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Empresa Nacional de Electricidad S.A. – ‘6-K’ for 6/30/06

On:  Friday, 4/28/06, at 9:22am ET   ·   For:  6/30/06   ·   Accession #:  1292814-6-1122   ·   File #:  1-13240

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FORM 6-K

Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of April, 2006

Commission File Number: 001-13240

Empresa Nacional de Electricidad S.A.

National Electricity Co of Chile Inc

Santa Rosa 76
Santiago, Chile
(562) 6309000

Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  [X]   Form 40-F  [   ]

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes    [  ]      No    [X]

Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes    [  ]      No    [X]

Indicate by check mark whether by furnishing the information
contained in this Form, the Registrant is also thereby furnishing the information to the Commission
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes    [  ]      No    [X]

If “Yes” is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A

ENDESA CHILE ANNOUNCES CONSOLIDATED RESULTS FOR
THE PERIOD ENDED MARCH 31, 2006

(Santiago, Chile, April 26, 2006) – Endesa Chile (NYSE: EOC), announced today its consolidated financial results for the period ended March 31, 2006. All figures are in constant Chilean pesos and are in accordance with the Chilean Generally Accepted Accounting Principles (Chilean GAAP) as required by Chilean authorities (FECU). March 2005 figures have been adjusted by the year-to-year CPI variation of 4.1% . The figures expressed in US Dollars for both periods were calculated based on the March 31, 2006 exchange rate of 526.18 pesos per dollar.

The consolidated financial statements of Endesa Chile for such period include all of its Chilean subsidiaries, as well as its Argentine subsidiaries (Hidroeléctrica El Chocón S.A. and Endesa Costanera S.A), its Colombian subsidiaries (Central Hidroeléctrica de Betania S.A. and EMGESA) and its Peruvian subsidiary (Edegel).

Table of Contents

The net income of Endesa Chile for the first quarter of 2006 was US$ 63.7 million, a 100 % improvement over the US$ 31.8 million for the same period of 2005. This is due to improvements in both operating income and the non-operating result.

Operating income for the first quarter of 2006 reached US$ 226.4 million, a 7.9 % increase when compared to the US$ 209.9 million of the first quarter of 2005. This result was principally due to the good performance of our business in Chile, which was mainly offset by the accounting effect of the appreciation of the Chilean peso against the US dollar which produced reduced results from the rest of the countries where we operate, plus depressed earnings from our business in Argentina. It should be noted that the results for the first quarter of 2005 included contributions from Cachoeira Dourada in Brazil, which was de-consolidated at the beginning of the last quarter of 2005.

The consolidated EBITDA, (operating income plus depreciation and amortization), of Endesa Chile reached, in constant US dollars, US$ 305.2 million for the period ended March 31, 2006, a 16.6 % increase over the same period of 2005, despite that the previous year’s figures included the operating figures of Cachoeira Dourada. The EBITDA distribution by country, adjusted for the shareholding in each subsidiary, shows that Chile contributed 74.1 %, Colombia 11.3 %, Argentina 7.3 % and Peru 7.2 %.

The most notable events of the first quarter were:

• the improved operating income in Chile, amounting to US$ 124.2 million and representing a 65.9% increase over 2005, due to better hydrological conditions, thus showing the strength of the company portfolio operating in a consolidated market like Chile.
  
  
• a revolving credit facility for US$ 200 million signed by the Company came into effect on January 26, 2006, which was later syndicated. The Company obtained an interest rate of Libor plus 30 basis points, reflecting its financial strength and the trust of the financial markets in Endesa Chile.
  
  
• the Chilean National Energy Commission published on April 17, 2006 its April 2006 Node Price definitive report which set a price of US$ 62.03 MWh at the Alto Jahuel node, effective from May 1, 2006.
  
  
• on March 2, 2006 Emgesa, the Colombian subsidiary of Endesa Chile, finalized the purchase of the assets of Termocartagena for approximately US$ 17 million dollars and announced an investment plan of around US$ 5 million dollars in order to pay down debts and restore to 203 MW plant located on the Atlantic coast.
  
  
• on January 17, 2006, the shareholders of Edegel, the Peruvian subsidiary of Endesa Chile, and Etevensa ratified the decision taken by both their boards on November 29, 2005 regarding the absorption of Etevensa by Edegel. The approval of the National Institute for the Defence of Competition and of the Institute for the Protection of Intellectual Property (Indecopi) was obtained on April 12, 2006, a necessary step for completing the merger.

Consolidated sales to March 2006 amounted to US$ 550.7 million, 2.3% below the US$ 563.6 million of the previous year. Physical sales in the first quarter were 12,847 GWh, a reduction of 809 GWh compared to the first quarter of 2005. Considering a comparative 2005 which excludes the results to March 2005 of Cachoeira Dourada, sales would have grown by 2.1% in the first quarter of 2006, while physical volumes would have increased by 1%, or 88 GWh.

The cost of sales of the first quarter of 2006 was US$ 309.0 million, a 7.5% drop from the same period in 2005. The hydrology and the conservative management of the contracting policy has enabled Endesa Chile to reduce its variable costs detaching the reduction in purchases of energy and power and the reduction in fuel costs in Chile as a consequence of the lower thermo generation. Cachoeira Dourada’s de-consolidation and the accountable effect of the appreciation of the Chilean peso over the operational results of our foreign companies explained the additional reduction in operating expenses. Administrative and selling expenses reached US$ 15.3 million, a 22% decrease when compared to the same period of 2005.

Electricity generation reached 11,967 GWh during the first quarter of 2006, compared to the 12,631 GWh generated in 2005, a decline of 5.3% . However, the production of Cachoeira Dourada in the first quarter of 2005 was 931 GWh which, excluded from the 2005 figure, results in an increase of 2.3% .

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Main events during the period

Investments

Regarding the investment projects in progress in Chile, the Palmucho pass-through hydroelectric plant is under construction. This 32 MW plant will use the ecological flow of the Ralco plant and will involve a total projected investment of US$ 32 million. Its start-up is planned for the second half of 2007.

The announced thermal plant alongside the San Isidro plant is also under construction. Endesa Chile gave the order to proceed to Mitsubishi as the supplier of the turbine for the plant to have a maximum capacity in combined cycle with liquefied natural gas (LNG) of 377 MW. It is expected that this will start operating commercially in open cycle on March 31, 2007. Production in combined cycle will start commercial operations in late February 2008. The investment is estimated in US$ 200 million.

On February 1, the environmental impact approval was obtained from the Maule Region National Environmental Commission for the construction of the Ojos de Agua mini-hydroelectric plant to be located approximately 100 kilometers from the city of Talca, in the river Cipreses valley downstream from La Invernada Lake. The plant will have a capacity of 9 MW and an average annual production of 60 GWh, involving an investment of US$ 15.5 million.

Technical feasibility studies are currently taking place for the implementation of a wind-generating field on the SIC (Chile’s central electricity grid). This project forms part of Endesa Chile’s initiative for developing non-conventional renewable energy projects. The installed capacity is estimated to be in excess of 9 MW for a projected investment of US$ 9 million.

On March 2, 2006 Emgesa, the Colombian subsidiary of Endesa Chile, Emgesa, ended the purchase of the assets of Termocartagena through a bidding process for approximately US$ 17 million dollars and announced an investment plan of around US$ 15 million dollars in order to pay down debts and restore to 203 MW the plant located on the Atlantic coast.

Regarding the announced merger between Edegel, the Peruvian subsidiary of Endesa Chile and Etevensa, on January 17, 2006, the shareholders of Edegel ratified the decision taken by both their boards on November 29, 2005 approving the absorption of Etevensa by Edegel. With the approval of the National Institute for the Defence of Competition and of the Institute for the Protection of Intellectual Property (Indecopi) on April 12, 2006, a necessary step for completing the merger was obtained.

Regarding the development of the Aysén plants, Endesa Chile continues on-site exploration work and is progressing with its constant efforts for achieving a better communication and informing the communities and regional authorities with respect to the project. These plants, which involve a total installed capacity of 2,430 MW, will require an investment of around US$ 2,000 million. They are a necessity for the Chilean electricity system and demonstrate the responsible and continuous commitment of Endesa Chile with the country’s development.

Regulated tariffs

In Chile, the National Energy Commission, CNE, published on December 29, 2005 the node prices resulting from the application of the indexation formula, following the fall in international oil prices by more than 10 % from the price used in calculating the node prices in October. The new Alto Jahuel node price was US$ 59.29 per MWh, compared to US$ 63.38 per MWh previously set, effective from the date of the publication.

The CNE later made a second node price modification by application of the indexation formulas. These produced an accumulated rise in the energy price compared to that set on December 29, 2005. The new price was then set at US$ 64.10 per MWh for the Alto Jahuel node, applicable from February 27, 2006.

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On April 17, 2006, the CNE published its Node Price definitive report of April 2006 which set a new price of US$ 62.03 MWh at the Alto Jahuel node, effective from May 1, 2006. The appreciation of the Chilean peso against the US dollar was the main factor behind the fall in the node price, due to its effect on the average of contract prices with the non-regulated customers.

In Peru, the management council of the official energy investment supervisory body, OSINERG, published its resolution on April 10, 2006 setting the new bar price for the period May 2006 - April 2007. This is US$ 35.48 per MWh, 9.9% lower than the present bar price expressed in US dollars. The greater use of natural gas from CAMISEA, and the consideration of a new unit for marking capacity, influenced this change.

Financing

On January 26, 2006, Endesa Chile signed a revolving credit facility for US$ 200 million for a period of 5.5 years at an interest rate of Libor plus a spread of 30 basis points. The proceeds permitted the repayment on maturity of the Yankee bonds of March 2006 of Endesa Chile Internacional amounting to US$ 150 million, plus accrued interest.

On February 15, our subsidiary Betania issued a bond on the Colombian market for 100,000 million Colombian pesos (approximately US$ 44 million) at a term of 7 years, in order to prepay debt. The effective placement yield was CPI+1.8%, much lower than the nominal rate of CPI+6.29%, which meant obtaining proceeds of approximately US$ 53 million. Also, on February 23, Emgesa S.A. placed a bond issue on the Colombian market for 40,000 million Colombian pesos (approximately US$ 17.5 million) for a 10-year term at an interest rate of CPI + 2.4% . The proceeds were used to finance the acquisition of Termocartagena for approx. US$ 17 million.

Sustainability, the Environment and Corporate Governance

On March 2006, was announced The fourth Sustainability Report of Endesa Chile, reporting fully on the objectives achieved by the Company during 2005 in compliance with the seven commitments set out in its Sustainability Policy: commitment with quality of service; commitment with creation of value and profitability; commitment with health, safety and the personal and professional development of the people w orking for Endesa Chile; commitment with good governance and ethical behavior; commitment with environmental protection; commitment with efficiency; and commitment with the development of the societies in which it operates.

The ordinary shareholders’ meeting of Endesa Chile was held on March 21, in where were an election of the Board of Directors, confirming to Luis Rivera Novo as the President and Antonio Pareja Molina as the Vicepresident. At the same time, it was approved a dividend of $5.82 per share regarding the 2005 yearly results, which was paid on March 30, 2006.

Conclusion

Overall, Endesa Chile has proven the strength of counting with a portfolio of highly-efficient investments, which together with an adequate commercial policy and a solid financial position, has permitted the company to improve its results during the first quarter of 2006. The later, which reflects the trend over the last years, allows Endesa Chile to be in a appropriate condition to face new challenges and transform these into growth opportunities, as are the different projects in which is Endesa Chile responsibly working in to tackle the medium and long term energy requirements that have derived from high energy demands.

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Operating Income

The following presents an analysis of the business by country:

Operating income in Argentina for the first quarter of 2006 was US$ 13.2 million, compared to US$ 26.9 million the previous year. The principal causes were a reduction in sales of capacity by Endesa Costanera due to the problems of the Argentine electricity sector and their impact on the export business. Endesa Costanera sales thus fell by 32% to US$ 53.4 million. An efficient production management and commercial policies enabled Endesa Costanera to reduce its cost of sales by 7%, from US$ 55.2 million to US$ 51.3 million.

Hidroeléctrica El Chocón was able to capture 7.3% of the increased electricity demand in the Argentine market. Thanks to the good hydrology in the Comahue region during the hydrological year 2005, its production increased by 65% during the first quarter to 1,109.6 GWh, which was mainly sold on the spot market. As a consequence of the recognition of the costs related to natural gas extraction by the authority in the calculation of the station fixed price, the price in the spot market has followed a raise trend. El Chocón was therefore able to benefit from this and obtained a higher average price for the sale of its energy, increasing its operating income by 188%, from US$ 4.2 million during the first quarter 2005 to US$ 12.0 million in the same period 2006.

In analyzing the situation in Argentina, the accounting distortion should be borne in mind in comparing figures from one year to another in Chilean pesos. The chilean peso has shown a strong appreciation against the US dollar, an increase of 10.2% (Ch$ 526.18 per dollar at the end of March 2006 compared to Ch$ 585.93 in March 2005), while the Argentine peso has depreciated by 5.2% against the US dollar (Ar$ 3.0815 per dollar in March 2006 against Ar$ 2.9165 in 2005), thus creating an added effect that turns the results downward as a result of the application of the accounting treatment of foreign currency results required by Technical Bulletin No.64.

Operating income in Colombia reached US$ 59.0 million for the first quarter of 2006, US$ 7.7 million below the level of the corresponding quarter of 2005. The better hydrology motivated hydroelectric production but adversely affected market prices. Our production increased by 4.2% to 2,975.9 GWh but sales were US$ 125.6 million, 6.1% lower than in the same period of the year before. The cost of sales diminished by US$ 0.5 million despite US$ 1.8 million of higher costs incurred in fuel purchases with respect to its thermal generation.

Endesa Chile’s Peruvian subsidiary, Edegel, registered an operating income of US$ 30.1 million, a 12.4% decrease compared to the US$ 34.4 million recorded in the first quarter of 2005. Although production increased by 6.3% and sales volumes by 1.3%, sales fell by 3.3% from US$ 63.5 million to US$ 61.5 million. Operating expenses increased by US$ 2.1 million to US$ 27.0 million. The increase in the cost was mainly attributable to the higher thermal generation, which increased by 59.3 GWh in response to an 8.2% increase in demand on the domestic market. Thermo capability allows the company to cover the demand with its owned generation reducing energy purchases cost in 100% compared to the March 2005 quarter.

The operating figures in Peru were detrimentally affected by the appreciation of the Chilean peso against the US dollar, as the 3.22% depreciation of the Peruvian sol against the dollar caused an added negative effect to the results. Eliminating this effect, the difference in the operating result for the year was positive.

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Operating income in Chile reached US$ 124.2 million, exceeding by 65.9% the US$ 74.8 million produced in the first quarter of 2005. As a result of node prices averaging over US$ 60 per MWh and high spot energy prices, reflecting the strong demand and the constant cuts in natural gas supplies from Argentina. Sales rose 15.9% to US$ 285.1 million, compared to US$ 246.0 million in the same period of 2005. The production of 4,369.3 GWh for the period quarter meant a 1.6% increase in generation. The good hydrology enabled Endesa Chile to increase hydraulic generation proportion while at the same time contracting its thermal generation by 26.2% to 887.6 GWh. The cost of sales therefore declined by 5.8%, a US$ 11.5 million drop in variable costs. Endesa Chile’s commercial policy enabled it to be a net seller on the spot market and thus benefit from the margins provided by selling its water-generated energy at high prices.

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Non-Operating Income

The non-operating result for the first quarter of 2006 was a negative US$ 92.0 million, compared to a negative US$ 106.5 million in the previous year, thus favorably affecting the Company’s net income in comparison with 2005. The principal changes in the non-operating result were:

Consolidated financial expenses decreased by US$ 18.9 million from US$ 101.9 million in the first half of 2005 to US$ 82.9 million in 2006, a fall of 18.6% due to a reduced debt level and the appreciation of the Chilean peso against the dollar. On the other hand, smaller average cash balances and the de-consolidation of Cachoeira Dourada reduced financial income by US$ 6.1 million, from US$ 11.5 million to US$ 5.4 million.

The net result of investments in related companies increased by US$ 4.6 million in the first half of 2006, mainly due to the US$ 2.0 million of higher accrued net income in the affiliate company GasAtacama and the accrued income in Endesa Brasil S.A. in the first quarter of 2006 of US$ 11.2 million, a holding company created in October 2005 for the corporate restructuring in Brazil. This was mainly offset by the accrued income in the former affiliate company CIEN, which amounted to US$ 8.3 million in the first quarter of 2005, figured given to Endesa Brasil.

Other net non-operating income and expenses produced a lower result of US$ 12.0 million, mainly due to an increase of US$ 19.6 million in provisions for contingencies, litigation and others, which were partially offset by reduced provisions for the re-settlement of energy and power of US$ 6.9 million and an improved result from the conversion adjustment, per Technical Bulletin No.64 of the Chilean Institute of Accountants, of our foreign subsidiaries of US$ 2.2 million.

Price-level restatements and exchange differences showed a net positive change of US$ 8.7 million in the first quarter compared to that of the previous year, from a loss of US$ 12.8 million in 2005 to one of US$ 4.1 million in March 2006. This is mainly explained by variations in the exchange rate between both periods, as the Chilean peso depreciated in real terms against the US dollar by 3.0% in the quarter ended March 31, 2006, compared to a real depreciation of the peso of 5.9% in 2005.

With respect to income taxes and deferred taxes, these were reduced by US$ 3.4 million in the first quarter of 2006, compared to the same period of 2005. Consolidated income tax amounted to US$ 46.7 million, comprising a charge of US$ 27.3 million in income tax, US$ 6.9 million less than in the corresponding period of 2005, related to a lower taxable income, and US$ 19.5 million of deferred tax, an increase of US$ 3.5 million compared to the same period of 2005.

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The Company’s total assets as of March 31, 2006 show a decrease of US$ 1,229.0 million compared to the same date of the previous year for the following principal reasons:

Current assets decreased by US$ 71.5 million mainly due to a fall in cash and time deposits of US$ 172.6 million, due to a fall in other current assets of US$ 76.9 million, basically a reduction in securities acquired under resale agreements and deposits for payments of obligations and a reduction in trade accounts receivable of US$ 16.7 million, partially offset by increases in notes and accounts receivable from related companies of US$ 181.2 million, basically transfers to short term of the loan to our affiliate company Atacama Finance Co., and increases in sundry debtors and inventories of US$ 23.4 million.

Fixed assets declined by US$ 1,486.8 million, mainly explained by the end of the consolidation of Cachoeira Dourada S.A., representing US$ 705.6 million, the depreciation for the period of US$ 78.2 million and the effect of the exchange rate on the fixed assets of foreign subsidiaries of approximately US$ 787 million, following the application of the method of carrying non-monetary assets of subsidiaries in unstable countries in the accounts in nominal dollars, in accordance with Technical Bulletin No.64 of the Chilean Institute of Accountants. This was partially offset by acquisitions of assets amounting to US$ 84.1 million.

Other assets show an increase of US$ 329.2 million, basically explained by the increase in investments in related companies of US$ 602.2 million, principally the shareholding in Endesa Brasil S.A. as from the fourth quarter of 2005 and a reduction in negative goodwill of US$ 44.1 million reflecting the amortization for the period and the effect of the exchange rate in Chile on the negative goodwill in subsidiaries controlled in dollars, partially compensated by a reduction in investments in other companies of US$ 39.6 million, basically the dissolution of Cesa, a decrease of US$ 221.2 million in notes and accounts receivable from related companies, principally the transfer of the loan to our affiliate company Atacama Finance Co. to short term, and a reduction in other assets of US$ 44.7 million.

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Current liabilities show an increase of US$ 238.1 million, mainly due to an increase in bonds payable of US$ 292.3 million following transfers from long to short term of bonds of Endesa Chile an its subsidiaries Edegel and Emgesa S.A., an increase in notes and accounts payable to related companies of US$ 54.8 million and increases in sundry creditors, provisions and other current liabilities of US$ 58.6 million, partially offset by a reduction in borrowings from banks and financial institutions as a result of repayments and a lower exchange rate, for US$ 92.7 million and a reduction in accounts and dividends payable of US$ 77.7 million.

Long-term liabilities reduced by US$ 1,057.0 million, mainly explained by reduced borrowings from banks and financial institutions and bonds payable for US$ 1,060.6 million, following repayments, debt refinancing, transfers to short term, and also influenced by the appreciation of the Chilean peso against the dollar at March 31, 2006 compared to same date in 2005, and a reduction in sundry creditors and provisions of US$ 44.6 million, partially offset by increases in deferred taxes and other long-term liabilities for US$ 48.2 million.

The minority interest shows a fall of US$ 373.6 million mainly due to the decrease in the equity positions of the foreign subsidiaries controlled in dollars, under the terms of Technical Bulletin No.64 of the Chilean Institute of Accountants, and the dissolution of Cesa.

Shareholders’ equity declined by US$ 36.6 million compared to the first quarter of 2005. This is mainly explained by the increase in retained earnings of US$ 52.4 million and in the net income for the period of US$ 31.9 million, offset by the reduction in other reserves of US$ 121.4 million.

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The Company’s liquidity ratios declined as of March 2006 compared to March 2005. The current ratio was 0.79:1, 30.7% below the level as of March 2005, and the acid test ratio was 0.73:1, a 24.7% drop from the previous year. The deterioration in these ratios is mainly explained by increases in current liabilities, principally bonds payable and notes and accounts payable to related companies, as well as decreases in current assets, basically in cash, time deposits and other current assets.

The debt ratio as of March 2006 was 1.46:1, a reduction of 14.6% compared to the previous year, as the result of the prepayment of financial debt and the greater appreciation of the Chilean peso against the dollar in 2006 than in 2005.

It is important to mention that the main input of hydro-facilities is water, and both snow and water reservoirs are not considered current assets in the accounting figures, but they are the main resource in the generation of liquidity.

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Main aspects of the current period on the effective cash flow statement are:
a) Operating activities generated a positive cash flow of US$ 85.4 million, representing a 2.2% increase over March 2005. This flow mainly comprises the net income for the period of US$ 63.7 million, plus charges to income not representing net cash flows amounting to US$ 70.2 million, increases in assets affecting cash flow of US$ 149.8 million, increases in liabilities affecting cash flow of US$ 72.7 million and minority interest of US$ 28.6 million.

b) Financing activities generated a negative cash flow of US$ 69.5 million as of March 2006 compared to the negative US$ 145.5 million of the sane period of 2005. This mainly consisted of loan and bond repayments of US$ 329.0 million and dividend payments of US$ 100.0 million. This is partially offset by loans drawn and bonds payable of US$ 360.6 million.

c) Investment activities generated a negative flow of US$ 33.9 million, mainly acquisitions of fixed assets of US$ 84.1 million, offset basically by the collection of documented loans to related companies of US$ 50.6 million.

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Most important changes in the markets where the company operates

ARGENTINA

• Resolution 0269 of 2006 of the Secretary of Energy grants CEMSA a provisional authority for 180 days from February 25 to import electricity from Bolivia with a maximum capacity of 120 MW under the Firm Capacity and Associated Energy format for a term of 15 years. Operations are expected to start for the winter of 2007.

CHILE

• On February 15, 2006 Endesa, Enap and Metrogas signed a Letter of Agreement with British Gas which commits the parties and contains the essential terms for the development of the LNG supply project and the construction of the Quintero re-gasification terminal.

COLOMBIA

• Resolution CREG 001-2006 was published; it modifies Resolution 128 of 1996 concerning market share limitations on electricity companies. The limit for generation remains at 25%, but now adding to the calculation the Direct Participation Percentage of the company in generation plus the Direct Participation Percentage in this activity of other companies in which it has a controlling relationship, whether as parent company, subsidiary or subordinate.
• Starting March 2, Emgesa officially began to manage the recently acquired TermoCartagena plant, comprising three units operating with gas and totaling 199 MW.

PERU

• OSINERG published the bar tariff for the period May 2006 - April 2007. The amount set is US$ 35.48 per MWh monomic, which represents a fall of 9.9% compared to the current tariff. The factors influencing this reduction include the impact of the greater use of natural gas for generation and the modification of the point unit for the determination of the price for capacity which considers lower operating and maintenance costs.
• The CAMISEA gas pipeline was out of service between March 5 and 17 because of an explosion in the pipeline. The marginal cost was not affected by this situation, remaining at around US$ 23.5 per MWh.

Market risk analysis

ARGENTINA
- Hydrology: Chocón is at its high-water level and is a net seller in the spot market.

- Fuel price: Costanera has had its long-term gas supply contracts terminated by regulatory intervention since September 2005. Therefore, in the meantime it had to guarantee supplies under a scheme of monthly renewable contracts with Metrogas which has permitted normal gas supplies in the period.

- Variation in demand: Domestic energy demand grew by 7.3% in the first quarter 2006 compared to the same period of last year.

CHILE
- Hydrology: The hydrological year April 2005-March 2006 ended with a 30.6% probability of surplus (equivalent to approximately 110% of the historical average), which represented a normal-wet hydrology period for the system. The company has been a net seller in the spot market.

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- Fuel risk: The availability of gas in the first quarter of 2006 compares favorably with the same period of the year before. In the north, Taltal has maintained its normal restriction of 0.9 MMm3/d because of the lack of export permits while, in the central zone, San Isidro has not suffered gas supply restrictions from Argentina but there were transport restrictions by Gas Andes during some days in March. Despite this, other generators in the central zone suffered restrictions imposed by their producers in Argentina during the first quarter of 2006.

- Variation in demand: Demand increased near 6.6% in the SIC and 1.8% in the SING during the first quarter of 2006.

COLOMBIA
- Hydrology: The numbers of contracts of Group companies make their exposure to hydrology risk relatively low. Total contributions to the SIN in the first quarter of 2006 were 18% above average. For Guavio and Betania, water inflows in the quarter were 133% and 136% respectively (very wet conditions for both basins). It should be borne in mind that the first quarter of the year corresponds to the summer season in Colombia.

- Fuel price: Because of the declaration of offers mechanism, the fuel price is just one component of the declared price. For dry conditions, the declared price may rise according to the perception of market participants.

- Variation in demand: Demand increased near 4.3% during the first quarter 2006.

PERU
- Hydrology: Endesa Group is a net seller on the spot market so the risk of dry hydrological conditions is low. In the first quarter of 2006, the flows of the rivers Tulumayo, Rimac and Tarma were 92%, 98% and 72% of their average respectively and correspond to a semi-dry category. The flows of the river Mantaro were 79%, which corresponds to a dry category.

- Fuel price: The international oil price directly affects the price of liquid fuels used by most thermal plants, so energy prices in the system are strongly affected and the value of signed contracts diminishes.

- Variation in demand: Demand increased over 8.2% during the first quarter 2006.

Exchange and interest rate risk analysis

The company has a high percentage of its loans nominated in US dollars as most of its sales in the different markets where it operates show a high degree of indexation to that currency. The markets where the Company’s foreign subsidiaries operate show a lower indexation to the dollar so the subsidiaries in those markets have larger borrowings in local currency.

Despite this natural exchange rate hedge, the Company, in a scenario of high dollar volatility, has continued with its policy of partially hedging its dollar liabilities in order to attenuate the fluctuations in its results caused by exchange rate variations. In view of the important reduction in the mis-matched accounting position in recent years, which has reached prudent levels, the Company has modified its dollar-peso hedging policy by setting a maximum accounting mis-match position over which hedging transactions are made.

As of March 31, 2006, the Company in consolidated terms did not use dollar-peso forward contracts, compared to US$ 140 million of such forwards at the same date last year. This change is because the accounting mis-match was within the limit set out in the Company’s hedging policy.

Regarding the interest rate risk, the Company has a proportion of fixed to variable rate debt of approximately 89 % / 11 % as of March 31, 2006. The percentage at fixed rates has declined slightly compared to the 93% / 7 % fixed / variable percentages as of March 2005, but equally reduces the interest-rate fluctuation risk.

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Endesa Chile is pleased to inform you that it will conduct a conference call to review its results for the period ended March 31, 2006, on Friday, April 28, 2006, at 10:00 am (Eastern Time). To participate, please dial:

Conference Call Information:
Dial-In number: 1 (617) 597 53 24, international.
Dial-In number: 1 (866) 713 85 65
Passcode I.D.: 24568732

Replay Information:
Dial-In number: 1 (617) 801 68 88, international.
Dial-In number: 1 (888) 286 80 10
Passcode I.D.: 56272108

Please connect approximately 10 minutes prior to the scheduled starting time.

If you would like to take part in the Conference Call via the Internet and see an online presentation, or listen to a webcast replay of the call you may access www.endesachile.cl, (please note that this is a listen only mode)

This Press Release may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may appear in a number of places in this announcement and include statements regarding the intent, belief or current expectations of Endesa Chile and its management with respect to, among other things: (1) Endesa Chile’s business plans; (2) Endesa Chile’s cost-reduction plans; (3) trends affecting Endesa Chile’s financial condition or results of operations, including market trends in the electricity sector in Chile or elsewhere; (4) supervision and regulation of the electricity sector in Chile or elsewhere; and (5) the future effect of any changes in the laws and regulations applicable to Endesa Chile or its affiliates. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of various factors. These factors include a decline in equity capital markets of the United States or Chile, an increase in market interest rates in the United States or elsewhere, adverse decisions by government regulators in Chile or elsewhere, and other factors described in Endesa Chile’s Annual Report on Form 20-F. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates, Endesa Chile undertakes no obligation to release publicly the result of any revisions to these forward-looking statements.

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SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.