Endesa seeks local partners in Argentina, Brazil

Spanish energy company Endesa (NYSE: ELE) is seeking local partners to help manage its portfolio in Argentina and Brazil, CEO Rafael Miranda said in a conference call last week. Endesa is seeking partners in generation and distribution in Argentina and distribution in Brazil, according to the presentation. "Company policy has also been based on having local partners," Endesa spokesperson Fernando Nadal told BNamericas. Of the five Latin American countries in which Endesa operates, the compamy has local partners - such as private pension funds and banks - in Chile, Peru and Colombia, Nadal said. The company wants the same local integration in Argentina and Brazil, he added. Endesa "would be delighted" to discuss options with local companies "which want to accompany us in our projects," Nadal said. Participation possibilities include capital increases and share sales. "But this is nothing new and it's not that there is a project [of local partnership] in progress, but simply a demonstration of willingness [to partner]," he added. Endesa plans to invest 2.39bn euros (US$3bn) in Latin America in 2004-2008, of which 1.43bn euros will be for distribution and 939mn euros for generation, Miranda said. In line with plans to consolidate operations, the majority of Endesa's 2004-2008 regional investment - some 1.9bn euros - is budgeted for maintenance capex, while 461mn euros is for new capacity. The planned investment is in the following countries: Chile (792mn euros), Brazil (570mn euros), Argentina (477mn euros), Peru (358mn euros), and Colombia (197mn euros). Endesa's strategy in the region through 2008 is based on two "key elements," Miranda said. The first is capturing growth through demand growth, cost reduction and an expanded asset base. The second is reducing its risk profile through management of regulatory issues, financial strength and portfolio management. Endesa is confident that Latin America has recovered from the hangover of its economic crisis in 1999-2002. "Latin America has proven itself to be resilient in the face of the past crisis," Miranda said. "Electricity demand growth has returned to historic levels of about 5% annually after the difficult years of 1998-2002," he said. "Endesa expects this trend to continue." Endesa aims to improve the efficiency of its operations to reduce its generation and distribution costs, and reduce its yearly outage frequency and time. The company aims to reduce its generation operations and maintenance costs to US$2.2/MWh in 2008 from US$2.8/MWh in 2003, and its distribution O&M cost to US$12.3/MWh in 2008 from US$12.9/MWh in 2003. To meet higher demand, Endesa aims to increase its installed capacity to 16,473MW in 2008 from 15,333MW in 2003 through the start-up of its 570MW Ralco hydroelectric project in Chile, an additional 410MW in Chile and 160MW in Peru, Miranda said. Endesa currently has 4,492MW installed capacity in Argentina, 4,333MW in Chile, 3,031MW in Brazil, 2,589MW in Colombia, 1,458MW in Peru and 72MW in the Dominican Republic. In terms of financing, Endesa reduced its debt to 1.73bn euros in 1Q04 from 2.93bn euros in 2002, and the company aims to continue that trend, Miranda said. The company's goal is to reduce its investments as a percentage of Ebitda to 25% in 2008 from 34% in 2003. Endesa's Ebitda in Latin America in 2003 was 1.48bn euros, with assets worth a combined 15bn euros.