Endesa's US$2bn LatAm investment plans "conservative"

The US$2bn which Endesa Spain (NYSE: ELE) chairman Rafael Miranda said the company plans to invest in Latin America in 2003-2008 is "very conservative for six years," Fitch Ratings analyst Carlos Diez told BNamericas. Latin American assets represent about 40% of Endesa Spain's total consolidated assets, and the spending is part of Endesa's global US$14bn investment plan. "That's about US$333mn a year, which in the context of what Endesa has to invest annually to maintain the operations of its assets, doesn't seem like a sign of expansion," Diez said. According to Diez, the relatively low investment is consistent with what Enersis executives have said about not considering large-scale new investments in Latin America the short term. "Enersis has said that until the situation in Latin America stabilizes, they won't invest in expansion," Diez said, adding Endesa Spain is focusing on consolidating its European business. Of the total US$2bn investment destined for Latin America, most will be spent on Endesa Spain's Chilean generation and distribution subsidiaries, Endesa Chile and Chilectra, Miranda said. Diez is not surprised. "Chile has performed well, and to a lesser degree Peru and Colombia," he said, adding that about 40%-50% of Enersis' cash flow is generated in Chile. The profitability of these three countries has offset currency devaluations in Argentina and Brazil, which has permitted Enersis' classification to remain solid, Diez said. While other Latin American currencies continue to struggle against the dollar, the Chilean peso has strengthened 15% this year to some 634 pesos today. Endesa posted 48mn euros (US$56.2mn) Latin American net income during the first nine months of the year, turning round a 110mn euro loss in the same period of 2002. Higher power demand growth across the region, especially in Brazil, Argentina and Chile, was behind the increase, Miranda said.