Bear Upgrades Endesa Chile Stock

Bear Stearns has upgraded the stock of Endesa Chile to outperform from peer perform following a 12.9% increase in the “node” tariff to $104.05/MWh that will be applied beginning in November. Endesa sells approximately 50% of its total volume sales in Chile at regulated node tariffs, says Bear. Its year-end $50/ADR price target is under review as it incorporates this higher-than-expected tariff. “This node price, which was announced after the market close, was well above market expectations. The increase mainly reflects rising average free customer tariffs due to high winter spot prices on the back of poor rainfall and the lack of Argentine gas,” says Bear Stearns. It adds that the increase will benefit all Chilean generators and help cushion, to some extent, potentially declining margins in the second half fro bad hydrology last quarter.