Endesa and Colbún could eliminate from its assets nearly $ 256 million
This should conduct a “write-off” as a result of government’s refusal to HidroAysén. Each company would reduce its assets, approx in U.S. $ 150 million.
The economic effect involved the rejection to HidroAysén for Endesa and Colbún-owners of 51% and 49% of the project-is virtually nonexistent; however, with what happened yesterday of course they could suffer financial impact on their balance sheets.
The thing is that decision adopted yesterday by the Committee of Ministers would make, eventually that both companies disposed Aysén S.A.’s Hydroelectric Plants from their assets, which would mean a subtraction in rough set from $ 140.9 billion, according to figures at the end of 2013, equivalent to US 256,7 million as of yesterday’s dollar.
Why? On the possibility that the two companies to reduce the value of this asset to zero, accounting mechanism known as “write-off”. The decision to cancel the HidroAysén value in the financial statements of Endesa and Colbún passed by the board of both companies or by the express request of external auditors.
However, it is a definition that is not yet clear, considering that the Minister of Energy, Máximo Pacheco, still sees potential for development of energy projects in the region of Aysén as well as at El Maule, which is why both companies could be involved with this same vehicle.
¿ Effect in Numbers?
Banchile Investments estimates a potential loss due to books adjustment around U.S. $ 256 million based on the book value of HidroAysén to March 2014.
“This punishment would be proportionately recognized as an extraordinary expense according to their shares in the project. The impact on Endesa would reach 9.5% of expected earnings before taxes for 2014. Regarding Colbún, this impact would reach 49.4%”.
According to Elizabeth Palma, from Tanner, the above “is a technical issue, but there should be no economic impact on companies, beyond accounting”, a view shared by the market. Credicorp Capital, through a report, stated that the disposal of this project, whose effect of a negative impact estimated at $ 160 million for each company-, “should not affect stock prices”.
Indeed, shares of Endesa (+0.76%) and Colbún (-0.82%) moved little in the market. Is that like Mauricio Catalán explains, senior analyst from Bci Studies, “HidroAysén has no impact on these companies. It was never included in the portfolio of both, considering that there has been no certainty about their realization”.
Although the executive clarifies that it could have a very marginal effect on earnings of these companies, whereas HidroAysén in 2013 meant a loss of close to $ 4,500 million for both companies. Catalán estimates a target price for Endesa at $ 900 late 2014 and $ 140 for Colbún, with recommendation of over-weighting and under-weighting respectively.
Source: Pulso
