6-K 1 f6k_101501.txt REPORT OF FOREIGN ISSUER THE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 6-K Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the six months ended June 30, 2001 HQI Transelec Chile S.A. (Translation of registrant's name into English) Santa Rosa 76 Piso 9 Santiago, Chile (Address of principal executive offices) (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 whether the registrant by furnishing the information contained in this Form 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 HQI TRANSELEC CHILE S.A. Interim financial statements June 30, 2001 CONTENTS Report of independent accountants Balance sheet Statement of income Statement of cash flows Notes to the individual financial statements Ch$ - Chilean pesos ThCh$ - Thousands of Chilean pesos US$ - United States dollars UF - A daily inflation indexed, Chilean peso - denominated monetary unit REPORT OF INDEPENDENT ACCOUNTANTS Review of interim financial statements (Translation from the original in Spanish) Santiago, July 31, 2001 To the Board of Directors and Shareholders, HQI Transelec Chile S.A. We have reviewed the accompanying interim balance sheet of HQI Transelec Chile S.A. as of June 30, 2001, and the related interim statements of income and of cash flows for the six months period then ended. These financial statements (including the respective notes) are the responsibility of the Company's management. The accompanying financial analysis and description of relevant events are not an integral part of these financial statements, therefore, this report is not made extensive to them. We conducted our review in accordance with auditing standards generally accepted in Chile. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material adjustments that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in Chile. Eduardo Vergara D. HQI TRANSELEC CHILE S.A. ------------------------ BALANCE SHEET ------------- As of June 30, 2001 ASSETS ThCh$ ------ ----- CURRENT ASSETS Cash and banks 23,930 Time deposits 23,454,913 Marketable securities 2,962,602 Trade accounts receivable 8,118,506 Sundry debtors 403,695 Inventories 6,055 Recoverable taxes 586,805 Prepaid expenses 208,001 Deferred taxes 91,654 Other current assets 12,923,916 -------------- Total current asset 48,780,077 -------------- FIXED ASSETS Land 5,238,364 Buildings and infrastructure 267,508,743 Machinery and equipment 219,829,294 Other fixed assets 1,977,590 Increase value arising from technical reappraisal of fixed asset 19,641,854 Accumulated depreciation (50,958,736) --------------- Total fixed assets, net 463,237,109 -------------- OTHER ASSETS Investments in other companies 36,746 Goodwill 102,540,232 Long-term debtors 528,736 Notes and accounts receivable from related companies - long term 108,250,236 Deferred taxes 20,435,631 Intangibles 22,794,499 Amortization of intangibles (1,273,982) Other 11,957,716 -------------- Total other assets 265,269,814 -------------- Total assets 777,287,000 =========== LIABILITIES AND SHAREHOLDERS' EQUITY ThCh$ ----- CURRENT LIABILITIES Bonds payable - short term portion Accounts payable 7,928,714 Sundry creditors 4,317,459 Accounts payable to 1,513,346 related companies Provisions 314,500 Withholdings 1,037,601 Other current liabilities 1,380,031 22,001 -------------- LONG-TERM LIABILITIES 16,513,652 -------------- Long-term bonds payable Sundry creditors 439,706,344 Provisions 72,367 Deferred taxes 1,245,005 Other long-term liabilities 2,076,666 Total long-term liabilities 34,789 -------------- 443,135,171 -------------- SHAREHOLDERS' EQUITY Paid-in capital Other reserves 310,140,471 Retained earnings 4,655,286 Total shareholders' equity 2,842,420 -------------- 317,638,177 Total liabilities and equity 777,287,000 =========== The accompanying Notes 1 to 29 form an integral part of these financial statements. HQI TRANSELEC CHILE S.A. ------------------------ STATEMENT OF INCOME ------------------- For the six month period ended June 30, 2001 ThCh$ OPERATING RESULTS Sales 42,289,703 Cost of sales (11,801,453) ------------- Gross margin 30,488,250 Administrative and selling expenses (1,175,311) -------------- Operating income 29,312,939 NON-OPERATING RESULTS Financial income 2,468,755 Other non-operating income 74,323 Goodwill amortization (2,624,163) Financial expenses (16,026,817) Other non-operating expenses (154,161) Price-level restatement 1,763,590 Exchange differences (15,788,099) ----------- Non-operating results (30,286,572) ------------ Income before income taxes (973,633) Income tax 592,831 -------------- LOSS FOR THE PERIOD (380,802) ============== The accompanying Notes 1 to 29 form an integral part of these financial statements. HQI TRANSELEC CHILE S.A. STATEMENT OF CASH FLOWS For the six month period ended June 30, 2001 ThCh$ CASH FLOWS FROM OPERATING ACTIVITIES Loss for the period (380,802) --------- CHARGES (CREDITS) TO INCOME NOT REPRESENTING CASH FLOWS Depreciation 7,316,735 Amortization of intangibles 329,316 Amortization of negative goodwill 2,624,163 Price-level restatement (1,763,590) Exchange differences 15,788,099 Other credits to income not representing cash flows (2,340,504) Other charges to income not representing cash flows 873,103 CHANGES IN ASSETS WHICH EFFECT CASH FLOWS Trade accounts receivable (193,044) Inventories 28,643 Other assets 17,505,231 CHANGES IN LIABILITIES WHICH EFFECT CASH FLOWS Accounts payable related to operating results 684,444 Interest payable 7,928,714 Income tax payable (20,454,764) Value added tax and other taxes 145,800 ------------- Net cash flows from operating activities 28,091,554 ----------- CASH FLOWS FROM FINANCING ACTIVITIES Bonds 424,589,198 Other loans drawn from related companies 300,470 Payment of documented loans from related companies (326,389,760) Bond issuance and placement expenses (9,006,988) -------------- Net cash flows from financing activities 89,492,920 -------------- CASH FLOWS FROM INVESTMENT ACTIVITIES Purchase of fixed assets (1,985,793) Other loans to related companies (101,771,645) Net cash flows from investing activities (103,757,438) ------------ Total net cash flow for the year 13,827,036 EFFECT OF INFLATION ON CASH AND CASH EQUIVALENTS 604,831 --------------- NET CHANGE IN CASH AND CASH EQUIVALENTS 14,431,867 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 23,163,712 ------------- CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 37,595,579 ============= The accompanying notes 1 to 29 form an integral part of these financial statements. HQI TRANSELEC CHILE S.A. NOTES TO THE FINANCIAL STATEMENTS AT JUNE 30, 2001 NOTE 1 - COMPANY CONSTITUTION ----------------------------- Inversiones HQI Chile Limitada was formed as a limited liability company, as stated in public deed dated September 15, 2000. The Company was formed to invest in shares and partnership interests. On October 16, 2000 the Company changed its name to Inversiones HQI Transelec Chile Limitada without making any changes in its business activities. On November 23, 2000, the Company changed its name to HQI Transelec Chile S.A. and was registered as a closely held corporation with the Chilean Superintendency of Securities and Insurance Companies Register under number 729 as from March 22, 2001. The revised objective of the new Company is the exploitation and development of electrical systems, either owned by the Company or third parties, used for the transmission of electrical energy, for which they can purchase and/or make use of concessions, taking into account all the benefits that are available by law to electrical company. Per public deed dated January 18, 2001, the Company purchased from Inversiones HQI Chile Holding Limitada 98,606 shares, corresponding to 0.01% of the share capital in Compania Nacional de Transmision Electrica S.A., concentrating 100% of ownership. As a result of the latter, assets, liabilities, obligations and rights of Compania Nacional de Transmision Electrica S.A. were merged by absorption by HQI Transelec Chile S.A. Therefore, the Company directly assumed business operations associated with the transmission of electricity which were carried out by the absorbed subsidiary. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --------------------------------------------------- a) Period of analysis The accompanying interim financial statements and corresponding notes relate to the period from January 1, 2001 to June 30, 2001. b) General The accompanying financial statements of HQI Transelec Chile S.A. at June 30, 2001 have been prepared in conformity with accounting principles generally accepted in Chile issued by the Chilean Institute of Accountants, and specific instructions and regulations issued by the Superintendency of Securities and Insurance Companies. The latter predominate over the former in the event of discrepancy with established accounting principles. 2 c) Price-level restatement The financial statements have been restated in order to reflect the effect of changes in the purchasing power of the Chilean peso during the period. Accordingly, non-monetary assets and liabilities and shareholders' equity have been restated against income. The restatements have been determined on the basis of the official Chilean Consumer Price Index (CPI) issued by the National Institute of Statistics, applied one month in arrears, which was 1.5% for the six month period ended June 30, 2001. In addition, income statement accounts have been restated to their period-end values. d) Operating estimates The Company has to make accounting estimates to record its accounts receivable from transmission tolls. Final settlements of these accounts may extend beyond one fiscal year and can result in losses or gains for amounts not expected to be significant. e) Currency translation Balances in foreign currency are considered monetary items and are adjusted at the exchange rate prevailing on the closing date of the financial statements. Inflationary-indexed units have been adjusted according to the restatement index. Assets and liabilities in foreign currency and UF have been translated into Chilean pesos at the following closing exchange or conversion rates: Ch$ per unit ------------ Unidad de fomento (UF) 16,002.32 United States dollar 629.00 f) Time deposits Investments in time deposits are recorded at cost plus price-level indexation and accrued interest at period-end. g) Resale agreements Other current assets include purchases under resale agreements which are recorded at their present value calculated at the discount rate used to determine the price of each security on the purchase date. h) Marketable securities This item includes investments in mutual funds, which are valued at their quoted market value at period end. 3 i) Allowance for doubtful accounts The Company believes that it is unnecessary to record an allowance for doubtful accounts at period end considering the aging of its accounts receivable. j) Fixed assets Fixed assets include, lines, buildings and infrastructure, machinery and equipment owned by the Company, which are valued at restated purchase cost or contribution value at period end. Depreciation is calculated using the straight-line method. Assets purchased in 1999 are depreciated considering 95% of their value and as of 2000 considering 100% of their value. In addition, in 2001 the remaining useful life of some assets was extended, some of which include electrical lines and equipment. k) Goodwill The amount represents the difference between the purchase value of shares in Compania Nacional de Transmision Electrica S.A. and the book value of the investment on the purchase date. This difference is amortized over a 20-year period. l) Bonds payable This balance includes the obligation incurred in the issuance of bonds by the Company at nominal value plus accrued interest and restatements at period end. The difference between the book value and placement value is amortized until maturity. m) Severance indemnities The provision for severance payments to Company staff upon reaching 15 years of service is presented at present value on an accrual basis, using an annual interest rate of 6.5% and considering an average tenure of 35 years. An average of 75% of the benefit, for staff with less than 15 years of service, has been accrued at present value. n) Income tax At June 30, 2001 in conformity with current regulatory requirements, the Company has not set up a provision for Corporate Income Tax as it presents tax losses. However, as a result of the absorption of Compania de Transmision Electrica S.A. (Transelec) by HQI Transelec Chile S.A. on March 31, 2001, Corporate Income tax payments amounted to ThCh$ 1,248,349, for the period January 1 to January 30, 2001 of Transelec S.A. o) Deferred taxes Effective January 1, 2000 and in conformity with Technical Bulletin No. 60 issued by the Chilean Institute of Accountants, deferred taxes have been recorded for all temporary differences between accounting balances and tax balances for assets and liabilities at period end. 4 The effect of unrecorded deferred taxes at December 31, 1999 have been recorded in complementary asset and liability accounts, as applicable, and are being amortized over the weighted average term of reversal for temporary differences. p) Debt security issuance and placement expenses The Company has capitalized as deferred charges, expenses in the issuance and placement of debt securities during the period. These deferred charges are recorded under Other long-term and short-term assets, and are amortized using the straight-line method until maturity of the obligations. Amortization is presented under Financial expenses. q) Staff vacation In conformity with Technical Bulletin No. 47 issued by the Chilean Institute of Accountants, the annual cost of employee vacations is recorded as an expense in the financial statements on an accrual basis. r) Intangibles This balance consists of rights-of-way which are amortized on the straight-line basis over 40 years in conformity with Technical Bulletin No. 55 issued by the Chilean Institute of Accountants. s) Statement of cash flows Cash and cash equivalents correspond to cash and banks, time deposits and resale agreements which are presented in Other current assets. Cash flows from operating activities include all business-related cash flows as well as interest paid, interest income and, in general, all cash flows not defined as from financial or investment activities. The concept of operations used in this statement is broader than that used in the Income Statement. t) Derivative contracts At June 30, the Company has subscribed foreign exchange future contracts with financial institutions to hedge existing items and are recorded in conformity with Technical Bulletin No. 57 issued by the Chilean Institute of Accountants. NOTE 3 - ACCOUNTING CHANGES --------------------------- There have been no changes in acounting policies for the period January 1 to June 30, 2001. As discussed in Note 1j), the Company changed the useful life of some fixed assets, resulting in a decrease in the charge to income during the period of approximately ThCh$ 2,620,000. NOTE 4 - MARKETABLE SECURITIES ------------------------------ The balance of ThCh$ 2,962,602 corresponds to investments in mutual funds. 5 NOTE 5 - SHORT- AND LONG-TERM DEBTORS ------------------------------------- a) At June 30, 2001 trade accounts receivable correspond to the following: ThCh$ ----- Toll and transmission charges 7,903,627 Services provided to other parties 214,879 ----------- 8,118,506 =========== b) Short and long term debtors are comprised as follows as of June 30, 2001: Current --------------------------------- Up to 90 days 91 days to 1 year Short-term Long-term ------------- ----------------- ---------- --------- ThCh$ ThCh$ ThCh$ ThCh$ Trade accounts receivable 8,118,506 - 8,118,506 - Sundry debtors 403,695 - 403,695 528,736 --------- ------- Total debtors 8,522,201 528,736 ========= =======

6 NOTE 6 - BALANCES AND TRANSACTIONS WITH RELATED COMPANIES --------------------------------------------------------- Significant balances and transactions with related companies are shown below: a) Notes and accounts receivable Company ------- Short-term Long-term ---------- --------- ThCh$ ThCh$ Accounts receivable: Inversiones HQI Chile - 108,250,236 Holding Ltda. -------- ----------- Total - 108,250,236 ======== =========== Accounts payable: Hydro Quebec 314,500 - ======= ============= The receivable balance corresponds to a current account loan issued on April 17, 2001 to Inversiones HQI Chile Holding Ltda. for US$ 169,354,025.44. The amount due is payable in United States dollars and accrues a 7.85% interest on an annual basis of 360 days. The balance due will be paid from the dividends received by Inversiones HQI Chile Holding Ltda. from HQI Transelec Chile S.A., first for payment of accrued interest and then for capital amortization. b) Transactions with related companies Effect on Income Company Relation Transaction Amount (charge/credit) ------- -------- ----------- ------ --------------- ThCh$ ThCh$ Inversiones HQI Chile Holding Ltda. Parent Loan repaid 323,478,454 (8,539,108) Loan drawn 106,209,182 1,708,162 7 NOTE 7 - INCOME TAXES AND DEFERRED TAXES ---------------------------------------- a) At June 30, 2001 the Company has not provided for income tax due to tax losses amounting to ThCH$ 17,195,777. There are no undistributed tax profits from prior years. ThCh$ ----- i) Net tax loss (17,195,777) ii) Income tax payment January 2001 (1,298,349) iii) Provision for Article 21 tax (8,504) iv) Accumulated taxable income (loss carry forward) (17,195,777) b) Deferred taxes: Deferred assets Deferred liabilities Temporary differences Short-term Long-term Short-term Long-term --------------------- ---------- --------- ---------- --------- ThCh$ ThCh$ ThCh$ ThCh$ Accrued staff vacation 64,957 - - - Leased assets - - 2,702,740 Fixed asset depreciation - - 852,686 Accrued severance benefits - - 136,601 Other 26,697 - - Tax loss benefit - 2,579,367 - - Increase in value of fixed assets (absorption) - 17,856,264 - - Complementary accounts - net of amortization - - - 1,615,361 ---------- -------------- ---------- --------- Total 91,654 20,435,631 - 2,076,666 ====== ========== ========== ========= c) Income taxes Item ThCh$ ---- ----- Current tax expense (tax provision) (8,504) Deferred tax asset and liability for year 1,883,719 Amortization of complementary deferred tax asset and liability (34,035) Other charges or credits (1,248,349) ----------- Total 592,831 ============ NOTE 8 - OTHER CURRENT ASSETS ----------------------------- The composition of this balance is as follows: ThCh$ ----- Resale agreements 11,154,134 Bond issuance expenses 1,538,306 Other 231,476 ------------ Total 12,923,916 ============ NOTE 9 - PURCHASES UNDER RESALE AGREEMENTS OF SECURITIES. --------------------------------------------------------- The composition of this balance at period end is as follows: Purchase Expiration Subscription Final Market date date Counterparty Currency value Rate value Security Value ---- ---- ------------ -------- ----- ---- ----- -------- ----- ThCH$ % ThCh$ ThCh$ 28/06/2001 16/07/2001 BBV Banco Bhif Pesos 2,391,813 0.51 2,398,316 PRBC 2,391,813 19/06/2001 03/07/2001 Banco de Credito Pesos e Inversiones 110,600 0.68 110,951 PDBC 110,876 29/06/2001 12/07/2001 ABN Amro Bank Pesos 1,332,387 0.37 1,334,849 PCD 1,333,266 22/06/2001 04/07/2001 Banco Security Pesos 530,000 0.57 531,208 PRC 530,806 26/06/2001 03/07/2001 Corpbanca Pesos 975,000 0.69 976,569 CERO 975,897 15/06/2001 03/07/2001 HSBC Bank Pesos 3,246,000 0.68 3,257,036 PRBD 3,257,036 19/06/2001 03/07/2001 Banco del Desarrollo Pesos 718,000 0.69 720,312 PDBC 719,816 28/06/2001 16/07/2001 Banco Santiago Pesos 1,834,000 0.51 1,839,612 PRBC 1,834,624

8 NOTE 10 - FIXED ASSETS ---------------------- Fixed assets are summarized as follows: Accumulated Net Gross Value depreciation value ----------- ------------ ----- ThCh$ ThCh$ ThCh$ Land, rights and other 5,238,364 - 5,238,364 Buildings and infrastructure Buildings 6,249,070 (779,532) 5,469,538 Access roads 341,507 (31,447) 310,060 Main building 2,049 (1,536) 513 Lines 239,586,493 (19,937,609) 219,648,884 Houses and apartments 573,479 (159,212) 414,267 Non-hydraulic civil projects 17,398,800 (1,854,335) 15,544,465 Construction and infrastructure 3,357,345 - 3,357,345 ----------- ----------- ----------- Total 267,508,743 (22,763,671) 244,745,072 ----------- ----------- ----------- Machinery and equipment Telecommunication equipment 5,212,294 (3,234,282) 1,978,012 Machinery and office equipment, furniture 1,022,180 (835,110) 187,070 Service equipment 17,304 (11,080) 6,224 Tools and instruments 1,311,401 (1,008,556) 302,845 Power generation unit 452,127 (60,393) 391,734 Electrical equipment 181,193,462 (19,146,753) 162,046,709 Protection and mechanical equipment 29,380,182 (3,139,088) 26,241,094 Transportation and loading equipment 1,240,344 (759,803) 480,541 ----------- ------------ ----------- 219,829,294 (28,195,065) 191,634,229 ----------- ----------- ----------- Subtotal fixed assets 492,576,401 (50,958,736) 441,617,665 ----------- ----------- ----------- Other fixed assets Advances to contractors 170,374 - 170,374 Construction materials 1,807,216 - 1,807,216 ----------- ------------ ----------- 1,977,590 - 1,977,590 Increased value from technical appraisal 22,475,592 (2,833,738) 19,641,854 ------------ ------------ ----------- Total fixed assets 517,029,583 (53,792,474) 463,237,109 =========== =========== ===========

Depreciation for the period amounts to ThCh$ 7,316,735. The amount of ThCh$ 7,306,343 was charged to Operating costs and ThCh$ 10,392 was recorded in Administrative and selling expenses. Assets subject to technical reappraisal correspond to those contributed by Empresa Nacional de Electricidad S.A. (ENDESA) to Transelec S.A. and include: land, buildings, electrical equipment, telecommunication equipment, lines, houses, and apartments. 9 NOTE 11 - INVESTMENT IN OTHER COMPANIES --------------------------------------- This balance corresponds to an 8.33% of Sociedad Centro de Despacho Economico de Carga del Sistema Electrico Interconectado Central CDEC-SIC Limitada, whose objective is to administrate and operate the SIC and coordinate its electrical system. NOTE 12 - GOODWILL AND NEGATIVE GOODWILL ---------------------------------------- The balance at June 30, 2001 is summarized as follows: ThCh$ ----- Opening balance 122,508,078 Transfer to deferred taxes (1) (18,121,503) Opening equity balance difference (2) 1,968,870 ------------- 106,355,445 Amortization of accrued goodwill (3,815,213) -------------- Total 102,540,232 ============= (1) Corresponds to the deferred tax credit generated by the allocation of goodwill, resulting from the absorption of Transelec S.A. by HQI Transelec Chile S.A., to fixed assets (tax accounting). Consequently, goodwill was deducted in the equivalent amount of the deferred tax credit. (2) As a result of the arbitration process instituted by the audit firm Ernst & Young relative to the Share Purchase Agreement dated October 23, 2000 between Inversiones HQI Transelec Limitada (currently HQI Transelec Chile S.A.), Inversiones HQI Chile Holding Limitada and Hydro Quebec International Inc., the buyers, and Empresa Nacional de Electricidad (ENDESA) and Endesa Inversiones Generales S.A. (Enigesa), the sellers, whereby the share buyers undertook to reimburse the sellers the difference between the reference net equity set at ThCh$ 188,019,844, and the period-end net equity value on the agreement date, if such difference were positive. On June 29, 2001, an arbitration resolution was rendered, whereby the Arbitration Auditor determined net equity at year-end of ThCh$190,688,338, which was greater than the net equity reference by ThCh$ 2,668,494. Since a portion of this amount was recognized as goodwill at December 31, 2000, goodwill only increased by ThCh$ 1,968,870 during this period. Tax Amortization Goodwill Registration No. Company for the period balance ---------------- ------- -------------- ------- ThCh$ ThCh$ 96,659,380-6 Compania Nacional de Transmision Electrica S.A. 2,624,163 102,540,232 ========= =========== 10 NOTE 13 - INTANGIBLES --------------------- The composition of intangibles at period end is as follows: ThCh$ Rights-of-way 22,794,499 Accumulated amortization (1,273,982) ----------- Net value 21,520,517 ========== The amortization charge to income amounted to ThCh$ 329,316. NOTE 14 - OTHER (ASSETS) ------------------------ The balance at period end is summarized as follows: ThCh$ Rental deposits for employee housing 21,829 Prepaid expenses - bonds in UF 2,156,330 Prepaid expenses - bonds in US$ 5,576,972 Discount on bond placements - UF 2,824,691 Discount on bond placements - US$ 1,377,894 ----------- Total 11,957,716 ========== 11 NOTE 15 - LONG- AND SHORT-TERM OBLIGATIONS (PROMISSORY NOTES AND BONDS) ----------------------------------------------------------------------- a) The Company has made the following public offering of bonds in the local market: On April 2, 2001 the Company registered the first bond issuance for a maximum of UF 10,000,000 with the Superintendency of Securities and Insurance Companies under number 249. Of this amount, UF 9,200,000 were finally placed on April 11, 2001. As of June 30, 2001 the ratings obtained by the bonds are: Category -------- - Fitch Chile Clasificadora de Riesgo Ltda. AA - Feller-Rate Clasificadora de Riesgo Limitada AA+ The characteristics of these bonds are as follows: TERMS OF ISSUANCE Issuer HQI Transelec Chile S.A. Securities issued : Bearer bonds in local currency, denominated in Unidades de Fomento. Maximum issued : 10,000,000 Unidades de Fomento dividend into Series A Series A-1 : Up to UF 3,000,000 divided into 3,000 bonds at UF 1,000 each. Series A-2 : Up to UF 4,00,000 (400 bonds at UF 10,000 each). Series B Series B-1: Up to UF 1,000,000 (1,000 bonds at UF 1.000 each). Series B-2: Up to UF 3,000,000 (200 bonds at UF 10,000 each). Readjustment : Variation in Unidades de Fomento Amortization period : Series A: 6 years and Series B: 21 years (6 grace years and 1 to 15 years for capital amortization, respectively). Capital amortization Series A, in one installment, upon maturity, and Series B, payable half-yearly, in increasing amounts, and effective September 1, 2007. Early redemption : Series A: without early redemption and Series B,: effective September 1, 2009, on any of its denominated dates of payment of interest or interest and capital amortization. Interest rate : Series A and B bonds accrue an 6.20% annual interest rate on the outstanding capital, expressed in Unidades de Fomento. Interest is calculated over a period of 360 days, upon maturity and payable half-yearly in two semesters of 180 days each. 12 Interest payments : Half-yearly payments, upon maturity on March 1 and September 1 yearly, starting September 1, 2001. Interest accrued at year-end amounts to ThCh$ 2,996,838 and is presented in Current liabilities. Guarantees: : This issue has no special guarantees, except for the general guarantee on all of the issuer's assets. Period of placement : 36 months, as from the date of register with the Superintendency of Securities and Insurance Companies. b) The Company issued and placed notes in the international market on April 17, 2001 as follows: At period end, this bond issuance has the following risk classification: Category -------- Standard and Poor's Rating Group A- Fitch Ibca, Duff & Phelps A- Moody's Investors Service Inc. Baa1 Issuer HQI Transelec Chile S.A. Securities issued : US$ (Yankee Bonds) traded in the US market. Issue value : ThUS$ 465,000 of a single series Readjustment : Variation in United States dollar Capital amortization : Total expiration on April 15, 2011. Nominal interest rate : 7.875% annually. Interest payments : On April 15 and October 15 each year, effective October 15, 2001. Interest accrued at year-end amounts to ThCh$ 4,931,876 and is presented in Current liabilities. 13 c) Short-and long-term obligations (bonds) Placed Registration No./ Nominal Restatement Final Interest locally or identification Series placement value unit Interest rate maturity payment Amortization Par value abroad -------------- ------ --------------- ---- ------------- -------- ------- ------------ --------- ------ ThCh$ % ThCh$ Long-term bonds 249 A1 2,000,000 UF 6.2 01/03/2007 Semester At the end 32,004,640 Chile 249 A2 4,000,000 UF 6.2 01/03/2007 Semester At the end 64,009,280 Chile 249 B1 200,000 UF 6.2 01/03/2007 Semester Semester 3,200,464 Chile 249 B2 3,000,000 UF 6.2 01/03/2007 Semester Semester 48,006,960 Chile First issuance 465,000,000 US$ 7.875 15/04/2011 Semester At the end 292,485,000 Abroad ----------- Total long-term 439,706,344 ===========

14 NOTE 16 - PROVISIONS AND WRITE-OFFS ----------------------------------- Provisions at period end are summarized as follows: a) Short-term provisions ThCh$ ------ Severance indemnities 39,016 Accrued payroll 933,795 Cost of accidents (lines and substations 64,790 ------- Total 1,037,601 ========== b) Long-term provisions Severance indemnities 1,245,005 ========== c) Write-offs Inventories 108,671 ======== NOTE 17 - SEVERANCE INDEMNITIES ------------------------------- Changes in provisions are as follows: ThCh$ ----- Opening balance 1,232,173 Price-level restatement 2,513 Provision for the year 49,335 ------- Total 1,284,021 ========= Short-term 39,016 Long-term 1,245,005 --------- Total 1,284,021 ========= 15 NOTE 18 - CHANGES IN SHAREHOLDERS' EQUITY ----------------------------------------- a) During 2001, the changes in shareholders' equity are summarized as follows: Paid-in Other Retained Net income capital reserves earnings for the period ------- -------- -------- -------------- ThCh$ ThCh$ ThCh$ ThCh$ Opening balance 310,140,471 - - 3,178,720 Prior-year income distribution - - 3,178,720 (3,178,720) Price-level restatements - 4,655,286 44,502 - Loss for the period - - - (380,802) ------------- ------------- ------------ ------------- Final balance 310,140,471 4,655,286 3,223,222 (380,802) ============= ============= ============ =============

b) Number of shares ---------------- Series Number of shares Paid-in shares Voting Shares ------ ---------------- -------------- ------------- Single series 1,000,000 1,000,000 1,000,000 c) Capital Series Subscribed capital Paid-in capital ------ ------------------ --------------- ThCh$ ThCh$ Single series 310,170,471 310,170,471 NOTE 19 - OTHER NON-OPERATING INCOME AND EXPENSES ------------------------------------------------- These are summarized as follows: ThCh$ ----- Other non-operating income Prior-year income 74,171 Miscellaneous income 27 Income on disposal of materials 125 ------- Total 74,323 ====== Other non-operating expenses: Prior-year expenses 107,947 Miscellaneous losses 13,617 Retired employee benefits 18,432 Directors' remuneration 9,250 Fiscal and judicial fines 4,915 ------- Total 154,161 ======= 16 NOTE 20 - PRICE-LEVEL RESTATEMENT --------------------------------- The net effects of price-level restatements, as described in Note 2(c), resulted in a net credit to income amounting to ThCh$ 1,763,590 and is summarized as follows: Assets - credits Restatement index ThCh$ ---------------- ----------------- ----- Inventories Replacement cost 11,258 Fixed assets CPI 6,591,888 Other non-monetary assets CPI 1,951,944 Expense accounts CPI 146,668 ---------- Total (charges) credits 8,701,758 ========= Liabilities - charges --------------------- Shareholders' equity CPI (4,699,788) Non-monetary liabilities UF (1,866,900) Income accounts CPI (371,480) ----------- Net credit (6,938,168) =========== Price-level restatement net income 1,763,590 ========= NOTE 21 - EXCHANGE DIFFERENCES ------------------------------ The net effects of exchange differences amounted to a net change to income of ThCh$ 15,788,099. Currency Amount -------- ------ ThCh$ Assets - credits Time deposits US dollars 923,662 Investments in HQI Chile Holding Ltda. US dollars 5,679,707 Forwards US dollars 4,948,190 ---------- Total credits 11,551,559 ---------- Liabilities - charges --------------------- Loan HQI Holding US dollars (14,138,341) Bonds US dollars (13,201,317) ----------- Total charges (27,339,658) ---------- Loss from exchange differences (15,788,099) ========== 17 NOTE 22 - DEBT SECURITY ISSUANCE EXPENSES ----------------------------------------- Expenses incurred in debt securities issued in the local and foreign markets include: Stamp tax, placement fees, legal services, financial services, risk classification reports, and printing costs. Local Foreign Total ----- ------- ----- ThCh$ ThCh$ ThCh$ Issuance and offering expenses 2,588,668 6,418,320 9,006,988 Amortization for the year (results) (108,084) (210,337) (318,421) ----------- ----------- ----------- 2,480,584 6,207,983 8,688,567 ========= ========= ========= Balance sheet presentation: Other current assets 324,254 631,011 955,265 Other assets 2,156,330 5,576,972 7,733,302 --------- --------- --------- 2,480,584 6,207,983 8,688,567 ========= ========= ========= NOTE 23 - DERIVATIVES --------------------- The Company maintains forward contracts to hedge the risk of exchange rate fluctuations of short-term trade accounts receivable as follows: a) Contract description Value of Date of Specific Purchase/ Hedged Item Hedge value contract expiration Item sale item amount of item -------- ---------- ---- ---- ---- ------ ------- ThCh$ ThCh$ ThCh$ ~~4,000,000 16/07/2001 Exchange rate (US) P Trade receivables 2,516,720 2,516,000 4,000,000 16/07/2001 Exchange rate (US) P Trade receivables 2,519,800 2,516,000~~

b) Accounting effect Unrealized Liability Amount effect on income --------- ------ ---------------- ThCh$ ThCh$ Short-term sundry creditors 720 720 Short-term sundry creditors 3,800 3,800 18 NOTE 24 - CONTINGENCIES AND RESTRICTIONS ---------------------------------------- a) Restrictions As a result of the obligations incurred in the bond offerings, the Company is required to meet specific ratios and obligations, including: - Maintain at all times assets free from any encumbrance, assets with a book value equal to or greater than 1.2 times the book value of the issuer's total obligations and debts which are not pledged as actual guarantees on goods and assets owned. These obligations include debts arising from the aforementioned bond offering. - Prohibition to sell, assign, transfer, contribute or dispose of the issuer's primary assets in any way, either by monetary sale or free of charge. - Maintain an individual and consolidated leverage ratio whereby the proportion of Total liabilities/Total capitalization is not greater than 0.7 times. - Maintain at all times an individual and consolidated minimum equity equal to 15,000,000 Unidades de Fomento. b) Direct obligations There are no direct obligations c) Indirect obligations There are no guarantors or guarantees issued arising from indirect obligations. d) Pending lawsuits There are pending lawsuits filed against the Company, in response to which it has instituted the corresponding defense, representing a total of ThCh$ 130,149. Management believes that no significant contingencies will result from the pending lawsuits. e) Direct guarantees Book value of compromised Creditor of guarantee Debtor Type assets --------------------- ------ ---- ------------- ThCh$ Banco Santiago Conama Deposit 904,867 Banco Santiago Codelco Deposit 62,900 Banco Santiago Codelco Deposit 62,900 Banco Santiago Codelco Deposit 18,870 19 NOTE 25 - GUARANTEES -------------------- Guarantees obtained from third parties: The Company has received guarantees from contractors and third parties for the completion of constructions, maintenance work and repayment of housing loans, amounting to ThCh$ 922,669. NOTE 26 - LOCAL AND FOREIGN CURRENCY ------------------------------------ Assets and liabilities held in foreign currency have been translated to Chilean pesos at their respective exchange rates at period end and are summarized as follows: a) Assets: ------ Currency ThCh$ -------- ----- Cash and banks Chilean pesos 20,920 Cash and banks US dollars 3,010 Time deposits US dollars 23,454,913 Marketable securities Chilean pesos 2,962,602 Trade accounts receivable Chilean pesos 8,118,506 Sundry debtors Chilean pesos 403,695 Inventories Chilean pesos 6,055 Recoverable taxes Chilean pesos 586,805 Prepaid expenses Chilean pesos 1,746,307 Deferred taxes Chilean pesos 91,654 Other current assets Chilean pesos 231,476 Other current assets - resale agreements UF 11,154,134 ------------ Total current assets 48,780,077 ============ Fixed assets Chilean pesos 463,237,109 =========== Investments in other related companies Chilean pesos 36,746 Goodwill Chilean pesos 102,540,232 Long-term debtors UF 528,736 Accounts receivable from Inversiones HQI Chile Holding Ltda. US dollars 108,250,236 Intangibles Chilean pesos 22,794,499 Amortization of intangibles Chilean pesos (1,273,982) Long-term deferred taxes Chilean pesos 20,435,631 Other assets Chilean pesos 11,957,716 ----------- Total other assets 265,269,814 =========== b) Current liabilities: ------------------- Up to 90 days ------------- Annual average Currency Amount interest rate -------- ------ ------------- ThCh$ % Interest payable - bonds UF 2,996,838 6.2 Interest payable - bonds US dollars 4,931,876 7.875 Accounts payable Chilean pesos 4,317,459 Sundry creditors US dollars 28,900 Sundry creditors Chilean pesos 1,484,356 Provisions Chilean pesos 1,,037,601 Withholdings Chilean pesos 1,380,031 Other current liabilities Chilean pesos 22,001 Notes and accounts payable related companies US dollars 314,500 c) Long-term liabilities: --------------------- 1 to 3 years 5 to 10 years More than 10 years ------------ -------------------------------- ------------------ Average annual Average annual Currency Amount Amount interest rate Amount Interest rate -------- ------ ------ ------------- ------ ------------- ThCh$ ThCh$ % ThCh$ % Bonds US dollars - 292,485,000 7.875 - - Bonds UF - 100,110,514 6.2 47,110,830 6.2 Sundry creditors US dollars 72,367 Customs duties Provisions Chilean pesos 1,245,005 - - - - Long-term deferred taxes Chilean pesos 2,076,666 - - - - Other liabilities - long Chilean pesos 34,789 - - - - term

NOTE 27 - SANCTIONS ------------------- During the period between January 1, 2001 and June 30, 2001, the Company, its Directors and Management have not been sanctioned by the Superintendency of Securities and Insurance Companies. NOTE 28 - SUBSEQUENT EVENTS --------------------------- On July 31, 2001 Inversiones QHI Chile Holding Ltda. prepaid a portion of the debt incurred with HQI Transelec Chile S.A. Payment amounted to US$ 62,000,000, of which US$ 58,143,695.92 correspond to capital and US$ 3,856,304.08 to interest. On July 31, 2001 the Company paid Empresa Nacional de Electricidad S.A. (Endesa) and Endesa Inversiones Generales S.A. (Engesa) the amount of ThCh$ 2,668,227 and ThCh$ 267, respectively. The latter originated from the arbitration process undertaken by the auditing firm Ernst & Young in connection with the Share Purchase Agreement entered into on October 23, 2000, as discussed in Note 12. 21 There have been no other subsequent financial or accounting events between June 30, 2001 and the date these financial statements were presented to the Superintendency of Securities and Insurance Companies, which could significantly affect there interpretation. NOTE 29 - ENVIRONMENTAL EXPENSES -------------------------------- The Company has made no disbursements during the six month period ended June 30, 2001 in connection with this concept. 22 Page 1 of 1 HQI TRANSELEC CHILE S.A. RELEVANT EVENTS During the period January 2001 to June 2001 and in conformity with General Standard No. 30, the Company informed the Superintendency of Securities and Insurance Companies of the following relevant events: a) On January 31, 2001 HQI Transelec Chile S.A. purchased 98,606 shares in Compania Nacional de Transmision Electrica S.A. from Inversiones HQI Chile Holding Limitada. As a result, HQI Transelec Chile S.A. owns 100% of the shares in Compania de Transmision Electrica S.A., resulting in its dissolution in conformity with provisions set forth under Article 103 of Law 18,046. The purchase agreement was subscribed by public deed dated January 18, 2001 before the Public Notary Mr. Juan Ricardo San Martin Urrejola, in Santiago. b) On April 9, 2001 the Company placed bonds of HQI Transelec Chile S.A. in the foreign market with the following characteristics: Currency : United States dollar Amount : US$ 465,000,000 Securities issued : Singles-series bonds to the order Amount of series : US$ 465,000,000 Nominal value of bond : US$ 1,000 Interest rate : 7.85% Issue date : April 17, 2001 c) On April 16, 2001 the Company reported that on April 11, 2001, HQI Transelec Chile S.A. placed readjustable bearer bonds, registered with the Superintendency of Securities and Insurance Companies under No. 249. As of said date, total bonds for UF 9,200,000 were placed, of which 6,000,000 correspond to Series A and 3,200,000 to Series B. d) On April 18, 2001 the First Ordinary Shareholders' Meeting approved the balance sheets for the period ended December 31, 2000. In addition, it approved the proposition from the Company's Board of Directors to pay a final dividend for 2000 of Ch$ 8.21425 per share, which had already been paid to the shareholders by means of an interim dividend payment. e) On April 23, 2001 the Company reported that the First General Ordinary Shareholders' Meeting held on April 18, 2001 appointed Messrs. Yves Filion, Jacques Regis, Daniel Leclair, Gilles Marchaud, and Pedro Lizana Grve as members of the Board of directors. In addition, Messrs. Gonzalo Delaveau Swett, Roberto Guerrero del Rio, Roberto Guerrero Valenzuela, Jorge Delpiano Kraemer, and Arturo Marin Vicuna were elected alternate directors. Page 1 of 4 HQI TRANSELEC CHILE S.A. FINANCIAL STATEMENT ANALYSIS AT JUNE 30, 2001 a) Summary In the first semester of 2001, HQI TRANSELEC CHILE S.A. obtained a net loss of ThCh$ 380,802 in spite of its positive operating results of ThCh$ 29,312,939. The loss was generated from the negative non-operating results amounting to ThCh$ 30,286,572 and a net credit to income arising from income taxes of ThCh$ 592,831. Operating income during the year amounted to ThCh$ 42,289,703. This income is provided by current contracts subscribed in order to commercialize the installation's capacity for transmission and the sales of services. Operating expenses amounted to ThCh$ 11,801,453, which is broken down into Fixed asset depreciation (64.7%), payroll (14.4%), and work, supplies, and services hired (18.6%). Administrative and selling expenses amount to ThCh$ 1,175,311, which is broken down into payroll (48.6%), and expenses incurred in work, supplies and services hired (34.1%). Non-operating results for the period present a loss of ThCh$ 30,286,572 arising from financial expenses totaling ThCh$ 16,026,817 (52.9%), and exchange differences for ThCh$ 15,788,099 (52.1%) as a result of an increase in the US dollar exchange rate of 9.65% during the semester (Ch$ 55.35) as compared to the fluctuation in the Consumer Price Index (1.5% in the first semester). Other significant items with an effect on non-operating results were interest income amounting to ThCh$ 2,468,755 (8.1%) and goodwill amortization amounting to ThCh$ 2,624,163 (8.7%). b) Results January 1 to Concepts June 30, 2001 -------- ------------- ThCh$ Operating income 42,289,703 Toll sales 41,278,225 Work and services 1,011,478 Operating expenses (11,801,453) Fixed costs (4,165,794) Depreciation (7,306,343) Amortization of intangibles (329,316) Administrative and selling expenses (1,175,311) ------------ Operating results 29,312,939 Non-operating results (30,286,572) Income tax (deferred tax credit) 592,831 ------------- Page 2 of 4 Loss for the period (380,802) ============= EBITDA 23,447,460 ============ Profitability ------------- As of Ratios June 30, 2001 ------ ------------- Return on equity (0.12) Return on of assets (0.05) Return on income earning assets 6.03 Loss per share (Ch$) 381 c) Balance sheet analysis ThCh$ ---- Current assets 48,780,077 Fixed assets 463,237,109 Other assets 265,269,814 ----------- Total assets 777,287,000 =========== Current liabilities 16,513,652 Long-term liabilities 443,135,171 Shareholders' equity 317,638,177 ----------- Total Liabilities and Shareholders' equity 777,287,000 =========== Value of main operating fixed assets ------------------------------------ Assets ThCh$ ------ ----- Land 5,238,364 Buildings and infrastructure 267,508,743 Machinery and equipment 219,829,294 Other fixed assets 1,977,590 Increased value from technical reappraisal (net) 19,641,854 Depreciation (50,958,736) ------------ Total 463,237,109 =========== At June 30, 2001 fixed assets are mainly represented by land, buildings, infrastructure, and machinery and equipment. The Company's assets are valued in conformity with accounting principles generally accepted in Chile. Page 3 of 4 Liquidity and leverage ---------------------- Ratios ------ Current ratio 3.07 Acid test 2.31 Liabilities/Shareholders' equity 1.45 % Short-short debt 3.54 % Long-term debt 96.46 Significant fluctuations in the market in which the Company operates -------------------------------------------------------------------- In the Interconnected Central System (SIC), 100% of the 500KV transmission lines and 74.4% and 99.8% of the 220 and 154 kV, respectively, are exploited by HQI Transelec Chile S.A. It is worth noticing that in the first semester of 2001 there were no significant fluctuations in the market in which the Company operates. Exchange rate risk ------------------ At June 30, 2001 a portion of the Company's debt was denominated in United States dollars from the placement of bonds abroad amounting to US$ 472,527,187 (including accrued interest). The loan issued to the Parent Company, Inversiones HQI Chile Holding Limitada, for US$ 172,098,944 (including accrued interest), and short-term investments in the financial market for US$ 37,289,209, reduce the net exposure to US$ 263,139,034. At December 31, 2000 the net exposure of US$ 288,645,975, was originated from a loan for US$538,645,975 issued by the Parent Company and a forward position of US$ 250,000,000. During the period, price-level restatement arising from the devaluation of the Chilean peso compared to the US dollar amounted to ThCh$ 15,788,099. In the balance sheet, exposure to the exchange rate fluctuation is reduced by the fact that transmission toll income is associated with the US dollar. Toll contracts are denominated in US dollars, however monthly billing is expressed at their equivalent in Chilean pesos, at the average monthly Observed US dollar exchange rate for 85% of contracts, and at the current US dollar exchange rate on the last day of the month for the rest of the contracts, as follows: Exchange rate January February March April May June ------------- ------- -------- ----- ----- --- ---- Month's average 571.12 563.13 587.79 598.63 604.48 616.07 Last day of the month 561.61 572.86 594.97 598.61 610.85 629.00 Income from transmission tolls during the second quarter amounted to ThCh$ 21,061,826 compared to ThCh$ 20,216,399 the prior quarter. This difference is basically due to increases in the exchange rate. Each toll contract includes semester indexation formulas to reflect fluctuations in the net realization value of assets and in operating and maintenance costs. Some of these reflect international prices of equipment and others, prices of materials and local labour costs. Page 4 of 4 During the period between January 1, 2001 and June 30, 2001 the average toll ratio was 0.97288, which will be effective as of July 1, 2001. Toll income expressed in United States dollars, reduced by 2.7%, will be billed in Chilean pesos on a monthly basis at the exchange rate for each of the following six months. The average exchange rate in July was Ch$ 656.46 per dollar and on the last day of the same month it amounted to Ch$ 668.79, compared to average rates and the rate on the last day in June, Ch$ 616.07 and Ch$ 629.00, respectively. Financial results for the year include the loss from the devaluation in the Chilean peso applied on the debt (liabilities in foreign currency), however it is not possible to record the future increase in toll income from the same devaluation. Cash flows during the period ---------------------------- In the first semester of 2001, due mainly to operating activities, net positive cash flows amounting to ThCh$ 13,827,035 were generated. Financing activities generated positive cash flows of ThCh$ 89,492,920 arising from bond placements in the local market (UF 9,200,000) and foreign market (US$ 465,000,000). Cash flows from investment activities generated a negative cash flow of ThCh$ 103,757,438 as a result of a current account loan granted to Inversiones HQI Chile Holding Ltda. and the purchase of fixed assets. The effect of inflation on cash and cash equivalents amounted to ThCh$ 604,831. The closing cash flow balance amounted to ThCh$ 37,595,579 considering an opening balance of ThCh$ 23,163,712. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HQI Transelec Chile S.A. /s/Real Paul - Hus Date: October 16, 2001 By:------------------------- Real Paul - Hus Finance Manager

HQI TRANSELEC CHILE S A 6-K