Merrill Lynch raises Enersis, Endesa 2004-05 expectations

Merrill Lynch is raising its 2004-05 estimates for Chilean power sector holding Enersis and its generation subsidiary Endesa Chile, Merrill Lynch analyst Frank McGann said in separate reports. For Enersis, Merrill Lynch is increasing its 2004 EPS estimate slightly to US$0.34/ADR from US$0.33/ADR and its 2005 EPS estimate to US$0.41/ADR from US$0.37/ADR. The new estimates reflect higher expected earnings at Enersis' generation subsidiaries, a lower assumed tax rate (35% against 40% previously) and lower than previously estimated non-operating expenses. Merrill Lynch believes Enersis is entering a period of recovering results. Healthier generation results should be a key contributor to growth going forward and Chilean distribution earnings will rise sharply over the next five years, though 2005 earnings will be affected by an expected 6% decline in distribution tariffs as a result of the tariff review process, the analyst wrote. Merrill Lynch also expects gradual improvements in depressed results at Argentine distribution subsidiary Edesur and Brazilian distribution subsidiaries Cerj and Coelce. For Endesa Chile, Merrill Lynch is increasing its 2004 EPS estimate to US$0.52/ADR from US$0.40/ADR and its 2005 EPS estimate to US$0.62/ADR from US$0.46/ADR. The new estimates reflect three key assumptions: higher estimates of energy sales for Endesa's El Chocón hydro and Central Costanera thermo generators in Argentina; higher generation prices in Chile as a result of the implementation of the recently passed Ley Corta; and lower assumed non-operating expenses.