Equity Research

Chile Electric Utilities Sector Note 08 August 2013

Chile Power July 2013

Rainfall continued, but costs rose anyway
Higher coal, LNG and diesel lifted costs in both grids Despite the rainfall in the SIC grid in July, hydro generation output fell 28% YoY. Increases in coal and LNG generation (+68% and +26% YoY, respectively) werent able to offset system costs created by a jump (+64% YoY) in diesel-fired output, which was needed to satisfy the greater electricity demand. Generation costs thus increased on the back of a more inefficient supply. The SING grid faced a similar situation, where lower LNG output (-29% YoY) was met with significantly higher diesel output, which boosted system costs. Restored thermal plants should ease costs in coming months The Nehuenco II gas facility (Colbun), which was out of service since March 14 due to a mechanical failure, has been back on line since July 22, and the expected re-start of operations at the Nueva Renca gas plant (AES Gener) by end-August should ease system costs in coming months in the SIC grid. We expect cost pressure to linger in August, depending on future rainfall in the south of Chile. In the northern grid, the restoration of E-CLs combined cycle has helped the system to control costs. Reservoirs not as high as expected A lack of rainfall in July led to a sharp drop in reservoir levels (-49% YoY), though they were better than in the previous month (+31% vs. June). Due to continued generation in some cases, reservoirs reached their lowest levels for the period, forcing hydro facilities to occasionally stop generating energy again in July. Generators saw a substantial drop in hydro output, forcing them to increase their thermal output and/or face higher energy purchase costs to meet energy commitments. Thermals were best performers in July: AES Gener and E.CL Both AES Gener and E.CL increased their own generation, likely making the companies net sellers in the spot market, which should improve revenues. Higher expected fuel costs should be partially offset by lower YoY international fuel prices. We expect both companies to widen margins in July, particularly from lower energy purchase costs on the back of higher thermal output, led mainly by more coal-fired generation and the availability of LNG in the case of E.CL. For more details, please see the tables and charts below.
Joao Pimentel Brazil Banco BTG Pactual S.A. joao.pimentel@btgpactual.com +55 11 3383 3313 Antonio Junqueira, CFA New York BTG Pactual US Capital LLC antonio.junqueira@btgpactual.com +55 11 3383 2579 Tomas Gonzalez Chile - BTG Pactual tomas.gonzalez@btgpactual.com +562 2490 5034

ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 17 Banco BTG Pactual S.A. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Chile Power July 2013 08 August 2013

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A closer look at company performances

AES Geners output in the SIC grid climbed 29% YoY on a more thermal-heavy generation mix (+34%), driven by higher coal-fired output (+44% YoY) that will likely increase fuel costs YoY. Due to its greater own generation, it was able to be a net seller in the spot market, reducing its energy purchase costs (at attractive spot prices YoY) and leading to margin gains in July. In the SING grid, own generation sank 5% YoY, largely on lower YoY coal-fired output. We expect a lower level of coal generation to slightly decrease fuel costs, though this may also force the company to buy more energy in the spot market, offsetting the cost gains. That said, we anticipate more sales due to the greater contract commitments. E.CLs generation in the SING grid climbed 8% YoY in July. The higher YoY thermal output was led by a 12% increase in coal-fired output, which partially offset the lower LNG supply (cheaper, now linked to Henry Hub). Despite the higher YoY fuel costs expected, we should see margins expand at E-CL, led by a reduction in its energy purchase costs YoY. We believe the company was able to sell a slight amount of energy in the spot market, which should widen margins. Colbuns output in the SIC grid climbed 19% YoY in July, owing to more coal, LNG, and diesel generation. The worse generation mix, involving less hydro (-29% YoY) and more thermal, should result in a spike in fuel costs. However, the company was able to be a net seller in the spot market (albeit a small amount), increasing revenues, reducing its energy purchase costs, and thus expanding margins. Endesa Chiles own generation in the SIC grid fell 17% YoY in July, due to a significant reduction in hydro output (-37% YoY), though this was partially offset by higher but more efficient thermal generation (+39% YoY) on higher LNG and coalfired output (+20% and +114% YoY, respectively). The increase in thermal generation should result in greater capacity payments, which jointly with cheaper LNG should lead to lower costs YoY. However, we believe the company still needed to buy energy in the spot market, lifting energy purchase costs and partly offsetting the cost savings. In the northern grid (SING), the output from GasAtacama (50% stake) rose 100% in July, generating only with diesel, though costs edged up for this reason. That said, due to its lower level of contract commitments, it was able to sell more energy YoY in the spot market, expanding margins.

Chile Power July 2013 08 August 2013

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Table 1: SIC generation review (GWh) Period Jul-13 Jul-12 Reservoir 907.6 1,481.6 Run of River 805.4 883.5 Hydro 1,713.0 2,365.1 Natural Gas 8.6 8.1 LNG 675.0 535.5 Diesel 439.4 267.5 Coal 1,478.3 880.2 Thermal 2,601.4 1,691.3 Other 109.4 80.4 Total 4,423.8 4,136.8
Source: CDEC-SIC

Jun-13 620.2 695.2 1,315.5 12.3 673.8 584.8 1,546.0 2,816.9 90.9 4,223.2

YoY % (38.7) (8.8) (27.6) 7.0 26.1 64.3 67.9 53.8 36.0 6.9

MoM % 46.3 15.9 30.2 (29.8) 0.2 (24.9) (4.4) (7.7) 20.4 4.7

Period Reservoir Run of River Hydro Natural Gas LNG Diesel Coal Thermal Other Total

YTD-13 4,587.7 5,438.7 10,026.5 86.5 6,326.5 2,524.6 10,120.3 19,057.9 615.4 29,699.8

YTD-12 6,342.4 5,686.5 12,028.9 104.2 6,041.8 3,397.7 6,504.5 16,048.2 524.1 28,601.3

Var. (1,754.7) (247.8) (2,002.5) (17.7) 284.7 (873.1) 3,615.8 3,009.7 91.3 1,098.5

YoY % (27.7) (4.4) (16.6) (17.0) 4.7 (25.7) 55.6 18.8 17.4 3.8

Chart 1: SIC generation mix (Jul-13)

Chart 2: SIC generation mix (Jul-12)

Chart 3: SIC generation mix (Jun-13)

Natural Gas 0% LNG 13% Hydro 31% Other 2% Coal 37% Natural Gas 0% LNG 16%

Hydro 39% Other 3% Coal 33%

Natural Gas 0% LNG 15% Diesel 10%

Hydro 57%

Other 2%

Diesel 7% Coal 21%

Diesel 14%

Source: CDEC-SIC

Source: CDEC-SIC

Source: CDEC-SIC

Table 2: SING generation review (GWh) Period Jul-13 Jul-12 Hydro 5.1 4.8 Natural Gas 143.4 203.0 Diesel 117.4 12.9 Coal 1,160.0 1,106.1 Other 12.0 0.0 Thermal 1,432.9 1,321.9 Total 1,437.9 1,326.8
Source: CDEC-SING

Jun-13 4.8 43.5 125.8 1,247.8 12.8 1,429.9 1,434.8

YoY % 5.6 (29.3) 811.2 4.9 8.4 8.4

MoM % 5.0 229.7 (6.7) (7.0) (6.6) 0.2 0.2

Period Hydro Natural Gas Diesel Coal Other Thermal Total

YTD-13 38.8 917.1 768.3 8,108.8 65.5 9,859.7 9,898.5

YTD-12 41.4 1,341.8 319.7 7,929.9 0.0 9,591.3 9,632.7

Var. (2.6) (424.7) 448.6 179.0 65.5 268.4 265.8

YoY % (6.2) (31.6) 140.3 2.3 2.8 2.8

Chart 4: SING generation mix (Jul-13)

Hydro 0% Coal 81% Natural Gas 10% Diesel 8% Other 1%

Chart 5: SING generation mix (Jul-12)

Hydro 0% Natural Gas 15% Diesel 1% Other 0%

Chart 6: SING generation mix (Jun-13)

Hydro 0% Natural Gas 3% Coal 87% Diesel 9% Other 1%

Coal 84%

Source: CDEC-SING

Source: CDEC-SING

Source: CDEC-SING

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Table 3: SIC average spot prices (US$/MWh) 2003 2004 2005 Jan 13.1 21.0 31.6 Feb 14.7 22.7 74.6 Mar 16.9 53.1 108.8 Apr 19.8 37.4 153.5 May 19.3 54.7 109.3 Jun 16.0 54.7 25.4 Jul 15.3 26.0 21.6 Aug 16.7 24.9 12.8 Sep 16.7 19.9 11.4 Oct 16.4 25.3 13.9 Nov 18.2 20.9 10.3 Dec 17.3 24.9 12.6
1Q 2Q 1H 3Q 9m 4Q Y
Source: CDEC-SIC

2006 25.9 63.3 67.0 62.9 97.3 47.6 17.9 31.0 23.6 21.2 36.5 43.3 51.7 69.6 60.7 24.2 48.4 33.6 44.7

2007 52.5 121.0 142.7 145.6 173.7 262.2 227.6 215.9 180.3 153.9 169.4 218.0 104.9 193.6 149.5 208.2 169.3 180.6 172.1

2008 251.7 279.0 338.4 290.8 258.8 178.9 197.3 136.2 130.6 151.0 140.6 130.6 289.9 243.0 266.5 154.9 229.0 140.8 206.8

2009 117.8 145.4 138.1 124.3 96.9 111.0 102.3 97.0 67.4 103.1 83.5 64.2 133.4 110.6 121.9 89.1 110.9 83.6 104.0

2010 114.2 138.9 144.5 139.5 145.3 157.8 151.9 181.4 132.7 134.2 143.0 199.9 132.3 147.5 140.0 155.6 145.2 159.2 148.7

2011 174.3 242.7 260.8 223.9 246.9 257.4 196.0 167.1 165.9 136.9 153.9 171.3 225.4 242.8 234.1 176.4 214.7 154.1 199.4

2012 188.3 188.8 240.1 279.3 260.3 146.8 139.4 172.0 165.8 181.1 193.0 181.7 206.1 229.1 217.6 159.0 197.9 185.2 194.7

2013 YoY % MoM % 122.7 (34.8) (32.5) 128.3 (32.0) 4.6 178.5 (25.6) 39.1 171.8 (38.5) (3.8) 219.4 (15.7) 27.7 251.6 71.3 14.6 240.9 72.9 (4.2)

14.9 18.4 16.7 16.2 16.5 17.3 16.7

32.5 49.0 40.8 23.6 35.0 23.7 32.2

71.6 96.2 83.9 15.3 60.8 12.3 48.6

143.7 214.3 179.2 240.9 188.2

(30.3) (6.5) (17.6) 51.6 (4.9)

(22.4) 49.2 12.4

Chart 7: SIC average spot prices (US$/MWh) YTD 350

250 150 50 Jan Mar May 2013

Source: CDEC-SIC

Jul 2012

Sep

Nov

Jan

Chart 8: SIC average spot prices (US$/MWh) Jul. 2013

280

Chart 9: SIC average spot prices (US$/MWh) 2Q13 280

220

220

160

160

100 1-Jul
Source: CDEC-SIC

100
7-Jul 13-Jul 2013 19-Jul 25-Jul 2012 31-Jul

Jul
Source: CDEC-SIC

Aug 2013

Sep 2012

Oct

Chile Power July 2013 08 August 2013

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Table 4: SING average spot prices (US$/MWh) 2003 2004 2005 2006 Jan 16.7 22.3 27.0 28.3 Feb 14.7 17.8 28.4 26.2 Mar 14.0 17.5 29.5 24.9 Apr 13.3 26.6 31.3 31.0 May 15.7 28.7 29.7 30.1 Jun 13.9 27.5 24.6 48.5 Jul 15.1 25.9 28.3 44.7 Aug 14.9 30.4 29.5 41.2 Sep 15.7 26.6 30.5 31.3 Oct 16.5 25.6 27.1 48.2 Nov 18.8 25.8 25.0 39.0 Dec 16.1 26.4 23.9 45.6
1Q 2Q 1H 3Q 9M 4Q Y 15.2 14.3 14.7 15.2 14.9 17.1 15.5 19.2 27.6 23.4 27.7 24.8 25.9 25.1 28.3 28.5 28.4 29.4 28.7 25.3 27.9 26.5 36.5 31.5 39.2 34.1 44.3 36.7

2007 35.4 63.2 72.0 65.2 100.4 100.9 138.3 142.7 139.3 141.7 193.6 163.5 56.7 88.9 72.9 140.1 95.5 165.9 113.3

2008 204.9 174.3 164.2 199.7 229.9 230.4 241.8 289.7 234.4 180.2 163.9 105.8 181.3 220.1 200.7 255.5 219.1 149.8 201.7

2009 112.0 90.0 92.2 104.2 104.8 121.3 122.8 127.4 139.7 109.9 121.3 88.7 98.4 110.0 104.2 129.9 112.9 106.5 111.3

2010 99.7 148.1 144.4 144.3 100.5 119.9 115.1 107.8 121.3 108.1 124.0 123.2 130.2 121.3 125.7 114.7 122.0 118.4 121.1

2011 101.5 96.2 118.6 132.3 104.6 126.0 76.5 74.3 66.6 105.1 83.4 65.8 105.7 120.8 113.3 72.5 99.6 84.8 95.8

2012 64.8 88.2 77.6 112.6 111.8 133.2 73.8 67.6 71.9 69.1 81.3 84.8 76.6 119.1 97.9 71.1 88.9 78.4 86.2

YoY % MoM % 2013 99.2 53.1 17.0 68.8 (22.0) (30.7) 65.8 (15.1) (4.3) 82.2 (27.0) 24.8 72.6 (35.1) (11.7) 74.6 (44.0) 2.7 78.7 6.7 5.6

78.3 76.4 77.3 80.1 77.8

2.1 (35.9) (21.0) 12.7 (12.5)

(0.2) (2.4) 4.9

Source: CDEC-SING

Chart 10: SING average spot prices (US$/MWh) YTD

200 160 120 80 40 0 1-Jan

Source: CDEC-SING

1-Mar

1-May

1-Jul 2013

2012

1-Sep

1-Nov

1-Jan

Chart 11: SING average spot prices (US$/MWh) May. 2013

190 140 90 40 1-Jul

Chart 12: SING average spot prices (US$/MWh) 2Q13 190

140 90 40 1-Jul
Source: CDEC-SING

7-Jul

13-Jul 2013

19-Jul 2012

25-Jul

31-Jul

1-Aug 2013

1-Sep 2012

1-Oct

Source: CDEC-SING

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Table 5: Endesa Chile SIC generation review (GWh) Period Jul-13 Jul-12 Jun-13 Reservoir 676.9 1,133.9 424.2 Run of River 240.5 324.0 189.1 Hydro 917.4 1,457.9 613.3 Natural Gas 0.1 0.0 0.0 LNG 529.2 440.1 515.0 Diesel 11.7 1.2 39.0 Coal 203.1 94.8 250.8 Thermal 744.1 536.1 804.8 Other 13.4 16.6 8.2 Total 1,674.9 2,010.7 1,426.3
Source: CDEC-SIC

YoY % (40.3) (25.8) (37.1) 20.2 862.0 114.2 38.8 (19.7) (16.7)

MoM % 59.6 27.2 49.6 2.8 (70.1) (19.0) (7.5) 63.7 17.4

Period Reservoir Run of River Hydro Natural Gas LNG Diesel Coal Thermal Other Total

YTD-13 3,198.8 1,777.6 4,976.4 0.7 3,654.9 71.7 1,937.5 5,664.8 74.2 10,715.4

YTD-12 4,657.3 2,162.5 6,819.9 0.0 3,810.0 41.4 668.5 4,519.8 87.7 11,427.3

Var. (1,458.6) (384.9) (1,843.5) 0.7 (155.1) 30.3 1,269.1 1,145.0 (13.5) (712.0)

YoY % (31.3) (17.8) (27.0) 13,300.0 (4.1) 73.2 189.9 25.3 (15.4) (6.2)

Chart 13: SIC generation mix (Jul-13)

Natural Gas 0% LNG 32%

Chart 14: SIC generation mix (Jul-12)

Hydro 73% Natural Gas 0% LNG 22% Diesel Coal 0% 5%

Chart 15: SIC generation mix (Jun-13)

Hydro 55%

Hydro 43%

Natural Gas 0% LNG 36% Diesel 3%

Coal 18%

Coal 12%
Source: CDEC-SIC

Diesel 1%
Source: CDEC-SIC

Source: CDEC-SIC

Table 6: Endesa Chile SING generation review (GWh) Period Jul-13 Jul-12 Jun-13 Hydro Diesel 0.4 0.4 0.7 Coal 96.1 92.5 99.2 Thermal 96.5 92.9 99.9 Total 96.5 92.9 99.9
Source:

YoY % (2.6) 3.9 3.8 3.8

MoM % (50.5) (3.1) (3.5) (3.5)

Period Hydro Diesel Coal Thermal Total

YTD-13 4.1 600.4 604.6 604.6

YTD-12 2.6 441.5 444.2 444.2

Var. 1.5 158.9 160.4 160.4

YoY % 56.3 36.0 36.1 36.1

Chart 16: SING generation mix (Jul-13)

Chart 17: SING generation mix (Jul-12)

Chart 18: SING generation mix (Jun-13)

Coal 100%

Diesel 0%

Coal 100%

Diesel 0%

Coal 99%

Diesel 1%

Source: CDEC-SING

Source: CDEC-SING

Source: CDEC-SING

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Table 7: GasAtacama SING generation review (GWh) Period Jul-13 Jul-12 Jun-13 Natural Gas 0.0 41.3 0.0 Diesel 83.3 0.5 92.2 Thermal 83.3 41.8 92.2 Total 83.3 41.8 92.2
Source: CDEC-SING.

YoY % (100.0) 18,030.7 99.5 99.5

MoM % (100.0) (9.7) (9.7) (9.7)

Period Natural Gas Diesel Thermal Total

YTD-13 0.0 523.5 523.5 523.5

YTD-12 402.6 133.8 536.4 536.4

Var. (402.6) 389.7 (12.9) (12.9)

YoY % (100.0) 291.2 (2.4) (2.4)

Chart 19: Generation mix (Jul-13)

Chart 20: Generation mix (Jul-12)

Chart 21: Generation mix (Jun-13)

Natural Gas 0%

Diesel 100%

Natural Gas 99%

Diesel 1%

Natural Gas 0%

Diesel 100%

Source: CDEC-SING.

Source: CDEC-SING.

Source: CDEC-SING.

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Table 8: Colbun SIC generation review (GWh) Period Jul-13 Jul-12 Jun-13 Reservoir 230.7 347.7 196.0 Run of River 215.2 282.5 171.9 Hydro 445.9 630.3 367.9 Natural Gas 0.0 0.0 0.0 LNG 145.8 62.5 158.8 Diesel 139.4 85.9 132.6 Coal 270.1 64.1 260.4 Thermal 555.3 212.5 551.7 Total 1,001.2 842.7 919.6
Source: CDEC-SIC

YoY % (33.7) (23.8) (29.3) 133.4 62.3 321.3 161.4 18.8

MoM % 17.7 25.2 21.2 (8.2) 5.2 3.7 0.6 8.9

Period Reservoir Run of River Hydro Natural Gas LNG Diesel Coal Thermal Total

YTD-13 1,388.9 1,300.4 2,689.4 0.0 2,101.2 416.9 1,648.8 4,166.9 6,856.3

YTD-12 1,685.1 1,555.8 3,240.8 0.0 1,142.7 1,611.4 636.9 3,391.0 6,631.8

Var. (296.2) (255.3) (551.5) 0.0 958.5 (1,194.5) 1,011.9 775.9 224.5

YoY % (17.6) (16.4) (17.0) 83.9 (74.1) 158.9 22.9 3.4

Chart 22: Generation mix (Jul-13)

Natural Gas 0%

Chart 23: Generation mix (Jul-12)

Natural Gas 0% LNG 7% Diesel 10% Coal 8%

Chart 24: Generation mix (Jun-13)

Natural Gas 0% Hydro 40% LNG 17%

Hydro 44%

Hydro 75%

LNG 15% Coal 27%

Diesel 14%

Diesel 15% Coal 28%

Source: CDEC-SIC

Source: CDEC-SIC

Source: CDEC-SIC

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Table 9: AES Gener SIC generation review (GWh) Period Jul-13 Jul-12 Jun-13 Reservoir 0.0 0.0 0.0 Run of River 67.2 68.2 70.4 Hydro 67.2 68.2 70.4 Natural Gas 0.0 0.0 0.0 LNG 0.0 32.9 0.0 Diesel 25.4 12.2 61.0 Coal 550.1 383.4 598.4 Thermal 575.5 428.6 659.4 Total 642.7 496.7 729.9
Source: CDEC-SIC

YoY % (1.5) (1.5) (100.0) 107.9 43.5 34.3 29.4

MoM % (4.6) (4.6) (58.4) (8.1) (12.7) (11.9)

Period Reservoir Run of River Hydro Natural Gas LNG Diesel Coal Thermal Total

YTD-13 0.0 722.6 722.6 3.0 554.3 409.3 3,495.9 4,462.5 5,185.1

YTD-12 0.0 721.2 721.2 14.0 1,074.7 319.3 2,538.2 3,946.3 4,667.5

Var. 0.0 1.4 1.4 (11.0) (520.5) 90.0 957.6 516.2 517.6

YoY % 0.2 0.2 (78.3) (48.4) 28.2 37.7 13.1 11.1

Chart 25: Generation mix (Jul-13)

Natural Gas 0% Coal 86% Hydro 10% Diesel 4% LNG 0%

Chart 26: Generation mix (Jul-12)

Natural Gas 0% Coal 77% Hydro 14% LNG 7%

Chart 27: Generation mix (Jun-13)

Natural Gas 0% Coal 82% Hydro 10% Diesel 8% LNG 0%

Diesel 2%

Source: CDEC-SIC

Source: CDEC-SIC

Source: CDEC-SIC

Table 10: AES Gener SING generation review (GWh) Period Jul-13 Jul-12 Jun-13 Hydro Natural Gas 0.0 0.0 0.0 Diesel 0.0 0.0 0.0 Coal 384.9 406.9 505.7 Thermal 384.9 406.9 505.7 Total 384.9 406.9 505.7
Source: CDEC-SING

YoY % (5.4) (5.4) (5.4)

MoM % (23.9) (23.9) (23.9)

Period Hydro Natural Gas Diesel Coal Thermal Total

YTD-13 0.0 0.0 3,235.8 3,235.8 3,235.8

YTD-12 0.0 0.0 2,941.3 2,941.3 2,941.3

Var. 0.0 0.0 294.5 294.5 294.5

YoY % 10.0 10.0 10.0

Chart 28: Generation mix (Jul-13)

Chart 29: Generation mix (Jul-12)

Chart 30: Generation mix (Jun-13)

Coal 100%

Natural Gas 0% Diesel 0%

Coal 100%

Natural Gas 0% Diesel 0%

Coal 100%

Natural Gas 0% Diesel 0%

Source: CDEC-SING

Source: CDEC-SING

Source: CDEC-SING

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Table 11: Guacolda SIC generation review (GWh) (50% owned by AES Gener) Period Jul-13 Jul-12 Jun-13 YoY % MoM % Reservoir 0.0 0.0 0.0 Run of River 0.0 0.0 0.0 Diesel 0.0 0.0 0.0 Coal 454.9 337.9 436.4 34.6 4.2 Thermal 454.9 337.9 436.4 34.6 4.2 Total 454.9 337.9 436.4 34.6 4.2
Source: CDEC-SIC

Period Reservoir Run of River Diesel Coal Thermal Total

YTD-13 0.0 0.0 0.0 3,038.1 3,038.1 3,038.1

YTD-12 0.0 0.0 0.0 2,661.0 2,661.0 2,661.0

Var. 0.0 0.0 0.0 377.2 377.2 377.2

YoY % 14.2 14.2 14.2

Chart 31: Generation mix (Jul-13)

Chart 32: Generation mix (Jul-12)

Chart 33: Generation mix (Jun-13)

Coal 100%

Diesel 0%

Coal 100%

Diesel 0%

Coal 100%

Diesel 0%

Source: CDEC-SIC

Source: CDEC-SIC

Source: CDEC-SIC

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Table 12: E-CL SING generation review (GWh) Period Jul-13 Jul-12 Jun-13 Hydro 5.1 4.8 4.8 Natural Gas 143.4 161.7 43.5 Diesel 30.1 11.2 28.9 Coal 679.1 606.7 642.8 Thermal 852.6 779.5 715.3 Total 857.7 784.4 720.1
Source: CDEC-SING

YoY % 5.6 (11.3) 170.0 11.9 9.4 9.4

MoM % 5.0 229.7 4.2 5.6 19.2 19.1

Period Hydro Natural Gas Diesel Coal Thermal Total

YTD-13 35.9 917.1 222.6 4,272.6 5,412.3 5,448.2

YTD-12 39.9 939.2 171.0 4,547.1 5,657.3 5,697.1

Var. (3.9) (22.1) 51.6 (274.5) (245.0) (248.9)

YoY % (9.8) (2.3) 30.1 (6.0) (4.3) (4.4)

Chart 34: Generation mix (Jul-13)

Hydro 1% Natural Gas 17% Diesel 3%

Chart 35: Generation mix (Jul-12)

Hydro 1% Natural Gas 21% Diesel 1%

Chart 36: Generation mix (Jun-13)

Hydro 1% Coal 89% Natural Gas 6% Diesel 4%

Coal 79%

Coal 77%

Source: CDEC-SING

Source: CDEC-SING

Source: CDEC-SING

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Table 13: SIC reservoir review (end-of-month accumulated GWh) Period Jul-13 Jul-12 Jun-13 YoY % Colbun 198.4 276.4 79.9 (28.2) Rapel 37.9 63.3 47.0 (40.2) La invernada 5.1 12.4 6.0 (59.1) Lago Laja 356.4 1,198.4 255.9 (70.3) Lago Chapo 242.7 266.2 224.1 (8.8) Ralco 246.4 316.3 220.0 (22.1) Total 1,086.8 2,132.9 832.9 (49.0)
Source: CNE

MoM % 148.4 (19.3) (15.3) 39.2 8.3 12.0 30.5

Chart 37: SIC reservoir mix (Jul-13)

Lago Laja 33%

Chart 38: SIC reservoir mix (Jul-12)

Chart 39: SIC accumulated energy GWh YoY

La invernad a 0% Rapel 4%

Lago Chapo 22%

Lago Chapo 12% Lago Laja 56% La invernad a 1%

Source: CNE

400 300 200

Jul-13

Jul-12

Ralco 15% Colbun Rapel 13% 3%

100 0

Colbun 18%

Ralco 23%

Source: CNE

Source: CNE

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Chart 40: Lago Laja reservoir level trend

Chart 41: Melado (Pehuenche) reservoir level trend

1,360 1,350 1,340 1,330 1,320 1,310 1,300 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10

650

646

642

638 Jan-94

Jan-98

Jan-02

Jan-06

Jan-10

Source: CNE, CDEC-SIC

Source: CNE, CDEC-SIC

Chart 42: Rapel reservoir level trend 106

Chart 43: Ralco reservoir level trend

730 720 710

104 102 100 98 96 Jan-94

700 690 Jan-94

Jan-98

Jan-02

Jan-06

Jan-10

Jan-98

Jan-02

Jan-06

Jan-10

Source: CNE, CDEC-SIC

Source: CNE, CDEC-SIC

Chart 44: Colbun reservoir level trend 440

Chart 45: Lago Chapo (Canutillar) reservoir level trend 250

430 420 410 400 390 Jan-94

245 240 235 230 225 220 Jan-98 Jan-02 Jan-06 Jan-10 215 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10

Source: CNE, CDEC-SIC

Source: CNE, CDEC-SIC

Chile Power July 2013 08 August 2013

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Chart 46: Energy accumulated in reservoirs (GWh)

8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Jan-94

Jan-96 LAJA

Jan-98 RALCO

Jan-00

Jan-02 CHAPO

Jan-04 COLBUN

Jan-06

Jan-08 LA INVERNADA

Jan-10

Jan-12 RAPEL

Source: CNE, CDEC-SIC

Chart 47: Energy accumulated in reservoirs (GWh)

7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan

2008
Source: CNE, CDEC-SIC

2009

2010

Normal hydrology

Drought 98/99

2011

2012

2013

Chile Power July 2013 08 August 2013

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Figure 1: Electricity map of the SIC and SING grids

Source: CDEC-SIC/SING

Chile Power July 2013 08 August 2013

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Figure 2: Gas pipelines map of the SIC and SING grids

Source: CDEC-SIC/SING

Chile Power July 2013 08 August 2013

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Required Disclosures
This report has been prepared by Celfin Capital S.A. Corredores de Bolsa. The figures contained in performance charts refer to the past; past performance is not a reliable indicator of future results.

BTG Pactual Rating Buy Neutral Sell

Definition Expected total return 10% above the companys sector average. Expected total return between +10% and -10% the companys sector average. Expected total return 10% below the companys sector average.

Coverage *1 50% 45% 5%

IB Services *2 48% 49% 9%

1: Percentage of companies under coverage globally within the 12-month rating category. 2: Percentage of companies within the 12-month rating category for which investment banking (IB) services were provided within the past 12 months. Absolute return requirements Besides the abovementioned relative return requirements, the listed absolute return requirements must be followed: a) a Buy rated stock must have an expected total return above 15% b) a Neutral rated stock can not have an expected total return below -5% c) a stock with expected total return above 50% must be rated Buy

Analyst Certification
Each research analyst primarily responsible for the content of this investment research report, in whole or in part, certifies that: (i) all of the views expressed accurately reflect his or her personal views about those securities or issuers, and such recommendations were elaborated independently, including in relation to Banco BTG Pactual S.A., Celfin Capital Corredores de Bolsa S.A.. and/or its affiliates, as the case may be; (ii) no part of his or her compensation was, is, or will be, directly or indirectly, related to any specific recommendations or views contained herein or linked to the price of any of the securities discussed herein. Research analysts contributing to this report who are employed by a non-US Broker dealer are not registered/qualified as research analysts with FINRA and therefore are not subject to the restrictions contained in the FINRA rules on communications with a subject company, public appearances, and trading securities held by a research analyst account. Part of the analyst compensation comes from the profits of Banco BTG Pactual S.A. or Celfin Capital Corredores de Bolsa S.A. as a whole and/or its affiliates and, consequently, revenues arisen from transactions held by Banco BTG Pactual S.A., Celfin Capital Corredores de Bolsa S.A. and/or its affiliates.

Statement of Risk
<Disclosures_RS>

Company Disclosures
Company Name AES GENER 6, 12, 18, 19, 20, 21, 22 Colbun 6, 18, 19, 20, 21, 22 ECL 18, 19, 20, 21, 22 Reuters GENER.SA N.A. ECL.SA 12-mo rating N/A N/A Buy Price CLP332.94 CLP130.50 CLP737.53 Price date 7-8-2013 7-8-2013 7-8-2013

6. Celfin Capital Corredores de Bolsa S.A., Banco BTG Pactual S.A. and/or its affiliates receive compensation for any services rendered or presents any commercial relationships with this company, entity or person, entities or funds which represents the same interest of this company/entity. 12. Directors or employees of Celfin Capital Corredores de Bolsa S.A., Banco BTG Pactual S.A., its affiliates or subsidiaries take part on the advisory board of this company. 18. As of the end of the month immediately preceding the date of publication of this report, neither Celfin Capital Corredores de Bolsa S.A., Banco BTG Pactual S.A., nor its affiliates or subsidiaries beneficially own 1% or more of any class of common equity securities. 19. Neither Celfin Capital Corredores de Bolsa S.A., Banco BTG Pactual S.A. nor its affiliates or subsidiaries have managed or co-managed a public offering of securities for the company within the past 12 months. 20. Neither Celfin Capital Corredores de Bolsa S.A., Banco BTG Pactual S.A. nor its affiliates or subsidiaries engaged in market making activities in the subject company's securities at the time this research report was published. 21. Celfin Capital Corredores de Bolsa S.A., Banco BTG Pactual S.A. or its affiliates or subsidiaries have not received compensation for investment banking services from the companies in the past 12 months. 22. Celfin Capital Corredores de Bolsa S.A., Banco BTG Pactual S.A. or its affiliates or subsidiaries do not expect to receive or intends to seek compensation for investment banking services from the companies within the next 3 months.

Chile Power July 2013 08 August 2013

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AES GENER
400.0 320.0 240.0 160.0 80.0 0.0
8-Aug-10
Price (CLP) StockStock Price (CLP)

8-Nov-10

8-Nov-11

8-May-11

8-May-12

8-Nov-12

8-May-13

8-Feb-11

8-Feb-12

8-Aug-11

8-Aug-12

8-Feb-13

Buy Neutral Sell No Rating

Source: BTG Pactual and Economatica. Prices as of 07 August 2013

Colbun
200.0 160.0 120.0 80.0 40.0 0.0
Price (CLP) StockStock Price (CLP)

8-Nov-10

8-Nov-11

8-May-11

8-May-12

8-Nov-12

8-May-13

8-Feb-11

8-Feb-12

8-Aug-10

8-Aug-11

8-Aug-12

8-Feb-13

Buy Neutral Sell No Rating

Source: BTG Pactual and Economatica. Prices as of 07 August 2013

ECL
Stock Price (CLP) Price Target (CLP)

1600.0 1400.0 1200.0 1000.0 800.0 600.0 400.0 200.0

8-Nov-10

8-Nov-11

8-May-11

8-May-12

8-Nov-12

0.0

8-May-13

8-Feb-11

8-Feb-12

8-Aug-10

8-Aug-11

8-Aug-12

8-Feb-13

Buy Neutral Sell No Rating

Source: BTG Pactual and Economatica. Prices as of 07 August 2013

8-Aug-13

8-Aug-13

8-Aug-13

Chile Power July 2013 08 August 2013

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Global Disclaimer
This report has been prepared by Celfin Capital Corredores de Bolsa S.A. (Celfin S.A.), a Chilean broker dealer registered with Superintendencia Valores Y Seguros (SVS) in Chile, and is based in opinions from Celfin S.A., Banco BTG Pactual S.A. and its affiliates. Celfin S.A.s acquisition by Banco BTG Pactual S.A. (BTG Pactual S.A.), a Brazilian regulated bank, was approved by the Brazilian Central Bank on November 14th, 2012 and responsible for the distribution of this report in Chile and and Celfin Capital S.A. Sociedad Agente de Bolsa, registered with Superintendencia de Mercado de Valores (SMV) of Peru is responsible for the distribution of this report in Peru. BTG Pactual S.A. Comisionista de Bolsa (BTG Pactual Colombia) formerly known as Bolsa y Renta S.A. Comisionista de Bolsa, is a Colombian broker dealer register with the Superintendencia Financeira de Colombia and is responsible for the distribution of this report in Colombia. BTG Pactual Colombia acquisition by BTG Pactual S.A. was approved by Brazilian Central Bank on December 21st, 2012. BTG Pactual US Capital LLC (BTG Pactual US,), a broker-dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation is distributing this report in the United States. BTG Pactual US assumes responsibility for this research for purposes of U.S. law. Any U.S. person receiving this report and wishing to effect any transaction in a security discussed in this report should do so with BTG Pactual US at 212-293-4600, 601 Lexington Ave. 57th Floor, New York, NY 10022. This report is being distributed in the United Kingdom and elsewhere in the European Economic Area (EEA) by BTG Pactual Europe LLP (BTG Pactual UK), which is authorized and regulated by the Financial Services Authority of the United Kingdom. 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In all cases, investors should conduct their own investigation and analysis of such information before taking or omitting to take any action in relation to securities or markets that are analyzed in this report. BTG Pactual does not undertake that investors will obtain profits, nor will it share with investors any investment profits nor accept any liability for any investment losses. Investments involve risks and investors should exercise prudence in making their investment decisions. BTG Pactual accepts no fiduciary duties to recipients of this report and in communicating this report is not acting in a fiduciary capacity. The report should not be regarded by recipients as a substitute for the exercise of their own judgment. 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Analyst compensation is not based on investment banking revenues, however, compensation may relate to the revenues of BTG Pactual Investment Bank as a whole, of which investment banking, sales and trading are a part. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Options, derivative products and futures are not suitable for all investors, and trading in these instruments is considered risky. Mortgage and asset-backed securities may involve a high degree of risk and may be highly volatile in response to fluctuations in interest rates and other market conditions. Past performance is not necessarily indicative of future results. If a financial instrument is denominated in a currency other than an investors currency, a change in rates of exchange may adversely affect the value or price of or the income derived from any security or related instrument mentioned in this report, and the reader of this report assumes any currency risk. This report does not take into account the investment objectives, financial situation or particular needs of any particular investor. Investors should obtain independent financial advice based on their own particular circumstances before making an investment decision on the basis of the information contained herein. For investment advice, trade execution or other enquiries, clients should contact their local sales representative. Neither BTG Pactual nor any of its affiliates, nor any of their respective directors, employees or agents, accepts any liability for any loss or damage arising out of the use of all or any part of this report. 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United Arab Emirates Residents: This research report, and the information contained herein, does not constitute, and is not intended to constitute, a public offer of securities in the United Arab Emirates and accordingly should not be construed as such. The securities are only being offered to a limited number of sophisticated investors in the UAE who (a) are willing and able to conduct an independent investigation of the risks involved in an investment in such securities, and (b) upon their specific request. The securities have not been approved by or licensed or registered with the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the UAE. This research report is for the use of the named addressee only and should not be given or shown to any other person (other than employees, agents or consultants in connection with the addressee's consideration thereof). No transaction will be concluded in the UAE and any enquiries regarding the securities should be made with BTG Pactual CTVM S.A. at +55 11 3383-2638, Avenida Brigadeiro Faria Lima, 3477, 14th floor, So Paulo, SP, Brazil, 04538-133.