ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

ENEL CHILE

ANNOUNCES CONSOLIDATED RESULTS

FOR THE PERIOD ENDED SEPTEMBER 30, 2019

(Amounts expressed in millions of Chilean Pesos)

EXECUTIVE SUMMARY

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

SUMMARY BY BUSINESS

Generation

Distribution

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

FINANCIAL SUMMARY- ENEL CHILE

-        Cash and cash equivalents                            US$ 244 million.

-        Undisbursed committed credit lines (*)           US$ 197 million. 

(*) includes Enel Chile´s US$50 million undisbursed committed credit line with related party Enel Finance International.

• The average cost of Enel Chile’s debt as of September 2019 was 5.4%.
   
• Hedging and protection:

Enel Chile has established policies and procedures to protect its financial statements against the volatility of the exchange rate and the interest rate mitigating the financial risk related to the variations of these variables.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

 
Enel Chile’s exchange rate hedging policy states that there should be a balance between the currencies of each company’s operations and the currency of its debt.  Therefore, we have cross currency swap and forward contracts that amount to US$ 1,142 million and US$ 1,055 million, respectively.

To reduce financial statement volatility caused by interest rate variations, the Enel Chile Group maintains an adequate debt structure balance. Therefore, the Company has interest rate swaps for US$ 700 million.

INFORMATION RELEVANT TO THE ANALYSIS OF THESE FINANCIAL STATEMENTS

Change in Scope of Consolidation:

Corporate Reorganization Project

On August 25, 2017, Enel Chile proposed a corporate reorganization (“the Reorganization”)  to Enel S.p.A that involved integrating the Enel Green Power Latin America Ltda. (“EGPL”) renewable energy assets in Chile into Enel Chile, which controls the conventional electricity generation assets owned by Enel Generacion Chile S.A. (“Enel Generación Chile”) and the electricity distribution assets owned by Enel Distribución Chile S.A.

The proposed Reorganization involved the following stages: (i) Public Tender Offer (“PTO”) for the shares of Enel Generación Chile, (ii) Capital Increase to issue the shares to be exchanged for the shares of Enel Generación Chile and EGPL, and (iii) Merger of EGPL, parent of EGP Chile, and Enel Chile. Each stage of the proposed Reorganization was conditioned to the implementation of the others.

On December 20, 2017, the Extraordinary Shareholders’ Meeting of Enel Chile approved the Reorganization subject to complying with the conditions established for the PTO, Capital Increase, and Merger. The Shareholders’ Meeting also approved the Ch$ 1,891,727,278,668 capital increase of Enel Chile through the issuance of 23,069,844,862 new common shares, all of one same series and without par value, for a price and other terms approved by the Shareholders’ Meeting.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

 
Finally, on March 25, 2018, the amendments to the articles of incorporation of Enel Chile to include the agreements related to the Merger, Capital Increase and changes to the corporate purpose of Enel Chile, among other provisions, were approved. The PTO took place between February 16 and March 22 of 2018, the subscription of preferred shares related to the Capital Increase took place between February 15 and March 16 of 2018 and the Renewable Assets Reorganization (including the Merger) concluded and became effective on April 2, 2018 and led to the increase in Enel Chile’s shareholding in Enel Generacion Chile from 59.98% to 93.55%. The merger of Enel Chile and EGPL from that date on increased Enel S.p.A total shareholding in Enel Chile to 61.93%.

As a consequence of the aforementioned, the results of the Enel Chile Group include the results of the EGP Chile Group since April 2, 2018 and the increased ownership share of Enel Generación Chile from that same date on. For additional information see Note N^o 6 to the Interim Consolidated Financial Statements of Enel Chile as of September 30, 2019.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

MARKETS IN WHICH ENEL CHILE S.A. OPERATES

Generation business

We own and operate 130 generation units in Chile through our subsidiaries Enel Generación Chile, Pehuenche, Gas Atacama, and EGP Chile, which combined, have a total 7,463 MW installed capacity as of September 30, 2019. Of this total, 40 are hydroelectric units with 3,548 MW installed capacity, 22 are thermal units that operate using gas, coal or fuel oil and together have an installed capacity of 2,740 MW, 59 are wind generation units with 642 MW installed capacity, 8 are solar generation units with 492 MW installed capacity and 1 generation unit is geothermal with 41 MW installed capacity. Consequently, 63% of our installed capacity is renewable energy and 37% is thermal.

The following chart summarizes the physical information of our generation business segment for the period ended September 30, 2019 compared to the same period of 2018:

Distribution business

Our distribution business is carried out by our subsidiary Enel Distribución Chile S.A.

Enel Distribución Chile is one of the largest electricity distribution companies in Chile in terms of the number of regulated customers, distribution assets, and electricity sales. It operates in a 2,105 square kilometer concession area.  The Chilean Government granted the concession agreement to transmit and distribute electricity to 33 districts of the Metropolitan Region, including the concession areas of our subsidiaries Eléctrica de Colina Ltda., Luz Andes Ltda. and Empresa de Transmisión Chena S.A., for an unlimited period of time. Its service area, from the Chilean tariff regulation perspective, is considered primarily a densely populated area.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

 
The following chart summarizes the physical information of our distribution business segment for the period ended September 30, 2019 compared to the same period of 2018:

The following chart shows the electricity sales revenue per business segment and customer type:

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

CONSOLIDATED FINANCIAL STATEMENT ANALYSIS

1.     Statement of Comprehensive Income Analysis

Net income attributable to the controlling shareholders of Enel Chile as of September 30, 2019, reached Ch$ 206,223 million, 1.1% lower than the Ch$ 208,589 million booked for the same period in 2018.

The following chart compares the figure of each item of the income statement as of September 30, 2019 and 2018:

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

The consolidated EBITDA of Enel Chile amounted to Ch$ 809,630 million as of September 30, 2019, which represents a 43.1% increase when compared to the Ch$ 565,872 million booked the same period of the previous year. This increase was primarily explained by improved operational performance, particularly in the generation business, and the extraordinary income from the early termination of three energy supply contracts of Enel Generación Chile signed with its customer Anglo American Sur in 2016.

Operating revenue, operating costs, personnel and other expenses that determine our EBITDA, broken down by business segment for the periods ended September 30, 2019 and 2018, are presented below:

GENERATION BUSINESS EBITDA

The EBITDA of our Generation Business Segment reached Ch$ 675,682 million as of September 30, 2019, which represents a Ch$ 232,052 million increase, or 52.3%, when compared to the same period of the previous year. The main variables that explain this result are described below:

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

 
Operating revenues amounted to Ch$ 1,315,538 million as of September 30, 2019, a Ch$ 195,233 million, or 17.4% increase when compared to the same period of the previous year, mainly due to the following:

·       A Ch$ 71,618 million increase in electricity sales, mainly due to a higher average sales price expressed in Chilean pesos due to a higher average exchange rate for the period, and a +259 GWh increase in physical sales (+1,984 GWh more to non-regulated customers, +338 GWh more spot market sales, offset by -2,063 GWh less to regulated customers). This variation includes the revenue from energy sales of EGP Chile that amounted to Ch$ 23,334 million.

·       A Ch$ 10,120 million increase in other sales, mainly due to a Ch$ 10,144 million increase in gas sales.

·       A Ch$ 111,926 million increase in other operating revenues, mainly due to the Ch$ 121,118 million extraordinary income from the early termination of three energy supply contracts with Anglo American Sur, partially offset by lower revenue from insurance claims for Ch$ 9,466 million related to incidents at Central Tarapacá in 2018.

Operating costs increased to Ch$ 511,373 million as of September 30, 2019, a Ch$ 52,011 million decrease, equivalent to 9.2%, due to the following:

·       A Ch$ 75,479 million reduction in energy purchases, 45.4% less than the same period last year, partially explained by a -1,302 GWh reduction in physical energy purchases (-656 GWh less contracted energy purchases and -646 GWh less spot market purchases) to a significant extent explained by the higher availability of our power plants. This lower cost includes the positive effect of adding EGP Chile to Enel Chile, which led to a net Ch$ 49,001 million reduction in Enel Chile’s cost of energy purchases as a consequence of the elimination of related party transactions (sales among EGP Chile and Enel Generación Chile).

·       A Ch$ 22,851 million decrease in fuel costs, primarily due to: (i) lower fuel oil consumption for Ch$ 5,333 million significantly related to the lower dispatch of the power plants that operate with fuel oil, and (ii) lower coal consumption for Ch$ 32,315 mainly due to the lower price of coal. The aforementioned was partially offset by a Ch$ 14,801 million increase in gas consumption primarily resulting from the higher dispatch of our combined cycles as a consequence of the supply of gas from Argentina.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

The abovementioned was partly offset by:

·       A Ch$ 9,916 million increase in transportation costs, mainly due to higher gas transportation costs for Ch$ 9,391 million and higher regasification costs for Ch$ 4,349 million, partially offset by lower toll expenses for Ch$ 3,834 million related to the discounts applied to the equivalent transmission charge of the electricity injection toll, CET (in its Spanish acronym).

·       Other procurement and services costs increased Ch$ 36,403 million, mainly due to: (i) greater commercialization costs of gas sales amounting to Ch$ 24,862 million; (ii) higher thermal emission tax costs for Ch$ 7,743 million; and (iii) higher commodity derivative costs for Ch$ 2,379 million.

Personnel costs (net of expenses capitalized in fixed assets) for Ch$ 42,881 million as of September 2019 represents a Ch$ 2,614 million increase when compared to the same period of 2018, is primarily explained by higher personnel expenses in EGP Chile for Ch$ 3,492 million, due to the scope of consolidation, since in 2018 results were consolidated only for six months as of September 30, 2018, together with a higher cost in 2019 due to higher head count. The above was partially offset by lower personnel expenses in Enel Generación Chile for Ch$ 854 million, which are mainly explained by a lower head count for Ch$ 1,198 million, and lower employee bonuses related to collective bargaining carried out with the Company's unions for Ch$ 1,250 million, profits that are reduced in part by Ch$ 1,482 million of lower labor activation in Los Cóndores project.

Other expenses reached Ch$ 85,602 million as of September 30, 2019, a Ch$ 12,578 million increase when compared to the same period in 2018, mainly explained by: (i) decrease in head count for Ch$ 474 million; (ii) lower employee bonuses for collective bargaining carried out with the Company's unions for Ch$ 1,250 million; (iii) higher costs in maintenance and repair services for Ch$ 6,612 million; (iv) higher costs for technical and administrative services for Ch$ 2,968 million; and (v) higher property taxes and other taxes for Ch$ 2,134 million. This variation includes the effect of adding the EGP Chile Group to the scope of consolidation in April 2018 that amounted to Ch$ 9,289 million.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

DISTRIBUTION BUSINESS EBITDA:

The EBITDA of our Distribution Business Segment reached Ch$ 143,948 million as of September 30, 2019, which represents a Ch$ 5,739 million, or 4.2%, increase when compared to the same period of 2018. The main variables that explain this outcome are described below:

Operating revenues amounted to Ch$ 1,051,683 million, a Ch$ 118,507 million increase, equivalent to 12.7%, when compared to the same period of 2018 mainly due to: (i) higher energy sales revenue for Ch$ 111,534 million as a result of a higher average sales price when expressed in Chilean Pesos due to the higher exchange rate, the impact of the implementation of technical standards on tariffs in addition to higher physical energy sales (+310 GWh); and (ii) higher other services revenue for Ch$ 7,934 million mainly explained by higher zonal transmission toll billings.

Operating costs reached Ch$ 831,180 million, a Ch$ 105,108 million increase, primarily explained by: (i) greater energy purchases for Ch$ 92,102 million, mainly resulting from a higher average energy purchase price and greater physical purchases in the period (+ 333 GWh); (ii) higher zonal transmission tolls for Ch$ 11,545 million paid to distribution companies and transmission companies; and (iii) higher other procurements and services cost for Ch$ 1,461 million, primarily explained by higher emergency plan expenses for Ch$ 1,214 million.

Personnel costs (net of expenses capitalized in fixed assets) increased Ch$ 1,779 million as of September 2019 when compared to the same period of 2018 and is primarily explained by Ch$ 1,265 million related to higher head count required to implement the technical standards of the distribution business and Ch$ 514 million due to higher employee performance bonuses.

Other expenses reached Ch$ 56,477 million as of September 30, 2019, a Ch$ 5,880 million increase when compared to the same period of 2018, explained by an increase in operation and maintenance costs, also related to distribution business technical standards.

Depreciation, Amortization and Impairment

The following table summarizes the Enel Chile Group EBITDA, Depreciation, Amortization and Impairment Expenses and EBIT broken down by segment as of September 30, 2019 compared to September 30, 2018.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

Depreciation, amortization and impairment costs amounted to Ch$ 457,292 million, a Ch$ 300,273 million increase when compared to the same period of the previous year.  This variation is mainly explained by the impairment provision related to the Tarapacá and Bocamina I coal fueled units for Ch$ 195,809 million and Ch$ 81,939 million respectively, as a consequence of the Group´s decarbonization process, in addition to greater depreciation from EGP Chile that amounted to Ch$ 23,578 million.

The following chart presents consolidated non-operating income as of September 30, 2019, and 2018.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

Net Financial Result

The consolidated net financial result of Enel Chile, as of September 30, 2019, amounted to a Ch$ 107,971 million loss, Ch$ 34,134 million more than the Ch$ 73,837 million loss booked for the same period of 2018. This is primarily explained by the following:

Financial income decreased Ch$ 2,874 million due to lower income on short-term fixed income investments for Ch$ 2,658 million and lower income related to customer refinancing for Ch$ 216 million.

Financial expenses increased Ch$ 20,535 million, primarily explained by (i) higher interest on bank loans amounting to Ch$ 10,367 million, mainly related to the corporate restructuring carried out in 2018 (Elqui Project), (ii) Ch$ 11,437 million higher interest expenses on the debt with Enel Finance International, and (iii) Ch$ 1,269 million reduction in bank fees.

Income related to indexation decreased Ch$ 4,486 million, primarily due to (i) a greater negative impact of IAS 29 “Financial Reporting in Hyperinflationary Economies” on the branch of the Gas Atacama Group located in Argentina that amounted to a Ch$ 2,120 million, (ii) lower income from recoverable taxes for Ch$ 2,742 million, and (iii) lower income from hedging derivative contracts for Ch$ 766 million. The aforementioned was partially offset by lower losses as a result of indexation of financial liabilities recorded in U.F. for Ch$ 1,143 million.

Income from exchange rate differences decreased Ch$ 6,239 million, mainly due to greater negative exchange rate differences on forward contracts for Ch$ 6,491 million.

Corporate Taxes

Corporate income tax reached Ch$ 27,145 million as of September 30, 2019, a Ch$ 61,602 million reduction when compared to the same period of the previous year, primarily explained by: (i) Ch$ 74,922 million lower tax expenses due to the impairment loss related to the coal units of Tarapacá and Bocamina 1 power plants; and (ii) Ch$ 29,269 million positive effect of the absorption of Gasoducto Atacama Chile by GasAtacama Chile. The aforementioned was offset by: (i) the Ch$ 32,702 million effect of the extraordinary income generated by the early termination of three energy supply contracts with Anglo American Sur; and (ii) Ch$ 11,270 million tax expense increase related to higher recurrent earnings.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

BALANCE SHEET ANALYSIS

ASSETS

Total assets of the Company as of September 30, 2019, increased Ch$ 171,523 million, equivalent to 2.3%, when compared to total assets as of December 31, 2018, mainly due to the following:

Current Assets increased Ch$ 169,582 million as of September 30, 2019. The variations in the main categories are presented below:

•        Cash and cash equivalents decreased Ch$ 67,220 million, mainly explained by the following cash disbursements (i) dividend payments for Ch$ 234,169 million, (ii) purchase of property, plant and equipment for Ch$ 234,478 million, (iii) income tax payments for Ch$ 59,632 million, (iv) employee-related payments for Ch$ 99,980 million, (v) principal and interest payments on loans for Ch$ 378,062 million, (vi) insurance policy payments and collections for Ch$ 8,920 million (vii) net payments of forward contract liquidations for Ch$ 14,784 million, (viii) payments of financial leasing liabilities for Ch$ 3,472 million, (ix) purchase of intangible assets amounting to Ch$ 5,026 million; and  (x) other cash disbursements related to financing activities for Ch$ 773 million. All the above was offset by (i) other operational cash inflows for Ch$ 677,738 million, primarily from customer collections net of payments to suppliers, (ii) loans from related companies for Ch$ 283,829 million, (iii) net interest cash inflow for Ch$ 4,935 million, and (iv) dividends received for Ch$ 6,055 million; and (v) other cash inflows related to investment activities for Ch$ 679 million.

•        Other current non-financial assets increased Ch$ 24,975 million, mainly due to: (i) an increase in Value added tax credit for Ch$ 19,208 million; and (ii) advance payments on expenses of Enel X Chile projects for Ch$ 6,356 million. 

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

•        Trade accounts receivables and other current accounts receivables increased Ch$ 220,948 million, mainly due to (i)a Ch$ 91,571 million and Ch$ 109,031 million increase in the generation and distribution segments trade accounts receivables, respectively, primarily related to the pending application of tariff decrees to end customers, (ii)a Ch$ 10,845 million increase in trade accounts receivables related to gas sales of Enel Generación Chile; and (iii)a Ch$ 9,299 million increase in trade accounts receivables of Enel X Chile mainly explained by accounts receivables of electric bus leasings and an increase in sales of goods and services.

•        Inventories decreased by Ch$ 14,862 million, mainly due to: (i) an Ch$ 11,860 million reduction in inventories of the generation business, namely lower inventory of coal and other fuels; and (ii) a Ch$ 5,212 million reduction in the level of inventories of Enel X Chile after booking electric bus leasings, offset by a Ch$ 2,103 million increase in the purchase of inventory and materials.

Non-Current Assets amounted to Ch$ 6,493,013 million as of September 2019, stable when compared to the balance at December 2018. The variations in the main categories are presented below:

•        Decrease of other non-current non-financial assets for Ch$ 5,155 million, mainly due to the use of the remaining VAT tax credit of the EGP Group for Ch$ 10,707 million, which is offset by the reclassification of spare parts stocks, from short to long-term, for Ch$ 4,018 million (consumption schedule over one year) and an increase in water rights credits for Ch$ 1,314 million.

•        Increase in trade accounts receivable and other non-current accounts receivable for Ch$ 17,478 million, mainly due to the recognition of higher leasing debtors for Ch$ 56,588 million, mostly from Enel X Chile.

•        Decrease in investments accounted for using the equity method for Ch$ 4,761 million, mainly explained by dividend payments made in GNL Chile and Transmisora ​​Eléctrica de Quillota for Ch$ 5,552 million.

•        Decrease in Property, plant and equipment for Ch$ 78,877 million, mainly explained by the impairment provisions of Tarapacá and Bocamina I coal-fired generation units for Ch$ 195,809 million and Ch$ 81,939 million, respectively, as a result of the decarbonization process that is being carried out by the Group. The above is partially offset by an increase in works in progress for Ch$ 198,110 million, mainly in the generation segment.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

•        Increase in Deferred Tax Assets of Ch $ 30,690 million, mainly explained by a higher deferred tax resulting from tax losses, mostly explained by the sale to Enel Generación Chile of the investment that Enel Chile owned in Gas Atacama Chile.

LIABILITIES

Total Liabilities of the Company as of September 30, 2019, including Equity, increased Ch$ 171,523 million when compared to total liabilities as of December 31, 2018, mainly due to the following:

Current Liabilities decreased Ch$ 307,235 million. The variations in the main categories are presented below:

·       Other current financial liabilities decreased Ch$ 230,150 million, mainly (i) bank loan principal amortization payments for Ch$ 213,759 million (bridge loan to finance PTO), (ii) the payment of an EGP Chile debt for Ch$ 68,863 million, all partially offset by: (i) an increase in hedging derivative liabilities and other derivative liabilities for Ch$ 32,792 million; and (ii) interest accruals on other loans for Ch$ 15,832 million.

·       Trade accounts payable and other current accounts payable decreased Ch$ 46,865 million, mainly (i) lower accounts payable to suppliers of goods, services and fixed assets for Ch$ 38,274 million in the generation business, (ii) lower dividends payable for Ch$ 47,722 million, and (iii) lower fuel accounts payable for Ch$ 16,820 million. The above mentioned was partially offset by (i) higher debt related to energy purchases for Ch$ 53,480 million, and (ii) an increase in other accounts payable for Ch$ 2,470 million.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

·       Related party accounts payable decreased Ch$ 47,766 million, primarily due to Ch$ 63,650 million lower accounts payable to Enel SpA, including Ch$ 67,198 million lower dividend payments offset by Ch$ 3,548 million in other services received pending payment. The above was offset partly by (i) higher accounts payable to GNL Chile S.A. for Ch$ 6,024 million for gas purchases (ii) greater accounts payable to Enel Finance International for Ch$ 6,728 million due to credit line disbursements, and (iii) higher accounts payable to Enel Green Power SpA for Ch$ 5,102 million for technical support and other services.

·       Other non-financial current liabilities decreased Ch$ 24,130 million, primarily a reduction in value added tax debits.

The aforementioned was partially offset by:

·       A Ch$ 41,334 million increase in Current tax liabilities due to higher income tax provisions.

Non-Current Liabilities increased Ch$ 400,021 million as of September 30, 2019, which is explained by the following:

·       Other non-current financial liabilities increased Ch$ 110,345 million, mainly due to: (i) higher liabilities for Ch$ 57,419 million due to the effect of exchange rate differences on US dollar debt; (ii) a Ch$ 46,777 million increase in financial liabilities due to effect of the application of IFRS 16 “Leasing” of which Ch$ 31,822 million originate in EGP Chile Group; and (iii) an increase in hedging derivative liabilities for Ch$ 8,391 million.

·       Non-current accounts payable to related parties increased Ch$ 310,303 million mainly explained by Enel Chile´s new loan provided by Enel Finance International for Ch$ 291,284 million (US$ 400 million).

·       Other non-current provisions increased Ch$ 53,109 million mainly explained by a Ch$ 55,152 million increase in dismantling costs related to the programmed shutdown of Tarapacá and Bocamina I coal-fired generation units, compensated by reduction in legal claim provisions for Ch$ 2,043 million.

The aforementioned was partly offset by:

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

·       A reduction in Deferred tax liabilities for Ch$ 75,406 million mainly due to the Ch$ 74,992 million tax effect of the impairment loss booked due to the shutdown of the Tarapacá and Bocamina I power plants.

Total Equity amounted to Ch$ 3,752,900 million as of September 30, 2019.

Equity attributable to owners of Enel Chile amounted to Ch$ 3,493,458 million, comprised of the following: Issued capital for Ch$ 3,882,103 million, Retained earnings for Ch$ 2,012,508 million, and Other reserves for Ch$ 2,401,153 million.

Retained earmings increased during the period by Ch$ 97,710 million mainly due the period´s earnings for Ch$ 206,223 million, offset by dividends amounting to Ch$ 108,513 million.

Other reserves decreased by Ch$ 25,480 million mainly due to cash flow hedge reserves for Ch$ 63,462 million, compensated by greater translation reserves for Ch$ 34,785 million.

Equity attributable to non-controlling shareholdings amounted to Ch$ 259,442 million, which considers an initial Ch$ 252,935 million balance, plus the transactions booked throughout the year up to September 30, 2019, related to net income of the period for Ch$ 13,432 million, higher other comprehensive income for Ch$ 3,060 million, and other increases for Ch$ 866 million. The aforementioned was offset by a Ch$ 10,851 million reduction in dividends.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

The performance of main financial ratios is the following:

The current ratio, as of September 30, 2019, reached 1.28 times, which represents a 56.1% increase when compared to December 2018.  This increase is mainly due to the reduction of short-term financial liabilities.

The Acid test, as of September 30, 2019, was 1.23 times, which represents a 59.7% increase when compared to December 31, 2018, which is also mainly due to the reduction of short-term financial liabilities.

Working capital, as of September 30, 2019, amounted to Ch$ 256,301 million, which represents a Ch$ 476,817 million positive variation when compared to December 31, 2018, also mainly due to the reduction of short-term financial liabilities.

The debt ratio was 1.04 times, which means that the level of commitment of Enel Chile equity was 1.04 times for the nine-month period ended September 30, 2019.

The financial expenses coverage ratio for the period ended September 30, 2019, was 6.77 times, which represents the ability to cover all financial expenses with the EBITDA obtained during the period ended September 30, 2019. If the impact of the early termination of the Anglo American Sur contracts was excluded, the financial expense coverage ratio would have reached 5.75 times.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

The profitability index, calculated by dividing operating income by operating revenues, decreased 27.0% when compared to the same period of the previous year, reaching 16.9% as of September 30, 2019, due to lower operating income booked this period when compared to the same period of last year. If the impact of the early termination of the Anglo American Sur contracts, and the impairment loss related to Central Tarapacá and Bocamina I were excluded, this index would have increased 37.6%.

Return on equity of the owners of the controlling shareholder was 10.4% for the nine-month period ended September 30, 2019. If the impact of the early termination of the Anglo American Sur contracts, and the impairment loss related to Central Tarapacá and Bocamina I were excluded, return on equity would have reached 13.3%.

Return on assets was 5.2% for the nine-month period ended September 30, 2019. If the impact of the early termination of the Anglo American Sur contracts, and the impairment loss related to Central Tarapacá and Bocamina I were excluded, return on assets would have reached 6.7%.

MAIN CASH FLOWS

The net cash flow of Enel Group Chile reached a negative Ch$ 66,061 million as of September 30, 2019, which represents a Ch$ 149,281 million increase when compared to the same period of the previous year.  The main factors that explain this cash flow, classified as either operating, investing, or financing activities, compared to September 2018, are presented below:

Net cash flow from operating activities amounted to a Ch$ 509,206 million for the nine-month period ended September 30, 2019, which represents a 1.2% increase when compared to September 2018. These cash flows come primarily from: (i) sales and other revenue amounting to Ch$ 2,354,832 million; (ii) insurance policy premiums and services, annuities and other insurance benefits for Ch$ 7,908 million; (iii) leasing and asset sales for Ch$ 5,342 million; and (iv) other operational billings for Ch$ 581 million. These results were all partially offset by cash outflows related to (i) supplier payments for Ch$ 1,514,285 million, (ii) other payments related to operational activities for Ch$ 128,266 million, (iii) employee payments for Ch$ 99,980 million, (iv) income tax payments for Ch$ 59,632 million; (v) payments for

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

making or acquiring assets for lease and sale for Ch$  36,904 million, (vi) insurance premium payments and other payments related to insurance policies for Ch$ 16,828 million and (vii) other cash outflows for Ch$ 3,560 million.

Net cash flow used in investing activities amounted to Ch$ 242,620 million for the nine-month period ended September 30, 2019, which represents a Ch$ 1,587,849 million reduction in cash outflows when compared to September 2018.  These cash flows are mainly comprised of (i) cash outflows for Ch$ 234,478 million to purchase property, plant and equipment, (ii) payments of futures, options and swaps for Ch$ 14,784 million, and (iii) Ch$ 5,026 million to purchase intangible assets. These cash outflows were partially compensated by (i) interest payments received amounting to Ch$ 4,935 million, and (ii) dividends payments received for Ch$ 6,055 million.

The Ch$ 1,587,849 million positive variation in the Company´s investment cash flow, when compared to last year, is primarily explained by the PTO for Enel Generación Chile shares carried out during the first semester of 2018, which required the disbursement of Ch$ 1,624,327 million.

Net cash flow of financing activities amounted to Ch$ 332,648 million for the nine-month period ended September 30, 2019, which represents a Ch$ 1,444,623 million negative variation when compared to September 2018. The main cash flows are (i) loan payments for Ch$ 297,840 million, (ii) dividend payments for Ch$ 234,169 million (iii) interest payments for Ch$ 80,221 million, (iv) financial leasing liability payments for Ch$ 3,472 million, and (v) other cash outflows for Ch$ 773 million. The aforementioned was offset by loans from related companies for Ch$ 283,829 million.

The Ch$ 1,444,623 million negative variation in the Company´s financial cash flow, when compared to the same period of last year, is primarily due to the funding obtained during the first semester of 2018, specifically a capital increase, bond placement and bank loans amounting to a total Ch$ 1,581,495 million, to finance the PTO for Enel Generación Chile shares.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

The following table presents the cash disbursements related to additional Property, Plant and Equipment and its Depreciation for the nine-month period ended September 30, 2019 and 2018.

The most relevant cash outflows originate in the generation business and correspond to power plant investments and major maintenance that amounted to Ch$ 180,626 million as of September 30, 2019. In the distribution business, cash disbursements amounted to Ch$ 52,585 million and are basically investments in network operational optimization to increase the level of efficiency and service quality.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

MAIN RISKS ASSOCIATED WITH THE ACTIVITY OF ENEL CHILE S.A. GROUP

The Group’s activities are subject to a broad set of governmental regulations, and any changes in them could affect their activities, economic situation and operating income.

The Group’s operating subsidiaries are subject to a wide range of tariff regulations and other aspects that govern their operations in Chile. Consequently, the introduction of new laws or regulations, or the modification of current laws and regulations, could affect their operations, economic situation and operating results.

These new laws or regulations, on occasion, modify regulatory aspects that may affect existing entitlements; which, as the case might be, may adversely affect the Group’s future income.

The Group’s operations are also subject to wide-ranging environmental regulations that Enel Chile continuously meets. Eventual modifications introduced to such regulations could affect its operations, economic situation and operating income.

Enel Chile and its operating subsidiaries are subject to environmental regulations which, among other things, require the preparation and submission of Environmental Impact Studies for projects under study, obtaining licenses, permits and other mandatory authorizations and complying with all the requirements imposed by such licenses, permits and regulations. Just as with any regulated company, Enel Chile cannot guarantee that:

§  Public authorities will approve such environmental impact studies;

§  Public opposition will not lead to delays or modifications to any proposed project;

§  Laws or regulations will not be modified or interpreted in a manner that leads to increased expenses or that might affect the Group’s operations, plants or plans.

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ENEL CHILE FINANCIAL STATEMENTS ANALYSIS AS OF SEPTEMBER 30, 2019

The Group’s commercial operations have been planned in order to mitigate possible impacts as a result of changing hydrological conditions.

The operations of Enel Chile Group include hydroelectric generation, and therefore, depend on actual hydrological conditions throughout a broad geographical area where the Group’s hydroelectric generation facilities are located. Should the hydrological conditions lead to droughts or other conditions that might negatively affect hydroelectric generation business, our results could be adversely affected, which is why Enel Chile has established, as an essential part of its commercial policy, to refrain from contractually committing 100% of its generation capacity. At the same time, the electricity business is also affected by meteorological conditions, such as temperatures, that affect consumption. Our margins may be affected by weather conditions depending on the different climate conditions.

The financial situation and the results of our operations may be negatively affected if the exposure to interest rate fluctuations, commodity prices and foreign exchange rates are not effectively managed.

Risk Management Policy

The companies of Enel Group in Chile are exposed to determinate risks managed through the application of identification, measurement, concentration limits and supervision systems.

Some of basic principles defined by the Group when setting their risk management policy include the following:

·       Comply with good corporate governance standards.

·       Strictly comply with all of the Group’s regulatory systems.

·       Each business and corporate area must define:

I. The markets in which it can operate based on the knowledge and skills that would ensure effective management of the risk.

II. Criteria of counterparts.