Spain's Endesa Vows To Use Enersis Capital Increase for Latin America

Spanish utility Endesa SA (ELEZY, ELE.MC) vowed to use cash proceeds from a planned capital increase at Chilean unit Enersis SA (ENI, ENERSIS.SN) in Latin America and not, as some analysts and minority shareholders fear, to pay down debt in Europe.

In a filing with the Chilean SVS securities regulator Thursday, Endesa said it would use the proceeds to consolidate its Latin American assets at Enersis and finance the Chilean energy holding company's expansion plans in the region.

In coming months, Enersis, which operates in Chile, Argentina, Colombia, Peru and Brazil, plans to raise up to $6.56 billion via a capital increase in which Endesa would subscribe with between $3.59 billion and $3.97 billion of non-cash assets such as stakes in several Latin American companies, while minority shareholders would pay with up to $2.59 million in cash.

Although Endesa recently lowered the size of the transaction, initially valued at $8.02 billion, minority shareholders remain concerned about use of proceeds, fearing the cash could go to help finance Endesa's debt, or even that of its parent company, Italian Enel SpA (ENEL.MI), in light of Spain's and Italy's financial troubles.

Enersis shareholders will vote on the capital increase, which would be Chile's largest, on Dec. 20.

Write to Graciela Ibanez at [e-mail]