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)
 
      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.

 

2


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)
 
      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.

 

3


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)
 
      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.

 

4


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)
 
      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.

 

5


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.

 

6


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.

 

7


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.

 

8


LOGO

 

 

(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.

 

9


LOGO

 

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.

 

10


LOGO

 

     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.

 

11


LOGO

 

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.

 

12


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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.

 

13


LOGO

 

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.

 

14


LOGO

 

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

  

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.

 

15


LOGO

 

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

     13         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

     22           

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

     13         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

     22         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

     22           

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.

 

16


LOGO

 

Statement of financial position

   Note      Holding company  
      Sep. 30, 2016      Adjustments     Jun. 30, 2016
Re-presented
 

Assets

          

Non-current

          

Investments

     13         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

     22           

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         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

     22         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

     22           

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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LOGO

 

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  
      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

  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.

 

18


LOGO

 

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.

 

 

  

 

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.

 

19


LOGO

 

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

  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.

 

20


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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.

 

21


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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

  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.

 

22


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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

  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.

 

23


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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.

 

24


LOGO

 

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

  

 

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.

 

25


LOGO

 

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  
   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.

 

 

  

 

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.

 

26


LOGO

 

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.

 

27


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

  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.

 

28


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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

  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.

 

29


LOGO

 

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   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.

 

30


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

  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.

 

31


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

  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.

 

32


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

  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.

 

33


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
 
   Assets      Liabilities     Assets      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         —