Enersis S.A. (ENI)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

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

OR

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

For the fiscal year ended December 31, 2005

OR

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

OR

o           SHELL COMPANY REPORT PURSUANT TO SECTION 23 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                     to                  

ENERSIS S.A.

(Exact name of Registrant as specified in its charter)

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

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

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

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

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

YES ý    NO o

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

YES o    NO ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:

YES ý    NO o

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

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

ITEM 17 o    ITEM 18 ý

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

YES o    NO ý

INTRODUCTION

Financial Information

As used in this annual report on Form 20-F, first person personal pronouns such as “we,” “us” or “our” refer to ENERSIS S.A. (“Enersis”) and our consolidated subsidiaries unless the context indicates otherwise. Unless otherwise indicated, our interest in our principal subsidiaries and related companies is expressed in terms of our economic interest as of December 31, 2005.

In this annual report on Form 20-F, unless otherwise specified, references to “dollars,” “$,” “U.S. dollars” or “U.S.$” are to U.S. dollars, references to “pesos” or “Ch$” are to Chilean pesos, the legal currency of Chile, references to “Ar$” or “Argentine pesos” are to the legal currency of Argentina, references to “R$,” or “reais” are to Brazilian reals, the legal currency of Brazil, references to “soles” are to Peruvian soles, the legal currency of Peru, references to “CPs” or Colombian pesos are to the legal currency of Colombia and references to “UF” are to Unidades de Fomento. The Unidad de Fomento is a Chilean inflation-indexed, peso-denominated monetary unit. The UF rate is set daily in advance based on changes in the previous month’s inflation rate. As of December 31, 2005, 1 UF was equivalent to Ch$ 17,974.81. The U.S. dollar equivalent of 1 UF was U.S.$ 35.07 at December 31, 2005, using the Observed Exchange Rate, reported by the Banco Central de Chile (the “Chilean Central Bank” or the “Central Bank”) as of December 31, 2005, of Ch$ 512.50 per U.S.$ 1.00. As of February 28, 2006, 1 UF was equivalent to Ch$ 17,922.63. The U.S. dollar equivalent of 1 UF was U.S.$ 34.64 as of February 28, 2006, using the Observed Exchange Rate reported by the Central Bank of Ch$ 517.33 per U.S.$ 1.00.

Our consolidated financial statements and, unless otherwise indicated, other financial information concerning us and our subsidiaries included in this annual report are presented in constant Chilean pesos in conformity with Chilean generally accepted accounting principles (“Chilean GAAP”) and the rules of the Superintendencia de Valores y Seguros, or SVS. Our audited consolidated financial statements for the three fiscal years ended December 31, 2005 are expressed in constant Chilean pesos as of December 31, 2005. See note 2(c) to our consolidated financial statements. For Chilean accounting purposes, inflation adjustments are calculated based on a “one-month lag” convention using an inflation adjustment factor based on the Indice de Precios al Consumidor (Chilean consumer price index or “Chilean CPI”). The Chilean CPI is published by Chile’s Instituto Nacional de Estadísticas (the “National Bureau of Statistics”). For example, the inflation adjustment applicable for the 2005 calendar year is the percentage change between the November 2004 Chilean CPI and the November 2005 Chilean CPI, which was 3.6%. Chilean GAAP differs in certain important respects from accounting principles generally accepted in the United States (“U.S. GAAP”). See note 36 to our consolidated financial statements contained elsewhere in this annual report for a description of the principal differences between Chilean GAAP and U.S. GAAP, as they relate to us, and for a reconciliation to U.S. GAAP of stockholders’ equity and net income as of, and for the three years in the period ended, December 31, 2005.

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

•      control, directly or indirectly, more than a 50% voting interest in that company; or

•      nominate or have the power to nominate a majority of the Board of Directors of that company if we control 50% or less of the voting interest of that company.

As of December 31, 2005, we consolidated Empresa Nacional de Electricidad S.A., or Endesa Chile, Enersis Internacional, or Enersis Internacional, Chilectra S.A., or Chilectra, Inversiones Distrilima S.A. (which in turn consolidated Empresa de Distribución Eléctrica de Lima Norte S.A.A. or Edelnor), Empresa Distribuidora Sur S.A., or Edesur, Inmobiliaria Manso de Velasco Limitada, or IMV, Synapsis Soluciones y Servicios IT Ltda., or Synapsis, Compañía Americana de Multiservicios Ltda., or CAM, Codensa S.A. E.S.P. or Codensa and Elesur S.A. or Elesur. Through Endesa Brasil, S.A. or Endesa Brasil, we consolidated Ampla Energía e Servicos S.A., or Ampla, Investluz (which in turn consolidated Companhia Energética do Ceará S.A., or Coelce), Central Geradora Termelétrica Endesa Fortaleza S.A., or Endesa Fortaleza, Centrais Eléctricas Cachoeira Dourada S.A. or CDSA or Cachoeira

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Dourada and Companhia de Interconexão Energética S.A. or CIEN (which in turn consolidated Compañía de Transmisión del Mercosur or CTM and Transportadora del Energía de Mercosur S.A. or TESA).

Endesa Chile, in turn, consolidated all of its operational Chilean subsidiaries. In Argentina, Endesa Chile consolidated the hydroelectric company Central Hidroeléctrica El Chocón S.A., or El Chocón, and thermoelectric companies Endesa Costanera S.A., or Endesa Costanera or ENCO. In Colombia, Endesa Chile consolidated generation companies Central Hidroeléctrica de Betania S.A. E.S.P., or Betania, and Emgesa S.A. E.S.P., or Emgesa. Endesa Chile also consolidated the hydroelectric company Edegel S.A.A., or Edegel, in Peru.

For the convenience of the reader, this annual report contains translations of certain Chilean peso amounts into U.S. dollars at specified rates. Unless otherwise indicated, the U.S. dollar equivalent for information in Chilean pesos is based on the Observed Exchange Rate, as defined in “Item 3. Key Information — A. Selected Financial Data — Exchange Rates” at December 31, 2005. No representation is made that the Chilean peso or U.S. dollar amounts shown in this annual report could have been or could be converted into U.S.$ or Chilean pesos, as the case may be, at such rate or at any other rate. See “Item 3. Key Information — A. Selected Financial Data — Exchange Rates.”

Technical Terms

References to “GW” and “GWh” are to gigawatts and gigawatt hours, respectively; references to “MW” and “MWh” are to megawatts and megawatt hours, respectively; references to “kW” and “kWh” are to kilowatts and kilowatt hours, respectively; and references to “kV” are to kilovolts. Unless otherwise indicated, statistics provided in this annual report with respect to electricity generation facilities are expressed in MW, in the case of the installed capacity of such facilities, and in GWh, in the case of the aggregate annual electricity production of such facilities. One GW = 1,000 MW, and one MW = 1,000 kW. Statistics relating to aggregate annual electricity production are expressed in GWh and are based on a year of 8,760 hours. Statistics relating to installed capacity and production of the electricity industry do not include electricity of self-generators. Statistics relating to our production do not include electricity consumed by our generators.

Energy losses are calculated by:

•      subtracting the number of GWh of energy sold from the number of GWh of energy purchased and self-generated within a given period; and

•      calculating the percentage that the resulting quantity bears to the aggregate number of GWh of energy purchased and self-generated within the same period.

Calculation of Economic Interest

References are made in this annual report to the “economic interest” of Enersis in its subsidiaries or related companies. In circumstances where Enersis does not own its interest in a subsidiary or related company directly, the economic interest of Enersis in such ultimate subsidiary or related company is calculated by multiplying the percentage ownership interest of Enersis in a directly held subsidiary or related company by the percentage ownership interest of any entity in the chain of ownership of such ultimate subsidiary or related company. For example, if Enersis owns 60% of a directly held subsidiary and that subsidiary owns 40% of a related company, Enersis’ economic ownership interest in such related company would be 24%. References are also made in this annual report to the economic interest of Endesa Chile in its subsidiaries and related companies. Calculation of Endesa Chile’s economic interest is made based on the same method used to calculate the economic interest of Enersis.

We are a holding company with subsidiaries engaged in the generation, transmission and distribution of electricity in Chile, Argentina, Brazil, Colombia and Peru. As of the date of this annual report, we beneficially owned, directly or indirectly, 60.0% of Endesa Chile’s outstanding capital stock and 98.3% of Chilectra’s outstanding capital stock. ENDESA, S.A. (“Endesa-Spain”), the largest electricity generation and distribution company in Spain, owned a 60.6% beneficial interest in Enersis as of December 31, 2005.

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Forward-Looking Statements

This annual report contains statements that are or may constitute forward-looking statements. These statements appear throughout this annual report and include statements regarding our intent, belief or current expectations, including but not limited to any statements concerning:

•      our capital investment program;

•      trends affecting our financial condition or results from operations;

•      our dividend policy;

•      the future impact of competition and regulation;

•      political and economic conditions in the countries in which we or our related companies operate or may operate in the future;

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

•      other statements contained or incorporated by reference in this annual report regarding matters that are not historical facts.

Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to:

•      changes in the regulatory environment in one or more of the countries in which we operate;

•      changes in the environmental regulatory framework in one or more of the countries in which we operate;

•      our ability to implement proposed capital expenditures, including our ability to arrange financing where required;

•      the nature and extent of future competition in our principal markets;

•      political, economic and demographic developments in the emerging market countries of South America where we conduct our business; and

•      the factors discussed below under “Risk Factors.”

You should not place undue reliance on such statements, which speak only as of the date that they were made. Our independent public accountants have not examined or compiled the forward-looking statements, and, accordingly, do not provide any assurance with respect to such statements. You should consider these cautionary statements together with any written or oral forward-looking statements that we may issue in the future. We do not undertake any obligation to release publicly any revisions to forward-looking statements contained in this annual report to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

For all these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

PART I

Item 1.    Identity of Directors, Senior Management and Advisors

Not applicable

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Item 2.    Offer Statistics and Expected Timetable

Not applicable

Item 3.    Key Information

A.    Selected Financial Data.

The following summary of consolidated financial data should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements including their notes, included elsewhere in this annual report. Our consolidated financial statements are prepared in accordance with Chilean GAAP and the related rules of the SVS, which together differ in certain important respects from U.S. GAAP. Note 36 to our consolidated financial statements provides a description of the principal differences between Chilean GAAP and U.S. GAAP and a reconciliation to U.S. GAAP of net income (loss) and shareholders’ equity for the periods and as of the dates therein indicated. Financial data as of or for each of the five years ended December 31, 2005 in the following table have been restated in constant Chilean pesos as of December 31, 2005.

In general, amounts are in millions except for ratios and operating data. For convenience purposes, all data presented in U.S. dollars in the following summary as of or for the year ended December 31, 2005 are translated at the Observed Exchange Rate for December 31, 2005 of Ch$ 512.50 per U.S.$ 1.00. Such translations should not be construed as representing that the Chilean peso amounts actually represent, have been or could be converted into U.S. dollars at the rates indicated or used herein or at all. For information concerning historical exchange rates, see “Item 3. Key Information — A. Selected Financial Data — Exchange Rates” below.

The information detailed in the following table includes changes in certain accounting policies for the five years ended and as of December 31, 2005, which affect the comparability of the data presented below. See note 3 to our consolidated financial statements for a further description of changes in our accounting policies.

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(1)   Solely for the convenience of the reader, Chilean peso amounts have been translated into dollars at the rate of Ch$ 512.50 per U.S. dollar, the Observed Exchange Rate for December 31, 2005.

(2)   “Income before income taxes, minority interest and amortization of negative goodwill” as shown in our audited consolidated income statement.

(3)   See (“Item 5. Operating and Financial Review and Prospects — A. Operating Results — Results from Operations for the Fiscal Years Ended December 31, 2004 and December 31, 2005, and note 36 of the Financial Statements for a discussion of how our income statement and balance sheet can be impacted by accounting differences under Chilean and U.S. GAAP.)  The two most significant adjustments that result from reconciling our Chilean GAAP accounts to U.S. GAAP relate to accounting for amortization of goodwill discussed in paragraphs (i) and (II-o) of note 36 and accounting for derivative instruments discussed in paragraphs (t) and (II-j) of note 36 to the audited consolidated financial statements.

(4)   Does not include goodwill and negative goodwill amortization.

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(1)   Energy sold by Chilectra includes sales to Río Maipo up to 2003, in which year we sold this company.

(2)   Energy losses are calculated by (a) subtracting the number of GWh of energy sold from the aggregate GWh of energy purchased and self-generated within a period and (b) calculating the percentage that the resulting sum bears to the aggregate number of GWh of energy purchased and self-generated within the same period. Energy losses arise from illegally tapped energy as well as technical failures.

(3)   As a result of the creation of Endesa Brasil, Cachoeira Dourada became a subsidiary of Enersis as of October 2005. As of the same date, Enersis also started to consolidate Endesa Fortaleza. As of December 31, 2005, Ampla had small generation facilities with a maximum capacity of 62 MW, however a sales agreement for these facilities has been signed as of the same date. See “Item 4. Information on the Company — D. Property, Plants and Equipment”.

(4)   Energy production is defined as total generation minus energy consumption and technical losses within our own power plants.

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EXCHANGE RATES

To the extent our financial liabilities are denominated in foreign currencies, fluctuations in the exchange rate between the Chilean peso and the foreign currencies may have a significant impact on our earnings.

Chile’s Ley Orgánica del Banco Central de Chile No. 18,840, or the Central Bank Act, enacted in 1989, liberalized the ability to buy and sell foreign currencies in Chile. Prior to 1989, the law authorized the purchase and sale of foreign currencies only in those cases explicitly authorized by the Central Bank. The Central Bank Act currently provides that the Central Bank may require that certain purchases and sales of foreign exchange be carried out in the Mercado Cambiario Formal, or the formal exchange market, a market formed by banks and other entities explicitly authorized by the Central Bank. Purchases and sales of foreign currencies which are generally permitted to be transacted outside the formal exchange market can be carried out in the Mercado Cambiario Informal, or the informal exchange market, which is a recognized currency market in Chile. Both the formal and informal exchange markets are driven by free market forces.

For the purposes of the operation of the formal exchange market, the Central Bank sets a reference exchange rate (dólar acuerdo). The reference exchange rate is reset daily by the Central Bank, taking into account internal and external inflation and variations in parties between the Chilean peso and each of the U.S. dollar, the Japanese yen and the Euro in a ratio of 80:5:15, respectively. In order to keep the average exchange rate within certain limits, on rare occasions the Central Bank intervenes by buying or selling foreign exchange in the formal exchange market. The daily observed exchange rate (dólar observado) reported by the Central Bank and published daily in Chilean newspapers is computed by taking the weighted average of the previous business day’s transactions in the formal exchange market.

The informal exchange market reflects transactions carried out at informal exchange rates by entities not expressly authorized to operate in the formal exchange market (e.g., certain foreign exchange houses, travel agencies and others). There are no limits imposed on the extent to which the rate of exchange in the informal exchange market can fluctuate above or below the observed exchange rate. Since 1993, the observed exchange rate and the informal exchange rate have typically been within less than 1% of each other. On December 31, 2005, the informal exchange rate was Ch$ 512.30, or 0.04% greater than the published observed exchange rate of Ch$ 512.50 per U.S.$ 1.00. On February 28, 2006, the informal exchange rate was Ch$ 517.50 per U.S.$ 1.00, 517.33 as the observed exchange rate corresponding to such date. Unless otherwise indicated, amounts translated to U.S. dollars were calculated based on the exchange rates in effect as of December 31, 2005.

The following table sets forth, for the periods and dates indicated, certain information concerning the observed exchange rate reported by the Central Bank. No representation is made that the Chilean peso or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Chilean pesos, as the case may be, at the rates indicated or at any other rate. The Federal Reserve Bank of New York does not report a noon buying rate for Chilean pesos.

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(1)   Reflects Chilean pesos at historical values rather than in constant Chilean pesos.

(2)   Exchange rates are the high and low, on a day-by-day basis, for each period.

(3)   The average of the exchange rates on the last day of each month during the period.

B.    Capitalization and indebtedness.

Not applicable

C.    Reasons for the offer and use of proceeds.

Not applicable

D.    Risk factors.

Risks Relating to Our Operations

Approximately 68% of our consolidated installed capacity in Chile, Argentina, Brazil, Colombia and Peru is hydroelectric. Accordingly, adverse hydrological conditions affect our business and have a substantial influence over our results.

During periods of drought, thermal plants, including those that use natural gas, fuel oil or coal as a fuel, are dispatched more frequently. Our operating expenses increase during these periods and, depending on the size of our commitments, we may have to buy electricity from other parties in order to comply with our contractual supply obligations. The cost of these electricity purchases in the spot market may exceed the price at which we sell contracted electricity, thus producing losses from those contracts.

In 2000, our generation subsidiaries established a commercial and risk-reduction policy in order to mitigate the potential impact of interruptions to our ability to supply electricity, including those caused by droughts, interruptions in gas supply and prolonged plant stoppages. Pursuant to this policy, a volume of contracts is determined for each generation company that reduces the risks to acceptable levels, assured by a degree of statistical reliability of 95%. Any contracts for volumes that exceed this 95% level are required to include clauses transferring the risk of interruptions to the customers. Notwithstanding this risk-reduction policy, a prolonged drought could adversely affect our results.

In Chile, our electricity businesses may be subject to regulatory fines for any breach of current regulations, including energy supply failure. As of December 31, 2005, such fines may range from 1 Unidad Tributaria Mensual (“UTM”), equivalent to approximately U.S.$ 62, to 10,000 Unidades Tributarias Anuales (“UTA”), equivalent to approximately U.S.$ 7.4 million. Any electricity company supervised by the Chilean Superintendency of Electricity and Fuels, or SEF, may be subject to these fines, which apply in cases where, in the opinion of the SEF, operational failures that affect the regular energy supply to the system are the fault of such company. These fines may be appealed. An electricity company supervised by the SEF may be subject to fines when the electricity system is affected by operating failures, even when it is not within such company’s power to react to prevent such failures.

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Our generation and distribution subsidiaries may be required to pay fines or to compensate customers if those subsidiaries are unable to deliver electricity to them even if such failure is due to forces outside of our control. For example, in 1999 Argentine regulators required us to pay approximately U.S.$ 59 million in fines as a consequence of electricity outages resulting from a fire in one of our distribution substations belonging to Edesur. The imposition of these penalties in Argentina increased our operating costs significantly and was not accounted for under the tariff structure that determines our revenues. Although we received compensation from the contractor responsible for the fire, there can be no assurance that we will receive compensation from third parties in the event of any future delivery failure. Our profitability will be affected adversely if we are required to pay penalties and fines.

On August 14, 2003, the SEF imposed fines on some of our Chilean generation subsidiaries in an aggregate amount of 5,330 UTA, equivalent to approximately U.S.$ 3.9 million, due to a failure in the transmission of energy in the Metropolitan Region on September 23, 2002. On April 27 and May 3, 2004, the SEF imposed fines on both Endesa Chile and Chilectra in an aggregate amount of 3,860 UTA, equivalent to approximately U.S.$ 2.9 million, due to a blackout that occurred in the Metropolitan Region on January 13, 2003. On July 4, 2005, the SEF imposed fines of 1,260 UTA, equivalent to approximately to U.S.$ 0.9 million, on Endesa Chile due to a blackout that occurred in the Metropolitan Region on November 7, 2003. Our subsidiaries are currently appealing these fines, but these appeals may not be successful.

We are subject to extensive regulation of tariffs and other aspects of our business in the countries in which we operate, and these regulations may affect our profitability adversely. In addition, changes in the regulatory framework, including changes that if adopted would significantly affect our operations, are frequently submitted to the legislators and administrative authorities in the countries in which we operate, and could have a material adverse impact on our business.

Electricity rationing in Chile. If our Chilean generation subsidiaries are unable to comply with their contractual obligations during electricity rationing periods, we may be subject to higher operating costs. The Chilean government can impose electricity rationing during drought conditions or prolonged failures in the country’s thermoelectric facilities. If, during rationing, we are unable to generate enough electricity to comply with our contractual obligations, we may be forced to buy electricity in the pool market at the spot price, since a drought can no longer constitute a force majeure event. The spot price may be significantly higher than our costs to generate the electricity and can be as high as the “cost of failure” set by the Comisión Nacional de Energía (National Energy Commission), or the CNE. The “cost of failure” is determined by the CNE’s economic models as the highest cost of electricity during periods of electricity deficit. If we are unable to buy enough electricity in the pool market to comply with all our contractual obligations, then we would have to compensate our regulated customers for the volume we failed to provide at the “rationed end-consumer price.”  If rationing policies are imposed by regulatory authorities in Chile, our business, financial condition and results of operations may be affected adversely in a material way.

In similar way, if rationing policies are imposed by any regulatory authority as a result of adverse hydrological conditions in the countries in which we operate, our business, financial condition and results from operations may be affected adversely in a material way. Rationing periods may occur in the future, and consequently our generation subsidiaries may be required to pay regulatory penalties if such subsidiaries fail to provide adequate service under such conditions.

Approximately 76% of the installed capacity of our Chilean generation subsidiaries is hydroelectric. These generation companies own unlimited duration unconditional and absolute property water rights granted by the Chilean Water Authority. However, in March 2005, Chilean Congress approved a modification to the current laws governing unused water rights. Under the amended law, beginning on January 1, 2006, Chilean generation companies will have to pay an annual license for unused water rights. We are constantly analyzing which water rights we will maintain for the future and which we will disregard. If we determine that some water rights will not be used for a future project, we will abandon such water rights in order to avoid liability for license payments. We estimate that in the event that we do not abandon any water rights in the SIC, we will have to pay license fees aggregating no more than 5,773 UTA (or U.S.$ 4.3 million per year). License fee payments carried out during the

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eight years before the commencement of any project, or the use of such water rights, may be recovered through a tax credit that is applied monthly until the license fee payments are recovered in full.

In the case of water rights located in the extreme south of Chile (in particular, the Eleventh and Twelfth Regions, outside the area comprised by the SIC), the license payments will be paid starting as of January 1, 2012, using the same tax refund regime mentioned above for the SIC.

In May 2001, the Ministry of Economy issued Resolution 88, under which electricity generators such as ours are required to provide electricity to distribution companies that have been unable to contract an adequate supply to deliver to their customers. The last amendment to the electricity law, called Short Law II, established a mechanism of transitory compensations, under which until December 31, 2008, energy sales derived from Resolution 88 must be carried out at the spot price. Short Law II therefore temporarily alleviates for our subsidiaries some of the pricing risks implicit in Resolution 88. For a more complete discussion of this topic, see “Item 4. Information on the Company — B. Business Overview — Electricity Industry Regulatory Framework.”

Our operating subsidiaries are also subject to environmental regulations, which, among other things, require us to perform environmental impact studies for future projects and obtain permits from both local and national regulators. Approval of these environmental impact studies may be withheld by governmental authorities, public opposition may result in delays or modifications to any proposed project and laws or regulations may change or be interpreted in a manner that could adversely affect our operations or our plans for companies in which we hold investments. See “Item 4. Information on the Company — B. Business Overview —Electricity Industry Regulatory Framework.”

The Chilean peso and the other South American currencies in which we and our subsidiaries operate have been subject to large devaluations and appreciations against the U.S. dollar in the past and may be subject to significant fluctuations in the future. Historically, a significant portion of our consolidated indebtedness has been denominated in U.S. dollars and, although a substantial portion of our revenues are linked in part to U.S. dollars, we generally have been and will continue to be materially exposed to fluctuations of our local currencies against the dollar because of time lags and other limitations in the indexation of our tariffs to the dollar.

Because of this exposure, the cash generated by our subsidiaries can be diminished materially when our local currencies devalue against the dollar. For example, in the case of our Argentine subsidiaries, regulatory changes introduced in 2002 eliminated dollar indexation of our tariffs altogether, which together with a devaluation of approximately 71% of the Argentine peso against the U.S. dollar and “pesification” of our contractual rates, resulted in a reduction of net cash generation. Future volatility in the exchange rate of the Chilean peso, and the other currencies in which we receive revenues or incur expenditures, to the dollar, may affect our financial condition and results from operations. For more information on the risks associated with foreign exchange rates, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”

As of December 31, 2005, Enersis had total consolidated indebtedness of U.S. $6,867 million, which includes the effect of currency hedging instruments. This amount is different from the accounting figure, as it reflects financial debt. From this amount, U.S.$ 3,402 million, or approximately 50%, was denominated in U.S. dollars. For the twelve-month period ended December 31, 2005, our revenues amounted to U.S.$ 7,036 million (before consolidation adjustments) of which U.S.$ 402 million, or approximately 6%, were denominated in U.S. dollars, and U.S.$ 1,036 million, or approximately 15%, were linked in some way to the dollar. In the aggregate, approximately 20% of our revenues (before consolidation adjustments) were either in U.S. dollars or correlated to such currency through some form of indexation. On the other hand, the equivalent of U.S.$ 1,514 million were revenues in pesos, which represents approximately 22% of our 2005 revenues (before consolidation adjustments).

In addition to the dollar and the Chilean peso, our foreign-currency denominated consolidated indebtedness included the equivalent of U.S.$ 745 million in Brazilian reais (including the effect of a U.S.$/R$ swap contract), U.S.$ 728 million in Colombian pesos, U.S.$ 308 million in Peruvian soles, and U.S.$ 76 million in Argentine pesos, for an aggregate of U.S.$ 1,856 million in currencies other than Chilean pesos and U.S. dollars. At the same

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time, revenues before consolidation adjustments in these other currencies for the twelve-month period ended December 31, 2005, included the equivalent of U.S.$ 1,767 million in Brazilian reais, U.S.$ 1,077 million in Colombian pesos, U.S.$ 752 million in Argentine pesos, and U.S.$ 489 million in Peruvian soles. Despite the fact that we have both revenues and debt in these same currencies, we believe that we are subject to risk in terms of our foreign exchange exposure to these four currencies. The most material case is that of Argentina, where most of our debt is denominated in U.S. dollars while our revenues are mostly in Argentine pesos.

As of December 31, 2005, on a consolidated basis, we had U.S.$ 1,436 million of indebtedness maturing in 2006, U.S.$ 424 million in 2007, and U.S.$ 1,892 million of indebtedness maturing in the period 2008-09 and U.S.$ 3,115 million maturing thereafter.

As of the same date we had short-term indebtedness of U.S.$ 122 million in Argentina, U.S.$ 274 million in Brazil, U.S.$ 120 million in Colombia, U.S.$ 168 million in Peru, and U.S.$ 751 million in Chile.

We are subject to certain fairly standard financial covenants related to maximum ratios of indebtedness to adjusted cash flow, indebtedness to EBITDA, debt to equity and minimum ratios of adjusted cash flow to interest expense. In addition, substantially all of our indebtedness contains cross-default provisions, generally triggered by default on other indebtedness in amounts exceeding U.S.$ 30 million on an individual basis. In the event that any of our cross-default provisions are triggered and our existing creditors demand immediate repayment, a significant portion of our indebtedness could become due and payable. For more information on covenants and relevant provisions for these credit facilities, see “Item 5 — Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”

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

As of the date of this report, Argentina is the country with the highest refinancing risk. As of December 31, 2005, the third-party financial debt of our Argentine subsidiaries amounted to U.S.$ 377 million. As a matter of policy for all of our Argentine subsidiaries, as long as the foreign currency restrictions remain in Argentina, and as long as fundamental issues concerning the electricity sector remain unresolved, we are primarily making interest payments when due and we are rolling over most of our outstanding debt. Our international creditors have understood the extraordinary circumstances that have led us to take these steps and to date have accepted these refinancing arrangements. If our creditors do not continue to accept, or the Argentine Central Bank will not continue to permit, rolling over debt principal when it becomes due, we may be unable to refinance our indebtedness on terms that would otherwise be acceptable to us.

We are a holding company with no significant assets other than the stock of our subsidiaries. In order to pay our obligations, we rely on cash from dividends, loans, interest payments, capital reductions and other distributions from our subsidiaries, as well as cash from proceeds of the issuance of new securities. Our ability to pay our obligations will depend on the receipt of distributions from our subsidiaries. The ability of our subsidiaries to pay dividends, interest payments, loans and other distributions to us is subject to legal constraints such as dividend restrictions, fiduciary duties, contractual limitations, and foreign exchange controls that may be imposed in any of the five countries where our subsidiaries operate. Our subsidiaries and equity affiliates may be additionally limited by their operating results.

We have generally been able to access the cash flows of our Chilean subsidiaries. We have not been similarly able to access the cash flows of our non-Chilean operating subsidiaries due to government regulations, strategic considerations, economic conditions, and credit restrictions.

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Our future results from operations outside Chile may continue to be subject to greater economic and political uncertainties than what we have experienced in Chile, thereby reducing the likelihood that we will be able to rely on cash flow from operations in those entities to repay our debt.

Dividend Limits and Other Legal Restrictions. Our Chilean subsidiaries are subject to customary legal restrictions limiting the amount of dividend distributions. Some of our non-Chilean subsidiaries are also subject to legal reserve requirements and other restrictions on dividend payments. In addition, the ability of any of our less-than-wholly-owned subsidiaries to upstream cash to us may be limited by the fiduciary duties of the directors of such subsidiaries to their minority shareholders. As a consequence of such duties, our subsidiaries could, under certain circumstances, be prevented from upstreaming cash to us.

Contractual Constraints. Upstreaming restrictions in our subsidiaries’ contractual agreements include:

•      prohibitions against dividend distributions by Endesa Chile in the case of default, and Pangue, our Chilean generation subsidiary, if it is not in compliance with certain debt to equity ratios and debt coverage ratios (each as defined in Pangue’s credit agreements);

•      prohibitions against dividend distributions by Edelnor and Edegel in Peru, and Betania in Colombia in the case of default of certain loans;

•      prohibitions against repayments by Betania of intercompany debt unless it raises additional funds from the sale of assets or capital reductions of Emgesa, and against payments of interest on intercompany debt if any scheduled payment of Betania’s syndicated loan is due and not paid;

•      prohibitions against dividend distributions, capital reductions, intercompany interest payments and debt repayment by Ampla and Coelce in Brazil, and Endesa Costanera in Argentina, in each case in the case of default and if not in compliance with certain financial ratios.

Operating Results of Our Subsidiaries. The ability of our subsidiaries and equity affiliates to pay dividends or make loan payments or other distributions to us is limited by their operating results. To the extent that the cash requirements at any of our subsidiaries exceed available cash, such subsidiary will not be able to make cash available to us.

Foreign Exchange Controls. The ability of our non-Chilean subsidiaries and equity affiliates to pay dividends and make loan payments or other distributions to us may be subject to emergency restrictions that may be imposed by Central Banks or other governmental authorities in the various jurisdictions in which we operate. For example, during the economic crisis in Argentina, the Central Bank of Argentina imposed restrictions on the transfer of funds outside of Argentina.

In Argentina, the low price imposed by regulators on natural gas has directly affected production and investment in natural gas fields, which has in turn impacted the short and medium-term availability of this fuel in Chile. A natural gas shortage may force electricity generation companies, including ours, to use more expensive fuel oil, thus substantially increasing production costs. Strong demand for electricity in Chile’s central region, which increased by 4.5% in 2005 and is expected to continue to increase significantly in the foreseeable future, combined with a low level of investment in the electricity sector, makes the Chilean electricity sector particularly exposed to the adverse effects of the Argentine natural gas crisis.

In Chile’s central region, Endesa Chile’s thermal plants San Isidro and Taltal use natural gas for thermal generation and have gas contracts with Argentine suppliers. The Argentine government has adopted a resolution allowing governmental authorities to partially suspend natural gas exports and giving the President of Argentina the power to temporarily suspend the long-term supply contracts of Argentine exporters. Since then, Argentina has significantly curtailed its natural gas exports to Chile. As a result, the Chilean electricity sector is more vulnerable than in the past.

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Factors that may adversely affect our ability to build new facilities include:

•      delays in obtaining regulatory approvals, including environmental permits;

•      shortages or changes in the prices of equipment, materials or labor;

•      local opposition of political, environmental and ethnic groups;

•      adverse changes in the political and regulatory environment in the countries where we and our related companies operate;

•      adverse weather conditions, which may delay the completion of power plants or substations, or natural disasters, accidents or other unforeseen events; and

•      the inability to obtain financing at affordable rates.

Any of these factors may cause delays in the completion of all or part of our capital investments program and may increase the cost of the projects.

We are currently involved in various litigation proceedings, which could result in unfavorable decisions or financial penalties for us, and we will continue to be subject to future litigation proceedings, which could have material adverse consequences to our business.

We are a party to a number of legal proceedings, some of which have been pending for several years. Some of these claims may be resolved against us. Our financial condition or results from operations could be affected adversely to a material extent if certain of these material claims are resolved against us. See note 30 of “Item 18. Financial Statements.”

Endesa-Spain currently owns 60.6% of Enersis’ share capital. Therefore, Endesa-Spain has the power to determine the outcome of most material matters to be decided by a vote of our shareholders, such as the election of the majority of our board members and, subject to contractual and legal restrictions, the distribution of dividends. Endesa-Spain can also exercise influence over our operations and business strategies. Endesa-Spain conducts its business in South America through us and through affiliates not consolidated by us.

Certain of our directors are officers of Endesa-Spain and officers and directors of certain subsidiaries of Endesa-Spain. For more information about these directors, please refer to “Item 6. Directors, Senior Management and Employees — A. Directors and Senior Management.”

Our subsidiaries sell electricity to other companies controlled by Endesa-Spain at regulated prices and have entered into contracts for other services with other companies controlled by Endesa-Spain.

To the extent any conflict arises between our interests and those of Endesa-Spain’s other businesses in any jurisdiction in South America, Endesa-Spain may have a conflict of interest, which could have an adverse effect on our business.

At the time of this report, two companies have made tender offers for the control of our current parent company, ENDESA, S.A., (Endesa-Spain). In this context, some of our credit facilities have “change of control” contractual provisions. As of December 31, 2005, U.S.$ 1.1 billion of Enersis’ consolidated indebtedness (excluding Endesa Chile on a consolidated basis) and U.S.$ 600 million of Endesa Chile’s consolidated indebtedness, had some kind of “change of control provision” either in the form of a negative covenant, a mandatory prepayment or otherwise. However, U.S.$ 176 million of Enersis’ subsidiaries’ contracts require a preliminary condition prior to

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triggering such change of control provision, typically a merger or spin-off that would then result in a change of control. Similarly, U.S.$ 458 million in Endesa Chile’s subsidiaries’ contracts either (a) require a preliminary merger or spinoff prior to triggering such change of control provision, or (b) the change of control does not apply to Endesa-Spain but to the other companies instead.

A total of U.S.$ 935 million in Enersis and its consolidated subsidiaries other than Endesa Chile, and a total of U.S.$ 130 million in bank indebtedness incurred by Endesa Chile have “change of control provisions” which specifically refer to Endesa-Spain, directly or indirectly, as the controlling entity. If a change of control were to take place, both Enersis and Endesa Chile, and our subsidiaries, would need to seek the appropriate contractual waivers or amendments.

The U.S.$ 130 million of Endesa Chile debt and U.S.$ 65 million of Enersis debt are to be found in revolving credit instruments governed by the laws of New York, in which lenders under both facilities, on an individual basis, would be given rights to accelerate payment in the event that Endesa-Spain is no longer, directly or indirectly, the ultimate controlling parent, and the new controlling entity would have a lower rating (including with respect to outlook) than the unsecured long-term foreign currency rating of Endesa-Spain, as rated by each of S&P and Moody’s immediately prior to giving effect to a transaction involving a change of control, as defined. Endesa-Spain’s current ratings are “A3 with negative outlook” from Moody’s, “A with negative outlook” from S&P and “A with negative watch” from Fitch.

Enersis’ subsidiaries in Brazil have credit facilities for an aggregate of U.S.$ 840 million with some kind of “change of control language,” most of them involving standard BNDES clauses. BNDES is a state-owned development bank. Although we believe that BNDES would ultimately waive any potential change of control provision, especially if the ultimate controlling entity had good credit ratings, we can not give assurances that this would happen.

If a tender offer for Endesa-Spain is successful, and if a change of control were to take place, we cannot give assurances that our lenders and relevant governmental entities such as BNDES in Brazil would waive any acceleration rights that they might otherwise have under such credit agreements. For information on the recent tender offers over Endesa-Spain, see “Item 4. Information on the Company — A. History and Development of the Company — Recent Developments.”  For more detailed information on Enersis and Endesa Chile contractual provisions, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”

We have economic exposure to fluctuations in the market prices of certain commodities as a result of the long-term energy sales contracts we have entered into. Our subsidiaries have material obligations under long-term fixed-price electricity sales contracts, the values of which fluctuate with the market price of electricity. In addition, our generation subsidiaries have material obligations as selling parties under long-term energy supply contracts with prices that vary in accordance with the market price of electricity, water levels in our reservoirs, the market prices of primary materials such as natural gas, oil, coal and other energy-related products, as well as the exchange rate of the U.S. dollar. Changes in the market price of these commodities and in the exchange rate do not always correlate with changes in the market price of electricity or with our cost of production of electricity; accordingly, there may be times when the price paid to us under these contracts is less than our cost of production or acquisition of electricity. We do not carry out transactions in commodity derivative instruments to manage our exposure to commodity price fluctuations. Under Chilean GAAP, our income statement does not reflect fluctuations in the fair value of our long-term energy contracts, although we are required to do so under U.S. GAAP. Our policy is not to enter into supply contracts for amounts exceeding our firm capacity under adverse hydrological conditions. For further discussion, please refer to “Item 11. Quantitative and Qualitative Disclosures About Market
Risk — Commodity Price Risk.”

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Risk Factors Relating to Chile

A substantial portion of our assets and operations are located in Chile and, accordingly, our financial condition and results of operations are to a certain extent dependent upon economic conditions prevailing in Chile. In 2005, the Chilean economy grew by an estimated 6.3% compared to a 6.1% increase in 2004. The latest Chilean Central Bank estimate for growth in 2006 is in the range of 5.25%-6.25%. There is no assurance that such growth will be achieved, that the growth trend will continue in the future, or that future developments in the Chilean economy will not impair our ability to proceed with our strategic plans or impact our financial condition or results from operations adversely. Our financial condition and results from operations could also be affected by changes in economic or other policies of the Chilean government, which has exercised and continues to exercise a substantial influence over many aspects of the private sector. In addition, our financial condition and results from operations could also be affected by other political or economic developments in Chile, a well as regulatory changes or administrative practices of Chilean authorities, over which we have no control.

Although Chilean inflation has been low in recent years, Chile has experienced high levels of inflation in the past. High levels of inflation in Chile could affect the Chilean economy adversely and, indirectly, the value of shares of our common stock and ADSs. The Chilean Consumer Price Index, or Chilean CPI, for the 12 months ended December 31, 2005, was 3.7%, and the Chilean Central Bank estimates Chilean CPI to be approximately 3.2% and 2.8% for 2006 and 2007, respectively. Historically, a substantial part of our expenses have been denominated in Chilean pesos, and future increases in Chilean inflation could cause our expenses to rise significantly. As a result, the level of Chilean inflation may affect our financial condition and results from operations.

We believe that moderate inflation will not materially affect our business in Chile. Electricity tariffs in Chile, both for generation and distribution, contain indexing mechanisms that are intended to neutralize the effects of inflation. However, we believe that the performance of the Chilean economy, our operating results, and the value of securities issued by us, could be affected adversely if inflation levels were to rise significantly.

We are governed by the laws of Chile and all of our assets are located outside the United States. All of our directors and officers reside outside the United States and most of their assets are located outside the United States as well. If any shareholder were to bring a lawsuit against our directors, officers or experts in the United States, it may be difficult for them to effect service of legal process within the United States upon these persons or to enforce against them, in United States courts or Chilean courts, judgments obtained in United States courts based upon the civil liability provisions of the federal securities laws of the United States. In addition, there is doubt as to whether an action could be brought successfully in Chile on the basis of liability based solely upon the civil liability provisions of the United States federal securities laws.

Chilean trading in the shares of common stock underlying the ADSs is conducted in pesos. Our depositary bank will receive cash distributions that we make with respect to the shares underlying the ADSs in pesos. The depositary will convert such pesos to U.S. dollars at the then-prevailing exchange rate to make dividend and other distribution payments in respect of ADSs. If the Chilean peso depreciates against the U.S. dollar, the value of the ADSs and any distributions ADS holders receive from the depositary may decrease.

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Chilean securities markets are substantially smaller and less liquid than the major securities markets in the United States. In addition, Chilean securities markets may be affected materially by developments in other emerging markets, particularly other countries in South America. The low liquidity of the Chilean market may impair the ability of holders of ADSs to sell shares of our common stock withdrawn from the ADS program into the Chilean market in the amount and at the price and time they wish to do so.

Risk Factors Relating to the Rest of South America

All of our operations are located in South America. Although we originally operated only in Chile, we have, through strategic acquisitions and investments, expanded our operations throughout South America. In 2005, we generated approximately 65% of our consolidated operating revenues and approximately 63% of our consolidated operating income outside Chile (before consolidation adjustments). Accordingly, our consolidated revenues are sensitive to the performance of the South American economies as a whole. If local, regional or worldwide economic trends adversely affect the economy of any of the countries in which we have investments or operations, our financial condition and results from operations could be affected adversely.

The South American financial and securities markets are, to varying degrees, influenced by economic and market conditions in other emerging market countries. Although economic conditions are different in each country, investor reaction to developments in one country can have significant effects on the securities of issuers in other countries, including Chile. Chilean financial and securities markets may be affected adversely by events elsewhere, especially in other emerging markets, and such effects may affect the value of our securities. Moreover, we have significant investments in relatively risky non-Chilean countries such as Argentina, Brazil, Colombia and Peru. Generation and upstreaming of cash from subsidiaries in these countries have proven to be volatile.

Governmental authorities have often changed monetary, credit, tariff and other policies to influence the course of the economy of Argentina, Brazil, Colombia and Peru. These governments’ actions to control inflation and effect other policies have often involved wage, price and tariff rate controls as well as other interventionist measures, which have included freezing bank accounts and imposing capital controls. Changes in the policies of these governmental authorities with respect to tariff rates, exchange controls, regulations and taxation could affect our business and financial results adversely, as could inflation, devaluation, social instability and other political, economic or diplomatic developments, including the response by governments in the region to such circumstances. If governmental authorities intervene in any of the countries in which we operate, it could cause our business to be less profitable, and our results from operations may be affected adversely.

Risk Factors Related to Brazil

Our Brazilian distribution subsidiaries experience materially higher energy losses than those of the rest of our distribution operations, with Coelce and Ampla experiencing average loss rates for 2005 of 14.0% and 22.4%, respectively, compared with an average loss rate of 8.9% for the rest of our distribution operations. Elevated energy loss rates in our Brazilian distribution subsidiaries are due principally to energy theft, which is particularly acute in areas with high concentrations of low-income customers and in periods of economic downturn. Energy losses affect our financial results because lost energy could otherwise have been distributed to customers or sold to other distributors in return for payment.

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In April 2005, our distribution subsidiary, Coelce, went through its yearly tariff review process and obtained a tariff increase of 23.6%. However, part of the process was contested in court, which delayed its effective application until mid-October, thereby reducing our expected revenues. A final legal decision has yet to be taken. If the courts eventually reverse these new tariffs for Coelce, the result may have an adverse effect on our profitability.

Program for Regulatory Losses in Brazil. In connection with the next distribution tariff-setting process in 2008, we expect the government to reduce the provision for energy losses in tariffs. This represents a risk for our companies, Ampla and Coelce, because tariffs today recognize a level of losses close to the real level of each company. Consequently, any future tariff reduction will negatively affect Brazilian operations if we are not able to reduce the high level of energy theft.

Brazilian social low-income program. The Brazilian authorities have designed a program that will ensure electricity to those who cannot afford it. The program provides a subsidy to the distributor supply in order to allow residential consumers to pay a lower tariff for energy if they satisfy certain requirements. Consumers have faced difficulties enrolling in government programs of this kind. To solve this problem, ANEEL enacted Resolution No. 148/05, which allows consumers to enjoy the benefits of the government program by making a simple declaration agreeing to deliver the documentation that proves compliance with the applicable requirements of the program until February 2007. It is uncertain whether ANEEL will extend the deadline beyond such date, or whether consumers who have not delivered the required documentation by that date will lose the benefit of the electricity subsidy. Approximately 40% of Ampla’s customers require this benefit in order to pay their electricity bills. If these customers are unable to participate in this program, they may be unable to pay amounts owing to us in a timely manner, if at all, and electricity theft may increase, any of which may affect our operating results adversely.

The Central Bank of Argentina lifted, but may reinstate, restrictions on the transfer of funds outside of Argentina that could prevent our Argentine subsidiaries from distributing dividends and paying principal on certain of their external debt as it comes due.

From December 3, 2001 to May 6, 2003, the Argentine government imposed a number of monetary and currency exchange control measures that included restrictions on the free transfer of funds deposited with banks and severe restrictions on transferring funds abroad (including payments of dividends, principal and interest on debt), with certain exceptions for transfers related to foreign trade and other authorized transactions. The restrictions, requiring the Argentine Central Bank’s prior authorization for the transfer of funds abroad in order to make payments of principal and/or interest, were gradually relaxed from January to May 2003.

Currently, funds may be transferred abroad without the prior authorization of the Argentine Central Bank in order to pay dividends corresponding to prior periods provided that independent accountants have certified the financial statements for such period.

There can be no assurance, however, that the Argentine Central Bank will not once again require its prior authorization for the transfer of funds abroad for principal and/or interest payments by any of our Argentine subsidiaries to their foreign creditors or for dividend payments by our Argentine subsidiaries to their shareholders.

Should the Argentine Central Bank reimpose restrictions on the transfer of funds outside of Argentina that prevent our Argentine subsidiaries from paying principal on certain of their external debt, a substantial portion of their debt obligations may become due and payable, unless new financing is funded outside Argentina or our subsidiaries are able to renegotiate, or obtain a waiver with respect to the indebtedness that would be subject to such restrictions. If similar restrictions are imposed again, our Argentine subsidiaries may not be able to obtain new financing or be able to renegotiate or obtain waivers with respect to indebtedness subject to foreign exchange restrictions. In addition, such restrictions may impede the ability of our Argentine subsidiaries to make cash distributions to us.

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The Economic Emergency Law has affected Edesur adversely by repealing the provisions of Edesur’s concession contract that permitted its distribution tariffs to be pegged to the dollar, and that provided for certain price indexation mechanisms. Since Edesur’s invoices to its clients are no longer pegged to the dollar, the dollar value of such receivables declined significantly in the wake of the devaluation of the Argentine peso. Because Edesur’s indebtedness is largely dollar-denominated, the above-mentioned factors have had, and may continue to have, a significant negative impact on Edesur’s net income.

The Argentine public debt was restructured in a substantial portion on March 2005, but such restructuring continues to be subject to litigation. The Argentine government used its financial reserves in order to prepay a portion of U.S.$ 9.5 billion in debt held with the International Monetary Fund. This significant reduction in reserves could affect the government’s capacity to react to local or foreign risks in the short- and medium-term.

The insufficient electricity available in Argentina did not allow Argentine generators to fully comply with export contracts to Brazil in 2005, and created conflicts for generators who export electricity to CEMSA and CIEN, our transmission companies, as well as conflicts between CIEN and its Brazilian clients. Our Argentine generation subsidiary, Endesa Costanera (or ENCO), requested from CIEN and CEMSA, either a contractual amendment in order to restore the financial and economic equilibrium provisions which would result in a price increase, or alternatively, the rescission of the export contracts.

CIEN has been unable to comply with its clients, Furnas and Tractebel, given that those contracts call exclusively for Argentine electricity. Those clients retained some payments to CIEN, and CIEN in turn stopped certain payments to Endesa Costanera. Since both the Argentine and Brazilian regulators are directly involved in the conflict solution, Furnas and Tractebel have not initiated legal actions against CIEN. However, CIEN is contractually required to comply with its other clients, Copel and Ampla, and has in this case been forced to buy Brazilian-sourced electricity at the spot market. In so doing, CIEN’s short position has been only partially covered for 2006. As of the date of this report, CIEN’s operations under these contracts have been normal.

On December 9, 2005, the Argentine and Brazilian governments signed an Memorandum of Understanding, which facilitates the operation of export contracts without the imposition of fines for any incompliance, through a transitional period ending December 31, 2008. By that time, the assumption is that the full Argentine electricity supply should be reestablished. Under this Memorandum of Understanding, Endesa Costanera, CEMSA and CIEN are negotiating new conditions for the Argentine export contracts which would include new prices and a volume adjustment. CIEN is also under negotiations with Brazilian regulators, as well as Furnas and Tractebel.

Nevertheless, CIEN is currently short on its contracts with Copel and Ampla, which may be costly in poor hydrological conditions. In addition, we cannot give assurances that CIEN will reach a satisfactory resolution with Furnas and Tractebel, nor that Endesa Costanera will be able to achieve a desired financial and economic equilibrium or otherwise rescind its export contracts.

Since 2002, the Argentine electricity system has been operating under very tight conditions as a result of growth in demand, which has not been met with increased generation capacity. This situation may adversely impact our subsidiary Edesur, as distribution companies are obligated to supply to regulated customers in their concession area regardless of cost. Although the agreement signed in August 2005 establishes a waiver of this obligation until July 31, 2006, we do not know whether the waiver will be extended in the event that the generation of electricity proves to be insufficient for Edesur’s needs.

In August 2005, Edesur and the UNIREN (“Unidad de Renegociación y Análisis de Contratos de Servicios Públicos”), a government authority in charge of amending public service contracts, signed an agreement which

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established conditions for a new tariff setting process to be implemented during 2006. There is a risk that the tariff setting could take considerable time in its implementation.

Risk Factors Related to Colombia

The Commission for the Regulation of Energy and Gas (CREG) is promoting the creation of an electronic electricity exchange similar to a financial market. This would serve to increase the levels of competition and transparency in energy transactions between the different market players. However, according to preliminary documentation, the contracting parties would not be able to evaluate the creditworthiness of their counterparts. If, in the future, we are forced to conduct transactions through an electronic electricity exchange which does not allow us to assess counterparty credit risk, we will be exposed to a greater risk of payment and non-performance default, which may affect our revenues adversely.

Risk Factors Related to Peru

In 2004, generators in Peru agreed to satisfy the non-contracted demand of the regulated market at the node price through 2007. Each generator would supply energy in proportion to its share of the country’s installed capacity. This agreement exposes the company to possible losses as a result of differences between the node price and the marginal cost of electricity because the company may be required to purchase electricity at higher prices in the spot market and resell it at fixed node prices. The average spot market price in 2005 reached approximately 63 U.S. dollars per MWh while the node price averaged approximately 40 U.S. dollars per MWh. The problem persisted in 2005, although distributors have increased the amount of contracted demand. Consequently, the total amount of non-contracted electricity demand from regulated customers has declined since 2004. The “Comité de Operación Económica del Sistema” (COES) has continued to allocate generators the demand in excess of contracted energy and capacity which distribution companies withdraw from the system. There is no assurance as to what the price difference will be between the average spot price in the electricity market and the node price in the future nor what amount of non -contracted electricity will be absorbed by our Company.

The tariff setting process for secondary transmission systems (grids which are not part of the principal systems and are used to link generators or customers with the main grid) began in October 2005. This process will give rise to new tariffs in April 2007, and may have an adverse effect on Edelnor as owner of secondary transmission systems.

Item 4.    Information on the Company

A.    History and development of the Company.

Enersis was originally organized as Compañía Chilena Metropolitana de Distribución Eléctrica S.A., as recorded in a public deed on June 19, 1981. The existence of our company was authorized, and its by-laws were approved, pursuant to Resolution No. 409-S on July 17, 1981, issued by the Chilean Superintendency of Securities and Insurance, or SVS (using the Spanish acronym). The by-laws have been amended subsequently. The existence of our company under its current name, ENERSIS S.A., or Enersis, dates back to August 1, 1988. Enersis is a limited liability stock company domiciled in Santiago, Chile, and operates under Chilean law and regulations.

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The Company’s authorized representative in the United States of America is Puglisi & Associates, whose contact information is:

We are an electricity utility company primarily engaged, through our principal subsidiaries and related companies, in the generation, transmission and distribution of electricity in Chile, Argentina, Brazil, Colombia and Peru. We are one of the largest private sector electricity companies in South America in terms of consolidated assets and operating revenues, with over 11.2 million customers, and the largest electricity company in Chile. Through Endesa Chile, we are one of the largest private sector electricity generation companies in South America in terms of installed capacity. We also have smaller operations in other non-electricity businesses. Endesa-Spain, Spain’s largest electricity generation and distribution company, acquired control of our company in April 1999 and owned 60.6% of our outstanding shares as of December 31, 2005.

For the nine years ended December 31, 2005, we have ranked as the largest private sector electricity company in Chile, measured by consolidated assets and consolidated operating revenues. As of and for the year ended December 31, 2005, our consolidated assets were Ch$ 10,253.6 billion and our consolidated operating revenues were Ch$ 3,215.8 billion.

We trace our origin to Compañía Chilena de Electricidad Ltda., or CCE, which was formed in 1921 as a result of the merger of Chilean Electric Tramway and Light Co., founded in 1889, and Compañía Nacional de Fuerza Eléctrica, with operations dating back to 1919. In 1970, the Chilean government nationalized CCE. In 1981, CCE’s operations were divided into one generation company, the current AES Gener S.A., and two distribution companies, one with a concession in Region V, the current Chilquinta S.A., and the other with a concession in the Santiago metropolitan region, Compañía Chilena Metropolitana de Distribución Eléctrica S.A. From 1982 to 1987, the Chilean electric utility sector went through a process of re-privatization. On August 1, 1988, Compañía Chilena Metropolitana de Distribución Eléctrica S.A. changed its name to ENERSIS S.A. and became the new parent company of Distribuidora Chilectra Metropolitana S.A., later renamed Chilectra S.A. In 1989, Río Maipo was spun off from Chilectra, and Río Maipo has since operated the electricity distribution concession in the more rural southern and western portions of the Santiago metropolitan region. Enersis sold Río Maipo on April 30, 2003. In the 1990s, we diversified into electricity generation and transmission through our increasing equity stakes in Endesa Chile. We began our international operations with the 1992 investment in Edesur, the Argentine electricity distribution company. We then expanded primarily into electricity generation, transmission and distribution businesses in four South American countries: Argentina, Brazil, Colombia and Peru. We remain focused on the electricity sector, although we also have small operations in other businesses.

We continually evaluate potential asset reorganizations with the purpose of optimizing operating, financing and tax considerations. We expect to undertake such transactions, with a focus on the reorganization of Enersis, Endesa Chile and our subsidiaries in Chile and Peru.

The goal of the Peruvian project is to achieve generation synergies through the merger of Edegel and Empresa de Generación Termoeléctrica Ventanilla S.A. (“Etevensa”), a 342 MW thermoelectric generation company 60%-owned by Endesa-Spain. On January 17, 2006, this project was approved by the shareholders of both companies. Following the merger, Endesa Chile will consolidate Etevensa through Edegel.

On May 24, 2005, Enersis’ Board of Directors approved the creation of the holding company, Endesa Brasil S.A. (“Endesa Brasil”) through which a reorganization was carried out of all generation, transmission and

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distribution assets that Endesa Internacional, Enersis, Endesa Chile and Chilectra held in Brazil, namely through Ampla, Endesa Fortaleza, Investluz, CIEN, Cachoeira Dourada and Coelce. This reorganization, completed in October 2005, simplifies the ownership structure of these assets in Brazil, creates greater stability for local cash flows, improves access to third-party financing and improves the Group’s position to attain new business opportunities and operating synergies. As of December 31, 2005, the direct and indirect ownership of Endesa Internacional, Enersis, Endesa Chile and Chilectra in Endesa Brasil was 61.0%, 53.6%, 37.8% and 9.0%, respectively. As of October 2005, Enersis began consolidating Endesa Brasil. For more information, please see note 11 of our consolidated financial statements.

Regarding Chile, in order to simplify its organizational structure, diminish corporate costs, improve performance and optimize taxes, Enersis has decided to merge Elesur S.A. (“Elesur”) and Chilectra. Enersis is the parent company of Elesur, a privately owned company domiciled in Chile. As a consequence of this merger, Elesur would absorb Chilectra. This was approved by Enersis’ Board of Directors on October 6, 2005, and is subject to the approval of Elesur’s and Chilectra’s shareholders at their General Extraordinary Shareholders Meeting, expected to take place on March 31, 2006.

On September 5, 2005, Gas Natural SDG, S.A. (“Gas Natural”), a Spanish natural gas supplier, requested authorization from the Spanish Securities Market Commission (Comisión Nacional del Mercado de Valores, or “CNMV”) to tender for 100% of the share capital of Endesa-Spain, our parent company. As of the date of this report, the consideration offered to Endesa-Spain shareholders is € 7.34 in cash and 0.569 newly-issued Gas Natural shares for each Endesa-Spain share. The offer is conditional upon Gas Natural acquiring shares representing 75% of the share capital of Endesa-Spain. In addition, the offer is conditional on the modification by the Endesa-Spain shareholders of a number of Articles in its by-laws, including Article 32, which sets forth a limitation in respect of the maximum number of votes capable of being exercised by Endesa-Spain shareholders. On February 3, 2006, the Spanish Government’s Consejo de Ministros approved the potential economic concentration transaction arising from the tender offer subject to certain conditions.

On February 21, 2006, E.ON, the German multinational power and gas utility, announced a competing tender offer for 100% of the share capital of Endesa-Spain at a price of € 27.50 per share in cash. The offer is conditional on having E.ON acquire at least 529,481,934 shares of Endesa-Spain, representing 50.01% of our parent company’s share capital, and Endesa-Spain shareholder modifications to Articles 32, 37, 38, and 42 of the by-laws.

At the time of this report, we cannot predict if one of the tender offers above, possibly in some modified manner, will ultimately be successful, nor can we predict whether other potential parties will offer competing tender offers for the control of our parent company. Furthermore, we cannot forecast eventual credit ratings for any company that may prove successful in a tender offer over Endesa-Spain. We have outstanding credit facilities with “change of control” provisions which could result in some acceleration rights on such indebtedness. See “Item 3. — Key Information — D. Risk Factors.”

We coordinate the overall financing strategy of our subsidiaries and intercompany advances to optimize debt management as well as the terms and conditions of our financing. Our operating subsidiaries independently develop capital expenditure plans financed by internally generated funds or direct financings. One of our aims is to focus on investments that will provide a long-term benefit, such as energy loss reduction projects. Additionally, by focusing on Enersis as a whole and seeking to provide services across the group of companies, we are aiming to reduce the level of investment necessary at the individual subsidiary level in items such as procurement, telecommunication and information systems.

For the period between 2006 and 2010, we expect to make capital expenditures of approximately Ch$ 2,353 billion in our majority-owned subsidiaries, including Endesa Chile. The table below sets forth the capital expenditures made by our subsidiaries between 2003 and 2005 and the expected capital expenditures for the period 2006-2010.

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(1)   Beginning October 2005, we include investments corresponding to Endesa Fortaleza and CIEN. These companies consolidate in Endesa Brasil, which in turn is consolidated by Enersis.

The electricity generation and transmission businesses had total capital expenditures of Ch$ 59 billion in 2005. For the period between 2006 and 2010, we expects to make further capital expenditures of approximately Ch$ 812 billion in maintenance of existing operating plants and expand installed capacity.

In 2005, Endesa Chile began the construction of San Isidro II, a 377 MW thermal power plant, which will be located beside San Isidro I. The total investment is expected to be approximately Ch$ 115 billion.

In addition, Endesa Chile began the construction of Palmucho, a 32 MW hydroelectric plant located beside Ralco, which will take advantage of the flow that the Ralco plant must release under the conditions of Ralco’s Environmental Impact Assessment. Total investment is expected to be Ch$ 20 billion. The plant is scheduled to begin operating during the fourth quarter of 2007.