | 176,680,300                 |       | 13,342,680 |   | 20,964 |   |
| Accrued expenses                                                           |       | 5,489,198                   |       | 7,139,463 |   | 11,218 |   |
| Withholdings                                                               |       | 344,543                     |       | 6,041,425 |   | 9,492 |   |
| Income tax                                                                 |       | 132,058                     |       | 392,418 |   | 617 |   |
| Other current liabilities                                                  |       | 2,341,594                   |       | 1,952,557 |   | 3,068 |   |
|                                                                       |       |                        |       |   |   |   |   |
| Total current liabilities                                                  |       | 196,254,463                 |       | 170,408,372 |   | 267,748 |   |
|                                                                       |       |                        |       |   |   |   |   |
| LONG -TERM LIABILITIES:                                                    |       |                        |       |   |   |   |   |
| Due to banks and financial institutions                                    |       | 189,389,624                 |       | — |   | — |   |
| Bonds payable                                                              |       | 362,156,896                 |       | 417,553,588 |   | 656,067 |   |
| Amounts payable to related companies                                       |       | —                      |       | — |   | — |   |
| Miscellaneous payables                                                     |       | —                      |       | 25 |   | — |   |
| Accrued expenses                                                           |       | 33,756,690                  |       | 18,015,514 |   | 28,306 |   |
| Deferred income taxes                                                      |       | —                      |       | 1,101,865 |   | 1731 |   |
| Other long-term liabilities                                                |       | 222,659,249                 |       | 107,461,444 |   | 168,845 |   |
|                                                                       |       |                        |       |   |   |   |   |
| Total long-term liabilities                                                |       | 807,962,459                 |       | 544,132,436 |   | 854,949 |   |
|                                                                       |       |                        |       |   |   |   |   |
| SHAREHOLDERS’ EQUITY:                                                 |       |                        |       |   |   |   |   |
| Paid-in capital, no par value shares                                       |       | 2,824,882,834               |       | 2,824,882,834 |   | 4,438,499 |   |
| Additional paid-in capital                                                 |       | 201,314,070                 |       | 201,314,070 |   | 316,308 |   |
| Other reserves                                                             |       | (474,250,155                | )          | (339,568,470 | ) | (533,535 | ) |
| Retained earnings                                                          |       | 423,601,980                 |       | 490,313,366 |   | 770,388 |   |
| Net income for the year                                                    |       | 205,141,910                 |       | 570,883,101 |   | 896,980 |   |
| Provisional dividends                                                      |       | (19,095,350                 | )          | (50,612,089 | ) | (79,522 | ) |
|                                                                       |       |                        |       |   |   |   |   |
| Total shareholders’ equity                                            |       | 3,161,595,289               |       | 3,697,212,812 |   | 5,809,118 |   |
|                                                                       |       |                        |       |   |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS**’** EQUITY                        |       | 4,165,812,211               |       | 4,411,753,620 |   | 6,931,815 |   |

 

F-182

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Table of Contents

** **

**SCHEDULE I**

 

**ENERSIS S.A.**

**INCOME STATEMENT**

 

(Restated for general price-level changes and expressed in thousands ofconstant

Chilean pesos as of December 31, 2008 and thousands of US dollars)

 
| ** **                                                        | ** ** | **Years ended December 31,** | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------|------------|
| ** **                                                        | ** ** | **2006**                          | ** ** | **2007** | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                                                        | ** ** | **ThCh$**                         | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThUS$** | ** ** |
|                                                              |       |                              |       |   |   |   |   |   |   |
| OPERATING INCOME:                                                 |       |                              |       |   |   |   |   |   |   |
| SALES                                                             |       | 5,492,782                         | ** ** | 5,456,592 |   | 5,447,414 |   | 8,559 |   |
| COST OF SALES                                                     |       | (1,544,655                        | )          | (1,634,571 | ) | (1,714,126 | ) | (2,693 | ) |
|                                                              |       |                              |       |   |   |   |   |   |   |
| GROSS PROFIT                                                      |       | 3,948,127                         |       | 3,822,021 |   | 3,733,288 |   | 5,866 |   |
|                                                              |       |                              |       |   |   |   |   |   |   |
| ADMINISTRATIVE AND SELLING EXPENSES                               |       | (19,710,806                       | )          | (21,870,852 | ) | (23,476,673 | ) | (36,887 | ) |
|                                                              |       |                              |       |   |   |   |   |   |   |
| OPERATING LOSS                                                    |       | (15,762,679                       | )          | (18,048,831 | ) | (19,743,385 | ) | (31,021 | ) |
|                                                              |       |                              |       |   |   |   |   |   |   |
| NON-OPERATING INCOME AND EXPENSES:                                |       |                              |       |   |   |   |   |   |   |
| Interest income                                                   |       | 31,007,644                        |       | 39,177,200 |   | 35,875,802 |   | 56,369 |   |
| Equity in income of related companies                             |       | 465,245,713                       |       | 317,020,474 |   | 652,727,068 |   | 1,025,575 |   |
| Other non-operating income                                        |       | 7,695,665                         |       | 13,591,921 |   | 8,140,013 |   | 12,790 |   |
| Equity in losses of related companies                             |       | (11,308,418                       | )          | (10,660 | ) | (7,233,061 | ) | (11,365 | ) |
| Amortization of goodwill                                          |       | (63,584,720                       | )          | (63,504,580 | ) | (63,598,254 | ) | (99,927 | ) |
| Interest expense                                                  |       | (57,630,857                       | )          | (59,450,542 | ) | (55,174,610 | ) | (86,691 | ) |
| Other non-operating expenses                                      |       | (3,507,751                        | )          | (956,171 | ) | (11,734,274 | ) | (18,437 | ) |
| Price-level restatements, net                                     |       | (883,731                          | )          | (6,895,058 | ) | (10,945,606 | ) | (17,198 | ) |
| Exchange difference, net                                          |       | (5,188,455                        | )          | (21,291,132 | ) | 61,868,900 |   | 97,209 |   |
|                                                              |       |                              |       |   |   |   |   |   |   |
| NON-OPERATING RESULT                                              |       | 361,845,090                       |       | 217,681,452 |   | 609,925,978 |   | 958,325 |   |
|                                                              |       |                              |       |   |   |   |   |   |   |
| INCOME BEFORE INCOME TAXES AND AMORTIZATION  OF NEGATIVE GOODWILL |       | 346,082,411                       |       | 199,632,621 |   | 590,182,593 |   | 927,304 |   |
|                                                              |       |                              |       |   |   |   |   |   |   |
| INCOME TAX                                                        |       | (11,674,067                       | )          | 5,465,965 |   | (19,346,993 | ) | (30,398 | ) |
|                                                              |       |                              |       |   |   |   |   |   |   |
| INCOME BEFORE AMORTIZATION OF NEGATIVE  GOODWILL                  |       | 334,408,344                       |       | 205,098,586 |   | 570,835,600 |   | 896,906 |   |
|                                                              |       |                              |       |   |   |   |   |   |   |
| AMORTIZATION OF NEGATIVE GOODWILL                                 |       | 46,896                            |       | 43,324 |   | 47,501 |   | 74 |   |
|                                                              |       |                              |       |   |   |   |   |   |   |
| NET INCOME FOR THE YEAR                                           |       | 334,455,240                       |       | 205,141,910 |   | 570,883,101 |   | 896,980 |   |

 

F-183

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Table of Contents

 

**SCHEDULE I**

 

**ENERSIS S.A.**

**STATEMENTS OF CASH FLOWS**

 

(Restated for general price-level changes and expressed in thousands ofconstant

Chilean pesos as of December 31, 2008 and thousands of US dollars)

 
| ** **                                                                 | ** ** | **As of December 31,** | ** ** |
|----------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                 | ** ** | **2006**                    | ** ** | **2007** | ** ** | **2008** | ** ** | **2008** | ** ** |
| ** **                                                                 | ** ** | **ThCh$**                   | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** | **ThUS$** | ** ** |
| CASH FLOWS FROM OPERATING ACTIVITIES :                                     |       |                        |       | ** ** | ** ** | ** ** |   |   |   |
|                                                                       |       |                        |       | ** ** | ** ** | ** ** |   |   |   |
| Net income for the year                                                    |       | 334,455,240                 | ** ** | 205,141,910 |   | 570,883,101 |   | 896,980 |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| Charges (credits) to income which do not  represent cash flows:            |       |                        |       |   |   |   |   |   |   |
| Depreciation                                                               |       | 1,485,987                   |       | 1,575,335 |   | 1,649,119 |   | 2,591 |   |
| Amortization of intangibles                                                |       | 91,341                      |       | 91,341 |   | 91,341 |   | 144 |   |
| Equity in income of related companies                                      |       | (465,245,713                | )          | (317,020,474 | ) | (652,727,068 | ) | (1,025,575 | ) |
| Equity in losses of related companies                                      |       | 11,308,418                  |       | 10,660 |   | 7,233,061 |   | 11,365 |   |
| Amortization of goodwill                                                   |       | 63,584,720                  |       | 63,504,580 |   | 63,598,254 |   | 99,927 |   |
| Amortization of negative goodwill                                          |       | (46,897                     | )          | (43,324 | ) | (47,501 | ) | (75 | ) |
| Price-level restatement, net                                               |       | 883,731                     |       | 6,895,058 |   | 10,945,606 |   | 17,198 |   |
| Exchange difference, net                                                   |       | 5,188,454                   |       | 21,291,132 |   | (61,868,900 | ) | (97,209 | ) |
| Other credits to income which do not  represent cash flows                 |       | (146,971                    | )          | (5,512,124 | ) | — |   | — |   |
| Other charges to income which do not  represent cash flows                 |       | 3,281,109                   |       | 1,041,330 |   | 6,178,973 |   | 9,708 |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| Changes in assets which affect cash flows:                                 |       |                        |       |   |   |   |   |   |   |
| Decrease in dividends receipts                                             |       | —                      |       | — |   | — |   | — |   |
| Decrease in other assets                                                   |       | 135,378,053                 |       | 181,486,847 |   | 266,017,692 |   | 417,971 |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| Changes in liabilities which affect cash  flows:                           |       |                        |       |   |   |   |   |   |   |
| Increase (decrease) in accounts payable  associated with operating results |       | (14,620,485                 | )          | (2,736,571 | ) | (6,420,961 | ) | (10,089 | ) |
| Increase in interest payable                                               |       | 7,117,800                   |       | 12,994,359 |   | (33,600,712 | ) | (52,794 | ) |
| Decrease in income tax payable                                             |       | 13,111,378                  |       | (2,735,302 | ) | 27,206,542 |   | 42,747 |   |
| Increaseinotheraccountspayableassociatedwithnon-operatingresults           |       | (23,174,810                 | )          | (5,038,988 | ) | (6,769,333 | ) | (10,636 | ) |
| Net decrease in value added tax and other  similar taxes payable           |       | 49,786                      |       | 1,094,607 |   | 3,124,478 |   | 4,909 |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| Net cash flows provided by operating  activities                           |       | 72,701,141                  |       | 162,040,376 | ** ** | 195,493,692 |   | 307,162 |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                      |       |                        |       |   |   |   |   |   |   |
| Loans obtained                                                             |       | 191,633,915                 |       | 21,684,768 |   | 34,081,000 |   | 53,549 |   |
| Other loans obtained from related companies                                |       | 39,165,103                  |       | 44,975,163 |   | 1,599,712 |   | 2,513 |   |
| Loans obtained from related companies                                      |       | 10,904,034                  |       | — |   | — |   | — |   |
| Other sources of financing                                                 |       | —                      |       | — |   | 1,783,600 |   | 2,802 |   |
| Dividends paid by related company                                          |       | —                      |       | — |   | — |   | — |   |
| Dividends paid                                                             |       | (81,370,214                 | )          | (202,963,255 | ) | (154,048,173 | ) | (242,043 | ) |
| Payment of loans                                                           |       | (50,158,544                 | )          | — |   | (108,122,594 | ) | (169,884 | ) |
| Payment of bonds                                                           |       | (186,645,709                | )          | (1,675,031 | ) | (1,626,176 | ) | (2,555 | ) |
| Payment of loans granted by related  companies                             |       | (13,660,876                 | )          | — |   | — | ** ** | — |   |
| Payment of other loans obtained from  related companies                    |       | —                      |       | — |   | (144,733,306 | ) | (227,407 | ) |
| Other disbursements for financing                                          |       | —                      |       | — |   | — |   | — |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| Net cash used in financing activities                                      |       | (90,132,291                 | )          | (137,978,355 | ) | (371,065,937 | ) | (583,025 | ) |
|                                                                       |       |                        |       |   | ** ** | ** ** |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                      |       |                        |       |   |   |   |   |   |   |
| Sales of property, plant and equipment                                     |       | 219,277                     |       | — |   | — |   | — |   |
| Other receipts from investment                                             |       | 28,103,602                  |       | 3,159,947 |   | 31,849,336 |   | 50,042 |   |
| Proceeds from loans granted to related  companies                          |       | 26,773,256                  |       | 73,434,627 |   | 196,458,862 |   | 308,679 |   |
| Long-term investments                                                      |       | (14,179,720                 | )          | (284,048 | ) | — |   | — |   |
| Loans granted to relates companies                                         |       | (240,392                    | )          | — |   | 5,242,995 |   | 8,238 |   |
| Other loans to related companies                                           |       | (7,197,447                  | )          | (24,298,228 | ) | — |   | — |   |
| Sales of other investment                                                  |       | —                      |       | — |   | — |   | — |   |
| Additions to property, plant and equipment                                 |       | (211,889                    | )          | (614,594 | ) | (268,993 | ) | (422 | ) |
| Other disbursement for investments                                         |       | (587,616                    | )          | (24,359,230 | ) | (11,201 | ) | (18 | ) |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| Net cash provided by investing activities                                  |       | 32,679,070                  |       | 27,038,474 | ** ** | 233,270,999 |   | 366,519 |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| NET CASH FLOW FOR THE YEAR                                                 |       | 15,247,921                  |       | 51,100,495 | ** ** | 57,698,754 |   | 90,656 |   |
|                                                                       |       |                        |       |   | ** ** |   |   |   |   |
| EFECT OF PRICE-LEVEL RESTATEMENT ON CASH AND  CASH EQUIVALENTS             |       | 28,542                      |       | (957,545 | ) | (6,734,597 | ) | (10,582 | ) |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| NET INCREASE IN CASH AND CASH EQUIVALENTS                                  |       | 15,276,463                  |       | 50,142,950 |   | 50,964,157 |   | 80,074 |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF  THE YEAR                        |       | 141,651                     |       | 15,418,113 |   | 65,561,063 |   | 103,012 |   |
|                                                                       |       |                        |       |   |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT END OF THE  YEAR                              |       | 15,418,113                  |       | 65,561,063 | ** ** | 116,525,220 |   | 183,086 |   |

 

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Table ofContents

 

**SCHEDULE I**

 

**ENERSIS S.A.**

**STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY**

 

(Expressed in thousands of historical Chilean pesos, except as stated)

 
| ** **                                               | ** ** | ** **    | ** ** | **Additional** | ** ** | ** **   | ** ** | ** **   | ** ** | **Deficit of**        | ** ** | ** **    | ** ** | ** **       | ** ** | ** **    | ** ** |
|----------------------------------------------------------|------------|---------------|------------|----------------|------------|--------------|------------|--------------|------------|-----------------------|------------|---------------|------------|------------------|------------|---------------|------------|
| ** **                                               | ** ** | **Paid-in**   | ** ** | **paid-in**    | ** ** | **Other**    | ** ** | **Retained** | ** ** | **subsidiaries in**   | ** ** | **Interim**   | ** ** | **Net income**   | ** ** | ** **    | ** ** |
| ** **                                               | ** ** | **capital**   | ** ** | **capital**    | ** ** | **reserves** | ** ** | **earnings** | ** ** | **development stage** | ** ** | **dividends** | ** ** | **for the year** | ** ** | **Total**     | ** ** |
| ** **                                               | ** ** | **ThCh$**     | ** ** | **ThCh$**      | ** ** | **ThCh$**    | ** ** | **ThCh$**    | ** ** | **ThCh$**             | ** ** | **ThCh$**     | ** ** | **ThCh$**        | ** ** | **ThCh$**     | ** ** |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of January 1, 2006                               |       | 2,365,606,672 |       | 168,583,950    |       | (236,727,351 | )          | 230,391,292  |       | —                |       | —        |       | 68,016,865       |       | 2,595,871,428 |       |
| Transfer of prior year income to retained earnings       |       | —        |       | —         |       | —       |       | 68,016,865   |       | —                |       | —        |       | (68,016,865      | )          | —        |       |
| Investment equity variations                             |       | —        |       | —         |       | (10,585,093  | )          | —       |       | —                |       | —        |       | —           |       | (10,585,093   | )          |
| Accumulated deficit of subsidiaries in development stage |       | —        |       | —         |       | —       |       | —       |       | (181,751              | )          | —        |       | —           |       | (181,751      | )          |
| Final dividend N° 73                                |       | —        |       | —         |       | —       |       | (32,651,166  | )          | —                |       | —        |       | —           |       | (32,651,166   | )          |
| Cumulative translation adjustment                        |       | —        |       | —         |       | 14,766,794   |       | —       |       | —                |       | —        |       | —           |       | 14,766,794    |       |
| Reserve Technical Bulletin No. 72                   |       | —        |       | —         |       | (825,381     | )          | —       |       | —                |       | —        |       | —           |       | (825,381      | )          |
| Price-level restatement                                  |       | 49,677,740    |       | 3,540,263      |       | (4,971,274   | )          | 5,522,778    |       | —                |       | —        |       | —           |       | 53,769,507    |       |
| Interim dividend                                         |       | —        |       | —         |       | —       |       | —       |       | —                |       | (36,242,795   | )          | —           |       | (36,242,795   | )          |
| Net income for the year                                  |       | —        |       | —         |       | —       |       | —       |       | —                |       | —        |       | 285,960,366      |       | 285,960,366   |       |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of December 31, 2006                             |       | 2,415,284,412 |       | 172,124,213    |       | (238,342,305 | )          | 271,279,769  |       | (181,751              | )          | (36,242,795   | )          | 285,960,366      |       | 2,869,881,909 |       |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of December 31, 2006 (1)                         |       | 2,824,882,834 |       | 201,314,070    |       | (278,761,824 | )          | 317,285,020  |       | (212,574              | )          | (42,389,065   | )          | 334,455,240      |       | 3,356,573,701 |       |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of January 1, 2007                               |       | 2,415,284,412 |       | 172,124,213    |       | (238,342,305 | )          | 271,279,769  |       | (181,751              | )          | (36,242,795   | )          | 285,960,366      |       | 2,869,881,909 |       |
| Transfer of prior year income to retained earnings       |       | —        |       | —         |       | —       |       | 249,535,820  |       | 181,751               |       | 36,242,795    |       | (285,960,366     | )          | —        |       |
| Investment equity variations                             |       | —        |       | —         |       | (7,702,898   | )          | —       |       | —                |       | —        |       | —           |       | (7,702,898    | )          |
| Final dividend N° 75                                |       | —        |       | —         |       | —       |       | (159,675,172 | )          | —                |       | —        |       | —           |       | (159,675,172  | )          |
| Reserve Technical Bulletin No. 72                   |       | —        |       | —         |       | (56,695,443  | )          | —       |       | —                |       | —        |       | —           |       | (56,695,443   | )          |
| Cumulative translation adjustment                        |       | —        |       | —         |       | (115,113,442 | )          | —       |       | —                |       | —        |       | —           |       | (115,113,442  | )          |
| Price-level restatement                                  |       | 178,731,046   |       | 12,737,192     |       | (17,637,331  | )          | 27,842,117   |       | —                |       | (190,784      | )          | —           |       | 201,482,240   |       |
| Interim dividend                                         |       | —        |       | —         |       | —       |       | —       |       | —                |       | (17,343,973   | )          | —           |       | (17,343,973   | )          |
| Net income for the year                                  |       | —        |       | —         |       | —       |       | —       |       | —                |       | —        |       | 188,376,410      |       | 188,376,410   |       |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of December 31, 2007                             |       | 2,594,015,458 |       | 184,861,405    |       | (435,491,419 | )          | 388,982,534  |       | —                |       | (17,534,757   | )          | 188,376,410      |       | 2,903,209,631 |       |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of December 31, 2007 (1)                         |       | 2,824,882,834 |       | 201,314,070    |       | (474,250,155 | )          | 423,601,980  |       | —                |       | (19,095,350   | )          | 205,141,910      |       | 3,161,595,289 |       |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of January 1, 2008                               |       | 2,594,015,458 |       | 184,861,405    |       | (435,491,419 | )          | 388,982,534  |       | —                |       | (17,534,757   | )          | 188,376,410      |       | 2,903,209,631 |       |
| Transfer of prior year income to retained earnings       |       | —        |       | —         |       | —       |       | 170,841,653  |       | —                |       | 17,534,757    |       | (188,376,410     | )          | —        |       |
| Investment equity variations                             |       | —        |       | —         |       | 11,489,022   |       | —       |       | —                |       | —        |       | —           |       | 11,489,022    |       |
| Final dividend N° 77                                |       | —        |       | —         |       | —       |       | (111,424,065 | )          | —                |       | —        |       | —           |       | (111,424,065  | )          |
| Reserve Technical Bulletin No. 72                   |       | —        |       | —         |       | 13,374       |       | —       |       | —                |       | —        |       | —           |       | 13,374        |       |
| Cumulative translation adjustment                        |       | —        |       | —         |       | 123,179,289  |       | —       |       | —                |       | —        |       | —           |       | 123,179,289   |       |
| Price-level restatement                                  |       | 230,867,376   |       | 16,452,665     |       | (38,758,736  | )          | 41,913,244   |       | —                |       | (351,822      | )          | —           |       | 250,122,727   |       |
| Interim dividend                                         |       | —        |       | —         |       | —       |       | —       |       | —                |       | (50,260,267   | )          | —           |       | (50,260,267   | )          |
| Net income for the year                                  |       | —        |       | —         |       | —       |       | —       |       | —                |       | —        |       | 570,883,101      |       | 570,883,101   |       |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of December 31, 2008                             |       | 2,824,882,834 |       | 201,314,070    |       | (339,568,470 | )          | 490,313,366  |       | —                |       | (50,612,089   | )          | 570,883,101      |       | 3,697,212,812 |       |
|                                                     |       |          |       |           |       |         |       |         |       |                  |       |          |       |             |       |          |       |
| As of December 31, 2008 (2)                         |       | 4,438,499     |       | 316,308        |       | (533,535     | )          | 770,388      |       | —                |       | (79,522       | )          | 896,980          |       | 5,809,117     |       |

 

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(1) Restatedin thousands of constant Chilean pesos as of December 31, 2008.

(2) Expressedin thousands of US$as of December 31, 2008

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

F-185

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Thefollowing table presents the dividends received by Enersis individual in theyears ended December 31, 2006, 2007 and 2008:

 
| ** **         | ** ** | **Years ended December 31,** | ** ** |
|--------------------|------------|-----------------------------------|------------|
| ** **         | ** ** | **2006**                          | ** ** | **2007** | ** ** | **2008** | ** ** |
| ** **         | ** ** | **ThCh$**                         | ** ** | **ThCh$** | ** ** | **ThCh$** | ** ** |
|               |       |                              |       |   |   |   |   |
| Dividends received |       | 149,128,178                       |       | 204,886,686 |   | 195,555,835 |   |

 

The Company hassubsidiaries that must abide by certain financial ratios and covenants thatrequire minimum equity levels or that contain other characteristics thatrestrict the transfer of assets to the parent company. The amounts of Enersis ́sproportionate share of restricted net assets in consolidated subsidiaries as ofDecember 31, 2008 is  ThCh$1,571,456,602.

 

* * * * * *

 

F-186

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**EXHIBITINDEX**

 
| **Exhibit** | ** ** | **Description** |
|-------------|------------|-----------------|
| 1.1         |       |            | By-laws (Estatutos) of  Enersis, as amended.* |
| 1.2         |       |            | By-laws (Estatutos) of  ENERSIS S.A., as amended (English translation).* |
| 4.1         |       |            | Assignment of Rights  Contract, dated January 27, 2004, between Endesa Internacional S.A. and  Enersis (Spanish version).** |
| 4.2         |       |            | Assignment of Rights  Contract, dated January 27, 2004, between Endesa Internacional S.A. and  Enersis (English version).** |
| 8.1         |       |            | List of Subsidiaries as  of December 31, 2008. |
| 12.1        |       |            | Certification of Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act. |
| 12.2        |       |            | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act. |
| 13.1        |       |            | Certification of Chief  Executive Officer and Chief Financial Officer pursuant to Section 906 of  the Sarbanes-Oxley Act. |

 

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*      Incorporated by reference to Enersis Report on Form 20-Ffor the year ended December 31, 2006 filed with the Securities andExchange Commission on May 14, 2007.

 

**   Incorporated by reference to Enersis Report on Form 20-F forthe year ended December 31, 2004 filed with the Securities and ExchangeCommission on June 10, 2005.

 

We will furnish to theSecurities and Exchange Commission, upon request, copies of any unfiledinstruments that define the rights of holders of long-term debt of Enersis

 

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