Edgar Filing: ENERGY CO OF MINAS GERAIS

6-K

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13A-16 OR 15D-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of December 2016

Commission File Number 1-15224

Energy Company of Minas Gerais

(Translation of Registrant’s Name Into English)

Avenida Barbacena, 1200

30190-131 Belo Horizonte, Minas Gerais, Brazil

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper

as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper

as permitted by Regulation S-T Rule 101(b)(7): ☐

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ☐ No ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

Index


Item		Description of Items

1.		2Q 2016 Results

Forward-Looking Statements

This report contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Actual results could differ materially from those predicted in such forward-looking statements. Factors which may cause actual results to differ materially from those discussed herein include those risk factors set forth in our most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. CEMIG undertakes no obligation to revise these forward-looking statements to reflect events or circumstances after the date hereof, and claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

By:		/s/ Franklin Moreira Gonçalves
		Name: Franklin Moreira Gonçalves Title: Acting Chief Finance and Investor Relations Officer

Date: December 23, 2016

1. 2Q 2016 RESULTS

LOGO

CONTENTS


STATEMENTS OF FINANCIAL POSITION		2
CONSOLIDATED STATEMENTS OF INCOME		4
STATEMENTS OF COMPREHENSIVE INCOME		6
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – CONSOLIDATED		8
STATEMENTS OF CASH FLOW		10
STATEMENTS OF ADDED VALUE		12

CONDENSED EXPLANATORY NOTES TO THE INTERIM FINANCIAL STATEMENTS		13
1.	OPERATIONAL CONTEXT	13
2.	BASIS OF PREPARATION	14
3.	PRINCIPLES OF CONSOLIDATION	18
4.	CONCESSIONS AND AUTHORIZATIONS	18
5.	CASH AND CASH EQUIVALENTS	22
6.	SECURITIES	23
7.	CONSUMERS; TRADERS; CONCESSION HOLDERS – TRANSPORT OF ELECTRICITY	24
8.	RECOVERABLE TAXES	25
9.	INCOME TAX AND SOCIAL CONTRIBUTION TAX	25
10.	ESCROW DEPOSITS	28
11.	ENERGY DEVELOPMENT ACCOUNT (CDE) AND ‘FLAG TARIFF’ ACCOUNT FUNDS	28
12.	FINANCIAL ASSETS AND LIABILITIES OF THE CONCESSION	29
13.	INVESTMENTS	36
14.	PROPERTY, PLANT AND EQUIPMENT	49
15.	INTANGIBLE ASSETS	51
16.	SUPPLIERS	53
17.	TAXES	54
18.	LOANS, FINANCINGS AND DEBENTURES	55
19.	REGULATORY CHARGES	60
20.	POST-RETIREMENT OBLIGATIONS	60
21.	PROVISIONS	61
22.	STOCKHOLDERS’ EQUITY AND REMUNERATION TO STOCKHOLDERS	73
23.	REVENUE	74
24.	OPERATIONAL COSTS AND EXPENSES	78
25.	FINANCIAL REVENUE (EXPENSES)	83
26.	RELATED PARTY TRANSACTIONS	84
27.	FINANCIAL INSTRUMENTS AND RISK MANAGEMENT	87
28.	MEASUREMENT AT FAIR VALUE	96
29.	OPERATING SEGMENTS	98
30.	THE ANNUAL TARIFF ADJUSTMENT	100
31.	NON-CASH TRANSACTIONS	100
32.	SUBSEQUENT EVENTS	100

CONSOLIDATED ECONOMIC AND FINANCIAL PERFORMANCE		104

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

STATEMENTS OF FINANCIAL POSITION

AT JUNE 30, 2016 AND DECEMBER 31, 2015

ASSETS

(In thousands of Brazilian Reais – R$)


	Note		Consolidated (Unaudited)				Holding company (Unaudited)
	Note		June 30, 2016 Re-presented		Dec. 31, 2015 Re-presented		June 30, 2016 Re-presented		Dec. 31, 2015 Re-presented
CURRENT
Cash and cash equivalents		5		1,500,415		924,632		280,338		256,484
Marketable securities		6		932,321		2,426,746		88,804		127,390
Consumers and traders; Concession holders – Transport of electricity		7		3,294,449		3,764,477		—		—
Financial assets of the concession		12		997,954		873,699		—		—
Recoverable taxes		8		193,070		175,330		4,818		4,821
Income tax and Social Contribution taxes recoverable		9a		385,650		305,829		—		—
Dividends receivable				34,436		62,025		445,811		1,004,796
Linked funds				1,047		162		132		133
Inventories				40,817		37,264		12		10
Advance to suppliers		26		51,397		87,241		—		—
Energy Development Account (CDE)		11		63,751		71,695		—		—
Other				660,875		647,638		13,225		10,224

TOTAL, CURRENT				8,156,182		9,376,738		833,140		1,403,858
NON-CURRENT
Marketable securities		6		54,402		83,566		1,711		2,275
Advance to suppliers		26		110,042		60,000		—		—
Consumers and traders; Concession holders – Transport of electricity		7		139,491		133,691		—		—
Recoverable taxes		8		253,892		257,851		6,570		6,570
Income tax and Social Contribution tax recoverable		9a		177,330		205,620		177,330		205,620
Deferred income tax and Social Contribution tax		9b		1,653,023		1,498,479		917,142		778,120
Escrow deposits		10		1,873,767		1,813,341		506,658		483,264
Other				812,931		807,724		21,112		23,255
Financial assets of the concession		12		5,090,698		2,659,805		—		—
Investments		13		10,077,908		9,744,847		14,316,007		13,412,081
Property, plant and equipment		14		3,848,629		3,940,323		2,426		2,177
Intangible assets		15		10,487,061		10,275,104		1,868		1,918

TOTAL, NON-CURRENT				34,579,174		31,480,351		15,950,824		14,915,280

TOTAL ASSETS				42,735,356		40,857,089		16,783,964		16,319,138

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

STATEMENTS OF FINANCIAL POSITION

AT JUNE 30, 2016 AND DECEMBER 31, 2015

LIABILITIES

(In thousands of Brazilian Reais – R$)


	Note		Consolidated (Unaudited)				Holding company (Unaudited)
	Note		June 30, 2016 Re-presented		Dec. 31, 2015 Re-presented		June 30, 2016 Re-presented		Dec. 31, 2015 Re-presented
Suppliers		16		1,565,749		1,901,153		5,915		8,765
Regulatory charges		19		433,294		516,983		—		—
Employees’ and managers’ profit shares				15,652		114,031		920		7,986
Taxes and charges		17a		671,608		740,113		26,242		53,123
Income tax and Social Contribution tax		17b		13,011		10,646		—		—
Interest on Equity, and dividends, payable		22		572,872		1,306,815,		572,641		1,306,584
Loans, financings and debentures		18		4,618,734		6,300,359		—		—
Payroll and related charges				276,302		220,573		12,408		10,382
Post-retirement obligations		20		185,785		166,990		10,199		9,139
Concessions payable				2,900		2,811		—		—
Concession Grant Fee – Auction 12/2015		12		827,921		—		—		—
Financial liabilities of the concession		12		41,507		—		—		—
Financial instruments – Put options		13		1,679,455		1,245,103		1,679,455		1,245,103
Other obligations				480,412		548,495		3,921		5,200

TOTAL, CURRENT				11,385,202		13,074,072		2,311,701		2,646,282
NON-CURRENT
Regulatory charges		19		303,176		226,413		—		—
Loans, financings and debentures		18		10,829,029		8,866,178		—		—
Taxes and charges		17a		740,111		739,711		—		—
Deferred income tax and Social Contribution tax		9b		854,179		689,247		—		—
Post-retirement obligations		20		3,173,491		3,086,381		307,624		294,052
Concessions payable				19,119		18,578		—		—
Provisions		21		785,346		754,573		312,799		335,134
Financial liabilities of the concession		12		411,244		—		—		—
Financial instruments – Put options		13		173,625		147,614		—		—
Other obligations				262,667		266,646		57,816		59,972

TOTAL, NON-CURRENT				17,551,987		14,795,341		678,239		689,158

TOTAL LIABILITIES				28,937,189		27,869,413		2,989,940		3,335,440
STOCKHOLDERS’ EQUITY		22
Share capital				6,294,208		6,294,208		6,294,208		6,294,208
Capital reserves				1,924,503		1,924,503		1,924,503		1,924,503
Profit reserves				5,285,253		4,662,723		5,285,253		4,662,723
Equity valuation adjustments				61,082		102,264		61,082		102,264
Retained earnings				228,978		—		228,978		—

EQUITY ATTRIBUTABLE TO CONTROLLING STOCKHOLDERS				13,794,024		12,983,698		13,794,024		12,983,698

EQUITY ATTRIBUTABLE TO NON-CONTROLLING STOCKHOLDER				4,143		3,978		—		—

STOCKHOLDERS’ EQUITY				13,798,167		12,987,676		13,794,024		12,983,698

TOTAL LIABILITIES AND EQUITY				42,735,356		40,857,089		16,783,964		16,319,138

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2016 AND 2015

R$ ‘000 (except Net profit per share)


	Note	Consolidated (Unaudited)						Holding company (Unaudited)
	Note	Jun. 30, 2016			Jun. 30, 2015			Jun. 30, 2016			Jun. 30, 2015
NET REVENUE	23		9,205,807			11,241,759			453			161
OPERATING COSTS
COST OF ELECTRICITY AND GAS	24
Electricity purchased for resale			(3,956,110	)		(4,733,681	)		—			—
Charges for use of the National Grid			(525,912	)		(492,643	)		—			—
Gas bought for resale			(427,009	)		(523,922	)		—			—

			(4,909,031	)		(5,750,246	)		—			—
OTHER COSTS	24
Personnel and managers			(683,827	)		(539,889	)		—			—
Materials			(17,088	)		(24,813	)		—			—
Raw materials and inputs for production of electricity			(27	)		(74,971	)		—			—
Outsourced services			(353,972	)		(360,189	)		—			—
Depreciation and amortization			(382,969	)		(416,652	)		—			—
Operating provisions			(86,834	)		(77,903	)		—			—
Infrastructure construction cost			(583,733	)		(499,663	)		—			—
Other			(38,936	)		(104,733	)		—			—

			(2,147,386	)		(2,098,813	)		—			—
TOTAL COST			(7,056,417	)		(7,849,059	)		—			—
GROSS PROFIT			2,149,390			3,392,700			453			161
OPERATING EXPENSES	24
Selling expenses			(174,566	)		(58,077	)		—			—
G&A expenses			(309,029	)		(276,265	)		(21,291	)		(25,983	)
Operating provisions			(472,212	)		(137,025	)		(446,201	)		(137,025	)
Other operational expenses			(286,341	)		(369,216	)		(23,537	)		(20,322	)

			(1,242,148	)		(840,583	)		(491,029	)		(183,330	)
Equity method gain (loss)	13		14,042			95,810			502,706			2,130,839
Fair value gain (loss) on stockholding transaction	13		—			734,530			—			—
Operational profit before Financial income (expenses) and taxes			921,284			3,382,457			12,130			1,947,670
Financial revenues	25		609,260			524,855			71,455			13,422
Financial expenses	25		(1,233,847	)		(1,049,886	)		(3,204	)		(3,698	)

Profit before income tax and Social Contribution tax			296,697			2,857,426			80,381			1,957,394
Current income tax and Social Contribution taxes	9c		(78,867	)		(745,033	)		(12,237	)		—
Deferred income tax and Social Contribution tax	9c		(10,499	)		(93,502	)		139,022			61,220

PROFIT (LOSS) FOR THE PERIOD			207,331			2,018,891			207,166			2,018,614

Total of net profit for the year attributed to:
Interest of the controlling stockholders			207,166			2,018,614			207,166			2,018,614
Interest of non-controlling stockholder			165			277			—			—

			207,331			2,018,891			207,166			2,018,614

Basic and diluted profit per preferred share	22		0.16			1.60			0.16			1.60
Basic and diluted profit per common share	22		0.16			1.60			0.16			1.60

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2016 AND 2015

(In thousands of Brazilian Reais – R$ – except Net profit per share)


	Note		Consolidated (Unaudited)						Holding company (Unaudited)
	Note		2Q16			2Q15			2Q16			2Q15
NET REVENUE		23		4,754,147			5,392,480			88			81
OPERATING COSTS
COST OF ELECTRICITY AND GAS		24
Electricity purchased for resale				(2,024,749	)		(2,312,277	)		—			—
Charges for use of the National Grid				(267,206	)		(251,254	)		—			—
Gas bought for resale				(189,146	)		(261,914	)		—			—

				(2,481,101	)		(2,825,445	)		—			—
OTHER COSTS		24
Personnel and managers				(354,752	)		(272,821	)		—			—
Materials				(11,909	)		(14,261	)		—			—
Raw materials and inputs for production of electricity				(9	)		2,547			—			—
Outsourced services				(197,911	)		(185,997	)		—			—
Depreciation and amortization				(197,950	)		(175,813	)		—			—
Operating provisions				(6,352	)		(69,427	)		—			—
Infrastructure construction cost				(348,712	)		(266,090	)		—			—
Other				(30,279	)		(79,025	)		—			—

				(1,147,874	)		(1,060,887	)		—			—
TOTAL COST				(3,628,975	)		(3,886,332	)		—			—
GROSS PROFIT				1,125,172			1,506,148			88			81
OPERATING EXPENSES		24
Selling expenses				(98,303	)		(31,377	)		—			—
G&A expenses				(103,138	)		(132,124	)		(9,239	)		(10,748	)
Operating provisions				(377,187	)		(137,025	)		(360,667	)		(137,025	)
Other operational expenses				(141,527	)		(160,655	)		(10,338	)		(943	)

				(720,155	)		(461,181	)		(380,244	)		(148,716	)
Equity method gain (loss)		13		71,969			5,718			439,272			631,078
Operational profit before Financial income (expenses) and taxes				476,986			1,050,685			59,116			482,443
Financial revenues		25		390,398			242,751			48,924			7,468
Financial expenses		25		(602,427	)		(494,332	)		(1,345	)		(1,716	)

Profit before income tax and Social Contribution tax				264,957			799,104			106,695			488,195
Current income tax and Social Contribution taxes		9c		(7,075	)		(286,276	)		(10,583	)		—
Deferred income tax and Social Contribution tax		9c		(55,758	)		21,436			105,935			45,937

PROFIT (LOSS) FOR THE PERIOD				202,124			534,264			202,047			534,132

Total of net profit for the year attributed to:
Interest of the controlling stockholders				202,047			534,132			202,047			534,132
Interest of non-controlling stockholder				77			132			—			—

				202,124			534,264			202,047			534,132

Basic and diluted profit per preferred share		22		0.16			0.42			0.16			0.42
Basic and diluted profit per common share		22		0.16			0.42			0.16			0.42

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2016 AND 2015

(In thousands of Brazilian Reais – R$)


	Consolidated (Unaudited)						Holding company (Unaudited)
	Jun. 30, 2016			Jun. 30, 2015			Jun. 30, 2016			Jun. 30, 2015
PROFIT (LOSS) FOR THE PERIOD		207,331			2,018,891			207,166			2,018,614
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to the Profit and loss account
Adjustment of actuarial liabilities – restatement of obligations of defined benefit plans, net of taxes		(115	)		(118	)		—			—
Equity gain on Other comprehensive income in jointly-controlled subsidiary		6,803			—			6,688			—

		6,688			(118	)		6,688			—
Items that may be reclassified to the Profit and loss account
Exchange differences on Equity gain (loss) on Other comprehensive income in jointly-controlled subsidiary		(26,048	)		11,626			(26,058	)		11,592
Foreign exchange conversion differences on transactions outside Brazil		(10	)		84			—			—

		(26,058	)		11,710			(26,058	)		11,592

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		187,961			2,030,483			187,796			2,030,206

Total of comprehensive income attributed to:
Interest of the controlling stockholders		187,796			2,030,206			187,796			2,030,206
Interest of non-controlling stockholder		165			277			—			—

		187,961			2,030,483			187,796			2,030,206

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2016 AND 2015

(In thousands of Brazilian Reais – R$)


	Consolidated (Unaudited)					Holding company (Unaudited)
	2Q16		2Q15			2Q16		2Q15
PROFIT (LOSS) FOR THE PERIOD		202,124		534,264			202,047		534,132
OTHER COMPREHENSIVE INCOME
Items that may be reclassified to the Profit and loss account
Exchange differences on Equity gain (loss) on Other comprehensive income in jointly-controlled subsidiary		7,169		(1,636	)		7,174		(1,832	)
Foreign exchange conversion differences on transactions outside Brazil		5		(196	)		—		—

		7,174		(1,832	)		7,174		(1,832	)

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		209,298		532,432			209,221		532,300

Total of comprehensive income attributed to:
Interest of the controlling stockholders		209,221		532,300			209,221		532,300
Interest of non-controlling stockholder		77		132			—		—

		209,298		532,432			209,221		532,300

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY – CONSOLIDATED

FOR THE PERIODS ENDED JUNE 30, 2016 AND 2015

(In thousands of Brazilian Reais – R$)


(Unaudited)	Share capital		Capital reserves		Profit reserves		Equity valuation adjustments			Retained earnings		Total interest of controlling stockholders			Non-controlling stockholder		Total of Stockholders’ equity
BALANCES ON DECEMBER 31, 2015 (Re-presented)		6,294,208		1,924,503		4,662,723		102,264			—		12,983,698			3,978		12,987,676

Profit (loss) for the period		—		—		—		—			207,166		207,166			165		207,331
Other comprehensive income
Adjustment of actuarial liabilities – restatement of obligations of the defined benefit plans, net of taxes		—		—		—		(115	)		—		(115	)		—		(115	)
Equity gain (loss) on Other comprehensive income in subsidiary and jointly-controlled subsidiary		—		—		—		(19,245	)		—		(19,245	)		—		(19,245	)
Foreign exchange conversion differences on transactions outside Brazil		—		—		—		(10	)		—		(10	)		—		(10	)

Total comprehensive income for the period		—		—		—		(19,370	)		207,166		187,796			165		187,961
Other changes in Stockholders’ equity:
Portion of mandatory dividends that will not be distributed – Reversal of provision		—		—		622,530		—			—		622,530			—		622,530
Realization of reserves
Valuation adjustments to Stockholders’ equity – deemed cost of PP&E		—		—		—		(21,812	)		21,812		—			—		—

BALANCES ON JUNE 30, 2016 (Re-presented)		6,294,208		1,924,503		5,285,253		61,082			228,978		13,794,024			4,143		13,798,167

EQUITY ATTRIBUTABLE TO MINORITY STOCKHOLDERS		—		—		—		—			—		—			4,143		4,143
EQUITY ATTRIBUTABLE TO CONTROLLING STOCKHOLDERS		6,294,208		1,924,503		5,285,253		61,082			228,978		13,794,024			—		13,794,024

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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(Unaudited)	Share capital		Capital reserves		Profit reserves		Equity valuation adjustments			Retained earnings		Total interest of controlling stockholders			Non-controlling stockholder			Total of Stockholders’ equity
BALANCES ON DECEMBER 31, 2014		6,294,208		1,924,503		2,593,868		468,332			—		11,280,911			4,041			11,284,952

Profit (loss) for the period		—		—		—		—			2,018,614		2,018,614			277			2,018,891
Other comprehensive income
Adjustment of actuarial liabilities – restatement of obligations of the defined benefit plans, net of taxes		—		—		—		(118	)		—		(118	)		—			(118	)
Equity gain on Other comprehensive income in jointly-controlled subsidiary		—		—		—		11,626			—		11,626			—			11,626
Foreign exchange conversion differences on transactions outside Brazil		—		—		—		84					84			—			84

Total comprehensive income for the period		—		—		—		11,592			2,018,614		2,030,206			277			2,030,483
Other changes in Stockholders’ equity:
Additional dividends proposed in 2014 to non-controlling stockholders		—		—		—		—			—		—			(335	)		(335	)
Portion of mandatory dividends not distributed – reversal of provision		—		—		797,316		—			—		797,316			—			797,316
Realization of reserve for adjustments to Stockholders’ equity – deemed cost of PP&E		—		—		—		(39,728	)		39,728		—			—			—

BALANCES ON JUNE 30, 2015		6,294,208		1,924,503		3,391,184		440,196			2,058,342		14,108,433			3,983			14,112,416

MINORITY INTERESTS		—		—		—		—			—		—			3,983			3,983
EQUITY ATTRIBUTABLE TO CONTROLLING STOCKHOLDERS		6,294,208		1,924,503		3,391,184		440,196			2,058,342		14,108,433			3,983			14,112,416

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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STATEMENTS OF CASH FLOW

FOR THE PERIODS ENDED JUNE 30, 2016 AND 2015

(In thousands of Brazilian Reais – R$)


	Consolidated (Unaudited)						Holding company (Unaudited)
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
CASH FLOW FROM OPERATIONS
Profit (loss) for the period		207,331			2,018,891			207,166			2,018,614
Expenses (revenues) not affecting cash and cash equivalents
Income tax and Social Contribution tax		89,366			838,535			(126,785	)		(61,220	)
Depreciation and amortization		398,717			428,708			260			241
Losses on write-offs of PP&E and Intangible assets		39,899			55,653			25			—
Equity method gain (loss)		(14,042	)		(95,810	)		(502,706	)		(2,130,839	)
Interest and monetary updating		52,518			556,266			(52,666	)		—
Fair value gain (loss) on stockholding transaction		—			(734,530	)		—			—
Provisions (reversals) for operational losses		733,612			273,005			446,201			137,025
CVA Account (Account for Compensation of Portion A items) and Other Financial Components in tariff adjustments		663,555			(762,497	)		—			—
POST-RETIREMENT OBLIGATIONS		223,576			187,502			20,972			9,950

		2,394,532			2,765,723			(7,533	)		(26,229	)
(Increase) / decrease in assets
Consumers and Traders		291,711			(1,104,759	)		—			—
CVA Account (Account for Compensation of Portion A items) and Other Financial Components in tariff adjustments		341,694			806,923			—			—
Funding from Energy Development Account (CDE)		7,944			(116,543	)		—			—
Recoverable taxes		(13,781	)		(38,268	)		3			(15	)
Income tax and Social Contribution tax recoverable		(206,075	)		(44,985	)		28,290			34,664
Transport of electricity		(2,049	)		(29,422	)		—			—
Escrow deposits in litigation		(21,159	)		(22,317	)		(219	)		562
Dividends received from equity holdings		345,406			151,393			540,054			300,863
Financial assets of the concession		161,826			4,818			—			—
Other		(27,944	)		(96,404	)		24,141			18,735

		877,573			(489,564	)		592,269			354,809
Increase (reduction) in liabilities
Suppliers		(335,404	)		(139,653	)		(2,850	)		(1,037	)
Taxes and charges		(68,105	)		89,570			(26,881	)		(37,571	)
Income tax and Social Contribution tax payable		179,160			(1,415	)		(3,345	)		2,673
Payroll and related charges		55,729			13,937			2,026			404
Regulatory charges		(6,926	)		294,460			—			—
Post-retirement obligations		(117,671	)		(99,414	)		(6,340	)		(5,308	)
Other		(208,228	)		91,459			(15,193	)		(5,830	)

		(501,445	)		248,944			(52,583	)		(46,669	)

Cash generated by Operations		2,770,660			2,525,103			532,153			281,911
Interest paid on loans and financings		(1,084,559	)		(846,938	)		—			(2,673	)
Income tax and Social Contribution tax paid		(101,229	)		(707,985	)		(8,892	)		—

NET CASH GENERATED BY OPERATIONAL ACTIVITIES		1,584,872			970,180			523,261			279,238

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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	Consolidated (Unaudited)						Holding company (Unaudited)
	June 30, 2016			June 30, 2015			June 30, 2016			June 30, 2015
CASH FLOW IN INVESTMENT ACTIVITIES
Securities – Cash investments		1,523,589			484,735			39,150			(61,585	)
Financial assets		(1,472,264	)		(56,258	)		—			—
Linked funds		(885	)		1,056			1			268
Investments
Acquisition of equity interests in investees		—			(309,684	)		—			—
Cash injection in Investees		(643,254	)		(84,445	)		(426,660	)		(105,431	)
In PP&E		(45,005	)		(30,629	)		(484	)		(1,220	)
In Intangible assets		(466,716	)		(399,912	)		—			—

NET CASH FROM (USED IN) INVESTMENT ACTIVITIES		(1,104,535	)		(395,137	)		(387,993	)		(167,968	)

CASH FLOW IN FINANCING ACTIVITIES
New loans and debentures		2,251,598			3,097,192			—			—
Loans and debentures paid		(2,044,738	)		(3,673,618	)		—			—
Interest on Equity, and dividends		(111,414	)		(128,745	)		(111,414	)		(128,745	)

NET CASH FROM (USED IN) FINANCING ACTIVITIES		95,446			(705,171	)		(111,414	)		(128,745	)

NET CHANGE IN CASH AND CASH EQUIVALENTS		575,783			(130,128	)		23,854			(17,475	)

STATEMENT OF CHANGES IN CASH AND CASH EQUIVALENTS
Beginning of period		924,632			887,143			256,484			113,336
End of period		1,500,415			757,015			280,338			95,861

		575,783			(130,128	)		23,854			(17,475	)

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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STATEMENTS OF ADDED VALUE

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2016 AND 2015

(In thousands of Brazilian Reais – R$)


	Consolidated (Unaudited)								Holding company (Unaudited)
	Jun. 30, 2016				Jun. 30, 2015				Jun. 30, 2016					Jun. 30, 2015
REVENUES
Sales of electricity, gas and services		13,304,975				15,831,447				499					161
Distribution construction revenue		552,099				443,405				—					—
Transmission construction revenue		31,634				56,258				—					—
Revenue from financial updating of concession grant fee		148,694				—				—					—
Transmission indemnity revenue		592,469				54,872				—					—
Investments in property, plant and equipment		35,335				5,895				—					—
Other revenues		2,407				1,158				—					—
Provision for doubtful receivables		(174,566	)			(58,077	)			—					—

		14,493,047				16,334,958				499					161
INPUTS ACQUIRED FROM THIRD PARTIES
Electricity purchased for resale		(4,348,815	)			(5,143,052	)			—					—
Charges for use of national grid		(585,301	)			(534,469	)			—					—
Outsourced services		(591,299	)			(597,819	)			(3,829	)				(4,196	)
Gas bought for resale		(427,009	)			(523,922	)			—					—
Materials		(330,061	)			(327,695	)			(45	)				(145	)
Other operational costs		(757,701	)			(394,935	)			(455,803	)				(145,902	)

		(7,040,186	)			(7,521,892	)			(459,677	)				(150,243	)
GROSS VALUE ADDED		7,452,861				8,813,066				(459,178	)				(150,082	)
RETENTIONS
Depreciation and amortization		(398,717	)			(428,708	)			(260	)				(241	)

NET ADDED VALUE PRODUCED BY THE COMPANY		7,054,144				8,384,358				(459,438	)				(150,323	)
ADDED VALUE RECEIVED BY TRANSFER
Equity method gain (loss)		14,042				95,810				502,706					2,130,839
Financial revenues		609,260				524,855				71,455					13,422
Fair value gain (loss) on stockholding transaction		—				734,530				—					—

ADDED VALUE TO BE DISTRIBUTED		7,677,446				9,739,553				114,723					1,993,938

DISTRIBUTION OF ADDED VALUE
				%				%				%					%

Employees		933,243		12.16		861,466		8.85		28,984		25.26			29,700		1.49
Direct remuneration		646,198		8.42		617,457		6.34		9,690		8.45			20,484		1.03
Benefits		243,073		3.17		209,780		2.15		18,509		16.13			8,292		0.42
FGTS fund		43,972		0.57		34,229		0.35		785		0.68			924		0.05
Taxes and charges		5,174,448		67.39		5,683,751		58.36		(124,953	)	(108.92	)		(58,478	)	(2.93	)
Federal		2,551,316		33.23		3,571,438		36.67		(125,194	)	(109.13	)		(58,714	)	(2.94	)
State		2,615,849		34.07		2,106,430		21.63		48		0.04			105		0.01
Municipal		7,283		0.09		5,883		0.06		193		0.17			131		0.01
Remuneration of external capital		1,362,424		17.75		1,175,445		12.07		3,526		3.07			4,102		0.21
Interest		1,313,343		17.11		1,120,047		11.50		3,204		2.79			3,697		0.19
Rentals		49,081		0.64		55,398		0.57		322		0.28			405		0.02
Remuneration of own capital		207,331		2.70		2,018,891		20.73		207,166		180.58			2,018,614		101.24
Retained earnings		207,166		2.70		2,018,614		20.73		207,166		180.58			2,018,614		101.24
Non-controlling stockholders’ interest in Retained earnings		165		—		277		—		—		—			—		—

		7,677,446		100.00		9,739,553		100.00		114,723		100.00			1,993,938		100.00

The Condensed Explanatory Notes are an integral part of the Interim Financial Statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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CONDENSED EXPLANATORY NOTES TO THE INTERIM FINANCIAL STATEMENTS

FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2016

(In thousands of Brazilian Reais – R$ ’000 – except where otherwise indicated)

(Unaudited)

1.	OPERATIONAL CONTEXT

a)	The Company

Companhia Energética de Minas Gerais (‘Cemig’, also herein ‘the Company’, ‘Parent company’ or ‘Holding company’) is a listed corporation registered in the Brazilian Registry of Corporate Taxpayers (CNPJ) under Nº 17.155.730/0001-64, with shares traded on the BM&FBovespa (‘Bovespa’) at Corporate Governance Level 1; on the New York Stock Exchange (NYSE), through ADRs; and on the stock exchange of Madrid (‘Latibex’). It is domiciled in Brazil, with head office at Avenida Barbacena 1200, Belo Horizonte, capital of the state of Minas Gerais. It operates exclusively as a holding company, with interests in subsidiaries or jointly controlled entities, which are engaged in the activities of the construction and operation of systems for generation, transformation, transmission, distribution and sale of electricity, and also activities in the various fields of energy, for the purpose of commercial operation.

On December 21, 2015, Cemig D signed, with the Mining and Energy Ministry, the Fifth Amendment to its concession contracts, extending its electricity distribution concessions for a further 30 years, as from January 1, 2016. The new amendment establishes service quality and economic-financial parameters that Cemig D must meet during the new concession period.

On June 30, 2016 the Company’s consolidated current liabilities exceeded its consolidated current assets by R$ 3,229,020. The reason for this working capital deficiency was, primarily, new financings obtained in 2015 with short-term maturities for the Company’s Investment Program, and transfer of debentures from long term to short term, associated with the provision for dividends and Interest on Equity in the amount of R$ 633,967, in December 2015, and the provision for loss on put options in the amount of R$ 1,679,455 in June 2016. Another factor in this result was the amount of R$ 830,821, posted in Concessions payable, referring to the remaining balance of the debt owed by Cemig GT to the concession-granting power under the auction of the plants of Lot D.

Management monitors the Company’s cash flow, and for this purpose assesses measures to adjust the present situation of its financial assets and liabilities to the levels considered appropriate to meet its needs. In this case, in the first half of 2016 the Company carried out negotiations which resulted in issuance by Cemig D of a Bank Credit Note for R$ 695,000, debentures for R$ 1,615,000, and issuance of Promissory Notes by Cemig GT for R$ 620,000, in July 2016. See more details in Notes 18 and 32.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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Negotiations are in progress with financial institutions for rollover of the debt becoming due in 2016, for long-term maturities. Also, the Company has had positive cash flow from its operations, of R$ 1,584,872 to June 2016 and R$ 970,180 to June 2015.

On June 30, 2016 the current liabilities of the Holding company exceeded its current assets by R$ 1,478,561. This was principally the result of the provision for dividends in the amount of R$ 633,967 in December 2015, and the provision of R$ 1,679,455 for loss on put options.

Management monitors the Company’s cash flow, and for this purpose assesses measures to adjust the present situation of its financial assets and liabilities to the levels considered appropriate to meet its needs. Also, the Holding company has had positive cash flow from its operations, of R$ 523,261 to June 2016 and R$ 279,238 to June 2015.

The Company’s by-laws establish certain target levels for debt and investments which the Company’s management must obey. However, the Annual General Meeting of Stockholders of May 30, 2016 gave authorization to exceed these indicators, exceptionally for the year 2016, as follows:


	Target in the by-laws		Excess authorized by the AGM
Consolidated debt / Ebitda		2.00		4.12
(Net debt) / (Net debt + Stockholders’ equity)		40.00%		52.00%
(Capex including acquisition of any assets) / Ebitda		40.00%		146.00%

2.	BASIS OF PREPARATION

2.1

Statement of compliance

The interim Financial Statements have been prepared in accordance with Technical Pronouncement 21 –Interim Reporting (Pronunciamento Técnico 21 – Demonstração Intermediária, or CPC21), and IAS 34 –Interim Financial Reporting, issued by the International Accounting Standards Board (IASB); and are also presented in a form compliant with the rules issued by the Brazilian Securities Commission (Comissão de Valores Mobiliários, or CVM), applicable to preparation of Interim Financial Statements for the Quarterly Information (Informações Trimestrais, or ITR).

The Company has opted to present the individual and the consolidated Interim Financial Statements in a single group, since there is no difference in the values stated for (a) Stockholders’ equity and (b) Net profit (loss) between the individual and the consolidated Interim Financial Statements.

This Interim Quarterly Information has been prepared according to principles, practices and criteria consistent with those adopted in the preparation of the annual accounting statements at December 31, 2015. Thus, this Interim financial information should be read in conjunction with the re-presented financial statements for 2015, approved by the Company’s management on November 11, 2016.

All the material information used by Management in the management of the Company is in evidence in these interim financial statements.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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Authorization by the Company’s management for issuance of the original Interim accounting information for the period ended June 30, 2016 was given on August 11, 2016. This Re-presented Interim accounting information for the period ended June 30, 2016 was approved by the Company’s management on November 11, 2016, and reflects the effects of the adjustments described in Note 2.3 to this Interim accounting information.

2.2

Reconciling the Notes published in the annual financial statements and those in the Interim Financial Information

The table below shows the correlation between the Explanatory Notes published in the consolidated annual financial statements at December 31, 2015 and the consolidated interim financial accounting information at June 30, 2016.

The Company believes that this interim accounting information presents the material updating of information relating to its equity situation, and its results for the six months ended June 30, 2016, in compliance with the requirements for disclosure stated by the CVM (the Brazilian Securities Commission).


Number of the Note		Title of the Note
Dec. 31, 2015	June 30, 2016	Title of the Note
1	1	Operational context
2	2	Basis of preparation
3	3	Consolidation principles
4	4	Concessions and authorizations
5	29	Operational segments
6	5	Cash and cash equivalents
7	6	Marketable securities
8	7	Consumers and traders; Concession holders – Transport of electricity
9	8	Recoverable taxes
10	9	Income tax and Social Contribution tax
11	10	Escrow deposits
12	11	Passthrough funding from the Energy Development Account (Conta de Desenvolvimento Energético, or CDE) and the Flag Tariff Centralizing Account
13	12	Financial assets and liabilities of the concession
14	13	Investments
15	14	Property, plant and equipment
16	15	Intangible assets
17	16	Suppliers
18	17	Taxes and social security
19	18	Loans, financings and debentures
20	19	Regulatory charges
21	20	Post-retirement obligations
22	21	Provisions
23	22	Stockholders’ equity and remuneration to stockholders
24	23	Revenue
25	24	Operational costs and expenses
26	25	Financial revenue (expenses)
27	26	Related party transactions
28	27	Financial instruments and risk management
29	28	Measurement at fair value
32	31	Transactions not involving cash
33	32	Subsequent events

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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The Explanatory Notes of the 2015 annual report that were not included in this present Quarterly Information because they had no material changes, and/or were not applicable to the interim information, are as follows:


Number		Title of the Note
30		Insurance
31		Commitments

2.3

Re-presentation of the financial statements

As a result of the conclusions and results identified by the independent investigation into projects in which Norte Energia S.A. has equity interests, Cemig has recognized in its financial statements the impacts arising from this result, in proportion to its holding in NESA (through Aliança Norte and Amazônia Energia), as follows:

Statement of financial position

Note

Consolidated

June 30, 2016

Adjustments

30/06/2016
Re-presented

Assets

Non-current

Investments

10,100,783

(22,875

)

10,077,908

Total, non-current

34,602,049

(22,875

)

34,579,174

Total assets

42,758,231

(22,875

)

42,735,356

Stockholders’ equity

Profit reserves

5,308,128

(22,875

)

5,285,253

Total of stockholders’ equity

13,821,042

(22,875

)

13,798,167

Total liabilities and Stockholders’ equity

42,758,231

(22,875

)

42,735,356

Statement of financial position

Note

Consolidated

2015

Adjustments

2015
Re-presented

Assets

Non-current

Investments

9,767,722

(22,875

)

9,744,847

Total, non-current

31,503,226

(22,875

)

31,480,351

Total assets

40,879,964

(22,875

)

40,857,089

Liabilities

Current

Interest on Equity, and Dividends, payable

1,318,253

(11,438

)

1,306,815

Total, current

13,085,510

(11,438

)

13,074,072

Total liabilities

27,880,851

(11,438

)

27,869,413

Stockholders’ equity

Profit reserves

4,674,160

(11,437

)

4,662,723

Total of stockholders’ equity

12,999,113

(11,437

)

12,987,676

Total liabilities and Stockholders’ equity

40,879,964

(22,875

)

40,857,089

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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Statement of financial position

Note

Holding company

Sep. 30, 2016

Adjustments

Jun. 30, 2016
Re-presented

Assets

Non-current

Investments

14,338,882

(22,875

)

14,316,007

Total, non-current

15,973,699

(22,875

)

15,950,824

Total assets

16,806,839

(22,875

)

16,783,964

Stockholders’ equity

Profit reserves

5,308,128

(22,875

)

5,285,253

Total of stockholders’ equity

13,816,899

(22,875

)

13,794,024

Total liabilities and Stockholders’ equity

16,806,839

(22,875

)

16,783,964

Statement of financial position

Note

Holding company

2015

Adjustments

2015
Re-presented

Assets

Current

Dividends receivable

1,015,491

(10,695

)

1,004,796

Total, current

1,414,553

(10,695

)

1,004,796

Non-current

Investments

13,424,261

(12,180

)

13,412,081

Total, non-current

14,927,460

(12,180

)

14,915,280

Total assets

16,342,013

(22,875

)

16,319,138

Liabilities

Current

Interest on Equity, and dividends, payable

1,318,022

(11,438

)

1,306,584

Total, current

2,657,720

(11,438

)

2,646,282

Total liabilities

3,346,878

(11,438

)

3,335,440

Stockholders’ equity

Profit reserves

4,674,160

(11,437

)

4,662,723

Total of stockholders’ equity

12,995,135

(11,437

)

12,983,698

Total liabilities and Stockholders’ equity

16,342,013

(22,875

)

16,319,138

Statement of changes in stockholders’ equity

Jun. 30, 2016

Adjustments

30/06/2016
Re-presented

Profit reserves

To Retained earnings

5,308,128

(22,875

)

5,285,253

Balance of Stockholders’ equity

13,821,042

(22,875

)

13,798,167

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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Statement of changes in stockholders’ equity	2015			Adjustments			2015 Re-presented
Retained earnings
Net profit for the period		2,491,375			(22,875	)		2,468,500
Dividends under the by-laws		(1,267,935	)		11,438			(1,256,497	)
Profit reserves
To Retained earnings		1,262,280			(11,437	)		1,250,843

Total of profit reserves		4,674,160			(11,437	)		4,662,723

3.	PRINCIPLES OF CONSOLIDATION

The reporting dates for the interim accounting information on the subsidiaries and jointly-controlled subsidiaries, used for the purposes of calculation of consolidation and equity method gains (losses) coincide with those of the Company.

The Company uses the criteria of full consolidation for the following companies which are direct equity investments of Cemig:


Subsidiary	Form of valuation		June 30, 2016
Subsidiary	Form of valuation		Direct stake, %
Cemig GT (Generation and Transmission)		Consolidation		100.00
Cemig Distribuição		Consolidation		100.00
Gasmig		Consolidation		99.57
Cemig Telecom		Consolidation		100.00
Rosal Energia		Consolidation		100.00
Sá Carvalho		Consolidation		100.00
Horizontes Energia		Consolidation		100.00
Usina Térmica Ipatinga		Consolidation		100.00
Cemig PCH		Consolidation		100.00
Cemig Trading		Consolidation		100.00
Efficientia		Consolidation		100.00
Cemig Comercializadora de Energia Incentivada		Consolidation		100.00
Barreiro Thermal Plant		Consolidation		100.00
Empresa de Serviços e Comercialização de Energia Elétrica		Consolidation		100.00

4.	CONCESSIONS AND AUTHORIZATIONS

Renewal of the concessions of the Jaguara and São Simão Hydroelectric Plants

The company believes that it has the right to extension of these concessions, based on the original terms of the Concession Agreement, and is currently arguing this point in the courts, as follows:

The Jaguara hydroelectric plant

As specified in the concession the agreement for the Jaguara Plant, the Company applied for the extension of the concession. The Mining and Energy Ministry (‘MME’) refused the Company’s application, on the grounds that the application was made outside the time limits set by Law 12,783/13.

Av. Barbacena 1200

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Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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On June 20, 2013, Cemig GT obtained an interim injunction in its application to the Higher Appeal Court (Superior Tribunal de Justiça, or STJ) for order of mandamus No. 20,432/2013, against the decision of the MME not to entertain the application for extension of the period of concession of the Jaguara plant (424MW capacity, with average 336 MW assured offtake), which had an expiration date on August 28, 2013. The interim remedy, given by Reporting Justice Sérgio Kukina, ensured that Cemig GT would continue to operate the concession for the Jaguara plant until final judgment in the action. On August 23, 2013, Justice Sérgio Kukina ruled that the application for mandamus had failed.

On August 30, 2013 the STJ granted an interim order, published on September 3, 2013, in a new application for mandamus in the STJ, against the decision by the Mining and Energy Ministry which, in a dispatch published on August 23, 2013, refused, on its merits, the application by Cemig GT for extension of the concession of the Jaguara Plant under its Concession Agreement. This interim order gives Cemig GT the right to remain in control of the Jaguara Plant, commercially operating the public service concession granted to it, until final judgment of the case.

On June 24, 2015 the judgment on the application for mandamus brought by Cemig GT was completed. With all the votes given by the Justices of the first Section of the STJ, the applications made by Cemig GT were defeated by six judgment votes to 2.

On September 22, 2015, Cemig GT filed a further action, for Provisional Remedy, with the Federal Supreme Court (Supremo Tribunal Federal, or STF), to maintain the ownership of the concession for the Jaguara plant, on the initial bases of the concession agreement.

On November 3, 2015, the Reporting Justice of the Federal Supreme Court published a Dispatch requesting a position from the parties on their interest in holding a reconciliation hearing, due to the complexity and importance of the debate on the subject in the action for Provisional Remedy. On November 4, 2015, Cemig filed a statement with the Court stating its interest in such a hearing.

On December 21, 2015, Supreme Court Justice Dias Toffoli, rapporteur of the case, granted the application for interim injunction made by the Company, to suspend the effects of the judgment of the First Section of the STJ, and keep Cemig GT in possession of the concession to operate the Jaguara plant, on the initial bases of the concession agreement, until such time as the Supreme Court might make a decision to the contrary. On February 1, 2016, the decision granting the application for interim injunction applied for was published.

On February 15, 2016 the Panel Judgment of the STJ was published, containing the decision of the First Section of that Court, which refused to grant mandamus and refused the Special Appeal.

On February 22, 2016, in the STF, the Reporting Justice issued a Dispatch postponing continuity of the Reconciliation Hearing between Cemig GT and the federal government; the parties are currently awaiting a further dispatch to set a new date for continuation of that hearing, begun on December 15, 2015.

On March 1, 2016 the Company filed an Ordinary Appeal with the STJ against the panel judgment of February 15, 2016, and on April 11, 2016 the Justice Deputy Chair of the STJ issued a decision accepting that this Ordinary Appeal should be heard, and ordered it to be submitted to the STF.

Considering the present status of the legal dispute and supported by the opinion of its internal and external legal advisors, in the first half of 2016 the Company recognized the operational revenues and costs of this plant, in accordance with current accounting practices, in view of the fact that it remained in the control of the asset during this period.

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Brazil

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São Simão hydroelectric plant

On June 3, 2014, the Company filed a request for extension of the concession of the São Simão Hydroelectric Plant, since it believes that the concession contract for this plant is not subject to the new rules created by Provisional Measure 579 (which became Law 12783/2013).

On August 5, 2014, the Council of Aneel decided to recommend to the Mining and Energy Ministry (MME) that renewal of the concession for the São Simão plant should be refused.

On August 29, 2014, the Mining and Energy Minister decided to refuse the request for extension of the period of concession of the São Simão hydro plant, based on Opinion 559/2014/CONJURMME/CGU/AGU.

On September 10, 2014, Cemig GT filed a Hierarchy Appeal with the MME, with request for reconsideration, for the Mining and Energy Minister to reconsider his decision and to grant the Company’s request based only on Concession Contract 007/1997; and, successively, that the appeal should be sent to the President of the Republic, so that the President should issue a decision in favor of the Company’s request in the same terms. This appeal is still pending, awaiting consideration by the MME.

Notwithstanding this, on December 15, 2014 Cemig GT filed an application for mandamus (No. 21465/DF), with the Higher Appeal Court (STJ), requesting interim relief, against an act that was illegal and violated the net and certain right of the plaintiff, practiced by the Mining and Energy Minister, for the purpose of obtaining extension of the period of concession of the São Simão plant, based on the Concession Agreement.

On December 17, 2014, Justice Mauro Campbell granted an interim order (published on December 19, 2014) that Cemig GT should remain in control of the plant, commercially operating the public service concession conceded to it, until the final judgment on application for mandamus governing the Jaguara plant, or until a re-examination of the remedy just refused.

When the judgment in the application for mandamus governing the Jaguara plant was concluded, with rejection of the application, the Reporting Justice revoked the interim remedy given in the Application for mandamus relating to the São Simão plant, the decision on which was published on June 30, 2015.

On July 3, 2015, Cemig GT filed a Special Appeal for retraction of the decision by the Reporting Justice, or, if the court should not be of that opinion, that the appeal referred to should be submitted to consideration by the First Section of the STJ, for an interim remedy ordering that the Company should continue to hold the concession for the São Simão Plant, on the initial bases of the Concession agreement.

Av. Barbacena 1200

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30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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On July 10, 2015, the Energy Planning and Development Department (Secretaria de Planejamento e Desenvolvimento Energético) sent an official letter to Cemig GT requiring it to state whether the Company would be interested in remaining in possession of the São Simão Plant, on the new bases of Law 12783/13, until its assumption by the winner of a new tender to be held, in view of the repeal of the interim remedy.

In response to this new event, on July 22, 2015 Cemig GT filed a petition with the Chair of the STJ requesting the application for retraction made within the Special Appeal, in such a way that, through reconsideration of the decision appealed against, an interim remedy should be granted, to keep the Company as holder of the concession of the São Simão Plant, on the initial basis of the Concession Agreement, until final judgment be given on this application for mandamus, or, subsidiarily, that, at least, suspension effect should be attributed to the Special Appeal.

On August 20, 2015 it was stated that the MME would take the necessary measures to designate Cemig GT as provider of electricity generation service through the São Simão plant, under the quota regime, on the basis that the revocation of the interim order given in the application for mandamus had immediate enforceability.

In response, Cemig GT stated interest in remaining responsible for the provision of the electricity generation service of the São Simão plant, but pointed out that there are doubts as to the type, and legal security, of this provision of services, since the matter was still pending court and administrative decisions.

The MME, by Ministerial Order 432/2015, published on September 15, 2015, designated Cemig GT as the party responsible for provision of electricity generation service through the São Simão plant, under the quota regime (being responsible for the operation and maintenance of the plant without, however, having the right to its output of electricity, which will be allocated to the Guaranteed Power Offtake Auctions) until the taking over of the concession by the winner of the auction.

Further, in the judiciary, Cemig GT filed a further application for mandamus, to Justice Mauro Campbell Marques, requesting an annulment of the act of coercion, and assertion of the interim remedy that authorized the applicant to remain in possession and operation of the concession of the São Simão plant, on the initial bases of the contract, until final judgment was given on the application for mandamus governing the São Simão plant or, subsidiarily, until the merit of the Special Appeal would be considered.

Although judgments have been given against the pleadings put forward by the Company in relation to orders of mandamus, the Company continues to be confident of its right, based on a contractual clause, and the legislation currently in effect, and on the Opinions issued by renowned jurists. The chances of success in the court dispute have been categorized ‘possible’, by the Company’s internal and external legal advisers.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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Considering the present status of the legal dispute, and supported by the opinion of its internal and external legal advisers, the Company:

◾

recognized, up to the date of September 15, 2015, the operational revenues and costs of this plant, in accordance with current accounting practices, in view of the fact that it remained in control of the asset up to that date;

◾

considering the requirements of Ministerial Order 432/2015, as from September 16, 2015, ceased to recognize the expenses of depreciation on the São Simão plant, and began to recognize revenues relating to the provision of services of operation and maintenance of the plant, in accordance with the regime of quotas;

◾

transferred, on September 16, 2015, the amount of R$ 219,869 from its PP&E to the account line Other long term assets, considering that it is still under decision in the Courts. Based on the terms of the concession agreement, this asset is considered as having a recovery value higher than the value at which it is recorded.

Concession of the Miranda Hydroelectric Plant

On June 10, 2016, Cemig Geração e Transmissão filed application to the regulator, Aneel, to extend the period of the concession for the Miranda Hydroelectric Plant for 20 years. On July 12, 2016, Aneel, complying with the judgment vote of the Reporting Council Member in the case, José Jurhosa Junior, decided to submit the case “to the Mining and Energy Ministry with the recommendation not to give cognizance to the request by Cemig Geração e Transmissão S.A. – Cemig GT for extension of the period of concession of the Miranda Hydroelectric Plant, since it was made outside the period stipulated by Law 12783/2013”.

5.	CASH AND CASH EQUIVALENTS


	Consolidated				Holding company
	June 30, 2016		Dec. 31, 2015		June 30, 2016		Dec. 31, 2015
Banks accounts		46,927		51,939		4,643		4,161
Cash investments
Bank certificates of deposit		1,259,062		722,738		260,383		234,754
Overnight (Repos)		185,577		127,916		15,312		17,569
Treasury Financial Bills		8,401		5,659		—		—
Other		448		16,380		—		—

		1,453,488		872,693		275,695		252,323

		1,500,415		924,632		280,338		256,484

The financial investments are in transactions that are liquid, promptly convertible into a known amount of cash, are subject to insignificant risk of change in value, and have no restrictions on use. Fixed-rate or floating-rate Bank certificates of deposit (Certificados de Depósito Bancário, or CDBs) are remunerated at a percentage of the rate for interbank deposits (the Certificado de Depósito Interbancário, or CDI, rate), which is published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip). This percentage ranges from 75% to 108.5%, depending on the transaction.

Overnight repo transactions are short-term cash investments, with availability for redemption on the day following the date of investment. They are usually backed by treasury bills, notes or bonds and referenced to a fixed rate of approximately 14.4% p.a.

The Company’s exposure to interest rate risk and an analysis of sensitivity of financial assets and liabilities are given in Note 27 to this Interim Consolidated Financial Information.

Av. Barbacena 1200

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30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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6.	SECURITIES


	Consolidated				Holding company
	Jun. 30, 2016		Dec. 31, 2015		June 30, 2016		Dec. 31, 2015
Cash investments
Current
Bank certificates of deposit		107,538		1,716,944		19,531		30,804
Financial Notes – Banks		554,142		460,639		45,724		61,989
Treasury Financial Bills		119,282		87,938		10,535		12,588
Debentures		150,234		160,332		12,396		21,590
Other		1,125		893		618		419

		932,321		2,426,746		88,804		127,390
Non-current
Bank certificates of deposit		33,692		42,011		—		—
Financial Notes – Banks		12,900		41,367		1,066		2,249
Debentures		—		—		645		—
Other		7,810		188		—		26

		54,402		83,566		1,711		2,275

		986,723		2,510,312		90,515		129,665

Fixed-rate or floating-rate Bank certificates of deposit (Certificados de Depósito Bancário, or CDBs) are remunerated at a percentage of the rate for interbank deposits (Certificado de Depósito Interbancário, or CDI, rate), which is published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip). This percentage ranges from 98.5% to 109% depending on the transaction.

Bank Financial Bills (Letras Financeiras, or LFs) are fixed-rate fixed-income securities, issued by banks and remunerated at a percentage of the CDI rate published by Cetip. The remuneration rate on the LFs in Cemig’s portfolio varies between 104.8% and 112.7% of the CDI rate.

Treasury Financial Bills (LFTs) are fixed rate securities, the yield on which follows the daily variation of the Selic rate between the date of purchase and the date of purchase of the security.

Debentures are medium and long term debt securities, which give their holders a right of credit against the issuing company. The debentures in the portfolio of Cemig’s Investment Fund have a remuneration rate varying between 108% and 113% of the CDI rate.

Note 27 gives a classification of these securities. Cash investments in securities of related parties are shown in Note 26.

Av. Barbacena 1200

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30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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7.	CONSUMERS; TRADERS; CONCESSION HOLDERS – TRANSPORT OF ELECTRICITY


	Consolidated
	Balances not yet due		Up to 90 days past due		More than 90 days past due			June 30, 2016			Dec. 31, 2015
Invoiced supply		1,068,249		726,594		776,320			2,571,163			2,412,520
Supply not yet invoiced		981,618		—		—			981,618			1,125,479
Wholesale supply to other concession holders		121,927		21,847		2,294			146,068			98,814
CCEE (Electricity Trading Chamber)		53,815		—		942			54,757			516,362
Concession holders – Transport of electricity		157,993		11,057		203,436			372,486			370,438
(–) Allowance for doubtful accounts		—		—		(692,152	)		(692,152	)		(625,445	)

		2,383,602		759,498		290,840			3,433,940			3,898,168

Current assets									3,294,449			3,764,477
Non-current assets									139,491			133,691

The Company’s exposure to credit risk related to Consumers and Traders is given in Note 27.

The provision for the allowance for doubtful receivables is considered to be sufficient to cover any losses in the realization of these assets, and breaks down by type of consumer as follows:


	June 30, 2016		Dec. 31, 2015
Residential		260,945		210,957
Industrial		140,604		135,925
Commercial, services and others		129,099		116,684
Rural		20,033		18,877
Public authorities		11,288		11,546
Public lighting		3,901		5,052
Public service		9,818		9,783
Charges for use of the network – TUSD		111,513		111,513
Other		4,951		5,108

		692,152		625,445

Changes in the provision for doubtful receivables in the six months to June 30, 2016 were as follows:


Balance on December 31, 2014	649,850

New provisions	58,077
Written off	(43,273	)

Balance on June 30, 2015	664,654

Balance on December 31, 2015	625,445

New provisions	174,566
Written off	(107,859	)

Balance on June 30, 2016	692,152

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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8.	RECOVERABLE TAXES


	Consolidated				Holding company
	June 30, 2016		Dec. 31, 2015		June 30, 2016		Dec. 31, 2015
Current
ICMS tax recoverable		131,035		113,459		3,432		3,432
PIS and Pasep taxes		12,823		9,477		—		—
Cofins tax		39,442		43,755		1		—
Other		9,770		8,639		1,385		1,389

		193,070		175,330		4,818		4,821
Non-current
ICMS tax recoverable		185,811		182,504		4,754		4,754
PIS and Pasep taxes		11,669		12,966		4		4
Cofins tax		54,185		60,155		16		16
Other		2,227		2,226		1,796		1,796

		253,892		257,851		6,570		6,570

		446,962		433,181		11,388		11,391

The credits of the PIS, Pasep, Cofins and ICMS taxes, recorded in Non-current assets, arise from acquisitions of property, plant and equipment and can be offset over 48 months. The transfer to Non-current was made in accordance with estimates by management of the amounts that will be realized up to June 30, 2017.

9.	INCOME TAX AND SOCIAL CONTRIBUTION TAX

a)	Income tax and Social Contribution tax recoverable

The balances of income tax and Social Contribution tax refer to tax credits in corporate income tax returns of previous years and to advance payments which will be offset against federal taxes payable.


	Consolidated				Holding company
	June 30, 2016		Dec. 31, 2015		June 30, 2016		Dec. 31, 2015
Current
Income tax		273,525		225,638		—		—
Social Contribution tax		112,125		80,191		—		—

		385,650		305,829		—		—
Non-current
Income tax		154,173		191,978		154,173		191,978
Social Contribution tax		23,157		13,642		23,157		13,642

		177,330		205,620		177,330		205,620

		562,980		511,449		177,330		205,620

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Brazil

Tel.: +55 31 3506-5024

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b)	Deferred income tax and Social Contribution tax

Cemig and its subsidiaries have income tax credits, constituted at the rate of 25.00%, and Social Contribution tax credits, at the rate of 9.00%, as follows:


Deferred income tax and Social Contribution tax.	Consolidated						Holding company
Deferred income tax and Social Contribution tax.	June 30, 2016			Dec. 31, 2015			June 30, 2016			Dec. 31, 2015
Tax credits
Tax loss carryforwards		255,270			236,168			229,258			234,529
Provisions		879,985			712,999			677,366			537,281
Post-retirement obligations		866,189			830,748			94,456			89,509
Provision for doubtful receivables		232,726			210,072			7,192			7,195
Taxes payable – suspended liability (1)		200,612			199,571			—			—
Paid concession		9,324			9,000			—			—
Other		22,676			54,378			229			2,214

Total		2,466,782			2,252,936			1,008,501			870,728

Deferred obligations
Funding cost		(31,183	)		(20,532	)		—			—
Deemed cost		(272,854	)		(279,575	)		—			—
Cost of acquisition of equity interests		(490,445	)		(499,403	)		(91,359	)		(92,608	)
Financial charges capitalized		(132,295	)		(107,676	)		—			—
Tax on revenues not realized – Presumed Profit accounting method		(3,319	)		(1,821	)		—			—
Transmission assets: Indemnity gain		(462,960	)		(261,521	)		—			—
Updating of Financial assets		(274,882	)		(273,155	)		—			—
Other		—			(21	)		—			—

Total		(1,667,938	)		(1,443,704	)		(91,359	)		(92,608	)

Total, net		798,844			809,232			917,142			778,120

Total assets		1,653,023			1,498,479			917,142			778,120
Total liabilities		(854,179	)		(689,247	)		—			—

(1)	Refers to the court escrow deposit of PIS, Pasep and Cofins taxes charged on amounts of ICMS tax.

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c)	Reconciliation of the expense on income tax and Social Contribution tax

This table reconciles the nominal expenses on income tax (rate 25%) and the Social Contribution tax (rate 9%) with the actual expense, presented in the Statement of income:


	Consolidated						Holding company
	1H16			1H15			1H16			1H15
Pre-tax profit		296,697			2,857,426			80,381			1,957,394
Income tax and Social Contribution tax – nominal expense		(100,877	)		(971,525	)		(27,329	)		(665,514	)
Tax effects applicable to:
Equity gain (loss) in subsidiaries (net of Interest on Equity)		(9,851	)		35,444			153,240			726,150
Gain on change in percentage equity interest in Aliança Geração		—			88,392			—			—
Non-deductible contributions and donations		(1,804	)		(1,815	)		—			—
Tax incentives		1,109			4,302			50			—
Tax credits not recognized		(1,586	)		(539	)		(66	)		3
Difference between Presumed Profit and Real Profit Methods		34,286			15,093			—			—
Income tax and Social Contribution tax correction to prior year tax return		—			(114	)		—			—
Non-deductible fines		(7,582	)		(4,429	)		(14	)		(3	)
Excess reactive power and excess demand		(6,157	)		(5,540	)		—			—
Other		3,096			2,196			904			584

Income tax and Social Contribution tax – effective credit (expense)		(89,366	)		(838,535	)		126,785			61,220

Effective rate		30.14%			29.35%			(157.73)%			(3.13)%
Current tax		(78,867	)		(745,033	)		(12,237	)		—
Deferred tax		(10,499	)		(93,502	)		139,022			61,220


	Consolidated						Holding company
	2Q16			2Q15			2Q16			2Q15
Pre-tax profit		264,957			799,104			106,695			488,195
Income tax and Social Contribution tax – nominal expense		(90,085	)		(271,696	)		(36,276	)		(165,986	)
Tax effects applicable to:
Equity gain (loss) in subsidiaries (net of Interest on Equity)		7,693			4,813			131,048			211,407
Non-deductible contributions and donations		(1,057	)		(1,020	)		—			—
Tax incentives		(2,195	)		2,328			20			—
Tax credits not recognized		578			(58	)		24			(5	)
Difference between Presumed Profit and Real Profit Methods		25,627			8,368			—			—
Income tax and Social Contribution tax – correction to prior year tax return		—			(114	)		—			—
Non-deductible fines		(2,430	)		(2,207	)		(14	)		(1	)
Excess reactive power and excess demand		(3,136	)		(2,680	)		—			—
Other		2,172			(2,574	)		550			522

Income tax and Social Contribution tax – effective credit (expense)		(62,833	)		(264,840	)		95,352			45,937

Effective rate		23.71%			33.14%			89.37%			(9.41)%
Current tax		(7,075	)		(286,276	)		(10,583	)		—
Deferred tax		(55,758	)		21,436			105,935			45,937

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

10.

ESCROW DEPOSITS

These payments are mainly for legal actions relating to employment-law contingencies and tax claims. The most important escrow deposits refer to tax disputes, which mainly concern: (i) income tax withheld at source on Interest on Equity; and (ii) the Pasep and Cofins taxes – in actions seeking exclude the ICMS tax itself from the taxable amount on which the Pasep and Cofins taxes are charged.


	Consolidated				Holding company
	June 30, 2016		Dec. 31, 2015		June 30, 2016		Dec. 31, 2015
Employment-law cases		378,448		367,440		33,525		36,996
Tax cases
Income tax on Interest on Equity		14,774		14,774		—		—
Pasep and Cofins taxes (1)		743,398		751,318		—		10,604
Credits of ICMS tax on PP&E		—		35,674		—		—
Donations and legacy tax (ITCD)		43,396		33,848		42,957		42,711
Urban property tax (IPTU)		69,296		67,637		59,462		72,113
Finsocial tax		50,816		23,343		50,816		29,962
Other		235,150		185,439		42,874		15,029

		1,156,830		1,112,033		196,109		170,419
Other
Monetary updating on AFAC from Minas Gerais State Government (2)		239,445		239,445		239,445		239,445
Regulatory		59,528		56,523		25,519		24,253
Third party liability		12,495		9,810		6,065		5,757
Consumer relations		4,340		3,779		1,516		1,489
Court embargo		9,454		11,783		3,090		3,288
Other		13,227		12,528		1,389		1,617

		338,489		333,868		277,024		275,849

		1,873,767		1,813,341		506,658		483,264

(1)	The balances of the escrow deposits relating to the Pasep and Cofins taxes have a corresponding provision in Taxes. See more details in Note 17.

(2)	Administrative deposit seeking suspension of enforceability of the credit charged by Minas Gerais State Government for a difference in monetary updating on the Advance against Future Capital Increase (Adiantamento contra Futuro Aumento de Capital, or AFAC). For more details please see Note 21.

11.

ENERGY DEVELOPMENT ACCOUNT (CDE) AND ‘FLAG TARIFF’ ACCOUNT FUNDS

Reimbursement of tariff subsidy payments

The subsidies applicable to tariffs charged to users of public electricity distribution service are reimbursed through payments of funds from the Energy Development Account (Conta de Desenvolvimento Energético, or CDE).

On June 30, 2016 the total appropriated as incoming subsidies was R$ 409,102 (R$ 362,898 in 2015). Of the amount provisioned, the Company has R$ 63,751 receivable (R$ 71,695 at December 31, 2015). This is recognized in current assets.

Payments from the Flag Tariff Funds Centralizing Account

The ‘Flag Account’ (‘Conta Bandeira’) manages the funds collected from captive customers of utilities of the national grid holding electricity distribution concessions and permissions – these were paid, on behalf of the CDE, directly to the Flag Account. The resulting funds are passed through by the Wholesale Trading Chamber (CCEE) to distribution agents, based on the differences between (i) realized costs of thermal generation and exposure to short-term market prices, and (ii) the amounts covered by the tariff.

Av. Barbacena 1200

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Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

On June 30, 2016, the amounts passed through from the Flag Account totaled R$ 341,694 (R$ 402,504 on June 30, 2015). They were recognized as a partial realization of the CVA credit receivable.

12.

FINANCIAL ASSETS AND LIABILITIES OF THE CONCESSION


Financial assets of the concession	Jun. 30, 2016		Dec. 31, 2015
Assets related to infrastructure (a)
Transmission concessions		471,512		401,139
Distribution concessions		176,708		135,983
Indemnity receivable – Transmission		1,646,598		1,054,129
Indemnity receivable – Generation		546,424		546,424
Generation assets – Assets remunerated by tariff		—		46,173
Concession Grant Fee – Plants contracted at Auction 12/2015		2,262,688		—

		5,103,930		2,183,848

CVA (Portion A Variation Compensation Account) and Other financial components in tariff adjustments (b)		984,722		1,349,656

Total		6,088,652		3,533,504

Current assets		997,954		873,699
Non-current assets		5,090,698		2,659,805


Financial liabilities of the concession	Jun. 30, 2016		Dec. 31, 2015
CVA (Portion A Variation Compensation Account) and Other financial components in tariff adjustments (b)		452,751		—
Current liabilities		41,507		—
Non-current liabilities		411,244		—

a)	Assets related to infrastructure

The distribution, transmission and gas contracts of the Company and its subsidies are within the criteria for application of Technical Interpretation ICPC 01 (IFRIC 12), which governs accounting of concessions. They refer to the investment made in infrastructure that will be the subject of indemnity by the Concession-granting power, during the period and at the end of the concessions, as specified in the regulations of the electricity sector and in the concession contracts signed by Cemig and its subsidiaries with the related concession-granting powers.

The portion of the assets of the concession that will be totally used up during the concession period is recorded as an Intangible asset and is completely amortized during the concession agreement period. The part of the value of the assets that will not be completely amortized by the end of the concession agreement period is reported as a Financial asset due to an unconditional right to receive cash or other financial asset directly from the grantor.

Indemnity receivable – Transmission

The Company’s transmission concession contracts are within the criteria for application of Technical Interpretation ICPC 01 (IFRIC 12), which deals with accounting of concessions, and refer to invested infrastructure that will be the subject of indemnity by the Concession-granting power during and at the end of their concession periods, as laid down in the regulations for the electricity sector, and in the concession contract.

Aneel Normative Resolution 589, of December 10, 2013, set the criteria for calculation of the New Replacement Value (Valor Novo de Reposição, or VNR) of the transmission facilities, for the purposes of indemnity.

Av. Barbacena 1200

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Brazil

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The valuation opinion delivered to Aneel on July 31, 2014 represented an indemnity to the Company in the amount of R$ 1,169,145, on base date December 31, 2012.

On July 12, 2016, Aneel sent to the Company the Report of Inspection with final Review of the Opinion sent by the Company, deciding the value of the indemnity at R$ 1,177,488, of which R$ 285,483 had been received in the first quarter of 2013.

On April 22, 2016 the Mining and Energy Ministry published its Ministerial Order 120, setting the deadline and method of payment of the remaining amount of the indemnity.

The Ministerial Order determined that the amounts homologated by Aneel should become part of the Regulatory Asset Base for Remuneration (Base de Remuneração Regulatória, or BRR) and that the cost of capital should be added to the related Permitted Annual Revenues (‘RAP’). We would point out that the information relating to the cost of capital was a subject of debate up to the date of issue of Ministerial Order 120.

The amount will be updated by the Expanded Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA), and the cost of capital will not be incorporated for the period from the extensions of the concessions up to the tariff-setting process of 2017. The latter is to be updated and remunerated at the real cost of own capital of the transmission segment of the industry as decided by Aneel in the methodologies of the Periodic Tariff Reviews for Revenues of Existing Concession Holders, currently 10.44% per year, to be paid over eight years by reimbursement through the RAP.

The Ministerial Order still depends on decisions that will be the subject of Public Hearings held by Aneel, which are listed in Aneel’s Regulatory Agenda for the second half of 2016 and the first half of 2017.

Based on the best information available, the Company made its estimate and recognized, in June 2016, the amount of R$ 548,734, as follows:

◾

R$ 20,381 relating to the difference between the amount of the Preliminary Revision made by Aneel on February 23, 2015 of the Opinion sent by the Company, R$ 1,157,106, and the Final Revision;

◾

R$ 90,442 representing the difference between the variations resulting from the IGP-M index and the IPCA index – since the Company had updated the balance by the IGP-M index until March 31, 2016;

◾

R$ 437,911 representing the remuneration from use of own capital, calculated on the basis of 10.44% p.a.

In addition, in the first half of 2016 the company recognized an item of R$ 47,735 for updating by the IGP-M index, up to May 2016, of the balance of indemnity receivable at the end of December 2015, in the amount of R$ 1,054,129.

For the new assets consisting of improvements and strengthening of facilities implemented by the transmission concession holders, Aneel calculates an additional portion of Permitted Annual Revenue (RAP) in accordance with a methodology specified in the Tariff Regulation Procedures (Procedimentos de Regulação Tarifária, or Proret).

Under these procedures, the revenue established in the Resolutions is payable to the transmission companies as from the date of start of commercial operation of the facilities. In the periods between reviews, the revenues associated with the improvements and strengthening of facilities are provisional. They are then definitively decided in the review immediately subsequent to the start of commercial operation of the facilities; this review then has effect backdated to the date of start of commercial operation. Any difference arising from the review of value is then applied in the RAP of the transmission company in equal parts up to the subsequent periodic review of RAP.

Av. Barbacena 1200

Santo Agostinho

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Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

Indemnity receivable – Generation

In July 2015 a termination date was reached under Concession Contract 007/97, for several of the plants operated by the Company. As from the termination of the concession, the Company held the right to indemnity of the assets not yet indemnified, as specified in the concession contract referred to. The accounting balances corresponding to these assets, including the Deemed Cost, were transferred from Fixed assets to Financial assets on the date of termination of the concession in July 2015, and total R$ 546,424.


Generating plant	Concession expiry date		Installed capacity (MW)		Net balance of assets based on Historic Cost at Sep. 30, 2015		Net value of assets based on Deemed Cost at Dec. 31, 2014
Três Marias Hydroelectric Plant		Jul. 2015		396.00		71,694		413,450
Salto Grande Hydroelectric Plant		Jul. 2015		102.00		10,835		39,379
Itutinga Hydroelectric Plant		Jul. 2015		52.00		3,671		6,923
Camargos Hydroelectric Plant		Jul. 2015		46.00		7,818		23,095
Piau Small Hydroelectric Plant		Jul. 2015		18.01		1,531		9,005
Gafanhoto Small Hydroelectric Plant		Jul. 2015		14.00		1,232		10,262
Peti Small Hydroelectric Plant		Jul. 2015		9.40		1,346		7,871
Tronqueiras Small Hydroelectric Plant		Jul. 2015		8.50		1,908		12,323
Joasal Small Hydroelectric Plant		Jul. 2015		8.40		1,379		7,622
Martins Small Hydroelectric Plant		Jul. 2015		7.70		2,132		4,041
Cajuru Small Hydroelectric Plant		Jul. 2015		7.20		3,576		4,252
Paciência Small Hydroelectric Plant		Jul. 2015		4.08		728		3,936
Marmelos Small Hydroelectric Plant		Jul. 2015		4.00		616		4,265

				677.29		108,466		546,424

As specified in Aneel Normative Resolution 615/2014, the Valuation Opinions proposing the amounts of the indemnity of the assets were delivered to Aneel by December 31, 2015. Based on the discussions and valuations currently in progress, management believes that the amount recorded is the best estimate of indemnity taking into account the information available up to the reporting date of the interim accounting statements at June 30, 2016.

From the termination of a concession contract until January 4, 2016, the plants were operated by the Company under the Quota regime, with remuneration by a tariff only to cover costs of operation and maintenance of the assets. From January 5, 2016 to May 31, 2016, with signature of the related concession contracts, the assets began to be operated in accordance with the terms of Auction won by Cemig GT on November 25, 2015 (‘Auction 12/2015’). As from June 1, 2016, the assets have been operated by the seven specific-purpose companies (‘the Generation SPCs’), which are wholly-owned subsidiaries of Cemig GT, created in compliance with the requirements of Auction 12/2015.

Concession Grant Fee – Auction 12/2015

Under Provisional Measure 579/2012, enacted as Law 12783/2013, the concessions of 14 plants of Cemig GT (Cajuru, Camargos, Gafanhoto, Itutinga, Joasal, Marmelos, Martins, Paciência, Peti, Piau, Salto Grande, Três Marias, Tronqueiras and Volta Grande), and those of the Jaguara, São Simão and Miranda plants were made subject to acceptance of predefined tariffs, and indemnity of the yet unamortized investments made for each plant. At the time, Cemig GT did not accept the terms for renewal.

Av. Barbacena 1200

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Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

In November 2015, Cemig GT took part in Auction 12/2015 and won the concessions of Lot D. This lot comprises 18 plants – for five of which the concession had been previously held by Furnas S.A. – with total assured average power offtake of 420 MW, as follows:


Generating plant	Concession expiry date		Installed capacity (MW)		Average physical offtake guarantee level (‘Assured Energy’) – MW
Três Marias Hydroelectric Plant		Jan. 2045		396.00		239.00
Salto Grande Hydroelectric Plant		Jan. 2045		102.00		75.00
Itutinga Hydroelectric Plant		Jan. 2045		52.00		28.00
Camargos Hydroelectric Plant		Jan. 2045		46.00		21.00
Piau Small Hydroelectric Plant		Jan. 2045		18.01		13.53
Gafanhoto Small Hydroelectric Plant		Jan. 2045		14.00		6.68
Peti Small Hydroelectric Plant		Jan. 2045		9.40		6.18
Tronqueiras Small Hydroelectric Plant		Jan. 2045		8.50		3.39
Joasal Small Hydroelectric Plant		Jan. 2045		8.40		5.20
Martins Small Hydroelectric Plant		Jan. 2045		7.70		1.84
Cajuru Small Hydroelectric Plant		Jan. 2045		7.20		2.69
Paciência Small Hydroelectric Plant		Jan. 2045		4.08		2.36
Marmelos Small Hydroelectric Plant		Jan. 2045		4.00		2.74
Coronel Domiciano Small Hydroelectric Plant (1)		Jan. 2045		5.04		3.59
Dona Rita Small Hydroelectric Plant (1)		Jan. 2045		2.41		1.03
Ervália Small Hydroelectric Plant (1)		Jan. 2045		6.97		3.03
Neblina Small Hydroelectric Plant (1)		Jan. 2045		6.47		4.66
Sinceridade Small Hydroelectric Plant (1)		Jan. 2045		1.42		0.35

				699.60		420.27

1)	Plants for which the concession was previously held by Furnas, which will be under the regime of assisted operation by the prior concession holder for a period of 180 calendar days from the date of signature of the contracts.

Information on installed capacity, offtake guarantees, and other operational information is, due to its nature, is not part of the scope of a review of interim financial statements, and has thus not been examined by the external auditors.

Signature of the contract for these plants gives Cemig the concession for their commercial operation for the next 30 years. In 2016 the whole of the output will be sold in the Regulated Market, under the Physical Guarantee Quota System (Sistema de Cota de Garantia Física or CGF); and in 2017, 70% of the output will be sold in the Regulated Market and 30% in the Free Market.

Cemig’s offer for the Lot was R$ 498,694, and the single Fee paid for the grant of the 30-year concession for the 18 hydroelectric plants was R$ 2,216,353. Of this fee, 65% was paid on January 4, 2016, and the payment for the remaining 35% (initially R$ 775,724) was paid on July 1, 2016 (updated by the Selic rate to a total payment of R$ 827,921). The contract was signed on January 5, 2016, at the Mining and Energy Ministry.

Av. Barbacena 1200

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Brazil

Tel.: +55 31 3506-5024

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This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

On Jun 8, 2016, title to Concession Contracts 08 to 16/2016, relating to the Auction won by Cemig GT on November 25, 2015, was transferred to the related specific-purpose companies, wholly-owned subsidiaries of Cemig GT, as follows:


	Balance at Dec. 31, 2015		Addition		Monetary updating		Amortization			Balance at June 30, 2016
Cemig Geração Três Marias S.A.		—		1,260,400		110,634		(83,042	)		1,287,992
Cemig Geração Salto Grande S.A.		—		395,523		34,818		(26,189	)		404,152
Cemig Geração Itutinga S.A.		—		147,662		14,019		(11,134	)		150,547
Cemig Geração Camargos S.A.		—		110,746		10,468		(8,289	)		112,925
Cemig Geração Sul S.A.		—		144,603		14,286		(11,662	)		147,227
Cemig Geração Leste S.A.		—		98,301		10,381		(8,856	)		99,826
Cemig Geração Oeste S.A.		—		59,118		6,284		(5,383	)		60,019

Total		—		2,216,353		200,890		(154,555	)		2,262,688

The amount of the concession grant fee was recognized as a financial asset, due to the Company having the unconditional right to receive the amount paid, plus updating by the IPCA Index and remuneratory interest, during the period of the concession. The amortization corresponds to the amounts received monthly.

This table shows the changes in Financial assets of the concession related to infrastructure:


	Transmission			Generation			Distribution			Consolidated
Balance on January 1, 2015		1,272,986			—			5,943,682			7,216,668

Addition		146,030			—			—			146,030
Written off		(5,818	)		—			(59,863	)		(65,681	)
Transfer from Financial assets to Intangible assets, on renewal of concessions		—			—			(7,161,504	)		(7,161,504	)
Assets acquired in business combination		(2,035	)		—			808,119			806,084
Generation – Indemnity receivable		—			546,424			—			546,424
Amounts received		(10,250	)		—			—			(10,250	)
Monetary updating		100,528			—			605,549			706,077

Balance on December 31, 2015		1,501,441			546,424			135,983			2,183,848

Addition		31,634			—			—			31,634
Addition – Grant Fee – Plants		—			2,216,353			—			2,216,353
Written off		(163	)		—			(352	)		(515	)
Amounts received		(7,271	)		(154,555	)		—			(161,826	)
Transfer from Financial to Intangible assets		—			—			35,752			35,752
Monetary updating		592,469			200,890			5,325			798,684

Balance on June 30, 2016		2,118,110			2,809,112			176,708			5,103,930

b) The CVA Account (Account for Compensation of Portion A items) and Other Financial Components in tariff adjustments

The Amendment that extended the period of the concession of Cemig D guarantees that, in the event of extinction of the concession, for any reason, the remaining balances (assets and liabilities) of any shortfall in payment or reimbursement through the tariff must also be included by the Concession-granting power in the total of the indemnity.

The balances on (i) the CVA Account (Compensation for Variation of Portion A items), (ii) the account for Neutrality of Sector Charges, and (iii) Other financial components in the tariff calculation, refer to the positive and negative differences between the estimate of the Company’s non-manageable costs and the payments actually made. The variations found are the subject of monetary updating based on the Selic Rate and compensated in the subsequent tariff adjustments.

Av. Barbacena 1200

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Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

LOGO

The balances of these financial assets and liabilities are shown below. Please note that in the Interim Accounting Information the balances of each line are presented at net value in assets or liabilities in accordance with the tariff adjustments homologated or to be homologated:


Balances at June 30, 2016	Current					Non-current					Total assets		Total liabilities
Balances at June 30, 2016	Assets		Liabilities			Assets		Liabilities			Total assets		Total liabilities
‘Portion A’ items
Quota for payment to the Energy Development Account (CDE)		415,930		(22,788	)		—		(225,806	)		415,930		(248,594	)
Tariff for use of transmission facilities of grid participants		2,149		(4,363	)		—		(10,347	)		2,149		(14,710	)
Tariff for transport of electricity provided by Itaipu		12,172		—			1,657		—			13,829		—
Proinfa – Program to encourage alternative sources of electricity		32,825		(188	)		5,337		—			38,162		(188	)
System Service Charges (ESS) and Reserve Energy Charge (EER)		—		(133,317	)		—		(12,860	)		—		(146,177	)
Electricity purchased for resale		2,329,565		(1,519,769	)		231,440		(363,051	)		2,561,005		(1,882,820	)
‘Other financial components’
Overcontracting of supply		—		(234,072	)		—		(37,614	)		—		(271,686	)
Neutrality of Portion A		174,541		—			—		—			174,541		—
Other financial items		263,572		(373,037	)		—		—			263,572		(373,037	)
‘Flag Tariff’ amounts (1)		—		(5	)		—		—			—		(5	)

TOTAL		3,230,754		(2,287,539	)		238,434		(649,678	)		3,469,188		(2,937,217	)

Balance at December 31, 2015

Current

Non-current

Total assets

Total
liabilities

Assets

Liabilities

Assets

Liabilities

‘Portion A’ items

Quota for payment to the Energy Development Account (CDE)

248,672

—

88,130

—

336,802

—