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Enersis S.A. (NYSE:ENI)

Q3 2012 Earnings Call

November 7, 2012 10:00 am ET

Executives

Eduardo Escaffi J. – Chief financial officer

Analysts

Diego Moreno – Bank of America Merrill Lynch

Operator

Good day, ladies and gentlemen, and welcome to the nine months period 2012 Enersis SA ADS Earnings Conference Call. My name is Christy, and I’m your operator for today. At this time all participants are in a listen-only mode. (Operator Instructions) As a reminder this call is being recorded for replay purposes.

During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements could include statements regarding the intent, belief or current expectations of Enersis and its management with respect to, among other things, Enersis' business plans, Enersis' cost reduction plans, trends affecting Enersis' financial condition or results of operations including market trends in the electricity sector in Chile or elsewhere, the supervision and regulation of the electricity sector in Chile or elsewhere, and the future effect of any changes in the laws and regulations applicable to Enersis or its affiliates.

Such forward-looking statements reflect only our current expectations, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those anticipated in the forward-looking statements as a result of various factors. These factors include a decline in the equity capital markets of the United States or Chile, and increase in the market rates of interest in the United States or elsewhere, adverse decisions by government regulators in Chile or elsewhere, and other risk factors described in Enersis' Annual Report on Form 20-F including under risk factors.

You may access our 20-F on the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements which speak only as of their date. Enersis undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate.

I would now like to turn the presentation over to Mr. Eduardo Escaffi, Enersis' CFO. Please proceed sir.

Eduardo Escaffi J.

Thank you, Christy. Good morning or afternoon to everyone, and thank you for participating today in our conference call to review the performance of Enersis Group for the nine months period ended September 12 in comparison with the same period in 2011 unless otherwise indicated. My name is Eduardo Escaffi, Chief financial Officer of Enersis and with me today Ms. Denisse Labarca, Head of Investor Relations.

I use to be the Enersis’ CFO in the late 90s and I’m very glad to be here again. Remember that our conference call will be conducted following our presentation that has been already been uploaded to our website and that you can also watch in our webcast. As customary, we will take your questions at the end of this conference call. Additionally, our Investor Relations team will be available to assist you with detailed information after this call.

In order to make things in an orderly way, first we are going to go through the quarter results presentation and its Q&A section. After that, I’ll talk about the main regarding Enersis capital increase proposal and open a new Q&A session regarding that.

Let’s move to slide number 2. As a consequence of the long term drought experienced in Chile, lower operating results in Argentina and unavailability until very recently of our Chilean power plant Bocamina II, our consolidated EBITDA decreased 2%. This decrease in EBITDA is mostly attributable to 5% higher energy purchases. It’s a 19 increase in transport costs and to a lesser extent 1% in higher fuel consumption.

A poor performance in the Generation business segment was only partially offset by Distribution segment, whose EBITDA increased 4.6% and accounted for 49% of our consolidated EBITDA firmly explained by higher contributions made from our subsidiaries located in Columbia, Chile and Peru.

On the other hand, Generation and Transmission which in aggregate explains 51% of our EBITDA decreased 8% attributable to higher transport costs, increased other variables operating expenses, and higher related services. This decrease came about despite the improvement in the contribution made by our Colombian generation subsidiary.

Let's take a look over slide number 3. In all five countries of operations, economic activity continues growing at a solid phase, positively impacting the demand productivity. This growth combined with a low per capita consumption added positive electricity explained the 4.6% increase in physical energy demand.

Some specific reasons behind this growth in energy demand are related to new real estate development, new factories located in our construction area, increased commercial activity, higher residential consumption, as well as other demographic growth of our customer base. In relation to the Generation segment, the very positive issue was the significant growth recorded by Empresa in Colombia. However, this positive outcome could not offset the important decrease experienced in Argentina 35%, and in Chile, 39%.

In our Distribution segment, the highest contribution is made by our subsidiaries located in Brazil. In this respect, let me remind you that Coelce and Ampla in the aggregate account for more than 40% of our total distribution client.

Now I will move to slide number four. Regarding our key drivers, let me start making some comments on the distribution business. During these first nine months of the year, the average demand for the five countries where we operate recorded a solid 4.5% growth confirming the sustained and solid trend derived from the increasing levels of economic growth in South America. In the case of Chile and Peru, those high levels are closely tied to the overall economic activity in both countries.

In Chile, as you can see in the slide number four, spot prices fell by an average of 6.6% compared to the same period last year. While we are still experiencing the adverse effects of the third consecutive dry year, something never seen before with such intensity in our historical series principal levels have slightly improved since June. This has allowed for a recovery in the hydro generation and together with the end of the rationing decrease has led to a drop in the spot prices.

A sustained drought together with several delays in the entrance of new and more efficient thermal capacity has led to generation with higher production cost, facilities and fuels, and to the purchase of some electricity in the spot market.

In the case of Brazil, due to some prices of the South Middle West sub-system, hydro conditions during the last quarter have even worsened after two typical wet years. Lately, the very low reservoir levels have caused spot prices to exceed $360 per megawatt hour, a very material fourfold increase. Nevertheless, contributions from Parnaiba River which is relevant for Cachoeira, have increased and so did that subsidiary dispatch level.

In Peru, spot prices increased over 35% during the period. The expansion of thermal generation in order to satisfy the search in demand more than offset the increment in hydro generation. In Colombia, spot prices have increased 22.8% for the period under review showing towards the end of the quarter and activation of La Nina effect and positive hydro conditions well above the historical average levels during this last few years.

Let me remind you that La Nina and the EU effect have inversely affected in Chile and in Columbia. Then when it is wet in Columbia, it’s dry in Chile. After this brief summary, please go to slide number 5 in order to analyze the main changes in results.

Revenues increased by 1% attributable to higher energy sales a result of increased electricity demand and to an increase in operating revenues and related to electricity. This increase in revenues however was not enough to fully offset a 3% increase in operating costs. As a result, gross margin dropped by 2% driven by 5% higher energy prices, 1% increase in fuel purchases and 19% high transportation costs due to inefficiencies that arise from bottlenecks in Chilean transmission.

Other fixed operating expenses decreased by 13%, a reduction of more than 47 billion Chilean pesos and favorable expenses increased by 11%. These variations explain the 2% lower EBITDA mentioned before. Financial expense net of financial income increased by 16.3% mainly due to 9% lower financial income in turn driven by lower amount of investment cash equivalent an average of 5.7% higher interest rate expense, and additionally the negative impact of foreign currency exchange differences amounting to more than 23 billion Chilean pesos. All in all net income decreased 7.8% from 688 billion Chilean pesos down to 634 billion Chilean pesos were net income attributable to controlling company fell 17.1%.

Let's go to slide number 6. Gross margin decreased 2.1% primarily explained by 6.4% reduction in the contribution from our Generation business, partially offset by a 2.3% increase in our Distribution business segment. The decrease in Generation is mostly explained by higher cost in Chile as necessary to generate in very dry years and lower margins in Argentina.

The improved contribution from the Distribution business was explained by an important increase of demand in every concession area. However this positive growth was partially offset by the conversion effect Brazilian Real into Chilean pesos as well as the distribution carried out in Coelce from April 2011. This is the kind of circumstances well the benefits have been properly diversified paid off.

The positive Generation segment results in Colombia and Peru flat a good distribution result in Colombia, Chile and Peru have to mitigate the aforementioned negative effect.

A detailed analysis can be seen in slide number 6, explaining the variations in gross margin by business and country-by-country. By the way, please remember that this presentation will be available for all of you in our website.

Let's now move to slide number 7, were we’ll cover in detail the main changes in EBITDA. I will pass now to number 7. Enersis’ consolidated EBITDA decreased 2% mainly due to an important 8% of lower EIBTDA coming from Generation that could not be offset by the 4.6% contribution increase from our Distribution business.

As seen in the slide number 7, the unit margin decreased 13.7% in Generation and 2.2% in Distribution. Argentina, the EBITDA in Argentina keep decreasing tendency evidenced along this year. The negative result impacted both Generation and Distribution businesses.

In Generation, this negative result is mainly a consequence of lower average sales prices, lower fuel expenses and better results from El Chocon were not enough to revert this situation.

In Distribution, frozen tariff affecting us since 2002 and higher payroll expenses derived from union agreement kept EBITDA. It is important to remind you that our debt agreement at Enersis’ had a different feeling, do not have cross default, bankruptcy or insolvency class, linked to debt contracts of our non-Chilean subsidiary. We are therefore referenced against the higher risk of our Argentina index.

EBITDA in Brazil showed increase in both business segments. And Coelce was the company which more contributed to this fall. This negative result was also explained by the acquisition of the Brazilian Real against the Chilean pesos by 12.3%.

In Generation and Transmission, it's important to mention that the higher Generation and sales volume in Fortaleza and Cachoeira we're not able to offset the higher energy for sales cost that affect Fortaleza, with prices that more than double. Cien showed a decrease in its margin and EBITDA due to a reversal of 2011 provision. Isolating this one-time effect the company situation improved since the recognition of Cien as regulatory asset. In Distribution Brazilian company are still the most important growth businesses, and maintained a robust energy demand and a 11.5% increase in the great of Coelce and 3.8% for Ampla.

The ENEL tariff adjustment approved by ENEL in March 2012, gave Ampla a 7% increase. In Coelce, the situation is the opposite with the third cycle of tariff revisions decreasing the tariffs the final customers by an average of 6.8% in 2012. Our excellent growth levels in the region coupled within our efficiency and quality of service recognized by Abrade during the four consecutive years as the best Brazilian institution company has it made for Coelce to achieve a rapid recovery profit margins after the new walk (inaudible).

In Chile, the EBITDA decreased mainly explained by the aforementioned effect in Generation. This was partially compensated by better performance of our subsidiary Chilectra and attributable to an increase and abundance mix of clients as well as higher physical sales.

In Colombia, confirming the benefits of a strong diversification both business segment registered outstanding improvements in EBITDA. This combined effect led to an increase of almost 40%. Additionally, we remind you that of the non-recurring negative impact coming from the one-time equity tax recorded within operating expenses and fully booked during the first quarter of 2011.

In Generation, we registered 18% higher revenues in connection with 11% higher physical energy sales at better average sales price, hydrological conditions allowed Endesa to continue evidencing a 14% increase in hydraulic generation. In Distribution, EBITDA improved 13% because of higher revenues on sales related to 3.3% increase in Codensa electricity demand.

EBITDA in Peru remained almost flat due to the negative impact on both businesses originated by higher payroll expenses in 2012 due to a non-recurring effect persisted in June 2011 as a consequence of accounting conversion through IFRS, which led to a reclassification of the provision made for worker's profit participation, creating in that period a one-time benefit in personnel expenses.

This one-time effect didn’t affect our fundamentals in generation, where we registered 21% increase in revenues, 2% growth in physical energy sales and better average sales price properly captured by an adequate commercial policy. In Distribution, we maintained a strong pace with an increase of 5.1% in Edelnor's demand and higher average sales prices, reflecting 21% better revenues from electricity sales.

Let's move to the slide number 8, in this slide, I would like to highlight some key issues of our sales strategy applied to our Generation business. The commercial policy has been designed to minimize the hydrological volatility risk by means of contracting and added with volume of energy according to market conditions and hydro availability and in relation to the requirements of our regulated and non-regulated clients.

Unfortunately, the delay in the startup of Bocamina II implied less efficiency thermal coal-fired capacity as necessary to contain cost in our Chilean metrics. In this respect, I am very happy to inform you that after many delays, our 350 megawatt capacity coal-fired power plant Bocamina II went on stream at the end of [the quarter].

We manage our fuel purchases under a global strategic optimization thereby helping to contain price increases and to reduce costs. We continue moving forward a more efficient contracting level in order to optimize margins and risks. We have already contracted about 80% of our 2012 potential generation, decreasing down to 69% of next year expected generation.

Moving to the medium to long-term, let us notice that 22% of future generation has been committed through contracts that go beyond five years and 53% has been commercialized through contracts with a term of over 10 years. The table shown in the slide presents the energy auction by regulated clients and the average price prevailing for those contracts.

Let’s move to slide number 9. As seen in this page, we try to balance our sales in the region depending on the effective generation conditions and structure of our portfolio in each case. In the particular circumstances of Argentina, most of our sales are carried out in the spot market due to regulatory constrains and somewhat abnormal market conditions. The goal is to diminish as much as possible, the uncertainties arising from the volatility of short-term prices. In the slide, you may note the relevant data for each country, with the disclosure of sales per market.

Now, let’s move to slide number 10. As part of the efforts carried out to improve overall efficiency, we would like to include a follow-up of two important initiatives developed at ENEL and Endesa Spain, the Synergy and Zenith plans. Both plans were considered under an ambitious goal of capturing synergy opportunities in our Generation and Distribution business.

The scope has been also extended to other operating expenses including, goals for energy losses, centralized criteria procurement, measures to optimize hydro generation capacities, maintenance improvement in generation, better insurance programs and many other corporate actions addressed to achieve a more efficient use of resources.

The Synergy plan launched in 2008 was considered as multidimensional plan focused on optimization opportunities in the Distribution and Generation businesses, together with IT, among others, not only reducing fixed cost, but also improving margins and operating capital.

On the other hand, the Zenith plan was developed to achieve additional savings in certain fixed cost both in Generation and Distribution business. At the ENEL's level grows for 2012 for the Synergy and Zenith plan have been set at €144 and €69 million, respectively.

Now let’s move to slide number 11. As you may be aware regulation is a key consideration in development of our activities, especially in the Distribution business. I would like to mention those relevant factors for Enersis in the region. Starting with Brazil, our distribution company Coelce ended its tariff review process, the outcome which concluded in April 2012 was the reduction of work from 9.95% to 7.5% after taxes.

It is important to mention that the Brazilian Federal Court allowed Coelce to capture the revenues coming from the tax benefit from SUDENE. The net effect for 2012 was a tariff reduction of 6.76%. Despite this tariff review, the Company maintains a very attractive return and continues to being one of the most efficient subsidiaries.

As mentioned already Coelce was awarded for the fourth consecutive year recognition for being the best distribution company in Brazil. This excellent performance and efficiency gain allow us to expect to offset in short time the negative effects related to the tariff reduction.

In relation to annual tariff adjustment, adjustment in our subsidiary CIEN during this year ENEL approved a resolution increasing by 5% the RAP for the 2012 and 2013 period equivalent to R$ 278 million for the period.

In Chile and according to the schedule, this year Chilectra will have its eighth tariff review. The process has been evolving according to the schedule and final resolution should be published no later than December. Another important issue being discussed in Chile is the electricity highway as well as the interconnection between the six and the [single]. The project six to define lines of “public interest” and of course in the transmission system expansion. This highway considers both the main and transmission line that meet certain requirements, generation, warranty consumption for (inaudible).

EBIT finds the prosecute by which through a study of the mainline, the past for those lines will be determined. Independent consultant under the supervision and of an inter-ministerial committee created specifically for this task. The construction and operation of the line is carried out after a [tender]. The electricity highway improves their prosecutes for the determination of allowances on amount to compensate both from the legal and environmental point of view.

The (inaudible) to develop this infrastructure with a size that allows a proper development of all kinds of generation. Renewal, non-conventional, hydro et cetera, and that (inaudible) and have enough capacity for the development of this project. The legal process is being made currently with the improvement of the construction low project also in the congressional debate. Although it has no direct relationship, it is being simultaneously scratch with the 20/20 renewal low project. If you suspect that that the process may last between six to nine months, this is just an estimate as there is no fixed line.

Please go to slide number 12, in Argentina, the situation continues to be uncertain in many respects. During July and after two consecutive partial defaults in meeting the payment to COMESA, the Argentina electrical entity designed a supervisor for our Argentina subsidiary Edesur.

In Argentina, there is a growing uncertainty about the country situation, where the electricity sector as well as other industries are being adversely impacted by low tariffs.

The group continues to expect a much anticipated integral tariff review, which would allow us to compensate for investment and for the real operating cost so as to ensure a proper quality service in accordance to the group standards. Nowadays our subsidiary is making its best effort to sorting out this difficult scenario. Because of the deficiencies in the current regulatory framework at the end of 2011 Enersis recognized the risk linked to our operations in Argentina. In this slide we share with you some figures to put in a proper context our limited exposure in Argentina.

Please go to slide number 13. The next slide shows how the fundamentals of our business continue to develop with an ample room to keep growing and to invest in projects that not only allow us to increase our installed capacity and a number of clients, but warranty quality of service and reliability to our customers and long term profitability to our shareholders.

As was mentioned, the Distribution business increased its client base by more than 308,000 new customers and a higher per capital consumption related to an increased economic environment this has been the fundamental pillar to our continues growth.

Regarding our CapEx program in Generation, we are currently building a new installed capacity in El Quimbo in Colombia and finishing the last days in Bocamina II in Southern Chile.

Please move now to the slide number 14. In addition to those power plants in different stages of construction, we have several potential products in the pipeline. Some of them are in the environmental approval process and others are in the development phase. The Indian region is where we think we should have our best opportunities for developing and operating new efficient and profitable asset based on their sustained growth and legal and regulatory stability.

Let's move to slide number 15. In slide number 15, we can appreciate the final hope of our group, which has remained solvent and liquid enough to withstand potential disruptions in the capital market. This has been gratified by rating agencies who have upgraded not only Enersis, but also the rating of some of our subsidiaries throughout South America.

Our debt maturities given have been managed to provide a payment capacity well aligned to our cash generation. As seen in our financial statements, our interest coverage indicates that we covered more than four times our interest payment through our EBITDA. Additionally, and considering of key variables in the capital market we continue to contract wage derivatives so as to better manage interest and exchange and rate increased.

Let's move to slide number 16. Now in order to summarize the key drivers of our nine months results, let me guide you through slide number 16. Demand for electricity in the five countries where we operate continuous growing at the fastest space when compared to more developed countries and no major risk are ambitioned in the foreseeable future expect for the unclear situation in Argentina.

During the remaining quarter, we have high expectations. Looking forward we should see a slight improvement in the volume conditions in Chile. This year, we will look 12 months of CIEN new permitted annual revenues. We will benefit from our projected electricity demand growth over 5% on a weighted average basis. We will add about 400,000 new clients per annum. We expect the approval of some of our sound generation projects. Our dealer business portfolio reflected during these nine months in Distribution improvement have highly hedge to mitigate poor Generation results.

And some final words. Although the region continues growing, global concerns regarding the future developed economy have impacted the world stock market placing downward pressure on our stock performance. Nevertheless research analysts cover Enersis continue to maintain a positive view about the fundamentals of our company as seen during this call.

Let's move to slide number 17. A detailed analysis of all the information summarized here can be found in our press release already available in our webpage together with full financial statement. Additionally if you have specific questions regarding the results of our business, please contact our Investor Relations department. We will be very glad to assist you.

Thank you very much for your attention. And now I would like to pass the call to the operator for further questions are concerning the nine month results. Christy please.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from the line of Diego Moreno from Bank of America Merrill Lynch. Please go ahead, Diego.

Diego Moreno – Bank of America Merrill Lynch

Good evening everyone. I just had a question regarding the strategic review of the company. In Brazil, we just had the announcement of the final parameters from the construction renewals, and we are seeing that the market is really punishing the companies and stocks they are suffering a lot. I would like to see the view of the company, what is the perspective of continued to invest in Brazil. Going forward, since the company will probably see a capital increase and we had a lot of money and available to due to some investments. And if you Brazil, is out of the math for them, how big going on [deploy] in the other countries in the region, the amount of money that will be injecting the company probably. Thank you.

Eduardo Escaffi J.

Hi, Diego, thank you. Well as I mentioned before we are going to talk about the capital increase afterwards. And I’ll just answer you the question about the strategy on Brazil and the recent changes in proposed changes in the environment.

In our business, we are not going to be impacted. We should probably impacted with a new regulation, because the changes are more related to the concessions that are going to expire by 2017. In our case, CIEN is going to – our line, the transmission line is going to expire in 2024, Ampla in 2026, Chilectra about 2027, and Coelce 2028, Fortaleza is not the regulatory asset. Then it definitely has a concession.

Then, as I mentioned in my presentation, Coelce is the best-in-class performance. Then we think that we are not going to be active negatively in change regulation.

Diego Moreno – Bank of America Merrill Lynch

Thank you. But regarding the investment perspective is going forward that is change our review about the investments opportunity in the country or not?

Eduardo Escaffi J.

Probably you noticed before we have been in a sort of wait and see mode in the recent part regarding a Brazilian investment. Then that mode proved very right since they have changed in regulation, we are still continuing in that position.

Diego Moreno – Bank of America Merrill Lynch

Okay, thank you.

Operator

Thank you. We have no more questions came for immediately. (Operator Instructions) We have no new questions for you, and I’d like to turn the call back over to Eduardo Escaffi to talk about the capital increase afflation. Please proceed, Eduardo.

Eduardo Escaffi J.

Hi, Christy. We have prepared a brief presentation in order to inform you about the status of the proposed capital increase. This presentation is intended exclusively to provide supplementary information about the proposed transaction. It does not constitute commercial material nor much easily constitute adjustment, opinion or recommendation by Company's management.

The transaction originated in a proposal made by Endesa LatAm a wholly-owned subsidiary of sustained to the rest of our shareholders. In Endesa LatAm intend to contribute 100% of its shares in Cono Sur liability free as special-purpose bagel which is holds Endesa LatAm that takes in 13 companies including both subsidiaries of Enersis and companies where Enersis is not currently a shareholder. Despite the fact that we managed some of them, they are called in-kind contributions in the context of a proposed capital increase. The rest of the shareholders are invited to the capital increase through their pro rata cash contributions. Therefore the announced transaction will be structured Enersis capital increase to be paid in kind and in cash.

Let's move to slide number 4. Let me first remind you that the change of – let me remind you the change of control. ENEL is our ultimate foreign company, it’s an Italian utility that owns 92% of Endesa pain, which in turn owns 100% of Endesa LatAm and 100% of Cono Sur. Endesa LatAm in turn owns 60.6% of Enersis while the rest of the shareholders own 39.44% among the minor shareholders the principal blocks are held by the Chilean pension fund companies and ADR holders.

I’m going to talk about the evaluation of Cono Sur takes and held by Endesa LatAm. The Cono Sur in kind contributions are being valued back. (inaudible) independent appraisal higher by Enersis with the methodology of discount, cash flow, that it was valued at $4.862 billion.

After that and following the instruction from the superintendence, I am just amortizing Chilean in was appointed by the Board of Directors and in order to analyze the value of the asset and the overall value of the transaction, used also the DCF methodology for evaluation and it arrived to a $4.7 billion and after that, the adjusted that number to the same amount that comes from DCF of Enersis related to the market price of Enersis. That gave to them a 31.7 relation between the Cono Sur value to the Enersis value, then that's why they left the result that they will publish, it is something between $3.4 billion to $3.6 billion related to the current value of Enersis.

(Inaudible) appointed by the directors committee also use to utilize to the evaluation method of DCF and they arrived to $4.6 billion and also they adjusted that number to the relation with the discount that the market was giving at that moment to the price of Enersis and the relation. And the relation was at 35% that relates to the 31.7% of Enersis. And the value that they could reach for the Cono Sur contribution was between $3.87 billion and $3.9 billion. I strongly recommend you to see to read the full reports that are currently in our uploaded in our webpage.

The Board of Directors yesterday approved a resolution falling a capital increase having in mind that the operation the transaction proposed will be – is a good transaction for interest of the company, because the contributions in kind makes sense from a strategic perspective. The profits of interest are being reduced by a degree because this company – Enersis going to be the sole vigil for in Latin America for Endesa, and that having in mind and with a range of value that they considered that if the final value to be defined by the shareholders meeting, it's going to be the market price the board agreed to convoke an extraordinary shareholders meeting to be held on December 20.

In order to propose the amount of capital increase in the range between $5.9 billion and $6.5 billion or the amount that the shareholders may determine. The capital increase would be subject the condition that after the preemptive price period and a subsequent offering it needed, the minority shareholder contribution will be large enough to allow in the sustained not exceed the 65% shareholding threshold in our loss. Relevant dates for the capital increase is coming from now is that in December 20 we're going to have a shareholders meeting, and if everything goes smoothly by the end of March 2013, we are going to have the preemptive strike period.

If you have any questions Christy?

Operator

(Operator Instructions) And the first question comes from the line of Diego Moreno. Your line is open please go ahead.

Diego Moreno – Bank of America Merrill Lynch

Hi. I just have a question regarding the capital increase of how it's going to happen on the shareholder meeting that you [schedule] for December 20. Do you think 67% the two thirds that you need to approve the transaction, is from the whole shareholders or from the shareholders who attend the shareholders meeting?

Eduardo Escaffi J.

Well it's going to be from the whole base of shareholders, outstanding shareholders not only they once (inaudible) event, it is 66.7% of the whole capital base that is 32.6 billion shares outstanding.

Diego Moreno – Bank of America Merrill Lynch

So it needs to be for all shareholders, even though they want that they do not attend the [kind of account.

Eduardo Escaffi J.

Right, absolutely.

Unidentified Analyst

To see if you...

Eduardo Escaffi J.

Yeah, absolutely.

Unidentified Analyst

Okay, thank you.

Operator

Thank you. There are no current questions. We still have no questions for you Eduardo.

Eduardo Escaffi J.

Well, thank you Christy. Well, thank you everyone, and as I mentioned before we are ready to answer any questions that you will have our Investor Relations team will be glad to assist you. Well, that's it. Thank you, bye.

Operator

Thank you, sir. And thank you to everyone for your participation in today's conference. This does conclude the presentation. You may now disconnect.

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