Transelec norTe s.a.

Transcription

Transelec norTe s.a.
c
Transele
2011
eport
Annual R
.
Norte S.A
01.
Company
Information
2
IDENTIFICATION
Name: Corporate Registration: Tax List Number:
Domicile:
Transelec Norte S.A.
Business Registry of the Real Estate Official Property Registry of Santiago, Sheet
14,386, Nº 11018, 2003.
99.521.950-6
Avenida Apoquindo Nº 3721, 6th Floor, Las Condes, Santiago
Legal Nature:Open Stock Corporation
Subscribed Capital:
US$30,005,000
CORPORATE PURPOSE
In keeping with the same, Transelec Norte
Paid-in Capital:
The company’s exclusive purpose is to
exploit and develop electrical systems
designed for the transport or transmission
of electrical energy and owned by Transelec Norte or by third parties. For this
purpose, the company shall be entitled to
obtain, purchase and operate respective
concessions and permits and to exercise
all rights and authorities granted to power
companies by current legislation. The
corporate purpose includes commercialization of power line transport capacity,
substation transformation and associated
equipment in order for both domestic and
US$30,005,000
provides consulting services to engineering and management divisions of companies related to its exclusive purpose. The
company also performs other commercial
and industrial activities related to the
harnessing of electricity transmission
infrastructure. In keeping with its corporate purpose, the corporation is entitled to
act directly or by means of its subsidiaries
or associated corporations in Chile and
abroad. Transelec Norte performs electricity transmission activities, especially
in the Far North Interconnected System,
SING.
foreign power plants to transmit electrical
energy produced by the same and reach
their power consumption centers.
3
CAPITAL
Transelec Norte’s capital is divided into
750,125 shares. 750,050 of these were
subscribed and paid in by Transelec S.A.,
amounting to 99.99% of the corporation’s
share capital, while 75 shares were subscribed and paid in by Transelec Holdings
Rentas Limitada, amounting to 0.01% of
the corporation’s share capital.
Therefore, as of 31 December 2011, the
corporation’s overall paid share capital
came to 30,005,000 dollars of the United
States of America (USD).
BOARD OF DIRECTORS
Transelec Norte’s Board of Directors is
made up of nine Chilean and Canadian
directors and their respective alternate
directors, who shall remain in these positions for a period of two years and shall
be eligible for reelection. The Chairman is
appointed by the directors chosen at the
shareholders meeting.
The Board of Directors is presently made
up of Directors Richard Legault, Bruce
Hogg, Patrick Charbonneau, Brenda
Eaton, Bruno Philippi Irarrázabal, Mario
Valcarce Durán, Blas Tomic Errázuriz,
José Ramón Valente Vias and Alejandro
Jadresic Marinovic, and by their respective alternate directors Jeffrey Blidner,
Daniel Fetter, Paul Dufresne, Richard
Dinneny, Enrique Munita Luco, Juan José
Eyzaguirre Lira, Federico Grebe Lira,
Juan Paulo Bambach Salvatore and Juan
Irarrázabal Covarrubias.
4
CHAIRMAN
RICHARD LEGAULT
DIRECTORS
MANAGEMENT TEAM
As of 31 December 2011, Transelec’s
management group was made up of
BRUCE HOGG
leading executives in each of their areas
BRENDA EATON
records in the electrical sector:
PATRICK CHARBONNEAU
MARIO VALCARCE DURAN
JOSÉ RAMÓN VALENTE VÍAS
BRUNO PHILIPPI IRARRÁZABAL
BLAS TOMIC ERRÁZURIZ
ALEJANDRO JADRESIC MARINOVIC
SECRETARY OF THE BOARD OF DIRECTORS
FERNANDO ABARA
of expertise, featuring outstanding track
MAIN EXECUTIVES
FERNANDO ABARA ELÍAS
VICE PRESIDENT OF LEGAL AFFAIRS AND
GENERAL COUNSEL
Lawyer
Universidad Católica de Valparaíso
MBA, Universidad Gabriela Mistral
Tax ID number 8.003.772-4
COMMERCIAL RELATIONS WITH
ANDRÉS KUHLMANN JAHN
TRANSELEC S.A.
GENERAL MANAGER
Transelec Norte signed a general services
Civil Industrial Engineer
agreement with Transelec S.A. for the
Pontificia Universidad Católica de Chile
operation and maintenance of Transelec
Tax ID number 6.554.568-3
Norte’s facilities. In addition, this contract
RODRIGO LÓPEZ VERGARA
VICE PRESIDENT OF OPERATIONS
Civil Electrical Engineer
features a series of administrative services including treasury, accounting, information technology, legal, tax and commercial consulting duties, among others.
Universidad de Chile
Tax ID Number 7.518.088-8
ALEXANDROS SEMERTZAKIS PANDOLFI
VICE PRESIDENT OF ENGINEERING AND
CONSTRUCTION
Civil Engineer
Universidad de Santiago
Postgraduate degree in Administration,
Universidad Adolfo Ibáñez
Tax ID number 7.053358-8
5
LETTER FROM THE CHAIRMAN OF
THE BOARD OF DIRECTORS
MESSRS. SHAREHOLDERS:
Operation and maintenance activities executed in the Transelec Norte Transmission
On behalf of the Transelec Norte S.A.
System focused on ensuring reliability,
Board of Directors, it is with great pleasure
safety and sustainability of its transport
that we present the company’s Annual Re-
network, maintaining or increasing the
port corresponding to the 2011 fiscal year
value of its assets. In addition, work
for the consideration of its shareholders.
continued on the Polymeric Insulator Replacement Plan throughout 2011. These
In this scenario, 2011 was a year for Tran-
insulators have been quickly deteriorating
selec Norte to review its systems in order
over recent years. Insulators classified as
to further advance work started after the
highly critical have all been replaced and
27 February 2010 earthquake, clearly for
the project should be integrally completed
the purpose of maintaining reliability levels in 2012.
and transporting power consumed by
nearly 98% of the country safely and con-
Bay controllers were replaced as part of
tinuously. In addition, work continued on a
the modernization process for the control
series of projects designed to strengthen
system at the Encuentro substation that
the system and accompany the country’s
continued throughout 2011. In addition,
growth.
the telecontrol project at the Tarapacá
6
RICHARD
LEGAULT
CH
ECTORS
ARD OF DIR
F THE BO
AIRMAN O
substation was completed and a corres-
systems were now classified as trunk
with our Strategic Plan to ensure growth
ponding telecontrol project at the Atacama
systems. There are consequently four
with sustainable profitability in alignment
substation is currently underway. This
power lines classified as trunk systems in
with our mission to continue delivering the
project should be completed in early 2012. the SING power grid.
best service to Chile and its inhabitants.
Moreover, microwave link installation
projects were executed in order to replace
We wish to highlight that we have main-
OPGW fiber optic cables that were out of
tained commercial contracts with Compañía
service.
Eléctrica de Tarapacá S.A. (CELTA), Gas
Atacama Generación Ltda, Minera Doña
After completing the valuation process
Inés de Collahuasi, Minera Spence, Emp-
for trunk facilities in the SIC and SING
resa Eléctrica de Iquique, Electroandina,
power grids and after the Panel of Experts
Celulosa Arauco y Constitución S.A. and
report was issued, the Ministry of Energy
Compañía Minera Carmen de Andacollo.
published Decree N° 61 dated 17 November 2011. This study determined that the
Lastly, I wish to highlight that the Chilean
Encuentro-Atacama, Lagunas-Crucero
power transmission market has under-
and Tarapacá-Lagunas power lines, as
gone substantial changes in recent years
RICHARD LEGAULT
well as the respective substations and
and this is why we have implemented a
CHAIRMAN OF THE BOARD OF
bays formerly considered to be additional
series of initiatives and programs in tune
DIRECTORS
7
02.
THE BUSINESS
8
COMMERCIALIZATION
Transelec Norte’s corporate purpose is
the commercialization of its power lines’
transmission capacity and eventually
transformation capacity development.
Current electricity regulations –Statutory
Decree N°1 dated 1982 and amended
with the publication of Law N° 19,940
known as Short Law I published in March
2004- define transmission systems by
classifying transmission facilities as belonging to Trunk Transmission Systems,
Subtransmission Systems or Additional
Systems, according to the purpose and
characteristics of each facility.
Current legal regulations establish an
open access layout for the first two systems. In addition, these regulations grant
power transmission facility owners the
right to collect compensation for use of
their transmission system by power companies and their customers. This compensation corresponds to annual investment
value (AIV) plus operating, maintenance
this case, compensation should be agreed
and administration expenses (COMA).
by establishing bilateral contracts.
After completing the valuation process
In addition, the so-called Short Law I
for trunk facilities in the SIC and SING
declares trunk and subtransmission sys-
power grids and after the Panel of Experts
tems to be public services and these are
report was issued, the Ministry of Energy
therefore subject to tariff regulation. Tariff
published Decree N° 61 dated 17 Novem-
setting for these systems is executed
ber 2011.
every four years by the National Energy
Commission, CNE, based on studies
This study determined that the 220 kV
performed by consulting companies. In
Encuentro-Atacama, 220 kV Lagunas-
the case of power lines belonging to the
Crucero and 220 kV Tarapacá-Lagunas
Trunk System, AIC and COMA are set
power lines, as well as the respective sub-
by a consultant selected by means of an
stations and bays formerly considered to
international tender. Annual investment
be additional systems were now classified
value (AIV) for both systems are calculat-
as trunk systems. There are consequently
ed according to the economic service life
four power lines classified as trunk sys-
of each facility and consider a real annual
tems in the SING power grid.
discount rate of 10%.
As for subtransmission, the National
Energy Commission delivered a Technical
Additional facilities are those providing
Report to the Ministry of Energy indicating
services to non-regulated customers, or
subtransmission tariffs and their respect-
for production evacuation for a power
ive indexing formulas for 2011-2014,
plant or a small group of power plants. In
including background information about
9
subtransmission studies and reports by
the corresponding Honorable Panel of
Experts. A Decree setting subtransmission
tariffs and their respective indexing formulas for the aforementioned period should
be published in early 2012.
Additional tariffs stem from use of the
transmission system for electricity withdrawals executed by power companies in
order to supply their customers, such as
distribution companies and customers that
are not subject to price regulation.
COMMERCIAL CONTRACTS
An agreement was signed with Metro
S.A. in 2011 in order to develop a power
transmission system to supply their future
consumption needs.
As of 31 December 2011, Transelec Norte
has commercial contracts with the following:
1) Compañía Eléctrica de Tarapacá
S.A. (CELTA): a basic toll contract
for injections by its Tarapacá power
plant and an additional toll contract
for withdrawals made by its customers Minera ACF, Minera DCM, Minera
Collahuasi and Minera Cerro Colorado.
10
2) Gas Atacama Generación Ltda.: a
6) Electroandina S.A.: land leasing and
basic toll contract for injections by its
shared facilities for the 23 kV Nueva
Atacama power plant and an addition-
Victoria Bay at the Lagunas sub-
al toll contract for withdrawals made
station.
by its customers Emelari, Eliqsa y
Elecda.
7) Celulosa Arauco y Constitución S.A.:
an investment agreement for the
3) Minera Doña Inés de Collahuasi: land
leasing and shared facilities for 220
Ciruelos substation in order to connect its Valdivia plant to the SIC.
kV bays at the Lagunas and Encuentro substations.
8) Compañía Minera Carmen de Andacollo: an additional toll contract for a
4) Minera Spence: land leasing and
power transmission solution contract
shared facilities for the 220 kV bay at
for the withdrawal of power needed
the Encuentro substation.
for its Hypogen Project at the Pan de
Azúcar substation.
5) Empresa Eléctrica de Iquique: land
leasing and shared facilities for the
23 kV Pintados Bay at the Lagunas
substation.
11
03.
THE
OPERATION
12
Operation and maintenance activities exe-
staffed by 19 persons as of 31 December
cuted in the Transelec Norte power trans-
2011. These are distributed between the
mission system have focused on guaran-
Antofagasta and Iquique offices, as well
teeing reliability, safety and sustainability
as at the Lagunas and Encuentro sub-
of its transport network, maintaining or
stations.
increasing the value of its assets.
General operating and maintenance
Transelec Norte facilities, which are
services for these facilities are executed
mainly located in the Far North Intercon-
based on a general benefits and services
nected System (SING), are serviced by
contract that establishes the specifica-
the Transelec mother company by means
tions, characteristics and responsibilities
of the Far North Zone Management
agreed to by both parties.
13
Power line, substation electrical equip-
Maintenance operations for Transelec
al have all been replaced and the project
ment and communications system main-
Norte facilities were provided by means
should be integrally completed in 2012.
tenance work is executed by means of
of preventive maintenance programs
service contracts with companies special-
designed for these facilities, in conformity
A total blackout took place at June 2011 at
izing in these respective lines of business,
with the provisions of the Technical Safety
7:48 AM in the SING power grid. This was
in accordance with the same criteria and
and Service Quality Standards in force
due to a fault not detected by relay protec-
standards applied by Transelec. Control
since 21 March 2005. Program compli-
tion at a 220 kV power line owned by third
system maintenance is executed by Tran-
ance, an index comparing project comple-
parties. Service recovery was partially
selec’s own personnel. This is also the
tion with scheduling executed at the start
delayed by a control equipment break-
case for Transelec Norte facilities located
of each year, came to 89.1%. This index
down at the Lagunas substation owned by
in the Central Interconnected System
also included basic preventive mainten-
Transelec Norte. This event meant EIT of
(SIC), specifically the 220 kV Pan de
ance and the execution of scheduled
8.7 system minutes for 2011.
Azúcar - Carmen de Andacollo power line
extraordinary maintenance in 2011.
in the Coquimbo region and the Ciruelos
Bay controllers were replaced as part of
substation in the Los Ríos Region, which
In addition, work continued on the
the modernization process for the control
are respectively serviced in the same way
Polymeric Insulator Replacement Plan
system at the Encuentro substation that
by the Near North Division and the South-
throughout 2011. These insulators have
continued throughout 2011. In addition,
ern Zone Division.
been quickly deteriorating over recent
the telecontrol project at the Tarapacá
years. Insulators classified as highly critic-
substation was completed and a corres-
14
ponding telecontrol project at the Atacama
substation is currently underway. This
project should be completed in early 2012.
In addition, microwave link installation
projects were executed in order to replace
OPGW fiber optic cables that were out of
service.
In addition, transformer oil was analyzed
for transformers at the Lagunas and
Encuentro substations in order to control
the effectiveness of passivation executed
in former years. This was done in order
to counteract the effect of corrosive sulfur
in insulating oil. The results obtained
warranted reapplication of the passivation
process for the transformer at the Encuentro substation.
15
04.
FINANCES
16
In 2003, Transelec Norte (formerly HQI
2011 fiscal year. This debt was transferred
Transelec Norte S.A.) financed the pur-
from Transelec S.A. to its mother corpora-
chase of a series of assets in the SING
tion Transelec Holdings Rentas Ltda. in
by means of an installment paid into the
2011.
business account the company held until
2011 with Transelec S.A. (formerly HQI
Repayment of deductions made in 2003
Transelec Chile S.A.) amounting to USD
for asset procurement was completed for
79.7 million, as well as a payment made
Celta and GasAtacama in 2008.
by Transelec S.A. (formerly HQI Transelec
Chile S.A.) amounting to USD 30.0 million
Transelec Norte purchased transmission
corresponding to 750,050 shares held by
solution assets from Transelec S.A. for
the shareholder Transelec S.A. as of 31
Minera Carmen de Andacollo for US$13.6
December 2010.
million in 2010.
In 2005, Transelec Norte paid Transelec
FINANCING POLICIES
S.A. (formerly HQI Transelec Chile S.A.)
the amount of USD 2.7 million as partial
payment of a loan taken out by the corporation from the business account it held
with Transelec S.A. This business account
came to USD 76.9 million at the end of the
17
Transelec Norte’s normal source of financing is its own resources and those of its
mother corporation Transelec S.A.
RISK FACTORS
In keeping with the characteristics of the
Chilean electricity market and standards
regulating this sector, Transelec Norte
is not exposed to substantial risk in the
course of operating its main line of business. However, the following risk factors
should be highlighted:
THE REGULATORY FRAMEWORK
Legal standards regulating Chile’s electricity transmission business were amended
by the passing of Law 19,940, known as
Short Law l, published 13 March 2004.
Decree 207 establishing the Annual
Transmission Value by Segment (VATT)
and its indexing formulas for the four-year
period between 2007 and 2010 pub-
lished 15 January 2008 also established
N° 320 published in the Official Gazette
application conditions for the payment of
dated 9 January 2009 set subtransmission
transmission services in trunk transmis-
tariffs and their indexing formulas which
sion systems. The provisions contained in
were first applied 14 January 2009 and
this Decree establish a series of pending
these remained in force until 31 October
issues that allow trunk facility owners to
2012. New subtransmission tariffs to be
collect VATT from their facilities. A second
applied between November 2010 and
Trunk Transmission Study was completed
October 2014 will be set by the Ministry of
in 2010 and will set tariffs and indexing
Energy based on subtransmission facility
formulas corresponding to the 2011-2014
valuation studies that started in 2010. At
four-year period. Decree 61 published
the date this document was issued there
17 November 2011 specifies tariffs to be
was not yet any decree to set subtrans-
applied retroactively starting 01 January
mission tariffs for the aforementioned Nov-
2011. The application of new tariffs and
ember 2010 - October 2014 period. Tariffs
reliquidation corresponding to 2011 will be
established by Decree 320/2009 will be
executed during the first half of 2012.
temporarily applied during the interim. The
difference between what is temporarily
In turn, Ministry of Economic Affairs,
invoiced and the corresponding final value
Development and Reconstruction Decree
will have to be reliquidated.
18
SINGLE CUSTOMER REVENUE CON-
as earthquakes, among others. Notwith-
EXPOSURE TO EXCHANGE RATE
CENTRATION
standing, the Administration believes that
VARIATION
Most of Transelec Norte’s revenue comes
Transelec Norte has proper risk coverage
The Company’s functional currency is the
from GasAtacama Generación Ltda.
in conformity with industry practices.
US dollar and most of its transactions are
(GasAtacama) and Compañía Eléctrica de
Tarapacá S.A. (CELTA). These two com-
executed using this currency. Exposure
TECHNOLOGICAL CHANGES
to exchange rate risk from transactions
panies generate most of Transelec Norte’s Compensation for Transelec Norte power
expressed in other currencies (mainly the
future cash flow and any substantial
transmission facility investment is made
Chilean peso) is minimal.
change made to their business models,
by an annual existing facility assess-
financial status or operating income could
ment (AIV) fee. If important technological
negatively affect Transelec Norte.
advances are made for power lines and/
or equipment that comprise Transelec
OPERATIONS
Norte facilities, this compensation could
Transelec Norte is exposed to certain
lower and thus partially prevent recovery
transmission system operating risks in-
of investments made.
cluding damage to power transmission facilities, work-related accidents, equipment
failure and natural catastrophes such
19
INSURANCE
THE IFRS IMPLEMENTATION PRO-
of changes made to administrative and
Throughout the 2011 fiscal year, the
JECT
accounting procedures and information
company continued its policy of holding
The Superintendency of Securities and
insurance policies to protect fixed asset
Insurance (SVS) established a plan to
goods and to cover other operating risks.
adopt International Financial Reporting
Coverage is provided by means of an
Standards (IFRS) for corporations
industrial multi-risk policy that includes
regulated by this institution. As part of
physical damage, machinery breakdown,
this plan, Transelec Norte S.A. was
earthquakes and the forces of nature,
required to implement IFRS starting in
including indemnity for suspension dam-
2010 as required by the Superintendence
systems based on the SAP platform. As
of 31 December 2011, the Company had
already met all the requirements stated
in SVS instructions and had prepared its
financial statements in accordance with
IFRS.
PROFIT SHARING
ages associated to said risks. Coverage of of Securities and Insurance (SVS). In
PROFITS SHARED IN 2011
physical risks for power lines was con-
order to fully comply with this standard,
At the Transelec Norte S.A. shareholders
sidered unnecessary in that good inter-
the company designed a working plan
meeting held 28 April 2011, the corpora-
national practices and Chilean standards
(which consults activities started as of
tion agreed to share a portion of total and
are observed for construction of these
2007) featuring different stages, including
final profits corresponding to the 2011 fis-
facilities and these standards are deemed
personnel training activities; the recom-
cal year amounting to USD 2,885,478.70.
to be stringent enough.
mendation of accounting policies to be
(USD 3.8466638 per share).
approved by the Transelec Norte Board
In addition, the company continues to
of Directors; analysis of impacts affecting
hold civil responsibility, terrorism and
the Corporation in the event of choosing
sabotage insurance. The company chose
one alternative or another when it comes
to continue insuring vehicles and national
time to adopt these standards and during
transport operations, as well as equipment operations, as well as the implementation
and material imports.
20
PROFITS SHARED
YEAR
HISTORICAL VALUE
DIVIDENDS PER SHARE
US$US$ / SHARE
2004
1,966,565.00
2.621649730
2005
4,125,283.48
5.499461400
2006
3,393,253.00
4.523583400
2007
4,482,066.53 5.975092857
2008
2,850,781.23
3.800408000
2009
3,621,386.31 4.827711
2010
3,411,166.93
4.547465
2011
2,885,478.70
3.8466638
PROFITS SHARED
(charged from each fiscal year)
YEARUS$
% PROFITS
FROM THE FISCAL YEAR
2003
1,966,565.00 100%
2004
4,125,283.48 100%
2005
3,393,253.00 100%
2006
3,499,617.00
100%
2007
3,833,230.76
100%
2008
3,621,386.31
100%
2009
3,411,166.93
100%
2010
2,885,478.70
100%
21
RELEVANT Facts
1) The following relevant fact was
reported 17 March 2011 in accordance with the provisions of Article 9
subsection 2 and article 10 of Law Nº
18,045 on the Securities Market:
At a meeting held 16 March 2011,
Transelec Norte S.A.’s Board of
Directors agreed to schedule the
annual shareholders meeting to be
held 28 April 2011 at 10:00 AM, at the
company’s headquarters located at
Av. Apoquindo 3721, sixth floor, Las
Condes.
The purpose of this meeting is to
inform the shareholders and request
their approval for the following matters:
1) Annual Report, General Balance,
Financial Statements and External
Auditors Report corresponding to
the period ending 31 December
2010.
2) Final dividend distribution.
22
3) Dividends distribution policy and
ments and the External Auditors
ance with Article 9 subsection 2 and
information about payment proced-
Report for the period finishing 31
Article 10 of Law N° 18,045 on the
ures.
December 2010.
Securities Market:
4)Appointment of external auditors.
5)Newspaper used to publish notices of shareholders meeting.
2,885,478.70 as the final divi-
Transelec Norte’s Board of Directors
dend for 2010. This dividend is to
acknowledged Mr. Jeffrey Blidner’s be paid starting 27 May 2011 to
resignation from his position as direc-
company and within the sharehold-
shareholders registered in the cor-
tor and Mr. Richard Legault’s resig-
ers’ competency.
responding list 20 May 2011.
nation from his position as alternate
3) The company’s 2011 dividends
director for Mr. Blidner at a meeting
6) Other matters of interest for the
2) The following relevant fact was
reported 29 April 2011 in accord-
2)Approval of the amount of US$
distribution policy was reported.
held 16 November 2011.
4)Approval of the appointment of
ance with the provisions of Article 9
Ernst & Young as the company’s
subsection 2 and Article 10 of Law Nº
external auditors for the 2011 fiscal
Board of Directors agreed to ap-
18,045 on the Securities Market:
year.
point Mr. Richard Legault as Director
At the same meeting, Transelec’s
5) Diario Financiero was approved
and Chairman of the company, and
The company’s regular shareholders
as the newspaper to be used
to appoint Mr. Jeffrey Blidner as his
meeting was held 28 April 2011 and
for publishing notices of general
respective alternate director.
the following matters were agreed:
shareholders meetings.
1) Approval of the Annual Report,
3) The following relevant fact was re-
General Balance, Financial State-
ported 17 November 2011 in accord23
LEGAL INCORPORATION AND
It was agreed at the company’s second
AMENDMENTS
special shareholders meeting held 28 April of the Superintendency of Securities and
Transelec Norte was incorporated by
public deed dated 26 May 2003 at the
Santiago Notary owned by Mr. Iván Torrealba Acevedo. An extract of the same
was published in the Business Registry of
the Real Estate Official Property Registry
of Santiago, sheet 14,386, N° 11,018, corresponding to the year 2003.
The articles of incorporation were amended at the company’s first special shareholders meeting held 8 September 2004,
increasing the members of the corporation’s Board of Directors from five to six.
The minutes of this first special shareholders meeting were executed as public deed
dated 8 September 2004 at the Santiago
Notary owned by Mr. Aníbal Opazo Callis.
An extract of this reform was published in
the Business Registry of the Real Estate
Official Property Registry of Santiago,
sheet 30,075, Nº 22,308, corresponding
to the year 2004 and was published in
the Official Gazette Nº 37,970 dated 25
September 2004.
be registered in the Securities Registry
2005 that the company would be founded
Insurance. The minutes of this third spe-
as an open stock corporation by means
cial shareholders meeting were executed
of the voluntary registration of its shares
as public deed dated 20 January 2006 at
in the Securities Registry of the Super-
the Santiago Notary owned by Mr. Iván
intendency of Securities and Insurance.
Tamargo Barros. An extract of this reform
In addition, the expression regarding the
was published in the Business Registry of
company’s purpose was changed from
the Real Estate Official Property Regis-
“main” to “exclusive”. The minutes of this
try of Santiago, sheet 4,252, Nº 2,899,
second shareholders meeting were exe-
corresponding to the year 2006 and was
cuted as public deed dated 28 April 2005
published in the Official Gazette Nº 38,377
at the Santiago Notary owned by Mr. Iván
dated 31 January 2006.
Tamargo Barros. An extract of this reform
was published in the Business Registry of
By means of public deed dated 15 June
the Real Estate Official Property Registry
2006 granted before the Santiago Notary
of Santiago, sheet 14,639, Nº 10,647,
owned by Mr. Iván Tamargo Barros, and
corresponding to the year 2005 and was
in conformity with Article 11 of Corpora-
published in the Official Gazette Nº 38.152 tions Law N° 18,046, the initial capital
dated 4 May 2005.
established in the corporate incorporation
deed was reduced to the amount truly
It was agreed at the company’s third
paid in, which is to say the amount of US$
special shareholders meeting held 19
30,005,000, divided into 750,125 regis-
January 2006 that the company’s articles
tered shares without nominal value.
of incorporation would be amended in
order to make Transelec Norte an open
It was agreed at the company’s fourth
stock corporation in conformity with Cor-
special shareholders meeting held 30
poration Law N° 18,046, meaning that the
June 2006 that the corporation’s Board of
corporation and its shares could therefore
Directors would be completely renewed.
24
It was agreed at the company’s fifth spe-
ive acting directors were elected: Derek
of Directors should be dismissed, both
cial shareholders meeting held 16 August
Pannell, Patrick Charbonneau, Graeme
directors and acting directors. The follow-
2006 that the corporation’s articles of
Bevans, Richard Dinneny, Enrique Munita
ing persons were elected for the positions
incorporation would be amended, approv-
Luco, Juan José Eyzaguirre Lira, Federico
of directors: Jeffrey Blidner, Bruce Hogg,
ing an integrated text for the same. The
Grebe Lira, Juan Paulo Bambach Salva-
Patrick Charbonneau, Brenda Eaton,
minutes of this fifth special shareholders
tore and Juan Irarrázabal Covarrubias.
Bruno Philippi Irarrázabal, Mario Valcarce
meeting were executed as public deed
Durán, Blas Tomic Errázuriz, José Ramón
dated 23 August 2006 at the Santiago No-
It was agreed at the company’s seventh
Valente Vias and Alejandro Jadresic
tary owned by Mr. Iván Tamargo Barros.
special shareholders meeting held 28
Marinovic. The following respective acting
An extract of this reform was published in
July 2009, that all members of the Board
directors were elected: Richard Legault,
the Business Registry of the Real Estate
of Directors should be dismissed, both
Daniel Fetter, Paul Dufresne, Richard
Official Property Registry of Santiago,
directors and acting directors. The follow-
Dinneny, Enrique Munita Luco, Juan José
sheet 34,991, Nº 24,636, corresponding
ing persons were elected for the positions
Eyzaguirre Lira, Federico Grebe Lira,
to the year 2006 and was published in
of directors: Jeffrey Blidner, Bruce Hogg,
Juan Paulo Bambach Salvatore and Juan
the Official Gazette Nº 38,551 dated 29
Patrick Charbonneau, Brenda Eaton,
Irarrázabal Covarrubias.
August 2006.
Felipe Lamarca Claro, Juan Andrés
Fontaine Talavera, Blas Tomic Errázuriz,
It was agreed at the company’s sixth
José Ramón Valente Vías and Alejandro
special shareholders meeting held 21 July
Jadresic Marinovic. The following respect-
2008, that all members of the Board of
ive acting directors were elected: Thomas
Directors should be dismissed, both direc-
Keller, Graeme Bevans, Paul Dufresne,
tors and acting directors. The following
Richard Dinneny, Enrique Munita Luco,
persons were elected for the positions of
Juan José Eyzaguirre Lira, Federico
directors: Jeffrey Blidner, Bruno Guil-
Grebe Lira, Juan Paulo Bambach Salva-
mette, Scott Lawrence, Brenda Eaton,
tore y Juan Irarrázabal Covarrubias.
Felipe Lamarca Claro, Juan Andrés
Fontaine Talavera, Blas Tomic Errázuriz,
It was agreed at the company’s eighth
José Ramón Valente Vías and Alejandro
special shareholders meeting held 24 Au-
Jadresic Marinovic. The following respect-
gust 2010 that all members of the Board
25
Financial
Statements
TRANSELEC
NORTE S.A.
December 31, 2011
(Translation of the Financial Statements
originally issued in Spanish)
US$
ThUS$
$
U.F
: US Dollars
: Thousand of US Dollars
: Chilean Pesos
: Unidades de Fomento
INDEX
Statements of Financial Position
5
Statements of Comprehensive Income by Function
7
Statements of Changes in Equity
9
Statements of Cash Flows
72
11
73
TRANSELEC NORTE S.A.
Statements of Financial Position
As of December 31, 2011 and December 31, 2010 (Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note
2011
2010
ASSETS
ThUS$
ThUS$
Current AssetS
Cash and cash equivalents
(5)
Other financial assets
(10)
Other non-financial assets
Trade and other receivables
(6)
Receivables from related parties
(7)
Current tax assets
7,204
769
3,233
3,593
373
-
5,832
392
2,010
3,133
78
Total current assets
15,172
11,445
15,759
707
125,462
141,928
12,268
842
130,482
143,592
157,10
155,037
Non-Current AssetS
Other financial assets
Intangible assets other than goodwill
Property, plant and equipment
Total non-current assets
(10)
(8)
(9)
Total Assets
The accompanying notes numbers 1 to 22 form an integral part of these financial statement
74
TRANSELEC NORTE S.A.
Statements of Financial Position
As of December 31, 2011 and December 31, 2010 (Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
NET EQUITY AND LIABILITIES
Note
2011
2010
ThUS$
ThUS$
CURRENT LIABILITIES
Other financial liabilities
Trade payables and other payables
(12)
Payable to related parties
(7)
Current tax liabilities
Other non-financial liabilities
(12)
Total current liabilities
-
1,563
1,695
146
-
3,404
27
870
915
865
2,677
Non-Current LiabilitieS
Payables to related parties
(7)
76,984
Deferred tax liabilities
(11)
6,704
Total non-current liabilities
83,688
77,014
6,991
84,005
Total liabilities
87,092
86,682
30,005
40,003
70,008
30,005
38,350
68,355
157,100
155,037
Equity
Paid-in capital
(13)
Retained earnings Total net equity
Total Net Equity and Liabilities
The accompanying notes numbers 1 to 22 form an integral part of these financial statement
75
TRANSELEC NORTE S.A.
Statements of COMPREHENSIVE INCOME BY FUNCTION
For the years ended December 31, 2011 and 2010 (Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note
2011
2010
ThUS$
ThUS$
Operating revenues
(14)
Cost of sales
Gross margin
19,580
(7,009)
12,571
19,051
(7,506)
11,545
Administrative expenses Other gains (losses), net
(14)
Financial income
(14)
Financial expenses
(15)
Foreign currency translation
(15)
Profit before taxes (3,833)
251
301
(4,308)
(318)
4,664
(3,332)
89
901
(6,128)
367
3,442
Income tax expense
(16)
Profit from continuing operations
Profit from discontinued operations Profit
(991)
3,673
-
3,673
(557)
2,885
2,885
STATEMENT OF COMPREHENSIVE INCOME BY FUNCTION
Earnings per share
Basic earnings per share
Basic earnings per share from continuing operationsUS$/s
Basic earnings per share from discontinued operationsUS$/s
Basic earnings per share US$/s
4.897
-
4.897
3.850
3.850
Diluted earnings per share
Diluted earnings per share US$/s
Diluted earnings per share from discontinued operationsUS$/s
Earnings per share diluted
US$/s
--
4.897
-
4.897
-3.850
3.850
Net Income
3,673
2,885
Other comprehensive income
-
-
952.205
782.533
Otro resultado integral
Total comprehensive income
The accompanying notes numbers 1 to 22 form an integral part of these financial statement
76
3,673
2,885
TRANSELEC NORTE S.A.
Statements of changes in equity
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Paid -in capital
Retained earnings
(accumulated losses)
Total equity
ThUS$
ThUS$
ThUS$
Opening balance as of January 01, 2011
30,005
38,350
68,355
Increase (decrease) from changes in accounting policies
Increase (decrease) from corrected errors
Restated opening balance
-
-
30,005
-
-
38,350
68,355
FOR THE YEAR ENDED DECEMBER 31, 2011
Changes in equity
Comprehensive income
Income (loss)
-
3,673
3,673
Other comprehensive income
-
-
Comprehensive income
-
3,673
3,673
Dividends
-
(2,020)
Increase (decrease) from transfers and other changes
-
-
Total changes in equity
-
1,653
(2,020)
Closing balance as of December 31, 2011
1,653
30,005
40,003
70,008
Paid -in capital
Retained earnings
(accumulated losses)
Total equity
ThUS$
ThUS$
ThUS$
Opening balance as of January 01, 2010
30,005
38,743
68,748
Increase (decrease) from changes in accounting policies
Increase (decrease) from corrected errors
Restated opening balance
-
-
30,005
-
-
38,743
68,748
Changes in equity
Comprehensive income
Income (loss)
-
2,885
Other comprehensive income
-
-
Comprehensive income
-
2,885
2,885
2,885
FOR THE YEAR ENDED DECEMBER 31, 2010
Dividends
Increase (decrease) from transfers and other changes
Total changes in equity
-
-
-
Closing balance as of December 31, 2010
30,005
The accompanying notes numbers 1 to 22 form an integral part of these financial statement
77
(3,278)
-
(393)
(3,278)
(393)
38,350
68,355
TRANSELEC NORTE S.A.
Statements of Cash Flows
For the periods ended December 31, 2011 and 2010 (Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
2011
2010
Indirect Statement of Cash Flows
ThUS$
ThUS$
Cash flows provided by (used in) operating activities
Profit
3,673
2,885
Ajustes por conciliación de ganancias
Adjustments for income tax expense
Adjustments for decreases in trade receivables
Adjustments for decreases (increases) in other receivables arising from operating activities.
Adjustments for decreases (increases) in accounts payable
Adjustments for decreases (increases) in other accounts payable arising from operating activities.
Adjustments for depreciation and amortization expenses
Adjustments for other non-cash items
Total adjustments for reconciliation of income
991
(461)
(1,223)
692
780
6,290
4,245
11,314
557
300
(2,782)
5,841
6,137
10,053
Interest paid
Income tax paid
Net cash flows provided by operating activities
(4,390)
(970)
9,627
(6,128)
(436)
6,374
Cash Flows Provided by (Used in) Investing Activities
Purchases of property, plant and equipment
Net cash flows used in investing activities
(5,370)
(5,370)
(13,952)
(13,952)
Cash Flows Provided by (Used in) Financing Activities
Dividends paid
Net cash flows used in financing activities
(2,885)
(2,885)
(3,411)
(3,411)
Net Increase (Decrease) in Cash and Cash Equivalents
1,372
(10,989)
Cash and Cash Equivalents, Beginning Balance
5,832
16,821
Cash and Cash Equivalents, Ending Balance
7,204
5,832
The accompanying notes numbers 1 to 22 form an integral part of these financial statement
78
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note 1 - General Information
Transelec Norte S.A. (hereinafter the Company) is a publicly-held corporation domiciled at Av. Apoquindo No. 3721, floor 6, Las
Condes, Santiago, Chile. The Company is registered in the Securities Register of the Superintendency of Securities and Insurance
(SVS) under No. 939.
The Company’s line of business involves operating and developing electrical systems owned by the Company or by third parties designed to transport or transmit electricity and may, for these purposes, acquire and/or use the respective concessions and permits
and exercise all of the rights and powers that current legislation confers on electric companies.
The Company is directly controlled by Transelec S.A. and indirectly controlled by ETC Holdings Ltd.
The Company’s financial statements for the year ended December 31, 2010 were approved by its Board of Directors at its meeting
held on March 16, 2011, and were subsequently presented for consideration at the Ordinary Shareholders’ Meeting held on April
28, 2011, where they were ultimately approved.
These interim financial statements were approved by the Board of Directors in Ordinary Meeting No.92 held on March 21, 2012.
Note 2 - Summary of Significant Accounting Principles
The principal accounting policies applied in preparing these interim financial statements are detailed below. These policies have
been applied uniformly for all periods presented.
2.1 Basis of preparation
These financial statements have been prepared in accordance with IFRS, including International Accounting Standard 34 (IAS 34)
issued by the International Accounting Standards Board (IASB).
The figures in these financial statements and notes are expressed in thousands of United States Dollars, the Company’s functional
currency. For the convenience of the reader these financial statements have been translated from Spanish into English.
79
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
In preparing these financial statements certain critical accounting estimates have been used to quantify some assets, liabilities, revenues and expenses. Management was also required to exercise judgment his trial in the process of applying accounting policies.
The areas involving a higher degree of trial or complexity or areas where assumptions and estimates are significant to the financial
statements are described in Note 4.
Information contained in these financial statements is the responsibility of the Company´s management.
2.2 New standards and interpretations issued but not yet effective
Below is a summary of new standards, interpretations and improvements to IFRS issued by the IASB that are not yet effective as of
on December 31, 2011:
IFRS 7 - Financial Instruments: Disclosures
In October 2010, the IASB issued a series of modifications to help financial statement users to assess their exposure to transfers of
financial assets, analyze the impact of risks on the financial position of the entity and promote transparency, especially on transactions involving the securitization of financial assets.
Entities are required to apply the changes to annual periods beginning on or after July 1, 2011.
The Company is currently evaluating the potential impact that the adoption of IFRS 7 will have on its financial Statements.
IFRS 9 - Financial Instruments
Financial liabilities
On October 28, 2010, the IASB included in IFRS 9 the accounting treatment of financial liabilities, maintaining the classification and
measurement criteria existing in IAS 39 for all liabilities except those for which the fair value option was used. Entities whose liabilities are valued using the fair value option should determine the amount of variation attributable to credit risk and recorded in equity
if it does not produce an accounting mismatch.
Entities are required to apply the changes to annual periods beginning on or after January 1, 2013.
80
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
The Company is currently evaluating the potential impact that the adoption of IFRS 9 will have on its financial statements.
Financial Instruments: Recognition and Measurement
In November 2009, the IASB issued “Financial Instruments” (IFRS 9), the first phase in its project to replace IAS 39 Financial Instruments: Recognition and Measurement.
IFRS 9 introduces new requirements for classifying and measuring financial assets that are in the scope of IAS 39. This new regulation requires that all financial assets are classified according to the business model of the entity for the management of financial
assets and cash flow characteristics of contractual financial asset. A financial asset is measured at amortized cost if they meet two
criteria: (a) the purpose of the business model is to maintain a financial asset to receive contractual cash flows, and (b) cash flows
represent contractual payments principal and interest. If a financial asset does not meet the above conditions it will be measured at
fair value. Additionally, the standard allows a financial asset that meets the criteria to be valued at amortized cost may be designated at fair value through profit or loss under the fair value option, provided that it significantly reduces or eliminates an accounting
mismatch. Also, the IFRS 9 eliminates the requirement to separate embedded derivatives primary financial asset. It therefore requires a hybrid contract is classified in its entirety on amortized cost or fair value.
Under IFRS 9 all equity investments are measured at fair value. However, the Administration has the option to apply directly the
changes in fair value in equity under “Valuation Accounts.” This designation is available for the initial recognition of an instrument
and is irrevocable. The unrealized gains recorded in “Accounts of valuation”, from changes in fair value should not be included in
the income statement.
The IFRS 9 is effective for annual periods beginning on or after January 1, 2013, allowing early adoption before that date. IFRS 9
should be applied retroactively, however, if adopted before January 1, 2012, does not require restating comparative periods.
The Company is currently evaluating the potential impact that the adoption of IFRS 9 will have on its financial statements.
IFRS 13 “Fair Value Measurement”
IFRS 13 is a single source that describes how to measure fair value under IFRS, when fair value is required or permitted to be
used, but does not change when an entity is required to use fair value.
81
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
The standard changed the definition of Fair value- Fair value is the price that would be received to sell an asset or paid to transfer
a liability in an ordinary transaction between market participants at the measurement date (an exit price). In addition the standard
includes some new disclosure requirements.
IAS 12 “Income Taxes”
IAS12 introduces a rebuttable presumption that deferred taxes on investment properties measured at fair value will be recognized
on the basis of sales (sales basis), unless the entity has a business model that may indicate that investment in property will be
consumed during the business. If consumed, a consumer base should be adopted. It also introduces requirement that deferred
taxes on non depreciable assets measured using the revaluation model in IAS 16 should always be measured on a sales base. Its
application is mandatory for annual periods beginning on or after July 2012.
2.3 Foreign exchange transactions
2.3.1
Functional and presentation currency
These financial statements have been prepared in US dollars, which is the Company’s functional and presentation currency.
2.3.2
Transactions and balances
The operations carried out by the Company in a currency other than its functional currency are recorded at the exchange rates in
force at the time of the respective transactions. During the year, differences between the exchange rate for accounting purposes
and the exchange rate in force as of the collection or payment date are recorded as foreign exchange differences in the income
statement. Likewise, as of year-end balances receivable or payable in currencies other than Company’s functional currency are
converted at the closing exchange rate. Losses and gains on foreign currency arising from settling these transactions and from converting monetary assets and liabilities denominated in currencies other than the functional currency using year-end exchange rates
are recorded in the income statement.
82
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
2.3.3
Exchange rates
Assets and liabilities denominated in foreign currency and Unidades de Fomento (UF) had the following respective year-end exchange rates and values:
December 31, 2011
December 31, 2010
US$US$
Chilean peso ($)
0.00193
0.00213
Unidades de fomento (UF)
42.9392
45.8442
2.4 Segment reporting
The Company manages its operations based on one sole operating segment: electricity transmission.
2.5 Property, plant and equipment
Property, Plant and Equipment are valued at purchase cost, net of any accumulated depreciation and impairment losses. In addition
to the price paid to acquire, the cost also includes, where appropriate, all costs directly related to placing the asset in the location
and condition that enables it to be used in the manner intended by management. Financial expenses incurred during the construction period which are directly attributable to the acquisition, construction or production of qualifying assets, which are those that
require a substantial period of time before they are ready for use, are capitalized. The interest rate is used for the specific funding
or, in their absence, the average company financing.
Any future disbursements that Transelec Norte S.A. has to make in relation to the close of its facilities are incorporated into the value of the asset at the updated value, and the corresponding provision is recognized for accounting purposes. Transelec Norte S.A.
reviews its estimation of these future disbursements on an annual basis and increasing or decreasing the value of the asset based
on the result of this estimation.
Assets under construction are transferred to operating assets once their testing year has been completed and they are available for
use, at which time their depreciation begins.
Expansion, modernization or improvement costs that represent an increase in productivity, capacity or efficiency, or an extension
of the useful lives of the assets, are capitalized as an increased cost of the corresponding assets. Substitutions or renovations of
complete elements that increase the asset’s useful life or economic capacity are recorded as greater cost for the corresponding
83
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
asset, and the elements that have been substituted or renovated are derecognized for accounting purposes. Periodic maintenance,
conservation and repair costs are recorded directly in income as a cost for the period in which they are incurred.
Property, Plant and Equipment, net of their residual value, are depreciated using the straight-line method to distribute the cost of
the different components over the estimated useful lives, which constitute the period over which the companies expect to use them.
The useful lives and residual values of fixed assets are reviewed on an annual basis.
The following table details useful lives of principal classes of assets:
Account
Range for estimated useful life
Minimum
Buildings and infrastructure
Machinery and equipment
Other
20
15
3
Maximum
50
40
15
2.6 Intangible assets
2.6.1
Rights of way
Rights of way are presented at historical cost. These rights have no defined useful life and, therefore, are not amortized. However,
these indefinite useful lives are reviewed during each reporting period to determine if they remain indefinite. These assets are tested for impairment on an annual basis.
2.6.2
Computer software
Purchased software licenses are capitalized based on the costs incurred to purchase them and prepare them for use. These costs
are amortized on a straight-line basis over their estimated useful life that ranges from three to five years.
Expenses for developing or maintaining computer software are expensed when incurred. Costs directly related to creating unique,
identifiable computer software controlled by the Company that is likely to generate economic benefits in excess of its costs during
more than one year are recognized as intangible assets.
84
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
2.7 Impairment of non-financial assets
Assets with an indefinite useful life, such as rights of way, are not amortized and are tested annually for impairment. Depreciated
and amortized assets are tested for impairment whenever events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable.
An impairment loss is recognized for the difference between the asset’s carrying amount and its recoverable amount.
The recoverable amount is the higher of its fair value less cost to sell and its value in use.
In order to assess impairment losses, assets are grouped at the lowest level for which there are separately identifiable cash flows
(cash generating units).
Impairment losses for continued operations are recognized in the income statement in the category of expenses related to the
function of the assets that suffered impairment.
Non-financial assets that suffered an impairment loss are reviewed at each reporting date for possible reversal of the impairment, in
which case the reversal may not exceed the amount originally impaired. Reversals are recognized in the income statement.
2.8 Leases
Leases in which substantially all risks and benefits inherent to the property are transferred to the lessee are classified as finance
leases. Other leases that do not meet this criterion are classified as operating leases.
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at the inception
date, whether fulfillment of the arrangement is dependent in the use of a specific asset or assets or the arrangement conveys a right
to use the asset, even if that right is not explicitly specified in an arrangement.
2.8.1
The company as lessor
Operating leases
The operating lease payments for these contracts are recognized as income on a straight-line basis.
85
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Financial leases
These contracts are valued at the present value of the lease payments at an effective rate, which implies including expenses associated with the agreement’s origin
2.9 Financial assets
Upon initial recognition, the Company classifies its financial assets, with the exception of investments accounted for using the equity
method and investments held for sale, in four categories:
-
Loans and receivables, including Receivables from related parties: are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such financial assets are carried at amortized cost using the effective
interest rate method
-
Investments held to maturity: non derivative financial assets with fixed or determinable payments and fixed maturities that the
Company intends to hold and is capable of holding until their maturity. After initial recognition these assets are valued at its
amortized cost as defined in the preceding paragraph.
During the periods covered by these financial statements, the Company had no financial assets in this category.
-
Financial assets at fair value through profit or loss: These assets include the investment portfolio and those financial
assets that have been designated as such upon initial recognition and are managed and evaluated according to the fair value
criterion. They are valued at fair value in the consolidated statement of financial position, and changes in their value are recorded
directly in income when they occur.
During the years covered by these financial statements, the Company had no financial assets in this category..
-
Available-for-sale investments: these are assets that are specifically designated as available for sale or that does not fit
into the three previous categories. Almost all of these assets correspond to financial investments in capital. These investments are
recorded in the statement of financial position at fair value when it can be reliably determined. With respect to shares in unlisted
companies, normally the market value cannot be reliably determined, and therefore they are valued at purchase cost or a lower
86
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
amount if there is evidence of impairment. Changes in fair value, net of tax effects, are recorded with a charge or credit to an Equity
Reserve called “Available-for-sale financial assets” until the disposal of such investments, at which point the accumulated amount in
this category relating to such investments is wholly recorded in the statement of income. Should the fair value be less than purchase cost, if there is objective evidence that the asset has been affected by impairment that cannot be considered temporary, the
difference is recorded directly in the statement of income.
Purchases and sales of financial assets are accounted for using the transaction date
A financial asset is derecognized when:
a) the rights to receive cash flows from the asset have expired; or
b) the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has
transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
At each reporting date, the Company assesses whether there is objective evidence that a financial asset or group of financial assets may be impaired.
A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment
as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss
event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is a measurable decrease in the estimated future cash flows, for
example delayed payments.
In the case of financial assets valued at amortized cost, the amount of the impairment loss is measured as the difference between
87
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
the carrying amount and the present value of the future estimated cash flows. The carrying amount is reduced using a provision
account and the loss is recognized in the income statement. If in a later period the amount of the expected loss increases or decreases as a consequence of an event occurred after the recognition of the impairment, the impairment loss previously recognized
is increased or reduced adjusting the provision account. If the write-off is later recovered, this reversal is recognized in the income
statement.
In the case of financial assets classified as available-for-sale, in order to determine if the assets have been impaired, it will be
considered if a significant or prolonged decrease in fair value of the assets below cost has occurred. If any such evidence exists for
available-for-sale financial assets, the cumulative loss, measured as the difference between the acquisition cost and the current fair
value, less any impairment loss on that financial asset previously recognized in the income statement, is reclassified from equity
and recognized in the income statement. Impairment losses recognized in the income statement for equity instruments are not
reversed in the income statement.
2.10
Cash and cash equivalents
Cash and cash equivalents presented in the statement of consolidated financial position includes cash, time deposits and other
highly-liquid, short-term investments that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value.
2.11Paid-in capital
Paid-in capital is represented by one class of ordinary shares with one vote per share.
Incremental costs directly attributable to new share issuances are presented in equity as a deduction, net of taxes, from income.
2.12
Financial liabilities
The Company’s financial liabilities include trade payables and other accounts payable, loans and liabilities of a similar nature. The
Company determines the classification of financial liabilities on initial recognition.
Financial liabilities are initially recognized at its fair value. In the case of loans they also include the direct transactions costs.
88
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Trade and other payables are initially recognized at fair value and subsequently measured at amortized cost using the effective
interest rate method.
Loans, bonds payable and financial liabilities of a similar nature are subsequently valued at amortized cost and any difference between the funds obtained (net of costs to obtain them) and repayment value are recognized in the income statement over the life of
the debt using the effective interest rate method.
2.13
Income tax and deferred taxes
Expense or benefit from income taxes for the year is determined as the sum of the Company’s current taxes being the result of the
application of the tax rate over the taxable income for the year, after applying any admissible tax deductions, plus changes in deferred tax assets and liabilities and tax credits for both tax losses and deductions.
Differences between the book value and the tax base of assets and liabilities give rise to deferred tax asset or liability balances that
are calculated using the tax rates that are expected to apply when the assets and liabilities are realized.
Current taxes and changes in deferred tax assets and liabilities that are not the result of business combinations are recorded in
income or in equity in the statement of financial position, depending on where the gains or losses giving rise to such assets or liabilities were recorded.
Deferred tax assets and tax credits are recognized only when it is likely that there are future tax gains sufficient enough to recover
deductions for temporary differences and make use of tax losses. The carrying amount of deferred income tax assets is reviewed
at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all
or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each reporting
date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be
recovered.
Deferred tax liabilities are recognized for all temporary differences, except those derived from the initial recognition of goodwill and
those that arose from valuing investments in subsidiaries, associates and jointly-controlled companies in which the Company can
control their reversal and where it is likely that they are not reversed in the foreseeable future.
89
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is
realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date.
2.14
Provisions
Provisions for environmental restoration, asset retirement, restructuring costs, onerous contracts, lawsuits and other contingencies
are recognized when:
-
The Company has a present obligation, whether legal or implicit, as a result of past events;
-
It is more likely than not that an outflow of resources will be required to settle the obligation;
-
The amount can be reliably estimated.
Provisions are measured at the present value of management’s best estimate of the expenditures required to settle the obligation.
The discount rate used to determine the present value reflects current market conditions, as of the reporting date, of the time value
of money, as well as the specific risk related to the particular liability, if appropriate. Increases in provisions due to the passage of
time are recognized in interest expense.
As of the date of issuance of these financial statements, the Company has no obligations for environmental restoration and similar
liabilities.
2.15
Classification of current and non-current balances
In the statement of financial position, balances are classified based on maturity (i.e. current balances mature in twelve months or
less from the financial statement closing date and non-current balances in more than twelve months).
In the event that there are obligations due within less than twelve months but whose long-term refinancing is assured at the
Company’s discretion through available unconditional credit contracts expiring in the long term, such obligations may be classified
as long-term liabilities.
90
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
2.16
Revenue recognition
Revenue relate mainly to revenues from the sale of electric transmission capacity of the facilities of the Company. Revenue includes
transmission service provided but not invoiced at the end of the period, which is valued at the price of sale as required by existing
contracts and toll reports issued by the Center for Economic Load Dispatch Northern Interconnected System (CDEC-SING).
The Company recognizes revenues when the amount can be reliably measured and it is probable that future economic benefits will
flow to the Company.
2.17
Distribution of dividends
Dividends payable to the Company’s shareholders are recognized as a liability in the financial statements in the period in which
they are declared and approved by the Company’s shareholders or when the corresponding obligation arises based on current legal
provisions or distribution policies established by shareholders.
On the Company’s Board meeting No. 78 held on September 30, 2010, the policy used for the determination of distributable net
profit was approved. This policy does not consider adjustments to the profit.
Note 3 - Risk Management Policy
3.1 Financial risk
The Company is exposed to the following risks as a result of the financial instruments it holds: Market risk stemming from interest
rates, exchange rates and other prices that impact market values of financial instruments, credit risk and liquidity risk. The following
paragraphs describe these risks and how they are managed::
3.1.1Market risk
Market risk is defined for these purposes as the risk of changes in the fair value or future cash flows of a financial instrument as a
result of changes in market prices. Market risk includes the risk of changes in interest and exchange rates and variations in market
prices due to factors other than interest or exchange rates such as commodity prices or credit spread differentials.
91
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Company policy regulates investments and indebtedness, in an attempt to limit the impact of changes in the value of currencies and
interest rates on the Company’s net results by:
a) Investing cash surpluses in instruments maturing within no more than 90 days.
b) Entering into forward contracts and other instruments to maintain a balanced foreign exchange position.
c) Long term loan issued by its parent Transelec S.A. at a fixed rate.
3.1.1.1
Interest rate risk
On Assets: Given the average recovery period of investment does not exceed 45 days, an increase in interest rates has no significant impact on company earnings.
On Liabilities: The Company has no liabilities except for a loan from its parent company Transelec S.A., with a fixed interest rate.
Therefore the Company´s liabilities are not affected as a result of increases in the interest rates do not impact its net income.
3.1.1.2 Foreign currency translation risk
The Company’s functional currency is the US dollar and, therefore, the majority of its transactions are carried out in this currency.
Exposure to exchange rate risk for transactions expressed in other currencies (mainly the Chilean peso) is minimal.
In terms of currency matching, the Company’s current balance as of December 31, 2011 has fewer assets than liabilities in Chilean
pesos equivalent to US$ 2.3 million This exposure in pesos translates into a gain/ (loss) for foreign currency translation of approximately US$ 45 thousand for each $ 10 variation in the peso-dollar rate.
3.1.2
Credit risk
Credit risk for receivables from commercial activity is historically very limited given the short length of time before payment is due,
which limits the accumulation of significant individual amounts.
However, there is a concentration of the Company’s total transmission income of 76.58% in only one client. Nevertheless, considering the compensation of energy flows mechanisms in the system, this percentage could be lower.
92
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Regarding the risk of investing surplus cash, it can be invested in banks or financial institutions with limits set according to capital
and risk classification of each financial institution, in terms not exceeding 90 days..
3.1.3
Liquidity risk
a) Risk associated with management of the company
Liquidity risk is the risk of the Company not satisfying a need for cash to pay a debt upon maturity. Liquidity risk also includes
the risk of not being able to liquidate assets in a timely manner at a reasonable price.
In order to guarantee its ability to quickly react to investment opportunities and to pay its obligations by their maturity dates, the
Company maintains a high level of liquidity. Its principal source of liquidity is cash and cash equivalents, in addition to accounts
receivable.
In addition, the Company has an available credit line granted by its parent company, Transelec S.A. that allows meeting any
cash needs.
b) Associated risk to the settlement of trunk transmission system tariff revenues
According to Decree N°4/20.018 from the Ministry of Economy, Fomentation and Reconstruction, in its articles 81, 101, 104 and
106, and complementary rules, Transelec has the right to perceive on a provisory basis the real tariff income(IT for its name in
Spanish) of the trunk transmission system generated for every period. In order to get their own revenues set up in the first paragraph of article N°101 of the above mentioned Decree N°4/20.018, the real tariff income perceived on a provisory basis must
be settled by Transelec according to the repayment schedule prepared by the respective CDEC (Center of Economic Dispatch
of Charge) through the collection or payment to the different companies owner of generation facilities.
Transelec could face the risk of not opportunely collect the IT that some of the companies owners of generation facilities should
pay as set up in the repayment schedule of CDEC, which may temporarily affects the liquidity situation of the company . In this
sense, and in the opinion of the company, the clearing house work being done by Transelec in respect of the above-mentioned
collection consists not in the collection of values for its own benefit, but in the mere collection and payment to third parties of
credits and debts that belong to the generating companies, with the exception of the expected tariff income.
93
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note 4 - Critical Estimates, Judgments or Criteria Employed By Management
The estimates and criteria used by the Company are continually evaluated and are based on historical experience and other factors, including expectations of future events that are considered reasonable based on the circumstances.
The Company makes estimates and assumptions about the future. By definition, the resulting accounting estimates will rarely be
equal to the real outcomes. Estimates and assumptions with a significant risk of causing a material adjustment to the balances of
assets and liabilities during the upcoming year are detailed below:
-
The estimates of recoverable amounts of fixed assets to determine potential existence of impairment losses.
-
The useful lives and residual values of the property, plant and equipment and intangibles
Note 5 - Cash and Cash Equivalents
As of December 31, 2011 and 2010, this account is detailed as follows:
Classes of Cash and Cash Equivalents
Balance as of
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Bank balances
Short-term deposits
Marketable securities
35
7,141
28
205
3,534
2,093
Cash and cash equivalents
7,204
5,832
The following table details cash and cash equivalents by type of currency:
Detail of Cash and Cash Equivalents
Currency
December 31,
December 31,
2011
2010
ThUS$
ThUS$
Amount of cash and cash equivalents
Chilean pesos
Amount of cash and cash equivalentsUS$
2,365
4,839
4,727
1,105
Total
7,204
5,832
94
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note 6 - Trade and Other Receivables
As of December 31, 2011 and 2010, this account is detailed as follows:
Current trade and other receivables, net
Balance as of
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Current trade receivables, net
Current trade and other receivables, net
3,593
3,593
3,133
3,133
The Company’s maximum exposure to credit risk as of the reporting date is equal to the carrying amount of the receivables. The
Company does not request collateral as guarantees.
Note 7 - Balances and Transactions with Related Parties
Transactions with related companies are payable/receivable immediately or within 30 days and are not subject to special conditions,
except for long-term loan.
Short-term funds transfers to and from the parent company that are not for services receivable or payable are structured using mercantile current accounts, for which a monthly variable interest rate has been established, based on market conditions.
Transactions between related parties are performed under normal market conditions. These transactions are adjusted as established in articles No. 44 and 49 of Law No. 18,046 on Corporations.
95
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
7.1Balances and transactions with related parties
7.1.1
Receivables from related parties
As of December 31, 2011 and 2010, this account is detailed as follows:
Payables to related parties Taxpayer ID Number
Current balances as of
Company
Concept
December 31, 2011
December 31, 2010
ThUS$
ThUS$
76.555.400-4
Transelec S.A.
(Parent Company)
Current account
Total
7.1.2
373
-
373
-
Payables to related parties
As of December 31, 2011 and 2010, this account is detailed as follows:
Payables to related parties
Taxpayer ID Number
76.555.400-4
(Parent Company)
Current balances as of
Company
Concept
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Transelec S.A.
Current account
Total
Payables to related parties
Taxpayer ID Number
76.555.400-4
76.559.580-0
1,695
915
1,695
915
Non-current balances as of
Company
Concept
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Transelec S.A.
Loan
-
77,014
(Parent Company)
Transelec Holdings Rentas Loan
76,984
-
Limitada
(Parent Company Indirect)
Total
96
76,984
77,014
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
The balance of accounts payable to related parties non-current at December 31, 2010 corresponds to the loan agreement with its
direct parent entity (Transelec S.A.) for the acquisition of electric transmission assets to the Company Gasatacama Generation Ltd.
in July 2003. In May 2011, Transelec Norte S.A. prepaid mentioned loan using funds obtained from another loan obtained from its
indirect parent Company “Transelec Holdings Rentas Limitada”. The previous loan was agreed at an annual rate of 7.875%. The
new loan was agreed at an annual rate of 4.17%.
7.1.3
Transactions with related parties and their effect on income
The Company’s more significant transactions with related parties and their effect on income for the periods ended December 31,
2011 and 2010 are presented in the table below.
More significant transactions and their effect on income
Concept
2011
Effect on income
2010
Effect on income
Taxpayer ID Number Company
charge /
charge /
ThUS$
ThUS$
ThUS$
ThUS$
Transelec S.A.
Accrued and
4,390
interest payment
Transelec S.A.
Services received 2,080
4,390
6,128
6,128
2,080
2,206
2,209
76.555.400-4
76.555.400-4
During 2010 the project under construction called Solution 220 kv Transmission Line Pan de Azucar - Andacollo was transferred
from Transelec S.A., to Transelec Norte S.A.
The facilities included in the substation connection part, its other assets, the line Pan de Azúcar - Andacollo and their rights of
ways, all owned by Transelec S.A. were transferred on December 29, 2010 to Transelec Norte S.A. for a total price of US dollars
14,593,047
The contract for the Transmission Solution in Transelec Norte S.A. with Minera Carmen de Andacollo was considered as a finance
lease (see Note 10).
97
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
7.2Board of Directors and management
Transelec Norte S.A. is managed by a Board of Directors composed of nine members, who hold their positions for 2 years and may
be reelected. The Board of Directors was elected on the Ordinary General Shareholders’ Meeting held August 24, 2010.
7.2.1Board of directors’ compensation
As established in article 8 of the Company’s by-laws, the Directors do not receive compensation for their services.
7.2.2Management compensation
The Company’s management does not receive remunerations from the Company.
Note 8 - Intangible Assets
As of December 31, 2011 and 2010, intangible assets are detailed as follows:
Intangible assets, net
Computer software
Rights of way
Identifiable intangible assets, net
Intangible assets, gross
Computer software
Rights of way
Identifiable intangible assets, gross
98
December 31, 2011
December 31, 2010
ThUS$
ThUS$
-
707
707
135
707
842
December 31, 2011
December 31, 2010
ThUS$
ThUS$
194
707
901
194
707
901
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Accumulated amortization and impairment of intangible assets
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Computer software
Rights of way
(194)
-
(59)
-
Accumulated amortization and impairment of intangible assets
(194)
(59)
The following table details the useful lives applied to intangible assets as of December 31, 2011 and 2010:
Estimated useful lives or amortization rates used
Computer software
Rights of way
Maximum
Minimum
life or rate
life or rate
5 years
Indefinite
3 years
Indefinite
Movements of intangible assets during the years ended December 31, 2011 and 2010 are detailed as follows:
Movements in intangible assets
2011
Computer
Rights-of- way,
Software, Net
net
Intangible
Activos intangibles Assets, Net
ThUS$
ThUS$
ThUS$
Opening balance as of January 1,2011
Additions
Retirement
Amortization
135
-
-
(135) Ending balance of identifiable intangible assets as of December 31, 2011
99
-
Identifiable
707
-
-
-
842
(135)
707
707
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Movements in Intangible Assets
2010
Computer
Rights-of- way,
Identifiable
Software, Net
net
Intangible
Assets, net
ThUS$
ThUS$
ThUS$
Opening balance as of January 1, 2010
Additions
Retirement
Amortization
135
-
-
-
707
-
-
-
842
-
Ending balance of identifiable intangible assets as of December 31, 2010
135
707
842
The charge to income for amortization of intangibles is presented in cost of sales.
Note 9 - Property, Plant and Equipment
9.1
9.1
As of December 31, 2011 and 2010, this account is detailed as follows
Classes of Property, Plant and Equipment, Net
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Land
Buildings and infrastructure
Machinery and equipment
Other
2,957
104,593
17,899
13
2,957
108,091
19,431
3
Total
125,462
130,482
Classes of Property, Plant and Equipment, gross
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Land
Buildings and infrastructure
Machinery and equipment
Other
2,957
125,201
24,535
13
2,957
124,246
24,371
3
Total
152,706
151,577
100
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Accumulated Depreciation of Property, Plant and Equipment
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Buildings and infrastructure
Machinery and equipment
(20,608)
(6,636)
(16,155)
(4,940)
Total
(27,244)
(21,095)
9.2
9.2
The following table details the reconciliation of changes in property, plant and equipment by class during the periods ended
December 31, 2011 and 2010
Year 2011
Land
Buildings
Machinery
Other property, Property,
and
and equipment
plant and
plant and
infrastructure
equipment
equipment, net
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
Beginning balance as of January 1, 2011
Additions
Retirements
Transfer to receivables
Depreciation
2,957
-
-
-
-
108,091
5,010
-
(4,235)
(4,273)
19,431
350
-
-
(1,882)
3
10
-
-
-
130,482
5,370
(4,235)
(6,155)
Ending balance as of December 31, 2011
2,957
104,593
17,899
13
125,462
101
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Year 2010
Land
Buildings
Machinery
Other property, Property,
and
and equipment
plant and
plant and
infrastructure
equipment
equipment, net
ThUS$
ThUS$
ThUS$
ThUS$
ThUS$
Beginning balance as of January 1, 2010
Additions
Retirements
Transfer to receivables
Depreciation
Impairment loss
2,957
-
-
-
-
-
111,295
13,949
(101)
(12,594)
(4,458)
-
20,812
2
-
-
(1,383)
-
3
-
-
-
-
-
135,067
13,951
(101)
(12,594)
(5,841)
-
Ending balance as of December 31, 2010
2,957
108,091
19,431
3
130,482
9.3 Property, plant and equipment investment policy
The policy for recognizing decommissioning, restoration and rehabilitation costs for property, plant and equipment is based on
contractual obligations for each project. Therefore, the Company has not made an estimate for this concept as it has no legal or
contractual obligation.
No guarantees have been established on the Company’s property, plant and equipment to guarantee compliance with its obligations.
Transelec Norte S.A. has taken out insurance policies to cover possible risks to its tangible assets as well as possible claims related
to its activities that may arise. These policies are understood to sufficiently cover the risks to which the Company is exposed. The
Company is also covered against the risk of lost profits resulting from work stoppage.
102
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note 10 - Leases
10.1
Financial lease receivables
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Financial lease receivables current
Financial lease receivables non-current
769
15,281
392
11,828
Total
16,050
12,220
Within current and non-current other assets receivable, the Company maintains assets that have been built at the express request
of the lessee. All risks and benefits are transferred when the asset is put into operation.
Period Years
As of December 31, 2011
Nominal value
Interest receivable
Present value
MUS$
MUS$
MUS$
Less than 1
1-5
More than 5
768
3,155
12,127
166
586
966
935
3,741
13,092
Total
16,050
1,718
17,768
As of December 31, 2010
Nominal value
Interest receivable
Present value
MUS$
MUS$
MUS$
Less than 1
1-5
More than 5
392
1,283
10,545
544
1,523
4,417
936
2,806
14,962
Total
12,220
6,484
18,704
Period Years
103
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
10.2
Operating lease receivables
The Company has received ThUS$ 1,172 and ThUS$ 1,443 from operating leases in the periods 2011 and 2010, respectively. These lease agreements for land and common facilities located in the Great North Interconnected System (SING) have been signed
with: Gas Atacama Generación Ltda., Compañía Eléctrica de Tarapacá S.A. (CELTA), Electroandina S.A., Empresa Eléctrica de
Iquique (ELIQSA) and Minera Spence and they will remain in effect until the lessees remove their facilities or make use of ours,
which is estimated to occur after 2018.
The following table details the amounts receivable based on the maturity of each contract.
Contract
Up to one year
Between one and five years
More than five years
ThUS$
ThUS$
ThUS$
Lease of facilities and land 1,172
4,688
23,440
Total
1,172
4,688
23,440
10.3
Company as lessee
To date, the Company has no lease agreements in effect in which it is the lessee.
Note 11 - Deferred Taxes
The origin of the deferred taxes recorded as of December 31, 2011 and 2010 is detailed as follows:
11.1Deferred tax liabilities
Deferred Tax Liabilities
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Depreciable fixed assets
Leasing
Intangible assets
Land
Other
4,210
2,729
(452)
268
(51)
7,059
(336)
268
-
Deferred tax liabilities
6,704
6,991
104
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
11.2The following table details deferred tax movements in the statement of financial position
Movements in deferred tax liabilities
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Deferred tax liabilities, beginning balance
Increase (decrease) in deferred tax liabilities
Changes in deferred tax assets, total
6,991
(287)
(287)
7,375
(384)
(384)
Deferred tax liabilities, ending balance
6,704
6,991
Note 12 - Trade and Other Payables
As of December 31, 2011 and 2010, this account is detailed as follows:
Amounts of trade and other payables
Balances as of
Current
Non-Current
December 31,
December 31,
December 31,
December 31,
2011
2010
2011
2010
ThUS$
ThUS$
ThUS$
ThUS$
Trade payables
Other payables
1,563
-
870
865
-
-
-
Total trade and other payables
1,563
1,735
-
-
Note 13 - Equity
13.1
Subscribed and paid capital
As of December 31, 2011 and 2010, authorized, subscribed and paid share capital amounts to ThUS$ 30,005.
13.2
Number of subscribed and paid shares
As of December 31, 2011, the Company’s share capital is represented by 750,125 shares with no par value, with one vote per
share.
No shares have been issued or redeemed in the years covered by these financial statements.
105
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
13.3
Dividends
At the Ordinary Shareholder´s Meeting held on April 28, 2010 shareholders approved distribution of a final dividend for the year
2009 of US$3,411,166.93 equivalent to, US$4.54746 per share, to be paid beginning April 30, 2010. Until December 31, 2010, this
dividend has been fully paid.
At the Ordinary Shareholder´s Meeting held on April 28, 2011 shareholders approved distribution of a final dividend for the year
2010 of US$2,885,478.70 equivalent to, US$3.84666 per share, to be paid beginning May 27, 2011. At December 31, 2011, this
dividend was fully paid.
13.4
Other reserves
As of December 31, 2011 and 2010, there are no movements in this account.
13.5
Capital management
The Company’s capital management objective is to maintain adequate capitalization levels to sustain operations and provide sensible leverage, thus optimizing shareholder returns and maintaining a sound financial position.
Capital requirements are incorporated by its parent company based on the Company’s financing needs, taking care to maintain an
adequate level of liquidity and complying with financial covenants established in current debt contracts.
106
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note 14 - Revenues and Income
14.1
Revenue
The following table details revenue for the years ended December 31, 2011 and 2010:
Revenue
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Contractual revenues
19,580
19,051
Total revenue
19,580
19,051
14.2
Other operating income
The following table details other income for years ended December 31, 2011 and 2010:
Other operating income
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Other gains
Financial income
251
301
89
901
Total
552
990
Note 15 - Relevant Income Statement Accounts
15.1
Expenses by nature
The following table details the Company’s principal operating and administrative costs and expenses for the years ended December
31, 2011 and 2010.
Expenses by nature
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Operating and maintenance expenses
Depreciation
3,962
6,290
3,401
5,841
10,252
9,242
Total
107
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
15.2
Financial results
The following table details financial results for the years ended December 31, 2011 and 2010.
Financial result
Bank interest
Leasing interest
Financial income
December 31, 2011
December 31, 2010
ThUS$
ThUS$
147
154
301
341
560
901
Expenses for parent company loan
Other financial expenses
(4,308)
-
(6,128)
-
Financial Expenses
(4,308)
(6,128)
(318)
(367)
(4,325)
(4,860)
Gain for exchange differences
Total financial result, net
Note 16 - Income Tax Result
The charge to income for income taxes amounts to ThUS$ 991 for the period 2011and ThUS$ 557 in the period 2010, and is composed as follows:
Income tax expense (income), current and deferred portions
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Current tax expense, total
Current tax benefit, total
(1,279)
288
(940)
383
Income tax expense, total
(991)
(557)
(Presentation)
108
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
The following table reconciles the income tax expense calculated at statutory rate to tax expense at effective rate for the periods
2011 and 2010.
Reconciliation of tax expense using statutory rate
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Tax expense using statutory rate
Tax effect of rates in other jurisdictions
Tax effect of non-tax-deductible expenses
Total adjustments to tax expense using statutory rate
(933)
-
-
(58)
(585)
(28)
Tax expense using effective rate
(991)
(557)
with tax expense using effective rate
Reconciliation of statutory tax rate to effective tax rate
Statutory tax rate
Total adjustments to statutory tax rate
Effective tax rate
December 31, 2011
December 31, 2010
%
%
20.00
1.2
21.2
17.00
(0.82)
16.18
Note 17 - Earnings per Share
Basic earnings per share is calculated by dividing net income attributable to the Company’s shareholders by the weighted average
number of common shares in circulation during the year excluding, if any, common shares purchased by the Company and maintained as treasury shares.
Basic earnings (loss) per share
December 31, 2011
Profit (ThUS$)
Weighted average number of shares, basic
Basic Earnings per share (US$/a)
3,673
750,125
4.897
There are no transactions or concepts that create a dilutive effect.
109
December 31, 2010
2,885
750,125
3.850
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note 18 - Segment Information
The Company is engaged exclusively in providing services related to electricity transmission.
Electricity transmission service falls under the legal framework that governs the electricity sector in Chile. This framework defines
transmission systems and classifies transmission facilities into three categories (the trunk transmission system, the subtransmission
system and additional systems), establishing an open access scheme for the first two systems and allowing additional lines that use
rights of way and have national assets for public use along their paths to be used by third parties under non-discriminatory technical
and economic conditions. The law also sets criteria and procedures for determining compensation that transmission facility owners
are entitled to receive.
Transelec’s revenue from the trunk system consists of the “annual transmission value per segment” (VATT for its Spanish acronym),
which is calculated every 4 years based on the “annual investment value” (AVI for its Spanish acronym), plus “operating, maintenance and administrative costs” (COMA for its Spanish acronym) for each trunk system segment.
The annual subtransmission system value (VASTX for its Spanish acronym) is calculated every four years. It is based on the
valuation of facilities that are economically adapted to demand and consists of standard investment, maintenance, operating and
administrative costs, plus average energy and capacity losses of the adapted facilities.
Revenue from transport on additional systems is established in private contracts with third parties, which are principally generators
and users that are not subject to price regulation. The main objective of the additional systems is to enable generators to inject their
production into the electricity system and to allow large customers to make withdrawals.
The law distinguishes between the different systems in order to ensure that tariffs are appropriate for each case. Nevertheless,
facilities of a given voltage (220 KV, for example) are identical, whether trunk, subtransmission or additional. Thus, a 220 KV facility
requires a given type of maintenance, fundamentally because of its geographic location, its proximity to the ocean, the climate, etc.,
but in no case does this maintenance depend on whether that 220 KV facility is trunk, subtransmission or additional. Precisely the
same happens with operating costs: operations are executed by the corresponding CDEC regardless of whether that 220 KV facility
is trunk, subtransmission or additional. Thus, for Transelec this classification into trunk, subtransmission or additional systems is
merely for tariff purposes and has no other consequences.
110
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
The Company’s management analyzes its business as a set of transmission assets that enables it to provide services to its customers. As a result, resource allocation and performance measurements are analyzed in aggregate.
Internal management takes into account this classification criterion for revenue and costs merely for descriptive purposes but in no
case for business segmentation.
As a result, for the purposes of applying IFRS 8, all of the businesses described above are defined as one sole operating segment
for Transelec Norte S.A.
Information about products and services
Accumulated
December 31, 2011
December 31, 2010
ThUS$
ThUS$
Regulated revenues 19,580
19,051
Total revenues
19,580
19,051
Information about sales and principal customers
Accumulated
December 31, 2011
ThUS$
%
December 31, 2010
ThUS$
%
Gasatacama Chile S.A.
Grupo Endesa .
Others
10,520
4,474
4,586
53.7%
22.9%
23.4%
11,150
4,141
3,760
58.5%
21.7%
19.8%
Total revenue
19,580
100.0%
19,051
100.0%
111
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
Note 19 - Contingencies, Lawsuits and Other Claims
19.1
Lawsuits and other legal actions
The Company has no pending lawsuits or legal actions.
19.2
Arbitration proceedings
The Company is not party to any arbitration proceedings.
19.3
Administrative sanctions
Charges presented by the Superintendency of Electricity and Fuels (SEC) for failure on January 12, 2009. Fine applied: UTA 300
(three hundred annual tax units), equivalent to ThCh$ 140,476 as of December 31, 2011. Current situation: the Company filed a
motion for administrative reconsideration against the ruling that imposed the fine, which has not been ruled on as of December 31,
2011. Probable outcome: Based on the SEC’s historical behavior in this type of investigation, it is reasonable to presume that the
SEC will uphold the fine, in which case the Company will eventually file an appeal with the Santiago Court of Appeals.
As of December 31, 2011, Transelec Norte S.A. has established a provision for this contingent obligation of ThUS$ 270.56, equivalent to ThCh$ 140,476 as of December 31, 2011.
Note 20 - Third-Party Guarantees, Other Contingent Assets and Liabilities and Other Commitments
The Company has no direct guarantees for compliance with construction contracts requested by third parties.
It has no indirect guarantees.
Note 21 - Environment
In accordance with environmental policies, Transelec Norte S.A. has no objections against its facilities, In addition, based on its new
investment projects and in compliance with current legislation, the Company has initiated studies to prepare Environmental Impact
Statements or Environmental Impact Studies, These documents are prepared and filed for approval from the Regional Environ-
112
TRANSELEC NORTE S.A.
notes to the financial statements
(Expressed in thousands of US dollars (ThUS$))
(Translation of the financial Statements originally issued in spanish)
mental Commission (CONAMA) in accordance with General Environmental Laws No, 19,300 and 20,417 and their corresponding
regulations.
During the periods 2011 and 2010 the Company has not incurred any environmental disbursements.
Note 22 - Subsequent Events
Between December 31, 2011 closing date of the financial statements and the filing date, there have been no significant events in
financial and accounting that may affect the assets of the Company or the interpretation thereof.
113
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
INTRODUCTION
During 2011, Transelec Norte S.A. obtained net earnings of ThUS$3,673, which is higher by 27.3% compared to the earnings
obtained the prior year (ThUS$2,885). Revenues amounted to ThUS$19,580, which are higher by 2.8% compared to the revenues
obtained during the year 2010 (ThUS$19,051). EBITDA for the year amounted to ThUS$15,433, with a margin over revenues of
78.8% (77.2% during 2010). On the other hand, non-operating income for the current period was a loss of ThUS$4,074, lower by
14.6% compared to the previous period.
Transelec Norte S.A. has prepared its financial statements as of December 31, 2011 in conformity with International Financial
Reporting Standards (IFRS) and corresponds to the comprehensive, explicit and non-reserved adoption of the abovementioned
international standard. The figures of this ratio analysis are expressed in thousands of U.S. dollars as the U.S. dollar is the functional currency of Transelec Norte S.A.
1. INCOME STATEMENT ANALYSIS
ITEMS
Operating Revenues
Toll sales
Operating costs
Fixed costs
Depreciation
Administraton and sales expenses
Operating Income
Lease financial income
Other financial income
Financial cost
Foreign Exchange differences
Gain (loss) for indexed assets and liabilities
Other income
Non-Operating Income
Income before Income Taxes
Income tax
Net Income
Dec. 2011
ThUS$
19,580
19,580
-7,009
-719
-6,290
-3,834
8,737
153
147
-4,308
-318
0
251
-4,074
4,664
-991
3,673
EBITDA
15,433
EBITDA=Revenue throughout the Period+abs(Income Tax)+abs(Depreciation)+abs(Non-operating Income)+abs(Other Profits)+Financial Interest from Leasi
114
Dec. 2010Variation 2011/2010
ThUS$
%
19,051
2.8%
19,051
2.8%
-7,506
-6.6%
-1,665
-56.8%
-5,841
7.7%
-3,332
15.1%
8,213
6.4%
560
-72.6%
341
-56.8%
-6,128
-29.7%
367
-186.6%
0
89
182.3%
-4,770
-14.6%
3,442
35.5%
-557
77.9%
2,885
27.3%
14,702
5.0%
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
a) Operating Income
During 2011, operating income amounted to ThUS$ 19,580, which is higher by 2.8% than the revenues for 2010 which amounted
to ThUS$19,051. This income is mainly from the commercialization of the transmission capacity of the Company’s facilities in the
Greater North Interconnected System (SING). It is worth mentioning that the Company’s revenues are supported by contracts.
Operating costs for the period amounted to ThUS$ 7,009, which is 6.6% lower than ThUS$ 7,506 recorded in 2010. Costs are
broken down basically in depreciation of the goods of PP&E (89.7% in 2011 v/s 77.8% in 2010), while the remaining 10.3% (22.2%
in 2010) corresponds basically to operation, maintenance and administrative services received from Transelec S.A.
b) Non-operating Income
Non-operating income for the current period was a loss of ThUS$4,074, which is lower by 14.6% compared to the prior period
(ThUS$4,770). This decrease is mainly explained by the lower interest expense charge in 2011 (ThUS$4,308 in 2011 versus
ThUS$6,128 in 2010).
2. BALANCE SHEET ANALYSIs
Items
Current assets
Non-current assets
December
2011
ThUS$
15.172
141.928
Total Assets
Current liabilities
Non current liabilities
Equity
Total liabilities & Equity
115
DecemberVariation
2010
2011/2010
ThUS$
%
11.445
32,6%
143.592
-1,2%
157.100
155.037
1,3%
3.404
83.688
70.008
2.677
84.005
68.355
27,1%
-0,4%
2,4%
157.100
155.037
1,3%
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
VALUE OF THE MAIN PP&E IN OPERATION
Assets
Land
Building, Infraestucture, works in progress
Machinery and equipment
Other fixed assets
Depreciation (less)
December
2011
ThUS$
2.957
125.202
24.534
13
-27.244
Total
125.461
DecemberVariation
2010
2011/2010
ThUS$
%
2.957
0,0%
124.245
0,8%
24.373
0,7%
3
339,0%
-21.096
29,1%
130.482
-3,8%
As of December 31, 2011, property, plant and equipment mainly consist of buildings, infrastructure works, machinery and equipment.
3. MAIN CASH FLOWS DURING THE PERIOD
Items
Cash flow araising from (used in) operating activities
Cash flow araising from (used in) investing activities
Cash flow araising from (used in) financing activities
December
2011
ThUS$
9.627
-5.370
-2.885
DecemberVariation
2010
2011/2010
ThUS$
%
6.374
51,0%
-13.952
-61,5%
-3.411
0,0%
Net increase (decrease) of cash and cash equivalent
Cash and cash equivalent at the begining of the period
1.372
5.832
-10.989
16.821
Cash and cash equivalent at the end of the period
7.204
5.832
-112,5%
-65,3%
23,5%
During the period from January to December 2011, a net positive cash flow of ThUS$1,372 was generated, mainly originated
by operating activities, which provided ThUS$9,627, while financing and investing activities correspond to disbursements of
ThUS$2,885 and ThUS$5,370, respectively. In the same period in 2010, a net negative cash flow of ThUS$10,984 was generated, mainly originated by operating activities in the amount of ThUS$6,374, which was negatively affected by financing activities of
ThUS$3,411 and investing activities of ThUS$13,952.
116
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
Investing activities in 2011 and 2010 are mainly associated with additions of property, plant and equipment and generated a cash
outflow in the amount of ThUS$5,370 and ThUS$ 13,952, respectively.
As of December 31, 2011, the final balance of cash and cash equivalents amounted to ThUS$7,204, from an opening balance of
ThUS$5,832. The final balance of cash and cash equivalents as of December 31, 2010 amounted to ThUS$5,832, from an opening
balance of ThUS$16,821.
4. INDICATORS
INDICATORS
December
2011
Profitability
Shareholders’ Equity profitability
Assets profitability
Operating assets profitability
Earnings per share (US$)
Liquidity & Indebtedness
Current Ratio
Acid-Test Ratio
Debt to Equity
% Short term debt
% Log term debt
Financial expenses coverage
DecemberVariation
2010
2011/2010
5,25%
2,34%
6,93%
4,89672
4,22%
1,86%
6,26%
3,84666
24,3%
25,6%
10,6%
27,3%
4,46
4,46
1,24
3,91
96,09
3,58
4,27
4,27
1,27
3,09
96,91
2,40
4,3%
4,3%
-1,9%
26,5%
-0,8%
49,3%
Note: These are annualized indices.
5. THE MARKET
The business of Transelec Norte S.A. is mainly focused on commercialization of the electricity
transmission and transformation capacity of its facilities located in the SING, which covers Chile’s northern regions of Tarapacá (I),
Arica y Parinacota (XV) and Antofagasta (II), at a voltage of 220kV.
117
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
6. MARKET RISK FACTORS
Due to the nature of the electrical market and the legislation and standards that regulate this sector, the Company is not exposed to
significant risks in developing its main business. However, the following risk factors should be mentioned and considered:
Technological Changes
Transelec Norte S.A. is compensated for investments it makes in electrical transmission facilities through the annuity of the investment value of the existing facilities (AVI). Any important technological changes in the equipment at its facilities could lower this
valuation. This situation would prevent partial recovery of the investments made. However, Transelec Norte S.A. owns long-term
contracts that guarantee its revenues.
Regulatory Framework
The legal regulations governing the electricity transmission business in Chile were amended by the enactment of Law 19,940, referred to as Short Law I, published on March 13, 2004.
Decree 207, published January 15, 2008, established, among other matters, the Annual Transmission Value per Segment (VATT for
its Spanish acronym) and its indexation formulas for the four-year period from 2007 to 2010, as well as the application conditions
to determine payments for transmission services along trunk transmission systems. The provisions of this decree define a set of
previously pending matters that allow trunk facility owners to receive VATT for their facilities. The second Trunk Transmission Study
was conducted in 2010 to set tariffs and indexation formulas for the period 2011-2014. Decree 61, published on November 17, 2011
contains the tariffs that will be retroactively applicable as from January 1, 2011. It is expected that the application of the new tariffs
and the resettlement for 2011 will be carried out during the first semester of 2012.
On the other hand, Decree No.320 of the Ministry of Economy, Development and Reconstruction, which establishes the tariffs
for the sub-transmission facilities, was published in the Official Gazette on January 9, 2009, the new tariffs became effective on
January 14, 2009, and their validity is until October 31, 2010. The new sub-transmission tariffs that will be applicable for the period
November 2010 – October 2014 will be established by the Ministry of Energy based on studies of the valuation of sub-transmission
facilities, these studies started in 2010. To the date of issuance of this document, the decree that will establish the sub-transmission
tariffs for the abovementioned period is still not available; meanwhile, the tariffs under decree 320/2009 are being provisionally
applied. The difference between the provisional invoicing and the amounts corresponding to the values finally established shall be
resettled.
118
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
Concentration of Income
The majority of Transelec Norte’s revenues come from the companies Gas Atacama Generación Ltda. (GasAtacama) and Compañía Eléctrica de Tarapacá S.A. (CELTA). A significant change in the financial position of these companies could potentially have a
negative impact on Transelec Norte.
Exposure to Exchange Rate Variations
Since the Company maintains its accounting and manages its main financial commitments and income in U.S. dollars, it is not significantly exposed to foreign exchange variation risks.
The application of Environmental Standards and/or Policies could negatively affect Transelec Norte.
The operations of Transelec Norte are subject to Law No. 19.300 on Chilean environment (“Environmental Law”), enacted in 1994,
which was modified in 2010. The Environmental Law states that all those who develop high voltage transmission line projects and
substations or their modifications, should be subject to the Environmental Impact Evaluation System (“SEIA”) and perform Environmental Impact Studies (EIA) or Environmental Impact Statements (DIA) and present them to the new Environmental Evaluation
Service.
As stated above, the environmental law has been modified and this situation has resulted in changes in the environmental institutional structure as new environmental management instruments have been created and the existing ones have been modified;
therefore, Transelec Norte shall adjust to these new environmental requirements. According to recent modifications, among other
matters, a new institutional scheme was created comprised of: (i) the Ministry of Environmental Affairs; (ii) the Minister Council for
Sustainability; (iii) the Environmental Evaluation Service; and (iv) the Superintendence of Environmental Affairs; these institutions
are in charge of the regulation, evaluation and inspection of the activities involving environmental impacts. These new institutions
replaced the National Commission of Environmental Affairs (“CONAMA”) and the Regional Commissions of Environmental Affairs
and are fully operative except for: (i) the inspection and penalizing capacity of the Superintendence of Environmental Affairs, which
is subject to the creation of the Environmental Courts; and (ii) new requirements for the Environmental Impact Studies and Statements and new powers to the environmental institutions, which will become effective through a Regulation that has not yet been
reviewed by the National Comptroller’s Office.
119
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
Notwithstanding that Transelec Norte meets the environmental requirements of the environmental law, it is not possible to assure
that these filings (EIA o DIA) before the environmental authority will be approved by government authorities or that the possible
public opposition will note cause delays or modifications in the proposed projects, or that the laws and regulations will not change or
will be interpreted in a way that may adversely affect the company’s operations and plans, as the new institutional structure is just in
progress.
Financial risk
The Company is exposed to the following risks as a result of holding financial instruments: market risks (interest rate risk; exchange
rate risk and other prices that have an impact on the market values of the financial instruments), credit risk and liquidity risk.
The following is a description of these risks and their management:
Market risk
For this purposes, market risk is defined as the risk that the fair value or future flows of a financial instrument fluctuate due to
changes in the market prices. The market risk includes the risk of changes in interest rates, exchange rates and changes in market
prices due to factors other than the interest rates or exchange rates such as the price of shares, raw materials or credit differences.
The Company’s treasury policy regulates the investments and indebtedness by trying to limit the impact of the changes on the
valuation of currencies and the interest rates on company’s net income by means of:
a) The investment of cash surpluses in instruments whose maturity dates do not exceed 90 days.
b) The subscription of forwards and other instruments in order to maintain a balanced position of change.
c) Long-term financing granted by its parent company Transelec S.A. at a fixed rate.
Interest rate risks
On assets: given that the average term for recovering investments does not exceed 45 days, the impact of the variations in interest
rates on the Company’s net income is not significant.
120
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
Liabilities: as of December 31, 2011, the Company does not have any significant financial liabilities except for a fixed-rate loan from
its indirect parent Transelec Holdings Rentas Limitada, therefore, the variations in interest rates do not affect its net income.
Foreign exchange risk
The Company’s functional currency is the U.S. dollar and most of its transactions are made in this currency. The exposure to foreign
exchange risk for transactions expressed in other currencies (primarily the Chilean peso) is minimal. In terms of currency matching,
the Company’s balance sheet as of December 31, 2011 presents a net liability in Chilean pesos equivalent to US$ 2.3 million. This
exposure results in a foreign currency exchange difference of approximately US$45 thousand for every Ch$10 of variation in the
parity Chilean peso – U.S. dollar.
Credit risk corresponding to accounts receivable from commercial activities is historically very low due to the nature of the business
of the Company’s clients and the short term of collection to clients, which explain the fact of not having large accumulated amounts.
However, there is concentration of transmission revenues, given that 76.6%(determined based on the invoicing basis) of the
Company’s revenues are from two main clients. Notwithstanding, given the energy flow compensation mechanisms in the system,
this percentage could be lower.
In regards to the risk of investment of cash surpluses, they can be invested in banks or financial institutions with limits established
by each entity in accordance with the capital and risk classification of each financial entity, in terms that do not exceed 90 days.
Liquidity risk
a) Risk related to the Company’s management
Liquidity risk refers to the Company not being able to meet the demand for cash or payment on a maturing debt. Liquidity risk
also includes the risk of not being able to liquidate assets in a timely manner at a reasonable price.
To guarantee its ability to react quickly to investing opportunities as well as paying obligations on maturity dates, the Company
keeps a high level of liquidity. The main source of liquidity is cash and cash equivalents as well as accounts receivable.
On the other hand, the Company has a line of credit granted by its parent company Transelec S.A.; this line of credit allows
facing any cash needs.
121
TRANSELEC NORTE S.A.
MANAGEMENT DISCUSSION & ANALYSIS OF THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2011
b) Risk related to the resettlement of revenues from tariffs of the trunk transmission system
In virtue of DFL N°4/20.018 of the Ministry of Economy, Development and Reconstruction, in articles 81, 101, 104 and 106, and
supplementary provisions, Transelec Norte is entitled to provisionally receive the actual revenues from tariffs of the trunk system generated in each period. In order for Transelec to collect its remuneration, which is established in subsection one, article
No.101 of the aforementioned DFL N°4/20.018, it resettles, on a monthly basis, the revenues from tariffs provisionally received
in conformity with the payment schemes prepared by the corresponding CDEC (Centro de Despacho Económico de Carga)
through the collection or payment of the different companies that own generation means.
The Company may face the risk of not collecting, on a timely basis, the revenues from some of the companies that own generation
means established in the payment schemes of the CDEC, which may temporarily affect the Company’s liquidity position. In this
sense and in the Company’s opinion, the activity performed by Transelec Norte in regard to the aforementioned collection does not
refer to the collection of its own balances receivable but relate to the collection of amounts and payments to third parties of loans
and debt obligations of others and which, except for expected revenue from tariffs, belong to the generating companies.
122
TRANSELEC NORTE S.A.
Relevant Facts
Year 2011
1) On March 17th 2011, and according to article 9 and subsection 2 of article 10 of the law No 18,045 of Securities Market, the
following relevant fact was reported:
Transelec Norte S.A.’s Board of Directors, at the meeting held on March 16th 2011, agreed on calling to the Annual Shareholders’
Meeting to be held on April 28th 2011, at 10:00 am, at the company’s headquarters located at Av. Apoquindo 3721, sixth floor, Las
Condes.
This meeting aims to inform the shareholders and request their approval for the following matters:
1) Annual Report, General Balance, Financial Statements and Report from the External Auditors, corresponding to the year finished on December 31 2010.
2) Definitive dividend distribution.
3) Dividends policy and information about the payment procedures.
4) Appointment of External Auditors.
5) Newspaper to be used for calling Shareholders’ Meetings.
6) Other matters of interest for the company and within the Shareholders’ competency.
2) On April 29th 2011, and according to article 9 and subsection 2 of article 10 of the law No 18,045 of Securities Market, the following relevant fact was reported:
On April 28th 2011, the annual shareholders meeting of the company was held, where the following matters were agreed:
1) Approving the Annual Report, General Balance, Financial Statements and Report from the External Auditors, corresponding to
the period finished on December 31st 2010.
2) Approving the amount of $ 2,885,478.70 as the definitive dividend for year 2010 to be paid from May 27 2011 to the shareholders registered at the corresponding registrar on May 20th 2011.
3) The dividends policy for year 2011 was informed.
4) Approving the appointment of Ernst & Young as the company’s external auditors for the 2011 period.
5) Approving the “Diario Financiero” as the newspaper to be used to publish the notices for calling to the general shareholders
meetings.
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TRANSELEC NORTE S.A.
Relevant Facts
Year 2011
3) On November 17th 2011 and according to article 9 and subsection 2 of article 10 of the law No 18,045 of Securities Market, the
following relevant fact was reported:
Transelec Norte S.A.’s Board of Directors, at the meeting held on November 16th 2011, acknowledged Mr. Jeffrey Blidner’s resignation to his position of director, and Mr. Richard Legault’s resignation to his position of alternate director of Mr. Blidner.
In the same meeting, the Company’s Board of Directors agreed on appointing Mr. Richard Legault as Director and also as the
Company’s Chairman, and to appoint Mr. Jeffrey Blidner as his respective alternate director.
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Responsibility Statement
The undersigned Directors and General Manager of Transelec Norte S.A. agree to be held responsible, under oath, for the veracity of the
information contained in this 2011 Annual Report, in compliance with General Rule Nº 30, issued by the Superintendence of Securities and
Insurance.
Jeffrey Blidner
Patrick Charbonneau
Brenda Eaton
Director
Foreign
Director
Foreign
Director
Foreign
MARIO VALCARCE DURÁN
BRUNO PHILIPPI IRARRÁZABAL
JOSÉ RAMÓN VALENTE VÍAS
Director
Rut 5.850.972-8
Director
Rut 4.818.243-7
Director
Rut 8.533.255-4
Alejandro Jadresic Marinovic
Andrés Kuhlmann Jahn
Director
Rut 7.746.199-k
General Manager
Rut 6.554.568-3
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