BMI Chile Power Report Q2 2014

Q2 2014
www.businessmonitor.com
CHILE
POWER REPORT
INCLUDES 10-YEAR FORECASTS TO 2023
ISSN 1755-702X
Published by:Business Monitor International
Chile Power Report Q2 2014
INCLUDES 10-YEAR FORECASTS TO 2023
Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: March 2014
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CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 8
Industry Forecast ................................................................................................................ 9

Chile Snaphot ........................................................................................................................................... 9
Table: Country Snapshot: Economic And Demographic Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table: Country Snapshot: Power Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Chile Forecast Scenario ............................................................................................................................ 10
Electricity Generation And Power Generating Capacity ................................................................................ 10
Table: Chile Total Electricity Generation Data And Forecasts, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table: Chile Total Electricity Generation Data And Long-Term Forecasts, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table: Chile Electricity Generating Capacity Data And Forecasts, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Table: Chile Electricity Generating Capacity Data And Long-Term Forecasts, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Electricity Consumption .......................................................................................................................... 20
Table: Chile Total Electricity Consumption Data And Forecasts, 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Table: Chile Total Electricity Consumption Long-Term Forecasts, 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Transmission & Distribution, Imports & Exports ......................................................................................... 21
Table: Chile Electric Power Transmission And Distribution Losses Data And Forecasts 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table: Chile Electric Power Transmission And Distribution Losses Data And Long-Term Forecasts 2017-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table: Chile Trade Data And Forecasts 2012-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Table: Chile Trade Data And Long-Term Forecasts 2018-2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Industry Risk/Reward Ratings ......................................................................................... 23

Latin America Power Risk/Reward Ratings ................................................................................................... 23
Table: Latin America Power Risk/Reward Ratings, (Scores Out Of 100) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Chile Power Risk/Reward Ratings ............................................................................................................... 29
Rewards ............................................................................................................................................... 29
Risks .................................................................................................................................................... 29
Market Overview ............................................................................................................... 31

Key Policies And Market Structure .............................................................................................................. 31
Regulation And Competition ..................................................................................................................... 31
Sustainable Energy Policies ..................................................................................................................... 33
Pricing ................................................................................................................................................. 33
Chile Power Projects Database .................................................................................................................. 34
Table: Chile Major Projects - Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Competitive Landscape .................................................................................................... 39

Transelec .............................................................................................................................................. 40
Enersis/Endesa ...................................................................................................................................... 40
Suez/Tractebel ....................................................................................................................................... 41
© Business Monitor International Page 4

AES ..................................................................................................................................................... 41
Colbún ................................................................................................................................................. 42
Pacific Hydro ........................................................................................................................................ 43
Company Profile ................................................................................................................ 44

Enersis .................................................................................................................................................. 44
Regional Overview ............................................................................................................ 48

Industry Trend Analysis ............................................................................................................................ 48
Glossary ............................................................................................................................. 55
Table: Glossary Of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Methodology ...................................................................................................................... 56
Methodology And Sources ......................................................................................................................... 56
Industry Forecast Methodology ................................................................................................................ 56
Sources ................................................................................................................................................ 59
Risk/Reward Ratings Methodology ............................................................................................................ 59
Table: Power Risk/Reward Rating Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

BMI Industry View
BMI View: Chile is one of the most attractive markets in Latin America, with political stability,
abundant natural resources and a healthy economic growth outlook all adding to its appeal. But in terms of
energy, Chile's geography and considerable distances between urban areas and potential sources of
power, all create challenges in the electricity market. Hydroelectricity accounts for about one-third of
production, but it is a sector shrouded in regulatory uncertainty and lengthy appeals processes. While
rumours of new hydro projects abound, there is no guarantee these proposals will become a reality soon. In
the thermal sector, gas-fired projects are gaining ground and these are appealing because of their
reliability when compared to renewable sources of power. That said, renewable energy will continue to play
an increasing role in the electricity mix, with solar and wind power projects particularly popular.
Domestic demand for energy in Chile is growing, and as electricity generation struggles to keep up with the
pace of demand, energy shortages are feared, and price hikes are already emerging. Chile needs to diversify
its electricity-generating mix to ensure that supply meets the growing demands of the population and its
energy-intensive mining industry. However, efforts to boost electricity production from other sources, such
as coal at the Punta Alcalde power plant, are held back by lengthy approval and appeals processes, while
environmental concerns continue to disrupt investment in established sectors such as hydroelectricity.
During the period 2014-2023, BMI forecasts that Chile's total power generation will increase by an annual
average of 5.4%, reaching 115.3 terawatt hours (TWh). The population is expected to rise from 17.5mn to
18.9mn during this period, with net power consumption set to rise from 63.5TWh in 2014 to 76.6TWh by
2018 and then to 95.8TWh by 2023.
The key developments in Chile's power sector since last quarter are:
■ The planned construction of a US$730mn hydroelectric dam - approved in late 2013 after lengthy a
lengthy legal process - has been blocked once more by an appeals court on Coyhaique, which cited
environmental concerns. The project, a joint venture between Origin Energy and Glencore Xstrata, will
produce 640MW of electricity and is a further example of the uncertain regulatory climate faced by
investors in Chile.
■ Copec announced in November 2013 it plans to sell its share in the thermal power plant Guacolda. AES
Gener - which already holds a stake in the power plant - is tipped to be keen to bid, to take full control of
the power station.
■ The large-scale hydroelectric power project Hidro Aysen continues to be put on hold. The previous
government ruled in January that any decision on granting of permits for the project will be put off until
the administration of Michelle Bachelet took office. With further studies to be completed, a final decision
on the project is unlikely to be made until late 2014 at the earliest.

SWOT
SWOT Analysis
Strengths ■
Chile privatised its electricity sector in the 1980s and all generation, transmission and
distribution activities are now in private hands.
■
A steadily growing economy, stable political backdrop and an energy-hungry mining
sector will keep demand for electricity growing steadily in the years ahead.
Weaknesses ■
Increasing energy demand, environmental concerns and the unreliability of
hydropower prompted the government to encourage the use of natural gas, requiring
large-scale imports from 1997 and triggering 20% annual growth in demand.
■
The regulatory environment underpinning the sector remains shrouded in uncertainty,
with projects frequently being postponed or blocked by the country's courts,
generally citing environmental issues.
Opportunities ■
Transelec is investing US$1bn in transmission lines and substations between 2011
and 2015 to substantially increase its capacity.
■
Government proposals to launch a tender to connect Chile's North and Central
electricity grids; the government approved a bill to this effect in July 2013.
Threats ■
Delays in the awarding of project permits, and court rulings overturning previous
approvals, increase the operational risks.
■
Hydropower has been Chile's largest power source, but droughts have curtailed
production, causing supply shortfalls and blackouts.
■
A lack of political will to push hydroelectric projects through - many were put on hold
and left for the incoming president in 2013's elections to deal with.

Industry Forecast
Chile Snaphot
Table: Country Snapshot: Economic And Demographic Data
2012 2017f 2022f

GDP, US$bn 268.42 380.50 566.70
GDP per capita, US$ 15,369.40 20,883.36 29,964.06
Real GDP growth, % 5.56 4.81 4.28
Population, mn 17.46 18.22 18.91
f = BMI forecast. Source: BMI Macroeconomic Databases
Table: Country Snapshot: Power Sector
Access to Electricity, % of population 99

Quality of Electricity Supply (Value) 5.8/7
Quality of Electricity Supply (Rank) 39/144
Source: BMI, World Economic Forum - Global Competitiveness Report 2012-2013, World Bank

Chile Forecast Scenario
Electricity Generation And Power Generating Capacity
Table: Chile Total Electricity Generation Data And Forecasts, 2012-2017
2012 2013e 2014f 2015f 2016f 2017f
Total Generation, TWh 66.04 69.51 74.14 78.61 83.32 87.73

Total Generation, Growth % y-o-y 8.71 5.25 6.66 6.04 5.99 5.29
Total Generation, KWh per capita 3,781.36 3,944.97 4,171.35 4,385.83 4,610.18 4,814.85
Thermal Generation, TWh 40.66 42.27 44.55 47.29 50.11 52.41

Thermal Generation, Growth % y-o-y 6.08 3.97 5.40 6.15 5.97 4.57
Thermal Generation, KWh per capita 2,327.92 2,399.05 2,506.73 2,638.37 2,772.80 2,876.23
Thermal Generation, % of Total Electricity 61.56 60.81 60.09 60.16 60.15 59.74
Generation
Coal Generation, TWh 17.45 18.60 19.78 20.99 22.45 23.98

Coal Generation, Growth % y-o-y 4.50 6.60 6.34 6.11 6.95 6.84
Coal Generation, KWh per capita 999.13 1,055.69 1,112.92 1,171.00 1,242.08 1,316.39
Coal Generation, % of Total Thermal Electricity 42.92 44.00 44.40 44.38 44.80 45.77
Generation
Coal Generation, % of Total Electricity 26.42 26.76 26.68 26.70 26.94 27.34
Generation
Natural Gas Generation, TWh 3.17 3.87 4.59 5.76 6.81 7.83
Natural Gas Generation, Growth % y-o-y 22.34 22.20 18.61 25.40 18.23 15.09
Natural Gas Generation, KWh per capita 181.36 219.67 258.29 321.17 376.59 429.90
Natural Gas Generation, % of Total Thermal 7.79 9.16 10.30 12.17 13.58 14.95
Electricity Generation
Natural Gas Generation, % of Total Electricity 4.80 5.57 6.19 7.32 8.17 8.93
Generation
Oil Generation, TWh 20.04 19.80 20.18 20.54 20.86 20.59

Oil Generation, Growth % y-o-y 5.26 -1.20 1.93 1.80 1.53 -1.30
Oil Generation, KWh per capita 1,147.43 1,123.70 1,135.51 1,146.20 1,154.14 1,129.94
Oil Generation, % of Total Thermal Electricity 49.29 46.84 45.30 43.44 41.62 39.29
Generation
Oil Generation, % of Total Electricity 30.34 28.48 27.22 26.13 25.03 23.47
Generation

Chile Total Electricity Generation Data And Forecasts, 2012-2017 - Continued
2012 2013e 2014f 2015f 2016f 2017f
Nuclear Generation, TWh 0.00 0.00 0.00 0.00 0.00 0.00

Nuclear Generation, Growth % y-o-y
Nuclear Generation, KWh per capita 0.00 0.00 0.00 0.00 0.00 0.00
Nuclear Generation, % of Total Electricity 0.00 0.00 0.00 0.00 0.00 0.00
Generation
Hydropower Generation, TWh 21.21 22.38 24.37 25.76 27.08 28.79

Hydropower Generation, Growth % y-o-y 2.00 5.50 8.90 5.70 5.13 6.30
Hydropower Generation, KWh per capita 1,214.73 1,270.27 1,371.40 1,437.35 1,498.61 1,580.18
Hydropower Generation, % of Total Electricity 32.12 32.20 32.88 32.77 32.51 32.82
Generation
e/f = BMI estimate/forecast. Source: BMI, EIA, World Bank, OECD
Table: Chile Total Electricity Generation Data And Long-Term Forecasts, 2018-2023
2018f 2019f 2020f 2021f 2022f 2023f
Total Generation, TWh 91.14 95.49 100.36 104.54 109.36 115.27

Total Generation, Growth % y-o-y 3.89 4.78 5.10 4.16 4.61 5.40
Total Generation, KWh per capita 4,962.70 5,159.85 5,382.86 5,566.62 5,782.55 6,053.78
Thermal Generation, TWh 54.53 57.07 59.53 62.15 65.31 69.07

Thermal Generation, Growth % y-o-y 4.05 4.66 4.31 4.40 5.09 5.76
Thermal Generation, KWh per capita 2,969.26 3,083.89 3,192.85 3,309.16 3,453.19 3,627.33
Thermal Generation, % of Total Electricity 59.83 59.77 59.32 59.45 59.72 59.92
Generation
Coal Generation, TWh 25.32 26.86 28.41 30.05 31.74 33.93

Coal Generation, Growth % y-o-y 5.56 6.10 5.78 5.74 5.62 6.90
Coal Generation, KWh per capita 1,378.66 1,451.50 1,523.98 1,599.90 1,678.06 1,781.78
Coal Generation, % of Total Thermal Electricity 46.43 47.07 47.73 48.35 48.59 49.12
Generation
Coal Generation, % of Total Electricity 27.78 28.13 28.31 28.74 29.02 29.43
Generation

Chile Total Electricity Generation Data And Long-Term Forecasts, 2018-2023 - Continued
2018f 2019f 2020f 2021f 2022f 2023f
Natural Gas Generation, TWh 8.85 10.04 11.11 12.23 13.39 14.90
Natural Gas Generation, Growth % y-o-y 12.98 13.45 10.64 10.11 9.50 11.25
Natural Gas Generation, KWh per capita 481.88 542.51 595.74 651.22 708.11 782.44
Natural Gas Generation, % of Total Thermal 16.23 17.59 18.66 19.68 20.51 21.57
Electricity Generation
Natural Gas Generation, % of Total Electricity 9.71 10.51 11.07 11.70 12.25 12.92
Generation
Oil Generation, TWh 20.36 20.17 20.01 19.87 20.18 20.24

Oil Generation, Growth % y-o-y -1.10 -0.94 -0.80 -0.69 1.56 0.31
Oil Generation, KWh per capita 1,108.72 1,089.89 1,073.13 1,058.04 1,067.01 1,063.11
Oil Generation, % of Total Thermal Electricity 37.34 35.34 33.61 31.97 30.90 29.31
Generation
Oil Generation, % of Total Electricity 22.34 21.12 19.94 19.01 18.45 17.56
Generation
Nuclear Generation, TWh 0.00 0.00 0.00 0.00 0.00 0.00

Nuclear Generation, Growth % y-o-y
Nuclear Generation, KWh per capita 0.00 0.00 0.00 0.00 0.00 0.00
Nuclear Generation, % of Total Electricity 0.00 0.00 0.00 0.00 0.00 0.00
Generation
Hydropower Generation, TWh 29.60 30.94 32.89 33.92 35.00 36.39

Hydropower Generation, Growth % y-o-y 2.82 4.50 6.30 3.16 3.17 3.98
Hydropower Generation, KWh per capita 1,612.01 1,671.65 1,763.75 1,806.35 1,850.59 1,911.34
Hydropower Generation, % of Total Electricity 32.48 32.40 32.77 32.45 32.00 31.57
Generation
f = BMI forecast. Source: BMI, EIA, World Bank, OECD
Table: Chile Electricity Generating Capacity Data And Forecasts, 2012-2017
2012 2013e 2014f 2015f 2016f 2017f
Net Capacity, MW 18,347.43 19,255.49 20,681.27 22,052.17 23,619.15 25,016.27

Net Capacity, Growth % y-o-y 10.10 4.95 7.40 6.63 7.11 5.92

Chile Electricity Generating Capacity Data And Forecasts, 2012-2017 - Continued
2012 2013e 2014f 2015f 2016f 2017f
Thermal Capacity, MW 11,482.36 12,117.34 12,767.66 13,399.66 14,202.47 14,915.44

Thermal Capacity, Growth % y-o-y 6.55 5.53 5.37 4.95 5.99 5.02
Thermal Capacity, % of Total Capacity 62.58 62.93 61.74 60.76 60.13 59.62
Nuclear Capacity, MW 0.00 0.00 0.00 0.00 0.00 0.00

Nuclear Capacity, Growth % y-o-y
Nuclear Capacity, % of Total Capacity 0.00 0.00 0.00 0.00 0.00 0.00
Hydropower Capacity, MW 5,911.36 6,088.70 6,606.24 7,136.72 7,632.01 8,098.33

Hydropower Capacity, Growth % y-o-y 4.00 3.00 8.50 8.03 6.94 6.11
Hydropower Capacity, % of Total Capacity 32.22 31.62 31.94 32.36 32.31 32.37
e/f = BMI estimate/forecast. Source: BMI, UN, EIA, Ministerio de Energia
Table: Chile Electricity Generating Capacity Data And Long-Term Forecasts, 2017-2022
2017f 2018f 2019f 2020f 2021f 2022f
Net Capacity, MW 26,363.71 27,871.94 29,636.72 31,440.39 33,257.53 35,343.51

Net Capacity, Growth % y-o-y 5.39 5.72 6.33 6.09 5.78 6.27
Thermal Capacity, MW 15,642.84 16,484.49 17,539.50 18,591.87 19,707.38 20,889.83

Thermal Capacity, Growth % y-o-y 4.88 5.38 6.40 6.00 6.00 6.00
Thermal Capacity, % of Total Capacity 59.33 59.14 59.18 59.13 59.26 59.11
Nuclear Capacity, MW 0.00 0.00 0.00 0.00 0.00 0.00

Nuclear Capacity, Growth % y-o-y
Nuclear Capacity, % of Total Capacity 0.00 0.00 0.00 0.00 0.00 0.00
Hydropower Capacity, MW 8,470.25 8,864.50 9,282.39 9,678.75 10,040.96 10,570.12

Hydropower Capacity, Growth % y-o-y 4.59 4.65 4.71 4.27 3.74 5.27

Chile Electricity Generating Capacity Data And Long-Term Forecasts, 2017-2022 - Continued
2017f 2018f 2019f 2020f 2021f 2022f
Hydropower Capacity, % of Total Capacity 32.13 31.80 31.32 30.78 30.19 29.91
f = BMI forecast. Source: BMI, UN, EIA, Ministerio de Energia
BMI estimates Chilean power generation in 2013 was 69.5TWh, up by 5.3% from the previous year. We
also estimate that overall thermal generation climbed by 4.0%, while oil-fired power generation fell by
1.2%. Gas posted a strong performance in 2013, increasing by an estimated 22.2%. Coal-fired generation
posted slower growth of 6.6%, while hydroelectric power generation increased by 5.5% in 2013.
During the period 2014-2023, BMI forecaststhat Chile's overall power generation will increase by an
annual average of 5.1%, reaching 115.3TWh. Driving this growth is an average annual gain of 15.5% in
gas-fired and a 6.0% rise in coal-fired electricity supply, accompanied by an average annual increase of
5.1% for hydropower generation.
BMI believes that hydropower will remain the dominant source of electricity generation in the coming
years; however, there is industrial interest in gas, with several projects on the agenda. These include a long-
term energy contract between BHP Billiton with a consortium formed of Korea Southern Power Co and
Samsung C&T Corporation to develop a gas-fired power station (announced in November 2013), and a
project presented by GasAtacama in November 2013, for a three 430MW gas turbines at a single power
station. As interest in shale gas grows, this will also improve the prospects of gas-fired power production; if
US shale gas production booms, then the Chilean authorities may take advantage of a reduction in price and
import LNG.
Thermal
Codelco, the Chilean state-owned copper company, is taking steps to secure the power supply to its mining
operations by planning a US$1.7bn electricity plant. Codelco has carried out an environmental impact study
for the development of a 1.05GW plant, Energía Minera. The facility would be near the company's
Ventanas facility and would include three 350MW turbines. The thermal plant would have a 30-year
operational life. In another move to ensure the continuity of energy supply for its mining operations, in
February 2013, Codelco announced that it had submitted an environmental impact study for the construction
of a gas-fired power plant in Mejillones, an industrial port in the north of Chile. Codelco proposes that a

third-party constructs the 760MW power plant at an estimated cost of US$758mn and that the project will
be made available to firms that participate in a tender to supply electricity to Codelco's mines in the region.
Because of the Argentine gas supply crisis, coal-fired power plants have attracted fresh interest. Chile has
two existing facilities: the 340MW Ventanas and the Guacolda plants, and a third, Santa María, which
started operations in August 2012. In September 2009, AES announced that the 152MW Guacolda 3 had
started commercial operations, and in March 2013, the firm announced that it had started commercial
operations at the fourth unit at its coal-fired Ventanas complex. In June 2013, AES announced it has begun
retrofits of the first and second unit at the Ventanas power plant, and at two units at its Norgener coal-fired
power station. By June 2013, AES had invested US$118mn in modernisation works. AES is also adding a
fifth unit to the Guacolda complex, with its construction forecast to be complete by H215. AES announced
that work on the construction of the fifth 152MW unit was 25% complete by the end of June 2013. In
November 2013, Copec and Ultraterra - which together hold 50% of Guacolda - announced that they had
contracted BTG Pactual to advise them on the sale of their stake in the power plant. AES Gener has
expressed its interest in purchasing this stake.
Another project developed by AES is the Cochrane thermal power plant - costing US$1.4bn. In November
2012, Mitsubishi joined AES on this project, taking a 40% share, and the two firms announced that the
target start date for the Cochrane power plant is 2016. A US$1bn financing deal for the Cochrane power
plant closed in March 2013, with a consortium of Japanese and South Korean lenders providing funding.
AES Gener announced, in June 2013, that work on the power station began in late March 2013 and that by
June 2013, it was 11% complete.
There are numerous large-scale gas-based power projects that are currently either under way or in the
pipeline. Colbún built the 250MW Candelaria combined-cycle gas-fired turbine (CCGFT) plant, followed
by Endesa's 370MW CCGFT at its San Isidro plant near Santiago. Colbun revealed in February 2013 that it
is considering closing the cycle at Candelaria to add 130MW to the generating capacity. Southern Cross, a
private equity fund, built the 120MW Campanario project that also has the ability to run on diesel, but in
September 2011 this plant ran into financial difficulties with its owners - Southern Cross held 80% and
Gasco 20% - declaring bankruptcy. By March 2012, after the plant being paralysed for six months,
distribution, transmission and energy generating group Saesa began to take steps to sell the business,
restarting the turbines in March to check that they still function correctly. Saesa aimed to auction the power
station in April 2012. Local press claimed that there were over a dozen interested parties in bidding for
Campanario, including Energía Latina, Norway's BW and private equity groups. In July 2012, the El Pulso

newspaper announced that Duke Energy Corp's (DUK) Latin American subsidiary Duke Energy
International acquired the bankrupt power plant for $86.2mn.
Some planned projects have been delayed, including the 740MW Totihue CCGFT south of Santiago. In
November 2011, Colbún revealed that, given the high price of liquefied natural gas, the utility is studying
the possibility of constructing a regasification plant in Chile. Colbún revealed that it would make a decision
on whether to proceed with this project by June 2012. In early September 2012, Colbún and AES Gener
announced that they had started to negotiate a contract with Norway's Höegh LNG regarding the
installation of a floating LNG terminal in Quintero bay, which would begin operations in late 2014. The
shale gas boom in the US may lead to an increased supply of gas and lower prices and this could facilitate
the export of LNG to countries such as Chile.
In November 2013, GasAtacama announced its plans for a 1,290MW gas-fired power plant, formed of three
430MW turbines. It aims to fuel the gas plant by using the liquefied natural gas plant Mejillones.
GasAtacama submitted an environmental impact assessment report at the end of 2013.
In August 2012, Chile's Supreme Court rejected the US$4.4bn Castilla project because of environmental
concerns. Developers - a joint venture between Brazil's MPX Energia and Germany's E.ON - announced
they would 're-evaluate their business strategy in Chile' following the decision. The Court did offer the
firms the option of resubmitting their environmental impact study, grouping together both the power plant
and the port, leaving a door open for future approval. One other thermal power station to be overturned was
the 50MW coal-fired and biomass Pirquenes project; in August 2012, a court ruled that its environmental
approval was in fact illegal, and overturned permission to construct the US$82mn power station.
In March 2009, Endesa Chile announced plans to build a coal-fired power complex in northern Chile for an
estimated US$1.4bn. The project comprises two coal-fired power plants and will have a total electricity
generating capacity of 740MW. The project will be built over 10 years and on completion it will supply
electricity to the Central Interconnected System (SIC). In other developments, Endesa's Bocamina II coal-
fired power station - situated just south of Santiago - was to become operational in Q212, but delays meant
that its start date was pushed back to January 2013..But Endesa is keen to upgrade its facilities, and in
November 2013, Endesa was preparing an environmental impact study for a modernisation project, and
aimed to present it to the Supreme Court by the end of 2013.
Endesa's Punta Alcalde power plant, which was in and out of court battles during 2012 and 2013, was
subject to new delays in March 2013 when a group of fishermen presented their objections to a Chilean

court. The project received a further blow in August 2013 as a Chilean court put the project on hold again,
overturning a previously approved environmental impact study. Press reports from November 2013 alleged
that a Chilean court had paralysed Punto Alcalde permanently. These developments reinforce our view that
regulatory risks are a key barrier to the construction of large scale projects in the Latin American region.
In April 2010, South Korean steel producer POSCO Engineering and Construction (POSCO E&C)
secured an order worth US$700mn to build a coal-fired power plant in Coronel. The 400MW power plant
will take 43 months to complete.
Nuclear
There is no nuclear power generating capacity in Chile but there is growing support for a small-scale project
to diversify the country's electricity supply further. However, in a 200-page report on energy procurement
prepared for the government in 2011, the Advisory Commission for Energy Development (CADE) did not
recommend developing nuclear power for the time being. In February 2012, Álvarez presented Chile's
National Energy Strategy, which defines Chile's short- to medium-term energy strategy, and made no
reference to nuclear power.
Hydro
On average hydroelectric sources of power accounted for approximately one-third of electricity generating
capacity in Chile in 2013, but this figure hides considerable regional variations. Chile's geographical shape
and separate electricity grids means that some parts of the country have greater dependence upon
hydroelectric sources of power than others, and this leads to regional disparities in terms of the reliability of
electricity supply.
In November 2011, Pacific Hydro's 111MW Chacayes run-of-the-river hydropower plant in Alto
Chacapoal Valley was officially inaugurated, in a project that has cost US$450mn. Looking forward, Pacific
Hydro's other projects include the Nido de Águila run-of-the-river hydropower plant in the same valley.
Endesa Chile's investment includes the Los Cóndores 150MW hydroelectric plant, which received
environmental approval in November 2011. A run-of-the-river plant, Los Cóndores will use water from the
Laguna del Muele reservoir; Endesa estimates that it will take five years to construct.
Colbún plans to invest US$1bn in the construction of two new hydropower plants with a total capacity of
500MW, with financing for the projects having been secured, CEO Bernado Larrain said. The power plants

will be in San Pedro and Angostura, which are both south of Santiago. Work on the San Pedro hydro plant
has not gone beyond a symbolic laying of the first stone - according to local press reports in February 2012
- because of construction problems. Colbún submitted a study of the terrain where it plans to construct the
dam to regional government in late February so that the authorities can evaluate the project's future, and the
firm does not expect to surpass this analytical stage until H213 at the earliest. In November 2013, Colbun
reported that it was beginning initial studies in Guaiquivilo Melado for a 400MW hydroelectric power
station, in a project that will cost around US$800mn. This is in addition to refilling the Angostura reservoir,
and restarting work at San Pedro.
In August 2009, Energía Austral, the Chilean subsidiary of Swiss mining group Xstrata, submitted an EIS
for a 640MW hydro plant that is to be built on the Cuervo River in southern Chile. The project, worth US
$733mn, was expected to be completed in 56 months. However, in January 2012 groups opposed to the
plant filed a legal challenge to the construction work, which has resulted in a lengthy legal dispute. In late
2013, an appeals court in Coyhaique ruled construction on the project should be halted and the plant's future
remains unclear.
Chile Total Capacity (MW)

2012f
f = BMI forecast. Source: BMI, UN, EIA, Ministerio de Energia

The Cuervo hydropower plant is part of a larger project - with a combined capacity of 1.1GW - which
involves the construction of three units, the main 640MW unit, a 375MW Blanco project and a 54MW
Condor project. The project is estimated to cost a total of US$2.5bn and the plants could come online by
2019.
CGE gained permission and environmental approval for the construction of the Ñuble run-of-the-river
hydropower plant in 2008. However, this 136MW facility has been the source of controversy, with local
objections pushing back the start date for construction. In December 2011, CGE confirmed that work to
build the facility would begin in 2013, with completion expected by 2016. The plant is estimated to cost US
$300mn and will have an annual generating capacity of 0.7TWh. It will connect up to the country's central
SIC grid.
Another hydroelectric project that remains mired in regulatory uncertainty is the 2.75GW HidroAysen
hydro project, which has been tipped as the solution to meeting the country's growing energy requirements,
but its future is still unclear. The project, a joint venture (JV) between generators Endesa Chile and Colbún,
will see the construction of five hydroelectric power stations - two along the Baker River and three on the
Pascua River - around 1,600km south of Santiago. The new dam complex should deliver 20% of current
capacity. The pathways used for around 2,000km of power cables and towers that will link the dams with
Santiago and beyond are still subject to a separate environmental review. Over a third of these transmission
lines are in protected parkland, creating further controversy.
The HidroAysen mega-hydropower complex is facing similar opposition and legal challenges as the
controversial Belo Monte dam in Brazil. Local courts have filed injunctions to halt the construction of the
dam. The first injunction has already been issued by the appeals court in Puerto Montt, which ordered the
suspension of work on the dam. In October 2011, these suspension orders were lifted.
A month later, Energy Minister Rodrigo Alvarez revealed that the council of ministers must meet before the
end of 2011 or during the first quarter of 2012 to resolve the objections and observations of environmental
groups regarding the project. Endesa and Colbún's proposed route for power lines will see cables pass
through approximately 800 private estates, and the two utilities had to submit their proposed route for
evaluation by the Environmental Assessment Service by March 2012. The firms did not meet this date.
Additional uncertainty emerged in May 2012, when Colbún announced that its board had recommended
indefinitely suspending moves to seek environmental permission to construct transmission lines, claiming
that the government needed to offer investors greater security in terms of energy policies, and a clearer
operating environment. Colbún filed a statement with Chile's securities regulator to this effect in late May

2012. HidroAysen's Vice-President, Daniel Fernández, remarked in August 2012 that Chile is in a 'critical
situation' in terms of energy provision, and that if both Castilla and HidroAysen are rejected, 'half of the
central grid will have no future'.
The developers revised their target completion date for the project in February 2013, stating that ministerial
delays on its revision had pushed back the start date to 2022. In April 2013, Chile's Supreme Court
approved HydroAysen, but environmentalists have brought the issue to a ministerial group for review. The
Environmental Assessment Service announced it would produce a report on the hydroelectric project,
resonding to 34 objections, in December 2013. Presidential elections in November 2013 did not bring a
political answer to the solution, with no single candidate obtaining sufficient votes for outright victory.
Chileans return to the polls in December 2013, and the new president will have HidroAysen on their agenda
in 2014.
Chilean generator AES Gener's Alto Maipo hydro project will have a power generation capacity of 530MW
and is likely to involve an investment of US$900mn. AES Gener planned for construction work to begin in
late 2012, with a target completion date of 2016. Impregilo, Astaldi, Hochtief, Camargo Corrêa and
Norberto Odebrecht reportedly showed interest in the construction tender. The project was initially
announced in 2006 and has faced problems since then, but in November 2012, AES Gener announced that
Austria's Strabag had won the US$490mn contract to design and construct the project, and to undertake
tunnelling and civil work at Alto Maipo, with work scheduled to begin in 2013. Strabag is undertaking the
work in collaboration with Hochtief. Media reports state that AES Gener signed a private contract with
utility Aguas Andinas regarding the rights to waters at the hydroelectric project in June 2011, but in
January 2013, a judge ruled that the two firms must make its contents public.
Electricity Consumption
Table: Chile Total Electricity Consumption Data And Forecasts, 2012-2017
2012 2013e 2014f 2015f 2016f 2017f
Net Consumption, TWh 58.00 60.72 63.50 66.36 69.80 73.43

Net Consumption, Growth % y-o-y 4.80 4.69 4.59 4.50 5.19 5.20
Net Consumption, KWh per capita 3,320.88 3,446.00 3,572.98 3,702.19 3,862.34 4,030.35
e/f = BMI estimate/forecast. Source: BMI, EIA

Table: Chile Total Electricity Consumption Long-Term Forecasts, 2018-2023
2018f 2019f 2020f 2021f 2022f 2023f
Net Consumption, TWh 76.58 80.23 83.90 87.75 91.26 95.82

Net Consumption, Growth % y-o-y 4.29 4.76 4.57 4.60 4.00 5.00
Net Consumption, KWh per capita 4,170.19 4,335.22 4,499.67 4,672.49 4,825.47 5,032.61
f = BMI forecast. Source: BMI, EIA
Following an estimated increase in real GDP of 5.6% in 2012, BMI forecasts average annual growth of
4.2% in real GDP between 2013 and 2023. The population is expected to rise from 17.6mn to 18.9mn
during 2013-2023, and net power consumption looks set to increase from 60.7TWh in 2013 to 72.7TWh by
2017, then rise to 95.82TWh by 2023.
During the period 2012-2017, the average annual growth rate for electricity demand is forecast at 4.6%, but
it will slow slightly later in the decade to an average of 4.4% in 2017-2023. Our forecast is slightly below
that of the president of Endesa Chile, Jorge Rosenblut, who claimed in November 2012 that electricity
demand would grow annually at between 5.5% and 6.0% in the short term.
Transmission & Distribution, Imports & Exports
Table: Chile Electric Power Transmission And Distribution Losses Data And Forecasts 2012-2017
2012 2013e 2014f 2015f 2016f 2017f
Electric Power Transmission And Distribution 10.03 10.76 11.68 12.97 13.99 14.98
Losses, TWh
Losses, % of Output
e/f = BMI estimate/forecast. Source: BMI

Table: Chile Electric Power Transmission And Distribution Losses Data And Long-Term Forecasts 2017-2023
2018f 2019f 2020f 2021f 2022f 2023f
Losses, TWh
Losses, % of Output
f = BMI forecast. Source: BMI
Table: Chile Trade Data And Forecasts 2012-2017
2012 2013e 2014f 2015f 2016f 2017f
Total Net Imports, TWh 1.99 1.97 1.05 0.71 0.47 0.68
e/f = BMI estimate/forecast. Source: BMI, EIA, OECD
Table: Chile Trade Data And Long-Term Forecasts 2018-2023
2018f 2019f 2020f 2021f 2022f 2023f
Total Net Imports, TWh 1.27 1.59 1.54 2.26 2.15 2.23
f = BMI forecast. Source: BMI, EIA, OECD

Industry Risk/Reward Ratings

Latin America Power Risk/Reward Ratings
BMI View: After a pronounced shift at the top end of the ratings table last quarter, the rankings remain
largely unchanged heading into this quarter. Chile still tops the table, with Brazil in second place, and
Mexico and Peru in third and fourth respectively. Argentina has moved one place higher as the country
begins to move towards the implementation of more moderate economic policies, while positive
developments within the market point to progress. Unsurprisingly, Venezuela has retained it position at the
bottom of the table, with a recent power cut in December 2013 highlighting that a swathe of problems
persist within the country's power sector.
The individual power markets that comprise our Latin American coverage are diverse in both nature and in
terms of the relative risks and rewards that are on offer - as evidenced by the 22-point differential between
the top- and bottom-ranked countries in our Latin America Power Risk/Reward Ratings (RRRs).
Divergence In Play
Latin America Power Industry Risk/Reward Ratings, Scores Out Of 100
Dotted line = regional average. *Higher score = Lower risks. Source: BMI

The key themes and trends identified throughout Latin America's Power RRRs can be summarised as
follows:
■ Our view that industrial metals exporting economies in Latin America would be hit hard by slowing
growth in China and weaker metals prices played out in 2013. Chile, Peru, and to a lesser extent Brazil
have been hit hard as weaker exports have fed through to widening current account shortfalls, and in
some cases have helped to make net exports a more significant drag on growth in 2013. That said, we
believe that most of the downside for metals exporting economies has played out and forecast real GDP
growth to remain at close to current levels in 2014.
■ Latin America has a great deal of natural potential for renewable energy and the majority of countries
within the region, including Central America, have shown a keen interest in incorporating renewable
energy into their power mixes. Nearly all the countries have established some sort of national target for
renewable energy and adopted regulatory frameworks to help attract private investment - with Chile the
top renewables pick for the Latin American region.
■ The outlook with regards to our financing indicator for the region looks increasingly promising.
Developments over 2013 have highlighted that financing is still being committed to the region's power
sectors, particularly into gas-fired facilities, hydropower, renewables and the transmission and
distribution (T&D) networks.
■ A busy election schedule and signs of growing social tension as economic growth models across the
region lose their shine, suggest that public unrest could be a key theme in the region during 2014 - giving
rise to more populist politics. This could have an adverse impact on policy continuity.
Risks vs. Rewards
Latin America Power Industry Risk/Reward Ratings, Scores Out Of 100
*Higher score = Lower risks. Source: BMI.

Constructive Outlook For Chile
Chile retains its leading position in our regional ratings this quarter. Overall, our outlook for the Chilean
power sector is positive, and we forecast an annual average growth rate of 4.5% in power consumption
between 2014 and 2022; driven by growth in the mining sector and positive macroeconomic and
demographic fundamentals. The country's relatively stable operating environment, political stability and a
liberalised power market help to attract investors. Furthermore, Chile's position as a key emerging
renewables market, in both Latin America and the wider global arena is appealing to foreign renewable
energy developers.
Chile's Power Expansion Underway

Chile Electricity Generation and Consumption, 2013-2022
150 5.5
5
100
4.5
50
4
0 3.5
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
Electricity Consumption, TWh (LHS)

Electricity Generation, TWh (LHS)
Electricity Consumption Growth, % y-o-y (RHS)
f = BMI forecast. Source: EIA/BMI
That said, we continue to stress that regulatory risks, manifesting as environmental disputes, do pose a real
downside risk to Chile's capacity expansion plans - despite the country's many appealing characteristics.
Most recently, in October 2013, the development of the 640MW Rio Cuervo hydropower plant in Chile's
southern region of Aysen was blocked by a Chilean appeals court over environmental concerns.

Mexico's Drive To Reform
We have been following President Enrique Peña Nieto's reform drive closely over the last six months, and
we maintain the view that breaking state-owned Comisión Federal de Electricidad (CFE)'s monopolistic
position in the power sector and opening up the industry to private players will help secure investment in
much-needed electricity generation capacity; while gradual deregulation should drive down prices and bring
both social and economic benefits. As such, our outlook for the Mexican market is fairly buoyant; however,
the full impact the reform is still a relative unknown, and there is therefore scope for upward movement in
Mexico's RRR scores over the coming quarters.
Brazil's Vast Market Unrivalled But Economic Headwinds
Brazil's vast market size is incomparable to any other country in the region, and this is without doubt a key
factor which continues to attract investors into the Brazilian power market. That said, Brazil slipped to
second place in our ratings table in mid-2013, and has remained in that position since. The economy
remains in a rough patch following a significant slowdown and we forecast muted 2.4% growth in real GDP
in 2014 - which is likely to have a knock-on effect on power demand.
Venezuela Trailing
Despite a small number of power projects coming online over the previous year, resulting in relatively
robust growth in net capacity for 2012, Venezuela is still significantly underperforming its regional peers.
The country's business environment is notably unattractive, with high levels of corruption, an opaque
tendering process and extremely low levels of liberalisation within the power market. Furthermore,
electricity output from successfully commissioned plants is at the mercy of Venezuela's ageing and
inefficient T&D infrastructure - with power outages still a pressing concern for the majority of the
population. Widespread power cuts in Caracas in December 2013 served to highlight this point.
Progress In Argentina
Argentina was the only country to move up the ratings table this quarter, from ninth to eighth place, and we
mostly attribute this upward movement to the country's softening stance towards foreign investors.
Argentina faced a near perfect storm of economic conditions in 2013, but shrewd policymaking and some
legal wrangling have enabled the economy to emerge mostly unscathed. Additionally, we started to see
promising developments in the Argentine power sector towards the end of 2013, with Argentine federal

planning and public investment ministry signing an agreement to tender the 640MW Chihuido I
hydroelectric project, and also awarding a US$64.7mn construction contract to local utility IMPSA for the
25MW small-scale Carem nuclear plant's reactor vessel (both in December 2013). Additionally, China
Gezhouba Group announced in November 2013 that it plans to build two hydroelectric dams worth US
$4.7bn in the Patagonia region. Despite these positive announcements, Argentina's Power R/R score
continues to underperform the regional average.
Central America Making Positive Headway
Although situated towards the middle and lower end of the regional ratings table, we are witnessing a wave
of positive announcements across the Central American power markets, primarily with regard to capacity
expansion plans and renewable energy ambitions, regulatory developments and multilateral funding.
Panama Leading The Pack

Real GDP Growth, By Country (2013-2022)
10
0
2013f
2014f
2015f
2016f
2017f
2018f
2019f
2020f
2021f
2022f
Panama Real GDP Growth, % y-o-y

Nicaragua Real GDP Growth, % y-o-y
Honduras Real GDP Growth, % y-o-y
Guatemala Real GDP Growth, % y-o-y
El Salvador GDP Growth, % y-o-y
Costa Rica Real GDP Growth, % y-o-y
f = BMI forecast. Source: Banco Central de Costa Rica/BMI
Our core economic outlook for most of Central America in 2014 envisages a slight acceleration in real GDP
growth from 2013 levels, as signs of a stronger US economy point to more robust external demand for the

region's manufactured exports, as well as an increase in remittance inflows - boosting private consumption.
Panama in particular is set to remain above trend compared to the rest of Central America and features
highly in the ratings table, outperforming the regional average. This reflects relatively strong growth
prospects - with strong policy continuity and short-term political stability helping to encourage investment.
Table: Latin America Power Risk/Reward Ratings, (Scores Out Of 100)
Industry Country Industry Country Power R/R

Rewards Risks* Rank
Rewards Rewards Risks* Risks* Ratings
Chile 49.75 44.80 47.85 73.80 76.02 74.75 57.26 1
Brazil 65.50 34.60 53.62 56.36 66.01 60.50 56.02 2
Mexico 58.00 45.40 53.15 60.15 56.39 58.53 55.04 3
Peru 44.00 60.00 50.15 61.28 63.57 62.26 54.39 4
Panama 30.50 69.20 45.38 51.75 55.92 53.54 48.24 5
Colombia 35.00 54.60 42.54 58.18 59.06 58.56 48.14 6
Costa Rica 30.50 56.40 40.46 49.75 68.73 57.88 46.56 7
Argentina 43.00 36.60 40.54 49.56 58.80 53.52 45.08 8
Guatemala 34.50 57.00 43.15 46.39 48.79 47.42 44.65 9
Nicaragua 33.50 51.20 40.31 45.93 39.78 43.29 41.35 10
El Salvador 28.50 47.60 35.85 46.44 50.68 48.26 40.19 11
Honduras 29.50 56.60 39.92 43.73 33.62 39.40 39.74 12
Venezuela 40.25 38.80 39.69 21.03 32.89 26.11 34.94 13
Regional 40.19 50.22 44.05 51.10 54.63 52.62 47.05 -
Average
*Higher score = Lower risks. Source: BMI.

Chile Power Risk/Reward Ratings
Chile takes a leading position in our Q114 Latin America Power Risk/Reward Ratings, out of 13 markets.
The Risks side of the equation favours Chile rather more than the Rewards side. Its overall score and rating
reflects healthy growth prospects and the small market size, while risks are generally low.
Rewards
Industry Rewards
With widespread access to electricity, Chile has excellent market coverage, and the government's plans to
launch a tender to connect two of Chile's electricity grids, the SIC and the SING further improve Chile's
score here. The political support for the project is also positive. Electricity demand is growing steadily year-
on-year, with the country's middle class and its mining sector increasing consumption, but pricing concerns
remain. New capacity, particularly in terms of gas-fired power plants, also illustrates the opportunities here.
Country Rewards
Boosting the score for Country Rewards is the high level of growth in the five-year GDP per capita forecast,
its transparent business environment and the country's healthy inflation outlook; Chile remains a regional
benchmark. However, Michelle Bachelet's election as president in late 2013 could impact the sector
negatively, given that she has voiced her opposition to HidroAysen during her campaign.
Risks
Industry Risks
The country's Industry Risks profile is attractive. Chile scores particularly well for liberalisation and the
transparency of the tendering process, in terms of its tax climate and access to finance, subsidies and feed-in
tariffs (FiTs), and the government is also supportive of the renewable energy sector and these factors make
Chile attractive to international investment. But as delays to HidroAysen, objections to Punto Alcalde, and
repeated requests for environment impact studies at Bocamina II illustrate, the regulatory environment lacks
direction and creates considerable uncertainty across the sector.

Country Risk
Policy continuity helps to lift the country's high score for Country Risk and it fares well in terms of
institutions and corruption, posting one of the highest scores in the region for this indicator. The tendering
process is open, access to funding is good and the government is receptive to international investment. The
key concern is the outcome of the late 2013 presidential elections, as this will shape the business
environment in the short term.

Market Overview
Key Policies And Market Structure
Regulation And Competition
Chile privatised its electricity sector in the 1980s, and since then all generation, transmission and
distribution activities have been in private hands. CNE is largely responsible for state regulation of the
power sector, along with the Ministry of Economy and Energy (MEE). Chile has four separate electric
systems: the Sistema Interconectado Central (SIC), which serves the central part of the county; Sistema
Interconectado del Norte Grande (SING), which serves the desert mining regions in the north; and the
Aysen and Magallanes systems, which serve small areas of the extreme southern part of the country.
These systems are largely autonomous, as considerable distances between them make integration extremely
difficult, although the government has recently taken steps towards the construction of a transmission line
that would link the SIC and the SING. In August 2012 President Piñera revealed that the government would
launch a tender for the more than 600km of transmission lines to connect these two grids in 2013. By July
2013, the government had passed a bill to facilitate this connection, and this bill was approved by the senate
in September 2013. The government has cited 2017 as a target date for joining the two grids. Transelec
controls almost the entire national transmission grid that serves the four systems. In August 2006, Hydro-
Quebec sold its majority stake in Transelec to a consortium of private investors.
Of the four electricity systems, the largest is the SIC, which covers the major population centres
surrounding Santiago and serves more than 90% of all customers. In the SIC, the most important player is
Enersis, majority-owned by Spain's Endesa utility group. Enersis holds controlling stakes in both the
largest generating company, Endesa, and the largest distribution company, Chilectra, which serves about
half of Chile's population.
Unlike the large number of household consumers in the SIC, the SING serves mostly large industrial
customers, principally mining interests, in Chile's northern regions. Also unlike the SIC, the large majority
(around 90%) of the electricity supply of the SING comes from thermal sources, chiefly imported gas from
Argentina and coal. The largest generating company in the SING is Electroandina, owned by Tractebel
and Corporación Nacional del Cobre (Codelco).

Chile CO2 Emissions

2000-2007
Source: World Bank.
Transelec is controlled by a Canadian consortium led by Brookfield Asset Management and it currently
owns 8,239km of transmission lines and 50 substations in Chile. The company owns and operates 98% of
the transmission lines on the SIC power grid, as well as all of the lines on the SING grid. While the SIC
power grid has approximately 11.2GW of capacity, the SING grid totals some 3.6GW. Transelec had
previously stressed the needed to invest in new transmission lines in several areas, including the Santiago
metropolitan region, and has also announced plans to place between US$285mn and US$390mn in bonds
into the local market to pay down debt. These bonds will be denominated in inflation-indexed peso units,
known as Unidad de Fomento (UF), and have maturities of five, 21.5 and 28 years. In November 2011, as
part of plans to invest in new transmission lines, Transelec contracted Arcadis to perform an environmental
impact assessment for 800km of high-voltage transmission lines in the south of Chile.
Electricity supply is highly topical in Chile and Chile's dependence upon hydroelectricity means that the
country is vulnerable to shortages in dry years. Delays to new capacity, namely HidroAysen, will do little to
reduce these outages - the future of this ambitious hydroelectric power station will not be clear until 2014,
after the presidential elections. Chile's mining sector is heavily dependent upon a reliable source of power,

and as electricity consumption rises, the industry has expressed concerns that new capacity is not keeping
pace with the rise in energy demand. Endesa's General Manager in Chile, Joaquím Galindo, claimed that
there are 'barriers' to developing electricity projects in Chile, namely lengthy court battles, and these delays
make projects more expensive, less attractive to investors and less likely to be completed on time.' We agree
that regulatory uncertainty and legal delays are one of the main risks associated with investing in Chile's
electricity sector.
Sustainable Energy Policies
From April 2009, law 20.257 has promoted the use of renewable energies. This calls for energy generators
to produce at least 5% of their energy from renewable sources between 2010 and 2014, raising this figure
progressively by 0.5% from 2015, so that by 2024, a minimum of 10% of energy produced and sold by
utilities is generated from renewable sources. There is speculation that this figure could be raised to 20% by
2024.
In May 2013, Chile's Mines and Energy Commission voted in Congress in favour on the 20/20 project,
which calls for 20% of electricity to be generated by renewable sources by 2020. The Senate approved this
law in September 2013, but extended the target date to 2025.
Pricing
Electricity prices in Chile are among the highest in the Latin American region, reflecting the expense of
transmission and distribution infrastructure as many of the country's key sources of power are far from
urban areas. Electricity prices are vulnerable to change because of the unreliability associated with gas
imports from Argentina, and price increases have been commonplace in 2013 because drought has caused
shortages in supply.
In February 2013, energy prices changed for customers on the SIC (central) and SING (northern) power
grids, with retroactive effect from November 2012. Residents connected to the SIC grid will see electricity
prices decrease by an average of 1.8%, while those connected to the SING grid will see prices climb by an
average of 2.3%. The high cost of electricity is one of the key drivers of the renewable energy market, as the
government sees it as a means of reducing transmission costs - small and medium-sized renewable projects
can be located closer to consumers. Prices are expected to continue to climb in the short term.

Chile Power Projects Database
Table: Chile Major Projects - Power
Project Name Value (US Capacity/Length Companies Timeframe Status

$mn)
Calama Wind Farm, 685 310MW E-CL na Approved (May
Antofagasta 2013)
Cerro Pabellon geothermal na 50MW Geotermica del Norte, 2012- Approved
power plant, Antofagasta Enel (Granted the
environmental
permit)
Santa Maria Coal-fired 750 342MW 2011-2012 Completed
plant
Calama Solar Power Plant 40 9MW Solarpack -2014 Announced
(Proposed)
Cuervo Hydro Plant 733 640MW Glencore, Origin Energy -2015 Approved
(September 2013
- Approved by
environmental
committee of
Chile's southern
region)
Construction and 450 111MW Hatch Ltd (Design/ 2009-2011 Completed
development of the Architect), Astaldi (27.3%) (October 2011)
Chacayes hydropower
Castilla coal-fired power 4,400 2,100MW MPX Energia, E.ON 2009-2016 Suspended
plant (August 2012)
Construction of two 1,000 466MW Colbun SA 2009-2013 Under
hydropower plants at San construction (San
Pedro and Angostrua Pedro to start
operations by
2012. Capacity of
Angosutra (316M
W) and San Pedro
(150MW))
Punta Alcalde Coal-fired 1,400 740MW Empresa Nacional de 2009-2019 Suspended
Power Complex, Atacama Electricidad (Endesa) (Suspended due
to project's
potential to cause
water and air
pollution. August
2013 - Endesa to
appeal court
rejection)
Farellones Coal-Fired 1,200 800MW Codelco 2007-2012 Feasibility
Plant, Region IV studies/EIA under
way (November
2008- EIS
Withdrawn)
Tranmission line to 1,000 1,100MW Transelec S.A, Energia At planning stage
Santiago Austral
HydroAysen power project, 8,000 2,750MW Colbun SA, Endesa Chile 2012- Suspended
Region XI (Suspended
due to public
opposition)

Chile Major Projects - Power - Continued

$mn)
Angamos Coal Fired Plant 1,300 5,20MW Hyundai Engineering and 2009-2011 Completed
(Construction of coal-fired Construction Co Ltd. (Completed
power station) (Design/Architect), AES, construction of
PECC Construction twin coal-fired,
Industrial Corporation, 260-MW units)
POSCO
Hydroelectric power plants, 80 24MW HydroChile na At planning stage
Biobio
Hydro project, Region X 76.6 52.9MW Pilmaiquen na Feasibility
studies/EIA under
way (EIS
submitted to
Corema)
Barrancones coal-fired 1100 540MW GDF Suez Energy na Suspended
power plant International
Cobal Waste to Fuel Plant, 200 na Novahol Santiago Norte 2008-2009 Approved
Santiago (Permits
approved)
Nuble run-of-the-river 300 136MW Compania General de 2010-2014 Under
hydropower plant, Chile Electricidad (CGE) construction
Bocamina II, Thermal coal 841 350MW POSCO Engineering and Completed
power plant, Coronel Construction (October 2012)
Collipulli wind farm 108 48MW Ener-Renova 2014- At planning stage
(September 2013)
Chiloe Wind farm, Chiloe 250 101MW Ecopower 2016- Feasibility
island studies/EIA under
way (May 2013)
San Pedro Wind Farm 100 36MW JEALSA RIANXEIRA SA na Under
construction
(October 2013)
Central Interconnected 859 na na na Project finance
System (SIC) Power Grid closure
(Investment
Approval granted)
Parque Fotovoltaica 773 250MW Atacama Solar 2011-2016 Under
Atacama Solar construction
(March 2012)
SIC - SING transmission 700 580km Alusa Engenharia na Contract
connector Awarded (January
2014 - E-CL gives
a green light for
the construction
which is expected
to take 3 years)
HidroAysen dam 3,200 1,912 km Colbun (HidroAysen), 2014-2024 Approved (Nov
transmission line Project (2,750MW) Empresa Nacional de 2013-government
{linking to central grid (SIC) Electricidad (Endesa) outlines terms for
private
investment)
Ckani wind farm project, 480 240MW Mainstream Renewable 2012- Under
Antofagasta Power, Xinjiang Goldwind construction
Science & Technology


$mn)
Taltal wind farm, 190 99MW Enel Green Power SpA -2013 Under
Antofagasta construction
(August 2013)
Bocamina II coal fired 841 370MW Empresa Nacional de -2012 Delayed (Delayed
power plant, Region VIII Electricidad (Endesa) from Q1 2012 to
June 2012)
HidroAysen dam, 3,200 2750MW Colbun (HidroAysen), -2018 Approved (April
Patagonia Empresa Nacional de 2012 - Court
Electricidad (Endesa) ruled in favour of
construction)
Negrete Cuel wind farm 70 33MW Mainstream Renewable -2013 Under
Power, Xinjiang Goldwind construction
Science & Technology (February 2013 -
Secured Chinese
Development
Bank financing)
Coya solar PV power plant 320 80MW Solventus -2017 Approved
(October 2012)
Laja I hydropower plant 112 35MW GDF Suez Energy -2012 Completed
International
Energia Austral 3,600 1,000MW Origin Energy, Xstrata 2012-2020 Approved (May
hydropower plant 2012 - First of
four power units
approved)
El Arrayan wind project, 245 115MW Parque Eolico El Arrayan 2012-2014 Under
Santiago (PEEA), Pattern Energy construction
Group, Siemens, (February 2013)
Antofagasta, AEI China
Power
Tocopilla solar power 616 193MW Eosol Energy At planning stage
project, Antofagasta
Pozo Almonte Solar na 25MW Solarpack, Dona Ines de 2013-2013 Under
project, Tarapaca Collahuasi construction
(March 2013)
Valle de Los Vientos wind 140 90MW Enel Green Power SpA, 2013- Under
farm, Antofagasta SoWitec Energias construction
Renovables de Chile, (February 2013)
Vestas Corporation
154MW Huasco Coal-fired 318 154MW Mitsubishi Heavy -2015 Contract
Power Plant Project Industries Awarded
(November 2012)
Pirquenes Thermo Plant 82 50MW na 2011-2013 Suspended
Project (biomass and coal) (November 2012 -
Supreme court
overturns the
approval of the
project)
Punta Sierra wind power 250 108MW Pacific Hydro 2013-2015 Approved (May
plant, Coquimbo region 2012 - Approved;
Construction is
expected to start
in late 2013)


$mn)
Alto Maipo Hydropower 2,000 531MW Strabag International, 2014-2019 Project finance
Plants AES, Hochtief Group, closure (January
CMC di Ravenna 2014 - Closed a
US$245mn loan
from OPIC)
Amanecer Solar CAP, 212.5 100MW International Finance 2013-2014 Under
Atacama Desert (for CAP Corporation (IFC) construction
mining project) (Financier), Overseas (August 2013,
Private Investment September 2013:
Corporation (Financier), $212.5M Project
SunEdison Financing closed)
Mariposa geothermal 58.3 50MW Alterra Power Corp., 2013-2016 At planning stage
project, Andes Energy Development (June 2013:
Corporation Execution of JV)
Curacautin Geothermal 525 70MW MRP Geotermia 2013-2018 Feasibility
Project, Tolhuaca Volcano Curacautin Ltda studies/EIA under
way (Unit 1
(12MW) may get
started in
November 2013,
if given the go-
ahead)
Talinay Oriente 90MW EPC 165 90MW Haciendas Talinay, Enel 2012-2013 Completed
Wind Farm, Limari Green Power SpA, Vestas (March 2013)
Wind Systems
Cochrane Coal Fired Power 1,350 532MW POSCO Engineering and 2013-2016 Under
Plant Construction, AES, construction
Mitsubishi Corporation (November 2013 -
15 % of the
construction work
completed, April
2013 - Project
finance closure)
Biobio geothermal power na 70MW MRP Geotermia na Approved (May
plant Curacautin Ltda 2013 -
Environmental
permit awarded)
Transmission Line linking 80 174km (220kV) Interconexion Electrica SA 2013-2017 Contract
Encuentro and Lagunas, Awarded (June
SING Grid 2013)
44 km Transmission Line 43 44km (220kV) Endesa Chile na Feasibility
(transiting electricity from studies/EIA under
740MW Punta Alcalde way (July 2013 -
thermo plant) EIA submitted,
once approved
construction will
take 12 months to
complete the
project)
Luz del Norte Solar Park, 370 162MW First Solar Group 2014- At planning stage
Atacama region (July 2013)
Project Salvador IPP, 200 70MW Total, Solventus, 2013-2015 Announced
Atacama region SunPower, Etrion (October 2013)
Corporation


$mn)
Abengoa Solar Chile's 1,000 110MW Inter-American 2014-2017 Contract
Cerro Dominador CSP Development Bank (IADB) Awarded (The
project (Financier), Clean project will have
Technology Fund 17.5 hours of
(Financier), KfW storage through
(Financier), European the use of molten
Union (Financier), Chile salts)
Government (Financier),
Abengoa
Central Inca Varas I Solar 100 50MW -2015 Approved
Project (1,220,000m2) (February 2014 -
EIS for the project
approved by
Environmental
Licensing
Agency; About
216,000 solar
panels to be
installed)
Sarco Wind farm project, na na Mainstream Renewable na na
Atacama Region Power (MRP)
Central Solar Chaka na na Schwager Energy SA na na
project, Diego de Almagro,
Atacama region
na = not available. Source: BMI

Competitive Landscape
Chile privatised its electricity sector in the 1980s and all generation, transmission and distribution activities
are in private hands. Comisión Nacional de Energía (CNE) is largely responsible for government
regulation of Chile's electricity sector, along with the Ministry of Economy and Energy (MEE). Chile has
four separate electric systems: the SIC, which serves the central part of the county; the SING, which serves
the desert mining regions in the north; and the Aysen and Magallanes systems, which serve small areas of
the extreme southern part of the country. Transelec controls almost the entire national transmission grid
that serves the four systems.
In the SIC, the most important player is Enersis, which is majority owned by Spain's Endesa. Enersis holds
controlling stakes in both the largest generating company, Endesa Chile, and the largest distribution
company, Chilectra, which serves about half of Chile's population. The largest generating company in the
SING is Electroandina, owned by Tractebel and Codelco.
In November 2011, GasAtacama announced plans to import liquefied natural gas from the US, with the
aim of supplying mining projects in the Norte Grande region of Chile. If initial contacts with mining
companies are favourable, GasAtacama plans to begin the construction of a floating regasification plant,
which it estimates will cost US$200-300mn. Colbún and AES Gener are also interested in LNG, and in
August 2012 began negotiations with Norway's Höegh LNG regarding the installation of a floating LNG
terminal in Quintero bay, with a view to beginning operations in late 2014. Press reports from May 2013,
however, implied that Colbún has yet to finalise a location for the LNG installation. Increased interest in
shale gas in the US has caught Chile's attention - with the government considering importing LNG if, as
expected, the price of gas falls.
Chinese companies are gaining interest in Chile's energy market, with China's Xinjiang Goldwind Science
& Technology creating a joint venture (JV) with Mainstream Renewable Power in February 2012 to
construct a wind farm in Northern Chile, at Ckani. In January 2012, State Grid Corporation of China
submitted a proposal to develop the nearly 2,000km of transmission lines for Chile's HidroAysen
project. Similarly, a Korean consortium - formed of Samsung C&T and Korea Southern Power Co. - won
a contract from BHP Billiton in November 2013 to develop a gas-fired power plant in Mejillones. The
power plant, which will connect to SING, has an estimated cost of US$600mn, and with the target
completion date being H216.

In other developments, GeoGlobal Energis Chile revealed in September 2012 that it had successfully
completed its exploratory drilling programme for the development of geothermal energy. Colombia's ISA,
meanwhile, was awarded the contract for three transmission projects in Chile, which will see the
construction of 743km of transmission lines within a five-year period.
Transelec
Transelec owns and operates most of the electricity transmission lines and sub-stations of Chile's trunk
transmission system in the SIC, as well as a portion of the high-tension lines in the SING. Transelec is
100% owned by the BAM Consortium, which includes: Brookfield Asset Management (27.8%), which
leads the consortium; Canadian Pension Plan Investment Board (CPP - 27.7%); British Columbia
Investment Management Corporation (26.0%); and other investors (18.5%). Transelec's assets are the
backbone of the Chilean electricity sector, with the company owning over 8,000km of transmission lines
and 51 power sub-stations. Its assets deliver electricity to around 99% of the Chilean population through
various local distribution companies.
Transelec has approved an investment programme of US$1.1bn over five years, according to Fitch Ratings
and reported by Reuters. The investment is to be directed towards transmission (US$510mn), sub-
transmission (US$240mn) and additional systems (US$360mn) in Chile. In 2012, it claimed to have
invested US$21mn in improvements to the SIC and SING grids. Returns will be supported by either the
existing regulatory framework or by long-term contracts with major electric transmission users and will be
covered by the same regulatory environment. In November 2011, Dutch firm Arcadis announced that it had
been awarded a US$11.5mn contract to perform an environmental impact assessment for Transelec on an
800km high voltage transmission line in the south of Chile. In December 2011, work was scheduled to
come to an end at Transelec's Cerro Navia substation, which will add an additional 300MW to the grid. In
November 2012, Transelec contracted Alstom Grid for the construction of a gas substation in Lo Aguirre,
in a EUR20mn deal. Work is scheduled to begin in 2013, with completion set for 2014. In the same month,
it submitted its project for this substation for environmental impact assessment.
Enersis/Endesa
Enersis is one of the principal private power utilities, involved in generation and distribution of electricity in
Chile, as well as Colombia, Argentina, Brazil and Peru. The group owns transmission assets outside of the
Chilean market. It is 60.6% owned by Spain's Endesa group. In 1989, Enersis acquired its first shares in
Endesa Chile, the largest electricity-generating company in the country. The following year, it became its
major shareholder. Endesa Chile and its subsidiaries, Pehuenche, Pangue, San Isidro, Celta and Canela,
own and operate 28 generating plants in Chile, 16 of which are hydroelectric, 10 run on coal, oil or gas, plus

two wind farms, amounting to a total installed capacity of approximately 5.16GW, representing 32% of the
total capacity in Chile.
Endesa Chile supplies electricity to the major regulated distributors, the large non-regulated industrial
companies (primarily in the mining, cellulose and steel sectors) and to the spot market. Endesa Chile is
facing regulatory hurdles on two fronts: its coal-fired Punta Alcalde power station had its already-approved
environmental impact assessment overturned by a court in August 2013; and it holds a 50% stake in the
large-scale HidroAysen hydroelectric project, which has faced more than two years of delays. While
HidroAysen has been pushed into political territory - we do not expect that any major decisions will be
taken over its future until well into 2014 - a supreme court did rule in November 2013 that work on Punta
Alcalde should be paralysed.
Suez/Tractebel
The Franco-Belgian utility group owns stakes in several Chilean power companies. Edelnor is the second-
largest power generator in the SING system, operating nine units with a total installed capacity of 681MW.
It is the owner and operator of 861km of high-voltage transmission lines. Electroandina is the largest power
generator in the SING system that covers northern Chile. Its generating park of 10 units, located in
Tocopilla, totals an installed capacity of 939MW, and it is also the owner and operator of 921km of high-
voltage transmission lines. Tractebel is a participant in Colbún, which has capacity comprising
17 hydropower plants and seven thermal plants, and total installed capacity of 2.96GW. Colbún is the owner
and operator of 429km of high-voltage transmission lines.
AES
AES Gener is the largest thermal generator and second-largest generator of electricity in Chile. The
company has put into operation the 125MW facility - Los Vientos diesel-fired plant. This took AES's total
generating capacity in Chile to 2.56GW, which is about 20% of the country's total generating capacity. It
serves the SIC through four hydroelectric passage plants, three thermal carbon plants and a gas turbine. It
also serves the SIC through a combined natural gas cycle unit belonging to its subsidiary Electrica
Santiago, two coal-based thermal units belonging to its related company Empresa Electrica Guacolda and
two co-generation plants of its subsidiary Energia Verde. It also supplies energy for the SING, through its
two subsidiaries, Norgener and TermoAndes. The former has two coal-fired units in the city of Tocopilla
and the latter has a gas generating plant in Salta, Argentina, connected to the SING through a transmission
line owned by subsidiary InterAndes.
In early 2006, the Guacolda coal-fired facility, which is half-owned by AES, received environmental
approval for a 200MW addition to capacity. In September 2009, AES announced that the 152MW Guacolda

3 had started commercial operations. Co-owners, Ultraterra and Copec announced in November 2013 they
had appointed BTG Pascual to advise them on the sale of their stake in Guacolda; AES is keen to purchase
this share.
In 2006, AES received environmental approval for a 250MW expansion at the Ventanas coal-fired facility;
in March 2013 the fourth unit at this site began commercial operations. In October 2007, AES Gener said
that it had submitted an environmental impact study to build a US$1.3bn coal-fired power plant in southern
Chile. The firm's chief executive, Felipe Ceron, said the Los Robles plant would have a generating capacity
of 750MW and feed into Chile's south-central electricity grid. In February 2012, AES Gener announced that
it was planning to award a contract for the construction of a hydro project in Chile through a private tender
in H112 at Alto Maipo, with 530MW capacity, revealing in November 2012 that Strabag had secured a
contract for the design, construction, tunnelling and civil work at the power plant in a deal worth US
$490mn; the firm expected that work would begin on the project in 2013.
In November 2012, AES Gener and Mitsubishi announced plans to work together on the construction of the
Cochrane 472MW coal-fired thermal power plant in Antofagasta, in the north of Chile. Construction work
began on the project, which will cost around US$1.3bn, in March 2013 and by end-June 2013, it had
progressed by 11%. Completion is expected by 2016. AES Gener will hold a 60% share of the project;
Mitsubishi the remainder. AES signed a US$1bn funding agreement for this project in with a consortium
made up of Japanese and South Korean lenders.
Colbún
Colbún is the second-largest SIC power generator, with capacity comprising 17 hydropower plants and
seven thermal plants, with a total installed capacity of 2.96GW. It is owner and operator of 429km of high-
voltage transmission lines. In November 2004, Colbún said it would continue with the construction of the
70MW Quilleco hydroelectric plant on the Rio Laja. Colbún is also developing the Chiburgo (19MW) and
Hornitos (55MW) hydroelectric projects. Colbún's coal-fired power station, Santa María, began operations
in August 2012. In November 2013, it announced plans to construct a 400MW hydroelectric plant in Maule
region, although it has not revealed any more details.
In November 2011, Colbún announced it is considering seeking a partner for a liquefied natural gas
regasification plant- it would be the third in Chile if built - and the utility stated that it would make a
decision on whether or not to go ahead with the project by June 2012. In August 2012, Colbún revealed that
alongside AES Gener, it had begun talks with Norway's Höegh LNG regarding the installation of a floating
liquefied natural gas (LNG) terminal in Quintero bay, but press reports from May 2013 suggest that Colbún
has yet to decide on the final location of the plant. In February 2012, BG Group revealed that it is

considering lowering its stake in the Quintero LNG regasification plant - it currently holds a 40% share -
with Colbún pinpointed as a potential buyer alongside AES Gener. Colbún also holds a 49% stake in the
HidroAysen dam project, and in May 2012 its board recommended that the firm suspends its environmental
impact studies because of regulatory uncertainty. With presidential elections entering their second round in
December 2013, this uncertainty is set to continue into 2014.
Pacific Hydro
In October 2008, Pacific Hydro announced plans to invest US$1.5bn in Brazil and Chile's hydropower and
wind power generation sectors over five years. Pacific Hydro is a key player in the Latin American
renewable energy market, particularly in Chile. It has a hydropower plant in Chile with a capacity of
76.3MW and a further seven projects under development, which will have a total capacity of 824MW. The
projects are due to come online before 2014. In May 2009, Italy's Astaldi announced it was taking a 27.3%
equity stake in Pacific Hydro Chacayes, the vehicle created for the development and operation of the
Chacayes 111MW hydropower plant. Pacific Hydro awarded the US$282mn construction contract to
Astaldi in late September 2008, which was inaugurated in November 2011. In November 2012, the Chilean
environmental evaluation service issued a favourable opinion of Pacific Hydro's 108MW Punta Sierra wind
power project.

Company Profile
Enersis
SWOT Analysis
Strengths ■
Diversified generating portfolio.
■
Major share in distribution companies.
■
Endesa's backing.
■
Stock exchange listing.
Weaknesses ■
Substantial investment requirement.
■
Exposure to thermal power costs.
Opportunities ■
Plant upgrading/expansion at home.
■
Diversification into other power forms.
• Expansion of international portfolio.
Threats ■
Strong competition in domestic power market.
■
Changes in national energy policy.
■
Opposition by environmental groups slowing the progress of major hydroelectricity
projects, namely HidroAysén.
Company Overview With the financial and technical support of Spanish utility major Endesa, Enersis claims
it has the muscle to develop a multinational Latin American power business, tapping
into high-growth markets such as Chile and Brazil. It is expanding its domestic portfolio
to include renewable energy generation and reducing its exposure to hydrocarbons
price volatility. The firm claims the integrated nature of its business, including
transmission outside Chile, as well as generation, provides great flexibility.
In February 2012, Endesa Chile announced plans to restructure its operations in Chile,
fusing some affiliates to simplify the business. Endesa announced that during the
course of the year, Endesa Chile would absorb the subsidiaries Ingendesa, Compañia

Eléctrica San Isidro, Centra Eléctrica Tarapacá, Inversiones Endesa Norte, Endesa Eco,
Enigesa and Emprea Eléctrica Pangue.
Strategy In Chile, the focus is on diversification of power generation, with new wind power and
small-scale hydropower plants planned.
Market Position Enersis is involved in generation and distribution of electricity in Chile, as well as
Colombia, Argentina, Brazil and Peru. The group owns transmission assets outside
Chile. It is 60.6% owned by Spain's Endesa group. In 1989, Enersis acquired its first
shares in Endesa Chile, the largest electricity-generating company in the country. The
following year, it became its major shareholder. Endesa Chile and its subsidiaries
Pehuenche, Pangue, San Isidro, Celta and Canela, own and operate a total of 28
generating plants in Chile, 16 of which are hydroelectric, 10 run on coal, oil or gas, and
two wind farms, amounting to a total installed capacity of approximately 5.61GW,
representing about one-third of the total capacity in Chile.
In its year end results for 2013 Endesa Chila announced that electricity sales had fallen
by 2% compared to 2012, while revenues had fallen by 13% to US$1,965mn. Endesa
Chile supplies electricity to the major regulated distributors, the large non-regulated
industrial companies (primarily in the mining, cellulose and steel sectors) and to the spot
market.
Recent In June 2012, Endesa proposed increasing Enersis' capital, but its proposal was
Developments rejected by Chilean authorities.
Enersis Group/Endesa Chile reported net income of CLP100,115mn in H113,

representing a 1.3% decrease compared to H112.
The company's well balanced portfolio allowed Enersis to derive 56% of contributions
to EBITDA from the generation and transmission business, with the remaining 44%
being contributed by the distribution business in 2011.
In 2011, it reported an increase in customers by 1.8% year on year (y-o-y), taking total
customer numbers to over 1.64mn. In its full-year results for 2012, it claimed it had
increased its total customer base to 1.66mn.
Projects under construction in Chile include the Bocamina II power station, which
eventually opened in January 2013 after considerable delays. Endesa is now awaiting
environmental approval for modernisation works at the station.
Other projects include the long delayed HidroAysén plant. HidroAysen's future has been
unclear, although in October 2011 a suspension order was lifted, indicating that it
should be able to go ahead. In late November 2011, energy minister Rodrigo Alvarez
revealed that the Council of Ministers would meet by Q112 at the latest to address the
latest set of observations presented by environmental groups regarding the plant.
Enerisis' partners in the HidroAsyen project, Colbún, announced in May 2012 that its

board had recommended the suspension of the preparation of an environmental impact

assessment, because of regulatory uncertainty. In September 2012, Endesa's General
Manager in Chile, Joaquín Galindo, warned that there were 'important barriers' to
investing in Chile, citing delays in environmental assessment studies as one of them.
In February 2013, the firm revealed plans to present an environmental impact

assessment for the transmission line during the course of 2013. In May 2013, Chile's
Supreme Court ruled in favour of the project, although environmentalists have brought
the project to a special ministerial group for review; this group will present its findings in
December 2013. With presidential elections in November 2013 not leading to a winning
candidate, and a second round pushed into December 2013, we think that it is unlikely
the government will push this project forwards beforehand. If centre-left candidate
Michelle Bachelet returns to power, there will be further problems for the project as she
has publicly expressed her objections to the project.
Under evaluation, the portfolio of projects included three hydroelectric plants: the
490MW Neltume (Enersis expects to obtain regulatory approval for the project during
2013), Los Cóndores (construction of which will begin in 2013, at the time of writing it
had already received three environmental licences), Choshuenco; the Piruquina mini-
hydraulic plant; and the Punta Alcalde thermo-electric plant. The Punta Alcalde plant
was set back in June 2012, when it failed to pass its environmental evaluation and then
paralysed by a Supreme Court in late 2013; Endesa Chile revealed it would appeal
against this decision and plans to make a final decision on the plant's future during
2013. In March 2013, the project faced a new setback when a group of fishermen
successfully appealed to halt the project on environmental grounds and again in August
2013, when a court overturned a previously approved environmental impact
assessment. This supports our long-held view that regulatory risks are the greatest
barrier to the completion of large-scale power projects in the Latin American region.
Financial Data Revenues
■ CLP5,277mn (2013)
■ CLP6,578mn (2012)
■ CLP6,535mn (2011)
■ CLP6,564mn (2010)
■ CLP6,472mn (2009)
Net Income
■ CLP377.4mn (2012)
■ CLP375.5mn (2011)
■ CLP486.2mn (2010)
■ CLP660.2mn (2009)
Operational Data ■ Customers: 1.66mn (2012)

■ Power market share: 32%

■ Installed capacity: 5.61GW
Company Details Enersis
Santa Rosa 76
Santiago de Chile
+56-2 353 440
www.enersis.cl

Regional Overview
Industry Trend Analysis
BMI View: Momentum will pick up across the Latin American power sector in 2014 - underpinning our
forecasts for higher levels of consumption across the region and our expectation that large-scale ventures
will continue to dominate the project pipeline. Hydropower looks set to remain the primary source for
electricity generation across the majority of countries in Latin America. However, there has been a
significant push towards the adoption of renewable energy - a trend that we expect to continue over our 10-
year forecast period.
We expect power consumption in the region to pick up during 2014, as we believe that the macroeconomic
headwinds that the region faced in 2013 - particularly industrial metals exporting economies - have now
lessened. A brighter economic picture, coupled with positive demographic fundamentals, should help to
spur power demand. Overall, we expect electricity consumption in the region to grow by 3.4% in 2014, and
over the longer-term we anticipate an annual average growth rate in consumption of 3.9% between 2014
and 2022.

Consumption Picking Up
Latin America Total Electricity Consumption Growth (% y-o-y), 2014-2022
Consumption Winners And Losers
When examining consumption patterns at a country-specific level, it becomes clear that there is a degree of
variation amongst the individual countries' consumption trajectories. For example, Venezuela and Argentina
continue to trail at the bottom of the region, posting annual average growth rates in consumption of 2.7%
and 3.1% respectively between 2014 and 2022. In Venezuela's case this is primarily a result of the
inefficiencies within its power network; in Argentina, the precarious economic environment which is
sapping power demand.
That said, some countries are faring better; Peru and Chile are prime examples. Both countries are
progressing with plans to bring a significant amount of new generation capacity online in order to power
their energy intensive mining sectors and we continue to hold a relatively optimistic outlook towards both
countries' power industries.

Capacity Swelling, With Brazil Out Front
We anticipate total installed capacity to reach over 332 gigawatts (GW) by end-2014 - increasing to over
452GW by the end of our forecast period in 2022. This growth is underpinned by the ambitious capacity
expansion plans currently being implemented by many of the countries included in our Latin American
coverage.
Capacity On The Rise
Total Capacity, as % By Country, 2014f and 2022f
Brazil's power market accounts for roughly 40% to the total Latin American power market in terms of
capacity, and we do not believe that this pattern will shift significantly going forward; anticipating the
contribution to rise slightly to 42% by 2022. Mexico also makes a valuable contribution to the total, and the
recent passing of the energy reform bill certainly provides upside to our already optimistic outlook for the
country's power sector. That said, it is difficult to judge what the exact material impact will be on the
electricity market until secondary legislation is enacted in early 2014; however, the unlocking of private

investment in the energy sector will no doubt play a critical role in sustaining the country's buoyant
economic trajectory and will help secure investment in much-needed electricity generation capacity.
Focusing on the Central American region (consisting of Panama, Costa Rica, El Salvador, Guatemala,
Honduras and Nicaragua), we believe that Costa Rica's power market will contribute the lion's share to the
Central American capacity mix. Overall, however, the sub-region continues to be fairly insignificant when
compared to the other large power markets, such as Brazil, Mexico and Argentina.
Environmental Disputes Remain A Barrier To Investment
We have long-highlighted that some of the most pertinent risks to the region's capacity expansion plans are
environmental barriers, and we continue to see this view play out. As such, news that a Chilean appeals
court blocked the already approved 640MW Rio Cuervo hydropower project in October 2013, due to
environmental concerns, reinforces this viewpoint. According to Reuters, lawyers from the environmental
prosecutor's office lodged an appeal claiming that the plant's environmental permit, which was granted in
September 2013, was not legal (the project has been opposed from the outset based on environmental
concerns and claims it will be built on a geological fault line). Such delays when developing large-scale
power plants are nothing new to Chile (or the wider Latin America region), and we have seen several high-
profile projects encounter setbacks of this nature, including the 4GW Castilla coal-fired power plant in
Chile and the 11.2GW Belo Monte hydropower project in Brazil.
Hydropower Dominating...
In terms of the region's energy mix, we continue to expect hydropower to dominate the mix (currently
hydropower accounts for roughly 47% of total electricity generation in Latin America) despite the
unreliable nature of this power resource. In fact, there have been several recent project announcements that
highlight that hydropower is set to continue to play a pivotal role in the region. For example, the Peruvian
Mines and Energy Minister Jorge Merino announced in May 2013 that the government was preparing a US
$3bn concessions package that would include 1,000MW of hydropower capacity and would also propose a
new law aimed at stimulating investment in new hydropower plants. Additionally, it was announced in
November 2013 that China Gezhouba Group has announced it will build two hydroelectric dams worth US
$4.7bn in the Patagonia region in Argentina.
That said, relying so heavily on hydropower does not come without risks, as the output level is often highly
dependent on climatic conditions. This was evidenced in Panama in May 2013 when an emergency across a

third of the country was declared after drought-hit hydropower projects stopped producing electricity (see
'Central America View Crystallises Around Panama', May 10).
Hydro-Heavy Mix
Regional Capacity, By Type (MW), 2014f and 2022f and Regional Generation Mix (TWh), By Type,
2013-2022
f = BMI forecast. Inner circle = 2014f and outer circle = 2022f. Source: BMI
...But Gains In Gas
While most of the countries' power mixes will be underpinned by hydropower, the notable exception, and a
key factor behind the regional rise in gas, will be Mexico. According to the Energy Information
Administration (EIA), Mexico is planning to add 28GW of new gas-fired power capacity. Our forecasts
reflect the pivot towards natural gas in the country, with natural gas generation expected to increase by an
annual average of 6.5% between 2014 and 2022. That said, we caution that plans to exploit yet greater
volumes of US gas could create both downside and upside risks for Mexico. It would leave the country
vulnerable to longer-term fluctuations in gas prices; but at the same time exposure to currently cheap US
gas has the potential to boost Mexico's competitiveness and push down electricity costs for manufacturers.
In addition, we have also seen Peru show signs of expanding the role of gas in its domestic power mix.
President Humala continues to advance plans to establish a 1,000km, US$2.4bn natural gas pipeline known
as the Peruvian Southern Pipeline project, which will reportedly be tendered in February 2014. The project

is hugely ambitious in scale and will include US$4bn-worth of new power plants (known as the Nodo
Energetica del Sur) and a US$3.5bn petrochemicals complex (see 'Robust Growth Contingent On
Midstream Development', November 25).
Renewables On The Up
In order to boost long-term energy security and reduce their dependence on hydropower, the majority of
countries in Latin America are turning towards renewable energy. Many countries have adopted renewable
energy agendas, and despite some weaknesses in the regulatory framework, we expect non-hydropower
renewables capacity to increase substantially throughout the region over our forecast period (with average
annual growth rates of non-hydro renewables capacity of nearly 10% between 2014 and 2022).
Renewables Entering The Mix

Total Non-Hydro Renewables Capacity, By Country (MW), 2022f
Again, although we anticipate Brazil will continue to dominate the Latin America renewable energy picture,
in terms of total installed capacity, we believe some of the other markets in the region present greater scope
for growth. In fact, Chile tops our regional renewables RRRs table - owing in part to the vast array of

investment opportunities on offer across multiple types of technology, including solar, geothermal and wind
power. Furthermore, the business environment is proving conducive to investment, the project pipeline
continues to strengthen and numerous project announcements by European utilities, including Enel Green
Power, Total and Terna, suggest that investor appetite will remain high going forward.
It seems that biomass and wind are the two regional technologies of choice - with wind capacity set to
register the most marked growth rates. That said, we also see potential for growth in the geothermal and
solar segments.

Glossary
Table: Glossary Of Terms
bn: billion IPP: independent power producer

capex: capital expenditure km: kilometres
CEE: Central and Eastern Europe kW: kilowatt (103 watts)
CHP: combined heat and power plants kWh: kilowatt hour
DoE: US Department of Energy LNG: liquefied natural gas
e/f: estimate/forecast MEA: Middle East and Africa
EBRD: European Bank for Reconstruction and Development mn: million
EIA: US Energy Information Administration MoU: memorandum of understanding
EM: emerging markets MW: megawatt (electric) (106 watts)
EU ETS: European Union Emissions Trading System MWh: megawatt hour
EU: European Union na: not available/applicable
EWEA: European Wind Energy Association NGL: natural gas liquids
FDI: foreign direct investment OECD: Organisation for Economic Co-operation and
Development
FiT: feed-in tariff OPEC: Organization of the Petroleum Exporting Countries
FTA: free trade agreement PV: solar photovoltaics
GDP: gross domestic product RES: renewable energy sources
GHG: greenhouse gas R&D: research and development
GW: gigawatt (109 watts) t: metric ton = tonne (1 t = 1,000 kg)
GWh: Gigawatt hour (1 GWh = 3.6 TJ) TPES: total primary energy supply
GWEC: Global Wind Energy Council trn: trillion
IAEA: International Atomic Energy Agency TW: terawatt (1012 watts)
IEA: International Energy Agency TWh: terawatt hour (1 TWh = 3.6 PJ)
IMF: International Monetary Fund -
IPO: initial public offering -
Source: BMI

Methodology
Methodology And Sources
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case determined, as per standard practice, by the prevailing features of the industry data being examined.
Common to our analysis of every industry is the use of vector autoregressions. They allow us to forecast a
variable using more than the variable's own history as explanatory information. For example, when
forecasting oil prices, we can include information about oil consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
We mainly use OLS estimators and in order to avoid relying on subjective views and encourage the use of
objective views, we use a 'general-to-specific' method. We mainly use a linear model, but simple non-linear
models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for
example poor weather conditions impeding agricultural output, dummy variables are used to determine the
level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account;
■ Testing the directional movement and magnitude of coefficients;
■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);
■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity.

BMI uses the selected best model to perform forecasting.
Human intervention plays a necessary and desirable role in all of our industry forecasting. Experience,
expertise and knowledge of industry data and trends ensure analysts spot structural breaks, anomalous data,
turning points and seasonal features where a purely mechanical forecasting process would not.
Sector-Specific Methodology
■ Generation And Consumption Data
A number of principal criteria drive our forecasts for each generation and consumption variable, with the
following identity forming the basis of our forecast model:
"Total consumption = total generation + total net imports - transmission and distribution losses"
■ Total Generation
Total generation is defined as the process of producing electric energy or the amount of electric energy
produced by transforming other forms of energy, commonly expressed in kilowatthours (kWh) or related
units.
While gross electricity production is measured at the terminals of all alternator sets in a station, and thus
includes the energy taken by station auxiliaries and losses in transformers that are considered integral parts
of the station, net electricity production is defined as gross production less own use of power plants.
According to the International Energy Agency (IEA), the difference between gross and net production is
generally observed to be about 7% for conventional thermal stations, 1% for hydro stations and 6% for
nuclear.
Historical figures for electricity generation are based on data published by the US Energy Information
Administration (EIA) and the World Bank, and consider net electricity production. Whenever possible, we
compare these data with accounts published by government/ministry sources and official data of the
companies operating in each country.
BMI's electricity generation forecasts examine the sector with a bottom-up approach, forecasting electricity
production for each resource in order to calculate the value of total generation. The regression model used

to calculate generation considers real GDP, industrial production, fixed capital formation, population and
fiscal expenditure.
■ Total Consumption
Total consumption is commonly expressed in kilowatt hours (kWh) or related units.
Historical figures for electricity consumption are based on data published by the EIA. Whenever possible,
we compare these data with accounts published by government/ministry sources and official data of the
companies operating in each country. Our electricity consumption forecasts are based on a regression
similar to the model illustrated above for electricity generation.
■ Total Net Imports
Historical figures for net imports are computed as total imports, minus total exports, based on data from the
EIA. Our total net imports forecasts are calculated as total consumptions, minus total generation, plus
transmission and distribution losses.
■ Transmission And Distribution Losses
Transmission and distribution losses include electric energy lost due to the transmission and distribution of
electricity. Much of the loss is thermal in nature.
Our historical figures for electricity transmission and distribution losses are computed as generation, plus
net imports, minus consumptions. However, transmission and distribution losses are calculated using a
regression model in the forecasts.
■ Electricity Generating Capacity Data
Electricity generation capacity is defined as the maximum output, commonly expressed in megawatts (MW)
or related units, that generating equipment can supply to system load, adjusted for ambient conditions.
Historical figures for electricity generation capacity are based on data published in UN statistical databases.
Whenever possible, we compare these data with accounts published by government/ministry sources and
official data of the companies in each country.
Our electricity generation capacity forecasts examine the sector with a bottom-up approach, forecasting
capacity for each resource to calculate the total value of capacity in each country. Our electricity generation
capacity forecasts are based on a regression similar to the model illustrated above for electricity generation.

Sources
BMI uses publicly available information to compile the country reports and collate historical data. Sources
used in power industry reports include those from international bodies mentioned above, such as the EIA,
the World Bank and the UN as well as local energy ministries, officially released company figures, national
and international bodies and associations and news agencies.
Risk/Reward Ratings Methodology
BMI's Risk/Reward Ratings (RRR) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market. The RRR system divides into two distinct areas:
Rewards: Evaluation of a sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is broken down into two sub-categories:
■ Industry Rewards (this is an industry-specific category taking into account current industry size and
growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall
score for potential returns for investors);
• Country Rewards (this is a country-specific category, and factors in favourable political and economic
conditions for the industry).
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is broken down into two sub-categories:
■ Industry Risks (this is an industry-specific category whose score covers potential operational risks to
investors, regulatory issues inhibiting the industry and the relative maturity of a market);
• Country Risks (this is a country-specific category in which political and economic instability,
unfavourable legislation and a poor overall business environment are evaluated).
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Rating, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
Risk/Reward Rating a weighted average of the total score. Importantly, as most countries and territories
evaluated are considered by BMI to be 'emerging markets', our rating is revised on a quarterly basis. This

ensures the rating draws on the latest information and data across our broad range of sources, and the
expertise of our analysts.
Sector-Specific Methodology
In constructing these ratings, the following indicators have been used. Almost all indicators are objectively
based.
Table: Power Risk/Reward Rating Indicators
Indicator Rationale
Rewards
Industry Rewards
Electricity capacity, MW, 5- Objective measure of size of sector, based on BMI's power forecasts. The larger the sector,
year average the greater the opportunities.
Electricity generation, GWh, Objective measure of size of sector, based on BMI's power forecasts. The larger the sector,
5-year average the greater the opportunities.
Electricity generation, %, 5- Objective measure of growth potential, based on BMI's power forecasts. Rapid growth
year average results in increased opportunities.
Electricity consumption, Objective measure of size of sector, based on BMI's power forecasts. The larger the sector,
GWh, 5-year average the greater the opportunities.
Electricity consumption, %, Objective measure of growth potential, based on BMI's power forecasts. Rapid growth
5-year average results in increased opportunities.
Access to electricity, % of Objective measure of size of sector. The larger the sector, the greater the opportunities.
population Low electricity coverage is proxy for pre-existing limits to infrastructure coverage.
Country Rewards
Real GDP growth, %, 5- Proxy for the extent to which structure of economy is favourable to the power sector. The
year average more substantial the growth rate, the greater the demand and the need for additional
generation.
GDP per capita, %, 5-year Proxy for the extent to which structure of economy is favourable to the power sector. The
average more substantial the growth rate, the greater the demand and the need for additional
generation.
Population, % change y-o-y Proxy for extent to which demographic dynamics are favourable to power sector. The more
substantial the growth rate, the greater the demand and the need for additional generation
Imported raw material Objective measure taken from BMI's Oil & Gas service. It gives an indication of a
dependence renewables market's exposure to thermal fuel imports, namely gas.
Electricity import Objective measure of sector. Denotes underlying risks to the security of power sector. The
dependence lower the imports, the greater the energy security.
Inflation, 5-year average Proxy for the extent to which structure of economy is favourable to the power sector. The
lower the inflation, the better the financial outlook of power projects.
Risks
Industry Risks
Liberalisation level Subjective evaluation against BMI-defined criteria. Evaluates barriers to entry.

Power Risk/Reward Rating Indicators - Continued
Indicator Rationale
Financing Objective measure from BMI's Infrastructure Project Finance ratings. It quantifies the risks
to both raising financing and repayment of project loans over the course of a project's life
Renewables outlook Objective measure taken from BMI's Infrastructure service. Used as a gauge to measure
the potential and sophistication of renewable sector
Transparency of tendering Subjective evaluation against BMI-defined criteria. Evaluates predictability of operating
process environment.
Country Risks
Short-term political stability From BMI's Country Risk Ratings (CRR). Denotes health of political structure, including
various indicators such as policy making-process, social stability and security/external
threats and policy continuity.
Policy continuity Subjective rating from CRR. Denote predictability of policy over successive governments.
External risk From CRR. Denotes vulnerability to external shock, which is principal cause of economic
crises.
Institutions From CRR. Denotes strength of legal institutions in each state. Security of investment can
be a key risk in some emerging markets.
Corruption From CRR. Denotes risk of additional illegal costs/possibility of opacity in tendering/
business operations, affecting companies' ability to compete.
Source: BMI

Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal
weight. The following weighting has been adopted:.
Table: Weighting Of Indicators
Component Weighting, %
Rewards 65, of which
Industry Rewards 40, of which
Electricity capacity, MW, 5-year average 10
Electricity generation, GWh, 5-year average 5
Electricity generation, % 8
Electricity consumption, GWh 5
Electricity consumption, % 8
Access to electricity, % of population 4
Country Rewards 25, of which
Real GDP growth, %, 5-year average 5
GDP per capita, %, 5-year average 5
Population, % change 5
Imported raw material dependence 3.5
Electricity import dependence 3.5
Inflation, 5-year average 3
Risks 35
Industry Risks 20, of which
Liberalisation level 4
Financing 6
Renewables outlook 6
Transparency of tendering process 4
Country Risks 15, of which
Short-term political stability 4
Policy continuity 2
External risk 3
Institutions 3
Corruption 3
Source: BMI

BMI Chile Power Report Q2 2014

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Q2 2014

Part of BMI’s Industry Report & Forecasts Series

Published by: Business Monitor International

Copy deadline: March 2014

Business Monitor International © 2014 Business Monitor International

BMI Industry View ............................................................................................................... 7

Industry Forecast ................................................................................................................ 9

Industry Risk/Reward Ratings ......................................................................................... 23

Market Overview ............................................................................................................... 31

Competitive Landscape .................................................................................................... 39

© Business Monitor International Page 4

Company Profile ................................................................................................................ 44

Regional Overview ............................................................................................................ 48

© Business Monitor International Page 5

BMI Industry View

© Business Monitor International Page 7

© Business Monitor International Page 8

Table: Country Snapshot: Economic And Demographic Data

2012 2017f 2022f

f = BMI forecast. Source: BMI Macroeconomic Databases

Table: Country Snapshot: Power Sector

Access to Electricity, % of population 99

© Business Monitor International Page 9

Chile Forecast Scenario

Electricity Generation And Power Generating Capacity

Table: Chile Total Electricity Generation Data And Forecasts, 2012-2017

2012 2013e 2014f 2015f 2016f 2017f

Total Generation, TWh 66.04 69.51 74.14 78.61 83.32 87.73

Thermal Generation, TWh 40.66 42.27 44.55 47.29 50.11 52.41

Coal Generation, TWh 17.45 18.60 19.78 20.99 22.45 23.98

Oil Generation, TWh 20.04 19.80 20.18 20.54 20.86 20.59

© Business Monitor International Page 10

Chile Total Electricity Generation Data And Forecasts, 2012-2017 - Continued

2012 2013e 2014f 2015f 2016f 2017f

Nuclear Generation, TWh 0.00 0.00 0.00 0.00 0.00 0.00

Hydropower Generation, TWh 21.21 22.38 24.37 25.76 27.08 28.79

e/f = BMI estimate/forecast. Source: BMI, EIA, World Bank, OECD

2018f 2019f 2020f 2021f 2022f 2023f

Total Generation, TWh 91.14 95.49 100.36 104.54 109.36 115.27

Thermal Generation, TWh 54.53 57.07 59.53 62.15 65.31 69.07

Coal Generation, TWh 25.32 26.86 28.41 30.05 31.74 33.93

© Business Monitor International Page 11

2018f 2019f 2020f 2021f 2022f 2023f

Oil Generation, TWh 20.36 20.17 20.01 19.87 20.18 20.24

Nuclear Generation, TWh 0.00 0.00 0.00 0.00 0.00 0.00

Hydropower Generation, TWh 29.60 30.94 32.89 33.92 35.00 36.39

f = BMI forecast. Source: BMI, EIA, World Bank, OECD

Table: Chile Electricity Generating Capacity Data And Forecasts, 2012-2017

2012 2013e 2014f 2015f 2016f 2017f

Net Capacity, MW 18,347.43 19,255.49 20,681.27 22,052.17 23,619.15 25,016.27

© Business Monitor International Page 12

Chile Electricity Generating Capacity Data And Forecasts, 2012-2017 - Continued

2012 2013e 2014f 2015f 2016f 2017f

Thermal Capacity, MW 11,482.36 12,117.34 12,767.66 13,399.66 14,202.47 14,915.44

Nuclear Capacity, MW 0.00 0.00 0.00 0.00 0.00 0.00

Hydropower Capacity, MW 5,911.36 6,088.70 6,606.24 7,136.72 7,632.01 8,098.33

e/f = BMI estimate/forecast. Source: BMI, UN, EIA, Ministerio de Energia

2017f 2018f 2019f 2020f 2021f 2022f

Net Capacity, MW 26,363.71 27,871.94 29,636.72 31,440.39 33,257.53 35,343.51

Thermal Capacity, MW 15,642.84 16,484.49 17,539.50 18,591.87 19,707.38 20,889.83

Nuclear Capacity, MW 0.00 0.00 0.00 0.00 0.00 0.00

Hydropower Capacity, MW 8,470.25 8,864.50 9,282.39 9,678.75 10,040.96 10,570.12

© Business Monitor International Page 13

2017f 2018f 2019f 2020f 2021f 2022f