Merrill Lynch adjusts Enersis, Endesa Q4 expectations

The fourth quarter results of Chilean power sector holding Enersis (NYSE: ENI) could be negatively impacted by new accounting rules, while the results of generation subsidiary Endesa Chile (NYSE: EOC) could be higher than expected due to the stronger Chilean peso, according to Merrill Lynch. Merrill Lynch's Q4 estimate of US$83.4mn net income at Enersis is lower than previous estimates because "of the expected effects of the application of Technical Bulletin 64 on non-operating income and expense," Merrill Lynch analyst Frank McGann said. Nevertheless, operating income is expected to climb 84.2% to US$260mn from US$141.4mn in 4Q02, while Ebitda should increase 38.8% to US$426mn. Merrill Lynch continues to rate Enersis's shares at "Buy" because, after successfully wrapping up its 2003 refinancing program, Enersis's earnings and cash flow should benefit in 2004 from continued strong growth in Chile, improvements in Brazil and recovery in Argentina. Meanwhile, Enersis's generation subsidiary Endesa Chile is expected to post a US$21.6mn profit in Q4, compared to a US$99.6mn loss in 4Q02, Merrill Lynch said in a separate report. Operating income is expected to climb 13.5% to US$147mn from US$129mn in 4Q02, while EBITDA should increase 10.5% to US$223mn. Merrill Lynch raised its expectation for Q4 profit to US$21.6mn from US$9.7mn due to the impact of the stronger Chilean peso on the company's results, the report said. Merrill Lynch continues to rate Endesa Chile's shares "Neutral," although the enactment of the Ley Corta transmission bill, finally passed by congress on January 22, could lead to higher generation prices and lower transmission costs, the report said.