Fitch: Potential Change in Enersis Ownership Structure Likely Neutral to Credit Quality

Business Wire, Sept 7, 2005

CHICAGO -- Fitch Ratings views the announcement of Gas Natural, SDG's (Gas Natural) unsolicited EUR22.5 billion (US$28.3 billion) takeover bid for 100% of Empresa Nacional de Electricidad S.A. of Spain (Endesa-Spain) as likely to be neutral to the credit quality of Chile's Enersis S.A. (Enersis) and Empresa Nacional de Electricidad S.A. (Endesa-Chile). Enersis is currently 60.62% owned by Endesa-Spain. As noted in a separate release ('Fitch Places Spain's Gas Natural And Endesa on Negative Watch Following Takeover Bid,' dated Sept. 6, 2005), however, Fitch has placed the ratings of both Gas Natural (senior unsecured rating of 'A ')and Endesa-Spain (senior unsecured rating of 'A') on Rating Watch Negative. There are numerous regulatory, administrative and political issues to be clarified and resolved in the coming months.

Fitch currently assigns the following ratings to Enersis and Endesa-Chile:

Enersis

-- International local and foreign currency 'BBB-' (Outlook Positive);

-- Long-term national scale corporate rating 'A (chl)' (Outlook Stable).

Endesa-Chile

-- International local and foreign currency 'BBB-' (Outlook Positive);

-- Chilean national scale rating 'A (chl)' (Outlook Stable).

The companies' credit profile is related to the degree to which any new ultimate shareholder would change Enersis' and Endesa-Chile's financial and/or growth policies and strategies. Gas Natural has noted that the combined Latin American investments would provide an excellent growth platform for the new group, which could affect the company's credit profile depending on how the growth is funded. Fitch expects additional announcements regarding the investment strategy and the long-term financial structure for Latin America to be made should the acquisition become more certain.

Gas Natural is Spain's dominant natural gas player, with majority market shares in regulated distribution and unregulated supply, and, with its investments in Latin America, serves close to 10 million customers. It is also a leader in the Latin American gas market, with a presence in Brazil, Argentina, Colombia, Mexico, and Puerto Rico. Other activities include international gas supply and transportation, and electricity generation and supply. The group's financial profile has been strong for the rating level: fiscal (FY) 2004 net debt (including EUR684 million in finance leases related to the funding of two cryogenic vessels) to EBITDA was less than 2.5 times (x) and EBITDA/net interest coverage was approximately 9x. Similar to the strategy employed by Endesa-Spain, most of Gas Natural's Latin American activities are funded locally on a nonrecourse basis. Fitch assumes that Gas Natural would remain committed to Latin American markets given their growth potential and existing material presence in the region.

Enersis is the largest private electricity distribution group in Latin America. The company has varying ownership interests in electric-distribution companies in Argentina, Brazil, Chile, Colombia, and Peru; electric-generating companies in Argentina, Brazil, Chile, Colombia and Peru through Endesa-Chile; and electric utility related service companies throughout Latin America.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.