Support Enel Generation

Texto faltantCurrently, Empresa de Energía de Bogotá (EEB) has a 51.5% economic participation in the company and the ENEL group holds 48.5%. However, since 14.07% of the EEB shares are preferential, it is the ENEL Group which exercises control with 56.4% of ordinary shares. For this reason, Enel Generation is considered a private company for all commercial and contracting purposes.e

Enel Generation is not listed in any local or international stock exchange, so that its shares are not quoted in any stock exchange, nor are they open to negotiations for the general public. It has been recognized as a recurrent bond issuer in the local capital market since 1997; in January 2011 the company started participating successfully in the international capital market, as the first Colombian corporate issuer to issue global bonds in pesos and payable in dollars.

Historically, Enel Generation has distributed 100% of its annual profits to its shareholders. However, article 81 of its corporate bylaws indicates the following:

"Profits distribution. After having made legal and occasional reserves and the reserve for tax payments, profits will be distributed among the shareholders subject to the General Shareholders' approval, according to i) the Trade Code and ii) the bylaws, taking into account whether shares have been issued with preferential dividends and no voting rights. Once the above reserves have been created, as well as reserves required for tax payments, at least 50%, or 70%, as applicable, of net profits, or their balance should previous years' losses have to be offset, will be distributed. However, if the sum of legal, regulatory, and occasional reserves exceeds 100% of the subscribed capital, the percentage the company will distribute will be 70% at least. However, with majorities indicated in the bylaws, the Assembly may decide that profits be distributed in lower percentages, or not at all. Should the above majority not exist, at least 50% of net profits, or their balance should previous years' losses have to be offset, should be distributed. Dividend payments will be made proportionally to the number of subscribed shares, in cash and on dates established by the General Shareholders Assembly, unless with the majority indicated in the bylaws such payment should be made in the form of company shares".

At a local level, as a securities issuer Enel Generation and its current bond issuances have a AAA rating from Fitch Ratings Colombia S.A. SCV, which was ratified on May 2016. At an international level, the company and its global bond in pesos are rated BBB by Fitch Ratings Inc (stable outlook) and by Standard & Poor´s (stable outlook).

The Enel Generation global peso bond was issued under the form 144A/Reg S (addressed exclusively to qualified institutional investors from the United States and Europe), not having been registered under the US Securities Act of 1933. The company is not required to prepare reports such as 10K, 10Q, or 20F. However, the company holds quarterly telephone conferences with its local and international investors and publishes quarterly reports on its webpage, distributing them directly to its investor base.

Enel Generation is a company dedicated to trading and generation of electrical power according to Law 143 of 1994. Recently, in December 2012 its General Shareholders Assembly approved the company participation in the combustible gas trading business, and in February 2013 the bondholders in Colombia approved the respective change in the company corporate object .

Currently, Enel Generation has 13 electrical generation plants: 11 water driven and 2 coal driven, for a total gross installed capacity of 3.469 MW. With start of operations of the Quimbo project in 2015, the company added 400 MW to the company installed capacity.

The main objective of the Enel Generation commercial policy is maintaining an optimal mix between mid-term contracts and sales in the energy exchange market. The optimal level of bilateral contracts is estimated as the one in which the company will be protected against low price conditions during rainy seasons, at the same time benefiting from price increases during dry seasons. Such commercial policy estimates every year the volume of sales that have to be made under contracts in order to maximize revenues and the operational margin volatility level, within limited and controlled levels of risk and according to the country's hydrology expectations.

Historically, such commercial policy has resulted in 70% of sales being made through contracts, the remaining 30% in the spot market, which has allowed minimizing volatility and generating stable revenues for the company in light of changes to the country's hydrology conditions.

Additionally, Enel Generation benefits from the supplementary situation of water flows to its generation plants in Colombia, so that during dry seasons its electrical power commitments can be met by other plans located in regions not affected by such dry seasons.

According to the Colombian electrical market structure, electrical power generators and traders, such as Enel Generation, sell electrical power to the wholesale market and to the non-regulated market.

The wholesale market includes the country's electrical power traders and distributors, which make their purchases through bilateral contracts. The electrical power these agents purchase from the generators is then distributed to the clients. This market represents over 70% of the Enel Generation contract sales.

The non-regulated market is comprised of clients with demands in excess of 0.1 MW or minimal monthly consumption greater than 55 MWh. These agents are able to negotiate directly with generating and trading companies under contracts for the supply of electrical power. These contracts represent close to 30% of the Enel Generation contract sales.

Currently, Enel Generation is developing the Quimbo Hydroelectric Project, the first private initiative to build a hydroelectric plant in Colombia. Following are the general project aspects:

• Multi-purposed reservoir in the Magnolia in the river, 12 km from Betania.
• Installed capacity: 400 MW (Francis turbines, 2x200).
• 2.216 GWh annual average expected generation (60% load factor).
• Estimated service life: 50 yearsTotal project area: 8.586 Ha. (6 municipalities).
• Construction time: Oct. 2010 – 2015.
• Estimated investment: US$ 1.093 M.
• Reliability charge for 2014 – 2034: close to US$400 m.