Water

Aguas de Antofagasta (“ADASA”) operates a 30-year concession for the distribution of water in Chile’s Antofagasta Region which it acquired from the state-owned Empresa Concesionaria de Servicios Sanitarios S.A. (“ECONSSA”) in 2003. ADASA’s operation consists of two businesses, a regulated water business supplying approximately 144,000 domestic customers and an unregulated business serving mines and other industrial users. It also provides sewage and treatment services in a number of cities in the Region.

Combined domestic and industrial water sales in 2009 amounted to 43.7 million cubic metres, a 2.3% increase on the 42.7 million cubic metres in 2008. Domestic sales remained relatively stable, increasing by 1.3% to 30.5 million cubic metres. Industrial sales increased 5.3% to 13.2 million cubic metres.

Turnover decreased by 1.1% to US$83.6 million, with a slight reduction in average tariffs and the weaker Chilean peso offsetting the improvement in volumes. Reduced operating costs, however, saw operating profit increase by 7.1% to US$45.3 million in 2009, from US$42.3 million in the previous year.

In March 2009 ADASA acquired the desalination plant located in the city of Antofagasta from the previous owner, Desalant S.A. (“Desalant”), for a purchase price of US$52.5 million. As part of this agreement, ongoing arbitration proceedings between ADASA and Desalant were also terminated. As ADASA is presently the sole customer of the plant the acquisition will have no direct impact on water volumes or sales. Nevertheless, the acquisition has consolidated ADASA’s position by placing it in full control of the plant, which provided it with 21.2% of its water for its distribution business in 2009. The desalination plant is held under the terms of the concession acquired from ECONSSA for a 30-year period from 2003.

ADASA is forecasting a slight increase in volumes in 2010. The company’s revenues and profits are predominantly in Chilean pesos, and will be impacted by the relative strength or weakness of that currency against the US dollar, the currency in which the Group reports its results.

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