6-K 1 f6k_032202.txt FORM 6-K UNITED STATES 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 twelve months ended December 31, 2001 HQI Transelec Chile S.A. (Translation of registrant's name into English) Apoquindo 3721, Piso 6 Las Condes 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 -- - TABLE OF CONTENTS Exhibit A...........................................Auditors Report Exhibit B...........................................Relevant Events Exhibit C...........................................Financial Statement Analysis 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. Date: March 21, 2002 By: /s/ Real Paul-Hus ---------------------------- Real Paul-Hus Finance Manager EXHIBIT A HQI TRANSELEC CHILE S.A Financial statements December 31, 2001 (Translation from the original in Spanish) CONTENTS Report of independent accountants Balance sheet Statement of income Statement of cash flows Notes to the financial statements Ch$ - Chilean pesos ThCh$ - Thousands of Chilean pesos UF - Unidad de Fomento (an official inflation-indexed monetary unit) US$ - United States dollars ThUS$ - Thousands of United States dollars [PricewaterhouseCoopers logo] REPORT OF INDEPENDENT ACCOUNTANTS (Translation from the original in Spanish) Santiago, February 1, 2002 To the Board of Directors and Shareholders, HQI Transelec Chile S.A. We have reviewed the accompanying balance sheets of HQI Transelec Chile S.A. as of December 31, 2001 and 2000, and the related statements of income and of cash flows for the year ended December 31, 2001 and for the period from September 15, 2000 to December 31, 2000. The financial statements of the Company (including the respective notes) are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Chile. Those standards require that we plan and perform the audits in order to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred above present fairly, in all material respects, the financial position of HQI Transelec Chile S.A. at December 31, 2001 and 2000 and the results of their operations and their cash flows for the year ended December 31, 2001 and for the period from September 15, 2000 to December 31, 2000, in conformity with accounting principles generally accepted in Chile. Eduardo Vergara D. RUT: 6.810.153-0 HQI TRANSELEC CHILE S.A. ------------------------ BALANCE SHEET -------------

~~ASSETS~~As ~~Notes~~of ~~ThCh$~~December 31, ------------------ 2001 2000 ---- ---- Assets ThCh$ ThCh$ ------ CURRENT ASSETS Cash and banks 30119,~~796~~762 90,562 Time deposits 281,862,818 ~~f 80~~19,~~679~~045,~~853~~122 Marketable securities 2 h,960,188 ~~4 3~~2,~~042~~019,~~341~~472 Trade accounts receivable 58,934,578 98,~~360~~123,~~771~~383 Sundry debtors 5276,722 ~~467~~337,~~107~~071 ~~Notes~~Accounts ~~and accounts~~ receivable from related companies ~~6 1~~2,~~014~~389,~~476~~387 -- Inventories 8178,~~348~~782 35,245 Recoverable taxes 1,~~029~~479,~~685~~870 105,197 Prepaid expenses 1655,~~651~~072 452,~~133~~628 Deferred ~~Taxes~~taxes 7179,909 ~~104~~404,~~513~~296 Other current assets 86,079,038 102,~~829~~496,~~648~~370 ----------- ----------- Total current ~~asset~~assets ~~108~~105,~~291~~016,~~671~~126 33,109,346 ----------- ----------- FIXED ASSETS Land 5,~~261~~385,~~461~~795 5,383,262 Buildings and infrastructure ~~271~~281,~~647~~185,~~884~~354 270,351,007 Machinery and equipment ~~221~~222,~~524~~328,~~313~~823 222,654,255 Other fixed assets 1,~~837~~824,~~850~~294 1,942,952 Increase in value ~~arising~~ from technical reappraisal ~~of fixed asset~~ 19,~~675~~528,~~108~~482 20,283,237 Accumulated depreciation (5457,~~124~~579,~~938~~571) (44,001,902) ----------- ----------- Total fixed assets, net ~~2 j~~472,673,177 ~~10 465~~476,~~821~~612,~~678~~811 ----------- ----------- OTHER ASSETS Investments in other companies 1137,142 3637,~~998~~142 Goodwill ~~2 k~~98,929,380 ~~12 101~~123,~~869~~229,~~711~~414 Long-term debtors 5441,858 ~~423~~654,~~436~~022 Notes and accounts receivable from related companies - long 6term 7772,~~293~~819,~~403~~412 ~~term~~-- ~~Deferred~~Intangibles ~~taxes 7 17~~23,~~453~~153,~~042~~860 ~~Intangibles 2 q~~23, ~~13 22~~153,~~951,742~~819 Amortization of intangibles ~~2 q, 13~~ (1,~~404~~575,~~552~~497) ~~Other~~(973,951) 2Deferred otaxes 19,501,969 14-- 11Other 12,~~914~~212,~~307~~898 1,105 ----------- ----------- Total other assets ~~230~~225,~~538~~521,~~087~~022 146,101,551 ----------- ----------- Total assets ~~804~~803,~~651~~210,~~436~~325 655,823,708 =========== ===========

~~Current~~As Upof toDecember 9031, ~~days~~------------------ 912001 ~~days~~2000 to---- 1---- ~~year~~ThCh$ ~~Short-term~~ThCh$ ~~Long-term~~LIABILITIES AND EQUITY ---------------------- CURRENT LIABILITIES Bonds payable - short term portion 8,318,443 -- Accounts payable 3,930,087 2,862,157 Sundry creditors 2,275,787 1,583,986 Accounts payable to related companies 270,159 321,911,503 Provisions 1,121,662 1,710,268 Withholdings 1,304,247 1,399,822 Other current liabilities 605,603 20,597 ----------- ----------- Total current liabilities 17,825,988 329,488,333 ----------- ----------- ~~ThCh$~~LONG-TERM ~~ThCh$~~LIABILITIES ~~ThCh$~~Long-term ~~ThCh$~~bonds ~~Trade~~payable ~~accounts receivable 9~~466,360,~~771~~228 -.- 9Sundry creditors -- 68,~~360~~045 Provisions 1,~~771~~299,299 1,230,145 Deferred taxes -.- ~~Sundry~~1,949,176 ~~debtors~~Other ~~467~~long-term liabilities 34,~~107~~789 35,867 -.---------- ----------- Total long-term liabilities 467,~~107~~694,316 ~~423~~3,~~436~~283,233 ----------- ----------- MINORITY INTEREST -- 20,056 ----------- ----------- SHAREHOLDERS' EQUITY Paid-in capital 319,754,826 319,754,826 Retained earnings 3,277,260 -- (Loss) profit for the period (5,342,065) 3,277,260 ----------- ----------- Total ~~debtors~~shareholders' 9equity 317,~~827~~690,~~878~~021 323,032,086 -.---------- 9----------- Total liabilities and equity 803,~~827~~210,~~878~~325 ~~423~~655,~~436~~823,708 ========= === ========= ==~~=====~~

The accompanying Notes 1 to 30 form an integral part of these financial statements HQI TRANSELEC CHILE S.A. ------------------------ STATEMENT OF INCOME ------------------- For the period For the year ended September 15 to December 31, 2001 December 31, 2000 ThCh$ ThCh$ OPERATING RESULTS Sales 89,958,980 17,508,602 Cost of sales (24,114,695) (5,731,123) Gross margin 65,844,285 11,777,479 ----------- ---------- Administrative and selling expenses (2,593,947) (240,227) ----------- ---------- Operating income 63,250,338 11,537,252 ----------- ---------- NON-OPERATING RESULTS Financial income 6,967,702 419,275 Other non-operating income 272,219 25,926 Goodwill amortization (5,436,668) (1,209,826) Financial expenses (35,731,518) (5,712,852) Other non-operating expenses (871,408) (131,515) Price-level restatement (2,815,730) 1,579,643 Exchange differences (30,078,816) (2,530,690) ----------- ---------- Non-operating results (67,694,219) (7,560,039) ----------- ---------- Income (loss) before income taxes (4,443,881) 3,977,213 Minority interest -- (406) Income tax (898,181) (699,547) ----------- ---------- (LOSS) PROFIT FOR THE PERIOD (5,342,065) 3,277,260 =========== ========== The accompanying Notes 1 to 30 form an integral part of these financial statements. HQI TRANSELEC CHILE S.A. ------------------------ STATEMENT OF CASH FLOWS -----------------------

~~Effect~~For the period For the year ended September 15 to December 31, 2001 December 31, 2000 ThCh$ ThCh$ CASH FLOWS FROM OPERATING ACTIVITIES (Loss) profit for the period (5,342,065) 3,277,260 Charges (credits) to income not representing cash flows: Loss on sale of fixed assets 41,975 -- Depreciation 14,885,188 3,572,705 Amortizacion de intangibles 667,730 302,047 Amortization of goodwill 5,436,668 1,209,826 Price-level restatement and exchange differences 32,894,546 951,047 Other charges (credits) to income ~~Company~~not ~~Relation~~representing ~~Transaction~~cash ~~Amount~~flows (~~charge/credit~~1,022,904) (68,233) Decrease (increase) in assets which effect cash flows: Trade accounts receivable and sundry debtors (750,846) (5,407,350) Inventories (43,537) 490,880 Other assets 860,237 27,374 Increase (decrease) in liabilities which effect cash flows: Accounts pay able and sundry creditors 1,100,751 487,894 Interest payable 6,152,019 -- Income tax payable (net) (1,739,660) -- Value added tax and other taxes 38,779 -- Profit minority interest -- 405 ------------ ------------ Net cash flows from operating activities 53,178,881 4,843,855 ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Capital increase -- 319,754,826 Bonds payable 430,901,228 -- ~~ThCh$~~Payment ~~ThCh$~~of ~~Inversiones~~related ~~HQI~~company ~~Chile~~loans ~~Holding~~(331,241,937) ~~Ltda.~~-- ~~Parent~~Bond ~~Loan~~issuance ~~repaid~~and ~~323~~placement expenses (9,~~478~~860,~~454~~346) -- ------------ ------------ Net cash flows from financing activities 89,798,945 319,754,826 ------------ ------------ CASH FLOWS FROM INVESTMENT ACTIVITIES Sale of fixed assets 74,878 -- Other loan reimbursements from related companies 39,208,951 4,619 Purchase of fixed assets (810,~~700~~507,~~862~~000) ~~Loan~~(1,298,518) ~~drawn~~Investment 78in subsidiary -- (320,~~307~~200,~~879~~267) Other loans to related companies (103,284,603) -- Other investment disbursements (2,708,521) -- ------------ ------------ Net cash flows from investing activities (77,216,295) (321,494,166) ------------ ------------ Total net cash flow for the year 65,761,531 3,~~481~~104,~~799~~515 EFFECT OF INFLATION AND EXCHANGE ON CASH AND CASH EQUIVALENTS 72,422 719,262 ------------ ------------ NET CHANGE IN CASH AND CASH EQUIVALENTS 65,833,953 3,823,777 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 23,528,854 19,705,077 ------------ ------------ CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 89,362,807 23,528,854 ============ ============

The accompanying Notes 1 to 30 form an integral part of these financial statements. HQI TRANSELEC CHILE S.A. ------------------------ NOTES TO THE FINANCIAL STATEMENTS --------------------------------- As of December 31, 2001 and for the period September 15 to December 31, 2000 (Translation from the original in Spanish) NOTE 1 - REGISTRATION --------------------- Inversiones HQ Chile Limitada was formed as a limited liability company by public deed dated September 15, 2000. The objective of the Company was to invest in shares and public securities. On October 16, 2000, the Company changed its name to Inversiones HQI Transelec Chile Limitada, without making any change to the Company's objective. On November 23, 2000, the Company changed its name to HQI Transelec Chile S.A. and was registered as a closed Company with the Chilean Superintendent of Securities and Insurance Companies, and is subject to its control, under number 729 as from March 22, 2001. The revised objective of the new Company is the exploitation and development of electrical systems of its own and of third parties pertaining to the transmission of electrical energy, for which they can acquire and/or make use of concessions, taking into account all the benefits that are available by law to electrical companies. On October 23, 2000, Inversiones HQI Transelec Chile Limitada (now HQI Transelec Chile S.A.) and Inversiones HQI Chile Holding Limitada together acquired all the shares of Empresa Nacional de Transmision Electrica S.A. ("TRANSELEC"), from Empresa Nacional de Electricidad S.A. ("ENDESA") and Endesa Inversiones Generales S.A. 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, Compania Nacional de Transmision Electrica S.A. was absorbed by HQI Transelec Chile S.A., the latter assuming all assets, liabilities, obligations and rights of TRANSELEC. The Company directly undertook business operations associated with the transmission of electrical energy which were carried out by the absorbed subsidiary. NOTE 2 - ACCOUNTING PRINCIPLES ------------------------------ a) Period The financial statements for the year 2001 relate to the twelve month period between January 1 and December 31. The consolidated financial statements as of December 31, 2000 and the respective notes, correspond to the period from September 15, 2000 to December 31, 2000. b) Basis of preparation The financial statements of HQI Transelec Chile S.A. at December 31, 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 Superintendent of Securities and Insurance Companies. The latter predominate over the former in the event of discrepancy. 2 The 2000 financial statements presented for purposes of comparability, correspond to the consolidation of HQI Transelec Chile S.A. and TRANSELEC for the period between September 15 and December 31, 2000. The consolidated financial statements as of December 31, 2000 have been prepared in conformity with accounting principles generally accepted, and include the assets, liabilities and results of HQI Transelec Chile S.A. and 99,99% of its subsidiary, TRANSELEC. c) Basis of presentation For comparative purposes, the consolidated financial statements for the period ended December 31, 2000 have been restated in the percentage of the change in the Consumer Price Index for the year 2001 which amounted to 3,1%. d) Basis of consolidation The consolidated financial statements as of December 31, 2000 include the assets, liabilities, results and cash flows of HQI Transelec Chile S.A. and TRANSELEC. The amounts and effects of the transactions between the companies have been eliminated and the participation of the minority investors has been recognized and presented in the balance sheet in the account Minority interest. e) 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 respective periods. 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 3,1% for the year ended December 31, 2001 (0,099% for the period from September 15 to December 31, 2000). In addition, the accounts in the income statement have been restated to their year-end values. f) 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. 3 g) Bases of translation Balances in foreign currency are adjusted at the exchange rate prevailing on the closing date of the financial statements. Indexed units have been restated according to variations in the corresponding 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 2001 2000 Unidad de Fomento 16,262.66 15,769.92 United Stated dollar 654.79 573.65 h) Time deposits Investments in time deposits are recorded at cost plus price-level indexation and accrued interest at year end. i) Resale agreements Other current assets include purchases under resale agreements which are recorded at their initial investment value at purchase date plus interest and readjustments. j) Marketable securities This item includes investments in mutual funds, which are valued at their quoted market value at each year end. k) Allowance for doubtful accounts The Company believes that it is unnecessary to record an allowance for doubtful accounts at year end considering the aging of its accounts receivable. l) Fixed assets Fixed assets are valued at restated purchase cost or contribution value at year end. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, considering a residual value of 5% for assets purchased until 1999. During 2001, the remaining useful life of some assets (including lines and electrical equipment) was modified, extending the period for depreciation. 4 m) Goodwill The amount presented as Goodwill represents the difference between the purchase value of shares in Compania Nacional de Transmision Electrica S.A. and the proportional equity value of the investment on the purchase date. This difference is amortized over a 20-year period. n) Bonds payable This item includes, in long-term, the obligation incurred in the issuance of bonds by the Company at nominal value plus readjustments at year end and, in short-term, accrued interest at year end. The difference between the book value and placement value is amortized until maturity and is presented in Other current assets and Other long-term assets . o) 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. p) Income taxes and deferred taxes The Company provides for income taxes in accordance with current legislation. 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 for assets and liabilities and the corresponding tax balances, considering the tax rate at the estimated date of reversal. The effect of deferred income taxes as of January 1, 2000, which were not previously recorded by TRANSELEC, acquired by HQI Transelec Chile S.A. on October 23, 2000, are recorded in net income as from acquisition based on the period of reversal. q) Debt security issuance and placement expenses The Company has deferred the expenses incurred in the issuance and placement of debt securities during 2001. 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. r) 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. 5 s) 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. t) Statement of cash flows Cash and cash equivalents correspond to cash and banks, time deposits, marketable securities and investments under resale agreements. Cash flows from operating activities include all business-related cash flows 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. u) Derivative contracts The hedging contracts subscribed by the Company include foreign exchange forward contracts and swaps and have been recorded at fair value in conformity with Technical Bulletin No. 57 issued by the Chilean Institute of Accountants. NOTE 3 - ACCOUNTING CHANGES --------------------------- There have been no changes in accounting policies for the period January 1 to December 31, 2001, that could effect significantly the interpretation of these financial statements. As discussed in Note 2 l), the Company changed the useful life of some fixed assets, resulting in a decrease in the charge to income during the year of approximately ThCh$ 5,240,000. NOTE 4 - MARKETABLE SECURITIES ------------------------------ The balance of marketable securities at each year end corresponds to investments in mutual funds as follows: Entity 2001 2000 ------ ---- ---- ThCh$ ThCh$ BHIF 580,884 542,002 Banchile 481,662 596,747 Citicorp 18,546 632,389 Santander 300,264 248,334 Santiago 655,254 -- Sudamericano 500,367 -- Credito e Inversiones 423,211 -- --------- --------- Total 2,960,188 2,019,472 ========= ========= 6 NOTE 5 - SHORT- AND LONG-TERM DEBTORS ------------------------------------- Debtors are summarized as follows: a) Trade accounts receivable short-term 2001 2000 ---- ---- ThCh$ ThCh$ Tolls and transmission charges 8,543,173 7,894,990 Services provided to other parties 391,405 228,393 --------- --------- Total 8,934,578 8,123,383 ========= ========= 7 b) Trade accounts receivable short and long-term

~~ThCh$~~Current Current Upto 90 days Between 90 and 1 year Total Current Long-term ------------ i)--------------------- ~~Net~~------------- ~~taxable~~--------- ~~income~~2001 ~~for~~2000 ~~the~~2001 ~~period~~2000 ~~(22,759,739)~~2001 ~~ii)~~2000 ~~Income~~2001 ~~tax~~2000 ~~payment~~ThCh$ ~~January~~ThCh$ ~~2001~~ThCh$ (1ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Tolls and transmission charges 8,~~248~~934,~~499)~~578 ~~iii)~~8,123,383 ~~Provision~~-- ~~for~~-- ~~Article~~8,934,578 218,123,383 ~~tax~~-- (4Sundry debtors 276,~~213)~~722 ~~iv)~~337,071 ~~Deferred~~-- ~~income~~-- ~~tax~~276,722 ~~(406~~337,~~491)~~071 v)441,858 ~~Accumulated~~654,022 ~~taxable~~------- ~~income~~------- ~~(loss~~Total ~~carry~~long-term ~~forward)~~receivables ~~(22~~441,~~759~~858 654,~~739)~~022 ======= =======

8 NOTE 6 - BALANCES AND TRANSACTIONS WITH RELATED COMPANIES --------------------------------------------------------- Significant balances and transactions with related companies are as follows: a) Notes and accounts receivable The receivable balance as at December 31, 2001 originates in a loan granted on April 17, 2001 to Inversiones HQI Chile Holding Ltda. for ThUS$ 169,354. On July 31, 2001 Inversiones HQI Chile Holding Ltda. paid ThUS$ 62,000 of the total debt, of which, MUS$ 58,144 corresponded to capital and MUS$ 3,856 to interest. The amount due is payable in United States dollars and accrues a 7.875% interest on an annual basis of 360 days. The balance due will be paid from the dividends to be received by Inversiones HQI Chile Holding Ltda. from HQI Transelec Chile S.A., first for payment of accrued interest and then for capital amortization. RUT Company Current Short-term --- ------- ------- --------- 2001 2001 M$ M$ 77.498.840-8 Inversiones HQI Chile Holding Ltda. 2,389,387 72,819,412 --------- ---------- Total 2,389,387 72,819,412 ========= ========== b) Notes and accounts payable On October 23, 2000, TRANSELEC, through the related company Inversiones HQI Chile Holding Limitada, acquired certain electricity transmission assets from ENDESA for an amount equivalent to ThUS$ 538.646, transaction that did not generate cash flow effects in TRANSELEC and was recorded in Notes and accounts payable to related companies at December 31, 2000. The debt was completely paid during 2001 by HQI Transelec Chile S.A. In order to hedge its exposure to exchange rate risk, TRANSELEC entered into a forward contract (US$ - UF) with Hydro Quebec for ThUS$250,000. This contract was entered into on December 1, 2000 and matured at various dates between April 6 and May 9, 2001. RUT Company Short-term --- ------- ---------- 2001 2001 M$ M$ 0-E Hydro Quebec 270,159 2,174,210 77.498.840-8 Inversiones HQI Chile Holding Ltda. -- 319,737,293 --------- ----------- Total 270,159 321,911,503 ========= =========== 9 c) Transactions

~~Deferred~~2001 ~~assets~~2000 ~~Deferred~~------------------------- ~~liabilities~~----------------------- ~~Temporary~~Effect ~~differences~~Effect ~~Short-term~~Nature ~~Long-term~~in ~~Short~~income in income Company RUT Relationship of transaction Amount (charge)credit Amount (charge)credit -~~term~~------ ~~Long~~-~~term~~-- ------------ --------- ----- ------ --------- ----- ------ -------------- ThCh$ ThCh$ ThCh$ ThCh$ ~~Accrued~~Inversiones ~~staff~~HQI ~~vacation~~Chile ~~79,398~~Holding ~~Leased~~Ltda. ~~assets~~77.498.840-8 ~~2,770,251~~Shareholder ~~Fixed~~Payment ~~asset~~of ~~depreciation~~loans ~~770~~323,~~332~~478,454 ~~Accrued~~(22,787,154) ~~severance~~-- ~~benefits~~Loans ~~114,975~~obtained ~~Deferred~~-- ~~charges~~-- 1319,~~322~~737,~~172~~293 ~~Forward contracts 25~~(6,~~115~~268,810) ~~Swap~~Loans ~~contract~~granted ~~415~~104,~~671~~445,612 ~~Tax loss benefit 3~~15,~~413~~536,~~961~~489 ~~Increase~~-- in-- ~~value~~Reimbursement of ~~fixed~~loans 1741,~~823~~464,~~114~~980 ~~assets (absorption) Complementary accounts (1,609,368)~~ -- -- --~~-----~~ Hydro Quebec 0-E ~~net~~Ultimate ofparent ~~amortization~~Forward ~~Total~~contract ~~104~~2,~~513~~843,874 214,~~237~~952,~~075~~710 32,~~784~~174,~~033~~210 (2,174,210)

10 NOTE 7 - DEFERRED TAXES AND INCOME TAXES ---------------------------------------- a) General information At December 31, 2001 the Company has not provided for income tax due to tax losses amounting to ThCh$ 19,362,984. Nonetheless, as a result of the merger with TRANSELEC, on March 31, 2001 the Company paid income taxes amounting to ThCh$1,248,349, corresponding to the taxable income of the subsidiary for the period between January 1 and 31, 2001. There are no undistributed tax profits from prior years. At December 31, 2000, the Company provided for an income tax expense of ThCh$ 943,845, based on taxable income of ThCh$ 6,173,799. 11 b) Deferred taxes In conformity with the principle described in Note 2 p), deferred taxes have been adjusted in 2001 to recognize the effect of the changes in the rate introduced by the tax reform published in September 2001. This adjustment represented a charge to net income during 2001 of approximately ThCh$ 259,000.

~~Purchase~~Concepts ~~Expiration~~2001 ~~Counterparty~~2000 ~~Currency~~-------- ~~Subscription Final Market~~ ----------------------------------------------- ----------------------------------------------- ~~date~~Deferred ~~date~~tax ~~value~~asset ~~Rate~~Deferred ~~value~~tax ~~Security~~liability ~~Value~~Deferred tax asset Deferred tax liability Temporary differences Short-term Long-term Short-term Long-term Short-term Long-term Short-term Long-term ---------------------- ---------- --------- ---------- --------- ---------- --------- ---------- --------- ThCh$ %ThCh$ ThCh$ ThCh$ ~~21/09/2001~~ThCh$ ~~02/10/2001~~ThCh$ ~~Banco~~ThCh$ deThCh$ ~~Credito~~Accrued eemployee ~~Inversiones~~vacations ~~Pesos 500~~62,~~000~~279 ~~0.44~~-- ~~500,807~~-- ~~PRBC~~-- ~~500~~63,~~660~~308 ~~21/09/2001~~-- ~~03/10/2001~~-- ~~BBVA~~-- ~~Banco~~Fixed ~~BHIF~~assets ~~Pesos~~-- ~~890,000~~-- ~~0.43~~-- ~~891~~3,~~531~~243,054 ~~PDBC~~-- ~~891~~-- -- 2,~~148~~636,050 ~~21/09/2001~~Accelerated ~~02/10/2001~~depreciation ~~Banco~~-- ~~Sudamericano~~-- ~~Pesos~~-- 2897,~~000,000~~715 ~~0.44~~-- ~~2,003,227~~-- ~~PDBC~~-- 2863,~~002,640~~050 ~~24/09/2001~~Accrued ~~09/10/2001~~emploee ~~BBVA~~severance ~~Banco~~benefits ~~BHIF~~-- ~~Pesos~~-- ~~790~~-- 119,~~000~~819 ~~0.53~~-- ~~792,094~~-- ~~PDBC~~-- ~~790~~124,~~837~~653 ~~25/09/2001~~Other ~~09/10/2001~~events ~~Banco~~22,753 A.-- ~~Edwards~~-- ~~Pesos~~-- 1340,~~037,000~~988 ~~0.56~~-- ~~1,039,710~~-- ~~PDBC~~-- 1Tax loss benefit -- 3,~~037~~291,~~968~~707 ~~27/09/2001~~-- ~~11/10/2001~~-- ~~Banco~~-- de-- ~~Credito~~-- e-- ~~Inversiones~~Increase ~~Pesos~~in ~~1,000,000~~value ~~0.54~~of ~~1,002,520~~fixed ~~PRBC~~assets 1(absorption) -- 20,~~000~~199,~~540~~007 ~~27/09/2001~~-- ~~16/10/2001~~-- ~~Banco~~-- de-- ~~Credito~~-- e-- ~~Inversiones~~Prepaid ~~Pesos~~expenses ~~1,000,000~~-- ~~0.54~~-- -- 1,~~003~~527,~~420~~158 ~~PRBC~~-- 1-- -- -- Coward contracts 94,~~000,540~~877 ~~27/09/2001~~-- ~~11/10/2001~~-- ~~Banco~~-- ~~Santiago~~-- ~~Pesos~~-- ~~1,000,000~~-- ~~0.53~~-- ~~1,002,473~~Complementary ~~PRBC~~accounts ~~1,000,530~~- ~~27/09/2001~~net ~~16/10/2001~~of ~~Banco~~amortization ~~Santiago~~-- ~~Pesos~~-- -- (1,~~428~~799,~~000~~001) ~~0.53~~-- ~~1,432,793~~-- ~~PRBC~~-- (1,~~428~~675,~~757~~O54) ~~27/09/2001~~------- ~~16/10/2001~~---------- ~~BBVA~~--------- ~~Banco~~------- ~~BHIF~~--------- ~~Pesos~~Total 1179,~~000~~909 23,~~000~~490,714 ~~0.53~~-- 13,~~003~~988,~~357~~745 ~~PDBC~~404,296 -- -- 1,~~000~~949,~~530~~176 ======= ========== ========= ======= =========

12 c) Income taxes

~~Accumulated~~Item ~~Net~~2001 ~~value~~2000 ~~Gross value depreciation~~ ---- ----~~---~~ ----~~--------~~ ThCh$ ThCh$ ~~ThCh$~~Current ~~Land,~~tax ~~rights~~expense ~~and other 5,261,461 5,261,461 Buildings and infrastructure Buildings 6,254,495~~ (~~829~~14,~~889~~331) ~~5,424,606 Access roads 343,862~~ (33944,702) 310,160 Lines 241,301,201 (21,219,976) 220,081,225 Houses and apartments 621,232 (192,157) 429,075 Non-hydraulic civil projects 17,530,638 (2,004,815) 15,525,823 Construction and infrastructure 5,596,456 5,596,456 Total 271,647,884 (24,280,539) 247,367,345 Machinery and equipment Telecommunication equipment 5,252,182 (3,234,248) 2,017,934 Machinery and office equipment, furniture 587,055 (492,258) 94,797 Service equipment 20,159 (11,986) 8,173 Tools and instruments 1,314~~,790 (1,019,422~~) ~~295,368~~Deferred ~~Power~~tax ~~generation~~effect ~~unit 465~~451,~~076~~377 ~~(64~~565,~~094)~~541 ~~400,982~~Amortization ~~Electrical~~on ~~equipment~~deferred ~~182,507,251~~tax ~~(20,570,507)~~complementary ~~161,936,744~~accounts ~~Protection and mechanical equipment 29,628,717~~ (386,~~399,622~~881) ~~26,229,095 Transportation and loading equipment 1,169,264~~ (~~637,068) 532,196 Personal Computer 205,746 (92,441) 113,305 Software 374,073 (322,753) 51,~~320 ~~------- --------- ------ 221~~,~~524,313 (29,844,399~~774) ~~191,679,914 Subtotal fixed assets 498,433,658 (54,124,938) 444,308,720~~ Other ~~fixed~~charges ~~assets Advances to contractors 116,172 116,172 Construction materials~~ (1,~~721~~248,~~678 1,721,678 --------- --------- 1,837,850 1,837,850 Increased value from technical appraisal 22,637,532 (2,962,424~~349) ~~19,675,108~~ --~~--------~~ ---------- ---------- Total ~~fixed~~income ~~assets~~tax ~~522~~(898,~~909,040~~184) (57699,~~087,362~~547) ~~465,821,678~~========== ~~---------- ------------ -----------~~========

NOTE 8 - OTHER CURRENT ASSETS ----------------------------- Other current assets is summarized as follows:

~~Registration~~2001 ~~No./~~2000 ~~Nominal Restatement Final Interest identification Series placement value unit Interest rate maturity payment Amortization~~ ----~~----------~~ ------ ~~---------------~~ThCh$ ~~---- ------------- -------- ------- ------------~~ ThCh$ %Resale ~~Long-term~~agreements ~~bonds 249 A1 2~~4,~~000~~420,~~000~~039 ~~UF 6.~~2 ~~01/03/2007 Semester At the end 249 A2 4~~,~~000~~373,~~000~~698 UFBond ~~6.2~~issuance ~~01/03/2007~~expenses ~~Semester At the end 249 B1 200~~1,~~000 UF 6.2 01/03/2022 Semester Semester 249 B2 3~~052,~~000,000~~476 UF-- ~~6.2~~Deferred ~~01/03/2022~~bond ~~Semester~~discount ~~Semester irst issuance 465~~592,~~000,000~~349 ~~US$ 7.875 15/04/2011 Semester At the end Total long~~-~~term~~- ~~Placed~~Other ~~locally~~14,174 or122,672 ~~Par value abroad~~ --------- --------- ~~ThCh$ 32~~6,~~189~~079,~~920~~038 ~~Chile 64~~2,~~379~~496,~~840~~370 ~~Chile~~========= ~~3,218,992 Chile 48,284,880 Chile 320,475,672 Abroad ------------- 468,549,304~~ =========

13 NOTE 9 - INFORMATION ABOUT PURCHASES UNDER RESALE AGREEMENTS OF SECURITIES -------------------------------------------------------------------------- At December 31, 2001 the resale agreements are summarized as follows:

~~Net~~Dates ~~income~~Subscription ~~Paid-in~~Rate ~~capital~~Final ~~Other~~Identification ~~reserves~~Market ~~Retained~~Code ~~earnings~~Purchase ~~for~~Maturity ~~the~~Company ~~period~~Currency value % value of security value ---- -------- --- ----- ------- -- ------ ----- - ----- ----------- ----- ThCh$ ThCh$ ThCh$ ~~ThCh$~~CRV ~~Opening~~12-17-2001 ~~balance~~01-02-2002 ~~310~~Banco Corpbanca Pesos 600,~~140~~000 0.55 601,~~471~~760 3PRD 601,~~178,720~~540 ~~Prior~~CRV 12-~~year~~17-2001 ~~income~~O1-02-2002 ~~distribution~~BBVA 3- Banco BHIF Pesos 1,~~178~~050,~~720~~555 -30.55 1,~~178~~053,~~720~~080 ~~Price-level~~PDBC ~~restatements 6~~1,~~823~~052,~~090~~695 ~~69,932~~CRV ~~Loss~~12-21-2001 ~~for~~O1-15-2002 ~~the~~Banco ~~period~~de (5Credito a Inversiones Pesos 1,~~823~~850,~~032)~~000 0.49 1,857,554 PDBC 1,853,022 CRV 12-26-2001 01-16-2002 Bank Boston Pesos 700,000 0.54 702,646 PRD 700,630 CRV 12-27-2001 Ol-17-~~----------------------------------------------------------------------------~~2002 ~~Final~~Banco ~~balance~~de ~~310,140,471~~Credito ~~6,823,090~~a 3Inversiones Pesos 212,~~248,652~~000 (50.54 212,~~823,032)~~801 ~~====================================================================================~~PRBC 212,152

14 NOTE 10 - FIXED ASSETS ---------------------- Fixed assets are summarized as follows:

~~Item~~2001 ~~Value~~2000 of----------------------------------- ~~Date~~----------------------------------- ofGross ~~Specific~~Accumulated ~~Purchase~~Net ~~Hedged~~Gross ~~Item~~Accumulated ~~Hedge~~Net value ~~contract~~depreciation ~~expiration~~value ~~item~~value ~~/Sale~~depreciation ~~item~~value ~~amount of item~~ ----- --- ---------- ----- ----- ---- ------ -- ----- ThCh$ ThCh$ ThCh$ 1ThCh$ 7ThCh$ ThCh$ Land,~~000~~ rights and others 5,~~000~~385,423 ~~4to.trimestre~~-- ~~Exchange~~5,385,795 ~~rate~~5,383,262 -- 5,383,262 Buildings and infrastructure Buildings 6,632,423 (US897,648) P5,434,775 ~~Trade~~6,269,448 ~~receivables~~(664,201) 45,~~872~~605,~~000~~247 4Access roads 346,~~865~~890 (36,~~140~~451) 310,439 346,890 (26,643) 320,247 Lines 243,566,829 (22,829,987) 220,736,842 243,152,418 (17,143,110) 226,009,308 Houses and apartments 613,668 (205,483) 408,185 582,519 (131,353) 451,166 Non-hydraulic civil projects 17,735,521 (2,179,891) ~~100~~15,~~000~~555,~~000~~630 ~~2do.trimestre~~17,636,914 ~~Exchange~~(1,550,852) ~~rate~~16,085,062 Work in progress 12,590,023 -- 12,590,023 2,363,818 -- ----------- ----------- ----------- ----------- ----------- ----------- 281,185,354 (US26,149,460) P255,035,894 ~~US$~~270,351,007 ~~Bonds~~(19,516,159) 67250,~~900~~834,~~000~~848 69----------- ----------- ----------- ----------- ----------- ----------- Machinery and equipment Telecommunication equipment 5,~~502~~369,~~000~~870 (3,289,228) 102,~~000~~080,~~000~~642 ~~4to.trimestre~~5,291,546 ~~Exchange~~(3,183,550) ~~rate~~2,107,996 Machinery and office equipment, furniture 1,131,322 (US720,077) P411,245 ~~US$~~1,029,878 ~~Bonds~~(784,379) 6245,~~842~~499 Service equipment 20,~~000~~720 6(12,~~950~~553) 8,~~200~~167 417,581 15(10,~~000~~388) 7,~~000~~193 ~~4to.trimestre~~Tools ~~Exchange~~and ~~rate~~instruments 1,329,714 (US1,041,610) P288,104 ~~US$~~1,332,084 ~~Bonds~~(985,792) 10346,~~243~~293 Power generation unit 477,~~500~~727 10(68,~~425~~928) 408,~~300~~799 5459,255 5(52,~~000~~400) 406,~~000~~855 ~~4to.trimestre~~Electrical ~~Exchange~~equipment ~~rate~~183,193,177 (US22,187,857) P161,005,320 ~~US$~~183,416,527 ~~Bonds~~(16,162,595) 3167,~~466~~253,~~500~~932 Protection and mechanical equipment 30,134,617 (3,~~475~~716,~~100~~692) 626,417,925 3029,~~000~~838,~~000~~064 ~~4to.trimestre~~(2,595,235) ~~Exchange~~27,242,829 ~~rate~~Transportation and loading equipment 671,676 (US393,166) S278,510 ~~US$~~1,269,320 ~~Bonds~~(711,404) 20557,~~477~~916 ----------- ----------- ----------- ----------- ----------- ----------- 222,~~700~~328,823 (31,430,111) 190,898,712 222,654,255 (24,485,743) 198,168,512 ----------- ----------- ----------- ----------- ----------- ----------- Subtotal 508,899,972 (57,579,571) 451,320,401 498,388,524 (44,001,902) 454,386,622 ----------- ----------- ----------- ----------- ----------- ----------- Other fixed assets Advances to contractors 101,140 -- 101,140 97,937 -- 97,937 Construction materials 1,723,154 -- 1,723,164 1,845,015 -- 1,845,015 ----------- ----------- ----------- ----------- ----------- ----------- 1,824,294 -- 1,824,294 1,942,952 -- 1,942,952 ----------- ----------- ----------- ----------- ----------- ----------- Increased value from technical reappraisal 22,641,489 (3,113,007) 19,528,482 22,829,884 (2,546,647) 20,~~850~~283,~~600~~237 ----------- ----------- ----------- ----------- ----------- ----------- Total fixed assets 533,365,755 (60,692,578) 472,673,177 523,161,360 (46,548,549) 476,612,811 =========== =========== =========== =========== =========== ===========

15 Depreciation for 2001 totalled ThCh$ 14,885,188 (ThCh$ 3,572,705 for period 2000). The amount of ThCh$ 14.854.029 was charged to Operating costs (ThCh$ 3,567,626 for period 2000) and ThCh$ 21,159 (ThCh$ 5,079 for period 2000) was recorded in Administrative and selling expenses. Assets subject to technical reappraisal correspond to those contributed by ENDESA to Transelec S.A. and include: land, buildings, electrical equipment, telecommunication equipment, lines, houses, and apartments. 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 Limitada (CDEC-SIC), whose exclusive objective is to administrate the operations of the power stations and transmission lines that are interconnected within the electricity system. Percentage of Book value at RUT Company Participation 2001 2000 --- ------- ------------- ---- ---- % M$ M$ 77.286.570-8 CDEC-SIC Ltda. 8.333 37,142 37,142 NOTE 12 - GOODWILL AND NEGATIVE GOODWILL a) Goodwill is summarized as follows: Year ended December 31, ----------------------- 2001 2000 ThCh$ ThCh$ Opening balance 124,439,240 124,439,240 Transfer to Deferred taxes(1) (20,861,770) - Opening equity balance difference(2) 1,998,404 - ------------ ----------- 105,575,874 124,439,240 Amortization of goodwill (6,646,494) (1,209,826) ------------ ----------- 98,929,380 123,229,414 ============ =========== (1) Corresponds to the deferred tax credit generated by the allocation of goodwill, resulting from the absorption of TRANSELEC by the Company, to fixed assets (tax accounting). Consequently, goodwill was deducted in the equivalent amount of the deferred tax credit. 16 (2) As a result of the arbitration process -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 share buyers undertook to reimburse the sellers the difference between the net equity of 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 by the arbitration auditors. A net equity at year-end of ThCh$ 190,688,338 was determined, which was greater than the initial 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 (historical) during 2001. b) Goodwill and the corresponding amortization is originated as follows:

~~Currency~~2001 ~~ThCh$~~2000 ---------------------------- ---------------------------------- ~~Cash~~Amortization ~~and~~Balance ~~banks~~of ~~Chilean~~Amortization ~~pesos~~Balance ~~24,291~~of ~~Cash~~RUT ~~and~~Company ~~banks~~during USthe ~~dollars~~period ~~6,505~~goodwill ~~Time~~during ~~deposits~~the USperiod ~~dollars~~goodwill ~~80,679,853~~--- ~~Marketable~~------- ~~securities~~----------------- ~~Chilean~~---------- ~~pesos~~----------------- ~~3,042,341~~---------- ~~Trade~~ThCh$ ~~accounts~~ThCh$ ~~receivable~~ThCh$ ~~Chilean~~ThCh$ ~~pesos~~96.659.380-6 ~~9,360,771~~Compania ~~Sundry~~Nacional ~~debtors~~de ~~Chilean pesos 467~~5,~~107 Inventories Chilean pesos 81~~436,~~348~~668 ~~Recoverable taxes Chilean pesos 1~~98,~~029~~929,~~685~~380 ~~Prepaid expenses Chilean pesos~~ 1,~~651~~209,~~133~~826 ~~Other Chilean pesos 175~~123,~~498 Resale agreements UF 10~~229,~~654,150~~414 ~~Notes~~Transmision ~~and~~Electrica ~~accounts~~S.A. ~~receivable~~----------- ~~from~~----------- ~~related companies US dollars 1,014,476 Deferred taxes Chilean pesos 104,513~~ ----------- ~~Total current assets 108,291,671 Fixed assets Chilean pesos 465,821,678 Investments in other companies Chilean pesos 36,998 Goodwill Chilean pesos 101,869,711 Long~~-~~term~~----------- ~~debtors UF 423~~5,436 ~~Accounts receivable from Inversiones HQI Chile Holding Ltda. US dollars 77~~,~~293,403~~668 ~~Intangibles Chilean pesos 22~~98,~~951~~929,~~742~~380 ~~Amortization of intangibles Chilean pesos (~~1,~~404~~209,~~552)~~826 ~~Long-term deferred taxes Chilean pesos 17~~123,~~453~~229,~~042~~414 ~~Other~~=========== ~~assets~~=========== ~~Chilean~~=========== ~~pesos 11,914,307 ---------- Total other assets 230,538,087~~=============

NOTE 13 - INTANGIBLES --------------------- Intangibles is summarized as follows: 2001 2000 ---- ---- ThCh$ ThCh$ Rights-of-way 23,153,860 23,153,819 Accumulated amortization (1,575,497) (973,951) ---------- ----------- Net value 21,578,363 22,179,868 ========== ========== The amortization charge to income amounted to ThCh$ 667,730 in 2001 (ThCh$ 302,047 for period 2000). 17 NOTE 14 - OTHER ASSETS ---------------------- The balance at each period end is summarized as follows: 2001 2000 ---- ---- ThCh$ ThCh$ Deferred expenses on bond placements - UF 2,026,376 - Deferred expenses on bond placements - US$ 5,904,430 - Discount on bond placements - UF 2,651,147 - Discount on bond placements - US$ 1,317,100 - Payments in advance 290,448 - Rental deposits for employee housing 23,397 1,105 --------- ----- 12,212,898 1,105 ========== ===== NOTE 15 - LONG- AND SHORT-TERM OBLIGATIONS (PROMISSORY NOTES AND BONDS) ----------------------------------------------------------------------- a) During 2001, the Company 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 Superintendent of Securities and Insurance Companies under number 249. Of this amount, UF 9,200,000 were finally placed on April 11, 2001. As of December 31, 2001 the risk ratings obtained are the following: Classifier Rating ---------- ------ Fitch Chile Clasificadora de Riesgo Ltda. AA Feller-Rate Clasificadora de Riesgo Limitada AA+ The terms of issuance of these bonds are as follows:

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 divided into Series A Series A-1 : Up to 90UF ~~days~~3,000,000 ~~-------------~~(3,000 ~~Annual~~bonds ~~average~~at ~~Currency~~UF ~~Amount~~1,000 ~~interest~~each). ~~rate~~Series A-~~-------~~2 ~~------~~:Up ~~-------------~~to ~~ThCh$~~UF %4,000,000 ~~Interest~~(400 ~~payable~~bonds at UF 10,000 each). Series B Series B-1: ~~bonds~~Up to UF ~~753~~1,~~547~~000,000 6(1,000 bonds at UF 1.2000 ~~Interest~~each). ~~payable~~Series B-2: Up to UF 3,000,000 (300 bonds USat ~~dollars~~UF 1110,~~594~~000 each). Indexation : Change in Unidades de Fomento 18 Amortization period : Series A 6 years and Series B 21 years (6 years of grace and 1 and 15 years for capital amortization,~~237~~ 7respectively).~~875~~ ~~Accounts~~Capital ~~payable~~amortization ~~Chilean~~: ~~pesos~~Series 2A,~~364~~ in one installment,~~589~~ ~~Sundry~~upon ~~creditors~~maturity, USand ~~dollars~~Series 32B,~~033~~ ~~Sundry~~payable ~~creditors~~half-yearly, ~~Chilean~~in ~~pesos~~increasing 2amounts,~~177,903~~ ~~Provisions~~and ~~Chilean~~effective ~~pesos~~September 1,~~430,445~~ ~~Withholdings~~2007. ~~Chilean~~Early ~~pesos~~redemption : Series A: without early redemption and Series B,: effective September 1,~~693~~ 2009,~~332~~ ~~Other~~on ~~current~~any ~~liabilities~~of ~~Chilean~~its ~~pesos~~denominated dates of payment of interest or interest and capital amortization. Interest rate : Series A and B bonds accrue an 6.20% annual interest rate on the outstanding capital,~~947~~ ~~Notes~~expressed ~~and~~in ~~accounts~~Unidades de Fomento. Interest is calculated over a period of 360 days, upon maturity and payable tohalf-yearly ~~related~~in ~~companies~~two ~~Chilean~~semesters ~~pesos~~of ~~140~~180 days each. Interest payments: Half-yearly payments,~~000~~ ~~Notes~~upon maturity on March 1 and ~~accounts~~September ~~payable~~1 yearly, starting September 1, 2001. Interest accrued at year-end amounts to ~~related~~ThCh$ ~~companies~~3,045,593 USand ~~dollars~~is 37presented in Current liabilities. Guarantees: : This issuance has no special guarantees,~~347~~ ~~Forward~~except ~~contracts~~for USthe ~~dollars~~general 81guarantee on all of the issuer's assets. Period of placement : 36 months,~~160~~ as from the date of register with the Superintendent of Securities and Insurance Companies.

b) The Company issued and placed notes in the international market on April 17, 2001 as follows: As of December 31, 2001 the risk ratings obtained are the following: Rating ------ 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 U.S. market. Issue value : ThUS$ 465,000 of a single series Indexation : Change in United States dollar Capital amortization At maturity on April 15, 2011. Nominal interest rate : 7.875% annual. Interest payments : On April 15 and October 15 each year, effective October 15, 2001. Interest accrued at year-end amounts to ThCh$ 5,272,850 and is presented in Current liabilities. 19 c) Bonds

1Periodicity toRegister 3number ~~years~~or ~~3 to 5 years 5 to 10 years More than 10 years~~ ------------ ------------ ---------~~----~~ ~~------------------~~Issued ~~Currency~~in ~~Amount~~identification ~~Interest~~of ~~Amount~~Nominal amount Interest ~~Amount~~Final ~~Interest~~Amortization ~~Amount~~Par ~~Interest~~value Chile or bonds Series placed Currency rate Maturity Payment of interest payments 12-31-2001 abroad ------ ------ -------- ------ ---- ---- --- --- --------- ------- -------- ~~rate rate rate rate~~ ---- ---- -- -- ---- ThCh$ %249 ~~ThCh$~~A1 %2,000,000 ~~ThCh$~~UF 6.20% ~~ThCh$~~03-01-2007 %Semester ~~Bonds~~At USmaturity ~~dollars~~32,525,320 ~~323~~Chile 249 A2 4,~~184~~000,~~300~~000 7UF 6.~~875~~20% ~~Bonds~~03-01-2007 UFSemester ~~100~~At maturity 65,~~690~~050,~~069~~640 Chile 249 B1 200,000 UF 6.220% 4703-01-2022 Semester At maturity 3,~~383~~252,~~563~~532 Chile 249 B2 3,000,000 UF 6.220% ~~Sundry~~03-01-2022 ~~creditors~~Semester USAt ~~dollars~~maturity 7948,~~962~~787,980 ~~Customs~~Chile ~~duties~~First ~~Provisions~~offering ~~Chilean~~Sole ~~pesos 1~~465,~~272~~000,~~660~~000 ~~Other~~US$ ~~liabilities~~7.875% ~~Chilean~~04-15-2001 ~~pesos~~Semester 34At maturity 304,~~789~~477,350 Abroad Swap contracts 23 contracts 7,~~708~~315,~~628~~503 7UF 9.~~875~~16% 2006 Semester At maturity 12,266,406 Chile ----------- Total long-term 466,360,228 ===========

20 NOTE 16 - PROVISIONS AND WRITE-OFFS ----------------------------------- Provisions at each year end are as follows: 2001 2000 ---- ---- ThCh$ ThCh$ a) Short-term provisions Employee severance indemnity benefits - 40,225 Accrued payroll 625,118 502,697 Employee vacation benefits 389,241 422,050 Cost of accidents (lines and substations) 107,303 22,306 Accural for TRANSELEC purchase price adjustment - 722,990 -------- ------- Total 1,121,662 1,710,268 ========= ========= b) Long-term provisions Employee severance indemnity benefits 1,299,299 1,230,145 ========= ========= NOTE 17 - SEVERANCE INDEMNITIES ------------------------------- The change in severance indemnities during each period is as follows: 2001 2000 ---- ---- ThCh$ ThCh$ Opening balance 1,232,173 1,188,101 Price-level restatement 38,197 51,607 Provision for the period 28,929 30,662 --------- --------- Total 1,299,299 1,270,370 ========= ========= Short-term - 40,225 Long-term 1,299,299 1,230,145 --------- --------- Total 1,299,299 1,270,370 ========= ========= NOTE 18 - MINORITY INTEREST --------------------------- The minority interest at December 31, 2000 was composed as follows: Subsidiary Percent ThCh$ --------- ------- ----- % TRANSELEC 0.01 20.056 21 NOTA 19 - EQUITY ---------------- During 2001 and the period September 15 and December 31, 2001, the changes in shareholders' equity are summarized as follows: a) Changes in equity

~~Exchange~~2001 ~~rate~~2000 ~~Average of the month Last day of the month~~ ------------- -------------------- ----------~~-----------~~ ~~Average for the Average for the Monthly value Quarter Monthly value Quarter January 571.12 561.61 574.01 576.48 February 563.13 572.86 March 587.79 594.97~~ ------------------------------------- Paid-in Retained Net income Paid-~~-----------------------------------------------------~~in ~~April~~Other ~~598.63~~Net ~~598.61~~income ~~606.39~~capital ~~612.82~~earnings ~~May~~(loss) ~~604.48~~for ~~610.85~~the ~~June~~period ~~616.07~~capital ~~629.00~~reserves for the period ------- -------- --------------------- ------- -------- -------------- ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ ThCh$ Opening balance 310,140,471 - 3,178,720 100 (100) - Prior-year income distribution - 3,178,720 (3,178,720) - - - Capital increase - - -~~-----------------~~ ~~July~~340,073,800 ~~656.46~~(340,073,800) ~~668.79~~- ~~670.47~~Capital ~~675.26~~decrease ~~August~~for ~~673.70~~change ~~661.97~~in ~~September~~legal ~~681.24~~structure ~~695.02~~- - - (32,993,485) 32,993,485 - Paid-in capital - - - - 307,049,463 - Paid-in capital - - - - 30,952 - Price-level restatements 9,614,355 98,540 - 3,060,056 - - Net income (loss) for the period - - (5,342,065) - - 3,178,720 ----------- --------- ----------- ---------- ----------- --------- Final balance 319,754,826 3,277,260 (5,342,065) 310,140,471 -~~-------~~ 3,178,720 =========== ========= =========== =========== =========== ========= Restated balance 319,754,826 3,277,260 =========== =========

22 b) Number of shares Number of Number of paid-in Voting Series shares shares shares ----- -------- ----------------- --------- Single series 1,000,000 1,000,000 1,000,000 c) Capital Subscribed Paid-in Series capital capital ------ ---------- -------- Single series 319,754,826 319,754,826 NOTE 20 - OTHER NON-OPERATING INCOME AND EXPENSES ------------------------------------------------- These are summarized as follows: 2001 2000 ---- ---- ThCh$ ThCh$ Other non-operating income: -------------------------- Prior-year income 208,149 - Miscellaneous income 2,523 25,926 Income on disposal of materials 61,547 - -------- ------ Total 227,219 25,926 ======== ====== Other non-operating expenses: ---------------------------- Prior-year expenses 151,002 131,515 Miscellaneous losses 528,387 - Retired employee benefits 121 - Directors' remuneration 18,785 - Fiscal and judicial fines 7,295 - Research expenses 56,517 - Loss on Disposal of fixed assets 109,301 - ------- ------- Total 871,408 131,515 ======= ======= 23 NOTE 21 - PRICE-LEVEL RESTATEMENT --------------------------------- The net effects of price-level restatements, as described in Note 2 e), resulted in a net charge to income amounting to ThCh$ 2,815,730 (net credit of ThCh$ 1,579,643 in period 2000) and is summarized below. In conformity with Circular 1560 issued by the Superintendent of Securities and Insurance on September 20, 2001, Exchange differences must be presented discounting the effect of inflation. The said effect is presented in Price-level restatement and implied a net charge of ThCh$ 5,916,520 (net credit in Exchange differences) during 2001 (ThCh$ 1,623,955 during period 2000). Index 2001 2000 ----- ---- ---- ThCh$ ThCh$ Assets (charges)/credits Fixed assets CPI 14,920,613 5,103,404 Other non-monetary assets CPI 6,927,291 1,927,272 Expense accounts CPI 402,884 38,989 ---------- --------- Total (charges)/credits 22,250,788 7,069,665 ---------- --------- Liabilities (charges)/credits Shareholders' equity CPI (9,712,895) (3,154,918) Non-monetary liabilities CPI/UF (13,932,198) (1,880,879) Income accounts CPI (1,421,425) (454,225) ------------ ----------- Total (charges)/credits (25,066,518) (5,490,022) ------------ ----------- Price-level restatement net (loss) income (2,815,730) 1,579,643 ============ =========== 24 NOTE 22 - EXCHANGE DIFFERENCES ------------------------------ The effects of exchange differences during 2001 amounted to a net charge to income of ThCh$ 30,078,816 (ThCh$ 2,530,690 in period 2000), and is summarized as follows: Amount Item Currency 2001 2000 ---- -------- ---- ---- ThCh$ ThCh$ Assets (charges)/credits Dollars (126,340) 252,047 Time deposits Notes and accounts receivable from related companies Dollars 8,686,767 - Forward contracts Dollars 1,786,570 - ---------- ------- Total (charges)/credits 10,346,997 252,047 ---------- ------- Liabilites (charges)/credits Notes and accounts payable to related companies Dollars (12,431,679) (2,782,737) Bonds payable Dolalrs (18,491,640) - Swap contracts Dollars (9,502,494) - ------------ ----------- Total (charges)/credits (40,425,813) (2,782,737) Net loss from exchange differences (30,078,816) (2,530,690) ============ =========== NOTE 23 - 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 Abroad Total ----- ------ ----- ThCh$ ThCh$ ThCh$ Composition Bond issuance expenses 2,630,432 7,229,914 9,860,346 Amortization (274,571) (602,493) (877,064 ---------- --------- --------- 2,355,861 6,627,421 8,983,282 ========= ========= ========= Balance sheet presentation -------------------------- Other current assets 329,485 722,991 1,052,476 Other long-term assets 2,026,376 5,904,430 7,930,806 --------- --------- --------- 2,355,861 6,627,421 8,983,282 ========= ========= ========= 25 NOTE 24 - DERIVATIVE CONTRACTS ------------------------------ The Company maintains forward contracts and swaps to hedge the risk of exchange rate fluctuations of short-term trade accounts receivable and long -term bond payables, as follows:

26 NOTE 25 - CONTINGENCIES AND RESTRICTIONS ---------------------------------------- a) 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 one point two 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. - Maintain an individual and consolidated leverage ratio whereby the proportion of Total liabilities/Total capitalization is not greater than zero point seven times. - Maintain at all times an individual and consolidated minimum equity equal to fifteen million 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$ 173,268. Management believes that no significant contingencies will result from the pending lawsuits. e) Direct guarantees

27 NOTA 26 - GUARANTEES OBTAINED FROM THIRD PARTIES ------------------------------------------------ At December 31, 2001 the Company has received financial guarantees from contractors and third parties for the completion of constructions, maintenance work and repayment of housing loans, amounting to ThCh$ 1,366,870 (ThCh$ 459,056 at December 31, 2000). NOTE 27 - LOCAL AND FOREIGN CURRENCY ------------------------------------ Assets and liabilities held in foreign currency have been translated to Chilean pesos at their respective exchange rates at each period end and are summarized as follows (see conversion rates in Note 2 g): a) Assets

28 b) Current liabilities

29 c) Long-term liabilities 12/31/2001

30 d) Long-term liabilities 12/31/2000

31 NOTA 28 - SANCTIONS ------------------- During 2001 and 2000, the Company, its Directors and Management have not been sanctioned by the Superintendent of Securities and Insurance Companies. NOTE 29 - SUBSEQUENT EVENTS --------------------------- There have been no subsequent events between December 31, 2001 and the date the financial statements were issued, which could significantly affect their interpretation. NOTE 30 - ENVIRONMENTAL EXPENSES -------------------------------- At December 31, 2001, the Company has made no disbursements related with this concept. Juan Carlos Rodriguez Guillermo Espinosa Accountant General Manager EXHIBIT B HQI TRANSELEC CHILE S.A. RELEVANT EVENTS During the period January 2001 to December 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 : 7.875% 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 Marchand, and Pedro Lizana Greve 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. f) On August 31, 2001 the Company reported that, as stipulated in the Registration Rights Agreement, HQI Transelec Chile S.A. registered with the Securities and Exchange Commission the US dollar issue and modified the existing bonds in order to make them fully registered according to the Securities Act. The terms and conditions remained unchanged except for the elimination of the transfer restrictions of the Rule 144A. EXHIBIT C HQI TRANSELEC CHILE S.A. FINANCIAL STATEMENTS ANALYSIS AT DECEMBER 31, 2001 A) SUMMARY The financial statements at December 31, 2001, are presented in comparison with the consolidated financial statements at December 31, 2000, notwithstanding that the later correspond to a period of two months and eight days, that is since the purchase of the shares of TRANSELEC on October 23 2000. For such a reason this comparison it is not significant. For the year 2001, HQI TRANSELEC CHILE S.A. obtained a net loss of ThCh$ 5,342,065 in spite of its positive operating results of ThCh$ 63,250,338. The loss was generated from the negative non-operating results amounting to ThCh$ 67,694,219 and a net charge to income arising from income taxes of ThCh$ 898,184. In the preceding period, the result was a net profit of ThCh$ 3,277,260 resulting from positive operating results of ThCh$ 11,537,252, negative non-operating results amounting to ThCh$ 7,560,039 and a net charge to income arising from income taxes of ThCh$ 699,547 Operating income during the year amounted to ThCh$ 89,958,980 compared to ThCh$ 17,508,602 in the previous period. 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$ 24,114,695, which is broken down into fixed assets depreciation (62.2%), payroll (14.1%), and work, supplies, and services hired (18.9%). Administrative and selling expenses amount to ThCh$ 2,593,947, which is broken down into payroll (52.8%), and expenses incurred in work, supplies and services hired (29.5%). Non-operating results for the period present a loss of ThCh$ 67,694,219 arising from financial expenses totaling ThCh$ 35,731,518 (52.8%), monetary correction loss for ThCh$ 2,815,730 (4.1%) and exchange rate loss for ThCh$ 30,078,816 (44.4%) as a result of an increase in the US dollar exchange rate of 14.1% during the period (Ch$ 81.14) , compared to a variation in the Consumer Price Index of only 3.1%. Other significant items with an effect on non-operating results were interest income amounting to ThCh$ 6,967,702 (10.3%) and goodwill amortization amounting to ThCh$ 5,436,668 (8.0%). 1 B) RESULTS Concepts From September 15 to From January 1 to -------- December 31, 2000 December 31, 2001 ThCh$ ThCh$ Operating income 17.508.602 89.958.980 Toll sales 16.598.419 85.282.472 Work and services 910.183 4.676.508 Operating expenses (5.731.123) (24.114.695) Fixed costs (1.856.371) (8.582.936) Depreciation (3.572.705) (14.864.029) Amortization of intangibles (302.047) (667.730) Administrative and selling expenses (240.227) (2.593.947) Operating results 11.537.252 63.250.338 Non-operating results (7.560.039) (67.694.219) Income tax (deferred tax credit) (699.547) (898.184) Profit (Loss) for the period 3.277.260 (5.342.065) EBITDA 14.460.957 45.908.710 Profitability Indices --------------------- Return on equity 1,01 -1,68 Return on of assets 0,50 -0,67 Return on income earning assets 2,31 12,80 Loss per share (Ch$) 3.277 (5.342) 2 C) BALANCE SHEET ANALYSIS

(*) Calculated as EBITDA / Financial expenses At December 31, 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. 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 nine months of 2001 there were no significant fluctuations in the market in which the Company operates. 3 Exchange rate risk ------------------ At December 31, 2001 a portion of the Company's debt was denominated in United States dollars from the placement of bonds abroad amounting to US$ 473,052,734 (including accrued interest). The loan issued to the Parent Company, Inversiones HQI Chile Holding Limitada, for US$ 114,859,418 (including accrued interest), and short-term investments in the financial market for US$ 125,021,484, Swap contracts for US$ 172,609,688 (including accrued interest) and a Forward contract for US$ 30,000,000 reduce the net exposure to US$ 30,562,144. 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, the effect of the devaluation of the Chilean peso compared to the US dollar amounted to ThCh$ 30,078,816. The balance sheet exposure to the exchange rate fluctuation is mitigated 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 about 85% of contracts, and at the current US dollar exchange rate on the last day of the month for the rest of the contracts. The evolution of the exchange rate during the year was as follows:

Toll contracts include semester indexation formulas to reflect fluctuations in the net replacement value of assets and in the operating and maintenance costs. These reflect variations in the international prices of equipment and the local costs of materials and labour. During the period between January 1, 2001 and June 30, 2001 the average toll index was 0.97288, which was effective as of July 1, 2001. The next indexation will be applied on January 1, 2002. 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 resulting from the same devaluation. 4 Cash flows during the period ---------------------------- In the year 2001, due mainly to operating activities, net positive cash flows amounting to ThCh$ 65,761,531 were generated. Financing activities generated positive cash flows of ThCh$ 89,798,945 arising from bond placements in the local market (UF 9,200,000) and foreign market (US$ 465,000,000) for a total of ThCh$ 430,901,228 less the loan repayment to Inversiones HQI Chile Holding for ThCh$ 331,241,937. Cash flows from investment activities generated a negative cash flow of ThCh$ 77,216,295 as a result of a current account loan granted to Inversiones HQI Chile Holding Ltda. Amounting to ThCh$ 103,284,603 and the purchase of fixed assets. On July 31, the loan from HQI Transelec Chile S.A. to Inversiones Chile Holding Ltda was reduced by ThCh$ 39,208,951. The effect of inflation on cash and cash equivalents amounted to ThCh$ 72,422. The closing cash flow balance amounted to ThCh$ 89,362,807 considering an opening balance of ThCh$ 23,528,854 5

Filing Compare · HQI TRANSELEC CHILE S A