Enersis S.A. 6-K 2012
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For the month of April, 2012
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ANNOUNCES CONSOLIDATED RESULTS
FOR THE PERIOD ENDED ON MARCH 31st,, 2012
Highlights for the Period
Ø Operating revenues increased 4.4%, reaching Ch$ 1,644,177 million, mainly as a consequence of higher energy sales by Ch$ 86,132 million, in line with important increases in demand for electricity, as follows,
· Argentina 6.4%
· Brazil 6.6%
· Chile 6.8%
· Colombia 4.7%
· Peru 6.4%
Ø Physical sales in distribution increased 981 GWh, or 5.7%, reaching 18,251 GWh. While in generation, the production reached 16,215 GWh, increasing 544 GWh, equivalent to 3.5%.
Ø Another positive factor which contributes to understand this better result, corresponds to the addition of 380,000 new clients during the last twelve months.
Ø Operating costs increased 6.0%, reaching Ch$ 925,421 million, due to higher energy purchases of Ch$ 38,940 million, increased fuel consumption by Ch$ 13.386 million, and higher transportation cost of Ch$ 28,688 million. As largely informed, these higher costs are heavily influenced by two and a half years of sustained drought in Chile.
Ø EBITDA of the Company increased 14.4% up to Ch$ 497,025 million, in a solid proof of the benefits of adequate diversification.
Ø Financial result was Ch$ 84,287 million losses, or 21.5% higher than for the first quarter of 2011. This negative output is mainly due to higher interest expenses, increase in negative exchange rate variations, as well as negative impact on loss from indexed assets and liabilities.
Ø Net Income before taxes improved 7.6% or Ch$ 20.867 million of higher results
Ø Taxes decreased by Ch$ 28.893 million
Ø Net income increased 27,4% or Ch$ 49.759 million, from Ch$ 181.340 million up to Ch$ 231.099 million.
Ø The diversified portfolio of Enersis Group, allowed us to maintain a well balanced contribution to our EBITDA, by business segment,
• Generation and Transmission: 46%
• Distribution: 54%
Consolidated figures for the distribution businesses are detailed as follows:
Ø Operating revenues rose 8.1% to Ch$ 1,163,172 million.
Ø Procurement and service costs were Ch$ 739,972 million, 4.8% higher than for the same period of 2011.
Ø EBITDA in the first quarter of 2012 amounted to Ch$ 267,165 million, 29.7% higher than the first quarter of 2011.
Ø Energy sales by customer type for each of our distribution companies is as follows:
Factors influencing this higher distribution business EBITDA are as follows:
In Argentina, EBITDA decreased by Ch$ 7,936 million, mainly explained by:
Ø Increase in operating costs, mainly due to higher energy purchases and salary increases under union agreements.
Ø This was partially offset by higher physical sales, due to a higher demand for electricity.
In Brazil, EBITDA grew by Ch$ 22,226 million as result of:
Ø Higher energy sales income of Ch$ 11,431 million, explained by a 6.8% larger demand and higher average sale price.
Ø This was partially compensated by Ch$ 35,087 or 28.1% lower other operating income.
In Chile, EBITDA grew by Ch$ 5,354 million, mainly explained by:
Ø Higher energy sales income of Ch$ 11,666 million, explained by 6.8% larger demand and higher average energy sale price.
In Colombia, EBITDA increased by Ch$ 41,049 million, mostly as result of:
Ø The effect of the Colombian government equity tax reform, which implied recording in 2011 the entire tax payable during the period 2011-2014.
Ø Higher energy sales income of Ch$ 28,623 million an 18.4% increase, explained by an 11.7% increase in demand and higher average energy sale price.
In Peru, EBITDA rose Ch$ 485 million as result of:
Ø 6.3% increase in physical sales.
Ø Higher other operating incomes of 3.7%.
Ø The previous was partially offset by Ch$ 12,815 million of higher energy purchases or 29.1% increase over the same period last year, and by 0.1 p.p increase in energy losses.
Generation and Transmission Business
Ø Operating revenues decreased 1.0% reaching Ch$ 632,454 million, due to a lower average energy sale price.
Ø Procurement and services costs increased 6.8% to Ch$ 342,102 million as result of higher transportation expenses of Ch$ 23,120 million and higher fuel consumption of Ch$ 13,385 million.
Ø EBITDA decreased 0.5%, amounting to Ch$ 230,587 million.
Ø Consolidated electricity generation grew 5.6%, reaching 14,093 GWh, basically explained by better performances of Colombia and Brazil.
Ø Consolidated physical sales increased 3.5% to 16,215 GWh, mainly because of Brazil and Colombia.
Main explanations for these changes are:
In Argentina, EBITDA decreased by Ch$ 7,756 million due to:
Ø Lower operation revenues of Ch$ 10,458 as a consequence of an 18.6% reduction in average energy sale prices.
Ø Higher personnel expenses of Ch$ 2,810 million.
Ø This was partially offset by lower fuel consumption cost of Ch$ 5,165 million.
In Brazil, EBITDA increased by Ch$ 13,993 million due to:
Ø Lower energy purchases cost of Ch$ 8,054 million, mainly explained by our subsidiary Endesa Fortaleza.
Ø Higher revenues on energy sales of Ch$ 12,263 million
In Chile, EBITDA decreased Ch$ 63,026 million, mainly due to:
Ø Lower operating revenues of Ch$ 38,168 million due to a 14.4% reduction in average energy sale prices.
Ø Higher transportation cost of Ch$ 17,941 million and higher fuel consumption cost of Ch$ 4,947 million, partially offset by lower energy purchase cost of Ch$ 4,926 million.
In Colombia, EBITDA grew by Ch$ 50,665 million, mainly due to,
Ø Non-recurring effect of the equity tax imposed by the Colombian government, which implied booking on the first quarter of 2011 the full amount payable in the period 2011-2014. This had an impact of Ch$ 42,672 million in operating result in that quarter.
Ø Increase in operating revenues of Ch$ 19,801 million due to a 14.4% increase in the average energy sale price and a 2.9% increase in physical sales due to higher hydro generation.
Ø This was partially offset by a higher fuel consumption cost of Ch$ 8,584 million.
In Peru, EBITDA increased by Ch$ 5,001 million due to:
Ø Higher operating revenues of Ch$ 10,821 derive from a 17% increase in average energy sale price and a 2.0% increase in physical sales
Ø The latter was partially offset by higher fuel consumption cost of Ch$ 4,456 million and higher personnel expenses of Ch$1,438 million.
Ø The average nominal interest rate increased from 9.6% to 9.7%., affected by inflation in Chile.
Ø Liquidity, a key consideration in our financial management, continues to be in a very solid position, as shown below on a consolidated basis for Enersis,
· Cash and cash equivalents US$ 2,289 million
· Committed credit lines US$ 905 million
· Non-committed credit lines available US$ 1,911 million.
Ø Coverage and protection: In order to mitigate exchange rate and interest rate risks, Enersis has established strict internal rules to protect our cash flows and balance sheet from fluctuations in these variables.
· Our exchange rate policy is based on cash flows and we strive to maintain a balance between US dollar indexed flows, and assets and liabilities in such currency. In addition to this policy, we have contracted cross currency swaps for a total amount of US$ 1,453 million and forwards for US$ 241 million.
· In order to reduce financial results’ volatility due to changes in market interest rates, we seek to maintain an adequate balance in our debt structure. Thus, we have contracted interest rate swaps (from variable to fixed rates) for US$ 311 million.
Ø Since April 2011, the Chilean Stock Exchange’s main index, IPSA, showed an increase of 1.0%, remaining active for most part of the year, although reflecting the uncertainty prevailing in the international stock markets, the Chilean Stock market was decoupled of global movements, as well as other Latin American markets.
Ø This situation can be seen in the behavior of some Latin America markets, as follows:
BOVESPA (Brazil): -5.9%
MERVAL (Argentina): -20.8%
COLCAP (Colombia): 1.5%
ISBVL (Peru): 11.0%.
In Europe, main stock exchanges showed poor results,
FTSE 250: -0.5%.
On the other hand, USA indexes showed a good performance; S&P 500: 6.2% and Dow Jones Industrial: 7.2%. All these stock performances are calculated in their domestic currency and are, therefore, non comparable
Ø Enersis’ share price remained with no major changes during the last 12 months. The price as of March 31, 2012 was $198.1 which represents a 0.2% decrease in comparison with March 31, 2011 price, when it reached $198.5. This flat performance is mainly explained by the negative global economic scenario and also by the drought affecting Chile for the last 30 months, reducing the results of its generation subsidiaries. The results of the first quarter show, however, that thanks to the diversification, it is possible to compensate local negative outcome.
Ø Enersis’ ADR also remained mostly flat during the last 12 months. The price fell from US$ 20.8 on March 31, 2011, to US$ 20.2 on March 31, 2012. The global economic situation, as well as the drought affecting Chile, impacted the equity’s value.
Ø During last twelve months, Enersis was, again, among the most actively traded companies in the local market (Santiago Stock Exchange and Chilean Electronic Exchange), with a daily average trading volume of US$ 5.4 million.
Source: Santiago Stock Exchange
Risk Rating Classification Information
The key considerations released by the Rating Agencies to maintain a stable Outlook of the Company, are, its well diversified asset portfolio, strong credit metrics, adequate debt structure and solid liquidity. The Company’s geographic diversification in Latin America provides a natural hedge against different regulations and weather conditions. Most of Enersis’ operating subsidiaries are financially strong and have leading market positions in the countries where Enersis operates.
Among the main events of 2011 and 2012, we can highlight the following:
Ø On April 25, 2011, Moody's upgraded the senior unsecured rating of Enersis from “Baa3” to “Baa2”, with stable outlook. We have just had our Update Meeting with no changes.
Ø On December 30, 2011, Feller Rate confirmed the “AA” local rating of Enersis’ bonds, shares and commercial papers program. Rating perspectives continue to be stable.
Ø More recently, Standard & Poor’s (November 30, 2011) and Fitch Ratings (January 5, 2012) affirmed the international credit risk rating for Enersis on “BBB+”, with stable outlook.
Current international risk ratings are:
Local ratings (for securities issued in Chile):
Table of Contents
(Santiago, Chile, Wednesday, April 25, 2012.) Enersis S.A. (NYSE: ENI), announced today its consolidated financial results for the first quarter of 2012. All figures are in Chilean pesos (Ch$) and in accordance with International Financial Reporting Standards (IFRS). Variations refer to the period between March 31, 2011 and March 31, 2012.
Figures as of March 31, 2012 are additionally translated into US$, merely as a convenience translation, using the exchange rate of US$ 1 = Ch$ 487.44 for the Balance Sheet, and the average exchange rate for the period of US$ 1 = Ch$ 489.04 for the Income Statement, Cash Flow Statements, Capex and Depreciation values.
The consolidation includes the following investment vehicles and companies:
a) In Chile: Endesa Chile (NYSE: EOC)*, Chilectra, and Inmobiliaria Manso de Velasco.
b) Others than Chile: Distrilima (Peru), Endesa Brasil (Brazil)**, Edesur (Argentina) and Codensa (Colombia).
* Includes Endesa Chile Chilean subsidiaries (Endesa Eco, Celta, Pangue, Pehuenche, San Isidro, and Tunel El Melón), non Chilean subsidiaries (Endesa Costanera, El Chocón, Edegel and Emgesa) and jointly controlled companies (GasAtacama, Transquillota and HidroAysén.)
** Includes Endesa Fortaleza, CIEN, Cachoeira Dourada, Ampla and Coelce.
Consolidated Income Statement Analysis
Enersis’ Net Income attributable to the owners of the controller for the cumulative period as of March 31, 2012 reached Ch$ 100,661 million, representing a 5.0% increase over the same period 2011, which was Ch$ 95,851 million.
Operating income increased by Ch$ 25,823 million, a 7.4% increase when compared to the first quarter of 2011.
Operating revenues and costs breakdown by business line for the period ending on March 31, 2011 and March 31, 2012 are:
Generation and transmission business evidenced an operating income of Ch$ 177,894 million, representing a Ch$ 22,871 million decrease from the first quarter of 2011, an 11.4% decrease. Physical sales increased 3.5%, amounting to 16,215 GWh in this quarter (15,672 GWh for the first quarter of 2011).
Operating income for generation and transmission business line, detailed by country is presented in the following table:
Distribution business showed a Ch$ 46,175 million higher operating income, totaling Ch$ 200,148 million. Physical sales amounted to 18,251 GWh, representing an increase of 981 GWh, or 5.7%. Our customer base increased by 380 thousand of new clients approximately, amounting over 13.7 million customers.
Operating Income for distribution business line, detailed by country, is as follows:
Net Financial Income
The Company’s net financial income as of March 31, 2012 totaled a loss of Ch$ 84,287 million, 21.5% higher than for the same period of 2011. The latter is mainly explained by:
Higher financial expense of Ch$ 9,562 million, due to the recognition of tax contingence interests of Ch$ 7,564 million in Edegel and Ch$ 1,957 in Edesur.
Increase in exchange rate expense of Ch$ 5,193 million, related to the USD mismatch that affects exchange rate variations, which had in March 2011 a variation of Ch$ 13.92 and this quarter a negative variation of $31.76 $/US$.
Higher indexed assets and liabilities expense of Ch$ 3,088 million as a result of the negative impact of inflation over U.F. denominated debt in Chile.
This was partially offset by higher financial revenues of Ch$ 2,947, due to higher deposits in Edelnor of Ch$ 1,566 million and in Codensa of Ch$ 960 million.
Sale of Assets
The net income from sale of assets registered an increase of Ch$ 9,504 million, explained by the recognition in 2011 of the loss generated due to the sale of CAM.
Income tax net expense decreased by Ch$ 28,893 million at the end of March 2012. This is explained by decreases in: Endesa Chile by Ch$ 26,655 million, Enersis by Ch$ 11,381 million and Chilectra by Ch$ 3,138 million.
The latter was partially offset by increases in: Coelce by Ch$ 10,879 million, Codensa by Ch$ 3,086 million and Edesur by Ch$ 1,828 million.
Consolidated Balance Sheet Analysis
Assets Under IFRS
Total Assets decreased Ch$ 275,786 million, mainly due to:
Ø Ch$ 154,664 million decrease in non-current assets, equivalent to 1.4%, as a result of:
v Ch$ 86,525 million decrease in Property, Plant and Equipment, explained by the net effect resulting from the translation of financial statements from local currencies to Chilean pesos by Ch$ 87,467 million, and depreciation for the period of Ch$ 85,557 million. The latter was partially offset by the additions for the period in approximately Ch$ 87,160 million.
v Ch$ 47,180 million decrease in intangible assets other than goodwill, due to the exchange rates variations of Ch$ 54,661 million, added to the amortization of the period of Ch$ 27,290 million, partially offset by additions for the period of Ch$ 34,170 million.
v Ch$ 30,381 million decrease in trade accounts receivables and other receivables, mainly due to the decrease in Coelce by Ch$ 9,861 million and Ampla by Ch$ 4,132 million, by the appliance of IFRIC 12 Norm, related to service concession arrangements. Also due to decreases in Costanera and Chocón for a total of Ch$ 13,805 million due to FONINVEMEN.
v Ch$ 25,103 decrease in Goodwill, mainly as a consequence of translation of local currencies to Chilean pesos.
The latter was partially compensated by:
v Ch$ 17,230 million increase in deferred taxes in: Endesa Chile by Ch$ 12,523 million and Enersis by Ch$ 9,065 million.
v Increase of Ch$ 22,614 million in other non-current financial assets, mainly explained by the grow in Endesa Chile by Ch$ 13,742 million, due to MTM of derivatives and an increase in Enersis of Ch$ 8,647 million in cash collateral.
Ø Ch$ 121,122 million decrease in current assets equivalent to 4.8%, mainly due to:
v Ch$ 105,134 million decrease in Cash and Cash Equivalent, primarily explained by decreases in: Endesa Chile by Ch$ 50,292 million due to the payment of the UF denominated bond Serie F, Enersis by Ch$46,760 million due to dividends payment and Emgesa by Ch$ 11,856 million also due to dividends payment .
v Decrease in trade and other accounts receivables by Ch$ 33,284 million mainly explained by decreases in: Costanera by Ch$ 15,698 million, Pehuenche by Ch$ 15,609 million, Endesa Chile by Ch$ 8,259 million and Pangue by Ch$ 3,583 million. This was partially offset by increases in Ampla by Ch$11,238 million.
Book Value and Economic Value of Assets
Regarding the more important assets, the following should be mentioned:
Properties, Plants and Equipment are valued at their purchase cost, net of the corresponding accumulated depreciation and impairment loss they have been subject to. Properties, Plants and Equipment, net of their residual value, if applicable, are linearly depreciated by distributing the cost of their different elements along the estimated years of useful life, which is the period that the companies expect to use them. The useful life is reviewed regularly.
The goodwill value generated by consolidation represents the acquisition cost surplus on the Group’s stake in terms of the reasonable value of assets and liabilities, including the identifiable contingent liabilities of a subsidiary at the time of acquisition. Goodwill is not amortized. Instead, at the closing of each accounting period an assessment is made of whether any impairment has occurred during the period that could reduce its recoverable value to an amount below the registered net cost, proceeding in this event to make a timely impairment adjustment (See Note 3.e to the Consolidated Financial Statements).
Throughout the fiscal year and in particular at the date of closing, an assessment is made as to any indication of possible loss due to the impairment of any asset. In the event of any such indication, an estimate of the recoverable sum of said asset is made to determine, if applicable, the depreciated amount. If this involves identifiable assets that do not originate independent cash flows, the recoverability of the Cash Generating Unit that the asset belongs to is estimated, understanding as such the smaller group of identifiable assets that generate independent cash incomes.
Assets expressed in foreign currency are expressed at the prevalent exchange rate at the closing of the period.
Notes and accounts receivable from related companies are classified according to their short and long term maturities. These operations are adjusted according to prevalent market equity conditions.
In summary, assets are valued according to the International Financial Reporting Standards, whose criteria are expressed in Note 3 of the Consolidated Financial Statements.
Liabilities and Shareholders’ Equity Under IFRS
The Company’s total liabilities and shareholders’ equity decreased by Ch$ 275,786 million, compared to the period ended on December 31, 2011, due to Ch$ 245,334 million decrease in non current liabilities and Ch$49,877 million in shareholders’ equity. This was partially offset by Ch$ 19,425 million increase in current liabilities.
Ø Non-current liabilities decreased by Ch$ 245,334 million, equivalent to 5.6%, mainly due to:
v Other non-current financial liabilities (financial debt and derivatives) decreased by Ch$ 215,576 million, mainly due to decreases in: Endesa Chile by Ch$ 122,727 million, due to converting U.F. bond to short term and exchange rate effect, Edelnor by Ch$ 23,656 million due to converting bond to short term and exchange rate effect, Codensa by Ch$ 17,136 million due to converting to short term, Ampla by Ch$ 16,483 million due to converting bond to short term and exchange rate effect, Coelce by Ch$ 15,655 million due to converting bond to short term and exchange rate effect, Edegel by Ch$ 15,266 million due to converting bond to short term and exchange rate effect and Fortaleza by Ch$ 1,456 due to exchange rate effect.
v Deferred taxes liabilities decrease in Ch$ 18,038 million due to reductions in Edegel by Ch$ 7,442 million, CIEN by Ch$ 3,626 million, Edelnor by Ch$3,060 million, GasAtacama by Ch$ 1,919 million, Coelce by Ch$ 1,538 million and Ampla by Ch$ 967 million.
Ø Current liabilities increased by Ch$ 19,425 million, equivalent to 0,8%, mainly explained by the following changes:
v Increase in other current financial liabilities by Ch$ 42,023 million, explained by increases in: Endesa Chile by Ch$ 53,373 million; Codensa by Ch$ 12,352 million; Edelnor by Ch$ 8,515 million. This was partially offset by decreases in Emgesa by Ch$ 21,264 million; Ampla by Ch$ 6,225 million and Coelce by Ch$ 821 million.
v Increase in accounts payable to related companies of Ch$ 21,868 million, as a result of the increase of accounts payable to Endesa Latinoamerica in Ch$ 33,805 million, mainly dividends, and to GNL Quintero by Ch$2,312 million, partially offset by decreases in accounts payable to Cemsa by Ch$ 6,123 million and Carboex by Ch$ 5,587 million.
The above was partially offset by:
v Reduction in current tax liabilities of Ch$ 20,473 million mainly due to the reduction in Cachoeira Dorada of Ch$ 13,090 million, Coelce by Ch$7,190 million, Pehuenche by Ch$ 5,934 million and Pangue by Ch$ 5,466 million, partially offset by increases in Chilectra by Ch$ 2,755 million, Edesur by Ch$ 2,036 million, Edelnor by Ch$ 1,998 million and Enersis by Ch$719 million.
v Reduction in trade and other current liabilities by Ch$ 17,709 million due to decreases in payables for goods and services by Ch$ 127,698 million, energy suppliers by Ch$ 29,322 million, fines and claims by Ch$ 4,889 million and payables to tax autorithies by Ch$ 4,427 million. The latter is partially offset by increases in dividend payable to third parties by Ch$87,823 million, other payable accounts by Ch$23,764, fuel and gas suppliers by Ch$ 21,882 million and in social obligations by Ch$ 7,062 million.
Equity decreased by Ch$49,877 million with respect to the first quarter of 2011:
v The equity attributable to owners of parent by Ch$24,682 million, mainly explained by the effect of the comprehensive result for the period of Ch$ 54,881 million, primarily driven by the result of the dominant of Ch$ 100,661 million, negative conversion reserves of Ch$ 72,116 million, positive hedge reserve of Ch$ 26,197 million and other reserves of Ch$ 1 million, less dividends of Ch$ 30,198 million.
v Non-controlling interest decreased by Ch$ 74,559 million, mainly explained by the effect of the comprehensive result for the period of Ch$ 94,372 million, principally driven by the result for the period of the non-controllers of Ch$ 130,437 million, negative other comprehensive results of the period of Ch$ 36,065 million, and by the reduction in other equity movements of Ch$ 168,932 million.
Debt Maturity with Third Parties, Thousand US$
Debt Maturity with Third Parties, Million Ch$
Evolution Of Key Financial Ratios
The liquidity ratio at March 31, 2012 was 0.97:1, a slight decrease of 0.06 times, equivalent to 5.8%, with respect to March 31, 2011. This reflects a company with a solid liquidity position, fulfilling its financial liabilities, financing its investments with cash generation and a comfortable debt maturity structure.
The leverage ratio is 0.97:1 as of March 31, 2012, reducing by 2.0% compared to March 31, 2011.
The financial expenses coverage shows a fall of 0.06 times, equivalent to 1.5%, moving from 3.94:1 as of March 31, 2011 to 3.88:1 as of March 31, 2012. This is the result of the increase in the company’s financial cost in this period.
The profitability indicator, operating income over operating revenues, grew 2.9% to 22.9% as of March 31, 2012.
On the other hand, the annualized return on equity of the owners of the controller (dominant) is 9.8%, with a fall of 24.2% with respect to March 31, 2011 when it was 12.9%. This was the result of the lower result reported for the period, added to the increase of the equity of the owners.
The annualized return on assets passed from 8.2% as of March 31, 2011 to 6.9% in March 31, 2012 as a result of the decline in the result for the annualized present period.
Consolidated Statements of Cash Flows Analysis