TCRLA_Public/050131.mbx         T R O U B L E D   C O M P A N Y   R E P O R T E R

                    L A T I N   A M E R I C A

            Monday, January 31, 2005, Vol. 6, Issue 21

                            Headlines

A R G E N T I N A

AGUAS ARGENTINAS: ETOSS Head Backs Idea of "Mixed Company"
MULTIFINAN S.A.: Verification Deadline Fixed
TELECOM ARGENTINA: S&P Maintains `raD' Rating on Bond Issues
TELECOM ARGENTINA: Issues S&P's Ratings Report Summary
TELEFONICA DE ARGENTINA: Reveals S&P's Ratings Report

TELEFONICA HOLDING: S&P Issues Report on Ratings
YACYRETA: Bank, Commission Create Fund to Complete Project


B E R M U D A

GRN REINSURANCE: Claims Check to End March 4
MARITIME MANAGEMENT: Proceeds With Voluntary Liquidation
RXKINETIX NEWCO: Names Robin Mayor as Liquidator
SOPHIA LIMITED: Begins Wind-Up Proceedings


B R A Z I L

BANCO SANTOS: Presents New Debt Proposal
EMBRATEL: Provides Telephone Service to Clube de Engenharia
EMBRATEL: To Invest $195M in New Satellite
NET SERVICOS: Shareholders to Vote on Debentures Issuance
SADIA: Announces ADR Ratio Change

VARIG/TAM: Ending Code-Sharing Agreement
VASP: DAC Grounds Last Eight Flights Due to Inadequate Service


C H I L E

ENDESA CHILE: Income Before Tax Rises 25% in 2004
ENERSIS: Net Income Nearly Triples in 2004


C O L O M B I A

CENTRAGAS: S&P Releases Report on Ratings


J A M A I C A

* JAMAICA: S&P Releases Report on Ratings


M E X I C O

DIRECTV: Generates $3B Revenues in 4Q04
HYLSAMEX: EBITDA Ends at $255/Ton in 4Q04


V E N E Z U E L A

PDVSA: Fuel Shortages Result of Rationing Plan

     -  -  -  -  -  -  -  -

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A R G E N T I N A
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AGUAS ARGENTINAS: ETOSS Head Backs Idea of "Mixed Company"
----------------------------------------------------------
The president of Argentina's water regulator ETOSS appears to be
in favor of turning water utility Aguas Argentinas into a "mixed
company" in which the national government holds a stake and
manages investments, indicates Dow Jones Newswires.

In an interview with Radio America Wednesday, ETOSS President
Alejandro Labado, said: "I agree with the generalized opinion
(of) the national government to put in place or constitute a
mixed company, because that will give the state the possibility
to resolve one of the largest conflicts ... that is, who
controls and defines the investment policy."

"I don't believe public service companies have to be re-
nationalized, but it seems to me that there has to be a level of
control that's much greater than what we've known up until now,
and that implies state participation in some cases," Labado
continued.

Aguas Argentinas's parent company, France-based Suez (SZE), and
the Argentine government are still locked in tough discussions
over a new, long-term contract. The firm, which serves the
province of Buenos Aires, wants a tariff rise of 60% to fund
water-supply improvements. But the government has rejected the
60% rise.

Labado also said that Aguas Argentinas would have to invest
between ARS800 million and ARS900 million ($1=ARS2.9225) "for
the concession to be at the height of what the privatization
imagined at the beginning of the 90s."

Planning Minister Julio De Vido hasn't ruled out the possibility
of canceling Aguas Argentinas water concession.


MULTIFINAN S.A.: Verification Deadline Fixed
--------------------------------------------
The verification of creditors' claims for the Multifinan S.A.
insolvency case is set to end on March 22, states Infobae. Mr.
Gustavo Daniel Micciullo, the court-appointed trustee tasked
with examining the claims, will submit the validation results as
individual reports on April 21. He will also present a general
report in court on June 3.

On November 1, the company's creditors will vote on the
settlement proposal prepared by the company. Infobae adds that
the company's reorganization is under the jurisdiction of Buenos
Aires' civil and commercial Court No. 18. Clerk No. 35 assists
the court with the proceedings.

CONTACT: Mr. Gustavo Daniel Micciullo, Trustee
         Avda Cordoba 1417
         Buenos Aires


TELECOM ARGENTINA: S&P Maintains `raD' Rating on Bond Issues
------------------------------------------------------------
Standard & Poor's International Ratings, Ltd. Sucursal Argentina
affirmed the `raD' ratings previously assigned to a number of
corporate bonds issued by Telecom Argentina S.A. (ex Telecom
Argentina STET - France Telecom S.A).

The affected bonds, according to information from the official
Web site of the country's securities regulator, Comision
Nacional de Valores (CNV), include:

-  EUR250 Million worth of bonds described as "Serie 1 bajo el
Programa Global de ONS (D) vencimiento en septiembre 2004" with
undated maturity.

-  EUR190 Million worth of bonds described as "Serie 2 bajo el
Programa Global de ONS (D) vencimiento en septiembre 2004" with
undated maturity.

- US$1.5 Billion worth of bonds describe as "Series C por U$S
128 mm, E por U$S 100 mm, F y H por Lit 400.000 mm, I por Euros
200 mm y K por Euros 250 mm, bajo Prog global de ONS vencido
agost99" with undated maturity.

The action by S&P was based on Telecom Argentina's financial
health as of September 30, 2004. The ratings agency said that a
`raD' rating is assigned to financial obligations that are
currently in default or whose obligor has filed for bankruptcy
protection.

The rating may also be issued when interest or principal
payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P has reason to believe
that payments will be made during such grace period.

CONTACT:  TELECOM ARGENTINA S.A.
          Alicia Moreau de Justo 50, 10th Floor
          Capital Federal (1107) Republica Argentina
          Phone: +54 11 4968 4000
          Home Page: http://www.telecom.com.ar

          Contacts:

          Alberto J. Ricciardi, Chief Financial Officer
          Elvira Lazzati, Finance Director
          Pedro Insussarry, Investor Relations Manager
          Phone: (5411) 4968-3626/3627
          Fax: (5411) 4313-5842/3109
          E-mail: inversores@intersrv.telecom.com.ar


TELECOM ARGENTINA: Issues S&P's Ratings Report Summary
------------------------------------------------------

Rationale

The rating on Telecom Argentina S.A. (TECO; formerly Telecom
Argentina STET-France Telecom S.A.), an Argentine-based
integrated telecom provider, reflects the company's decision to
suspend payments on all its financial debt obligations
(including those of its Argentine subsidiaries) to preserve
liquidity to fund operations due to the economic and regulatory
changes in the country. As of Sept. 30, 2004, total consolidated
debt amounted to approximately $3,607 million and cash holdings
to $1,216 million.

In August 2004, TECO announced that the proposal to restructure
its individual financial debt (approximately $2,840 million)
under an out-of-court agreement, or Acuerdo Preventivo
Extrajudicial (APE), had been accepted by creditors representing
94.4% of total debt (capital plus accrued interest). To become
effective, the APE must now be endorsed by a Commercial Court of
the City of Buenos Aires and go through additional steps. In
addition, in early December 2004, Telecom Personal, TECO's
mobile subsidiary, restructured its debt under a private
agreement with similar conditions to the proposal issued by
TECO. TECO's proposal includes the capitalization and
restructuring of part of the interest accrued up to Dec. 31,
2003, and the payment of interest accrued since Jan. 1, 2004,
and gives creditors three options, including new amortizing
notes maturing in 2014 and 2011 and cash. Considering the
current acceptance levels, TECO and Telecom Personal would issue
new bonds for about $2,245 million and disburse approximately
$700 million in cash (to cancel the cash tender offer and not
including interests). Standard & Poor's Ratings Services will
reassess the ratings once the APE is concluded.

TECO is one of two incumbent telephone companies in the Republic
of Argentina, holding about 47% of total lines in service and
32% of total mobile subscribers. TECO provides integrated basic
telecommunications services (local telephone as well as national
and international long-distance service, mobile communications,
and data transmission) throughout the country.

The company faces significant financial and regulatory
challenges derived from the freeze on and pesification of
tariffs and the devaluation of the currency since early 2002,
which created a dramatic cash-flow mismatch between its peso
cash generation and its dollar-denominated debt. Uncertainty is
high regarding the renegotiation of tariffs, which was mandated
by the government in early 2002 but is still pending. In
November 2004, the government extended the ruling of the
Emergency Law and the period for tariff and contracts
renegotiation until December 2005, which could result in
additional delays. Nevertheless, potential tariff adjustments
resulting from the renegotiation are not expected to compensate
for the effects of the devaluation of the peso and pesification
and freeze of tariffs.

These factors have caused TECO's financial condition to
deteriorate. Since 2003, financial measures started to show a
gradual recovery due to the more benign economic conditions in
the country, with significantly lower delinquency levels,
progressive traffic improvements, growth of the fixed and
especially mobile client base (as of September 2004, fixed lines
and mobile lines increased by about 3.8% and 39%, respectively,
compared to September 2003), and cost containment actions.
Nevertheless, the expansion in the mobile segment and labor cost
increases resulted in lower EBITDA margins of 46.2% in the first
nine months of 2004, from 53.4% in the equal period of 2003.

EBITDA interest coverage and funds from operations-to-total debt
for the 12 months ended September 2004 reached 2.8x and 19.2%,
respectively, from 2.1x and 13.3% in fiscal 2002. Nevertheless,
these measures are still below historical levels and the
currency mismatch persists. The company's future cash-flow
generation and financial profile will be tied to the result of
tariff renegotiations with the government, the closing of the
financial debt restructuring, and the sustained economic
recovery and stability in Argentina. In addition, as of Sept.
30, 2004, debt-to-capitalization levels continued to be high at
93.8% due to the mismatch between the high foreign currency debt
burden and its cash generation in Argentine pesos. This measure
is expected to improve after the closing of the debt
restructuring.

Nortel Inversora S.A. controls TECO with a 57.74% participation,
while TECO's employees own about 4.68% and the remainder of the
stock (40.58%) trades on the Buenos Aires, New York, and Mexico
City stock exchanges. Nortel is a holding company jointly
controlled by the Telecom Italia Group (BBB+/Positive/A-2) and a
local investor group, which, together, own 67.79% of its equity.

Liquidity

Despite cash holdings of $1,216 million as of Sept. 30, 2004,
TECO's liquidity is tight due to the financial payment
suspension, the relatively low cash-flow generation in relation
to the current debt burden, and the restricted access to
financing. An important portion of these cash holdings would be
devoted to complete the mentioned debt restructuring.

Primary Credit Analyst: Ivana Recalde, Buenos Aires (54) 114-
891-2127; ivana_recalde@standardandpoors.com

Secondary Credit Analyst: Marta Castelli, Buenos Aires (54) 114-
891-2128; marta_castelli@standardandpoors.com


TELEFONICA DE ARGENTINA: Reveals S&P's Ratings Report
-----------------------------------------------------
Rationale

The rating on Telef¢nica de Argentina S.A. (TASA) reflects the
financial and regulatory challenges of operating in the
Argentine environment after the crisis in 2002, which have
weakened TASA's debt-servicing ability (due to the fact that
most of its debt is foreign currency-denominated). Uncertainty
is still high regarding the contract and tariff renegotiation,
which was mandated by the government in early 2002 but is still
pending. In November 2004, the government extended the ruling of
the Emergency Law and the period for tariff and contracts
renegotiation until December 2005, which could result in
additional delays. Nevertheless, potential tariff adjustments
resulting from the renegotiation are not expected to compensate
for the effects of the devaluation of the peso and pesification
and freeze of tariffs. The company's good market position and
efficient operations partially mitigate the negative factors
mentioned above.

Despite the negative regulatory environment, TASA's financial
performance was gradually recovering after the crisis in
Argentina as a result of the economic stabilization in the
country and cost containment and efficiency measures taken by
the company. These factors resulted in significant margin
improvements (with EBITDA margin of 56.6% in the 12 months ended
September 2004 from 43.6% in fiscal 2002). Interest coverage and
funds from operations-to-total debt measures for the 12 months
ended September 2004 improved to 3.9x and 35.4%, respectively,
from 1.9x and 12.3% in 2002. Nevertheless, those ratios are
still lower than the 6.8x and 52.6% levels registered prior to
the devaluation, and the currency mismatch continues. TASA's
future cash-flow generation and financial profile will depend
primarily on the result of tariff renegotiations with the
government, the sustained economic recovery and stability in
Argentina, and the company's ability to contain costs. Margins
are expected to decline gradually with the upward adjustments in
wages and other costs.

In addition, the important amortization of mainly intercompany
debt improved TASA's debt-to-capitalization ratio to 58.8% and
the debt-to-12-month EBITDA to 2.4x as of Sept. 30, 2004
(compared to 72% and 4.7x, respectively, in December 2002).

Telefonica S.A. (TESA; A/Stable/A-1) directly and indirectly
owns 98% of TASA's shares. Although TESA provided several loans
in the past, the mentioned factors have somewhat weakened
Standard & Poor's Ratings Services' expectations of continuing
financial support from TESA to the Argentine operations.

TASA is one of two incumbent telephone companies in Argentina,
formed in 1990 after the privatization of state
telecommunications. Holding approximately 53% of the 8 million
lines in service in Argentina, TASA currently provides basic
telecommunications services (local, national, and international
long distance) throughout the country.

Liquidity

In spite of the completion of an exchange offer that reduced
maturities for 2004 and 2005, TASA's liquidity remains
relatively tight due to the limited funding flexibility for
Argentine companies and weaker expectations of support from
TESA. In addition, cash-flow generation is still affected by the
mismatch of peso flows and dollar debt burden.

As of Sept. 30, 2004, TASA had approximately $465 million in
short-term debt over a consolidated debt of $1,323 million.
Short-term maturities include intercompany loans for about $229
million, and Argentine pesos (ArP) 163.3 million of CP due in
May 2005 (equivalent to about $55 million). The company
cancelled $54.4 million that was due November 2004.

Although financial obligations with other group entities are
still rather significant (58% of the total short-term
obligations), their importance has been reducing since mid-2003.
Intercompany loans amounted to $269 million as of September 2004
compared to $864 million as of June 2003 (considering the
acquisition of Compa¤¡a Internacional de Telecomunicaciones
S.A.'s [COINTEL] debt in August 2003 applied to cancel TASA's
own intercompany debt).

TASA's internal cash generation and cash holdings, which
amounted to $103 million as of Sept. 30, 2004, are expected to
be devoted to fund capital expenditures, cancel third-party
maturities, and further reduce intercompany debt (including $134
million with Telef¢nica Internacional S.A (TISA), which
amortizes between January and November 2005, and additional
cancellations in the last quarter of 2004).

In late October 2004, the company issued the second tranch of
short-term bonds for ArP200 million (equivalent to about $67
million) due in October 2005 and April 2006, gradually reducing
foreign currency debt exposure.

Outlook

The negative outlook on TASA reflects our expectations that
TASA's cash-flow generation capacity will remain unclear as long
as the renegotiation of tariffs is not resolved. Additionally,
the company has to overcome the challenges regarding a sustained
economic recovery and stability in Argentina, given the exposure
to foreign currency debt.

Primary Credit Analyst: Ivana Recalde, Buenos Aires (54) 114-
891-2127; ivana_recalde@standardandpoors.com

Secondary Credit Analyst: Marta Castelli, Buenos Aires (54) 114-
891-2128; marta_castelli@standardandpoors.com


TELEFONICA HOLDING: S&P Issues Report on Ratings
------------------------------------------------

Rationale

The ratings on Argentine holding company Telefonica Holding de
Argentina S.A. (THA) are based on its indirect stake in
Telefonica de Argentina S.A. (TASA; of 32.4%), an Argentina-
based integrated telecom provider that has about a 53% fixed-
line share throughout the country. The ratings also reflect the
significant financial and regulatory challenges of operating in
the Argentine environment after the crisis in 2002, which
weakened TASA's debt-servicing ability (due to the fact that
most of its debt is foreign currency-denominated). Uncertainty
is high regarding the tariff renegotiation, which was mandated
by the government in early 2002 but is still pending. In
November 2004, the government extended the ruling of the
Emergency Law and the period for tariff and contracts
renegotiation until December 2005, which could result in
additional delays. Nevertheless, potential tariff adjustments
resulting from the renegotiation are not expected to compensate
for the effects of the devaluation of the peso and pesification
and freeze of tariffs. TASA's good market position and efficient
operations partially mitigate the negative factors.

Although the fact that almost all THA's financial debt is with
companies of the group significantly alleviates the company's
refinancing risk and flexibility, the mentioned factors have
somewhat weakened Standard & Poor's Ratings Services'
expectations of continued financial parental support. There are
no formal guarantees on the third-party debt, nor cross-default
clauses among debt held by THA, Compania Internacional de
Telecomunicaciones S.A. (COINTEL), TASA, and Spain's Telefonica
S.A. (TESA).

THA's overall financial profile is highly dependent on the
performance of its subsidiaries, as THA is a holding company
whose only significant asset is its stake in COINTEL, through
which it participates in TASA, its main source of funds through
dividends and management fees. Historically, dividends and
management fees were enough to cover selling, general, and
administrative expenses (SG&A) and interest. Nevertheless, since
2002, THA's financial measures were significantly affected by
the devaluation of the Argentine peso, as almost all the
financial debt is dollar denominated, while dividends and fees
are in pesos. This resulted in weak fixed-charge coverage,
calculated as the ratio of management fees plus dividends-to-
interest (effectively paid) plus SG&A, of 1.3x for the first
nine months of 2004. Paid interest in the first nine months of
2004 amounted to $17 million (out of a total accrued in that
period of $129 million). Financial measures are expected to
remain weak, due to the lower management fee levels (of 4% of
TASA's gross income since May 2003 from 9%) and no dividends
from COINTEL.

In addition, the non-cash foreign-exchange losses arising from
the largely dollar-denominated debt base significantly altered
THA's capital structure, resulting in negative net worth and a
debt-to-capitalization ratio of 228.3% as of Sept. 30, 2004
(compared to 50% before the devaluation of the currency).

Liquidity

THA's liquidity generation is very weak, but the arising risk is
mitigated by the fact that about 99% of its total debt is owed
to other companies of the TESA group. As of Sept. 30, 2004,
THA's financial debt amounted to $636 million, of which $629
million is loans with companies of the group, booked as short-
term. Only $7 million corresponds to THA's outstanding rated
notes (its only third-party debt) that mature in 2007. THA's
financial flexibility depends on its parent, while cash flow
ultimately depends on flows from TASA.

Outlook

Although THA has very little third-party debt, the negative
outlook reflects the close link with TASA's credit quality. The
negative outlook on TASA reflects our expectations that TASA's
cash-flow generation capacity will remain unclear as long as the
renegotiation of tariffs is not resolved. Additionally, the
company has to overcome the challenges regarding sustained
economic recovery and stability in Argentina, given the exposure
to foreign-currency debt.

Primary Credit Analyst: Ivana Recalde, Buenos Aires (54) 114-
891-2127; ivana_recalde@standardandpoors.com

Secondary Credit Analyst: Marta Castelli, Buenos Aires (54) 114-
891-2128; marta_castelli@standardandpoors.com


YACYRETA: Bank, Commission Create Fund to Complete Project
----------------------------------------------------------
An Argentine state-run development bank and the bi-national
commission that administers the Yacyreta hydroelectric project
on the border of Argentina and Paraguay have created a US$563.4-
million fund to complete the project by 2008, reports Dow Jones
Newswires.

The parties involved must sign the formal contract within 60
days. The fund will be administered by Argentina's Bank of
Investment and Foreign Trade (BICE).

The accord aims to raise water levels from the current 76 meters
above sea level to 83 meters. Payments into the fund, provided
by the Argentine government, will be spread over four years:
US$196.4 million this year, US$169.5 million in 2006, US$112.7
million in 2007, and US$84.8 million in 2008.

The new fund will also be used to pay for construction and
services, as well as compensation and expropriation fees related
to the upgrade.



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B E R M U D A
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GRN REINSURANCE: Claims Check to End March 4
--------------------------------------------
               IN THE SUPREME COURT OF BERMUDA

                           And

     IN THE MATTER OF Grn Reinsurance International Ltd.

                           And

          IN THE MATTER OF THE COMPANIES ACT 1981

TAKE NOTICE that the Supreme Court of Bermuda by order dated
January 13, 2005 has fixed the date for creditors of GRN
Reinsurance International Ltd. (the "Company") (formerly NRG
Victory International Ltd., formerly Victory Reinsurance
International Ltd), to file claims against the Company.

All creditors of the Company who believe they have claims
against the Company should complete and return a proof of claim
form to the Liquidator at the address appearing below on or
before close of business (Bermuda time) on Friday 4th March
2005.

If you have not received a proof of claim form and would like to
do so, or if you have any questions, please contact Mr. David
Alexander at the address appearing below.

CONTACT: Mr. John C. McKenna
         Liquidator
         Ernst & Young
         Reid Hall
         3 Reid Street
         Hamilton
         Bermuda HM 11
         Tel: 295 7000
         Fax: 294 5318


MARITIME MANAGEMENT: Proceeds With Voluntary Liquidation
--------------------------------------------------------
            IN THE MATTER OF THE COMPANIES ACT 1981

                            And

         IN THE MATTER OF Maritime Management, Ltd.

The Members of Maritime Management, Ltd., acting by written
consent without a meeting on 19th January, 2005, passed the
following resolutions:

(1) THAT the Company be wound up voluntarily, pursuant to the
provisions of the Companies Act 1981;

(2) THAT Robin J. Mayor be and is hereby appointed Liquidator
for the purposes of such winding-up, such appointment to be
effective forthwith.

The Liquidator informs that:

- Creditors of Maritime Management, Ltd., which is being
voluntarily wound up, are required, on or before February 9,
2005, to send their full Christian and Surnames, their addresses
and descriptions, full particulars of their debts or claims, and
the names and addresses of their solicitors (if any) to Robin J
Mayor at Messrs. Conyers Dill & Pearman, Clarendon House, Church
Street, Hamilton, HM DX, Bermuda, the Liquidator of the said
Company, and if so required by notice in writing from the said
Liquidator, and personally or by their solicitors, to come in
and prove their debts or claims at such time and place as shall
be specified in such notice, or in default thereof they will be
excluded from the benefit of any distribution made before such
debts are proved.

- Final general meeting of the Member(s) of Maritime Management,
Ltd. will be held at the offices of Messrs. Conyers Dill &
Pearman, Clarendon House, Church Street, Hamilton, Bermuda on
2nd March, 2005 at 9:00 a.m., or as soon as possible thereafter,
for the purposes of:

(1) receiving an account laid before them showing the manner in
which the winding-up of the Company has been conducted and its
property disposed of and of hearing any explanation that may be
given by the Liquidator; and

(2) by resolution determining the manner in which the books,
accounts and documents of the Company and of the Liquidator
shall be disposed of; and

(3) by resolution dissolving the Company.

CONTACT: Mr. Robin J. Mayor, Liquidator
         Clarendon House
         Church Street
         Hamilton, Bermuda


RXKINETIX NEWCO: Names Robin Mayor as Liquidator
------------------------------------------------
           IN THE MATTER OF THE COMPANIES ACT 1981

                          And

            IN THE MATTER OF RxKinetix Newco Ltd.

The Members of RxKinetix Newco Ltd., acting by written consent
without a meeting on 20th January, 2005, passed the following
resolutions:

(1) THAT the Company be wound up voluntarily, pursuant to the
provisions of the Companies Act 1981;

(2) THAT Robin J. Mayor be and is hereby appointed Liquidator
for the purposes of such winding-up, such appointment to be
effective forthwith.

The Liquidator informs that:

- Creditors of RxKinetix Newco Ltd., which is being voluntarily
wound up, are required, on or before February 9, 2005, to send
their full Christian and Surnames, their addresses and
descriptions, full particulars of their debts or claims, and the
names and addresses of their solicitors (if any) to Robin J.
Mayor at Messrs. Conyers Dill & Pearman, Clarendon House, Church
Street, Hamilton, HM DX, Bermuda, the Liquidator of the said
Company, and if so required by notice in writing from the said
Liquidator, and personally or by their solicitors, to come in
and prove their debts or claims at such time and place as shall
be specified in such notice, or in default thereof they will be
excluded from the benefit of any distribution made before such
debts are proved.

- A final general meeting of the Member(s) of RxKinetix Newco
Ltd. will be held at the offices of Messrs. Conyers Dill &
Pearman, Clarendon House, Church Street, Hamilton, Bermuda on
March 2, 2005 at 9:00 a.m., or as soon as possible thereafter,
for the purposes of:

(1) receiving an account laid before them showing the manner in
which the winding-up of the Company has been conducted and its
property disposed of and of hearing any explanation that may be
given by the Liquidator; and

(2) by resolution determining the manner in which the books,
accounts and documents of the Company and of the Liquidator
shall be disposed of; and

(3) by resolution dissolving the Company.

CONTACT: Mr. Robin J. Mayor, Liquidator
         Clarendon House
         Church Street
         Hamilton, Bermuda


SOPHIA LIMITED: Begins Wind-Up Proceedings
------------------------------------------
           IN THE MATTER OF THE COMPANIES ACT 1981

                           And

              IN THE MATTER OF Sophia Limited

The Members of Sophia Limited, acting by written consent without
a meeting on 20th January, 2005 passed the following
resolutions:

(1) THAT the Company be wound up voluntarily, pursuant to the
provisions of the Companies Act 1981;

(2) THAT Beverly Mathias be and is hereby appointed Liquidator
for the purposes of such winding-up, such appointment to be
effective forthwith.

The Liquidator informs that:

- Creditors of Sophia Limited, which is being voluntarily wound
up, are required, on or before February 9, 2005 to send their
full Christian and Surnames, their addresses and descriptions,
full particulars of their debts or claims, and the names and
addresses of their lawyers (if any) to Beverly Mathias, the
undersigned, at c/o Argonaut Limited, Argonaut House, 5 Park
Road, Hamilton HM O9, Bermuda, the Liquidator of the said
Company, and if so required by notice in writing from the said
Liquidator, and personally or by their lawyers, to come in and
prove their debts or claims at such time and place as shall be
specified in such notice, or in default thereof they will be
excluded from the benefit of any distribution made before such
debts are proved.

- A final general meeting of the Members of Sophia Limited will
be held at the offices of Argonaut Limited, Argonaut House, 5
Park Road, Hamilton HM O9, Bermuda, on February 28, 2005 at 9:30
a.m, for the purposes of:

(1) receiving an account laid before them showing the manner in
which the winding-up of the Company has been conducted and its
property disposed of and of hearing any explanation that may be
given by the Liquidator; and

(2) by resolution determining the manner in which the books,
accounts and documents of the Company and of the Liquidator
shall be disposed of; and

(3) by resolution dissolving the Company.

CONTACT: Ms. Beverly Mathias
         c/o Argonaut Limited
         Argonaut House 5
         Park Road
         Hamilton HM O9, Bermuda



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B R A Z I L
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BANCO SANTOS: Presents New Debt Proposal
----------------------------------------
Intervened Brazilian bank Banco Santos presented a new debt plan
to reestablish operations, indicating that its first
restructuring proposal was a flop, reports Dow Jones Newswires.

Under the new plan, the bank's owner, Brazilian businessman
Edemar Cid Ferreira, wants the Central Bank to maintain its
intervention for one more year, as opposed to the previous plan,
which would have immediately handed control of Banco Santos to a
special management team that could then negotiate a "market
solution" with creditors.

The latest proposal also removes an obligation for creditors to
leave their money untouched in the bank for 180 days.

The bank's management encouraged creditors to lobby the Central
Bank to allow time for a negotiated settlement, which it said
would be better than liquidation.

The latest move appears to be an attempt to forestall the Feb.
11 presentation of a report on the bank's condition to the
Central Bank.

Brazil's central bank took over Banco Santos, the country's 21st
biggest bank by assets, on Nov. 12 after the financial
institution ran out of cash to cover its bad loans. The central
bank shut Santos branches, its brokerage and asset management
units, the first government seizure of a bank since 1999.


EMBRATEL: Provides Telephone Service to Clube de Engenharia
-----------------------------------------------------------
Clube de Engenharia has just hired Embratel for the provision of
local telephone services. The institution will now be supplied
with a new telephone exchange connected directly to Embratel
exchanges. The users will be able to place local and long
distance calls through code 21.

The change in the telephone system is part of the project
designed to turn the Club's head office building located at Av.
Rio Branco into an "intelligent building", through latest
generation telecommunications and information resources.

Eight stores of the 25-storey building owned by the Club are
occupied by the its members. The remaining stores house other
sector companies. The entire building will now be provided with
Embratel's integrated telecommunications solutions for local,
DDD and IDD telephone services, data transmission, video and
Internet.

Embratel's local telephone service enables the direct connection
of the customers' PABX exchanges to Embratel's fully digital
exchanges. The service is available to the corporate market all
over the country.

Embratel offers a range of complete telecommunications solutions
to the market all over Brazil, including local, long distance
domestic and international telephone services, data, video and
internet transmission, and is present all over the country with
its satellite solutions.

CONTACT: Embratel Participacoes S.A.
         Rua Regenta Feijo
         166 sala 1687-B Centro
         Rio de Janeiro, 20060-060
         Brazil
         Phone: 5521-519-6474
         Website: http://www.embratel.net.br


EMBRATEL: To Invest $195M in New Satellite
------------------------------------------
Embratel, through Star One, has just signed an agreement with
Alcatel Space for constructing and launching Star One C2
satellite. The estimated total costs of the project sum US$ 195
million, including the satellite construction, launching and
insurance expenses.

Star One C2, together with Star One C1, whose construction is in
progress, is part of the renewal strategy of Star One satellite
fleet and will replace Brasilsat B1 and B2 satellites whose life
span is coming to an end.

"This investment attests Embratel's commitment to ensure the top
quality and the expansion of its satellite fleet, in addition to
offer new satellite communications services in Brazil and in
Latin America", says Carlos Henrique Moreira, CEO of Embratel.

Star One C2, weighting around 4 tons, will be launched by
Arianespace in the first quarter of 2007. It will have 44
transponders (equivalent to 36 MHz each) being 28 in C Band
(designed for general communications) and 16 in Ku Band (for
direct transmission of signs to users,   Internet access and
voice through the same antenna), plus an x Band transponder
exclusively for the Ministry of Defense of Brazil. It will cover
South America, Mexico and Florida.

C2, C1 and C12 satellites (due to be launched in February of
this year) will constitute the third generation of Star One
satellite launches. Today, B1, B2, B3 and B4 are in orbit with a
high utilization rate. The new satellites will enhance the
available capacity, the geographic expansion of the operation
coverage, and the offer of new KU band services, thus speeding
up the globalization process of Embratel's satellite services.

Embratel is pioneer in satellite communications in Brazil. In
1985, Brasilsat A1 was launched, forming with Brasilsat A2 the
first generation of Brazilian satellites for domestic
communications in Latin America.

Embratel satellites can receive and transmit television, radio,
telephone, internet and data signs for applications including
entertainment, tele-medicine, tele-education and business,
necessary for interconnecting the country and crucial for remote
communities.

Over 15 million Brazilian homes watch TV through Embratel
satellites free of charge. Today, Embratel satellites are being
used by the five major TV networks in Brazil, by independent
channels, by a number of banks, by most part of the country's
top corporations and by the Brazilian Government.

Embratel offers a range of complete telecommunications solutions
to the market all over Brazil, including local, long distance
domestic and international telephone services, data, video and
Internet transmission, and is present all over the country with
its satellite solutions.

CONTACT: Embratel Participacoes S.A.
         Rua Regenta Feijo
         166 sala 1687-B Centro
         Rio de Janeiro, 20060-060
         Brazil
         Phone: 5521-519-6474
         Website: http://www.embratel.net.br


NET SERVICOS: Shareholders to Vote on Debentures Issuance
---------------------------------------------------------
                EXTRAORDINARY GENERAL MEETING
                         CALL NOTICE

The shareholders of NET Servicos de Comunicacao S.A. ("Company")
are called to meet at the Extraordinary General Meeting to be
held on February 4, 2005, at 11:00 a.m., at the Company's
headquarters located at Rua Verbo Divino, 1356, 1§ andar, in the
city of Sao Paulo, State of Sao Paulo, to deliberate on the
following AGENDA:

(a) to approve the fourth public issuance of the Company's
debentures, not convertible into shares, with real and unsecured
guarantee ("Debentures");

(b) to delegate powers to the Company's Board of Directors in
order to (1) rectify and deliberate on all the terms and
conditions of the Debentures, not under the exclusive incumbency
of the General Meeting, by force of the Company's By-Laws or any
applicable rule, inclusive to rectify and deliberate on the
issues mentioned in the items VI to VIII of the Article 59 of
the Law 6,404, dated December 15, 1976, and further amendments
("LSA"), and any other amendments requested by the Securities
and Exchange Commission of Brazil ("CVM"); and (2) cancel the
non-placed Debentures in the first (1st) and second (2nd) series
of the fourth public issuance of the Company's Debentures;

c) to authorize the Company's management to take the necessary
measures to implement and carry out all the acts and documents
necessary for the registration of the Debentures issuance with
CVM;

(d) to approve the creation of real guarantees in favor of the
titleholders of securities issued by the Company "Multicanal
Notes") and by Net Sul Comunicacoes Ltda. ("Net Sul Notes", and,
jointly with "Multicanal Notes", "Notes") overseas, Debentures
and titleholders of securities, acknowledgment of indebtedness
instruments and bilateral loan agreements to be entered into
under the scope of the Company's financial restructuring, as
well as the approval for the execution of bilateral loan
agreements and acknowledgment of indebtedness instruments for
the purposes of the referred restructuring;

(e) to define the Company's favorable vote and of its direct and
indirect subsidiaries in general meetings and shareholders'
meetings related to the granting of surety and real guarantees
to the titleholders of acknowledgment of indebtedness
instruments and securities to be issued under the scope of the
Company's financial restructuring;

(f) to ratify the approval of the Company's capital increase
deliberated in the Board of Directors' Meeting ("RCA"), held on
November 3, 2004, in all its terms and conditions, as well as to
ratify the deliberations of RCA held on December 21, 2004,
referring to (i) the execution of acknowledgment of indebtedness
instruments, loan agreements, promissory notes, Notes and/or
other documents to be entered into under the scope of the
Company's financial restructuring; and (ii) the increase in the
number of shares to be subscribed and paid-up by the managers
taking part in the Company's financial restructuring;

(g) to approve the ratification of suspensive conditions
deliberated in the Company's RCA held on November 3, 2004, with
respect to the referred capital increase;

(h) to delegate powers to the Board of Directors to promote any
and all alteration to be necessary under suspensive conditions
set forth at the Company's RCA held on November 3, 2004, for the
realization of the capital increase under consideration; and

(i) to re-ratify the deliberations on the Company's Stock Option
Plan and its respective exercise, inclusive referring to the
examination of the Company's capital stock, with the resulting
amendment to the Article 5 of the Company's By-Laws.

The shareholders participating in the Fungible Custody of
Registered Shares of the Stock Exchanges intending to
participate in this Meeting shall submit a statement issued
forty-eight (48) hours before the Meeting, containing their
respective shareholding provided by the custody agency.

CONTACT: NET Servicos de Comunicacao S.A.
         Rua Verbo Divino 1356
         Chacara Santo Antonio
         Phone: 5511-5186-2000
         Sao Paulo, SP 04719-002
         Brazil
         Website: http://globocabo.globo.com


SADIA: Announces ADR Ratio Change
---------------------------------
Sadia S.A. is hereby notifying the market that on January 21,
2005, The Bank of New York, in its capacity as the depositary of
Sadia's ADR's, will be changing the ratio of shares per ADR from
the current thirty (30) preferred shares per one (1) ADR, to ten
(10) preferred shares per one (1) ADR.

To make this change, The Bank of New York will be distributing
two (2) additional ADR's for each outstanding ADR, at no cost to
holders. The trading of ADR's subject to this new ratio (1:10)
will begin on January 24, 2005.

- Holders of ADR's will not be required to take any action as a
result of this change;

- This is merely a technical change and will not affect the
trading of Sadia's preferred shares on the Sao Paulo Stock
Exchange (Bovespa), aiming only to improve the liquidity of
Sadia's ADR's on the NYSE.

Below follow more details on the process:

NYSE Ticker Symbol: SDA
CUSIP: 786326108
ADR Record Date: January 20, 2005
ADR Payable Date: January 21, 2005

- 2 additional ADR's per each outstanding ADR

Former ratio: 1:30
New ratio: 1:10

CONTACT: Sadia S.A.
         Rua Fortunato Ferraz
         Vila Anastacio
         2 Andar
         Sao Paulo, 05093-901
         Brazil
         Phone: 55-11-3649-3552
         Website: http://www.sadia.com.br


VARIG/TAM: Ending Code-Sharing Agreement
----------------------------------------
Brazil's two largest airlines, Viacao Aerea Riograndense SA
(Varig) and TAM Linhas Aereas SA have agreed with antitrust
authority (Cade) to end their code-sharing agreement. According
to Luiz Carlos Prado, an official from Cade, the agreement was
signed Thursday.

The two airlines started a code-sharing agreement after they
announced they were considering a merger early in 2003. But the
merger plan collapsed after the nonprofit Rubem Berta
Foundation, which owns 87% of Varig, balked at handing over
control of the airline. Since then, Cade has been pushing for
the companies to end their partnership.

In a statement published Thursday, Cade said the two airlines
would draw up a timetable by Feb. 15 for phasing out the code-
sharing agreement. That timetable will then be submitted to a
Feb. 23 meeting of Cade directors for approval.

"The program to be presented by the firms will have reasonable
deadlines that will be technically justified, to be done in such
as way as to preserve competition and the rights of the
consumers," Cade said.

The decision to end the code-sharing agreement could spell yet
more financial trouble for Varig. Cade had originally authorized
the code-sharing agreement to resolve Varig's estimated BRL6
billion ($1=BRL2.67) of debt.

However, the government continues to seek a solution to Varig's
debt problems. Vice President Jose Alencar reiterated Thursday
the possibility of a temporary takeover by the government,
followed by a quick sale to private investors or through a
public offer of shares on the stock exchange.

CONTACT:  VARIG (Viacao Aerea Rio-Grandense, S.A.)
          Rua 18 de Novembro No. 800, Sao Joao
          90240-040 Porto Alegre,
          Rio Grande do Sul, Brazil
          Phone: (51) 358-7039/7040
                 (51) 358-7010/7042
          Fax: +55-51-358-7001
          Home Page: www.varig.com.br/english/
          Contacts:
              Dorival Ramos Schultz, EVP Finance and CFO
              E-mail: dorival.schultz@varig.com.br

              Investor Relations:
              Av. Almirante Silvio de Noronha,
              n  365-Bloco "B" - s/458 / Centro
              Rio de Janeiro, Brazil


VASP: DAC Grounds Last Eight Flights Due to Inadequate Service
--------------------------------------------------------------
Viacao Aerea de Sao Paulo SA's (Vasp) financial woes deepened
Thursday after the civil aviation department (DAC) grounded the
last eight regular passenger routes operated by the ailing
airline.

DAC stripped Vasp of its permission to operate regularly
scheduled commercial flights, finding that the carrier had
failed to provide adequate service.

Regulators determined that of the 56 flights the carrier
scheduled in the past seven days, 42 did not take off because of
Vasp's policy of canceling flights with bookings of less than
50% of capacity to reduce operating costs.

DAC said the Company could fly charter flights. However, their
license expires in two months. To qualify for new routes, Vasp
will have to demonstrate that it has the financial resources and
technical capabilities to operate flights.

Meanwhile, the Company said late Wednesday it "deeply regretted"
the decision by its employees to stage an indefinite strike at
midnight.  Some 800 staffmembers voted to strike due to salary
delays.

In a statement, Vasp said the only way for it to survive is by a
joint effort of management and staff.

The Company has experienced financial difficulties since the
2001 recession that hit the industry. Its debts include BRL760
million owed to the Federal Airport Authority, known as
Infraero, for airport charges not paid since the 1990s.



=========
C H I L E
=========

ENDESA CHILE: Income Before Tax Rises 25% in 2004
-------------------------------------------------
Endesa Chile (NYSE: EOC), announced Thursday its consolidated
financial results for the period ended December 31, 2004.

Highlights for the Period:

- Income before taxes and minority interest of Endesa Chile for
the year 2004 rose by 25% over the year 2003 to reach US$365.8
million, US$72.5 million higher than the year before.

- The Company's operating income showed a better performance
than in 2003, amounting to US$662.0 million, a figure that
compares favorably with the US$622.5 million produced in 2003.

- The non-operating result also made a positive impact on the
Company's net income for 2004 as a result of a US$29.9 million
reduction in financial expenses. It should be noted that the
improvement in the result was despite a provision of US$30.7
million related to the re-liquidation of firm capacity in Chile
from the period April 2000 to March 2004 and the period April
2004 to November 2004, in accordance with the resolution of the
panel of experts.

- Endesa Chile's net income for 2004 was US$150.3 million,
which compares with net income of US$143.7 million in 2003.
Income tax to December 2004 amounted to US$167.6 million
compared to US$50.3 million at December 2003, a difference
produced mainly by an increase in deferred taxes as a result of
the effects of the tax losses caused by the devaluation of the
Argentine peso since 2002.

- The consolidated Cash Flows from Operations (Operating income
+ Depreciation & Operating Amortization) reached US$971.0
million during year 2004. The consolidated net debt was reduced
in US$537.4 million during 2004 compare with 2003. On 2004 the
investment amount reached US$183 million of which US$120 million
were investments in Chile.

The principal events occurring during 2004 are the following:

a) The commercial incorporation of the Ralco plant in the SIC
with a first unit as from September 6 and a second unit on
September 22, contributing a maximum capacity of 690 MW, higher
than the originally projected 570 MW. This greater capacity,
considering a late improvement in the country's hydrology in
2004, will enable it to contribute most significantly in meeting
the strong growth in energy demand on the Central Grid System,
SIC over the next few years.

b) Change in the domestic electricity scenario as a result of
the natural gas crisis in Argentina, leading to a rising trend
in the market prices for electricity, including the node price
which, as from May this year, was adjusted to incorporate the
increased cost of thermal generation due to the gas
restrictions, and later, in the process of price setting for the
period November 2004-April 2005, modifying the works plan
considering alternative technologies to natural gas for
supplying the future needs of the domestic electricity system.

c) Successful conclusion of the contractual commercial disputes
of the subsidiary in Brazil, Cachoeira Dourada, with its
principal customer, the Goi s state distribution company, CELG,
reflected an improvement in this subsidiary's financial
statements, with operating income practically quadruplicating
compared to the year 2003.

d) Positive signs from the Argentine authority in terms of the
justification process of electricity sector prices that began in
February with a first adjustment of the seasonal price for large
users and commercial customers and a second adjustment in
November, continuing in May and December respectively with the
transfer of the new natural gas price to variable generating
costs recognized by the regulator, leading to an increase in the
spot price for the generating companies.

e) Publication of tariff adjustments for energy generation by
the Peruvian entity Osinerg for the period November 2004-April
2005, which show an increase of 19 % in the monomic price in
dollars with respect to the tariff setting in May 2004. This
increase was due to a better estimate of the Works Plan, a
positive adjustment to demand growth, higher fuel costs and a
better estimate of the price for capacity.

f) Strong increase in demand for electricity in the countries
where we operate, with accumulated growth in 2004 above that of
2003 with 6.8% accumulated growth in Argentina, 5.4 % in Brazil,
2.7 % in Colombia, 7.9% in Chile's principal electricity system
and 5.9% in Peru.

g) Record daily level of production of Endesa Chile's operations
in Latin America, with a peak on November 23 of 204,115 MWh, 13%
higher than the daily record of previous years. This corresponds
to a load factor on such day of 58.1%.

h) Also, on January 26, 2005, the international rating agency
Moody's Investor Services upgraded the rating of Endesa Chile to
Ba1 with stable outlook, from Ba2. Although Endesa Chile
believes that this rating underestimate the solid situation of
the company, it was based on the operating and financial
efficiencies the company has achieved.

Main Events during the Period:

Investments

The completion of the Ralco project with its start-up on
September 6 concludes the Company's largest investment project
in the last 10 years. Its original installed capacity was
estimated at 570 MW but total capacity during the turbine
testing stage showed that it was potentially greater. On
December 9, 2004, the National Environmental Commission (CONAMA)
authorized the Ralco hydroelectric plant to operate with a
capacity of 690 MW, which implies contributing to the grid an
additional 120 MW and improving the distribution of the water
resource in order to cover demand at peak times, marginally
increasing annual average generation.

Tariffs and Legislation in Chile

The monomic price of the Alto Jahuel node set in April 2004 with
a load factor of 74.4% reaches Ch$25.39, which equates to
US$42.04 per MWh at the type of the setting. This tariff, which
is 6.2% higher in peso terms to that previously set, was
applicable as from May and until October 2004.

With respect to the node price-setting process of the SIC, which
culminated with the definitive report of October 2004, advised
by the CNE to the companies on October 19, 2004, it should be
noted that the free average price band operated on this
occasion. Changes were also introduced to the penalization
factors of energy and capacity by which the prices are defined
at the grid's different nodes.

For Endesa Chile, the effect of this last setting implied a rise
in the average price for billing regulated customers of 6.5% in
pesos and 4.3% in dollar terms compared to the average price at
the April 2004 setting.

Financing

During the first quarter of 2004, the company signed a loan
agreement for a total of US$250 million with an interest rate of
Libor plus a spread of 1.15% in order to refinance bank debt and
free the company from the guarantees of its subsidiaries
Pehuenche and Pangue and certain borrowing and investment
restrictions. This debt was replaced in November by a revolving
syndicated loan for the same amount, but with an interest rate
of Libor plus 0.375%.

In September 2004, the final documentation was signed for the
refinancing agreement of a loan to Central Costanera in
Argentina for an amount of US$47.7 million at an interest rate
of Libor plus a spread of 4.875%, extending the final maturity
of the debt from December 2004 to June 2006.

During 2004, the Endesa Chile's subsidiary in Peru made 4 bond
issues in the Peruvian capitals market, totaling a figure of
about US$35 million.

Emgesa has begun the process for a domestic bond issue for a
figure of around US$90 million, registering the program with
that country's Superintendency of Securities. Betania, another
subsidiary of Endesa Chile in Colombia, successfully made a bond
issue of approximately US$ 118 million in November at inflation
(CPI) + 6.29% and a term of 7 years.

Sustainability

In July 2004, Endesa Chile was chosen by Institutional Investor
Research Group as the best Latin American company in the
electric utilities category for its corporate governance. This
study was based on surveys of the most important participants in
the finance industry, including portfolio managers, investment
banks and analysts.

On September 13, 2004, Endesa Chile promised to respect and
comply with the nine principles of the Global Compact, an action
plan created by the United Nations for persuading through
ethical commitments companies from all parts of the world to
accept as an integral part of their strategy and operations,
principles that point to respecting human rights, the
environment and labor. This represents an important step by the
company in the field of sustainable development and corporate
social responsibility.

Endesa Chile recently improved its international evaluation in
Corporate Sustainability and will be able to maintain the logo
of membership of the Dow Jones Sustainability Index during 2005,
as in 2004. At December 31, 2004, Endesa Chile had also achieved
certification under the ISO 14001 international standard of 87%
of its installed capacity in Latin America.

Operating Income

The Company's consolidated sales in 2004 increased by 9.5% over
2003 to US$1,852.6 million. Physical sales of electricity grew
by 5.5 % and the average price of sales also showed a rise.
Endesa Chile's consolidated cost of sales amounted to US$1,128.8
million in 2004, an increase of 11.5% on the year before, mainly
the consequence of higher fuel costs for thermal generation
which amounted to US$213.9 million. Electricity provided by
thermal generation increased by 11.4% which allowed physical
energy purchases to be reduced by 23%, equivalent to 1,924 GWh.

The consolidated operating income in 2004 amounted to US$662.0
million, 6.4% higher than in 2003, due to improvements in
Colombia, Brazil and Argentina.

Operating income in Chile represented 40.6% of the Company's
total operating income. This contribution amounted to US$268.6
million, a reduction of US$16.9 million compared to 2003,
basically due to the higher variable costs of production. It
should be noted that this result is heavily influenced by the
lower result in the first half of the year which fell by an
amount close to US$25.1 million, being 17.3% below the level of
the first half of 2003. During the last quarter of 2004,
however, operating income from Chile rose by more than US$9
million over the same quarter of 2003, equivalent to growth of
14%, as a result of a 17% increase in hydroelectric generation.

In Argentina, operating income in 2004 was US$61.7 million,
representing 9.3% of Endesa Chile's consolidated operating
income for the year; this compares with US$ 59.4 million in
2003. The Argentine operation showed a significant 30% increase
in sales to US$266.1 million, reflecting the large increase in
generation and in electricity demand. The higher physical sales
of the Central Costanera subsidiary, which grew by 74% compared
to 2003, influenced by the ability of the Costanera plant to
operate not only with natural gas but also with fuel oil, are
partially offset by reduced sales by El Chocon due to the lower
hydrology in the Comahue area. The participation of the thermal
generation of Costanera rose from 50.3% of Endesa Chile's total
thermal generation in 2003 to 70.4% in 2004. The cost of sales
in Argentina increased by 41.0% to US$199.8 million in 2004
because of the higher cost of fuel which rose by 237.6% due to
the increased electricity generation at Costanera, which was
double the level of 2003, and the natural gas restrictions in
the Argentine market which led the Company to increase
generation with liquid fuels.

Operating income in Brazil of the subsidiary Cachoeira Dourada
represented 3.9% of Endesa Chile's consolidated operating income
in 2004. The former reached US$25.7 million, 281.8 % higher than
in 2003, showing the progress made by the company in terms of
its contractual dispute with its principal customer, CELG, which
was fully settled in 2004. Sales increased by 33.1% over the
year 2003, to US$75.4 million. The physical generation of
Cachoeira Dourada increased by 7.9% compared to 2003 as a
consequence of growing demand and favorable hydrology.

In Colombia, operating income in 2004 amounted to US$212.5
million, representing an increase of 34.4% compared to the level
of the year before and contributing 32.1% of Endesa Chile's
total operating income. The subsidiary Emgesa booked operating
income of US$181.0 million and Betania US$31.5 million,
equivalent to increases of US$32.9 million and US$21.5 million
respectively, compared to 2003. Energy sales in Colombia
improved by 17.6% as a result of stronger demand in the
Colombian market and good hydrology. Physical sales rose by 667
GWh and generation by 1,087 GWh, with a lower contribution from
thermal generation, which allowed energy purchases and fuel
costs to fall compared to 2003.

In Peru, operating income in 2004 of the subsidiary Edegel was
US$93.6 million, which compares with US$112.7 million in the
previous year. Edegel's operating income represents 14.1% of
Endesa Chile's total operating income. Sales showed growth of
7.7% during the year, equivalent to US$15.9 million, to a total
of US$221.3 million. Physical sales were down on the year 2003
because of the low hydrology in the area but the consequent
increase in price levels, also impacted by the rise in
international fuel prices, allowed it to offset the reduced
volume. However, the lower hydrology also affected the company's
operating costs, which increased by 44.6% over 2003 to a total
of US$114.4 million. The physical generation of Edegel fell by
3.9% to 4,285.2 GWh, with hydroelectric generation declining by
408.4 GWh and thermal generation increasing by 235.2 GWh, which
led to a greater expense on fuel and higher purchases of
electricity.

The consolidated Cash Flows from Operations (Operating income +
Depreciation & Operating Amortization) reached US$971.0 million
during year 2004, 10.8% increased compared to the same period of
2003 in constant US dollars. The distribution by country of the
EBITDA adjusted by ownership shows that Chile contributes with
58.5%, Colombia with 14.5%, Brazil with 7.9%, Peru with 7.7% and
Argentina with 11.4%.

Non-Operating Income

The Company recorded a negative consolidated non-operating
result for 2004 that was lower than in 2003, reaching a negative
US$296.2 million, signifying a 10% improvement. This improvement
is explained by US$28.6 million of lower net financial expenses,
US$29.7 million of higher non-operating income, US$2.5 million
of improved net income on investments in related companies and
US$20.5 million of higher gains from exchange differences,
offset by US$51.5 million of higher non-operating expenses.

Net result from investment in related companies. The improvement
in this item of US$2.5 million is basically explained by the net
income of our associate company Gasatacama that operates on the
Chilean SING grid.

Financial expenses less financial income. The reduction of
US$28.6 million in net financial expenses reflects the positive
impact of the financial strengthening plan, which was completed
in 2003. The appreciation of the Chilean peso against the dollar
also affected this result.

Monetary Correction

The improved result from monetary correction (price-level
restatements) of US$2.9 million, reaching US$4.0 million in 2004
compared to US$1.0 million in 2003. This is principally the
result of the higher inflation rate in Chile.

Exchange Differences

The increase in the gain from exchange differences of US$20.5
million in 2004 compared to 2003 is the result of a US$37.0
million gain in 2004 compared to that of US$15.5 million in
2003. This positive effect is due to the 6.1% appreciation of
the Chilean peso against the dollar during 2004 compared to a
17.4% appreciation in 2003, which negatively affected the
position we had in 2003.

Other Non-operating Income and Expenses

The higher other expenses less income of US$21.8 million are
mainly explained by a reduced result of US$48.8 million for the
appreciation of the Chilean peso against the dollar, mainly
offset by US$27.7 million of tax fines, re-liquidations of
energy and capacity, derivatives and provisions for obsolescence
of fixed assets of the Brazilian subsidiary Cachoeira Dourada in
2003.

Income Tax

Taxes showed an increase of US$117.3 million compared to 2003.
Consolidated income tax accumulated at December amounted to
US$167.6 million, composed of a charge for US$94.7 million for
income tax, which accumulates an increase over 2003 of US$2.6
million, and US$72.9 million for deferred taxes, representing a
rise of US$114.7 million compared to 2003. The higher income tax
of US$2.6 million is due to the improved taxable results of the
companies.

The higher charge for deferred taxes compared to 2003 when it
represented a benefit of US$41.8 million, was recorded mainly in
Argentina as a result of the effect of the significant
devaluation made as part of the Emergency Plan. This occurs
because in June 2003, the effects were recorded for the first
time of the tax losses of the companies which amounted at
December 31, 2003 to US$60.9 million, caused by the devaluation
of the Argentine peso since early in 2002. However, as a result
of the recovery in the exchange rate and improved results of the
companies, the tax loss has reduced, reflecting at December 2004
losses due to the reversal of deferred taxes of US$25.2 million.

Consolidated Balance Sheet Analysis

Current assets increased by US$254.8 million, mainly explained
by US$178.9 million of greater notes and accounts receivable
from related companies, basically Atacama Finance Co.; and an
increase in cash and time deposits of US$92.5 million. The 6.5%
reduction in fixed assets is primarily due to a year's
depreciation (US$306.4 million) and the effect of the exchange
rate on the fixed assets of foreign subsidiaries as a result of
methodology for carrying non-monetary assets in historic
dollars, in accordance with Technical Bulletin No.64, of
subsidiaries in unstable countries. The 28% reduction in other
assets is basically due to less notes and accounts receivable
from related companies due to the transfer from long to short
term of receivables due from Atacama Finance Co., and the
influence of the appreciation of the Chilean peso against the
dollar this year.

Short-term liabilities show a decline of US$84.6 million,
equivalent to 9.9% compared to the year before, basically due to
a reduction in notes and accounts payable to related companies
and an increase in borrowings from banks and financial
institutions and accounts payable. Long-term liabilities fell by
US$278.6 million, equivalent to 6.6%, mainly explained by lower
borrowings from banks and financial institutions resulting from
debt refinancing, also influenced by the appreciation of the
Chilean peso against the dollar this year. The minority interest
reduced by US$216.7 million mainly because of the fall in the
equity positions of foreign subsidiaries controlled in dollars,
in accordance with Technical Bulletin No.64.

The Company's liquidity ratios improved at December 2004
compared to the year before. The current ratio was 1.27 at
December 2004, improving by 51.2% compared to the previous year,
and the acid test reached 1.18, which compares with 0.77 at
December 2003. The improvement in the company's liquidity ratios
is mainly explained by higher current assets, mainly due to more
notes and accounts receivable from the related company Atacama
Finance Co.

The debt ratio at December 2004 has been reduced compared to
December 2003 as a result of the company's operating
performance, the prepayment of financial debt and the
appreciation of the Chilean peso against the dollar during the
year.

It is important to remember that the main input of hydro-
facilities is water, and both snow and water reservoirs are not
considered current assets in the accounting figures.

Consolidated Cash Flow(Chilean GAAP)

Main aspects of the current period on the effective cash flow
statement are:

a) Operating activities generated a positive flow of US$452.6
million, representing a decline of 12.1% compared to 2003. This
flow mainly comprises a net income for the year of US$150.3
million, plus charges to income that do not represent net cash
flows of US$273.4 million, asset changes affecting cash flows of
US$33.0 million, liability changes affecting cash flows of
US$(59.2) million, gains from the sale of fixed assets of
US$11.4 million and minority interest of US$76.8 million.

b) Financing activities generated a negative flow of US$197.5
million mainly from loan repayments of US$628.1 million, bond
repayments of US$55.8 million and dividend payments of US$132.5
million. This was partially offset by bonds issued of US$169.8
million and loans drawn of US$464.4 million.

c) Investment activities generated a negative flow of US$127.2
million, mainly explained by US$24.1 million of fixed assets
sales proceeds and other investment income of US$72.8 million,
which were basically offset by fixed asset acquisitions of
US$172.5 million relating to the construction of the Ralco plant
and net repayments and collections of loans with related
companies of US$56.2 million.

Most important changes in the markets where the company operates

ARGENTINA

- An increase was approved in August in seasonal energy prices
Res 842/2004). This established a separation for the first time
of demand of less than 10 kW; residential customers retain the
price levels current since February 2002 and non-residential
customers see their charges increased by almost 80%. The 10-300
kW segment will have an increase of 54% and those above 300 kW
an increase of 43%. The rises applied from September 2004.

- Res. SE 950/2004 has created a trust fund to be administered
by Cammesa to be used to finance the contracting of firm
transport and the purchase of natural gas to supply the thermal
plants.

- On December 17, the convoking of generating companies was
closed for adhering to the agreement proposed by the government.
The principal companies in the sector attended, including Endesa
Chile, Total and AES, which concentrate close to 65% of the
ownership of the new plants to be built under the agreement. It
should be remembered that the agreement pretends to devote part
of the credits that the generators produce between January 2004
and December 2006 to the construction of between 800 and 1,600
MW of additional generating capacity on the SADI.

BRAZIL

- On July 31, MME published its decree 5163-2004 which defines a
new regulatory framework for the electricity sector, especially
for the commercialization of electricity and the concessions
process for the entry of new plants. It separates the form of
free and regulated market contracting, establishing that
distributors purchase through tenders to be organized by state
entities. The supply of generation for these tenders will be
divided between existing and new energy (generators that join as
from the year 2009). In September, the rules and contract model
for energy bidding were published. These bids are the only way
to sell energy to distribution companies.

The so-called "MegaLeilao" was held on December 9, when sales
were closed to distributors for 17,008 average MW for the period
from 2005 to 2008. The average sales prices for December 2004
were R$57.5 per MWh for sales between 2005 and 2006, R$67.3 per
MWh for the period 2006-2008 and R$75.5 per MWh for 2007-2008.
Cachoeira Dourada took part in the bidding but was not awarded
any demand block.

CHILE

- The commercial incorporation of the Ralco plant to the SIC was
made on September 6 with the first unit and on September 22 with
the second unit.

COLOMBIA

- The Andean Regional Electricity Integration Agreement was
signed by the Ministries of Mines and Energy of Colombia, Peru
and Ecuador. This allows Colombia to reach Ecuador with a third
interconnection line and guarantees the sale of some 100 MW in
Peru.

- The Energy Plant Unit (UPME) approved a transmission expansion
that contemplates the expansion to 500 MW of the interconnection
line with Ecuador and a reinforcement of the national
transmission system.

PERU

- Osinerg published its proposed tariff adjustments for energy
generation for the period November 2004-April 2005, confirming
the definitive tariffs with a 18.8% increase in the monomic
price in dollars compared to the tariff setting of April 2004.

- The Congress in full session approved in December a bill (Law
28447) that modifies some clauses of the Electrical Concessions
Law and repeals DS-010-2004-EM mentioned above. Under this, the
calculation horizon of the electricity generation tariff would
be modified from four to three years (24 months forward and the
12 months prior to the calculation date). It is also
contemplated that the bar tariffs will be set annually by
Osinerg rather than semi-annually. It is expected that these
modifications will eliminate uncertainties in the projection of
supply and demand in order to motivate the construction of new
electricity plants and stabilize regulated prices.

- On December 25, the El Peruano Official Gazette published
Supreme Decree Nø 045-2004-EM approving the Regulation for the
Import and Export of Electricity (RIEE). In general terms, this
regulation fits in with the agreements signed following the
Decision CAN 536 of 2002, with a scheme very similar to that
applied between Colombia and Ecuador.

Market risk analysis

ARGENTINA

- Hydrology: Rainfalls during 2004 in Argentina have been normal
(Limay, C.Cura and Neuquen basins) and dry (74% in the Uruguay
and Paran  basins). Flows improved in the fourth quarter in
Salto Grande; but these again fell in the last days of December.
The light thaws in the southern zone caused a fall in the flows
to the system's principal reservoirs.

Fuel prices: The second stage of the well-mouth gas price rise
was applied in November, which was transferred to MEM prices
through the authorization of the dispatch variable costs of the
thermal units. Wholesale electricity prices rose by around 10%
in this respect.

Variation in demand : Exports to Brazil have remained at zero
since February 2002. Demand increased over 6.8% in the year
2004.

BRAZIL

- Hydrology: Average water flows in the South East-Center West
region in the third quarter were above the historic average
except in September when they were 86%. During the fourth
quarter, they were around historic levels. Reservoir water
levels in all regions are above the levels of 2003.

Fuel prices: Fuel prices for the thermal generation are
irrelevant for the Company as our installed capacity in Brazil
is totally hydroelectric.

- Variation in Demand: Demand increased over 5.4% in the year
2004.

CHILE

- Hydrology: The probability of an accumulated surplus for the
period April- December 2004 is 62.7 %, which represents normal-
dry hydrology in the system.

Fuels risk: Resolution 659 of the Argentine Secretary of Energy,
that establishes the current complementary procedure for the
domestic supply of natural gas, maintains a permanent cut for
the SING from the North West basin which has affected the normal
dispatch of the combined-cycle plants which have had to replace
the eventual shortfall with liquid fuels, thus raising the
system's costs. There were cuts on the SIC which reached an
average of 3.8 MMm3 per day between the period April - September
reducing to 2.3 MMm3 per day during October - December. Diesel
and coal prices in recent months have seen increases on the
international markets.

Variation in demand: Demand increased near 7.9% in the year
2004.

COLOMBIA

- Hydrology: Total flows on the SIN during 2004 have been 88%,
i.e. normal conditions. However, flows for the group companies
have been in surplus for Emgesa (119% of average for Guavio) and
in deficit for Betania (87 % of average).

Fuel prices: Because of the mechanisms of declaration of offers,
the fuels price is only one component of the declared price. In
dry conditions, the declared price could rise because of
producers' perceptions. The Endesa group has coal thermal
generation so an increase in the price of this fuel would affect
the production costs of that plant.

However, given the present hydrology, the operation for merit of
these plants has been low.

Variation in demand: Demand increased near 2.7% in the year
2004.

PERU

- Hydrology: During 2004, Rio Rimac discharge were 18% lower
than the year 2003, which corresponds to 83% of the average
history (1965-2003) considering it a dry year. Yanango plants
affluent were 18% lower than the year 2003, which means 63% of
the average history considering it a dry year. Finally, the
Chimay plant 2004 year discharge were 2% lower than the previous
year, equivalent to 95% of the average history consider semi
hummed.

Fuel prices: The international oil price directly affects the
price of liquid fuels used by most of the thermal plants, so
energy prices in the system are severely affected and the value
of firm contracts reduces.

Variation demand: Demand increased over 5.9% in the year 2004.

Exchange And Interest Rate Risk Analysis

The company has a high percentage of its debt denominated in
dollars as most of its sales in the different markets where it
operates show a high degree of indexation to that currency. The
Brazilian and Colombian markets show less indexation to the
dollar so the subsidiaries in those countries have greater debt
in local currency. In the case of Argentina, a large portion of
revenues comes from the export of energy to Brazil which is
dollar indexed, thus reducing the exchange risk exposure in that
country.

Despite this natural exchange rate cover, the company in a
scenario of high dollar volatility has continued with its policy
of partially covering it liabilities in that currency in order
to smooth out the fluctuations that cause exchange rate
variations in the results. In view of the large reduction in the
accounting mismatch in recent years, which has reached prudent
levels, the company has modified its dollar-peso hedging policy
to establish a maximum admissible accounting mismatch over which
hedging transactions will be used.

At December 31, 2004, the company in consolidated terms has
covered in Chile, through dollar-peso forward contracts, an
amount of US$78 million, compared to US$53 million at the end of
2003. The change is basically due to the increase in accounting
mismatch and the modification of the above-mentioned policy.

Regarding interest rate risk, the company has a ratio of fixed
to floating rate debt of approximately 90%:10% (fixed: variable)
at December 31, 2004. The percentage of fixed-rate debt has
fallen slightly when compared with the 95%:5% (fixed: variable)
ratio at the end of the previous year, but it equally permits
minimizing the risk of interest rate fluctuations.

To view financial statements:
http://bankrupt.com/misc/Endesa2004.pdf

NOTE:

All figures are in constant Chilean pesos and are in accordance
with the Chilean Generally Accepted Accounting Principles (GAAP)
as required by Chilean authorities (FECU).

December 2003 figures have been adjusted by the CPI variation
year-to-year, equal to 2.5%. The figures expressed in US Dollars
were calculated based on the December 31, 2004 exchange rate of
557.4 pesos per dollar.

The consolidated financial statements of Endesa Chile for the
period ended December 31, 2004, include all of the Company's
Chilean subsidiaries, as well as its Argentinean subsidiaries
(Hidroelectrica El Chocon S.A. and Central Costanera S.A), its
Colombian subsidiaries (Central Hidroelectrica de Betania S.A.
and EMGESA), its Brazilian subsidiary (Centrais Eletricas
Cachoeira Dourada S.A.), and its Peruvian subsidiary (Edegel)

CONTACT: Mr. Jaime Montero
         Investor Relations Director
         Endesa Chile
         Phone: (56-2) 634-2329
         E-mail: jfmv@endesa.cl


ENERSIS: Net Income Nearly Triples in 2004
------------------------------------------
HIGHLIGHTS
[All figures in Chilean Pesos]

Net Income more than doubled, based on an important 15.4%
improvement in Operating Income, as well as a 20.9% increase in
Non Operating Income.

Operating Income improved basically as a consequence of higher
Operating Income in our :

- Generation subsidiaries in Colombia, Argentina and Brazil
- Distribution subsidiaries in Colombia, Brazil, Chile and
Argentina

Non operating income also improved, and mainly due to a :

- 20.9% reduction in net financial expenses
- 73.5% increase in net income from related companies
- 226.0% increase in net of monetary exposure

Physical sales confirmed the increasing trend exhibited since
2H03, as a reflection of the recovery of the economy.

- Physical sales in generation increased 5.5%, from 50,633 GWh
to 53,443 GWh

- Physical sales in distribution increased 5.5%, from 49,577
GWh to 52,314 GWh

As in previous quarters, our client base grew again, adding more
than 440,000 new clients to be served by our distribution
subsidiaries.

Demand for electricity showed a sustained growth in all our
concession areas, as follows :

Argentina: 5.3%
Brazil: 4.5%
Chile: 7.6%
Colombia: 4.3%
Peru: 7.1%

As result of our efforts to improve the overall efficiency in
our distribution business, labor productivity increased 6.4%,
from 1,429 clients per employee in 2003 to 1,521 in 2004.

In Chile, the new hydroelectric power plant Ralco was authorized
to increase its installed capacity from 570MW up to 690MW.

As planned, indebtedness was reduced by US$206 million.

Moody's upgrade rating of Enersis to Ba1 from Ba2 with stable
outlook.

GENERAL INFORMATION

Enersis (NYSE: ENI), announced Thursday consolidated financial
results for the year ended December, 2004. All figures are in
both US$ and Ch$, and in accordance with Chilean Generally
Accepted Accounting Principles (Chilean GAAP) as shown in the
standardized form required by Chilean authorities (FECU).

Variations refer to the comparison between 2004 and 2003 and
figures have been adjusted by the CPI variation with the one-
month lag accounting convention between both periods, equal to
2.5%.

For the purpose of converting Chilean pesos (Ch$) into US
dollars (US$), we have used the exchange rate prevailing as of
December 2004, equal to US$1 = Ch$557.40, which compared to the
exchange rate of US$1 = Ch$593.80 prevailing as of December
2003, represents a Chilean nominal peso appreciation of 6.13%
against the US$.

The consolidation includes the following investment vehicles and
companies,

a) In Chile: Endesa Chile (NYSE: EOC), Chilectra, Synapsis, CAM
and Inm. Manso de Velasco.

b) Outside Chile: Distrilima (Peru), Cerj and Investluz
(Brazil), Edesur (Argentina), Luz de Bogota(Colombia) and
Enersis Internacional.

MARKET INFORMATION

Equity Market

The improved risk perception of Latin America, together with the
recovery in demand for electricity in the majority of the areas
under concession, was reflected in a sustained growth in the
liquidity of Enersis shares, both on the local market and New
York Stock Exchange. During the year 2004, market capitalization
increased 16.0% from US$4,729 million to US$5,486 million.
Additionally, the share price rose from $86.0 to $93.66.

During 2004, the ADR price rose by 15.6%, from US$7.36 to
US$8.51, which compares very favorably with respect to the 3.1%
variation of the Dow Jones Index for the same period.

Debt Market

The risk perception of bondholders has improved during 2004,
reaching prices over 100% of par value. This reflects the market
confidence in the capacity of Enersis to pay its debt.

RISK RATING CLASSIFICATION

INTERNATIONAL RISK RATING CLASSIFICATION:

Standard & Poor's: BBB- / Stable
Rationale:

"The BBB- corporate credit rating on Enersis reflects its solid
business position in Chile and significantly improved financial
profile, offset by the weak performance of its investments in
Argentina and Brazil".

Fitch: BBB- / Stable
Rationale:

"The ratings and Rating Outlook of Enersis reflect the success
of the company's financial strategy implemented during 2003 and
early 2004, which resulted in an improved capital structure and
increased financial flexibility consistent with Fitch Ratings'
expectations".

Moody's: Ba1 / Stable (upgrade 25/01/05)
Rationale:

"Key macroeconomic improvements and stronger financial
performance support the rating upgrade. In Moody's view a number
of regulatory and company developments in 2004 help support on-
going improvements at Enersis".

LOCAL RISK RATING CLASSIFICATION:

Feller Rate: A+ / Stable
Fitch: A / Stable
Humphrey's: BBB / Stable

CONSOLIDATED INCOME STATEMENT ANALYSIS
(Source in $ FECU)

Net Income

As of December 2004, the company registered profits of $44,308
million that represents an increase of $31,528 million or 246.2%
respect to profits of $12,780 million achieved in 2003. The
increase in results partially is explained mainly by the
improved operating income and the lower interest expense during
the period, partially offset by the increase in tax payments,
higher minority interest and lower negative goodwill. This
variation is explained as follows:

Operating Income

Operating income as of December 2004 amounted to $634,202
million, reflecting an increase of $84,704 million, or 15.4%,
with respect to the previous year. This increase is principally
due to an important increase in operating income in the
Generation subsidiaries in Colombia, Brazil and Argentina and in
the Distribution subsidiaries in Colombia and Argentina.

If we compare the operating income, deducting the effects of the
appreciation of the Chilean Peso against the US Dollar, (6.1%
between December 2003 and December 2004 from $593.80 to $557.40,
respectively) the increase in Operating Income would have been
22.1%.

Non Operating Income

The Company's non-operating result improved by $97,628 million
or 20.9% decreasing from a loss of $466,281 million as of
December 31, 2003 to a loss of $368,653 million as of December
31 this year. This is principally due to lower interest expense,
to the effects of exchange differences and to profits on
investments in related companies. Financial expenses net of
financial income decreased by $75,523 million or 20.9% from a
net expense of $362,027 million in 2003 to a net expense of
$286,504 million in 2004. This reduction in interest expense is
mainly the result of lower indebtedness and a decline in
interest rates.

Income from investments in related companies shows an increase
of $13,190 million or 73.5%, rising from a profit of $17,955
million as of December 2003 to a profit of $31,145 million as of
December 2004.

This is due basically to the registered profit of $11,857
million from the affiliate Central Fortaleza (CGTF) as a result
of the initiation of the operations of the plant at the
beginning of the year 2004 and to the increase of $6,486 million
in the profit registered from Gas Atacama, partially compensated
by the reduction of $4,975 million in the profit registered from
CIEN.

Amortization on positive goodwill remains at the same levels
with no significant variations. This amounted to $53,201
million, a reduction of 2.5%. The reduced amortization is due to
the effect of the Chilean Peso exchange rate on the foreign
subsidiaries controlled in US Dollars and that have a positive
goodwill.

Net other non-operating income and expenses reflect an increase
of $16,891 million, rising from a net loss of $56,832 million in
December 2003 to a net loss of $73,723 million as of December
2004. The principal reasons for this variation are as follows:

- A decrease of $84,677 million in profits on the sale of
investments.

- A rise of $12,549 million in net expenses on the
recalculation of power in the Central Interconnected system.

- An increase of $4.488 million in the Equity Tax of 1.2% on
all companies established in Colombia.

- Net losses amounting to $5,240 million on derivative
instrument contracts.

- A reduction of $2,434 million in dividends from affiliated
companies.

The above was partially compensated by the following:

- A reduction of $12,252 million in losses as a result of the
adjustment on the conversion to Chilean norms following the
application of Technical Bulletin N§ 64, principally on the
subsidiaries in Brazil. This was mainly produced by the
appreciation of the Brazilian Real against the US Dollar during
the year 2003 and its impact on the structure of the monetary
assets and liabilities.

- A reduction of $56,225 million in provisions on contingencies
and lawsuits.

- A reduction of $16,182 million in expenses on Brazilian
Pension Schemes.

- Indemnity of $7,657 million received by Edesur from Alstom-
Pirelli on the case involving the Azopardo sub station.

Price-level restatement and foreign exchange differences as of
December 2004 show an increase of $24,448 million with respect
to the same period of last year, improving from a loss of
$10,818 million as of December 2003 to a profit of $13,630
million during the current period. This is principally due to
the effects of holding, during the first half of the year, an
active position, when the US Dollar was at its highest rate in
the year, then having a more passive position, when the US
Dollar fell till it assumed a revaluation of the Chilean Peso of
6.1% as of December 2004. During the previous year, the
revaluation of the Chilean Peso was 17.4% and this had a
negative effect on the position we were holding in 2003.

Income Tax and Deferred Taxes. As of December 2004 the company
shows an increase of $94,631 million in tax expenses with
respect of the previous year, rising from $42,610 in December
2003 to $137,241 million in the current year.

The reduction of $12,560 million in income tax is mainly
explained by the fact that in the year 2003 the company
recognized the tax on profits resulting from the sale of its
investments in Rio Maipo, Canutillar and Infraestructura 2000
amounting to $23,120 million. This was partially compensated by
the increase in taxes this year due to the increase of $6,452
million and $8,749 million in taxable profits in the
subsidiaries, Codensa and Emgesa, respectively, and the rise in
the subsidiaries Edelnor and Cerj of $3,400 million and $3,247
million, respectively.

With regard to deferred taxes, these show a negative variation
of $107,191 million, explained mainly by the generating
subsidiaries in Argentina (Costanera and Choc¢n) for $47,961
million. This is the outcome of the fact that in June, 2003 the
companies registered for the first time the effects of tax
losses (mainly the devaluation of the Argentine Peso), that the
companies had as of that date ($24,332 million in profits from
deferred taxes). However, as a result of the recovery in the
exchange rate and of the improved results of the companies, the
tax loss has reduced, reflecting losses of $14,028 million as of
December, 2004 due to the reversal in deferred taxes.

Other companies that show significant increases in expenses on
deferred taxes include: Cerj with $27,783 million, Enersis with
$12,899 million, Edelnor with $5,150 million, Endesa Chile with
$8,362 million and Edegel with $5,352 million.

Amortization on negative goodwill in 2004 amounted to $17,107
million which, when compared to the same period of the previous
year, reflects a reduction of $35,349 million. The reduction in
the amortization is explained by the acceleration that took
place in 2003 of the greater added value following the
investment in Cerj that took place at the beginning of 2003.

Liquidity ratio as of December 2004 was 1.49, a 49.0%
improvement over the ratio as of the same date in the previous
year. This reflects the improved financial situation of the
company following the Capital Increase and the rescheduling of
debts carried out in the last two years.

Leverage ratio as of December 31, 2004 was 0.85 times,
reflecting a slight fall of 3.7% from the ratio for the same
period of the year 2003. This is fundamentally due to the effect
of the exchange rate in Chile.

On the other hand, return on equity improved to 1.73%. As of the
same date of last year, this was 0.49%. This increase in yield
is the result of a larger profit for the period with respect to
last year.

Return on assets rose from 0.12% in December 2003 to 0.42% as of
December 2004. This increase is basically due to the improved
results for the period and to the reduction in total assets. As
of December 2004 was 0.12%, the same amount of December 2003.

CONSOLIDATED BALANCE SHEET ANALYSIS

The Company's total assets reflect a decrease of $475,368
million respect to the same period of the previous year. This
was principally due to:

- A decrease of $613,947 million, or 7.4% in Fixed Assets due
principally to the depreciation for the year of $379,491 million
and the effect of the exchange rate on the fixed assets of the
overseas companies as a result of the methodology of carrying
the non-monetary assets in historic Dollars, in accordance with
Technical Bulletin N§ 64 in the subsidiaries located in unstable
countries. This is partly compensated by new incorporations
amounting to $265,934 million.

- Current Assets show an increase of $362,600 million due
principally to:

An increase of $29,465 million in cash and of $188,083 million
in term deposits due principally to an increase of $152,564
million in deposits in Codensa, for a future reduction in
capital, $33,258 million and $16,327 million in Endesa Chile and
Betania respectively, as cash surpluses, partially compensated
by a reduction of $13,541 million in deposits in Emgesa and of
$10,343 million in Choc¢n, held to pay dividends.

Increase of $96,899 million in short term accounts receivable
from related companies, explained basically by the due date
within one year of the loan to Atacama Finance for $104,134
million, partially compensated by smaller accounts receivable
from Gas Atacama for $2,681 million, from Cemsa for $1,874
million and from Cien for $1,049.

An increase of $49,890 million in sales debtors, mainly due to
the increase in invoicing at the subsidiaries Codensa, an
increase of $17,647 million, Chilectra $6,395 million, Investluz
$6,173 million, Emgesa $5,921 million, Cerj $4,167 million and
Edelnor $4,055 million, amongst others, partially compensated by
Cachoeira Dourada that decreased by $7,379 million.

An increase of $34,819 million in tax recoverable, mainly in
Elesur for $56,363 million and Codensa for $15,596 million,
partially compensated by reductions of $14,844 million in
Enersis, $11,895 million in Cerj, $9,682 million in Endesa and
$2,904 million in Coelce.

An increase of $28,147 million in prepaid expenses, mainly from
Cerj and Investluz for $21,704 and $3,215 million, respectively,
on the regulatory asset and Lot A.

A decrease of $39,660 million in other current assets, mainly as
a result of the reduction of $21,901 million, a reduction of
$8,953 million in forward contracts and repro agreements, a
reduction of $8,953 million in guarantee deposits and a
reduction of $4,163 million in deferred expenses on credits for
$4,163 million.

A reduction of $32,735 million in sundry debtors due mainly to
the payment from OHL of $38,730 million for the sale of
Infraestructura 2000 and $4,023 million less in prepayments to
suppliers in Codensa, partially compensated by the recalculation
of the power in the Central Interconnected System for $17,572.

Other long term assets show a decrease of $224,020 million,
explained mainly as follows:

A reduction of $131,875 million in accounts receivable from
related companies, explained basically by the maturity within a
year of the loan of $131,875 million to Atacama Finance
transferred to short term during the year 2004 and payment of
part of the loan.

A reduction of $66,372 million in the positive goodwill that
corresponds principally to the amortization of the year 2004 for
$53,201 million. The difference is the result of the exchange
rate in Chile for the goodwill in the subsidiaries controlled in
Dollars.

A reduction of $86,804 million in Investments in Other
Companies, basically the investment in Empresa Electrica de
Bogota, as a result of the liquidation of Luz de Bogota and the
transfer to minority interests of its holding.

A reduction of $59,843 million in other long term assets due to
the decrease of $46,527 million in deferred commissions and
expenses on loans, a reduction of $23,070 million in the effects
of the valuation to a Fair Value of the derivatives and a
reduction of $5,184 million in post-retirement benefits,
compensated partially by an increase of $11,161 million in
expenses and discounts on bonds The total liabilities show a
reduction of $475,368 million with respect to the same period of
the previous year. This is principally due to:

Short-term liabilities show a reduction of $136,519 million or
11.8% as a result of:

Reduction in the short term and the short-term portion of the
long-term obligations with banks of $128,037 million and $62,896
million respectively, as a result of prepayments of the Edesur
loan for $63,284 million and of the Codensa loan for $82,340
million.

Reduction of $16,609 million in other current liabilities,
principally due to the reduction of $29,680 million in
derivative contracts and their fair value.

Increase of $34,365 million in short term obligations with the
public following the transfer to short term of the Edegel bonds
for $22,733 million and the Cerj bonds for $16,522 million.

Increase of $32,172 million in accounts payable, principally in
Endesa and Edesur for $21,023 million and $11,956 million,
respectively.

Long term liabilities increased by $21,707 million or 0.6% due
basically to the following:

Increase of $136,723 million in obligations with the public,
taken to prepay debts with banks.

Increase of $57,348 million in other long-term liabilities,
mainly in Enersis due to the Fair Value of the derivative
instruments taken.

Increase of $56,340 million in long term deferred taxes, mainly
in Endesa and Edelnor for $39,396 million and $14,805 million,
respectively.

Reduction of $228,630 million in obligations with banks
following prepayments of credits with cash surpluses or with the
proceeds of bond issues.

Minority interests fell by $308,008 million due to the increase
in the participations in Cerj and Costanera and to the
liquidation of Luz de Bogota, added to the effect of the
reduction in the investments in the foreign subsidiaries
controlled in Dollars in accordance with Bulletin N§ 64.

Equity decreased by $52,548 million with respect to December
2003. This variation is explained principally by the reduction
of $96,275 million in other reserves provoked by the revaluation
of the Chilean Peso and its effect on the equity given the
difference in conversion adjustment on the investments
controlled in US Dollars, partially compensated by the increase
of $13,961 million in retained earnings and by the increase of
$31,528 million in the profit for the period.

CONSOLIDATED CASH FLOW ANALYSIS

cash flow is comprised mainly of:

Operating activities generated a net positive cash flow of
$618,005 million, an increase of $29,166 million with respect to
that obtained as of the same date of the previous year. As of
December 2004, the operating cash flow is comprised mainly of:

The profit for the period amounting to $44,308 million, plus:

Charges of $589,794 million to the income statement that do not
represent cash flow and correspond mainly to the Depreciation
for the period for $379,491 million, write-offs and provisions
for $38,380 million, amortizations of positive goodwill of
$53,201 million, the other charges that do not represent cash
flow for $111,142 million among which is the negative effect of
the conversion of the overseas branches to the Technical
Bulletin for $30,810 million and,

The variation of net liabilities that affect the cash flow by
$107,571 million.

The above was partly compensated by:

Increase in net liabilities that affect the operating cash flow
of $38,701 million, credits for $78,124 million that do not
represent cash flows, of which $15,464 million correspond to the
positive effect of the conversion of the overseas branches.

Profit on sales of assets of $6,841 million.

Financing activities produced a negative cash flow of $189,124
million due mainly to the payment of loans for a value of
$1,191,305 million, payments of dividends for $97,013 million,
the payment of Bonds for $22,110 million and division of capital
of subsidiaries for $21,172. The above is partly compensated by
the receipt of loans for $827,706 million, bond issues for
$328,720 million and other sources of financing for $22,781
million.

Investment activities generated a net negative cash flow of
$193,905 million that correspond mainly to the incorporation of
fixed assets for $265,934 million. Outstanding among these is
the investment made by Endesa in the Ralco Power Plant that for
the 2004 period was $65,258 million and other payments for
$1,592 million partially compensated by other income from
investments for $40,574 million, recovery of $15,295 million in
loans to related companies and the sale of subsidiaries for
$2,557 million.

ANALYSIS OF THE EXCHANGE RISK AND THE INTEREST RATE

The company has a high percentage of its credits expressed in US
Dollars as the greater part of its sales in the different
markets where it operates is mainly indexed to that currency.
Nevertheless, the Brazilian and Colombian markets are less
indexed to the Dollar and, therefore, the subsidiaries in those
markets have most of their debt in local currency. In the case
of Argentina, an important proportion of the income is derived
from exports of energy to Brazil and these are indexed to the
Dollar, reducing the exposure to an exchange risk in that
country.

Despite this natural hedge of the exchange risk, in a scenario
of a high volatility of the Dollar, the company has continued
with its policy of partly covering its debts in Dollars in order
to mitigate the effects of the fluctuations in the exchange rate
on the results. Considering the important reduction in the
accounting mismatch in recent years, achieving prudent levels,
the company has modified its policy on Dollar-Peso hedging in
order to establish a policy of covering the cash flows, together
with a maximum permissible accounting mismatch, on which hedging
operations will be performed.

As of December 2004, on a consolidated basis, the company has
hedged in Chile, by means of USD/UF Swap operations, an amount
of US$700 million, compared to US$219 million in forward
contracts as of the same date of the previous year. This
variation is principally due to the modification of the hedging
policy mentioned above.

With regard to interest rate risks, on a consolidated basis, the
company has a fixed rate/variable rate ratio of approximately
83.7% / 16.3% fixed / variable as of December 31, 2004. The
percentage of debt at a fixed rate has fallen slightly if
compared with the 99.0% / 1.0% ratio as of the same date of the
previous year due to the low level of market interest rates that
have permitted the company to borrow at more attractive interest
rates.

GENERATION BUSINESS

NET INCOME

Endesa Chile recorded a Net Income of $83,789 million which is
$3,705 million higher than the previous year. This is mainly
explained by:

OPERATING INCOME

Endesa Chile's operating income as of December 2004 came to
$369,026 million, an increase of 6.4% over the result obtained
as of the same date in 2003. This increase in the operating
income is mainly due to the improved operating income of the
subsidiaries in Colombia, Brazil and Argentina which were
partially compensated by the lower operating income in Chile and
Peru. During the current period of 2004, sales amounted to
53.443 GWh, representing an increase of 5.5% with respect to
2003.

In Chile, the operating income during the current year amounted
to $149.718 million, reflecting a decrease of $9,423 million
with respect to the figure achieved during the year 2003. This
was the result of greater variable operating costs that the
company had to assume due to the greater utilization of thermal
generation during the first half of 2004 as a consequence of the
relatively low hydrology in the area. This situation changed in
the latter part of the year, principally due to the start up of
the operations of the Ralco hydroelectricity plant.


In Argentina the operating income in 2004 amounted to $34,379
million, an increase of $1,258 or 3.8% over the previous year
when the operating income came to $33,121 million. The operation
in Argentina shows a significant increase of 30% in sales income
which amounted to $148,300 million as a result of the important
rise in generation and demand for electric energy. The increase
of 74% in the physical sales of the subsidiary, Central
Costanera with respect to the year 2003, due to the ability of
the Costanera plant to operate not only with natural gas but
also with fuel oil, was partly compensated by lower sales by El
Choc¢n, in view of the low hydrology in the Comahue zone. The
share in the aggregate thermal generation of our companies in
Argentina rose by 50.3% in 2003 to 70.4% in 2004. Consequently,
the operating costs in Argentina grew by 41.0% to $111,352
million in 2004. The cost of fuel during the period increased by
237.6% due to the restrictions on natural gas on the Argentine
market that obliged Costanera to increase its generation with
liquid fuels. If we eliminate the effect of the variation in the
Chilean exchange rate, the increase in the operating incomes of
Costanera and El Choc¢n would be $3,129 million and $768
million, respectively.

In Brazil, our subsidiary, Cachoeira Dourada, achieved an
operating income of $14,314 million, an increase of $10,565
million or 281.8% with respect to the year 2003. This
improvement is a reflection of the achievements in its
contractual agreements signed during the year 2004 with its
principal client, CELG.

Operating revenues rose by 33.1% with respect to the year 2003,
amounting to $42,006 million. Cachoeira Dourada's physical
generation increased by 7.9% in relation to 2003, as a result of
the growing demand and the favorable hydrology reigning in the
zone during the current year. If we eliminate the effect of the
variation in the Chilean exchange rate, the increase in the
operating income would be $10,881 million.

In Colombia, the subsidiaries Emgesa and Betania showed
increases in their operating income of $18,333 million and
$11,990 million, respectively. Emgesa achieved an operating
income of $100,903 million and Betania of $17,553 million. These
improved results are the consequence of a greater demand on the
Colombian market and to an abundance of water supplies during
the year 2004, which led to an increase of 17.6% in income from
sales of energy. Physical sales rose by 667 GWh and physical
generation by 1,087 GWh, with a smaller contribution from
thermal generation. This permitted a reduction in purchases of
energy and in the cost of fuel in relation to the previous year.
If we eliminate the effect of the variation in the Chilean
exchange rate, the increase in the operating incomes of Emgesa
and Betania would be $24,572 million and $13,171 million,
respectively.

In Peru, the operating income of the subsidiary Edegel for the
year 2004 fell by 17.0% from $62,829 million as of the same date
of last year to $52,158 million. Revenues rose during the period
by $8,843 million or 7.7% to $123,375 million. Physical sales
fell with respect to 2003 due to a shortage of water in the
region, provoking an increase in prices which, also affected by
the international prices of fuel, compensated for the fall in
physical sales. However, the lower level of rainfall also
affected the company's operating costs that increased by 44.6%
with respect to 2003, amounting to $63,779 million. Edegel's
physical generation of electric energy during the year 2004 fell
by 3.9% to 4,285 GWh, hydroelectric generation decreased by
408.4 GWh and thermal generation rose by 235 GWh. This led to an
increase in the cost of fuel and to greater purchases of
electric energy. If we eliminate the effect of the variation in
the Chilean exchange rate, the decrease in the operating income
would be $5,381 million or 8.5%.

NON OPERATING INCOME

Endesa Chile recorded a Non operating Loss of $165,109 million
which is $18,371 million lower than the previous year.

DISTRIBUTION BUSINESS

HIGHLIGHTS

In Chile, Physical sales in our concession area increased by
7.6% in 2004. In line with our expectations, Chilectra tariffs
decreased 4.4%. The Board of Chilectra approved the new client -
orientation structure of the company, making innovation one of
its main drivers.

In Brazil, Coelce `s physical sales increased by 4.0% in 2004.
Also Cerj's physical sales increased by 4,8% and energy losses
went down to 22,8% during the year 2004. On November 2004,
Coelce issued debentures in local currency, by Brl$ 89 million
with a 8 years maturity. This is the largest maturity ever
issued by an electric company in Brazil. Also, on June 2004,
Cerj, issued debentures in local currency, by Brl$ 294 million
for 3 years, as part of its strengthening plan.

In Colombia, physical sales in our concession area increased by
4.3% in 2004 Energy losses decreased below 10%, reaching 9,7%
which is a very close level to technical losses. On March 2004,
Codensa issued bonds in local currency, by Cop$ 500 million,
funds used to prepay short term debt.

In Argentina, energy demand has continued growing, as a
consequence of the strong industrial activity, showing an
increase of 5.3% when compared to the previous year. On October
2004, Edesur issued bonds in local currency, by Ar$ 120 million.
This is the first issuance in local currency since the
Argentinean crisis. It is worth mentioning that Edesur was
assigned with BBB local rating from Fitch Ratings.

In Peru, the country risk has been reaching lower historical
levels, helping companies to get better conditions for new local
refinancing. Physical sales in our concession area increased by
7.1% during 2004. On June 2004, Edelnor issued bonds in local
currency, by Pen$ 150 million, to refinance its debt.


CHILECTRA (UNDER CHILEAN GAAP)

NET INCOME

Chilectra registered a Net Income of $77,322 million, which is
$24,566 million higher than the previous year. This result is
mainly explained by:

OPERATING INCOME

Higher Operating Income of $2,237 million, due to higher
operating revenues of $38,202 million, partially compensated by
higher operating costs of $28,856.

NON OPERATING INCOME

Lower Non-Operating Loss of $38,040 million, due to lower net
loss from related companies of $36,027 million, lower net
financial expenses of $5,823 million, compensated by lower net
of monetary exposure of $3,265 million.

OTHER

Regarding Negative Goodwill Amortization, it decreased $13,246
million. The minority interest reached $1,021 million.

CERJ (UNDER CHILEAN GAP)

NET INCOME

Cerj registered a Net Loss of $30,959 million which is $70,284
million lower loss than the previous year. This result is mainly
due to:

OPERATING INCOME

Higher Operating Income of $21,767 million, mainly explained by
higher revenues from sales of $29,858 million, due to physical
sales, which increased by 352 GWh and also the reduction of
energy losses down to 22.8%. This was partially compensated by
higher operating costs of $3,936 million.

NON OPERATING INCOME

Lower Non Operating Loss of $79,546 million, mainly explained by
lower net other non operating expenses of $83,955 million,
mainly explained by a lower negative conversion effect of
$46,207 million as a result of the Brazilian Reais appreciation
and the application of the Technical Bulletin Nø64 of Chilean
GAAP.

COELCE

NET INCOME

Coelce registered a Net Loss of $14,040 million which is $3,597
million higher than the previous year. This result is mainly due
to:

OPERATING INCOME

Lower Operating Income of $15,286 million, mainly due to higher
operating costs of $67,652 million basically related to higher
energy purchases that were not entirely compensated by the
increase in tariffs and the increase of 236 GWh in physical
sales. This increase in costs was partially compensated by
higher operating revenues of $51,786 million related by higher
revenues from sales. This reduction is significantly offset by
Non Operating Loss.

NON OPERATING INCOME

Lower Non Operating Loss of $8,100 million, mainly explained by
lower net financial expenses of $2,428 million and negative
conversion effect of $984 million as a result of the Brazilian
Reais appreciation and the application of the Technical Bulletin
Nø64 of Chilean GAAP.

CODENSA (UNDER CHILEAN GAAP*)

NET INCOME

Codensa registered a Net Income of $56,675 million which is
$38,204 million higher than the previous year. This result is
mainly due to:

OPERATING INCOME

Higher Operating Income of $49,875 million, primarily explained
by higher energy sales of $40,634 million due to greater demand
that led to a rise of 4.3% in physical sales that amounted 9,656
GWh.

NON OPERATING INCOME

Lower Non-Operating Income of $3,120 million, primarily
explained by higher other non operating expenses of $5.204
million and higher losses of $6.435 million, related to the
negative conversion effect registered as a result of the
application of Technical Bulletin Nø64 of Chilean GAAP.

OTHER

Tax loss increase by $8,550 million compared to the previous
year.

EDELNOR (UNDER CHILEAN GAAP*)

NET INCOME

Edelnor registered a Net Loss of $523 million, negatively
compared with a Net Profit of $13,404 million registered the
previous year. This result is mainly due to:

OPERATING INCOME

Higher Operating Income of $637 million, related to higher
revenues from sales of $2,941 million, compensated by higher
operating cost of $2,097 million.

NON OPERATING INCOME

Higher Non-Operating Losses of $6,568 million, mainly due to
higher net financial expenses of $1,267 million and higher net
other non operating expenses of $5,301 million mainly explained
by the negative BT 64 conversion effect of $3,763 million.

OTHER

Higher Tax Loss of $7,996 million, from $10,648 million to
$18,644 registered on the year 2004.

EDESUR (UNDER CHILEAN GAAP*)

NET INCOME

Edesur registered a Net Loss of $17,130 million, $10,649 million
lower loss than the previous year. This result is mainly due to:

OPERATING INCOME

Higher Operating Loss of $5,124 million, mainly due to higher
operating revenues by $19,825 million, explained by the improved
energy demand observed in the country and which has led to an
increase of 5.3% in physical sales. This was compensated by
$16,230 million higher operating costs related to higher energy
purchases.

NON OPERATING INCOME

Lower Non-Operating Losses of $773 million, mainly explained by
higher net other non operating income of $3,992 million,
partially compensated by higher net financial expenses of $3,211
million.

OTHER

Tax loss decrease by $4,751 million compared to the previous
year.

To view financial statements:
http://bankrupt.com/misc/Enersis2004.pdf

CONTACT: Ms. Susana Rey
         Head of Investor Relations
         Enersis S.A.
         Santo Domingo 789
         Santiago, Chile
         Phone: 011-562-638-0840
                56 (2) 353 4554
         E-mail: srm@e.enersis.cl



===============
C O L O M B I A
===============

CENTRAGAS: S&P Releases Report on Ratings
-----------------------------------------

Rationale

The 'BB' foreign currency rating on US$172 million senior
secured notes due 2010 issued by Centragas-Transportadora de Gas
de la Region Central de Enron Development and Cia. S.C.A.
(Centragas) reflects the one-source revenue stream, a
noninvestment-grade offtaker, liquidity risk from Centragas'
bondholders' put option, and nonrecourse to the sponsors or
offtaker. However, the pipeline's strategic position in
Colombia, adequate tariff and bankruptcy-remote structure, and
healthy operation and debt-service coverage ratios strengthen
Centragas' credit profile, and partially offset the risks.

Bondholders have a put option for Centragas to buy the bonds
from them if Enron Corp.'s ownership in Centragas falls below
25%, Enron's ownership falls below 51% in Enron Development
Corp., or Enron Development is no longer Centragas' general
partner. Standard & Poor's believes that given present
conditions it is unlikely that bondholders will exercise the put
option. Instead, they would trigger the need for Centragas to
refinance debt under stressed market conditions, which would
also subject them to Colombian law and uncertainties inherent to
bankruptcy if their right to exercise the put option causes
solvency problems for Centragas.

Centragas can only distribute dividends from the distribution
account when the debt-service reserve is fully funded and the
debt-service coverage ratio exceeds 1.2x. In recent years, part
of Centraga's excess cash has been distributed to shareholders
in the form of intercompany loans. In 2002 Centragas and its
shareholders agreed that future dividends paid to Enron or its
affiliates will be used to reduce the outstanding balance on the
aforementioned intercompany loans. As of September 2004, the
loans had a balance of US$46.4 million.

Centragas has been operating according to project contract
standards. Only minor interruptions occurred, and Centragas has
met the pipeline's maintenance specifications. Debt-service
coverage for third-quarter 2004 was adequate at 1.68x, above the
projected figures.

Centragas is an Enron Development special-purpose entity (SPE)
that built, owns, operates, and will eventually transfer to
Ecogas a natural gas pipeline. The pipeline is about 578
kilometers long and runs from Ballena to Barrancabermeja,
Colombia.

Outlook

The stable outlook reflects that of the Republic of Colombia.
The company's favorable operating record and its predictable
cash flow also limit the potential for a rating downgrade.

Primary Credit Analyst: Luis Manuel Martinez, Mexico City
(52)55-5081-4462; luis_martinez@standardandpoors.com

Secondary Credit Analyst: Jose Coballasi, Mexico City
(52)55-5081-4414; jose_coballasi@standardandpoors.com



=============
J A M A I C A
=============

* JAMAICA: S&P Releases Report on Ratings
-----------------------------------------
Major Rating Factors

Strengths:
    * Ongoing government's commitment to fiscal austerity and
prudent macroeconomic policies.
    * Improving growth prospects.
    * Political stability.

Weaknesses:
    * High general government debt burden.
    * Limited fiscal flexibility.
    * Vulnerability stemming from the island's geographical
location, size, and openness.

Rationale
The ratings on Jamaica are supported by the island's improving
fiscal and external liquidity situation, ongoing commitment to
fiscal austerity, and stronger growth prospects, all of which
have helped stabilize the Jamaican dollar and increase the
confidence level of domestic businesses. The support of fiscal
and macroeconomic policies by trade unions and the private
sector, as demonstrated by the preparation of the Partnership
for Progress agreement and the signing of the Memorandum of
Understanding with labor unions, makes it more likely that
Jamaica will meet its challenging fiscal targets in 2005 and
beyond. It also lowers the risk of social tension in times of
austere reform.

On the fiscal front, Jamaica's officially reported central
government deficit was 5.8% of GDP (the primary surplus at 12.2%
of GDP) in 2003, which was within the budgeted target. However,
according to Standard & Poor's Ratings Services methodology,
which takes into account off-budget expenditure (including
Central Bank losses) and excludes one-off capital revenue, the
central government deficit was actually 9% of GDP (down from
10.5% in fiscal 2002). The government is committed to lowering
the central government deficit to 4.4% of GDP in fiscal 2004
(revised upward from the initially budgeted deficit of 4%
because of the impact of Hurricane Ivan). The rationalization of
expenditure, which was on target for the first seven months of
fiscal 2004, and higher grant receipts should help achieve this
goal. According to Standard & Poor's definition, the central
government deficit is expected to stand at 6.9% of GDP in fiscal
2004, which includes 2.5% of off-budget expenditure. More
importantly, the support of both trade unions and the business
community is likely to remain unwavering. The stable exchange
rate since September 2004 is a good indication of this
confidence.

Jamaica's external liquidity situation is also improving,
reflecting increasing reserves (US$1.86 billion at year-end
2004, up from US$1.2 billion at year-end 2003) and stronger
current account performance. The current account deficit is
expected to decline to 7% of GDP in 2004 (see Table 1) from 9%
in 2003, boosted by robust mining and tourism revenue.

The general government debt stock has been declining, reflecting
fiscal performance that has been improving since mid 2003 and is
expected to total 130% of GDP by fiscal year-end 2004 (down from
138% in 2003 and 140% in 2002). Still, the looming debt size
remains a major constraining factor on the ratings. Jamaica's
debt profile is unfavorable, with high (albeit declining)
sensitivity to interest- and exchange-rate fluctuations and an
increasing share of more-expensive commercial debt. The general
government debt burden is expected to decline further to an
estimated 120% in 2005 on the back of continued fiscal efforts
and improving growth prospects. The government confirmed its
commitment to a balanced budget in 2005/2006.

Medium-term growth is expected to hover at about 2.5%-3.0% of
GDP based on significant investment in the tourism (US$600
million over the next five years) and mining sectors (US$300
million over the next three years). Real growth in 2004,
however, has been revised down by 1%-1.5% because of Hurricane
Ivan, the impact of which is estimated at roughly US$600 million
(7% of GDP). As such, growth prospects remain vulnerable to the
risk inherent in the island's geographical location, size, and
openness.

Outlook

The outlook balances the improvement in the fiscal and debt
positions, supported by promising growth prospects and a
stronger external liquidity stance, with significant risk
stemming from the government's debt size. A larger-than-expected
deviation from the fiscal target in fiscal 2004 could endanger
public support for reform, macroeconomic stability, and foreign
investors' sentiment toward the country, all of which will harm
Jamaica's creditworthiness. On the other hand, Jamaica's track
record of fiscal prudence (including during the next election
period) and a continuing decrease in the government debt burden
could lead to a favorable outlook revision.

Primary Credit Analyst: Olga Kalinina, CFA, New York
(1) 212-438-7350; olga_kalinina@standardandpoors.com

Secondary Credit Analyst: Richard Francis, New York
(1)-212-438-7348; richard_francis@standardandpoors.com



===========
M E X I C O
===========

DIRECTV: Generates $3B Revenues in 4Q04
---------------------------------------
HIGHLIGHTS:

- Added a Fourth Quarter Record 1.1 Million Gross Subscribers
Bringing the Full Year Total to an All-Time High of 4.2 Million.

- Attained Net Subscriber Additions of 444,000 in the Fourth
Quarter Driving Full Year Additions to more than 1.7 Million.

- Generated Nearly $3 Billion in Revenues in the Fourth Quarter
Bringing Full Year Revenues to $9.8 Billion, or 27% Greater than
the Prior Year.

The DIRECTV Group, Inc. (NYSE:DTV) reported Thursday that fourth
quarter revenues increased 22% to $3.36 billion and operating
loss before depreciation and amortization was $156 million
compared to operating profit before depreciation and
amortization of $11 million in last year's fourth quarter. In
addition, The DIRECTV Group reported a fourth quarter 2004
operating loss of $437 million and net loss of $283 million
compared with an operating loss of $177 million and a net loss
of $310 million in the same period last year. Included in the
fourth quarter 2004 operating loss before depreciation and
amortization is a $217 million pre-tax charge for the expected
sale of Hughes Network Systems (HNS) and a $45 million pre-tax
charge related to the ongoing shut-down of DIRECTV Latin
America's Mexico operations (see below for a more detailed
explanation). In addition, beginning with the fourth quarter of
2004, DIRECTV U.S. reports its current and prior period
subscribers and churn on a total platform basis and will no
longer separately report subscribers and churn for the former
NRTC and Pegasus territories.

"While we considered 2004 a transition year, DIRECTV U.S. added
more new customers in 2004 than any other pay television service
in the country," said Chase Carey, president and CEO of The
DIRECTV Group. "We enjoyed strong momentum throughout 2004 and
our record fourth quarter gross new customer additions of more
than 1.1 million marks the second consecutive quarter in which
we added more than 1 million gross new subscribers. Equally
impressive is the fact that we have generated sustained growth
at DIRECTV, having added more than 400,000 net new customers for
the fourth consecutive quarter."

Carey continued, "Even with this strong growth, we recognize
that we need to improve our operational performance and margins.
Throughout last year, we took steps to strengthen DIRECTV and
focus on our core direct-to-home television business. With these
accomplishments, we have a solid foundation for future growth
and success. Looking ahead, we are excited about launching
several compelling new services and products in 2005 that we
believe will make DIRECTV even more appealing. Later this year,
we will launch the most dramatic expansion of programming since
DIRECTV's inception as we begin to roll-out local broadcast
channels in high-definition format. We also intend to introduce
advanced new programming and interactive services as well as a
new digital video recorder with interactive capabilities. We
plan to continue to expand DIRECTV's international programming
lineup, grow our presence in rural markets, and by year-end
introduce our Home Media Center that will provide an
entertainment solution for the entire home. We are committed to
offering the best content, service and features and the best
television experience in the U.S. -- an experience that is
designed to further distinguish DIRECTV from our competitors."


                  THE DIRECTV GROUP'S OPERATIONAL REVIEW

                           Three Months      Twelve Months
                        Ended December 31, Ended December 31,
                       -------------------------------------
                         2004      2003     2004     2003
        ----------------------------------------------------
  Revenues ($M)         $3,362    $2,754  $11,360   $9,372
        ----------------------------------------------------
  Operating Profit
  (Loss) Before
  Depreciation and
  Amortization(1)($M)    (156)       11   (1,273)     617
       -----------------------------------------------------
  Operating Loss ($M)    (437)     (177)  (2,111)    (138)
       -----------------------------------------------------
  Net Loss ($M)          (283)     (310)  (1,944)    (362)
       -----------------------------------------------------
  Loss Per
  Common Share(2) ($)    (0.20)    (0.22)   (1.40)   (0.26)
       -----------------------------------------------------
  Cash Flow(3) ($M)       (465)      (81)   1,322       58
       -----------------------------------------------------

Fourth Quarter Review

Special Items. In the fourth quarter of 2004, The DIRECTV Group
announced an agreement for the sale of substantially all of the
remaining assets of HNS to a new entity that will be jointly
owned by SkyTerra Communications, Inc. and The DIRECTV Group.

The transaction, which is expected to close in the first half of
2005, is subject to certain regulatory approvals, receipt of
financing and other customary closing conditions. The DIRECTV
Group will receive $251 million in cash, subject to closing
adjustments, and 300,000 shares of SkyTerra common stock,
currently valued at approximately $10 million. In the fourth
quarter, a pre-tax charge of $217 million was recorded related
to this transaction primarily for the write-down of HNS net-
assets to their fair value based on the agreed upon sales price.

Operational Review. In the fourth quarter of 2004, The DIRECTV
Group's revenues of $3.36 billion increased 22% compared to the
fourth quarter of 2003 driven principally by strong DIRECTV U.S.
subscriber growth and the consolidation of the full economics of
the former NRTC and Pegasus subscribers which were acquired in
June and July of 2004. These changes were partially offset by
the absence of DIRECTV(R) set-top receiver revenues at HNS due
to the sale of the set-top box manufacturing operations in June
2004.

The operating loss before depreciation and amortization of $156
million and the larger operating loss of $437 million were
primarily due to the $217 million charge related to the HNS
sale, increased subscriber acquisition costs related to the
fourth quarter record gross subscriber additions and higher
acquisition costs per subscriber (SAC), higher upgrade and
retention costs at DIRECTV U.S., as well as a charge of $45
million related to certain asset write-downs, severance and
other costs associated with the ongoing shut-down of DIRECTV
Latin America's Mexico operations. These changes were partially
offset by the increase in gross profit generated from the higher
revenues at DIRECTV U.S and a fourth quarter 2003 pre-tax charge
of $132 million related primarily to employee retention and
severance costs as well as bankers' fees associated with the
News Corporation transactions.

The DIRECTV Group's smaller fourth quarter 2004 net loss of $283
million was primarily due to reorganization expense of $193
million in the fourth quarter of 2003 related to agreements
reached with creditors in the DIRECTV Latin America, LLC
bankruptcy proceedings and a greater tax benefit in the fourth
quarter of 2004, partially offset by the larger operating loss
described above.

Full Year Review

For the full year of 2004, The DIRECTV Group's revenues
increased 21% to $11.36 billion principally due to the larger
subscriber base and higher ARPU at DIRECTV U.S., as well as the
consolidation of the full economics of the former NRTC and
Pegasus subscribers for approximately four months of 2004. The
operating loss before depreciation and amortization of $1.27
billion and the larger operating loss to $2.11 billion were
primarily due to a $1.47 billion non-cash impairment charge in
the third quarter of 2004 related to management's decision to
change the primary use of the SPACEWAY 1 and SPACEWAY 2
satellites, increased DIRECTV U.S.' subscriber acquisition costs
related to the record gross subscriber additions and higher SAC
as well as higher upgrade and retention costs, and the $217
million charge at HNS related to the pending sale. These changes
were partially offset by the increase in gross profit generated
from the higher revenues at DIRECTV U.S. and improved operating
performance at DIRECTV Latin America mostly related to its lower
post-bankruptcy cost structure.

The DIRECTV Group reported a larger net loss of $1.94 billion in
2004 mostly due to the operating loss described above, an after-
tax loss of $724 million related to the sale of PanAmSat
Corporation (reflected in "Income (loss) from discontinued
operations, net of taxes"), and a $311 million non-cash after-
tax charge related to a change in accounting for subscriber
acquisition, upgrade and retention costs at DIRECTV U.S.
(reflected in "Cumulative effect of accounting changes, net of
taxes").

These declines were partially offset in 2004 by a higher income
tax benefit primarily associated with the SPACEWAY impairment
charge, a pre-tax gain of $387 million related to the sale of
approximately 19 million shares of XM Satellite Radio common
stock and a $91 million after-tax gain associated with the
Hughes Software Systems (HSS) sale (reflected in "Income (loss)
from discontinued operations, net of taxes"). Also impacting the
comparison was a charge of $193 million in the fourth quarter of
2003 for reorganization expense due to agreements reached with
creditors in the DIRECTV Latin America, LLC bankruptcy
proceedings.

SEGMENT FINANCIAL REVIEW

                             DIRECTV U.S. Segment
                       Three Months      Twelve Months
  DIRECTV U.S.      Ended December 31, Ended December 31,
                    -------------------------------------
                      2004      2003     2004     2003
       ------------------------------------------------
  Revenue(1) ($M)   $2,960    $2,255   $9,764   $7,696
       ------------------------------------------------
  Average Monthly
  Revenue per
  Subscriber(1)
  (ARPU) ($)         71.92     71.75    66.95    63.92
       ------------------------------------------------
  Operating Profit
  Before
  Depreciation and
  Amortization ($M)    118       166      583      956
       ------------------------------------------------
  Operating Profit
  (Loss)( 1) ($M)     (65)       40       22      459
       ------------------------------------------------
  Cash Flow(1) ($M)   (44)       14   (1,241)     398
       ------------------------------------------------
       ------------------------------------------------
  Gross Platform
  Subscriber
  Additions(2)
  (000's)            1,103       908    4,218    3,206
       ------------------------------------------------
  Average Monthly
  Platform
  Subscriber
  Churn(2)            1.60%     1.51%    1.59%    1.55%
       ------------------------------------------------
  Net Platform
  Subscriber
  Additions(2)
  (000's)               444       361    1,728    1,036
       ------------------------------------------------
1 - The amounts presented for 2004 include the results from the
former NRTC and Pegasus subscribers for approximately the last
four months of 2004. The amounts presented for 2003 exclude the
results from the former NRTC and Pegasus subscribers for the
entire period presented.

2 - The amounts presented for 2003 and 2004 include the results
from the former NRTC and Pegasus subscribers for the entire
period presented.

Beginning with the fourth quarter of 2004, DIRECTV U.S. reports
its current and prior period subscribers and churn on a total
platform basis and will no longer separately report subscribers
and churn for the former NRTC and Pegasus territories. These
changes were made because during the third quarter of 2004,
DIRECTV U.S. completed the purchase of 1.4 million Pegasus and
NRTC member subscribers and certain related assets for
approximately $1.38 billion. The lump sum cash consideration
paid for these subscribers was approximately $956 million, which
is net of approximately $220 million owed DIRECTV U.S. by
Pegasus, and an additional approximately $200 million, plus
interest, that DIRECTV U.S. will pay to certain NRTC members
over the next seven years. Separately, but also related to these
transactions, DIRECTV U.S. purchased the NRTC contract rights in
June 2004 for $322 million which will be paid, plus interest,
over the next seven years.

Fourth Quarter Review

DIRECTV U.S. gross subscriber additions increased by 21% to a
fourth quarter record of 1,103,000 due to higher penetration
rates in local channel markets, more attractive consumer
promotions, an improved and more diverse distribution network,
and more effective marketing in the former NRTC territories.
After accounting for average monthly churn of 1.60% in the
period, DIRECTV U.S. added 444,000 net subscribers in the
quarter, an increase of 23% over the same period last year. As
of December 31, 2004, the total number of DIRECTV platform
subscribers was 13.94 million representing an annual growth rate
of 14% compared to the 12.21 million platform subscribers as of
December 31, 2003.

DIRECTV U.S. generated quarterly revenues of $2.96 billion, an
increase of 31% compared to last year's fourth quarter revenues.
The increase was primarily due to continued strong subscriber
growth and the consolidation of the full economics of the former
NRTC and Pegasus subscribers. ARPU increased $0.17 to $71.92
principally due to a March 2004 programming package price
increase, higher mirroring fees from an increase in the average
number of set-top receivers per customer and an increase in the
percentage of customers subscribing to local channels. These
ARPU improvements were mostly offset by the impact from the
consolidation of the former NRTC and Pegasus subscribers,
primarily due to the lower ARPU received from these subscribers.
The consolidation of the former NRTC and Pegasus subscribers
negatively impacted ARPU by approximately $3.50. Excluding this
negative impact, ARPU would have increased by about 5%.

The fourth quarter 2004 decline in operating profit before
depreciation and amortization and operating loss to $118 million
and $65 million, respectively, was due to increased subscriber
acquisition costs related to the record fourth quarter gross
subscriber additions and higher SAC resulting from an increase
in the average number of set-top boxes and digital video
recorders (DVRs) purchased by new subscribers, partially offset
by lower set-top box and DVR manufacturing costs. Also impacting
the quarter was higher upgrade and retention expenses mostly due
to an increase in the number of existing customers taking DVRs
and local channel equipment upgrades. These higher costs were
partially offset by the increase in gross profit generated from
the higher revenues. In addition, operating profit was
negatively impacted by additional amortization expense resulting
from the NRTC and Pegasus transactions which were completed in
the third quarter of 2004.

Full Year Review

DIRECTV U.S. gross subscriber additions increased by 32% to an
all-time record of 4,218,000 in 2004 due to higher penetration
rates in local channel markets, more attractive consumer
promotions, an improved and more diverse distribution network,
and, beginning in the third quarter, more effective marketing in
the former NRTC territories. After accounting for average
monthly churn of 1.59% in the period, DIRECTV U.S. added
1,728,000 net subscribers in 2004, an increase of 67% over last
year.

DIRECTV U.S. generated annual revenues of $9.76 billion, an
increase of 27% compared to last year's revenues. The increase
was due to continued strong subscriber growth, higher ARPU and
the consolidation of the full economics of the former NRTC and
Pegasus subscribers for approximately four months of 2004. ARPU
increased $3.03 in 2004 to $66.95, or 5% higher than in 2003
primarily due to a March 2004 programming package price
increase, higher mirroring fees from an increase in the average
number of set-top receivers per customer and an increase in the
percentage of customers subscribing to local channels. These
ARPU improvements were partially offset by the impact from the
consolidation of the former NRTC and Pegasus subscribers for a
portion of the year, primarily due to the lower ARPU received
from these subscribers.

Operating profit before depreciation and amortization and
operating profit for 2004 declined to $583 million and $22
million, respectively, due to increased subscriber acquisition
costs related to the record gross subscriber additions and
higher SAC resulting from an increase in the average number of
set-top boxes and DVRs purchased by new subscribers, partially
offset by lower set-top box and DVR manufacturing costs. Also
impacting the year were higher upgrade and retention expenses
due to an increase in the number of existing customers taking
DVRs, local channel equipment upgrades, additional set-top
receivers, the movers program, and high-definition equipment.
These higher costs were partially offset by the increase in
gross profit generated from the higher revenues. In addition,
operating profit was negatively impacted by additional
amortization expense resulting from the NRTC and Pegasus
transactions which were completed in the third quarter of 2004.

DIRECTV Latin America Segment

On October 11, 2004, The DIRECTV Group announced a series of
transactions with News Corporation, Grupo Televisa, Globo and
Liberty Media that will result in the reorganization of the
companies' direct-to-home (DTH) satellite TV platforms in Latin
America. The transactions are designed to strengthen the
operating and financial performance of DIRECTV Latin America by
combining the two DTH platforms into a single platform in each
of the major territories served in the region. In aggregate, The
DIRECTV Group is paying approximately $580 million in cash for
the News Corporation and Liberty Media equity stakes in the Sky
platforms, of which approximately $398 million was paid in
October 2004.


                             Three Months      Twelve Months
  DIRECTV Latin America  Ended December 31, Ended December 31,
                         -------------------------------------
                           2004     2003     2004     2003
       -----------------------------------------------------
  Revenue ($M)             $182     $159     $675     $598
       -----------------------------------------------------
  Operating Profit
  (Loss) Before
  Depreciation and
  Amortization ($M)         (25)     (18)      46      (85)
       ------------------------------------------------------
  Operating Loss ($M)       (76)     (66)    (142)    (285)
       ------------------------------------------------------
  Net Subscriber
  Additions (Losses)
   (000's)                  57(1)      50    111(1)     (83)
       ------------------------------------------------------
1 - Excludes impact from Sky transactions in Mexico, Chile and
Colombia.

Fourth Quarter Review

In the fourth quarter of 2004, DIRECTV Latin America added
57,000 net subscribers (excluding Mexico, Chile and Colombia)
primarily due to the continued stable economic environment in
the region. In Mexico, DIRECTV Latin America lost 53,000
subscribers in the quarter, including 35,000 subscribers who
migrated to the Sky Mexico platform. In addition, DIRECTV Latin
America began consolidating the financial results of 89,000
subscribers from the former Sky Chile and Sky Colombia
operations. As a result, the total number of DIRECTV subscribers
in Latin America as of December 31, 2004 was 1.65 million
compared with 1.50 million on December 31, 2003.

Revenues for DIRECTV Latin America increased 14% to $182 million
in the quarter primarily due to the larger subscriber base as
well as the consolidation of Sky Chile and Sky Colombia. The
larger DIRECTV Latin America's fourth quarter 2004 operating
loss before depreciation and amortization of $25 million and
operating loss of $76 million was primarily attributed to
charges associated with the ongoing shut-down of DIRECTV Latin
America's Mexico operations, which included a $36 million charge
principally for asset write-downs and a $9 million charge for
severance and other shut-down related costs. These declines were
partially offset by DIRECTV Latin America's lower post-
bankruptcy cost structure following its emergence from
bankruptcy in February 2004.

Full Year Review

In 2004, DIRECTV Latin America added 111,000 net subscribers
(excluding Mexico, Chile and Colombia in the fourth quarter)
primarily due to continued stable economic conditions in the
region throughout the year. In Mexico, DIRECTV Latin America
lost 53,000 subscribers in the fourth quarter, including 35,000
subscribers who migrated to the Sky Mexico platform. Also in the
fourth quarter, DIRECTV Latin America began consolidating the
financial results of 89,000 subscribers from the former Sky
Chile and Sky Colombia operations. Revenues increased 13% to
$675 million primarily due to the larger subscriber base and the
full year impact of consolidating the local operating companies
in Puerto Rico and Venezuela.

The improvement in operating profit before depreciation and
amortization and operating loss was primarily due to DIRECTV
Latin America's lower post-bankruptcy cost structure following
its emergence from bankruptcy partially offset by charges
associated with the ongoing shut-down of DIRECTV Latin America's
Mexico operations, which included a $36 million charge
principally for asset write-downs and a $9 million charge for
severance and other shut-down costs.

Network Systems Segment

In the fourth quarter of 2004, The DIRECTV Group announced an
agreement for the sale of substantially all of the remaining
assets of HNS to a new entity that will be jointly owned by
SkyTerra Communications, Inc. and The DIRECTV Group. SkyTerra is
an affiliate of Apollo Management, L.P., a New York-based
private equity firm. The transaction, which is expected to close
in the first half of 2005, is subject to certain regulatory
approvals, receipt of financing and other customary closing
conditions. The DIRECTV Group will receive $251 million in cash
at the close of the transaction and 300,000 shares of SkyTerra
common stock, currently valued at about $10 million. In the
fourth quarter, a non-cash pre-tax charge of $217 million was
recorded related to this transaction primarily for the write-
down of HNS net-assets to their fair value based on the agreed
upon sales price.

In the third quarter of 2004, The DIRECTV Group announced a
decision to change the primary use of the SPACEWAY 1 and
SPACEWAY 2 satellites to offer video services for DIRECTV U.S.
This decision triggered a requirement to test the SPACEWAY
assets for impairment. A valuation analysis showed that the
assets were impaired and that their book value of approximately
$1.9 billion exceeded fair value for use in the Company's U.S.
direct-to-home broadcast business by approximately $1.47 billion
which was recorded at HNS as a non-cash pre-tax impairment
charge in the third quarter of 2004.

During the second quarter of 2004, The DIRECTV Group announced
the sale of its interest in Hughes Software Systems (HSS was a
55% owned subsidiary of HNS) and received $227 million in cash.
Beginning in the second quarter of 2004, the Network Systems
segment excludes the financial results of HSS for all periods
presented. The DIRECTV Group reports HSS as a discontinued
operation in the consolidated financial statements. At the close
of the sale in the third quarter, The DIRECTV Group recorded a
$91 million after-tax gain (reflected in "Income (loss) from
discontinued operations, net of taxes").

Also in the second quarter of 2004, The DIRECTV Group entered
into an agreement with Thomson Inc. for a long-term supply and
development agreement which included the sale of HNS' set-top
box manufacturing operations. Due to the ongoing relationship
resulting from this new agreement, set-top box manufacturing is
not reported as a discontinued operation, and is included in the
Network Systems segment's financial results for 2003 and through
the date of the agreement, June 22, 2004.


                              Three Months       Twelve Months
  HNS                      Ended December 31, Ended December 31,
                         --------------------------------------
                             2004      2003     2004      2003
       -------------------------------------------------------
  Revenue ($M)               $223       406   $1,099    $1,271
       -------------------------------------------------------
  Operating Profit/(Loss)
  Before Depreciation and
  Amortization ($M)          (203)       15   (1,702)      (33)
       -------------------------------------------------------
  Operating Loss ($M)        (250)       (3)  (1,797)     (103)
       -------------------------------------------------------

Fourth Quarter Review

The fourth quarter 2004 revenue decline to $223 million was
primarily due to the sale of the HNS set-top box business to
Thomson discussed above. The higher operating loss before
depreciation and amortization and operating loss was principally
due to the $206 million impairment write-down of HNS assets to
their fair value based on the agreed upon sales price and a $11
million severance charge also associated with the expected sale.

Full Year Review

Full Year 2004 revenues declined to $1.10 billion primarily due
to the sale of the HNS set-top box operations to Thomson in the
second quarter of 2004. The higher operating loss before
depreciation and amortization and operating loss was principally
due to the $1.47 billion impairment charge for the SPACEWAY
assets, the $206 million impairment write-down, and $26 million
in severance charges associated with the sale of the HNS set-top
box manufacturing operations and substantially all of the
remaining assets of HNS.

                        BALANCE SHEET AND CASH FLOW
                             December 31, December 31,
                            -------------------------
                                2004        2003
       --------------------------------------------
  Cash and
  Cash Equivalents ($B)         $2.83       $1.75
       --------------------------------------------
  Total Debt ($B)                2.43        2.66
       --------------------------------------------
  Net Debt/(Cash) ($B)          (0.40)       0.91
       --------------------------------------------

In 2004, The DIRECTV Group's consolidated cash balance increased
by $1.08 billion to $2.83 billion and total debt declined by
$232 million to $2.43 billion compared to the December 31, 2003
balances. During this period, The DIRECTV Group had positive
cash flow(3) of $1.32 billion. The primary sources of cash were:
$2.64 billion for the sale of PanAmSat, $478 million for the
sale of XM Satellite Radio shares, $250 million for the
execution of the supply and development contract and sale of
HNS' set-top box operations to Thomson, and $227 million for the
sale of HSS. The primary uses of cash were: $1.02 billion for
capital expenditures primarily at DIRECTV U.S., $956 million in
lump sum payments for the purchase of Pegasus and NRTC
subscribers (net of amounts owed DIRECTV by Pegasus), $398
million for the News Corporation and Liberty Media equity stakes
in the Sky platforms, $204 million for payments to creditors of
DIRECTV Latin America, LLC associated with its emergence from
bankruptcy and $213 million for required payments by DIRECTV
U.S. on its term loan facility.

FOOTNOTES:

(1) Operating profit (loss) before depreciation and
amortization, which is a non-GAAP financial measure, should be
used in conjunction with other GAAP financial measures and is
not presented as an alternative measure of operating results, as
determined in accordance with accounting principles generally
accepted in the United States of America. Please see each of The
DIRECTV Group's and DIRECTV Holdings LLC's Annual Reports on
Form 10-K for the year ended December 31, 2003 for further
discussion of operating profit (loss) before depreciation and
amortization. Operating profit before depreciation and
amortization margin is calculated by dividing operating profit
before depreciation and amortization by total revenues.

(2) Earnings (loss) per common share is calculated using the
weighted average number of common shares outstanding, which was
calculated using the number of our common shares outstanding
from December 23, 2003 to December 31, 2004 and the number of
shares in the GM Class H Dividend Base prior to December 23,
2003. The GM Class H Dividend Base is equal to the number of
shares of GM Class H common stock which, if issued and
outstanding, would have represented 100% of the tracking stock
interest in our earnings. GM Class H common stock was a
"tracking stock" of GM designed to provide holders with
financial returns based on our financial performance. Holders of
GM Class H common stock had no direct rights in our equity or
assets, but rather had rights in the equity and assets of GM
(which included 100% of our common stock).

(3) Cash Flow is defined as "Net cash provided by (used in)
operating activities" plus "Net cash provided by (used in)
investing activities."

To view financial statements:
http://bankrupt.com/misc/DirecTV.htm

CONTACT: The DIRECTV Group
         Investor Relations DTV Stock
         P.O. Box 956
         2250 E. Imperial Hwy.
         El Segundo, CA 90245-0956
         Phone: (310) 964-0700
         E-mail: investorrelations@directv.com


HYLSAMEX: EBITDA Ends at $255/Ton in 4Q04
-----------------------------------------
HIGHLIGHTS

- Hylsamex registered solid quarterly volumes: shipments were
764,800 tons in 4Q04, up 4% compared to the same quarter of 2003
and down 8% compared to the previous quarter.

- Revenue per ton broke the US$800/ton mark in 4Q04, reaching
US$804/ton, which represents rises of 65% and 4% from the levels
registered in the same quarter of 2003 and the previous quarter,
respectively. Revenues amounted to US$615 million during 4Q04.

- COGS reached US$543/ton in 4Q04, 26% higher than the
US$429/ton recorded in the same quarter of 2003 and 9% greater
than the US$496/ton attained in the previous quarter. Against
3Q04, all variable input cost increases and upward adjustments
to fixed cost were met with improved pricing. Only the Peso
appreciation and lower spread of fixed cost affected margins.

- In 2004, Hylsamex generated EBITDA of US$759 million, more
than four times the US$187 million in EBITDA for 2003. During
4Q04, the Company generated EBITDA of US$195 million, more than
four times the US$48 million registered in the same quarter of
2003 and below the US$232 million of the previous quarter.
EBITDA margin reached 32% in 4Q04.

- On a per ton basis, EBITDA reached US$255/ton in 4Q04, almost
four times the US$65/ton obtained in the same quarter of 2003
and US$26/ton less than in the previous quarter. The quarter-
over-quarter decline is mostly attributed to the increase in
fixed cost per ton resulting from a lower spread of fixed cost
due to less volume sold, and a transient rise in operating
expenses.

- Excellent cash flow generation led to a reduction in leverage,
as debt net of cash declined US$41 million during the quarter to
end the year at US$546 million. Cash reserves reached US$125
million, up US$40 million over year-end 2003. The Net Debt to
LTM EBITDA ratio was 0.7x for 4Q04, while LTM Interest Coverage
improved to 9.3x.

- Net income for 4Q04 amounted to US$234 million (Ps.2,655
million), in contrast to the net loss of US$56 million (Ps.667
million) registered in the same quarter of 2003 and almost two
times the US$119 million (Ps.1,393 million) of net income
reported in the previous quarter. Net income for 2004 totaled
US$540 million (Ps.6,235 million), which compares favorably to
the net loss of US$72 million (Ps.860 million) registered in
2003.

OVERVIEW

Hylsamex finished 2004 with the highest level of EBITDA in
Company history, generating EBITDA of US$759 million for the
year, more than four times the US$187 million in EBITDA obtained
in 2003. During the fourth quarter of 2004, the Company
continued producing excellent results in terms of operating cash
flow. Hylsamex reported EBITDA of US$195 million for 4Q04, more
than four times the EBITDA of US$48 million gained in the same
quarter of 2003. On a per ton basis, EBITDA for 4Q04 reached
US$255/ton, almost four times the US$65/ton generated in the
same quarter of 2003.

During 4Q04, Hylsamex achieved further increases in revenue per
ton, which improved to US$804/ton, up US$31/ton versus the
previous quarter. The quarter-over-quarter rise in revenue per
ton more than offset the quarter's higher variable cost per ton,
which resulted from a greater cost of scrap and higher prices
for externally-sourced steel. The net result was a slight
increase in marginal contribution per ton in the quarter-over-
quarter comparison. But, the decrease in quarterly sales volume
-due to lower export tonnage of flat products and a drop in
domestic volumes of semi-finished products, a minor increase in
fixed costs due to the appreciation of the Peso, and the
resumption of Alfa's management fee, resulted in a decrease in
4Q04 EBITDA compared to the EBITDA achieved in 3Q04.

The EBITDA of US$759 million during 2004 greatly improved the
Company's financial structure. Through a combination of bank
debt prepayments and US$137 million in net proceeds from an
equity offering completed on July 15th, 2004, Hylsamex sharply
decreased its debt, net of cash, to a year-end balance of US$546
million, US$468 million or 46% lower than the balance at the end
of 2003. In addition, Hylsamex's main subsidiaries - Hylsa and
Galvak - refinanced US$335 million of bank debt under more
favorable terms. In 4Q04, the Company's strong cash flow
generation allowed further improvements to its capital
structure. Management carried out the following actions during
4Q04:

- Hylsamex made a US$44 million payment to its parent company
Alfa, for fees that Hylsamex had accrued since the debt
restructuring and owed to Alfa. This payment resulted in a
reduction in long-term accounts payable.

- The Company contributed US$28 million to its pension fund,
representing 20% of its pension liability.

In 2004, Hylsamex disbursed US$46 million in capital
expenditures. Out of this figure, Hylsa, the steel producing
subsidiary, invested US$35 million. Hylsa's investments were
focused on replacement of equipment, mine preparation, and
energy conservation and substitution projects.

For 2005, Hylsamex's management is considering capital
expenditures of up to US$100 million. Approximately 30% would be
aimed at normal investments, consisting of replacement of
equipment, mine preparation, and energy conservation and
substitution projects. The remainder would be focused on
strategic investments to grow the Company's processing capacity
and distribution network. These latter investments are subject
to Board approval.

Throughout 2004, Hylsamex's competitive strengths have permitted
the Company to capitalize on the favorable environment in the
global steel industry. While Hylsamex's revenue per ton
increased during 2004 due to tightness in international steel
demand and supply, the Company has maintained a relatively
stable cost per ton as a result of its vertical integration with
in-house access to low-cost iron ore, DRI production capability,
and flexibility in its metallic charge. The Company's EBITDA
margin, therefore, has expanded more than that of peers which
either are less vertically integrated or rely exclusively on
metal scrap for their metallic needs. In addition, Hylsamex's
status as "supplier-ofchoice" in the Mexican market, strong
distribution network and proximity to the U.S. market, allowed
it to register solid quarterly sales volumes during 2004.

The global steel industry experienced a remarkable year in 2004.

Greater global economic growth resulted in robust steel demand.
Additionally, the industry's consolidation, definitive capacity
shutdowns, raw materials shortages -particularly affecting those
participants using blast furnaces- and underinvestment during
the lean years, have limited the quickness and the size of the
supply response to greater demand, accentuating steel shortages
and increasing international steel prices. In Mexico, an
improved economic environment has also positively impacted
demand for Hylsamex's products. As a result of favorable
economic conditions, Hylsamex remains cautiously optimistic for
the coming quarters. Elements such as Chinese and U.S. economic
growth and their effect on international steel prices coupled
with energy cost volatility, remain the key variables in
assessing the future performance of the Company.

FREE CASH FLOW

Hylsamex generated free cash flow of US$128 million in 4Q04,
more than three times the US$38 million recorded in the same
quarter of 2003, and identical to the US$128 million obtained in
the preceding quarter.

  Hylsamex S.A. de C.V. & Subs.
  US$ Millions

                                      4Q04    4Q03   3Q04
  EBITDA                               195      48    232

  (+) Alfa Management Fee (1)            8       4      0
  (-) Cash Taxes                        (7)     (8)    (8)
  (-) Net Interest Expense             (18)    (25)   (20)
  (-) Net Working Capital              (34)     36    (63)
  (-) Capital Expenditures (2)         (15)    (17)   (13)
  (=) Free Cash Flow                   128      38    128
   ------------------------------------------------------------
(1) In order to provide comparability, the management fee is
added back.

(2) Capital expenditures for 3Q04 include US$8 million in sale-
leaseback transactions carried out by Galvak.

STEEL MARKET

Hylsamex recorded solid sales volume during 4Q04. Total
shipments for 4Q04 reached 764,800 tons, 4% or 28,000 tons
greater than the 736,800 tons shipped during the same quarter of
2003 and 8% or 62,900 tons lower than the 827,700 tons sold in
the previous quarter. The decrease versus the previous quarter
is mainly due to lower exports of flat products (also includes
coated and tubular products) and lower domestic sales of semi-
finished billet.

Domestic volumes remained healthy in 4Q04, even with a small
decrease compared to the preceding quarter, resulting primarily
from a reduction in sales of semifinished long products (i.e.
billet). Volume sold in the domestic market totaled 584,800
tons, 2% or 10,900 tons lower than the 595,700 tons registered
in the same quarter of 2003 and 4% or 23,300 tons less than the
608,100 tons of the prior quarter.

Hylsamex experienced strong export volume again in 4Q04,
particularly when compared against quarterly exports registered
in the 2003-04 period. Exports in 4Q04 reached 180,000 tons, 28%
or 38,900 tons more than the 141,100 tons exported in the same
quarter of 2003 and 18% or 39,600 tons less than the 219,600
tons of the previous quarter. The variations are mostly
explained by changes in the export volume of flat products,
which increased 40% or 44,600 tons compared to the same quarter
of 2003, reflecting a robust global demand for steel observed
for the full year 2004, and decreased 19% or 37,200 tons versus
the previous quarter due to a temporary increase of imports
within the NAFTA region.

Export prices for 4Q04 calculated in nominal dollars increased
64% and 4% versus the same quarter of 2003 and the previous
quarter, respectively. The latter figure was due to a better
product mix, while the former resulted from the positive year-
over-year trend observed in international steel prices. Strong
export volumes and prices allowed Hylsamex to generate export
revenues of US$153 million in 4Q04, more than two times the
export revenue obtained in the same quarter of 2003 and 12%
lower than the previous quarter.

In 2004, Hylsamex sold 3,167,000 tons, an increase of 10% over
shipments of 2,889,300 tons recorded in 2003. Both domestic and
export shipments registered solid growth: domestic volumes grew
8% to a level of 2,435,900 tons, while exports increased 15% to
a total of 731,100 tons. Greater domestic economic growth and
lower import penetration into Mexico coupled with an improved
international steel market led to stronger sales volume in 2004.

REVENUE

Hylsamex maintained strong revenue generation in 4Q04. Hylsamex
generated sales revenue of US$615 million (Ps.7,023 million) in
4Q04, 71% greater than the US$359 million (Ps.4,239 million)
achieved in the same quarter of 2003 and 4% lower than the
US$640 million (Ps.7,485 million) obtained in the previous
quarter. Compared to the previous quarter, a slight decrease was
observed due to lower sales volume.

The key element supporting revenue growth during 2004 has been
Hylsamex's ability to promptly adjust its products according to
international steel prices, particularly steel prices in the
U.S. Prices also reflect the increased cost of certain inputs
such as steel scrap. Hylsamex especially benefited from the
favorable trends in prices since most sales (approximately 85%)
are on a spot basis.

The strong pricing trends continued during 4Q04, as evidenced by
the consolidation of price initiatives announced in the previous
quarter and some price increases implemented in 4Q04.

Completion of pricing initiatives announced late in 3Q04 allowed
Hylsamex's revenue per ton in 4Q04 to further increase to
US$804/ton, consisting of an average steel price of US$757/ton
and a US$47/ton contribution from other steel revenue.

Hylsamex's revenue per ton of US$804/ton for 4Q04 represents a
notable surge of 65% or US$317/ton in relation to the US$487/ton
achieved in the same quarter of 2003 and reflects an increase of
4% or US$31/ton compared to the US$773/ton obtained in the
previous quarter.

In 2004, Hylsamex generated US$2,305 million (Ps.26,760 million)
in revenues, a rise of 59% compared to the revenues of US$1,449
million (Ps.16,806 million) reported in 2003. Revenue per ton
for 2004 reached US$728/ton, an increase of 45% compared to the
revenue per ton of US$502/ton obtained in the same period of
2003.

COST OF GOODS SOLD

In order to meet strong demand for steel in Mexico and abroad,
Hylsamex operated at high utilization levels in 2004 and 4Q04
was no exception. In addition, the high input cost environment
for the steel industry remained practically unchanged during
2004. Consequently, Hylsamex maintained DRI production at
maximum output -sourcing 100% of iron ore requirements from its
own mines- and continued to benefit from DRI's renewed cost
competitiveness vis-…-vis other metallics. In contrast to less
integrated producers, Hylsamex's vertical integration and
metallic charge flexibility allowed it to register only moderate
increases in aggregate COGS and cost per ton, despite high
natural gas prices during most of 2004.

As a sign of continued robust demand, Mill #1 of the Flat
Products Division (the primary flat products facility in use
before the mid-1990s modernization program) operated at a
production pace of approximately 30 thousand tons per month
during 4Q04. Production at Mill #1 is entirely on a variable
cost basis (i.e. no incurrence of fixed costs) and is easily
started and stopped as needed.

Hylsamex incurred in slightly higher scrap costs in 4Q04, as
compared to the previous quarter. The market for scrap remained
tight during 4Q04, with U.S. scrap prices1 prices consistently
above US$200/ton. So far early in 1Q05, scrap prices are seen at
US$209/ton, as of January 7th, 2005. As a result of higher scrap
prices and despite a high cost of natural gas, Hylsamex's DRI
cost advantage persisted and DRI production carried on. During
4Q04, Hylsamex utilized 30% more DRI than in the same quarter of
2003.

COGS for 4Q04 amounted to US$415 million (Ps.4,739 million), 31%
greater than the US$316 million (Ps.3,740 million) registered in
the same quarter of 2003 and 1% higher than the US$411 million
(Ps.4,806 million) recorded in the preceding quarter. The
increase in COGS versus the previous quarter occurred despite a
decrease in volume sold and mainly resulted from a higher cost
for energy, scrap and externally-sourced steel for the coating
operations. The rise against the same quarter of 2003 resulted
from these same factors.

On a per ton basis, COGS in 4Q04 reached US$543/ton, US$113/ton
or 26% superior to the US$429/ton recorded in the same quarter
of 2003 and US$46/ton or 9% greater than the US$496/ton attained
in the previous quarter. The US$113/ton increase in cost per ton
compared to the same quarter of 2003 consisted of US$95/ton and
US$18/ton increases in variable and fixed costs per ton, in that
order. The increase in variable cost results from higher energy
costs, greater prices for scrap metal, and a higher cost of
externally-sourced steel. Slightly greater maintenance expenses
during 4Q04 produced the slight increase in fixed cost per ton.

The US$46/ton increase in cost per ton against the previous
quarter was caused by increases of US$28/ton and US$18/ton in
variable and fixed costs per ton, respectively. A higher cost of
steel scrap and externally-sourced steel for the coating
operations explains the rise in variable cost.

The rise in fixed cost per ton is primarily due to the Peso's
appreciation in 4Q04 that increased the dollar equivalent figure
of some Peso-linked fixed cost items. The decrease in tonnage
sold and minor absolute rises in fixed costs also caused an
impact in fixed cost per ton. An explanation of the quarterly
behavior for the main components of COGS follows:

Energy Inputs: The effective natural gas price for Hylsamex
during 4Q04 was US$5.64/MMBtu (corresponding to a US$6.73/MMBtu
reference average price in South Texas), 13% greater than the
US$5.01/MMBtu recorded in the same quarter of 2003 and 3% higher
than the US$5.47/MMBtu observed in the previous quarter. During
October, the Company received a US$0.375/MMBtu discount in its
natural gas cost on 200 natural gas contracts, as a result of
the monetization of the US$5.00/MMBtu cap that took place in
4Q03. The Company is constantly monitoring and studying the
natural gas markets to manage this exposure. The current
financial hedging program has resulted positive for the Company.
As of the date of this report, the natural gas hedges consist of
the following positions:

2005

ú The South Texas price for January 2005 was set at
US$5.70/MMBtu.

ú February to December 2005: 32% of the needs are hedged with a
US$4.28/MMBtu swap capped at US$6.70/MMBtu.

ú February to August 2005: an additional 32% of the requirements
are covered through a US$5.86/MMBtu swap. When market prices
hover between US$4.50/MMBtu and US$5.73/MMBtu, the Company will
pay the prevailing market price plus US$0.13/MMBtu. The swap is
capped at US$7.70/MMBtu.

ú September to December 2005: an additional 32% of the
requirements are covered through a US$5.73/MMBtu swap. When
market prices hover between US$4.90/MMBtu and US$5.73/MMBtu, the
Company will pay the prevailing market price. The swap is capped
at US$7.70/MMBtu.

2007

ú Calendar 2007: The Company sold a swaption at US$4.20/MMBtu
for 32% of the requirements for the year.

Note: While the Company's financial hedges are referenced to
NYMEX natural gas prices, all of the Company's financial hedges
described above are shown at their South Texas equivalent price.
In 2004, South Texas prices were on average US$0.30 lower than
the NYMEX price.

The cost of electricity for 4Q04 was US›4.56/Kwh, 16% higher
than the US›3.92/Kwh recorded in the same quarter of 2003 and 1%
greater than the US›4.51/Kwh registered in the previous quarter.

The increase in the cost of electricity versus both periods was
the result of higher international prices for fossil fuels.

Metallic Inputs: In 4Q04, the weighted average cost of the
Company's metallic charge was US$70/ton higher than the cost
during the same quarter of 2003 and increased US$17/ton compared
to the previous quarter. In both assessments, the metallic
charge's cost increase is mainly attributed to higher scrap
prices, as the cost of DRI remained relatively stable.

In 4Q04, DRI's cost rose US$16/ton compared to the same period
of 2003 and slightly increased by US$10/ton versus the previous
quarter. This stability is due to the fairly steady effective
cost of natural gas for Hylsamex, which has hovered around
US$5.00/MMBtu since 2003, in part as a result of the Company's
natural gas hedging strategy. Since late in 2003, DRI has
regained competitiveness vis-avis steel scrap as a result of the
ascending tendency in scrap prices. Accordingly, Hylsamex's
competitive position has been enhanced compared to less
integrated producers.

As a sign of continued tightness in the steel scrap markets, the
cost of Hylsamex's overall scrap mix remained relatively high
compared to prior years. The cost of Hylsamex's domestic scrap
mix in 4Q04 rose US$116/ton compared to the same quarter of 2003
and increased by US$13/ton as measured against the preceding
quarter, following the upward trend exhibited by U.S. scrap
prices.

During 4Q04, the cost of Hylsamex's imported scrap mix increased
by US$96/ton in the comparison versus the same quarter of 2003.
The cost of imported scrap slightly increased US$17/ton compared
to the previous quarter. Sustained high scrap prices have been
induced by increased worldwide demand for steel products.

COGS for 2004 amounted to US$1,546 million (Ps.17,942 million),
increasing 21% from the US$1,278 million (Ps.14,815 million)
recorded in 2003. The 21% rise in COGS is due to the 10% growth
in shipments and higher variable costs in 2004. On a per ton
basis, COGS remained relatively stable, as it increased
US$46/ton or 10%, from US$442/ton in 2003 to US$488/ton in 2004.
In this comparison, variable costs augmented US$50/ton due to
higher costs of scrap and externally-sourced steel, and higher
prices of energy inputs. Due to higher shipment levels in 2004,
a decrease in fixed cost per ton was observed, which slightly
offset the rise in variable cost per ton.

OPERATING EXPENSES

Operating expenses for 4Q04 summed US$36 million (Ps.408
million), 42% higher than the US$25 million (Ps.297 million)
registered in the same quarter of 2003 and 29% greater than the
US$28 million (Ps.324 million) spent in the previous quarter. A
transient increase in operating expenses occurred in 4Q04, as
Hylsamex resumed payment of management fees to its parent
company Alfa. Hylsamex's payment for 2004 was US$8 million,
which was made during 4Q04, as compared to US$16 million in fees
accrued during all of 2003. This quarterly payment is based on
the level of revenues and will cease once the spin-off from Alfa
is completed. The ratio of operating expenses to sales reached
5.8% in 4Q04, lower than the 7.0% observed in the same quarter
of 2003 and slightly higher than the 4.3% of the previous
quarter. On a per ton basis, operating expenses reached
US$47/ton, reflecting increases of US$13/ton compared to the
same period of 2003 and the preceding quarter.

Operating expenses for 2004 amounted to US$123 million (Ps.1,423
million), up 13% from the US$109 million (Ps.1,260 million)
recorded in 2003. The ratio of operating expenses to sales
decreased to 5.3% in 2004 from 7.5% in 2003, as a result of
greater revenues and the fixed nature of most operating
expenses.

OPERATING INCOME AND EBITDA

Hylsamex generated very good operating profitability in 2004.
During 4Q04, operating income totaled US$164 million (Ps.1,876
million), US$147 million more than the US$17 million (Ps.202
million) obtained in the same quarter of 2003 and US$37 million
less than the US$201 million (Ps.2,355 million) gained in the
previous quarter. Hylsamex's operating profit margin for 4Q04
reached 27%, above the 5% operating profit margin obtained in
the same quarter of 2003 and slightly below the 31% registered
in the preceding quarter.

As has been the case throughout 2004, Hylsamex continued
reporting an excellent level of EBITDA in 4Q04. The Company's
EBITDA in 4Q04 of US$195 million (Ps.2,226 million) was more
than four times the US$48 million (Ps.562 million) achieved in
the same quarter of 2003 and was US$37 million less than the
US$232 million (Ps.2,714 million) generated in the previous
quarter. Hylsamex's EBITDA margin reached 32% during 4Q04,
sharply above the EBITDA margin of 13% registered in the same
quarter of 2003 and slightly below the prior quarter's EBITDA
margin of 36%. On a per ton basis, EBITDA reached US$255/ton in
4Q04, almost four times the US$65/ton obtained in the same
quarter of 2003 and US$26/ton less than in the previous quarter.

Operating profitability again reached very good levels in 4Q04,
explained by the current steel pricing environment and
Hylsamex's vertical integration that helped record relatively
stable costs. Compared to the previous quarter, a relatively
small decrease in profitability was observed both in absolute
terms and profit margins. This reduction is primarily explained
by the 8% drop in tonnage sold, a minor increase in fixed costs,
and the transient increase in operating expenses from the
resumption of the Alfa management fee. In the comparison against
the same quarter of 2003, Hylsamex not only enjoyed the benefit
of higher prices, but also the Company's enhanced position as an
efficient, vertically integrated minimill, allowed it to expand
profit margins more than other steel producers since the
Company's cost per ton increased to a lesser degree.

Operating income for 2004 amounted to US$636 million (Ps.7,395
million), more than ten times the operating income of US$63
million (Ps.731 million) obtained in 2003. EBITDA also grew
markedly, as Hylsamex generated US$759 million (Ps.8,821
million) in 2004, more than four times the EBITDA of US$187
million (Ps.2,168 million) registered in 2003.

COMPREHENSIVE FINANCIAL RESULT (CFR)

Hylsamex recorded in 4Q04 a net financial cost of US$1 million
(Ps.14 million), as compared to net financial costs of US$37
million (Ps.440 million) and US$10 million (Ps.115 million)
registered in the same quarter of 2003 and the previous quarter,
respectively. The CFR variations are largely attributable to
fluctuations in the Peso-dollar exchange rate and its effect on
Hylsamex's basically dollarized debt. As in the preceding
quarter, the Company experienced in 4Q04 sizeable decreases in
net interest expense measured against both comparable periods,
as a result of the deleveraging and refinancing efforts made
during 2004. Net interest expense for 4Q04 decreased 27% or US$7
million versus the same quarter of 2003 and dropped 9% or US$2
million compared to the previous quarter.

During 2004, the Company registered a net financial cost of
US$55 million (Ps.641 million), 61% less than the net financial
cost of US$141 million (Ps.1,629 million) reported for 2003. The
reduction is mostly explained by a US$74 million decrease in
foreign exchange losses for 2004, and a US$13 million drop in
net interest expense.

CONSOLIDATED NET INCOME

In 4Q04, the Company reported consolidated net income of US$234
million (Ps.2,655 million), in contrast to the net loss of US$56
million (Ps.667 million) posted in the same quarter of 2003 and
almost two times the net income of US$119 million (Ps.1,393
million) registered in the previous quarter. During 4Q04,
Hylsamex registered a tax gain of US$39 million, mainly
resulting from the cancellation of reserves against tax assets.

These reserves were created in the past, when the Company
estimated it would not fully take advantage of its accumulated
tax shields; given the improved profitability observed
throughout 2004, the Company cancelled such reserves. Against
the same quarter of 2003, the bottom line improved as a result
of the sharp increase in operating income.

For the year ended December 31, 2004, Hylsamex reported
consolidated net income of US$540 million (Ps.6,235 million),
which compares favorably to the net loss of US$72 million
(Ps.860 million) registered in 2003. The significant variation
is mainly explained by the positive swing in the Company's
operating profitability from 2003 to 2004 and by a lower net
financial cost.

  ----------------------------------------------------------
  Net Income (Loss) Integration
  Millon of Constant Pesos
  as of December 31, 2004              4Q04          2004

  Operating Income                  1,875.6        7,394.6
  Integral Financial Result           (13.5)        (640.6)
  Other income and
   special items, net                   7.8          (49.3)
  Taxes, Current and Deferred         432.2       (1,251.0)
  Equity income (loss)
  associated company                  353.4          780.9
  Consolidated Net Income in 4Q04   2,655.5
  Consolidated Net Income in 2004                  6,234.6
  -----------------------------------------------------------

NET DEBT & OTHER ITEMS

NET DEBT VARIATION 4Q04

Debt Net of Cash: Hylsamex's net debt as of December 31, 2004
decreased to US$546 million, US$41 million or 7% less than the
US$587 million registered as of September 30, 2004. This
reduction was mainly obtained though a US$30 million bank debt
prepayment and a US$12 million increase in cash reserves.

Cash Taxes Paid: Cash taxes paid during 4Q04 amounted to US$7
million, slightly less than the US$8 million disbursed in both
the same quarter of 2003 and the previous quarter. Despite the
significant increase in operating profitability, the Company is
paying only the asset tax. Management estimates that the Company
will face a low tax burden in 2005 due to the shield provided by
tax loss carry forwards and asset tax credits. As of December
31, 2004, the Company holds US$104 million and US$129 million in
tax loss carry forwards and asset tax credits, respectively. Tax
loss carry forwards can be used to reduce future taxable income
and consequently diminish income tax incurred. Furthermore, if
the remaining future income tax incurred is greater than the
asset tax, asset tax credits can be utilized to reduce income
tax payments to the asset tax level. During 2004, the Company
booked a reserve of US$31 million related to employee's profit
sharing generated during the fiscal year, which will be paid in
the second quarter of 2005.

Net Working Capital (NWC): During 4Q04, net working capital
represented a use of funds of US$34 million, which compares to a
source of funds of US$36 million in the same quarter of 2003 and
a use of funds of US$63 million in the previous quarter. In
4Q04, the Company directed funds primarily to accounts payable
and to a lesser degree to inventories.

Capital Expenditures: Capital expenditures reached US$15 million
during 4Q04, which represents a slight drop of US$2 million in
relation to the disbursements made in the same quarter of 2003
and an increase of US$10 million compared to the investments
made in the previous quarter.

Other Items: Hylsamex's strong free cash flow generation during
4Q04 allowed further improvements to its capital structure.
Hylsamex contributed US$28 million to its pension fund.
Additionally, the fees paid to Alfa reduced long-term accounts
payable.

NET DEBT VARIATION 2004

Debt Net of Cash: Hylsamex's net debt as of December 31, 2004
dropped to US$546 million, US$468 million or 46% less than the
US$1,014 million balance as of year-end 2003. This significant
reduction in net debt in 2004 was largely obtained through
US$291 million in bank debt prepayments made by the Company with
internal cash generation in 2004, US$137 million in net proceeds
from equity issuance used entirely for bank debt prepayments,
and a considerable increase in free cash flow that bumped cash
reserves higher by US$40 million from year-end 2003, for a
balance of US$125 million as of December 31, 2004.

Cash Taxes Paid: Cash taxes paid during 2004 amounted to US$32
million, slightly less than the US$34 million paid in 2003.

Net Working Capital (NWC): During 2004, net working capital
represented a significant use of funds amounting to US$205
million. The considerable investment in NWC is essentially due
the sharp rise in the monetary value of steel shipments and raw
materials during the year, and to greater production and sales
volume. The Company continued exhibiting efficient management of
working capital as demonstrated by the favorable tendency in the
operating activity ratios: NWC in days dropped to 40 days, from
48 days in 2003.

Capital Expenditures: Capital expenditures totaled US$46 million
during 2004, US$8 million less than the investments made in
2003. Galvak continues its expansion program and invested US$11
million in 2004. Galvak's cumulative figure for 2004 appears
relatively low because it opted to arrange "saleleaseback"
transactions for certain fixed assets totaling US$8 million.
Also, out of the figure for Hylsamex for 2004, US$8 million
corresponded mainly to the removal of overburden material at the
mines and to US$27 million that was invested in normal Capex at
Hylsa.

LIQUIDITY AND CASH RESERVES

Hylsamex continued with its excellent overall liquidity during
4Q04. Strong operating cash flow increased cash reserves. Cash
reserves reached US$125 million as of December 31, 2004, US$40
million more than the balance of US$85 million as of year-end
2003 and US$12 million higher than the balance of US$113 million
at the end of the previous quarter. Hylsa's US$60 million
Liquidity Facility, which was obtained to support general
corporate purposes and working capital needs, remains unused.

CAPITAL STRUCTURE

Hylsamex's strong cash flow generation during 4Q04 allowed
further improvements to its capital structure. Management
carried out the following actions during the quarter:

- During December, Hylsamex made a US$44 million payment to its
parent company Alfa, for fees that Hylsamex had accrued since
the debt restructuring and owed to Alfa. This payment resulted
in a reduction in long-term accounts payable.

- In addition, Hylsamex contributed US$28 million to its pension
fund.

KEY FINANCIAL RATIOS

Strong EBITDA generation throughout 2004 and the sharp reduction
in net debt achieved during the year notably improved Hylsamex's
financial ratios. The Company recorded Net Debt to LTM EBITDA of
0.7x as of the end of 4Q04, decreasing significantly from the
5.4x and 1.0x observed in the same period of 2003 and the
preceding quarter, in that order. The Interest Coverage ratio
(LTM EBITDA to LTM Net Interest Expense) followed a similar
trend: it reached 9.3x as of the end of 4Q04, compared to 2.0x
in the same quarter of 2003 and 6.9x in the previous quarter.

EQUITY INCOME FROM ASSOCIATED COMPANIES (SIDOR)

Hylsamex's minority stake in Amazonia generated a gain of US$31
million (Ps.353 million) in 4Q04, as compared to the gains of
US$8 million (Ps.96 million) and US$11 million (Ps.127 million)
recorded in the same quarter of 2003 and in the previous
quarter, respectively. Sidor continues to post a solid operating
performance as a result of favorable fundamentals in the global
steel market, the company's position as one of the world's
lowest-cost steel producers with vertical integration, and its
privileged geographic location that allows it to efficiently
supply the domestic and export markets.

OTHER DEVELOPMENTS

During January 2005, Hylsamex carried out a scheduled
maintenance program at Hylsa's flat products minimill in
Monterrey, in order to keep the facility in top operating
condition. The maintenance took 2 weeks to complete and resulted
in a loss of approximately 25,000 tons of finished product,
representing around 3 percent of quarterly shipments.

"This major maintenance was scheduled to coincide with the peak
period for our energy input costs and the seasonally lower steel
demand we usually face at the start of a new year," commented
Alejandro M. Elizondo, CEO of Hylsamex. "Today, our equipment is
in top operating condition and ready to fully capture the good
pricing levels in the market and the expected robust demand for
steel domestically and overseas."

Management believes the Company will continue generating strong
free cash flow in 1Q05, despite the effect of the programmed
maintenance. Expected additional production from Mill #1 of the
Flat Products Division, reductions in working capital
requirements, lower tax payments and a reduced interest burden,
could potentially offset the impact on cash flow arising from
the scheduled maintenance.

To view financial statements:
http://bankrupt.com/misc/Hylsa.pdf

CONTACT: Mr. Othon Diaz Del Guante
         Phone: +(52) 81-8865-1240
         E-mail: odiaz@hylsamex.com.mx

         Mr. Ismael De La Garza
         Phone: +(52) 81-8865-1224
         E-mail: idelagarza@hylsamex.com.mx

         Mr. Kevin Kirkeby
         Phone: +(646) 284-9416
         E-mail: kkirkeby@hfgcg.com



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V E N E Z U E L A
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PDVSA: Fuel Shortages Result of Rationing Plan
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Venezuelan state oil firm PDVSA is blaming the energy and oil
ministry's rationing plan for causing countrywide fuel
shortages, reports Business News Americas.

The plan, dubbed "Plan Piloto" and enforced by the armed forces,
allows PDVSA "to earmark, for each gas station and each
wholesaler, an average volume of fuel," PDVSA's domestic
distribution manager Rommel Rangel said.

Business News Americas reports that diesel and gasoline are
smuggled into neighboring countries because of the low,
regulated prices in Venezuela.

PDVSA sells fuels in the domestic market below cost, for example
a liter of gasoline that costs less than US$0.05 in Venezuela
sells for more than three times that in Colombia, which is a
potent incentive for smugglers.

According to PDVSA figures, 100 million liters make it across
the border each year.

On the other hand, the government is wary of increasing the
price of gasoline, seeing how such moves have lead to unrest and
riots in the past. As a result, gasoline prices have not been
increased since 1997, in a country where annual inflation
usually exceeds 20%.



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S U B S C R I P T I O N   I N F O R M A T I O N

Troubled Company Reporter - Latin America is a daily newsletter
co-published by Bankruptcy Creditors' Service, Inc., Fairless
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Copyright 2005.  All rights reserved.  ISSN 1529-2746.

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