Fitch Affirms Enersis' IDR at 'BBB+/AA(cl)'; Outlook Stable

Fitch Ratings has affirmed the foreign and local currency Issuer Default Ratings (IDRs) of Enersis S.A. at 'BBB+' and its long-term national scale rating at 'AA(cl)'. In addition, Fitch has affirmed Enersis' short-term national scale rating at 'F1+/AA(cl)'and its national Equity Rating at 'Primera Clase Nivel 1'. These rating actions affect approximately USD1.1 billion of outstanding Yankee bonds and USD67 million of domestic bonds.

The Rating Outlook is Stable.

Enersis' ratings reflect its solid business platform with a strong degree of business and geographic diversification across the electricity chain, and good financial metrics. The company's regulated business represents 49% of EBITDA providing a degree of earning stability as it operates under supportive regulatory environments. Geographic diversification through Latin America provides a natural hedge to different regulations and weather conditions. The Stable Outlook is driven by Enersis' adequate liquidity profile and credit metrics and the expectation that a balanced mix between generation and distributions businesses will be maintained.

Credit risks associated with the company include pressures from the shareholder Enel S.p.a. ('A-' IDR by Fitch) to increase dividends, possible environmental and/or political issues which could result in cost overruns or modifications of projects under construction, although these risks appear manageable. The ratings also consider the company's dependence on dividend payments from its subsidiaries to repay its own debt and incorporate the seasonal and regional cash flow volatility.

KEY RATING DRIVERS

A change in its power generation business' commercial policy that results in an imbalanced long-term contractual position, and/or a material and sustained deterioration of credit metrics (reflected in a Debt to EBITDA ratio greater than 3x and EBITDA to interest coverage below 4x) could result in a negative rating action. A material improvement in credit metrics that could be sustained over time, reduction in debt levels and in pressure from shareholders to distribute dividends could result in a positive rating action. Enersis and Endesa Chile's ratings are not expected to be impacted by the recently announced capitalization transaction, if approved.

BALANCED PROFILE

Enersis enjoys a strong business platform underpinned by a balanced portfolio of regulated and non-regulated activities and a well-diversified geographic presence. Enersis' cash generation is evenly split between its power generation and power distribution businesses which represented 51% and 49% of consolidated EBITDA as of September 2012, respectively. In the generation business, operations are concentrated in its subsidiary Endesa Chile ('BBB+' IDR by Fitch). Enersis generation business' conservative commercial policy is a key strength to reduce the company's exposure to hydrology risk as hydropower generation represents 58% of its generation matrix. Consolidated EBITDA streams are well diversified amongst Chile (21.6%), Colombia (35.2%) and Brazil (31.3%).

On the distribution side of the business, Enersis controls Chilectra S.A. (Chile) which provides it with very predictable cash flows; Chilectra has no debt outstanding. The cash flow stability and reliability of its other regional distribution companies is also sound, yet distributions to the holding company are more difficult to predict as they might be subject to legal restrictions of each country and the willingness of the other shareholders to distribute operating cash.

STRONG CREDIT METRICS

As of September 2012, Enersis maintained strong credit metrics with an EBITDA-to-interest of 4.3 times (x) and net debt-to-EBITDA of 1.3x. EBITDA for the latest 12 months (LTM) was USD4.4 billion and free cash flow was positive after capital expenditures of approximately USD 1.1 billion and consolidated dividends payments of USD 1.1billion. Enersis individual dividend payments are in the range of USD 500 million per annum.

Fitch expects Enersis to moderately increase its EBITDA to a level of USD4.7 billion in 2012-2013, mainly due to the organic growth of its power distribution segment. Cash flows from its generation business unit are expected to remain stable in the range of USD2 billion per annum and increase in 2015, after Quimbo power plant begins to operate. Consolidated capital expenditures are estimated at approximately USD1.3 billion during the next few years and are expected to be funded with the company's own cash flow generation. Free cash flow is expected to remain positive.

GOOD LIQUIDITY

Enersis' credit profile is supported by ample consolidated liquidity with USD 1.7 billion of cash as of September 2012 and access to a USD897 million of committed credit lines. Consolidated debt maturities are manageable of USD315 million due in 4Q'12, USD1 billion due in 2013 and USD1.3 billion due in 2014. Fitch expects the company will refinance a portion of its debt maturities, while interest coverage, as measured by EBITDA-to-interest is above 5.0x and leverage as measures by net debt-to-EBITDA to remain below 2.0x, between 2011 - 2014.

CAPITALIZATION NEUTRAL TO RATINGS

Enersis and Endesa Chile's ratings are not expected to be impacted by the recently announced capitalization transaction, if approved. On Dec. 7, 2012, Endesa presented the terms and conditions of its proposal to increase Enersis capital, initially announced on July 2012. Endesa expects to increase Enersis capital by USD5963 million, of which USD3615 million would be contributed in kind by Endesa, and up to USD2348 million will be contributed in cash by minority shareholders, to maintain their current stake in Enersis. Through this capitalization Endesa Spain is aiming to concentrate its assets in Latin America by placing all of them under Enersis, and simplifying its group structure.

Following the capitalization, Enersis consolidated pro-forma debt and cash generation would not change significantly as approximately 99% of the assets in which Enersis would increase its stake are already being consolidated by the company. On an individual basis, Enersis' dividend stream from its subsidiaries would marginally increase, proportionally to the increase of its stake in such entities, assuming the current dividend policy.

Enersis and Endesa Chile's ratings could be pressured in the event of a material change in Enersis current dividend policy or the existence of any additional transfer of funds to its shareholders. Endesa is committed not expect to use the expected cash contribution from minority shareholders to increase Enersis dividend payments or to receive any intercompany loans from Enersis. On a pro-forma basis, the potential contribution in cash from minority shareholders' would enhance Enersis' cash position and growth prospects.

Enersis is one of the largest private electricity utility groups in Latin America. The company has varying ownership interests in electric generation, distribution and transmission companies in Argentina, Brazil, Chile, Colombia and Peru. Enersis is currently 60.62% owned by Endesa Spain ('A-' IDR by Fitch), Spain's largest electrical utility. Beyond its direct investment in Enersis, Endesa Spain holds stakes in many investments as a partner of Enersis and Endesa Chile. Endesa Spain's ratings are linked to and capped by those of its majority shareholder (92%), Enel SpA ('A-' IDR by Fitch), based on strong legal, operational and strategic links.

Fitch has affirmed the following debt instruments of Enersis:

--Senior unsecured notes USD350 million due 2016 at 'BBB+';
--Senior unsecured notes USD350 million due 2014 at 'BBB+';
--Senior unsecured notes USD150 million due 2026 at 'BBB+';
--Commercial paper USD35 million at 'F1+/AA(cl)';
--Commercial paper USD45 million at 'F1+/AA(cl)';
--Commercial paper USD75 million at 'F1+/AA(cl)';
--Commercial paper USD45 million at 'F1+/AA(cl)';
--Senior unsecured CLF2.5 million notes due 2022 at 'AA(cl)';
--Medium-term notes program CLF12.5 million at 'AA(cl)'.

Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012).

Applicable Criteria and Related Research:
Corporate Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460
Parent and Subsidiary Rating Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

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