Duke walks; Enersis takes Endesa

Pam Boschee

News Editor

The bidding war between Duke Energy and Chile`s Enersis began shortly after Duke`s February 18 announcement stating its intent to acquire 51 percent control of Empresa Nacional de Electricidad S.A. (Endesa-Chile), offering 250 Chilean pesos per share.

Nearly 3 months later-after several incremental bid increases, the eventual withdrawal of Duke`s offer, and Chilean concerns about antitrust-the dust settled and Enersis paid $2.1 billion to acquire control of Chile`s largest power producer.

Enersis, which already owned 25.28 percent of Endesa-Chile, initially offered to buy an additional 29.7 percent control at 305 pesos per share. Duke then increased its offer on April 16 to 275 pesos per share for 60 percent control. Four days later, Enersis, which is majority owned by Spanish utility Endesa, countered with an increase to 360 pesos per share and 34.7 percent control. Duke bowed out the following day, leaving Enersis standing as the lone bidder.

Regulatory snafus entered the picture on April 28 when Chile`s anti-monopoly commission blocked Enersis` tender offer citing concerns about vertical integration.

Enersis already operates generation, transmission and distribution assets in Chile. Enersis appealed the decision, and the commission later lifted its injunction and allowed the sale of Endesa-Chile to proceed under certain conditions intended to avert conflicts of interest involving ownership of the two companies.

Regulators did not say when a final decision on the matter would be provided. At press time, Chile`s special antitrust prosecutor intended to appeal the antitrust commission`s decision to lift the injunction.

Enersis said it might sell the assets in electric transmission that Endesa-Chile holds. Selling Transelec, which owns transmission lines in Chile`s central electric grid, might remedy concerns about vertical integration. Enersis said that it is not, however, thinking of selling its unit Chilectra, the country`s largest power distributor.

Standard & Poor`s placed Enersis and Chilectra on its CreditWatch with negative implications following the antitrust commission`s decision to permit Enersis to proceed with the acquisition.

Their view was that the acquisition would weaken Enersis` business position by making its cash flows more dependent upon the riskier generating sector. Almost 40 percent of its net income (up from 23 percent prior to the newly acquired increase in control) would be generated by Endesa-Chile.

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