Two Chilean Electric Utility ADRs: Enersis and Empresa

Includes: ENIA, EOC
by: David Hunkar

The country of Chile is one of the top copper producers in the world. While many banks have failed in developed countries, Chilean banks have remained stable as its economy has held up well. Recently an article in Business Week discussed the growth of the IT industry in Chile. US companies are outsourcing their IT work to Chile since the cost of labor is cheap and the workforce is highly educated compared to other outsourcing destinations. In addition to banks and commodities, Chilean utilities hold good potential for future growth.

Two Chilean electric utilities trade on the New York Stock Exchange (NYSE). A brief overview of these two ADRs follows:

1. Enersis SA (ENI) generates, transmits and distributes power in Chile, Argentina, Brazil, Colombia and Peru. ENI is one of the largest private sector electricity companies in South America. Endesa of Spain is the largest shareholder in Enersis.

"For the six months ended on June 30, 2009, Enersis’ Net Income was Ch$360.906 million, an increase of 46.0% with respect to the same period in 2008. This better outcome is mainly explained by the increase in energy sales and lower purchases of fuel and other operating expenses, which implied a 15.2% higher Gross Income."

Enersis was also one of the top 10 largest traded stocks on the Santiago Stock Exchange in the first 6 months of this year. The current yield for ENI is 4.45%. From a low of about $10, the stock has rebounded to $18+ as of Wednesday's close.

2. Chile-based Empresa Nacional de Electricidad SA (NYSE:EOC) is another electric utility with operations in Argentina, Colombia and Peru as well. At the end of 2008, Empresa had 25 generation facilities outside of Chile.

Total revenue increased consistently for the past 5 years and the average annual dividend growth rate is 36.18%. The current dividend yield is 3.56%.