6-K

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2018

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.  

MATERIAL ANNOUNCEMENT DATED AS OF MARCH  19, 2018: PUBLIC OFFER OF RECEIPTS FOR 14,945,429 SHARES

2.  

MATERIAL ANNOUNCEMENT DATED AS OF MARCH  19, 2018: CONSUMER OUTAGE INDICES

3.  

MATERIAL ANNOUNCEMENT DATED AS OF MARCH  21, 2018: REMAINING SHARES IN CAPITAL INCREASE PLACED FOR R$ 110 MILLION

4.  

CONVOCATION AND PROPOSAL TO THE EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 23, 2018

5.  

MATERIAL ANNOUNCEMENT DATED AS OF MARCH  27, 2018: CEMIG’S OFFER TO RENOVA FOR INTEREST IN BRASIL PCH/CHIPLEY

6.  

SUMMARY OF MINUTES OF THE 728TH MEETING OF THE BOARD OF DIRECTORS HELD ON MARCH 28, 2018

7.  

NOTICE TO SHAREHOLDERS DATED MARCH  28, 2018 REGARDING ARTICLE 133 OF LAW 6,404 OF DECEMBER 15, 1976

8.  

MARKET NOTICE: TIMETABLE FOR THE RELEASE OF THE 1Q 2017 RESULTS

9.  

MARKET NOTICE DATED MARCH  28, 2018: ALTERATION TO CORPORATE EVENTS CALENDAR

10.  

EARNINGS RELEASE

11.  

PRESENTATION OF 2017 RESULTS

12.  

MATERIAL ANNOUNCEMENT DATED APRIL  2, 2018: ABSORPTION OF CEMIGTELECOM COMPLETED

13.  

BYLAWS, UPDATED VERSION AS APPROVED BY THE EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS HELD ON APRIL 23, 2018

 

 


 

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/ Maurício Fernandes Leonardo Júnior

 

Name: Maurício Fernandes Leonardo Júnior

Title: Chief Finance and Investor Relations Officer

Date: April 25, 2018

 

 

 


 

MATERIAL ANNOUNCEMENT DATED AS OF MARCH 19, 2018: PUBLIC OFFER OF RECEIPTS FOR 14,945,429 SHARES.

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Public offer of receipts for 14,945,429 shares

Complementary to the Material Announcement published on February 28, 2018, Cemig (Companhia Energética de Minas Gerais), a listed company with securities traded on the stock exchanges of São Paulo, New York and Madrid, as per CVM Instruction 358 of January 3, 2002, as amended, hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (BM&F Bovespa S.A.) and the market as follows:

With reference to the capital increase approved by the Extraordinary General Meeting of Stockholders held on October 26, 2017, Cemig will sell the totality of the shares not yet subscribed in that capital increase, by public offer of a single, indivisible lot (‘the Offer’ or ‘the Auction’),

 

comprising

     13,129,679     

receipts for Common Shares in Cemig (‘ON receipts’)

and

     1,815,750     

receipts for Preferred Shares in Cemig (‘PN receipts’).

     

The opening price will be

     R$ 106,383,474.79     

of which

     R$ 92,039,049.79     

will be the price of the totality of the ON Receipts,

priced at

     R$ 7.01     

per Receipt,

and

     R$ 14,344,425.00     

will be the price of the totality of the PN Receipts,

priced at

     R$ 7.90     

per receipt.

The offering, registered on the B3 under the code    CMIG15L,    is scheduled to take place on

Wednesday,    March 21, 2018,                from 11 a.m. to 12 midday.

The intermediary institution will be Morgan Stanley CTVM S.A. (‘the Intermediary’).

After completion of the Auction, transactions in CMIG15L will be canceled, and the related trades will be registered as the related ON Receipts (to trade with ticker CMIG9) and PN Receipts (ticker CMIG10).

The making of this Offer, under the terms of Sub-item II of Article 5 of CVM Instruction 400/2003, has been duly analyzed by the CVM and approved by its Official Letter 48/2018/CVM/SEP/GEA-3.

The decision to hold the Auction, for a single indivisible lot, has the merit of enabling subscribers of common shares to vote at the next annual general meeting, to be held by the end of April 2018.

 

  

 

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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It also provides Cemig with an option of lower cost, since the Company is not required to incur the high costs inherent in public offerings made under Paragraph 1 of Article 6 of CVM Instruction 400/2003.

Cemig will keep its stockholders updated on any further information on the sale of these remaining shares.

Belo Horizonte, March 19, 2018.

Maurício Fernandes Leonardo Júnior,

Chief Finance and Investor Relations Officer

 

 

  

 

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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MATERIAL ANNOUNCEMENT DATED AS OF MARCH 19, 2018: CONSUMER OUTAGE INDICES

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MARKET ANNOUNCEMENT

Consumer outage indices

Cemig (Companhia Energética de Minas Gerais), a listed company with securities traded on the stock exchanges of São Paulo, New York and Madrid, in compliance with CVM Instruction 358 of January 3, 2002 as amended, hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (Brasil, Bolsa, Balcão – B3) and the market as follows:

There is no inexact or irregular aspect to the calculation of the DEC and FEC indicators of outage frequency and duration of Cemig’s Distribution company, Cemig Distribuição S.A. (‘Cemig D’).

These indicators, along with all the other regulatory indicators and parameters measured for Cemig, are the result of oversight and inspection carried out in accordance with habitual procedures of the Brazilian Electricity Industry regulator, Aneel. The limits specified by Aneel in the concession contracts of all distributors relate to the Internal DEC and FEC indicators – i.e. those that are the responsibility of the local electricity distribution utility, and not the result of factors in the wider national grid system.

The Internal DEC and FEC indicators for 2016 and 2017, which quantify outages arising within Cemig D’s distribution network in those years, complied with the limits set by the regulator, Aneel.

Aneel’s responsibilities also include inspection and monitoring of compliance with regulatory requirements in all the technical, commercial and financial processes of all holders of electricity concessions, permissions and authorizations, throughout Brazil.

Cemig has been improving the quality of its services to clients continuously, each year; it was third-placed by the public among all concession holders in Brazil’s Southeast with over 400,000 consumers, in Aneel’s IASC Consumer Satisfaction Index for 2017.

Belo Horizonte, March 19, 2018.

Maurício Fernandes Leonardo Júnior,

Chief Finance and Investor Relations Officer

 

 

  

 

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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MATERIAL ANNOUNCEMENT DATED AS OF MARCH 21, 2018: REMAINING SHARES IN CAPITAL INCREASE PLACED FOR R$ 110 MILLION

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Remaining shares in capital increase placed for R$ 110 mn

Complementing the Material Announcements published on February 28 and March 19, 2018, Cemig (Companhia Energética de Minas Gerais) (‘Cemig’, or ‘the Company’), a listed company with securities traded on the stock exchanges of São Paulo, New York and Madrid, as per CVM Instruction 358 of January 3, 2002, as amended, hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (B3) and the market as follows:

Today (March 21, 2018), Cemig sold 100% of the shares not previously subscribed in the capital increase approved by the Extraordinary General Meeting of Stockholders held on October 26, 2017, by public offering of a single and indivisible lot (‘the Offer’ or ‘the Auction’).

The Offer was registered on the B3 under the code CMIG15L.

The sale realized proceeds of R$ 110,700,000.01, as follows:

 

Receipts

  

Ticker

  

Volume

  

Price per receipt (R$)

  

Total amount (R$)

Common (ON) shares

   CMIG9L    5,818,796    7.30    42,477,210,80
      7,310,883    7.29    53,296,337,07

Preferred (PN) shares

   CMIG10L    98,714    8.23    812,416,22
      1,717,036    8.22    14,114,035,92
           

 

Total amount

   110,700,000.01
  

 

After completion of the Auction, transactions in CMIG15L were canceled, and the related trades were included in the ON Receipts (with ticker CMIG9) and the PN Receipts (ticker CMIG10).

Ratification of the capital increase will be submitted to an Extraordinary Meeting of Stockholders to be called by the Company.

Cemig will keep the market and its stockholders updated on any further information about this capital increase.

Belo Horizonte, March 21, 2018.

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

 

 

  

 

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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CONVOCATION AND PROPOSAL TO THE EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 23, 2018

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

CNPJ 17.155.730/0001-64 – NIRE 31300040127

EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS

CONVOCATION

Stockholders are hereby called to an Extraordinary General Meeting of Stockholders to be held on April 23, 2018 at 3 p.m., at the Company’s head office, Av. Barbacena 1200, 21st floor, Belo Horizonte, Minas Gerais, Brazil, to decide on the following matter:

Verification and approval of increase in the Company’s share capital,

– to seven billion two hundred ninety three million seven hundred sixty three thousand five Reais,

through issue and subscription of

one hundred ninety nine million nine hundred ten thousand nine hundred forty seven

new shares, of which sixty six million eight hundred forty nine thousand five hundred five are common shares and one hundred thirty three million sixty one thousand four hundred forty two are preferred shares;

and consequent alteration of the head paragraph of Clause 4 of the by-laws.

Any stockholder who wishes to be represented by proxy at the said General Meeting of Stockholders should obey the precepts of Article 126 of Law 6406 of 1976, and of the sole paragraph of Clause 9 of the Company’s by-laws, by exhibiting at the time, or depositing, preferably by April 20,2018, proofs of ownership of the shares, issued by a depositary financial institution, and a power of attorney with specific powers, at Cemig’s Corporate Executive Office (Superintendência da Secretaria Geral) at Av. Barbacena 1200 – 19th Floor, B1 Wing, Belo Horizonte, Minas Gerais, Brazil.

Belo Horizonte, March 22, 2018.

José Afonso Bicalho Beltrão da Silva

Chair of the Board of Directors

 

 

 

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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PROPOSAL

BY THE BOARD OF DIRECTORS

TO THE

EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS

TO BE HELD ON APRIL 23, 2018 AT 3 P.M.

Dear Stockholders:

The Board of Directors of Companhia Energética de Minas Gerais – Cemig, in light of the following information and analysis:    

Information:

 

  a) On October 26, 2017 an Extraordinary General Meeting of stockholders decided to increase the Company’s share capital by up to one billion Reais, through issue of up to two hundred million new shares.

 

  b) The Company’s share capital is R$ 6,294,208,270.00 (six billion two hundred ninety four million, two hundred eight thousand two hundred seventy Reais), represented by 420,764,708 (four hundred twenty million seven hundred sixty four thousand seven hundred eight) nominal, common shares each with par value of R$ 5.00 and 838,076,946 (eight hundred thirty eight million seventy six thousand nine hundred forty six) nominal preferred shares, each with par value of R$ 5.00.

 

  c) The right to vote in a decision related to the Company’s share capital is reserved exclusively to the common shares, and each share has the right to one vote in decisions of the general meeting of stockholders.

 

  d) The preferred shares have right of preference in the event of reimbursement of shares and shall have the right to a minimum annual dividend of the greater of:

10% (ten percent) of their nominal value, or

3% (three percent) of the value of the stockholders’ equity corresponding to the shares.

 

  e) The common shares and the preferred shares have equal rights to distribution of bonuses.

 

  f) Stockholders have right of preference in subscription of capital increases and issues of the Company’s securities, in accordance with the legislation.

 

  g) Decision on any change in the company’s share capital, and consequent change to the by-laws, is a function of the General Meeting of Stockholders.

 

  h) The capital increase now proposed has the merit of providing the Company with a more robust capital structure, making it possible to reduce financial expenses associated with new financing transactions, and to reduce its financial leverage.

 

  i) The issue price has been set in accordance with the criteria established in Sub-item III of § 1 of Article 170 of Law 6404 of December 15, 1976 as amended, which is based on the weighted average market price of the preferred shares on the São Paulo securities exchange (B3 S.A.) in the period May 4, 2017 to August 31, 2017 (120 days), applying a discount of 20% on R$ 8.22 (eight Reais and twenty two centavos), which is the weighted average quoted price for the preferred shares on the B3 in that period, which results in a price of price per share of R$ 6.57 (six Reais and fifty seven centavos) per share.

 

  j) The discount is justified by the volatility of the Brazilian stock market, and aims to stimulate minority shareholders to take up their rights to the subscription – avoiding any possibility that the capital increase might become impracticable in a situation of price depression or high volatility of the stock market during the subscription preference 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.

 

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  k) From the economic point of view the discount was practically neutral, since the stockholders were able to subscribe the issue or sell their first refusal right. The practical effect is of dividing the same group of assets between a larger number of shares, causing no adverse effect for the Company, nor for its stockholders, nor for the market, which adjusts automatically.

 

  l) Existing stockholders were given first refusal right to subscribe the new shares in proportion to those they held at that time.

 

  m) The shares subscribed had full rights to all the benefits, including dividends and/or Interest on Equity, to be declared by the Company.

 

  n) With the new share subscription of R$ 999,554,735.00 (nine hundred ninety nine million five hundred fifty four thousand seven hundred thirty five Reais), the share capital of the company will increase from R$ 6,294,208,270.00 (six billion two hundred ninety four million, two hundred eight thousand two hundred seventy Reais), to R$ 7,293,763,005.00 (seven billion two hundred ninety three million seven hundred sixty three thousand and five Reais).

 

  o) This capital increase will provide for subscription of 199,910,947 (one hundred ninety nine million nine hundred ten thousand, nine hundred forty seven) new shares, each with par value of R$ 5.00 (five Reais), of these, 66,849,505 (sixty six million eight hundred forty nine thousand five hundred five) common shares and 133,061,442 (one hundred thirty three million sixty one thousand four hundred forty two) preferred shares, at the price of R$ 6.57 (six Reais and fifty seven centavos) per share.

 

  p) The capital increase will enable the Company to obtain proceeds of a minimum of R$1,313,414,921.79 (one billion three hundred thirteen million four hundred fourteen thousand nine hundred twenty one Reais and seventy nine centavos). Any amount that exceeds R$ 999,554,735.00 (nine hundred ninety nine million five hundred fifty four thousand seven hundred thirty five Reais) will be allocated to the Capital reserve account.

 

  q) The potential dilution resulting from the issue, for those stockholders who did not subscribe to the issue, was 13.704239283% for the common shares and for the preferred shares.

 

  r) The Company’s stockholders were able to exercise their preference right to subscription in the period from October 30, 2017 to November 29, 2017, in the proportion of 15.887624200% in relation to the shares of the same type that they hold at the close of October 26, 2017, the date of the Extraordinary General Meeting of Stockholders that decided on that subject.

 

  s) Stockholders not wishing to exercise their rights of first refusal for the subscription had the opportunity to assign those rights or trade them on a securities exchange.

 

  t) Stockholders who opted to subscribe shares that were not subscribed in these initial stages (‘the Leftover Shares’) were able to subscribe them, at the same price and on the same conditions, exclusively on the following dates:

1st apportionment:    December 5–7, 2017, in proportion to shares subscribed in the preference period; and

2nd apportionment: December 14–28, 2017, in proportion to shares subscribed in the preference period.

 

  u) The shares subscribed were paid up simultaneously with their subscription, in cash, and represent an entry of capital into the Company’s cash position, totaling R$1,215,453.26 (one billion two hundred fifteen million two hundred twenty three thousand four hundred fifty-three Reais and twenty six centavos).

 

  v) The Leftover Shares were equivalent by volume to 7.48% of the issue.

 

  

 

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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Analysis:

 

  a) The shares not subscribed, after the two periods of apportionment initially provided for, are to be sold on a stock exchange to the benefit of the Company, which is optional under Sub-clause ‘b’ of § 7 of Article 171 of Law 6404/1976, transcribed below:

“ § 7 In a listed company, the body that decides on an issue by private subscription shall decide on leftover shares not subscribed, and may:

  a) order them to be sold on a stock exchange, to the Company’s benefit; or

 

  b) share them out, in the proportion of the amounts subscribed, among the stockholders that have requested a reservation of leftover shares, in the subscription bulletin or list; in this event, the condition shall be stated in the subscription bulletins or lists and the balance thus not shared out shall be sold on the stock exchange, in accordance with the prior sub-clause.”

 

  b) Sale of Leftovers in a volume higher than 5% of the issue and less than 1/3 of the shares in circulation on stock exchanges is characterized as a primary public offering of shares and must be preceded by a simplified application for registry to the CVM, under § 1 of Article 6 of CVM Instruction 400.

 

  c) The CVM has up to 20 (twenty) business days from the filing of the request for registry to make statement on the request, and registry shall be obtained automatically if the CVM does not make statement in that period, as per Article 8 of CVM Instruction 400.

 

  d) However, Sub-item II of Article 5 of that instruction states that registry will automatically be dispensed with, without the need for formulation of the Request specified in Article 4, in the event of a public offering for distribution of a single, indivisible, lot of securities.

 

  e) In this context, and considering the interest of the Company in confirming and ratifying the capital increase as soon as possible, it becomes important to sell all the common and preferred shares not prescribed, in a single and indivisible lot – by a Special Auction on the Stock Exchange (B3) (‘the Auction’).

 

  f) The CVM, by Formal Letter 48/20l8/CVM/SEP/GEA-3, of March 12, 2018, has verified that there is no obstacle to the format of the auction in a single indivisible lot, under the terms of Sub-item II of Article 5 of CVM Instruction 400.

 

  g) The shares not subscribed, that is to say 13,129,679 (thirteen million one hundred twenty nine thousand six hundred seventy nine) common shares and 1,815,750 (one million eight hundred fifteen thousand seven hundred fifty) preferred shares, to be sold on the B3, to the benefit of the Company, are likely to provide an additional inflow of cash to the Company of at least R$ 98,191,468.53 (ninety eight million one hundred ninety one thousand four hundred sixty eight Reais and fifty three centavos).

 

  h) The sale of the Leftover Shares, by the Auction, must follow the rules specified in the Operational Procedures Manual and Regulations of the B3. The minimum price per share must necessarily be R$6.57 (six Reais and fifty seven centavos), that is to say the same price set at the time of the approval of the Company’s capital increase.

 

  i) A securities broker authorized to operate on the B3 must represent the Company in the Auction. Investors who wish to take part in the Auction must find a broker to represent them.

 

  j) The small volume of shares that it is intended to sell by Auction (equal to 7.48% of the issue, 2.77% of the voting stock, 0.19% of the non-voting stock and 1.04% of the total capital) should not influence the market price of Cemig’s shares, since the amount is little above the average daily trading volume of the Company’s shares (R$ 83 million) on the B3 in the last 60 (sixty) days.

 

  k) The shares offered in the Auction will be represented by subscription receipts up to the time of verification and ratification of the capital increase by the General Meeting of Stockholders.

 

  

 

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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  l) During the Auction, third party vendors will not be allow to enter the trading; only purchasers bidding for the entire single lot offered will be allowed to operate.

 

  m) The Company intends to sell the shares not yet subscribed in a single indivisible lot, by Auction, by March 19, 2018.

 

  n) After financial settlement of the Auction, which will take place on the third business day after it is held, the brokerage company shall transfer the proceeds of the sale, net of charges, to a current account in the name of Cemig; and

 

  o) Within up to 4 (four) business days after the date of the Extraordinary General Meeting of Stockholders to be called for the purpose of confirming and approving the said capital increase, the Company will announce the date for credit of the shares subscribed.

– do now propose to you as follows:

 

  I Verification and approval of increase in the Company’s share capital, from R$ 6,294,208,270.00 (six billion two hundred ninety four million, two hundred eight thousand two hundred seventy Reais), to R$ 7,293,763,005.00 (seven billion two hundred ninety three million seven hundred sixty three thousand and five Reais), through issue and subscription of 199,910,947 (one hundred ninety nine million nine hundred ten thousand nine hundred forty seven) new shares, each with par value of R$ 5.00 (five Reais), comprising 66,849,505 (sixty six million eight hundred forty nine thousand five hundred five) common shares and 133,061,442 (one hundred thirty three million sixty one thousand four hundred forty two) preferred shares.

 

  II Approval of the consequent alteration of the head paragraph of Clause 4 of the by-laws, which shall now have the following drafting:

“Clause 4    The Company’s share capital is R$ 7,293,763,005.00 (seven billion two hundred ninety three million seven hundred sixty three thousand and five Reais), represented by:

 

  a) 487,614,213 (four hundred eighty seven million six hundred fourteen thousand two hundred thirteen) nominal common shares, each with par value of R$ 5.00;

 

  b) 971,138,388 (nine hundred seventy one million one hundred thirty eight thousand three hundred eighty eight) nominal preferred shares, each with par value of R$ 5.00.”

As can be seen, the objective of this proposal is to meet the legitimate interests of the stockholders and of the Company, and for this reason it is the hope of the Board of Directors that it will be approved.

 

p)    Belo Horizonte, March 22, 2018.   

 

José Afonso Bicalho Beltrão da Silva

  

 

Carlos Eduardo Lessa Brandão

Marco Antônio de Rezende Teixeira    Hermes Jorge Chipp
Bernardo Afonso Salomão de Alvarenga    José Pais Rangel
Antônio Dirceu Araújo Xavier    Marcelo Gasparino da Silva
Arcângelo Eustáquio Torres Queiroz    Marco Antônio Soares da Cunha Castello Branco
Arlindo Magno de Oliveira    Nelson José Hubner Moreira
Helvécio Miranda Magalhães Junior    Patrícia Gracindo Marques de Assis Bentes

 

 

  

 

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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MATERIAL ANNOUNCEMENT DATED AS OF MARCH 27, 2018:

CEMIG’S OFFER TO RENOVA FOR INTEREST IN BRASIL PCH/CHIPLEY

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Cemig’s offer to Renova for interest in Brasil PCH/Chipley

Cemig (Companhia Energética de Minas Gerais), a listed company with securities traded on the stock exchanges of São Paulo, New York and Madrid, as per CVM Instruction 358 of January 3, 2002, as amended, hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (‘B3’) and the market as follows:

In the context of (i) the recent changes in the negotiations for capitalization of Renova Energia S.A. (‘Renova’), (ii) Renova’s interest in bringing forward revenues from power purchase agreements, and with a view to (iii) execution of Cemig’s Disinvestment Program, Cemig has today made a binding offer to Renova (‘the Offer’) for acquisition of 100% (one hundred per cent) of the shares in Chipley SP Participações S.A. (‘Chipley’) held by Renova or 51% (fifty one per cent) of the shares in Brasil PCH S.A. (‘Brasil PCH’) held by Chipley (‘the Transaction’).

Cemig’s intention is that Renova should sell its interest in Brasil PCH to a third party, or to Cemig itself or any of its affiliated companies, in the terms of the Offer, to make it possible for payment to be made of the amounts owed to Cemig Geração e Transmissão S.A. (‘Cemig GT’).

The conclusion of the Transaction, if accepted by Renova, will depend on conditions present specified in the Offer of the type that are usual for this type of transaction.

In view of the above, Cemig GT hereby declares itself impeded from making statements or voting in the governance bodies of Renova on any decision in relation to the said binding proposal.

Cemig will keep the market and its stockholders updated on any further information about this capital increase.

Belo Horizonte, March 27, 2018.

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

 

 

  

 

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


 

SUMMARY OF MINUTES OF THE 728TH MEETING OF THE BOARD OF DIRECTORS HELD ON MARCH 28, 2018

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY CNPJ 17.155.730/0001-64 – NIRE 31300040127

BOARD OF DIRECTORS

Meeting of March 28, 2018

SUMMARY OF PRINCIPAL DECISIONS

At its 728th meeting, held on March 28, 2018, the Board of Directors of Cemig (Companhia Energética de Minas Gerais) decided the following:

 

  1. Technical feasibility study on offsetting of tax credits.

 

  2. Report of Management and Financial Statements for the year 2017.

 

  3. Allocation of the net profit for 2017.

 

  4. Operational provisions in 2017.

 

  5. Orientation of vote in the Ordinary and Extraordinary General Meetings of Stockholders of Cemig D and Cemig GT.

 

  6. Calling of Ordinary and Extraordinary General Meetings of Stockholders, to be held concurrently on April 30, 2018 at 11 a.m.

 

 

  

 

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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NOTICE TO SHAREHOLDERS DATED MARCH 28, 2018 REGARDING ARTICLE 133 OF LAW 6,404 OF DECEMBER 15, 1976

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

BRAZILIAN LISTED COMPANY CNPJ 17.155.730/0001-64

NOTICE TO SHAREHOLDERS

We advise our shareholders that the documents referred to in article 133 of Law No. 6,404 of December 15, 1976, relating to the year 2017, are available for consultation at the head offices of this Corporation located at Av. Barbacena, 1,200, Belo Horizonte.

Belo Horizonte, March 28, 2018

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

 

 

  

 

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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MARKET NOTICE: TIMETABLE FOR THE RELEASE OF THE 1Q 2017 RESULTS

 

 

 

 

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Fourth Quarter 2017 Results Presentation

Cemig

(BM&FBOVESPA: CMIG3, CMIG4; NYSE: CIG, CIG.C; Latibex: XCMIG)

announces its

TIMETABLE for Release of 4Q2017 Results:

Publication

March 29, 2018 (Thursday)

(before the opening of markets in São Paulo and New York)

The information will be available on our website: http://ri.cemig.com.br

Webcast and Conference call

April 3, 2018 (Tuesday), at 2:00 p.m. (Brasília time)

Transmission of the results with simultaneous translation into English

by webcast at:

http://ri.cemig.com.br

or

by conference call at:

+ 55 11 2188-0155 (1st option) or

+ 55 11 2188-0188 (2nd option)

Password: CEMIG

Conference Call Playback:

Phone: (55 11) 2188-0400

Available: From April 3 to 18, 2018

For any questions please call +55 31 3506-5024.

 

 

  

 

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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MARKET NOTICE DATED MARCH 28, 2018 WITH THE ALTERATIONS TO THE CORPORATE EVENTS CALENDAR

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MARKET NOTICE

Alteration to Corporate Events Calendar    

Cemig (Companhia Energética de Minas Gerais), a listed company with securities traded on the stock exchanges of São Paulo, New York and Madrid – in accordance with Item 5.5.1 of the Corporate Governance Listing Regulations of the São Paulo Stock Exchange (B3) – hereby informs the public as follows:

Cemig has re-presented its Corporate Events Calendar to include the following changes in dates:

 

    Submission of Annual Financial Statements for the year ended December 31, 2017 to the CVM and the São Paulo Stock Exchange.

 

    From: March 28, 2018

 

    To: March 29, 2018

 

    Submission of Convocation Notice for, and Proposal by Management to, the Annual and Extraordinary General Meetings:

 

    From: March 28, 2018

 

    To: March 29, 2018

Belo Horizonte, March 28, 2018.

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

 

 

  

 

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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EARNINGS RELEASE

 

 

 

 

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PUBLICATION OF RESULTS

CEMIG REPORTS

EBITDA OF R$ 3,492 MILLION

IN 2017

Main impacts in 2017:

 

  Expense on acceptance of the Minas Gerais State Tax Regularization Plan – for ICMS tax expense claims totaling R$ 595 million.

 

  Reversal of expenses with life insurance of R$ 619 million

 

  Provision for losses on investments: R$ 347 million.

 

  Equity method result: loss of R$ 252 million.

 

Indicators (GWh)

   2017      2016      Change%  

Electricity sold (excluding CCEE)

     55,277        55,592        (0.57

Indicators – R$ ’000 000

   2017      2016      Change%  

Sales on CCEE

     860        161        434.16  

Net debt

     12,279        13,139        (6.54

Gross revenue

     32,862        29,269        12.28  

Net revenue

     21,712        18,773        15.66  

Ebitda (IFRS)

     3,492        2,638        32.37  

Net profit in the quarter

     1,001        334        199.70  

Net profit per share PN

     0.84        0.35        140.00  

Net profit per share ON

     0.37        0.10        270.00  

Ebitda margin, %

     16.08%        14.05%        2.03p.p.  

 

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Conference call

Publication of 4Q17 results

Video webcast and conference call

April 3, 2018 (Tuesday), at 2 p.m. Brasília time

This transmission on Cemig’s results will have simultaneous translation into English and can be seen in real time by Video Webcast, at http://ri.cemig.com.br or heard by conference call on:

+ 55 (11) 2188-0155 (1st option) or

+ 55 (11) 2188-0188 (2nd option)

Password: CEMIG

 

   

Playback of Video Webcast:

Site: http://ri.cemig.com.br

Click on the banner and download.

Available for 90 days

  

Conference call – Playback:

Tel.: +55 (11) 2188-0400

Password:

CEMIG Português

(Available from April 3-18, 2018)

Cemig Investor Relations

http://ri.cemig.com.br/

ri@cemig.com.br

Tel.: +55 (31) 3506-5024

Fax: +55 (31) 3506-5025

Cemig’s Executive Investor Relations Team

Chief Finance and Investor Relations Officer

Maurício Fernandes Leonardo Júnior

General Manager, Investor Relations

Antônio Carlos Vélez Braga

Manager, Investor Market

Robson Laranjo

 

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Summary

 

CONFERENCE CALL

     26  

CEMIG INVESTOR RELATIONS

     26  

CEMIG’S EXECUTIVE INVESTOR RELATIONS TEAM

     26  

SUMMARY

     27  

DISCLAIMER

     28  

CEMIG’S SHARES

     28  

LONG-TERM RATINGS

     29  

ADOPTION OF IFRS

     29  

PROFIT AND LOSS ACCOUNTS

     30  

CEMIG’S CONSOLIDATED ELECTRICITY MARKET

     31  

THE ELECTRICITY MARKET OF CEMIG D

     33  

THE ELECTRICITY MARKET OF CEMIG GT

     34  

QUALITY INDICATORS – DEC AND FEC

     35  

CONSOLIDATED OPERATIONAL REVENUE

     37  

SECTOR / REGULATORY CHARGES REPORTED AS DEDUCTIONS FROM REVENUE

     42  

OPERATIONAL COSTS AND EXPENSES

     42  

EQUITY METHOD GAINS IN NON-CONSOLIDATED INVESTEES

     45  

FINANCIAL REVENUE AND EXPENSES

     46  

EBITDA

     47  

DEBT

     48  

COVENANTS – EUROBONDS

     49  

RESULTS SEPARATED BY BUSINESS SEGMENT

     50  

ELECTRICITY LOSSES—2017

     51  

APPENDICES

     52  

TABLE CEMIG D

     53  

TABLE CEMIG GT

     54  

TABLE CEMIG

     55  

 

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Disclaimer

Certain statements and estimates in this material may represent expectations about future events or results, which are subject to risks and uncertainties, which may be known or unknown. There is no guarantee that the events or results will take place as referred to in these expectations.

These expectations are based on the present assumptions and analyses from the point of view of our management, in accordance with their experience and other factors such as the macroeconomic environment, market conditions in the electricity sector, and expected future results, many of which are not under Cemig’s control.

Important factors that could lead to significant differences between actual results and the projections about future events or results include Cemig’s business strategy, Brazilian and international economic conditions, technology, Cemig’s financial strategy, changes in the electricity sector, hydrological conditions, conditions in the financial and energy markets, uncertainty on our results from future operations, plans and objectives, and other factors. Due to these and other factors, Cemig’s results may differ significantly from those indicated in or implied by such statements.

The information and opinions herein should not be understood as a recommendation to potential investors, and no investment decision should be based on the veracity, currentness or completeness of this information or these opinions. None of Cemig’s professionals nor any of their related parties or representatives shall have any liability for any losses that may result from use of the content of this material.

To evaluate the risks and uncertainties as they relate to Cemig, and to obtain additional information about factors that could give rise to different results from those estimated by Cemig, please consult the section on Risk Factors included in the Reference Form filed with the Brazilian Securities Commission (CVM) – and in the 20-F form filed with the U.S. Securities and Exchange Commission (SEC).

Cemig’s shares

 

Security / index

   Ticker    Currency    Close of
2017
     Close of
2016
     Change
%
 

Cemig PN

   CMIG4    R$      6.87        7.28        –5.58%  

Cemig ON

   CMIG3    R$      6.41        7.70        –16.73%  

ADR PN

   CIG    US$      2.06        2.22        –7.15%  

ADR ON

   CIG.C    US$      1.85        2.53        –26.84%  

Ibovespa

   Ibovespa    —        76,402        60,227        26.86%  

IEEX

   IEEX    —        39,732        36,108        10.04%  

 

Source: Economática.

Trading volume in Cemig’s preferred shares (CMIG4) in full-year 2017 totaled R$ 17.02 billion, a daily average of R$ 69.17 million. Cemig’s shares, by volume (aggregate of common (ON) and preferred (PN) shares), were the second most liquid in Brazil’s electricity sector in the period, and among the most traded in the Brazilian market.

On the New York Stock Exchange the volume traded in ADRs for Cemig’s preferred shares (CIG) in full-year 2017 was US$2.96 billion – reflecting recognition by the investor market of Cemig as a global investment option.

The São Paulo stock exchange’s principal index, the Ibovespa, was up 26.9% in 2017, closing the quarter at 76,402 points. Cemig’s preferred shares performed below the Ibovespa, falling in value by 5.6% in 2017, and also in comparison to the electricity sector index, which rose 10.0% in the year. The price of Cemig’s common (ON) shares on the São Paulo exchange, however, fell 16.70% in the year. The ADRs for Cemig’s preferred shares (ticker: CIG), traded in New York, fell by 7.1% in the year.

 

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Long-term ratings

This table shows credit risk ratings and outlook for Cemig’s companies as provided by the principal rating agencies:

Brazilian rating:

 

Agency

   Cemig    Cemig D    Cemig GT
     Rating   Outlook    Rate   Outlook    Rating   Outlook

Fitch

   BB–(bra)   Negative    BB–(bra)   Negative    BB–(bra)   Negative

S&P

   brBBB–   Stable    brBBB–   Stable    brBBB–   Stable

Moody’s

   B2.br   Stable    B2.br   Stable    B2.br   Stable

Global rating:

 

Agency

   Cemig    Cemig D    Cemig GT
     Rating    Outlook    Rating    Outlook    Rating    Outlook

Fitch

   B–    Negative    B–    Negative    B–    Negative

S&P

   B    Stable    B    Stable    B    Stable

Moody’s

   B3    Stable    B3    Stable    B3    Stable

Ratings of Eurobonds:

 

Agency

   Cemig    Cemig D    Cemig GT
     Rating    Outlook    Rating    Outlook    Rating    Outlook

Fitch

   B    Negative    BB–    Negative    B    Negative

S&P

   B    Stable    B    Stable    B    Stable

Adoption of IFRS

The results presented below are prepared in accordance with Brazilian accounting rules, which now embody harmonization to IFRS (International Financial Reporting Standards). They are expressed in thousands of Reais (R$ ’000), except where otherwise noted.

 

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PROFIT AND LOSS ACCOUNTS

 

Consolidated – R$ ’000

   2017     2016     Change%  

REVENUE

     21,711,690       18,772,656       15.66  

OPERATING COSTS

      

Personnel

     (1,627,026     (1,643,253     (0.99

Employees’ and managers’ profit shares

     (4,640     (7,327     (36.67

Post-retirement obligations

     228,660       (344,559     —    

Materials

     (60,556     (57,915     4.56  

Raw materials and inputs for production of electricity

     (10,371     (40     25,827.50  

Outsourced services

     (973,957     (867,370     12.29  

Electricity purchased for resale

     (10,919,476     (8,272,911     31.99  

Depreciation and amortization

     (849,768     (834,291     1.86  

Operating provisions

     (853,668     (703,979     21.26  

Charges for use of the national grid

     (1,173,923     (947,479     23.90  

Gas bought for resale

     (1,070,623     (877,118     22.06  

Infrastructure construction costs

     (1,118,749     (1,193,140     (6.23

Other operating expenses, net

     (382,946     (153,621     149.28  
  

 

 

   

 

 

   

 

 

 

TOTAL COST

     (18,817,043     (15,903,003     18.32  

Equity method gains in non-consolidated investees

     (252,240     (301,844     (16.43

Adjustment for impairment of Investments

     —         (762,691     —    

Operational profit before Financial revenue (expenses) and taxes

     2,642,407       1,805,118       46.38  

Financial revenues

     803,713       1,041,304       (22.82

Financial expenses

     (1,800,264     (2,478,495     (27.36
  

 

 

   

 

 

   

 

 

 

Pre-tax profit

     1,645,856       367,927       347.33  

Current and deferred income tax and Social Contribution tax

     (644,260     (33,173     1,842.12  
  

 

 

   

 

 

   

 

 

 

NET PROFIT FOR THE PERIOD

     1,001,596       334,754       199.20  
  

 

 

   

 

 

   

 

 

 

 

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Cemig’s consolidated electricity market

The Cemig Group sells electricity through:

 

– its distribution company,    Cemig Distribuição (‘Cemig D’),
– its generation and transmission company,    Cemig Geração e Transmissão (‘Cemig GT’),

and other wholly-owned subsidiaries:

 

Horizontes Energia,

  

Sá Carvalho,

Termelétrica de Barreiro,

  

Cemig PCH,

Rosal Energia,

  

Cemig Geração Camargos,

Cemig Geração Itutinga,

  

Cemig Geração Salto Grande,

Cemig Geração Três Marias,

  

Cemig Geração Leste,

Cemig Geração Oeste, and

  

Cemig Geração Sul.

This market comprises sales of electricity to:

 

(I) Captive consumers in Cemig’s concession area in the State of Minas Gerais;

 

(II) Free Consumers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ACL);

 

(III) other agents of the electricity sector – traders, generators and independent power producers, also in the ACL; and

 

(IV) Distributors, in the Regulated Market (Ambiente de Contratação Regulada – ACR).

In 2017 the Cemig group sold a total volume of 55,276,770 MWh – this total was 0.6% less than in 2016.

Sales of electricity to final consumers plus Cemig’s own consumption totaled 42,499,365 MWh, or 1.4% less than in 2016.

Sales to distributors, traders, other generating companies and independent power producers in 2017 totaled 12,777,405 MWh – or 2.2% more than in 2016.

 

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In December 2017 the Cemig Group invoiced 8,347,483 customers – a growth of 1.1% in the customer base in the year since December 2016. Of these, 8,347,100 are final consumers; and 383 are other agents in the Brazilian electricity sector.

This chart shows the breakdown of the Cemig Group’s sales to final consumers in the year, by consumer category:

 

LOGO

Volume sold (GWh)

 

LOGO

 

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Consolidated

   MWh      Change,%   Average
price
2017
     Average
price
2016
 
   2017      2016        R$      R$  

Residential

     10,008,423        9,915,807      0.93     783.53        788.56  

Industrial

     17,760,807        19,494,391      (8.89)     276.27        276.78  

Commercial, Services and Others

     7,507,310        6,572,980      14.21     578.36        663.16  

Rural

     3,651,472        3,574,724      2.15     446.09        409.39  

Public authorities

     865,803        885,748      (2.25)     614.18        614.80  

Public lighting

     1,366,938        1,350,405      1.22     392.69        391.27  

Public services

     1,301,135        1,252,043      3.92     453.03        436.70  
  

 

 

    

 

 

    

 

 

 

 

    

 

 

 

Subtotal

     42,461,888        43,046,098      (1.36)     479.90        479.88  

Own consumption

     37,477        37,140      0.91     —          —    

Wholesale supply to agents in Free and Regulated Markets (*)

     12,777,405        12,508,453      2.15     135.20        216.90  
  

 

 

    

 

 

    

 

 

 

 

    

 

 

 

Total

     55,276,770        55,591,691      (0.57)     428.78        421.46  
  

 

 

    

 

 

    

 

 

 

 

    

 

 

 

 

(*) Includes Regulated Market Electricity Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.

The electricity market of Cemig D

Electricity billed to captive clients and electricity transported for Free Clients and distributors with access to Cemig D’s networks, in 2017, totaled 42,829,164 GWh, 1.1% less than in 2016.

There are two components in this reduction: consumption by the captive market 3.2% lower YoY, and use of the network by Free Clients 2.1% higher YoY.

In December 2017 the total number of clients billed was 8,346,147, or 1.05% more than in December 2016.

 

Cemig D

   Number of clients      Change,%  
   2017      2016     

Residential

     6,765,201        6,691,673        1.10  

Industrial

     73,833        74,535        (0.94

Commercial, Services and Others

     717,988        716,602        0.19  

Rural

     705,541        694,026        1.66  

Public authorities

     63,477        63,483        (0.01

Public lighting

     6,137        5,667        8.29  

Public services

     12,976        12,548        3.41  
  

 

 

    

 

 

    

 

 

 

Total

     8,345,153        8,258,534        1.05  
  

 

 

    

 

 

    

 

 

 

Energy transport – number of clients:

 

     

Industrial

     531        443        19.86  

Commercial

     456        264        72.73  

Rural

     4        —          —    

Concession holder

     3        3        —    
  

 

 

    

 

 

    

 

 

 
     8,346,147        8,259,244        1.05  
  

 

 

    

 

 

    

 

 

 

 

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Comments on the various consumer categories:

Residential

Consumption by captive residential users of Cemig D in 2017, at 10,008,423 MWh, was 0.93% more than in 2016. Average monthly consumption per consumer in 2017 was 123.8kWh/month, or 124.6% lower than the average for 2016 (124.6 KWh/month).

Industrial

Electricity used by captive industrial clients of Cemig D totaled 2,610,534 MWh in 207 – or 18.29% less than in 2016. Cemig D transported a total of 16,417,047 MWh for Free Clients in 2017.

Commercial

Total consumption by the captive clients of Cemig D in the commercial category totaled 5,252,799 MWh, or 8.03% less than in 2016, mainly because of the adverse conditions of the economy, with lower disposable family incomes and lower economic activity in the other private and public sectors of the economy. The increased consumption in the Free Market relates to the addition of 191 new consumers.

The electricity market of Cemig GT

Cemig GT billed a total of 29,553,715 MWh in 2017, 2.2% higher than in 2016.

The number of clients billed by Cemig GT – 1,243 clients – was 19.5% higher than in December 2016. Of these: 1,176 were in the industrial, commercial and rural categories, 47 were distribution companies, and 20 were traders, generators and independent power producers.

Free Clients – industrial, commercial and rural – consumed 15,807,993 MWh in 2017, or 55.2% of the total electricity provided by Cemig GT, and 3.2% less than in 2016.

This lower figure reflects consumption by industrial clients 12.4% lower year-on-year, due to: (i) some industrial clients terminating contracts with Cemig GT and signing new contracts with Cemig subsidiary companies; and (ii) low consumption by industrial clients, due to the economic context in Brazil, and also worldwide.

Between the end of 2016 and the end of 2017 Cemig GT added 50 new industrial clients, 1 rural client and 166 clients in the commercial and services category – in the latter, the year-on-year increase in consumption was 167.5%.

Sales and trading transactions in electricity with other agents of the electricity sector in the Free Market result from development of trading opportunities that often originate from spot market contracts. In 2017 total sales of electricity were 10,350,371 MWh, or 3.0% more than in 2016.

 

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Sales in the Regulated Market in 2017, including sales to Cemig D, totaled 2,490,635 MWh, or 2.6% less than in 2016, due to a lower volume of contracts with distributors.

 

Cemig GT

   MWh      Change,%  
   2017      2016     

Free Clients

     15,807,993        16,327,277        (3.18

Industrial

     13,577,928        15,494,833        (12.37

Commercial

     2,226,405        832,443        167.45  

Rural

     3,660        —          —    

Free Market – Free contracts

     10,350,371        10,044,817        3.04  

Regulated Market

     2,362,008        2,425,227        (2.61

Regulated Market – Cemig D

     128,627        131,192        (1.96
  

 

 

    

 

 

    

 

 

 

Total

     28,648,999        28,928,513        (0.97

SPCs of Cemig GT

        

Free Clients

     904,716        —          —    
  

 

 

    

 

 

    

 

 

 

Total

     29,553,715        28,928,513        (2.20
  

 

 

    

 

 

    

 

 

 

QUALITY INDICATORS – DEC and FEC

Cemig is continuously taking action to improve operational management, organization of the logistics of emergency services, and its permanent regime of inspections and preventive maintenance of substations, lines and distribution networks. It also invests in training of its staff for improved qualifications, state-of-the-art technologies, and standardization of work processes, aiming to uphold the quality of electricity supply, and as a result maintain the satisfaction of clients and consumers.

The charts below show Cemig’s indicators for duration and frequency of outages – DEC and FEC, since January 2016.

 

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Consolidated operational revenue

Revenue from supply of electricity:

Total revenue from supply of electricity in 2017 was R$ 23.701 billion, 1.16% higher than in 2016 (R$ 23.430 billion).

Final consumers

Total revenue from electricity sold to final consumers, excluding Cemig’s own consumption, in 2017 was R$ 20.438 billion, or 0.10% less than the figure for 2016, of R$ 20.458 million.

The main factors in this revenue were:

 

  Higher revenues from the ‘Flag Tariff’ components of customer bills: R$ 454 million in 2017, compared to R$ 360 million in 2016. This reflects the low level of reservoirs, activating the ‘Yellow Flag’ and ‘Red Flag’ additional tariff rates, leading to higher revenue, in 2017.

 

  The volume of electricity sold in 2017 was 1.36% lower than in 2016.

 

  The annual tariff adjustment for Cemig D effective May 28, 2016 (full effect in 2017), with average (upward) effect on consumer tariffs of 3.78%.

 

  The Annual Tariff Adjustment for Cemig D effective May 28, 2017, with average negative effect on consumer tariffs of 10.66%.

 

     R$ ’000     Change
%
    Average
price 2017
     Average
price 2016
     Change
%
 
   2017      2016            
                        R$      R$         

Residential

     7,841,851        7,819,174       0.29       783.53        788.56        (0.64

Industrial

     4,906,865        5,395,586       (9.06     276.27        276.78        (0.18

Commercial, Services and Others

     4,341,962        4,358,938       (0.39     578.36        663.16        (12.79

Rural

     1,628,883        1,463,470       11.30       446.09        409.39        8.96  

Public authorities

     531,761        544,554       (2.35     614.18        614.80        (0.10

Public lighting

     536,788        528,378       1.59       392.69        391.27        0.36  

Public services

     589,451        546,763       7.81       453.03        436.70        3.74  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Subtotal

     20,377,561        20,656,863       (1.35     479.90        479.88        0.01  

Supply not yet invoiced, net

     60,880        (198,785     —         —          —          —    
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Wholesale supply to other concession holders (*)

     1,727,527        2,713,083       (36.33     135.20        216.90        (37.67

Wholesale supply not yet invoiced, net

     1,535,393        258,552       493.84       —          —          —    
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total

     23,701,361        23,429,713       1.16       428.78        421.46        1.74  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

(*) Includes Regulated Market Electricity Sale Contracts (CCEARs) and ‘bilateral’ contracts with other agents.

 

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Revenue from use of distribution systems (the TUSD charge)

This is revenue from charging Free Consumers the Tariff for Use of the Distribution System (Tarifa de Uso do Sistema de Distribuição, or TUSD). This was R$ 1.611 billion in 2017, or 5.56% more than in 2016 (R$ 1.705 billion).

The main factors affecting revenue from use of the network in 2017, and its comparison with 2016, were:

 

  Reduction of 0.52% in the tariff for Free Consumers, given in the annual tariff adjustment of May 28, 2016.

 

  Reduction, in the 2017 Annual Tariff Adjustment, of approximately 40% in the TUSD, effective May 28, 2017.

CVA and Other financial components in tariff adjustment

The Company recognizes the difference between actual non-controllable costs (in which the CDE, and electricity bought for resale, are significant components) and the costs that were used as the basis of decision on the rates charged to consumers. The amount of this difference is passed through to clients in Cemig D’s next tariff adjustment – in 2017 this represented a gain in revenue of R$ 988 million, compared to a reduction in 2016 of R$ 1.455 billion. The difference mainly reflects higher costs of power supply acquired in auctions in 2017 (in 2016 there was a reduction in these costs), in relation to the figures for costs used as the basis for tariffs – this generated a financial asset for the Company, which also represents the amount to be restituted to consumers in the next tariff adjustment.

Movement in balances of financial assets and liabilities:

 

R$ ’000

      

Balance on December 31, 2015

     1,349,656  
  

 

 

 

(–) Net constitution of financial liabilities

     (858,003

(–) Realized

     (597,054

(–) Payments from the Flag Tariff Centralizing Account

     (341,244

(–) Transfer(1)

     (164,957

(+) Updating – Selic rate(2)

     204,352  
  

 

 

 

Balance at December 31, 2016

     (407,250
  

 

 

 

(–) Net constitution of financial assets

     810,634  

(–) Realized

     177,548  

(–) Payments from the Flag Tariff Centralizing Account

     (585,527

(+) Updating – Selic rate(2)

     (41,273
  

 

 

 

Balance on December 31, 2017

     (45,790
  

 

 

 

 

(1) The financial component constituted to be passed through to the tariff at the next tariff adjustment, arising from court decisions (injunctions/provisional remedy) in court actions challenging part of the amount of the CDE (Energy Development Account) charge, was reclassified to Credits owed by Eletrobras, and will be amortized, with counterpart in deductions from the monthly CDE charges to be paid to Eletrobras, as per a Dispatch issued by Aneel in 2016.
(2) Includes a complementary amount relating to homologation of the CVA by Aneel which took place in May 2016.

Transmission Indemnity Revenue

The transition indemnity revenue, in Cemig GT, was R$ 373 million in 2017, compared to R$ 751 million in 2016. In the previous year, as a result of the Mining and Energy Ministry setting the criteria for updating of the transmission indemnity, a posting was made, backdated to 2013, of the amount of the updating of the indemnity receivable based on the regulatory cost of own capital, which had a significant impact on the revenue reported.

We highlight the amount of R$ 149 million recorded in 2017 for the backdated difference of transmission concession assets the values of which were not included in the calculation basis for revenues in the previous tariff reviews.

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.

 

 

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On August 16, 2016 Aneel, by its Dispatch 2181, ratified the amount of R$ 892 million, in currency of November 2012, for the portion of the reversible assets not yet amortized, for the purposes of indemnity to Cemig GT. On April 22, 2016 the Mining and Energy Ministry published its Ministerial Order 120, setting the deadline and method of payment for the remaining amount of the indemnity. This Order determined that the amounts ratified by Aneel should become part of the Regulatory Remuneration Asset Base (Base de Remuneração Regulatória, or BRR), and that the cost of capital should be added to the related Permitted Annual Revenues (‘RAP’).

The portions of remuneration and depreciation not paid in the period from the extensions of the concessions up to the tariff-setting process of 2017, in the amount of R$1,095 million, are to be updated by the IPCA inflation index and remunerated at the real cost of capital of the transmission segment of the industry, as decided by Aneel in the methodologies for Periodic Tariff Reviews of revenues for existing concession holders – this is currently 10.44% per year, to be paid over eight years by reimbursement through the RAP.

Adjustment to Remuneration Base of the transmission assets – Aneel Technical Note 183/2017.

In the tariff review processes of Cemig GT, ratified on June 23, 2009 (backdated to July 1, 2005) and June 8, 2010 (backdated to July 1, 2009), certain conducting cables, which have been the subject of an application by the Company, were not included in the tariff calculation. Cemig GT applied for inclusion of these assets in the Remuneration Assets Base (BRR) and, consequently, for backdated calculation of the amounts not considered in the prior tariff reviews.

Aneel ruled in favor of this application, and calculated the differences between the amounts of revenue ratified in the above-mentioned tariff reviews and the new values calculated for inclusion of those conducting cables for the period from July 2005 through December 2012. Updated, these amounts were calculated to total R$ 149 million, at July 2017 prices, to be received by Cemig GT over the next 12 months. At December 31, 2017, the amount receivable was R$ 75 million.

Indemnity of transmission assets: injunction awarded to industrial consumers

On April 10, 2017, an interim court remedy was granted to the Brazilian Large-scale Free Consumers Association (Associação Brasileira de Grandes Consumidores Livres), the Brazilian Auto Glass Industry Technical Association (Associação Técnica Brasileira das Indústrias Automáticas de Vidro) and the Brazilian Ferro-alloys and Silicon Metal Producers’ Association (Associação Brasileira dos Produtores de Ferroligas e de Silicio Metálico) in their legal action against Aneel and the federal government requesting suspension of the effects on their tariffs of payment of the indemnity for transmission assets payable to agents of the electricity sector who accepted the terms of Law 12783/2013.

The preventive remedy was partial, with effects related to suspension of inclusion in the consumer tariffs paid by members of these associations’ members of the portion of the indemnity corresponding to the remuneration at cost of capital included since the date of extension of the concessions – at December 31, 2017 this amounts to R$ 299 million.

Complying with the court decision, Aneel, in its Technical Note 183/201-SGT/ANEEL of June 22, 2017, presented the new calculation, excluding the amounts that refer to the cost of own capital. Cemig GT believes that this is a provisional decision, and that its right to receive the amount referring to the assets of Basic National Grid (RBSE) is guaranteed by law, so that no adjustment to the amount posted at December 31, 2017 is necessary.

 

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Cemig GT expects to receive in full the credits receivable in relation to the transmission indemnity, and has calculated the following amounts as indemnity:

 

     R$ ’000  

Regulatory Remuneration Base (BRR) – Dispatch 2181 of 2016

     1,177,488  

Amount of the indemnity received so far

     (285,438
  

 

 

 

Net value of the assets for purposes of indemnity

     892,050  

Updating in accordance with MME Order 120/16 – IPCA index/cost of own capital – Period Jan. 2013 to Dec. 2016

     913,180  
  

 

 

 

Balance at December 31, 2016

     1,805,230  

Adjustment of the BRR of Transmission Assets – Aneel Technical Note 183/2017

     149,255  

Updating in accordance with MME Order 120/16 – IPCA index / Cost of capital – Period Jan. 2013 to June 2017

     120,600  

Monetary updating

     103,362  

Amounts received

     (250,409
  

 

 

 

Total at December 31, 2017

     1,928,038  
  

 

 

 

RAP – Cemig GT – Transmission
R$ million

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Generation Indemnity Revenue

In 2017 the Company recognized revenue of R$ 272 million for the adjustment to the balance not yet amortized of the concessions for the São Simão and Miranda hydroelectric plants, as per Ministerial Order 291/17.

Concessions of Jaguara, São Simão, Miranda and Volta Grande hydroelectric plants

Under Concession Contract 007/1997 the concessions of the Jaguara, São Simão, Miranda and Volta Grande hydroelectric plants, operated by the subsidiary Cemig GT, had expiration dates in August 2013, January 2015, December 2016 and February 2017, respectively.

 

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In spite of the fact that there were court proceedings still pending, involving the São Simão, Jaguara and Miranda plants, on September 27, 2017 the federal government auctioned the concessions for the São Simão, Jaguara, Miranda and Volta Grande plants – which had all previously belonged to Cemig GT. (The concession contract of the Volta Grande plant had an expiry date in February 2017). The new concession contracts were signed on November 10, 2017, and on this date extension of the periods of Assisted Operation was formalized, maintaining Cemig GT as the party responsible for provision of electricity generation service from the plants up to the following dates:

 

  Volta Grande plant: Until November 30, 2017.

 

  Jaguara and Miranda plants: Until December 28, 2017.

 

  São Simão plant: Until May 9, 2018.

The Annual Generation Revenue (Receita Anual de Geração, or RAG) of these plants was recognized, in the amount of R$ 462 million, in 2017 (R$ 319 million in 2016).

On August 3, 2017 Mining and Energy Ministry Order 291/17 established the values of indemnity, payable to Cemig GT, for the investments made in the São Simão and Miranda plants that have not been amortized up to the end of the contract. The total amount of the indemnity is R$ 1.028 billion, of which R$ 244 million relates to indemnity for the São Simão Plant, and R$ 784 million is for indemnity for the Miranda Plant – these figures being expressed in December 2015 and February 2016 currency, respectively. The amounts will be updated, pro rata die, by the Selic Reference Rate for Federal securities.

The balances not yet amortized of the concessions of the São Simão and Miranda Plants, in relation to their Basic Plans, were adjusted to reflect the matters decided by Ministerial Order 291/17. As a result revenue of R$ 272 million was recognized in the year.

Cemig GT is discussing, with the Mining and Energy Ministry, the criteria used for deciding the amount published in Ministerial Order 291/17, and also the date of payment, since that Order establishes that the payment of the indemnity must be made, by the federal government, on or before December 31, 2018, provided that there is budget and financial availability.

Revenue from transactions in the Wholesale Trading Market (CCEE)

Revenue from electricity sales on the CCEE (Câmara de Comercialização de Energia Elétrica) in 2017 was R$ 860 million, compared to R$ 161 million in 2016 – an increase of 435.02%. The change mainly reflects:

 

  – the spot price (Preço de Liquidação de Diferenças, or PLD) 244.28% higher year-on-year, at R$ 324.17/MWh in 2017, vs. R$ 91.16/MWh in 2016;

 

  – the higher quantity of electricity available for settlement in the wholesale market in 2017.

Revenue from supply of gas

Cemig reported revenue from supply of gas totaling R$ 1.759 billion in 2017, compared to R$ 1.444 billion in 2016 – an increase of 21.81%. This basically reflects volume of gas sold 23.72% higher YoY (1,319,242m³ in 2017, vs. 1,066,351m³ in 2016).

 

Market (‘000 m3/day)

   2013      2014      2015      2016      2017  

Residential

     0.17        0.72        1.04        3.38        11.44  

Commercial

     20.38        23.15        22.42        24.68        32.67  

Industrial

     2,734.95        2,849.24        2,422.78        2,173.76        2,453.22  

Others

     106.33        99.64        119.87        120.19        126.15  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total market excluding thermal plants

     2,861.83        2,972.75        2,566.11        2,322.01        2,623.47  

Thermal

     1,214.50        1,223.99        1,309.13        591.52        990.89  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,076.33        4,196.74        3,875.24        2,913.53        3,614.36  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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There was a recovery of activity in the industrial user category, the largest in Gasmig’s market, with higher consumption by companies in the metallurgy sector.

Supply of gas to the residential market, which began in 2013, totaled 30,605 households invoiced in December 2017 – compared to 14,935 on December  31, 2016.

Sector / regulatory charges reported as Deductions from revenue

Taxes and charges applied to operational revenue in 2017 were R$ 11.151 billion, or an increase of 6.23% from 2016 (R$ 10.497 billion).

ICMS tax

This expense in 2017 was R$ 5.847 billion in 2017, vs. R$ 5.211 billion in 2016. The increase primarily represents Cemig adhering, in October 2017, to the Minas Gerais State Tax Credits Regularization Plan (PRCT), and by doing so settling a specific tranche of ICMS tax. The effects of this agreement were recognized in the profit and loss account in 2017 as R$ 562 million in Deductions from revenue; R$ 31 million as Financial expenses; and R$ 1 million as Operational expenses.

Consumer charges – the ‘Flag’ Tariff system

Charges to the consumer arising from the Tariff Flag system were higher, at R$ 454 million, in 2017, compared to R$ 360 million in 2016, due to the low levels in the reservoirs’ water storage levels – which activated the ‘Yellow Flag’ and ‘Red Flag’ tariffs, leading to higher charges to the consumer.

 

The ‘Flag’ Tariff component – history

Oct. 2017

   Nov. 2017    Dec. 2017

Red 2

   Red 2    Red 1

Oct. 2016

   Nov. 2016    Dec. 2016

Green

   Yellow    Green

Operational costs and expenses

Operational costs and expenses totaled R$ 18.817 billion in 2017, or 18.32% more than in 2016 (R$ 15.903 billion).

 

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The following paragraphs comment on the main variations:

Electricity purchased for resale

The expense on electricity bought for resale in 2017 was R$ 10.920 billion, or 32.00% more than in 2016 (R$ 8.273 billion). The main factors in the higher figure are:

Cemig D:

The expense on electricity bought for resale in 2017 was R$ 6.783 billion, or 28.95% more than in 2016 (R$ 5.260 billion). The main factors are:

 

  Expense on power supply acquired in auctions 38.86% higher in 2017, at R$ 3.591 billion, compared to R$ 2.586 billion in 2016. This is mainly due to activation of the thermoelectric generation plants in 2017, due to the low level of water in the reservoirs of the hydroelectric plants of the system, with consequent increase in expense on fuel for the thermal plants.

 

  The expense on electricity from Itaipu Binacional was 8.65% higher, at R$ 1.243 billion in 2017, compared to R$ 1.144 billion in 2016. The change basically reflects the increased tariff – which was US$ 25.78/kW-month in 2016, and US$ 28.73/kW-month as from January 2017.

 

  Expense on power supply acquired in spot market 88.53% higher, at R$ 1.282 billion n 2017, compared to R$ 680 million in 2016, basically reflecting the strong increase in average spot price: R$ 324.17/MWh in 2017, vs. R$ 94.16/MWh in 2016.

Cemig GT:

The expense on electricity purchased for resale in 2017 was R$ 4.170 billion, 36.63% more than the figure of R$ 3.052 billion in 2016. This mainly reflects electricity purchased for resale 19.41% higher in 2017 (at 22,690,422 MWh) than in 2016 (19,002,578 MWh), and by the increase of 14.43% on the average price per MWh (R$ 183.78 in 2017, compared to R$ 160.62 in 2016).

Operating provisions

Operational provisions in 2017 totaled R$ 854 million, compared to R$ 704 million in 2016.

Notes on contingencies:

 

  Provisions for doubtful receivables were lower, at R$ 248 million in 2017, compared to R$ 382 million in 2016.

 

  The provision for employment-related legal actions was higher, at R$ 206 million in 2017, vs. R$ 120 million in 2016. The increase in the amount provisioned reflects re-evaluations of potential losses in certain actions as a result of the change in the procedural phase to provisional execution, in relation to actions disputing: the basis for calculation of hazardous work remuneration; claims for equal payment for allegedly unlawful outsourcing; and subsidiary/joint liability.

 

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The following is a summary of the values of options in existence:

 

Consolidated – balance of liabilities R$ ’000

   Balance at Dec.
31, 2017
    Balance at Dec.
31, 2016
 

Put options in shares of RME and Lepsa

     507,231       1,149,881  

SAAG Put options

     311,593       196,173  

Put / call options – Ativas and Sonda

     (3,801     (4,586
  

 

 

   

 

 

 
     815,023       1,341,468  
  

 

 

   

 

 

 

Default

With the Brazilian macro context of lower economic activity, which created unemployment and inflation, the adverse hydrological situation, and the increase in tariffs, which had been held down, Cemig has experienced higher than average growth in the total debt owed by clients. The good news is that Cemig’s confronting of default in 2017 has already reduced the index of default in recent months.

To combat a record level of default, in 2017 Cemig redoubled efforts to receive payment from customers in arrears with their electricity bills. An additional budget has been approved for efforts to recover the losses of revenue. Some results have already been achieved. Since December 2016 there has been no significant increase in the default percentages, showing that this situation is being brought under control. We expect to see a more consistent decline in the percentages from now on.

The average indicator of default was reduced by 12.65% from December 2016 to December 2017. From the end of September to the end of December 2017 the reduction was 8.28%.

The Company uses various tools of communication and collection to prevent increase in default. Measures used include contact by telephone, email, collection requests by text and by letter, negative posting on credit registers, collection through the courts and, principally, disconnection of supply. Aneel Resolution 414 allows supply to be cut off after 15 days from receipt of a notice to the defaulting consumer.

As well as these various collection tools, in 2017 Cemig launched a campaign offering special conditions for negotiation and re-negotiation for low-voltage consumers, hospitals and public authorities.

The Company is confident that with more intense collection and disconnection the levels of default will be reduced in 2017.

 

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Personnel

The expense on personnel was R$ 1.627 billion in 2017, 0.99% less than in 2016 (R$ 1.643 billion).

 

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Gas bought for resale

In 2017 the Company recorded an expense of R$ 1.071 billion on acquisition of gas. This was 22.06% higher than the comparable expense of R$ 877 million in 2016. This mainly reflects a volume of gas bought for resale 23.11% higher (at 1,309,459m³ in 2017, vs. 1,063,677m³ in 2016), partially offset by lower charges under the new agreement between Gasmig and Petrobras, which reduced the daily gas offtake obligation.

Equity method gains in non-consolidated investees

In 2017 Cemig posted a net equity method loss of R$ 252 million, which compares with a net loss of R$ 302 million in 2016. This variation is mainly due to the better results with equity pickup from Light in 2017, which represented a gain of R $ 35 million compared to a loss of R $ 121 million in 2016. Despite the lower equity loss, Renova and the Santo Antônio plant reported losses of R $ 390 million and R $ 204 million in 2017, respectively.

 

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Consolidated – R$ mn

   Gain (loss) by
equity method
2017
    Gain (loss) by
equity method
2016
 

Companhia Transleste de Transmissão

     4,985       5,325  

Companhia Transudeste de Transmissão

     3,709       3,783  

Companhia Transirapé de Transmissão

     4,451       4,654  

Transchile

     —         1,776  

Companhia de Transmissão Centroeste de Minas

     5,058       5,667  

Light

     34,807       (120,512

Axxiom Soluções Tecnológicas

     (7,398     (4,528

Luce

     295       (17,890

RME

     6,841       (17,757

Hidrelétrica Cachoeirão

     10,187       11,122  

Guanhães Energia

     (13,099     (102,108

Hidrelétrica Pipoca

     2,292       5,571  

Madeira Energia (Santo Antônio plant)

     (109,129     (71,093

FIP Melbourne (Santo Antônio plant)

     (94,678     (63,755

Lightger

     1,858       4,088  

Baguari Energia

     16,590       41,037  

Central Eólica Praias de Parajuru

     (1,489     287  

Central Eólica Volta do Rio

     (11,741     (3,838

Central Eólica Praias de Morgado

     (7,622     (2,440

Amazônia Energia (Belo Monte Plant)

     705       (6,659

Ativas Data Center

     (2,294     (31,424

Parati

     —         (24,305

Taesa

     216,330       341,081  

Renova

     (390,249     (373,313

Itaocara

     (1,741     —    

Aliança Geração

     71,756       103,849  

Aliança Norte (Belo Monte plant)

     (2,352     (6,551

Retiro Baixo

     9,688       16,089  
  

 

 

   

 

 

 

Total

     (252,240     (301,844
  

 

 

   

 

 

 

Financial revenue and expenses

Cemig posted net financial expenses in 2017 of R$ 997 billion, compared to net financial expenses of R$ 1.437 billion in 2016. The main factors are:

 

  Costs and charges on loans and financings 20.91% lower, at R$ 1.467 billion in 2017, compared to R$ 1.860 billion in 2016. This was due mainly to the increase of debt indexed to the CDI Rate, and the lower value of the CDI rate – the indexor for the debt: the CDI rate was 9.93% in 2017, compared to 14.06% in 2016.

 

  The result of FX variations in the year was lower: a net expense of R$ 53 million in 2017, compared to a new gain of R$ 26 million in 2016. This basically arises from an expense of R$ 57 million in Cemig GT in 2017 resulting from raising of funds indexed to the US dollar (Eurobonds);

 

  Expense on monetary updating of loans and financing 55.62% lower, at R$ 109 million in 2017, compared to R$ 245 million in 2016—due to the much lower IPCA inflation index in the year (2.95% in 2017, vs. 6.29% in 2016).

 

  Higher revenue from monetary variation on the CVA balances and Other financial components of tariffs: R$ 42 million in 2017, vs. R$ 204 million in 2016 – the 2016 figure contained an effect from ratification of the CVA amount by Aneel, in May 2016.

 

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  Lower revenue from short-term financial investments: R$ 205 million in 2017, 35.34% less than in 2016 (R$ 317 million). This basically reflects the lower CDI rate in the year (9.93% in 2017, vs. 14.06% in 2016).

 

  Higher monetary updating of tied funds: R$ 191 million in 2017, compared to R$ 46 million in 2016. In 2017 the Company recognized a revenue item of R$ 82 million, for reversal of the provision for the lawsuit challenging the constitutionality of the inclusion of ICMS tax (payable or paid) within the calculation of the Pasep and Cofins taxes on revenue.

 

  There was an expense of R$ 46 million in 2017, for monetary adjustment on the pre-sale of power supply under a contract to bring forward power supply sales during the year.

Ebitda

Cemig’s consolidated Ebitda was 32.37% higher in 2017 than in 2016:

 

Ebitda – R$ million

   2017      2016      Change,%  

Net profit (loss) for the period

     1,002        334        199.70  

+ Income tax and Social Contribution tax

     644        33        1,851.52  

+ Net financial revenue (expenses)

     997        1,437        (30.62

+ Depreciation and amortization

     850        834        1.92  
  

 

 

    

 

 

    

 

 

 

= EBITDA

     3,492        2,639        32.37  
  

 

 

    

 

 

    

 

 

 

 

LOGO

 

LOGO

 

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DEBT

 

LOGO

The Company’s consolidated total debt on December 31, 2017 was R$ 14,397,697, or 5.15% less than at December 31, 2016.

 

LOGO

 

     31/12/2017      31/12/2016      %  

Cemig

        

Total Debt

     14,397,697        15,179,280        (5.15

Net Debt

     12,279,303        13,138,920        (6.54

Cemig GT

        

Total Debt

     8,320,163        8,633,671        (3.63

Net Debt

     7,381,202        7,768,760        (4.99

Cemig D

        

Total Debt

     5,682,691        6,198,251        (8.32

Net Debt

     4,851,213        5,429,819        (10.66

 

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Covenants – Eurobonds

For so long as any of the Notes are Outstanding, Cemig and Cemig GT will include calculations of each sub-item of Covenant EBITDA, Covenant Net Debt and Total Secured Debt, in addition to calculations for the following financial covenant ratios: Covenant Net Debt / Covenant EBITDA and Total Secured Debt /EBITDA.

 

12 months

   2017     2017  

R$ (in million)

   H     GT  

Net income for the period/year (i)

     1,001       428  

Net financial expenses

     996       948  

Income tax and Social Contribution tax

     644       420  

Depreciation and amortization

     850       158  
  

 

 

   

 

 

 

LAJIDA

     3,491       1,954  

minus minority interest result

     252       519  

minus provision for the variation in value of the put option obligations

     347       115  

minus non-operating result (which includes any gains on asset sales and any asset write-off or impairments)

     (5     43  

plus non-cash expenses and non-cash charges, to the extent they are non-recurring

     —         —    

minus non-cash credits and gains increasing net income, to the extent they are non-recurring

     (720     (243

plus any cash payments made on a consolidated basis during such period relating to non-cash charges that were added back in determining covenant EBITDA in any prior period

     —         —    

plus expenses related to adherence to the Minas Gerais State Tax Credits Regularization Plan (Plano de Regularização de Créditos Tributários – PRCT), incurred in the third quarter of 2017

     562       30  

minus non-cash revenues related to transmission and generation indemnification

     (496     (496

plus cash dividends received from minority investments (as measured in the statement of cash flows)

     354       165  

minus monetary updating of concession grant fees

     (317     (317

plus cash inflows related to power generation concession grant fee

     234       234  

plus cash inflows related to tranmission revenue for cost of capital coverage

     264       264  

plus cash inflows from generation indemnification, provided that such amount shall not exceed 30% of the sum of clauses (i) through this definition of Covenant EBITDA

     —         —    
  

 

 

   

 

 

 

Covenant LAJIDA

     3,966       2,268  
  

 

 

   

 

 

 

Consolidated Indebtedness

     14,398       8,320  

plus debt contracts with Forluz

     1,003       227  

plus carrying liability of any put option obligation

     989       390  

minus escrow account amounts deposited to satisfy any put option obligation

     (88     —    

minus consolidated cash and cash equivalents; plus consolidated marketable securities recorded as current assets

     (2,088     (924
  

 

 

   

 

 

 

Covenant Net Debt

     14,214       8,013  
  

 

 

   

 

 

 

Covenant net debt/covenant ebitda

     3.58       3.53  

Limit Covenant Net Debt to Covenant EBITDA Ratio

     5.00       5.50  

Total Secured Debt

     5,951       2,441  

Covenant EBITDA

     3,966       2,268  

Total Secured Debt to Covenant EBITDA Ratio

     1.50       1.08  

Limit Covenant Net Debt to Covenant EBITDA Ratio

     2.00       1.50  

 

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RESULTS SEPARATED BY BUSINESS SEGMENT

 

INFORMATION BY MARKET SEGMENT ON DECEMBER 31, 2017

 

ITEM

   ELECTRICITY     TELECOM     GAS     OTHER     ELIMINATIONS     TOTAL  
   GENERATION     TRANSMISSION     DISTRIBUTION            

ASSETS OF THE SEGMENT

     14.365.635       3.954.921       20.021.054       347.344       2.000.287       1.582.372       (32.024     42.239.589  

ADDITIONS TO THE SEGMENT

     4.723.336       1.122.046       1.917.527       —         —         29.316       —         7.792.225  

Additions to the financial asset

     307.794       —         1.082.877       46.687       56.619       778       —         1.494.755  

INVESTMENTS IN SUBSIDIARIES AND JOINTLY-CONTROLLED ENTITIES

     —         174.082       145.283       —         —         —         —         319.365  

NET REVENUE

     7.190.105       776.960       12.312.331       127.291       1.481.990       111.272       (288.259     21.711.690  

COST OF ELECTRICITY AND GAS

                

Electricity purchased for resale

     (4.209.271     —         (6.782.988     —         —         (8     72.791       (10.919.476

Charges for use of the national grid

     (352.455     —         (1.002.452     —         —         —         180.984       (1.173.923

Gas bought for resale

     —         —         —         —         (1.070.623     —         —         (1.070.623
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operational costs, total

     (4.561.726     —         (7.785.440     —         (1.070.623     (8     253.775       (13.164.022

OPERATING COSTS AND EXPENSES

                

Personnel

     (281.120     (106.285     (1.123.026     (20.249     (55.434     (40.912     —         (1.627.026

Profit sharing

     (1.278     (59     (2.657     (380     —         (266     —         (4.640

Post-retirement obligations

     39.235       19.316       179.589       —         —         (9.480     —         228.660  

Raw materials and inputs for Energy production

     (11.097     (3.595     (43.267     (255     (1.962     (400     20       (60.556

Materials

     (10.371     —         —         —         —         —         —         (10.371

Outsourced services

     (126.805     (31.471     (784.654     (28.146     (16.640     (16.815     30.574       (973.957

Depreciation and amortization

     (176.177     —         (566.578     (35.136     (71.348     (529     —         (849.768

Operational provisions (reversals)

     (139.285     (10.076     (468.857     (1.105     (1.975     (232.370     —         (853.668

Construction costs

     —         (24.827     (1.044.682     —         (49.240     —         —         (1.118.749

Other operating expenses, net

     (117.052     (10.712     (408.392     (23.201     (14.963     187.484       3.890       (382.946
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of operation

     (823.950     (167.709     (4.262.524     (108.472     (211.562     (113.288     34.484       (5.653.021

OPERATING COSTS AND EXPENSES

     (5.385.676     (167.709     (12.047.964     (108.472     (1.282.185     (113.296     288.259       (18.817.043

OPERATIONAL PROFIT BEFORE EQUITY GAINS (LOSSES) AND FINANCIAL REVENUE (EXPENSES)

     1.804.429       609.251       264.367       18.819       199.805       (2.024     —         2.894.647  

Equity method gains in non-consolidated investees

     (519.024     234.533       41.648       (2.295     —         (7.102     —         (252.240

Financial revenues

     225.856       8.968       397.277       3.059       48.400       120.153       —         803.713  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial expenses

     (1.161.112     (3.443     (815.025     (13.635     (42.657     235.608       —         (1.800.264

PRE-TAX PROFIT

     350.149       849.309       (111.733     5.948       205.548       346.635       —         1.645.856  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income and Social Contribution taxes

     (256.648     (188.831     30.711       (3.274     (71.533     (154.685     —         (644.260
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET PROFIT ( LOSS)

     93.501       660.478       (81.022     2.674       134.015       191.950       —         1.001.596  

Interest of the controlling shareholders

     93.501       660.478       (81.022     2.674       133.373       191.950       —         1.000.954  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest of non-controlling shareholder

     —         —         —         —         642       —         —         642  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Electricity losses—2017

Control of electricity losses is one of Cemig D’s strategic objectives, and the Company has a structure dedicated to this: its Distribution Losses Measurement and Control Management Unit. Compliance with the target is monitored monthly, and measured by the Distribution Total Losses Index (Índice de Perdas Totais da Distribuição, IPTD). In the decision on the regulatory target, taken during the 3rd Tariff Review Cycle, the regulator, Aneel, made significant changes in the method of calculation of technical losses, imposing extremely challenging limits for Cemig D. The parameter Total losses comprises two components: (i) Technical losses, and (ii) Non-technical losses. The indicators for measurement of the two components: are the PPTD (Distribution Technical Losses Percentage); and the PPNT (Distribution Non-technical Losses Percentage).

 

LOGO

 

LOGO

 

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Appendices

 

RAP (Permitted Annual Revenue—Transmission )—2017/2018 cycle

 

Annual Permitted Revenue (RAP)

   RAP      %
Cemig
    Cemig
Consolidado
     Cemig GT  

Cemig GT

     687.018.817        100,00     687.018.817        709.016.589  

Cemig Itajuba

     21.997.772        100,00     21.997.772     

Transleste

     40.803.987        25,00     5.950.581     

Transudeste

     25.290.697        24,00     3.540.698     

Transirapé

     33.123.484        24,50     4.733.898     

Centroeste

     17.399.265        51,00     8.873.625     

Taesa

        32,00     816.937.362     

Transleste

     40.803.987        5,00     2.040.199     

Transudeste

     25.290.697        5,00     1.264.535     

Transirapé

     33.123.484        5,00     1.656.174     

ETEO

     88.077.706        100,00     28.184.866     

ETAU

     24.216.647        52,58     4.074.891     

NOVATRANS

     517.164.423        100,00     165.492.616     

TSN

     427.855.624        100,00     136.913.800     

GTESA

     9.361.375        100,00     2.995.640     

PATESA

     25.008.641        100,00     8.002.765     

Munirah

     36.484.440        100,00     11.675.021     

Brasnorte

     10.062.251        38,66     1.244.966     

São Gotardo

     5.203.930        100,00     1.665.258     

Abengoa

          

NTE

     153.424.301        100,00     49.095.776     

STE

     81.598.032        100,00     26.111.370     

ATEI

     149.036.948        100,00     47.691.823     

ATEII

     230.277.807        100,00     73.688.898     

ATEIII

     116.301.579        100,00     37.216.505     

TBE

          

EATE

     177.139.821        49,98     88.538.694     

STC

     17.592.992        39,99     7.034.930     

Lumitrans

     10.651.737        39,99     4.259.193     

ENTE

     112.564.897        49,99     56.270.002     

ERTE

     25.266.463        49,99     12.629.871     

ETEP

     28.183.293        49,98     14.087.265     

ECTE

     9.074.626        19,09     1.732.599     

EBTE

     34.269.232        74,49     25.527.494     

ESDE

     6.548.398        49,98     3.273.180     

ETSE

     3.722.327        19,09     710.696     

Light

     8.941.679        43,15     3.858.335     
       

 

 

    

 

 

 

RAP TOTAL CEMIG

          1.507.814.513        709.016.589  
       

 

 

    

 

 

 

 

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Table Cemig D

 

CEMIG D Market

 
     (GWh)      GW  

Quarter

   Captive
Consumers
     TUSD
ENERGY1
     T.E.D2      TUSD
PICK3
 

1Q16

     6.408        4.053        10.460        29  

2Q16

     6.711        4.497        11.208        29  

3Q16

     6.365        4.424        10.788        29  

4Q16

     6.402        4.409        10.811        30  

1Q17

     6.249        4.274        10.523        30  

2Q17

     6.314        4.287        10.601        31  

3Q17

     6.232        4.586        10.817        31  

4Q17

     6.221        4.591        10.813        31  

 

1. Refers to the quantity of electricity for calculation of the regulatory charges charged to free consumer clients (“Portion A”).
2. Total electricity distributed.
3. Sum of the demand on w hich the TUSD is invoiced, according to demand contracted (“Portion B”).

 

Operating Revenues

   4Q17     4Q16     Change%      2017     2016     Change%  

Sales to end consumers

     4.374       4.260       3        16.443       16.687       (1

TUSD

     389       367       6        1.643       1.741       (6

CVA and Other financial components in tariff

     840       (518     —          988       (1.455     —    

adjustment

             

Construction revenue

     339       248       37        1.045       1.102       (5

Others

     496       283       75        1.371       1.141       —    

Subtotal

     6.439       4.640       39        21.490       19.216       12  

Deductions

     (2.408     (2.045     18        (9.177     (8.620     6  

Net Revenues

     4.031       2.596       55        12.312       10.597       16  

 

Operating Expenses

   4Q17     4Q16     Change%     2017     2016      Change%  

Personnel/Administrators/Councillors

     246       295       (17     1.123       1.147        (2

Employee Participation

     (15     (17     (10     3       10        (73

Forluz – Post-Retirement Employee Benefits

     (381     65       —         (180     231        —    

Materials

     11       13       (11     43       42        3  

Contracted Services

     234       201       16       785       674        16  

Purchased Energy

     2.066       1.403       47       6.783       5.260        29  

Depreciation and Amortization

     160       157       2       561       525        7  

Operating Provisions

     121       174       (30     469       544        (14

Charges for Use of Basic Transmission Network

     341       154       121       1.002       760        32  

Cost from Operation

     339       248       37       1.045       1.102        (5

Other Expenses

     168       110       53       408       395        3  

Total

     3.290       2.801       17       12.043       10.688        13  

 

Statement of Results

   4Q17     4Q16     Change%      2017     2016     Change%  

Net Revenue

     4.031       2.596       55        12.312       10.597       16  

Operating Expenses

     3.290       2.801       17        12.043       10.688       13  

EBIT

     740       (206     —          270       (92     —    

EBITDA

     901       (49     —          831       433       92  

Financial Result

     (104     (85     22        (418     (335     25  

Provision for Income Taxes, Social Cont & Deferred Income Tax

     (215     80       —          31       103       (70

Net Income

     421       (211     —          (117     (324     (64

 

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Table Cemig GT

 

Operating Revenues

   4Q17     4Q16     Change%   2017     2016     Change%

Sales to end consumers

     1.027       864     19     3.945       3.647     8

Supply

     878       956     (8)     3.191       2.930     9

Revenues from Trans. Network

     191       111     72     519       410     27

Gain on monetary updating of Concession Grant Fee

     76       87     (12)     317       300     6

Construction revenue

     14       17     (22)     25       54     (54)

Transactions in the CCEE

     130       15     746     651       152     327

Transmission indemnity revenue

     77       59     32     373       751     (50)

Generation indemnity revenue

     12       —       —       272       —       —  

Others

     16       16     (0)     46       37     24

Subtotal

     2.422       2.126     14     9.339       8.281     13

Deductions

     (352     (410   (14)     (1.552     (1.472   5

Net Revenues

     2.070       1.716     21     7.787       6.809     14

 

Operating Expenses

   4Q17     4Q16     Change%   2017     2016      Change%

Personnel/Administrators/Councillors

     83       98     (16)     383       379      1

Employees’ and managers’ profit shares

     (5     (5   —       1       1      15

Forluz – Post-Retirement Employee Benefits

     (121     21     —       (59     77      —  

Materials

     5       4     28     14       13      5

Raw Materials and Supplies Energy Production

     10       —       —       10       —        —  

Contracted Services

     47       42     10     143       141      2

Depreciation and Amortization

     35       41     (15)     158       183      (13)

Operating Reserves

     43       35     23     150       98      53

Charges for Use of Basic Transmission Network

     93       88     6     350       318      10

Purchased Energy

     1.179       760     55     4.170       3.052      37

Construction Cost

     14       17     (22)     25       54      (54)

Other Expenses

     86       31     180     126       78      63

Total

     1.468       1.132     30     5.472       4.393      25

 

Statement of Results

   4Q17     4Q16     Change%   2017     2016     Change%

Net Revenue

     2.070       1.716     21     7.787       6.809     14

Operating Expenses

     1.468       1.132     30     5.472       4.393     25

EBIT

     603       584     3     2.315       2.416     (4)

Equity equivalence results

     (361     (292   (24)     (519     (448   16

Adjustment for impairment of Investments

     —         (763   —       —         (763   —  

EBITDA

     277       (430   (164)     1.954       1.388     41

Financial Result

     (219     (268   (18)     (948     (1.143   (17)

Provision for Income Taxes, Social Cont & Deferred Income Tax

     (120     274     —       (420     7     —  

Net Income

     (97     (465   (79)     428       70     513

 

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Table Cemig

 

Energy Sales (Consolidated)(GWh)

   4Q17      4Q16      Change%   2017      2016      Change%

Residential

     2.518        2.510      0     10.008        9.916      1

Industrial

     4.598        4.953      (7)     17.761        19.494      (9)

Commercial

     1.926        1.665      16     7.507        6.573      14

Rural

     882        875      1     3.651        3.575      2

Others

     881        885      —       3.534        3.488      1
  

 

 

    

 

 

    

 

 

 

 

    

 

 

    

 

Subtotal

     10.806        10.888      (1)     42.462        43.046      (1)

Own Consumption

     11        10      11     37        37      1

Supply

     3.610        3.695      (2)     12.777        12.508      2
  

 

 

    

 

 

    

 

 

 

 

    

 

 

    

 

TOTAL

     14.426        14.593      (1)     55.277        55.592      (1)
  

 

 

    

 

 

    

 

 

 

 

    

 

 

    

 

 

Energy Sales

   4Q17      4Q16      Change%   2017      2016      Change%

Residential

     2.045        2.000      2     7.842        7.819      —  

Industrial

     1.273        1.353      (6)     4.907        5.396      (9)

Commercial

     1.123        1.089      3     4.342        4.359      —  

Rural

     425        390      9     1.629        1.463      11

Others

     440        414      6     1.658        1.620      2
  

 

 

    

 

 

    

 

 

 

 

    

 

 

    

 

Electricity sold to final consumers

     5.306        5.247      1     20.378        20.657      (1)

Unbilled Supply, Net

     570        39      1.368     1.596        60      2.571

Supply

     438        829      (47)     1.728        2.713      (36)
  

 

 

    

 

 

    

 

 

 

 

    

 

 

    

 

TOTAL

     6.314        6.114      3     23.701        23.430      1
  

 

 

    

 

 

    

 

 

 

 

    

 

 

    

 

 

Operating Revenues

   4Q17     4Q16     Change%   2017     2016     Change%

Sales to end consumers

     5.411       5.153     5     20.438       20.458     (0)

TUSD

     380       357     6     1.611       1.705     (6)

Supply

     902       961     (6)     3.263       2.972     10

Transactions in the CCEE

     324       22     1.378     860       161     435

CVA and Other financial components in tariff adjustment

     840       (518   —       988       (1.455   —  

Gain on monetary updating of Concession Grant Fee

     76       87     (12)     317       300     6

Revenues from Trans. Network

     150       84     78     371       312     19

Construction revenue

     382       275     39     1.119       1.193     (6)

Gas supply

     453       407     11     1.759       1.444     22

Transmission Indemnity Revenue

     77       59     32     373       751     (50)

Others

     393       341     15     1.492       1.429     4

Subtotal

     9.401       7.229     30     32.862       29.269     12
  

 

 

   

 

 

   

 

 

 

 

   

 

 

   

 

Deductions

     (2.843     (2.563   11     (11.151     (10.497   6
  

 

 

   

 

 

   

 

 

 

 

   

 

 

   

 

Net Revenues

     6.558       4.666     41     21.712       18.773     16
  

 

 

   

 

 

   

 

 

 

 

   

 

 

   

 

 

 

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Operating Expenses

   4Q17     4Q16     Change%   2017     2016      Change%

Personnel/Administrators/Councillors

     351       426     (18)     1.627       1.643      (1)

Employee Participation

     (21     (23   (8)     5       7      (37)

Forluz – Post-Retirement Employee Benefits

     (522     96     —       (229     345      —  

Materials

     17       17     2     61       58      5

Raw materials and inputs for production of electricity

     10       —       —       10       —        —  

Contracted Services

     293       266     10     974       867      12

Purchased Energy

     3.234       2.146     51     10.919       8.273      32

Depreciation and Amortization

     233       233     —       850       834      2

Operating Provisions

     295       (10   —       854       704      21

Charges for Use of Basic Transmission Network

     383       206     86     1.174       947      24

Gas bought for resale

     281       254     11     1.071       877      22

Cost from Operation

     382       275     39     1.119       1.193      (6)

Other Expenses

     71       (219   —       383       154      149
  

 

 

   

 

 

   

 

 

 

 

   

 

 

    

 

TOTAL

     5.008       3.667     37     18.817       15.903      18
  

 

 

   

 

 

   

 

 

 

 

   

 

 

    

 

 

Financial Result Breakdown

   4Q17     4Q16     Change%   2017     2016     Change%

Financial revenues

     254       206     23     804       1.041     (23)
  

 

 

   

 

 

   

 

 

 

 

   

 

 

   

 

Revenue from cash investments

     34       97     (65)     205       317     (35)

Arrears penalty payments on electricity bills

     68       65     4     261       277     (6)

Exchange rate

     (1     6     —       19       62     (69)

Monetary updating

     123       48     156     237       152     56

Monetary updating—CVA

     —         (3   —       —         204     —  

Taxes applied to Financial Revenue

     (17     (34   (48)     (53     (88   (40)

Other

     47       27     75     134       117     15
  

 

 

   

 

 

   

 

 

 

 

   

 

 

   

 

Financial expenses

     (528     (590   (10)     (1.800     (2.478   (27)

Costs of loans and financings

     (332     (496   (33)     (1.534     (1.928   (20)

Exchange rate

     (60     (16   273     (73     (35   106

Monetary updating – loans and financings

     (34     (13   163     (109     (245   (56)

Monetary updating – paid concessions

     (1     —       —       —         (3   —  

Charges and monetary updating on Post-employment obligations

     (17     (16   7     (65     (103   (36)

Other

     (84     (49   71     (20     (163   (88)
  

 

 

   

 

 

   

 

 

 

 

   

 

 

   

 

Financial revenue (expenses)

     (275     (384   (28)     (997     (1.437   (31)
  

 

 

   

 

 

   

 

 

 

 

   

 

 

   

 

 

 

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Cash Flow Statement

   2017     2016     Change%

Cash at beginning of period

     995       925     8
  

 

 

   

 

 

   

 

Cash generated by operations

     580       1.213     (52)
  

 

 

   

 

 

   

 

Net profit

     1.002       335     199

Current and deferred income tax and Social Contribution tax

     644       33     1.842

Depreciation and amortization

     850       834     2

Passthrough from CDE

     (403     1.796     —  

Equity gain (loss) in subsidiaries

     252       302     16

Provisions (reversals) for operational losses

     854       704     21

Dividends received from equity holdings

     354       683     (48)

Interest paid on loans and financings

     (1.797     (2.369   (24)

Consumers and traders

     (818     (56   1.371

Others

     (359     (1.049   66
  

 

 

   

 

 

   

 

Financing activities

     (158     (529   70

Financings obtained and capital increase

     3.297       5.737     (43)

Payments of loans and financings

     (4.131     (5.592   (26)

Interest on Equity, and dividends

     (540     (675   (20)

Advance against Future Capital Increase

     1.215       —       —  
  

 

 

   

 

 

   

 

Investment activity

     (386     (614   (37)

Securities—Financial Investment

     (4     1.401     (100)

Acquisition of ownership interest and future capital commitments

     474       (506   —  

Financial assets

     —         —       —  

Fixed and Intangible assets

     (856     (1.508   (43)
  

 

 

   

 

 

   

 

Cash at end of period

     1.030       995     4
  

 

 

   

 

 

   

 

Total Cash

     2.118       2.040    
  

 

 

   

 

 

   

 

BALANCE SHEETS (CONSOLIDATED)—ASSETS

   2017      2016  

CURRENT

     8.537        8.285  

Cash and cash equivalents

     1.030        995  

Securities

     1.058        1.014  

Consumers and traders

     3.885        3.425  

Financial assets of the concession

     848        730  

Tax offsetable

     174        236  

Income tax and Social Contribution tax recoverable

     340        590  

Dividends receivable

     77        11  

Linked funds

     106        —    

Inventories

     38        49  

Passthrough from CDE (Energy Development Account)

     73        64  

Other credits

     907        803  
  

 

 

    

 

 

 

NON-CURRENT

     33.702        33.750  

Securities

     30        31  

Consumers and traders

     255        146  

Tax offsetable

     231        178  

Income tax and Social Contribution tax recoverable

     21        112  

Deferred income tax and Social Contribution tax

     1.871        1.797  

Escrow deposits in legal actions

     2.336        1.887  

Other credits

     644        1.279  

Financial assets of the concession

     6.605        4.971  

Investments

     7.792        8.753  

PP&E

     2.762        3.775  

Intangible assets

     11.156        10.820  
  

 

 

    

 

 

 

TOTAL ASSETS

     42.239        42.036  
  

 

 

    

 

 

 

 

 

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BALANCE SHEETS LIABILITIES AND SHAREHOLDERS’ EQUITY

   2017     2016  

CURRENT

     8.662       11.447  
  

 

 

   

 

 

 

Suppliers

     2.343       1.940  

Regulatory charges

     513       381  

Profit shares

     9       18  

Taxes

     705       794  

Income tax and Social Contribution tax

     115       27  

Interest on Equity, and dividends, payable

     428       467  

Loans and financings

     2.371       4.837  

Payroll and related charges

     207       225  

Post-retirement liabilities

     232       199  

Other obligations

     1.233       1.412  

Provisions for losses on investments

     507       1.150  
  

 

 

   

 

 

 

NON-CURRENT

     19.247       17.654  

Regulatory charges

     250       455  

Loans and financings

     12.027       10.342  

Taxes

     28       724  

Income tax and Social Contribution tax

     735       582  

Provisions

     678       815  

Post-retirement liabilities

     3.954       4.043  

Provisions for losses on investments

     308       192  

Other obligations

     1.267       502  
  

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

     14.326       12.930  

Share capital

     6.294       6.294  

Capital reserves

     1.925       1.925  

Profit reserves

     5.729       5.200  

Adjustments to Stockholders’ equity

     (837     (488

Advance against Future Capital Increase

     1.215       —    
  

 

 

   

 

 

 

NON- CONTROLLING STOCKHOLDER´S EQUITY

     4       4  
  

 

 

   

 

 

 

TOTAL LIABILITIES

     42.239       42.036  
  

 

 

   

 

 

 

 

58


 

PRESENTATION OF 2017 RESULTS

 

 

 

 

59


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CEMIG
RESULTS 2017
Assertive decision-making points to path of success

 

60


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Certain statements and estimates in this material may represent expectations about future events or results, which are
subject to risks and uncertainties, which may be known or unknown. There is no guarantee that the events or results will
take place as referred to in these expectations.
These expectations are based on the present assumptions and analyses from the point of view of our management, in
accordance with their experience and other factors such as the macroeconomic environment, and market conditions in the
electricity sector; and on our expectations for future results, many of which are not under our control.
Important factors that could lead to significant differences between actual results and the projections about future events or
results include our business strategy, Brazilian and international economic conditions, technology, our financial strategy,
changes in the electricity sector, hydrological conditions, conditions in the financial and energy markets, uncertainty on our
results from future operations, plans and objectives, and other factors. Because of these and other factors, our real results
may differ significantly from those indicated in or implied by such statements.
The information and opinions herein should not be understood as a recommendation to potential investors, and no
investment decision should be based on the veracity, currentness or completeness of this information or these opinions.
None of our professionals nor any of their related parties or representatives shall have any liability for any losses that may
result from the use of the content of this presentation.
To evaluate the risks and uncertainties as they relate to Cemig, and to obtain additional information about factors that could
give rise to different results from those estimated by Cemig, please consult the section on Risk Factors included in the
Reference Form filed with the Brazilian Securities Commission – CVM – and in the 20-F form filed with the U.S. Securities and
Exchange Commission – SEC.
In this material, financial amounts are in R$ million (R$ mn) unless otherwise stated.
Financial data reflect the adoption of IFRS.

 

61


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2017 Results
Net revenue
Ebitda
Net profit
15.7%
18.773
21.712
2016
2017
32.4%
2.638
3.492
2016
2017
198.8%
335
1.001
2016
2017

 

 

Factors in 2017 net revenue:

 

 

CVA item this year is a gain of R$ 988 million– in 2016 it was negative R$ 1.455 million

 

 

Generation Indemnity revenue: gain of R$ 272 million

 

 

Ebitda includes expense of R$ 564 million for ICMS tax Regularization Plan (PRCT)

 

 

Changes to life insurance cut aggregate post-retirement obligation by R$ 619 million

 

 

Lower debt, and lower Selic rate, reduce debt expense by R$ 530 million

 

 

Investees’ equity contribution: R$ 252 million negative, vs. R$ 302 million negative in 2016

 

1

‘Nova Regularize’ = Minas Gerais State Tax Regularization Plan.

 

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Consolidated net revenue
15.7%
18.773
21.712
2016
2017
Volume sold - GWh
-0.6%
55.592
93
1.734
934
77
46
269
55.277
2016
Residential
Industrial
Commercial
Rural
Others
Wholesale
2017
•From 2016 to 2017, change in CVA contributed R$ 2.443 billion positive in net revenue
•Revenue from supply of gas 21.8% higher, at R$ 315 million
•Generation indemnity revenue gain of R$ 272 million
•for adjustment to yet unamortized balance of concessions for the São Simão and Miranda Plants, as per Ministry Order 291/17. Asset now totals R$ 1.084 billion.
•Revenue from transactions in CCEE R$ 699 million higher than in 2016
•R$ 562 million expense posted for ICMS tax settlement program

 

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Operational expenses
15.903
18.817
2016
2017
18.3%
-16
-3
-573
3
107
2.647
15
150
226
194
165
Change in consolidated operational expenses, 2016–2017
.Personnel expenses: lower due to voluntary retirement program
.1,189 employees joined the program in 2017
.Reassessment of Life insurance reduces total post-retirement obligation by R$ 619
million
.Electricity and gas purchased for resale: total costs higher
.Action taken help reduce default
.Default provision down from R$ 382 million in 2016 to R$ 248 million in 2017
.Provisions for losses on investments
.Parati – R$ 231 million provision in 2017, balance R$ 507 million
.SAAG– R$ 115 million provision in 2017, balance R$ 312 million
1.643
1.627
58
61
867
974
356
388
2016
2017
P
M
S
O
4.3%
2,924
3,050

 

64


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Cemig, consolidated: debt profile
Maturities timetable – Average tenor: 4.1 years
Total net debt: R$ 12.3 billion
2.371
1.712
2.001
2.394
1.990
223
3.487
220
2018
2019
2020
2021
2022
2023
2024
After 2024
Each 1 p.p. reduction in Selic rate estimated to reduce debt cost by R$ 127 million
Financial expenses are already lower due to reduction in the Selic rate: R$ 530 million lower in 2017 compared to 2016
Main indexors
50%
26%
23%
1%
CDI
IPCA
DÓLAR
OUTROS
Dollar
Other
Debt in Dollar converted into CDI percentage per hedging instrument, within a band of Exchange variation
Cost of debt – %
3,74
8,40
8,29
8,97
7,22
6,01
14,28
15,89
15,95
12,03
10,39
9,09
2015
2016
mar/17
jun/17
set/17
2017
Real
Nominal
Leverage – %
Net debt
Ebitda
Net Debt
Stockholders’
equity + Net debt
48,9
50,4
49,5
49,0
46,1
4,98
4,21
3,98
6,20
3,52
2016
mar-17
jun-17
set-17
2017

 

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Cemig GT – 2017 results
Net revenue
Ebitda
Net profit
1.389
1.954
2016
2017
6.809
7.787
2016
2017
14.4%
40.7%
70
428
2016
2017
511.4%
Generation indemnity revenue gain of R$ 272 million
.for adjustment to yet unamortized balance of concessions for São Simão and Miranda Plants (Ministry Order 291/17)
.Revenue from supply of power up 8.5% (= up R$ 559 million) from 2016
.Revenue from transactions on CCEE R$ 499 million higher
.ICMS tax Regularization plan: impact of R$ 29 million on Ebitda, R$ 20 million on Net profit.
.Cost of supply bought for resale 36% higher (R$ 1.118 billion)
.2017 Equity method contribution R$ 519 million negative, vs. R$ 448 million negative in 2016

 

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Cemig GT – debt profile
Maturities timetable – Average tenor: 4.3 years
Total net debt: R$ 7.4 billion
Leverage - %
Main indexors
Cost of debt- %
3,66
8,59
8,46
9,85
7,41
6,14
14,41
16,03
16,11
12,07
10,07
9,23
2015
2016
Mar-17
Jun-17
Sep-17
2017
Real
Nominal
Restrictive covenants
For details see Note 18 (Loans, financings and debentures)
Net debt
Ebitda
Net Debt
Stockholders’
equity + Net debt
44%
16%
40%
CDI
IPCA
DÓLAR
Dollar
1.607
937
1.110
1.094
326
-
3.246
2018
2019
2020
2021
2022
2023
2024
5,60
4,51
4,53
5,78
3,78
62,9
60,9
58,3
58,2
60,6
2016
Mar-17
Jun-17
Sep-17
2017
.Debt in Dollar converted into CDI percentage per hedging instrument, within a band of Exchange variation

 

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Cemig D— 2017 results
10.596
12.312
2016
2017
433
831
2016
2017
-324
-117
2016
2017
16.2%
91.9%
63.9%
.Consumption in Cemig D’s concession area:
.Volume distributed: 1.10% lower
.Captive market: 3.1% lower
.Supply transported: 2.05% higher
.CVA – positive effect on net profit
.CVA item this year is R$ 988 million gain – in 2016 it was negative R$ 1.455 billion
.ICMS tax regularization plan: R$ 535 million effect on Ebitda, R$ 368 million on Net profit.
.Default provision R$ 228 million, vs. R$ 381 million in 2016
.Fall in Selic interest rate and debt reduced cost of debt in the year by R$ 272 million

 

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Cemig D— Debt profile
Total net debt: R$ 4.9 billion
Leverage – %
Maturities timetable – Average tenor: 4.0 years
Main indexors
Cost of debt- %
4,01
8,06
8,04
8,95
6,90
5,87
14,31
15,87
15,95
10,97
9,57
8,93
2015
2016
mar/17
jun/17
Sep-17
2017
Real
Nominal
Net debt
Ebitda
Net Debt
Stockholders’
equity + Net debt
1%
56%
43%
RGR
CDI
IPCA
594
683
860
1.227
1.633
223
243
220
2018
2019
2020
2021
2022
2023
2024
After
2024
66,2
68,0
69,3
73,9
56,5
2016
mar/17
jun/17
set/17
2017
12,55
10,39
13,78
5,84

 

69


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Investment
2017
GENERATION
277
Investment program 22
Aportes
255
Renova Energia S.A.
18
Aliança Norte
52
SPE – Guanhães
97
SPE - Amazônia Energia Participações S.A. (Belo Monte)
85
Usina Hidrelétrica Itaocara S.A.
3
TRANSMISSION
33
Investment program
33
CEMIG D
1,013
Investment program
1,013
Total
1,545

 

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Cash flow
1.030
1.058
Cash flow
Operations
R$579
Financing
-R$158
Investment
-R$386
Securities
995
1.030
1.001
1.897
1.797
522
1.215
833
540
258
473
1.117
Cash start of 2017
Profit 2017
Expenses (revenues) not affecting cash
Interest paid on loans and financings
Others
Subscription of shares
Loans and debentures
Dividends + Interest on Equity
Cash investments
Investments Intangible +
other
Cash end of 2017
NET CHANGE IN CASH AND EQUIVALENTS– R$35
Total
2,088

 

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Highlights
Debt profile lengthened
Bank debt re-profiled; Eurobond issue
Execution of disinvestment program
So far: R$ 797 million
Capital increase – submitted for ratification to EGM, April 23
Total subscribed: R$ 1.325 billion
Cemig D Tariff review
Effective May 28, 2018
DECi and FECi
Both indices are within Aneel limit

 

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Debt profile lengthened:
Short term debt of R$ 3.4 billion re-profiled
Amortization in 36 monthly tranches
Cemig GT: R$ 741 million – from January 2019
Cemig D: R$ 2.700 billion – from July 2019
Successful Eurobond issue – for US$1 billion (R$ 3.2 billion)
maturity 7 years, coupon 9.25%
Secondary market yield trading at ~7.5%
Improved credit perception, raising S&P´s rating on the Company
National brBBB- scale for brBBB, with a positive outlook
1.607
690
863
848
326
-
-
-
247
247
247
-
3.245
-
500
1.000
1.500
2.000
2.500
3.000
2018
2019
2020
2021
2022
2023
2024
2025
MILLIONS
Debt profile of Cemig GT (Dec/17)
Dĺvida mantida
Dĺvida do Reperfilamento/Bond
594
501
495
498
209
223
242
220
182
365
729
1.425
-
-
-
-
200
400
600
800
1.000
1.200
1.400
1.600
2018
2019
2020
2021
2022
2023
2024
2025
MILLIONS
Debt profile of Cemig D (Dec/17)
Dĺvida mantida
Dĺvida do Reperfilamento
Prior debt, maintained
New Maturities
Prior debt, maintained
New Maturities

 

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Our disinvestment program — execution
Company%
Stake
Book value R$ mn
Status
Realized
9.86%
717¹
Block trade completed Sale of 34 million Units. Cemig interest reduced from 31.54% to 21.68% (Nov. 2017)
25%
80¹
Transfer, to Taesa, completed (Nov. 2017); R$24 mn received as dividends and R$56 mn paid by Taesa on closing.
Em andamento
100%
247²
Absorption of CemigTelecomby Cemigcompleted on March 31, 2018.
-
413³
Proposal by Cemigto Renovathat Renovashould sell its 51% interest in BrasilPCH to a third party or to Cemigitself, as a means of making possible settlement of amounts owed to CemigGT for advance payments under a power supply contract. Involves no disbursement by Cemig(Mar. 2018)
48.86%
1,3504
In negotiation with proposers
18%
1.117²
Resumption of negotiations with potential purchaser
Consórcios de Exploração de Gás
24.50%
16²
Tender will be published in April 2018
ON (common) shares -49% PN (preferred) shares -100%
1,180²
Structuring of the sale model
12%
1,443²
Transaction postponed to 2019
Cachoeirão, Pipoca, Paracambi
49%
125²
Transaction postponed to 2019
(1)Effective amount of transaction.
(2)Amounts reported in the Company’s accounting. Do not represent a guarantee or expectation of the real sale value of the assets.
(3)Amount of the advance against receivables, payable by Renova.
(4)Market value (São Paulo Stock Exchange – B3) on March 29, 2018: R$ 13.55/share.

 

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Ratification of capital increase
Stockholders subscribe R$ 1.3 billion
.Same rights as existing shares of same class
Shares
Subscription
Auction On 21st of March,2018
Total subscription
ON
53,720
13,130
66,850
PN
131,246
1,816
133,061
Total
184,966
14,945
199,911
Valores Subscritos
R$ 1,215,223
R$ 110,700
R$ 1,325,923
Proposal for ratification submitted to EGM (April 23)
.Cemig’s share capital
Type
Nº of shares
Subscription
Total shares
ON
420,764
66,850
487,614
PN
838,077
133,061
971,138
Total Ações
1,258,841
199,911
1,458,752

 

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Preliminary result for Cemig D Tariff Review
•Aneel released preliminary readjustment in the Technical Note 45/2018-SGT
•Main points of the Review for the 4th Tariff Cycle:
.Investment around R$ 5 billion
.Investment on ‘Special obligations´ around R$ 1.2 billion
.Opex: Cemig D scores above average in efficiency metrics
•The Aneel proposal – main figures
Cemig D Tariff review
2013
2018 Proposed
Remuneration Base – gross R$
15,724
21,480
Remuneration Base – net R$
5,849
9,277
Average depreciation rate
3.84 %
3.84%
Remuneration of the special obligations
-
142
WACC
7.51%
8.09%
CAIMI R$
147
336
QRR R$
590
824
Remuneration of capital R$
587
1,274

 

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Quality indicatiors – DEC and FEC
Quality of electricity supply, and as a result maintain the satisfaction of clients and consumers
DECi
9,30
8,60
2,22
2,16
11,62
11,32
2016
2017
DECi Scheduled
DECi Accidental
Target
FECi
4,56
4,52
0,75
0,77
8,12
7,76
2016
2017
FECi Scheduled
FECi Accidental
Target
5,31
5,29
11,52
10,76

 

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CEMIG
Investor relations
Tel: +55 (31) 3506-5024
ri@cemig.com.br
http://ri.cemig.com.br

 

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MATERIAL ANNOUNCEMENT DATED APRIL 2, 2018: ABSORPTION OF CEMIGTELECOM COMPLETED

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Absorption of CemigTelecom completed

Complementing the Material Announcements published on January 12 and February 28, 2018, and in accordance with CVM Instruction 358 of January 3, 2002, as amended, Cemig (Companhia Energética de Minas Gerais), a listed company with securities traded on the stock exchanges of São Paulo, New York and Madrid, hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (B3) and the market as follows:

The absorption of Cemig Telecomunicações S.A. (CemigTelecom) by Companhia Energética de Minas Gerais – Cemig was completed on March 31, 2018 (‘the Absorption Date’).

Since this is an absorption of a wholly-owned subsidiary, there was no capital increase nor issue of new shares by Cemig. The shares in the subsidiary were canceled, on the Absorption Date, and the necessary accounting records made.

Cemig reiterates its commitment to keep stockholders and the market timely informed in accordance with the applicable law and regulations.

Belo Horizonte, April 2, 2018

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Office

 

 

  

 

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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BYLAWS, UPDATED VERSION AS APPROVED BY THE EXTRAORDINARY

GENERAL MEETING OF STOCKHOLDERS HELD ON APRIL 23, 2018

 

 

 

 

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

Below are the original by-laws of Cemig approved by the General Meeting held for formation of the Company, on May 22, 1952, the minutes of which were filed with the Minas Gerais Commercial Board (JUCEMG) on May 27, 1952, under No. 57386, as amended by all the General Meetings of Stockholders held for the purpose of altering the Bylaws, up to and including the most recent Extraordinary General Meeting of Stockholders, on April 23, 2018.

B Y L A W S

CHAPTER I

Name, constitution, objects, head office and duration

 

Clause  1 Companhia Energética de Minas Gerais – Cemig, constituted on May 22, 1952 as a corporation with mixed private and public sector stockholdings, is governed by these Bylaws and by the applicable legislation, and its objects are:

 

  to operate in the various fields of energy, from whatever source, with a view to economic and commercial operation;

 

  to provide consultancy services within its field of operation to companies in and outside Brazil; and to carry out activities directly or indirectly related to its objects, including the development and commercial operation of telecommunication and information systems, to build, operate and commercially operate systems of generation, transmission, distribution and sale of electricity, and related services;

 

  to operate in the various fields of energy, from whatever source, with a view to economic and commercial operation; to provide consultancy services, within its field of operation, to companies in and outside Brazil; and

 

  to carry out activities directly or indirectly related to its objects, including development and commercial operation of telecommunication and information systems.

 

  §1 The activities specified in this Clause may be exercised directly by Cemig or, as intermediary, by companies constituted by it or in which it may hold a majority or minority stockholding interest, upon decision by the Board of Directors, under State Laws 828 of December 14, 1951, 8655 of September 18, 1984, 15290 of August 4, 2004 and 18695 of January 5, 2010.

 

  §2 No subsidiary of Cemig, wholly-owned or otherwise, may take any action which might affect the condition of the State of Minas Gerais as controlling stockholder of the Company, in the terms of the Constitution of the State of Minas Gerais and the legislation from time to time in force.

 

  §3 Since the Company’s securities are traded in the special listing segment referred to as Level 1 Corporate Governance of the BM&FBovespa Stock, Commodities and Futures Exchange, the Company, its stockholders, Managers and members of its Audit Board are subject to the provisions of the BM&FBovespa Level 1 Differentiated Corporate Governance Practice Regulations.

 

Clause  2 The Company shall have its head office and management in Belo Horizonte, capital city of the state of Minas Gerais, Brazil, and may open offices, representations or any other establishments in or outside Brazil, upon authorization by the Executive Board.

 

Clause  3 The Company shall have indeterminate duration.

 

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CHAPTER II

Capital and shares

 

Clause  4 The share capital of the Company is R$ 7,293,763,005.00, (seven billion two hundred ninety three million seven hundred sixty three thousand and five Reais), represented by:

 

  a) 487,614,213 (four hundred eighty seven million six hundred fourteen thousand two hundred thirteen) nominal common shares each with nominal value of R$ 5.00; and

 

  b) 971,138,388 (nine hundred seventy one million one hundred thirty eight thousand three hundred eighty eight) nominal preferred shares, each with nominal value of R$ 5.00

 

  §1 The right to vote shall be reserved exclusively for the common shares, and each common share shall have the right to one vote in decisions of the General Meeting of Stockholders.

 

Clause  5 The preferred shares shall have right of preference in the event of reimbursement of shares and shall have the right to a minimum annual dividend of the greater of the following amounts:

 

  a) 10% (ten percent) of their nominal value;

 

  b) 3% (three percent) of the value of the stockholders’ equity corresponding to the shares.

 

Clause  6 The common shares and the preferred shares shall have equal rights to distribution of bonuses and stock dividends.

 

  §1 Capitalization of monetary adjustment to the value of the registered capital shall require a decision by the General Meeting of Stockholders, but shall be mandatory when the limit specified in Article 297 of Law 6404 of December 15, 1976 is reached.

 

Clause  7 In business years in which the Company does not obtain sufficient profit to pay dividends to its stockholders, the State of Minas Gerais shall guarantee to the shares issued by the Company up to August 5, 2004 and held by individual persons a minimum dividend of 6% (six percent) per year, in accordance with Clause 9 of State Law 828 of December 14, 1951, and State Law 15290 of August 4, 2004.

 

Clause  8 The State of Minas Gerais shall at all times obligatorily be the owner of the majority of the shares carrying the right to vote, and all its capital shall be subscribed in accordance with the legislation from time to time in force. The capital subscribed by other parties, whether individuals or legal entities, shall be paid in as specified by the General Meeting of Stockholders which decides on the subject

 

  §1 The Executive Board may, in order to obey a decision by a General Meeting of Stockholders, suspend the services of transfer and registry of shares, subject to the legislation from time to time in force.

 

  §2 The stockholders shall have the right of preference in subscription of increases of capital and in the issue of the Company’s securities, in accordance with the applicable legislation. There shall, however, be no right of preference when the increase in the registered capital is paid with funds arising from tax incentive systems, subject to the terms of §1 of Article 172 of Law 6404 of December 15, 1976.

 

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CHAPTER III

The General Meeting of Stockholders

 

Clause  9 The General Meeting of Stockholders shall be held, ordinarily, within the first 4 (four) months of the year, for the purposes specified by law, and extraordinarily whenever necessary, and shall be called with minimum advance notice of 15 (fifteen) days, and the relevant provisions of law shall be obeyed in its convocation, opening and decisions.

 

  §1 Stockholders may be represented in General Meetings of Stockholders in the manner specified in Article 126 of Law 6404, as amended, by showing at the time of the meeting, or by previously depositing at the Company’s head office, proof of ownership of the shares, issued by the depositary financial institution, accompanied by the proxy’s identity document and a power of attorney with specific powers.

 

Clause  10 Ordinary or extraordinary General Meetings of Stockholders shall be chaired by a stockholder elected by the Meeting from among those present, who shall choose one or more secretaries.

CHAPTER IV

Management of the Company

 

Clause  11 The management of the Company shall be exercised by a Board of Directors and an Executive Board.

 

  §1 The structure and composition of the Board of Directors and the Executive Board of the Company shall be identical in the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A., with the following exceptions: only the wholly-owned subsidiary Cemig Distribuição S.A. shall have a Chief Distribution and Sales Officer; and only the wholly-owned subsidiary Cemig Geração e Transmissão S.A. shall have a Chief Generation and Transmission Officer.

 

  §2 Appointments to positions on the Boards of Directors of the Company’s subsidiary or affiliated companies, the filling of which is the competency of the Company, shall be made as determined by the Board of Directors.

 

  §3 Positions on the support committees to the Boards of Directors of the subsidiaries and affiliated companies, the filling of which is the competency of the Company, shall be filled by Members of the Boards of Directors of the respective subsidiaries or affiliated companies. The Chief Business Development Officer shall always be appointed as one of the members of such committees, and shall always act in shared activity with the Chief Finance and Investor Relations Officer or any other Chief Officer.

 

  §4 The Board of Directors and the Executive Board, in the management of the company and of the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A., and of the other subsidiaries or affiliates and of the consortia in which those subsidiaries have direct or indirect holdings, shall obey the provisions of the Company’s Long-Term Strategic Plan, especially the dividend policy therein contained, as approved by the Board of Directors.

 

  §5 The Long-Term Strategic Plan shall contain the long-term strategic planning and fundamentals, and the targets, objectives and results to be pursued and attained by the Company and its dividend policy, and shall obey the commitments and requirements specified in § 7 below.

 

  §6 The Long-Term Strategic Plan shall be revised annually by the Executive Board and approved by the Board of Directors and shall be reflected in all the plans, forecasts, activities, strategies, capital expenditure and expenses of the Company and its subsidiaries and affiliates, and the consortia in which it directly or indirectly participates, including the Company’s Multi-year Strategic Implementation Plan and the Annual Budget, which shall be approved by the Board of Directors.

 

  §7 In its management of the Company and in the exercise of the right to vote in the wholly-owned subsidiaries, subsidiaries, affiliated companies and consortia, the Board of Directors and the Executive Board shall faithfully obey and comply with the following targets:

 

  a) to keep the Company’s consolidated indebtedness equal to or less than 2 (two) times the Company’s Ebitda (Earnings before interest, taxes, depreciation and amortization);

 

  b) to keep the consolidated ratio of (Net debt) / (Net debt + Stockholders’ equity) to a maximum of 40% (forty per cent);

 

 

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  c) to limit the consolidated balance of funds recorded in Current assets, for the purposes of Clause 30 of these Bylaws or otherwise, to the equivalent of a maximum of 5% (five per cent) of the Company’s Ebitda (Earnings before interest, taxes, depreciation and amortization);

 

  d) to limit the consolidated amount of funds spent on capital investment and/or the acquisition of any assets, in each business year, to the equivalent of a maximum of 40% (forty per cent) of the Company’s Ebitda (Earnings before interest, taxes, depreciation and amortization);

 

  e) to invest only in distribution, generation and transmission projects that offer real minimum internal rates of return equal to or greater than those specified in the Long-term Strategic Plan, subject to the legal obligations;

 

  f) to limit expenses of the wholly-owned subsidiary Cemig Distribuição S.A. (Cemig D), and of any subsidiary which operates in distribution of electricity, to amounts not greater than the amounts recognized in the tariff adjustments and reviews;

 

  g) to maintain the revenues of the wholly-owned subsidiary Cemig Distribuição S.A. and of any subsidiary which operates in distribution at the amounts recognized in the tariff adjustments and reviews.

 

  §8 The targets specified in §7 above shall be calculated on the consolidated basis, taking into account the Company and its permanent investments in the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A., subsidiaries, affiliated companies and consortia.

 

  §9 The targets established in Sub-clauses ‘a’, ‘b’, ‘c’ and ‘d’ of §7 above may be exceeded for reasons related to temporarily prevailing conditions, upon justification by grounds and prior specific approval by the Board of Directors, up to the following limits:

 

  a) consolidated indebtedness not to exceed 2.5 (two and a half) times Ebitda (Earnings before interest, taxes, depreciation and amortization);

 

  b) the consolidated ratio of (Net debt) / (Net debt + Stockholders’ equity) not to exceed 50% (fifty per cent);

 

  c) the consolidated balance of funds recorded in Current assets, for the purposes of Clause 30 of these Bylaws or otherwise, not to exceed 10% (ten per cent) of Ebitda (Earnings before interest, taxes, depreciation and amortization); and

 

  d) the consolidated amount of funds spent on capital investment and/or the acquisition of any assets not to exceed the equivalent of 65% (sixty five per cent) of Ebitda (Earnings before interest, taxes, depreciation and amortization) in the business year 2006, and not to exceed the equivalent of 55% (fifty five per cent) of Ebitda in 2007.

Section I

The Board of Directors

 

Clause  12 The Company’s Board of Directors shall be made up of 15 (fifteen) members and an equal number of substitute members. One of the members shall be its Chairman and another its Vice-Chairman, and all shall be elected for the same concurrent period of office of 2 (two) years, may be dismissed at any time by the General Meeting of Stockholders, and may be reelected

 

  § 1 The substitute members shall substitute the respective members of the Board if the latter are absent or impeded from exercising their functions and, in the event of a vacancy, shall do so until the related replacement.

 

  §2 The global or individual amount of the remuneration of the Board of Directors shall be set by the General Meeting of Stockholders, in accordance with the legislation from time to time in force.

 

  §3 The minority stockholders of common shares, and the holders of the preferred shares, both have the right to elect one member of the Board of Directors, in separate votes, in accordance with the legislation.

 

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  §4 The Boards of Directors of the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A. shall, obligatorily, be made up of the members and substitute members elected to the Board of Directors of the Company.

 

  §5 The posts of Chairman of the Board of Directors and Chief Executive Officer of the Company may not be held by the same person.

 

  §6 The members of the Board of Directors shall not take office unless they have previously signed the Managers’ Consent Undertaking, as specified in the Level 1 Regulations of the BM&FBovespa, and are also compliant with the applicable legal requirements.

 

Clause  13 In the event of a vacancy on the Board of Directors, the first subsequent General Meeting of Stockholders shall elect a new member, for the period of office which was remaining to the previous member.

 

  §1 In this event, if the previous Board member was elected by a minority, the new member shall be elected by the same minority.

 

Clause  14 The Board of Directors shall meet ordinarily once a month, to analyze the results of the Company and its subsidiaries and affiliated companies, and to decide on other matters included on the agenda in accordance with its internal regulations. It shall also meet extraordinarily, on convocation by its Chairman, or by its Vice-Chairman, or by one-third of its members, or when requested by the Executive Board.

 

  §1 The meetings of the Board of Directors shall be called by its Chairman or its Vice-Chairman, by written advice sent with 5 (five) business days’ notice, containing the agenda to be discussed. Meetings of the Board of Directors called on the basis of urgency may be called by its Chairman without being subject to the above-mentioned period provided that the other members of the Board are unequivocally aware of the convocation.

 

  §2 Decisions of the Board of Directors shall be taken by the majority of the votes of the Board Members present, and in the event of a tie the Chairman shall have the casting vote.

 

Clause  15 The Chairman of the Board of Directors has the competency to grant leave to the Board’s members, and the other members of the Board have the competency to grant leave to the Chairman.

 

Clause  16 The Chairman and Vice-Chairman of the Board of Directors shall be chosen by the members of that Board, at the first meeting of the Board of Directors that takes place after the election of its members, and the Vice-Chairman shall take the place of the Chairman when the Chairman is absent or impeded from exercising his functions.

 

Clause  17 The Board of Directors shall have the following functions and duties:

 

  a) to set the general orientation of the Company’s business;

 

  b) to elect or dismiss the Executive Officers of the Company, subject to these Bylaws;

 

  c) to decide, prior to the Company entering into them, on contracts between the Company and any of its stockholders, or any company that controls any such stockholder, or is controlled, individually or jointly, by any such stockholder.

 

  d) to decide, upon a proposal put forward by the Executive Board, on disposal or placement of a charge upon any of the Company’s property, plant or equipment, and on the giving by the Company of any guarantee to any third party of which the individual value is greater than or equal to R$ 14,000,000.00 (fourteen million Reais);

 

  e) to decide, upon a proposal put forward by the Executive Board, on the Company’s investment projects, signing of contracts and other legal transactions, contracting of loans or financings, or the constitution of any obligations in the name of the Company which, individually or jointly, have value of R$ 14,000,000.00 (fourteen million Reais) or more, including injections of capital into wholly-owned or other subsidiaries or affiliated companies or the consortia in which the Company participates;

 

  f) to call the General Meeting of Stockholders;

 

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  g) to monitor and inspect the management by the Executive Board: the Board of Directors may, at any time, examine the books and papers of the Company, and request information on contracts entered into or in the process of being entered into, and on any other administrative facts or acts which it deems to be of interest to it;

 

  h) to give a prior opinion on the report of management and the accounts of the Executive Board of the Company;

 

  i) to choose and to dismiss the Company’s auditors, from among companies with international reputation authorized by the Securities Commission (CVM) to audit listed companies;

 

  j) to authorize, upon a proposal by the Executive Board, commencement of administrative tender proceedings, and proceedings for dispensation from or non-requirement of tender, and the corresponding contracts, for amounts of R$ 14,000,000.00 (fourteen million Reais) or more;

 

  k) to authorize, upon a proposal put forward by the Executive Board, filing of legal actions, or administrative proceedings, or entering into court or out-of-court settlements, for amounts of R$ 14,000,000.00 (fourteen million Reais) or more;

 

  l) to authorize the issue of securities, in the domestic or external markets, for the raising of funding, in the form of debentures, promissory notes, medium-term notes and other instruments;

 

  m) to approve the Company’s Long-Term Strategic Plan, the Multi-year Strategic Implementation Plan, and the Annual Budget, and alterations and revisions to them;

 

  n) annually, to set the directives and establish the limits, including financial limits, for spending on personnel, including concession of benefits and collective employment agreements, subject to the competency of the General Meeting of Stockholders and the Annual Budget approved;

 

  o) to authorize the exercise of the right of preference and rights under stockholders’ agreements or voting agreements in wholly-owned or other subsidiaries, affiliated companies and the consortia in which the Company participates, except in the cases of the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A., for which the General Meeting of Stockholders has the competency for decision on these matters;

 

  p) to approve the declarations of vote in the General Meetings of Stockholders, and the orientations for voting in the meetings of the boards of directors, of the subsidiaries, affiliated companies and the consortia in which the Company participates, when participation in the capital of other companies or consortia is involved, and the decisions must, in any event and not only in matters relating to participation in the capital of other companies or consortia, obey the provisions of these Bylaws, the Long-term Strategic Plan and the Multi-year Strategic Implementation Plan;

 

  q) to approve the constitution of, and participation in the equity of, any company, undertaking or consortium;

 

  r) to approve the institution of committees, in accordance with its Internal Regulations, and each respective committee shall, prior to the decision by the Board of Directors, give its opinion, which shall not be binding: (i) on the matters over which competence is attributed to it by the Internal Regulations; and (ii) in relation to any matter whenever requested by at least 2/3 (two thirds) of the members of the Board of Directors, or the whole number of Members of the Board immediately below the number resulting from that quotient in the event that it is not a whole number;

 

  s) to authorize provisions in the Company’s accounts, in amounts of R$ 14,000,000.00 (fourteen million Reais) or more, upon proposal by the Executive Board; and

 

  t) to manage and direct the activities of internal auditing.

 

  §1 The Board of Directors, by specific resolutions, may delegate to the Executive Board the power to authorize entering into contracts for sales of electricity or for provision of distribution or transmission services, in accordance with the legislation.

 

  §2 The financial limits for decision by the Board of Directors shall be adjusted, in January of each year, by the IGP-M (General Market Price) inflation index, published by the Getúlio Vargas Foundation.

 

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Section II

The Executive Board

 

Clause  18 The Executive Board shall be made up of the following 11 (eleven) Executive Officers, who may be stockholders, resident in Brazil, elected by the Board of Directors:

Chief Executive Officer;

Deputy Chief Executive Officer;

Chief Finance and Investor Relations Officer;

Chief Corporate Management Officer;

Chief Distribution and Sales Officer;

Chief Trading Officer;

Chief Business Development Officer;

Chief Generation and Transmission Officer;

Chief Officer for Human Relations and Resources:

Chief Counsel; and

Chief Institutional Relations and Communication Officer.

 

  §1 The period of office of the Executive Officers shall be 3 (three) years, and re-election is permitted. The Executive Officers shall remain in their posts until their duly elected successors take office. The members of the Board of Directors shall not take office unless they have previously signed the Managers’ Consent Undertaking, as specified in the Level 1 Regulations of the BM&FBovespa, and are also compliant with the applicable legal requirements.

 

  §2 The global or individual amount of the remuneration of the Executive Board, including benefits of any type, shall be set by the General Meeting of Stockholders, in accordance with the legislation from time to time in force.

 

  §3 The Executive Officers shall exercise their positions as full-time occupations in exclusive dedication to the service of the Company. They may at the same time exercise non-remunerated positions in the management of the Company’s wholly-owned or other subsidiaries or affiliated companies, at the option of the Board of Directors. They shall, however, obligatorily hold and exercise the corresponding positions in the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A.

 

  §4 Executive Officers who are not employees shall have the right to an annual period of not more than 30 (thirty) days’ remunerated leave. This leave may not be accumulated, and its remuneration shall be augmented by one-third of the monthly remuneration currently in effect. This leave shall be granted to them by the Chief Executive Officer; the leave of the Chief Executive Officer shall be granted by the Board of Directors.

 

Clause  19 In the event of absence, leave, resignation or vacancy of the post of the Chief Executive Officer, this post shall be exercised by the Deputy Chief Executive Officer, for whatever period the absence or leave may last, and, in the case of the post being vacant, or of prevention of its exercise, or of resignation, until the post is filled by the Board of Directors.

 

  §1 In the event of absence, leave, resignation or vacancy of the post of any of the other members of the Executive Board, the Executive Board may, by approval of a majority of its members, attribute the exercise of the respective functions to another Executive Officer, for as long as the period of absence or leave lasts, or, in the event of vacancy, impediment or resignation, until the post is filled by the Board of Directors.

 

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  §2 The Chief Executive Officer or member of the Executive Board elected in the way described in this clause shall hold the position for the time which remains of the period of office of the Executive Officer who is substituted.

 

Clause  20 The Executive Board shall meet, ordinarily, at least 2 (two) times per month and, extraordinarily, whenever called by the Chief Executive Officer or by 2 (two) Executive Officers with prior notice of at least 2 (two) days, but this notice is not required if all the Executive Officers are present. Unless stated to the contrary in these Bylaws, the decisions of the Executive Board shall be taken by a vote of the majority of its members, and in the event of a tie the Chief Executive Officer shall have a casting vote and the Board of Directors must be advised that the casting vote has been used.

 

Clause  21 The Executive Board is responsible for the current management of the Company’s business, subject to the obligation to obey the Long-Term Strategic Plan, the Multi-year Strategic Implementation Plan and the Annual Budget, prepared and approved in accordance with these Bylaws.

 

  §1 The Company’s Multi-year Strategic Implementation Plan shall reflect the Company’s Long-Term Strategic Plan and contain the plans and projections for a period of 5 (five) financial years, and must be updated at least once a year, and shall deal in detail with the following subjects, among others:

 

  a) the Company’s strategies and actions, including any project related to its objects;

 

  b) new investments and business opportunities, including those of the Company’s wholly-owned and other subsidiaries, and affiliated companies, and of the consortia in which it participates;

 

  c) the amounts to be invested or in any other way contributed from the Company’s own funds or funds of third parties; and

 

  d) the rates of return and profits to be obtained or generated by the Company.

 

  §2 The Annual Budget shall reflect the Company’s Multi-year Strategic Implementation Plan and, consequently, the Long-Term Strategic Plan, and must give details of the operational revenue and expenses, the costs and capital expenditure, the cash flow, the amount to be allocated to the payment of dividends, investments of cash from the Company’s own funds or from funds of third parties, and any other data that the Executive Board considers to be necessary.

 

  §3 The Company’s Multi-year Strategic Implementation Plan and the Annual Budget shall be prepared and updated annually, by the end of each business year, to be in effect in the following business year. They shall be prepared under the coordination of the Chief Executive Officer and the Chief Finance and Investor Relations Officer, respectively, and, in relation to the affiliates and subsidiaries, jointly with the Chief Business Development Officer, and at all times, in all aspects, with the participation of all the Chief Officer’s Departments. The Multi-Year Strategic Implementation Plan and the Annual Budget shall be submitted to examination by the Executive Board and, subsequently, to approval by the Board of Directors.

 

  §4 The following matters shall require a decision by the Executive Board:

 

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  a) approval of the plan of organization of the Company and issuance of the corresponding rules and any changes to them;

 

  b) examination, and submission to the Board of Directors, for approval, of the Company’s Multi-year Strategic Implementation Plan, and revisions of it, including timetables, amount and allocation of the capital expenditure specified in it;

 

  c) examination, and submission to the Board of Directors, for approval, of the Annual Budget, which must reflect the Multi-year Strategic Implementation Plan at the time in force, and revisions of it;

 

  d) decision on reallocation of investments or expenditure specified in the Annual Budget which amount, individually or in aggregate, in a single financial year, to less than R$ 14,000,000.00 (fourteen million Reais), with consequent adaptation of the targets approved, obeying the multi-year Strategic Implementation Plan and the Annual Budget;

 

  e) approval of disposal of, or placement of a charge upon, any of the Company’s property, plant or equipment, and/or giving of guarantees to third parties, in amounts less than R$ 14,000,000.00 (fourteen million Reais);

 

  f) authorization of the Company’s capital expenditure projects, signing of agreements and legal transactions in general, contracting of loans and financings and the creation of any obligation in the name of the Company, based on the Annual Budget approved, which individually or in aggregate have values less than R$ 14,000,000.00 (fourteen million Reais), including injection of capital into wholly-owned or other subsidiaries, affiliated companies, and the consortia in which the Company participates, subject to the provisions of Sub-clause ‘o’ of Sub-item IV of Clause 22;

 

  g) approval, upon proposal by the Chief Executive Officer, prepared jointly with the Chief Business Development Officer and the Chief Finance and Investor Relations Officer, of the statements of vote in the General Meetings of the wholly-owned and other subsidiaries, affiliated companies and in the consortia in which the Company participates, except in the case of the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A., for which the competency to decide on these matters shall be that of the General Meeting of Stockholders, and decisions must obey the provisions of these Bylaws, the decisions of the Board of Directors, the Long-term Strategic Plan and the Multi-year Strategic Implementation Plan;

 

  h) authorization to open administrative tender proceedings and proceedings for exemption from or non-requirement for tender, and the corresponding contracts, in amounts of R$ 2,800,000.00 (two million eight hundred thousand Reais) or more and less than R$ 14,000,000.00 (fourteen million Reais);

 

  i) authorization to file legal actions and administrative proceedings, and to enter into Court and out-of-court settlements, for amounts less than R$ 14,000,000.00 (fourteen million Reais);
  j) authorization of the provisions in the Company’s accounts of less than R$ 14,000,000 (fourteen million Reais), upon proposal by the Chief Finance and Investor Relations Officer;

 

  k) approval of the nominations of employees to hold management posts in the Company, upon proposal by the Chief Officer concerned, subject to the provisions of Sub-clause ‘h’ of Sub-item I of Clause 22;

 

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  l) authorization of expenditure on personnel expenses and collective employment agreements, subject to the competency of the General Meeting of Stockholders, the directives and limits approved by the Board of Directors and the Annual Budget approved; and

 

  m) examination of and decision on the contracting of external consultants, when requested by the office of any Chief Officer’s Department, subject to the provisions of Clause 17, Sub-clause “j’, and Clause 21, §4, Sub-clause ‘h’.

 

  §5 Actions necessary for the regular functioning of the Company, entering into contracts, and other legal transactions shall be carried out by the Chief Executive Officer, jointly with one Executive Officer, or by a person holding a valid power of attorney.

 

  §6 Powers of attorney must be granted by the Chief Executive Officer, jointly with one Executive Officer, except for the power described in Sub-clause ‘c’ of Sub-item I of Clause 22, for which only the signature of the Chief Executive Officer is required.

 

  §7 The financial limits applying to decisions by the Executive Board shall be adjusted, in January of each year, by the IGP-M (General Market Price) inflation index, published by the Getúlio Vargas Foundation.

 

Clause  22 Subject to the provisions of the previous clauses, the following are the functions and powers attributed to the members of the Executive Board:

 

  I To the Chief Executive Officer:

 

  a) to oversee and direct the work of the Company;

 

  b) to coordinate the preparation, consolidation and implementation of the Company’s Multi-year Strategic Implementation Plan: in the case of the affiliated companies and jointly-controlled subsidiaries, jointly with the Chief Business Development Officer; and in both cases with the participation of the other Chief Officers of the Company;

 

  c) to represent the Company in the Courts, on the plaintiff or defendant side;

 

  d) to sign, jointly with one Chief Officer, documents which bind the Company;

 

  e) to present the annual report on the Company’s business to the Board of Directors and to the Ordinary General Meeting of Stockholders;

 

  f) to hire and dismiss employees of the Company;

 

  g) to manage and direct the Corporate Executive Office, and activities of strategic planning;

 

  h) to propose to the Executive Board, for approval, jointly with the Chief Officer to whom the employee is linked, nominations for management positions in the Company; and

 

  i) to propose the appointments to positions of Management and positions on the Audit Boards of the wholly-owned subsidiaries, and of Fundação Forluminas de Seguridade Social – Forluz, after hearing the Chief Finance and Investor Relations Officer; and of the Company’s subsidiaries and affiliated companies and of the consortia in which the Company participates, after hearing the Chief Business Development Officer, except in the case of the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A., for which the provisions of §4 of Clause 12 and §3 of Clause 18 of these Bylaws prevail;

 

 

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  II To the Deputy Chief Executive Officer:

 

  a) to substitute the Chief Executive Officer if he is absent, on leave, temporarily impeded from exercising his functions, or has resigned or his post is vacant;

 

  b) to promote improvement of the Company’s social responsibility and sustainability policies;

 

  c) to set the policies and guidelines for the environment, technological development, alternative energy sources and technical standardization;

 

  d) to co-ordinate the Company’s strategy for operations activity in relation to social responsibility, the environment, technological processes and strategic management of technology;

 

  e) to coordinate the putting in place and maintenance of the Company’s quality control systems;

 

  f) to promote implementation of programs for the Company’s technological development; and

 

  g) to monitor the management of the plans for compliance with the guidelines for the environment, technology and improvement of quality.

 

  III To the Chief Finance and Investor Relations Officer:

 

  a) to make available the financial resources necessary for the operation and expansion of the Company, in accordance with an Annual Budget, conducting the processes of contracting of loans and financing, and the related services;

 

  b) to coordinate the preparation and consolidation of the Company’s Annual Budget: in the case of the affiliated companies and jointly-controlled subsidiaries, jointly with the Chief Business Development Officer; and in both cases with the participation of the other Chief Officers of the Company;

 

  c) to arrange for economic and financial valuation of the Company’s capital expenditure investment projects, except those that are the responsibility of the Chief Business Development Officer;

 

  d) to accompany the economic and financial performance of investment projects, according to targets and results approved by the Executive Board and the Board of Directors;

 

  e) to carry out the accounting of, monitor and control the economic-financial transactions of the Company, including those of its wholly-owned and other subsidiaries;

 

  f) to determine the cost of the service and to establish a policy on insurance, as set out in the Company’s Multi-year Strategic Implementation Plan;

 

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  g) to prepare the short-, medium- and long-term financial programming in detail, as specified in the Company’s Multi-year Strategic Implementation Plan and Annual Budget;

 

  h) to control and supervise the Company’s share capital, and to propose to the Executive Board, for decision or for submission to the Board of Directors or to the General Meeting of Stockholders, subject to the provisions of these Bylaws, the governance policy in relation to the market, and the dividend policy, of the Company and its subsidiaries, and to suggest the same for the affiliated companies;

 

  i) to coordinate the preparation and negotiation of the tariffs for supply and distribution of electricity, and the revenues from transmission, with the National Electricity Agency, Aneel;

 

  j) to be responsible for the provision of information to the investing public, to the Securities Commission (CVM) and to the Brazilian and international stock exchanges and over-the-counter markets, and the corresponding regulation and inspection entities, and to keep the Company’s registrations with these institutions updated;

 

  k) to represent the Company to the CVM, the stock exchanges and other entities of the capital markets;

 

  l) to arrange for the financial management of the Company and of its wholly-owned and other subsidiaries, and affiliated companies, and of the consortia in which the company participates, within the criteria of good corporate governance and making continual efforts for compliance with their business plans, subject to the provisions of these Bylaws;

 

  m) to monitor the economic and financial results of the Company’s holdings in the subsidiaries and affiliated companies;

 

  n) to propose to the Executive Board, for approval or submission to the Board of Directors or to the General Meeting of Stockholders, depending on the competency specified in these Bylaws:

 

  (i) injections of capital into the wholly-owned subsidiaries; and

 

  (ii) jointly with the Chief Business Development Officer, injections of capital, exercise of the right of preference, and signing of voting agreements, in the subsidiaries, in the affiliated companies and in the consortia in which the Company participates;

 

  o) to take part in all negotiations that involve constitution or alteration of corporate documents of any of the companies in which the Company has any equity holding;

 

  p) to coordinate, jointly with the Chief Business Development Officer, the processes of disposal of stockholding interests held by the Company, subject to the provisions of the legislation and regulations from time to time in force; and

 

  q) to monitor and evaluate the financial performance of the subsidiaries and affiliates, and of the consortia in which the company participates, and to disseminate it within the Executive Board.

 

 

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  IV To the Chief Corporate Management Officer:

 

  a) to decide, conduct and supervise the Company’s telecommunications and information technology policy;

 

  b) to plan, put in place and maintain the Company’s telecommunications and information technology systems;

 

  c) to decide policies and rules on support services such as transport, administrative communication, security guarding, and provision of adequate quality in the workplace for the Company’s personnel;

 

  d) to provide the Company with infrastructure and administrative support resources and services;

 

  e) to coordinate the policies, processes and means of property security and security guarding approved by the Company;

 

  f) to administer the process of acquisition and disposal of materials, equipment and real estate property, contracting of works and services and construction and inspection of works on buildings;

 

  g) to effect quality control of the material acquired and monitoring of the qualification of contracted service providers;

 

  h) to administer and control the stock of material, and to arrange for separation and recovery of used material, and sales of excess and unusable material, and scrap;

 

  i) to arrange for and implement programs to increase, develop and continually improve suppliers of materials and services of interest to the company, alone or in cooperation with other Chief Officers or development agencies or industry associations, in the ambit of the State of Minas Gerais;

 

  j) to authorize opening of administrative tender proceedings and proceedings for exemption from or non-requirement for tender, and the corresponding contracts, in amounts up to R$ 2,800,000.00 (two million eight hundred thousand Reais);

 

  V To the Chief Distribution and Sales Officer:

 

  a) to make continuous efforts on behalf of the quality of supply of energy to consumers that are directly linked to the Company’s distribution system;

 

  b) to prepare the planning of the Company’s distribution system;

 

  c) to manage the implementation of the distribution facilities, including preparation and execution of the plan, construction and assembly;

 

  d) to operate and maintain the electricity distribution system and the associated systems of supervision and remote control;

 

  e) to manage the Company’s work safety policy within the scope of his/her activities;

 

  f) to propose and implement the policies for service to consumers served by this Chief Officer’s Department;

 

  g) to develop programs and actions with captive consumers that have demand lower than 500kW, with a view to the most efficient use of electricity;

 

  h) to establish commercial relationships with and coordinate the sale of electricity and services to captive consumers with demand lower than 500kW;

 

  i) to carry out environmental programs and actions within the scope of this Chief Officer’s Department;

 

  j) to represent the Company in the Brazilian Electricity Distributors’ Association (Abradee) and with other entities of the distribution sector;

 

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  k) to propose policies and guidelines to ensure the physical security of the distribution facilities, and to manage the asset security of these facilities;

 

  l) to seek continuous improvement of the processes of operation and maintenance, through the use of new technologies and methods, aiming to improve the quality and reduce the cost of those activities; and

 

  m) to monitor and evaluate the technical and operational performance of the Company’s wholly-owned subsidiaries, and disseminate this information within the Executive Board.

 

  VI To the Chief Generation and Transmission Officer:

 

  a) to make continuous efforts on behalf of the quality of supply of energy to consumers that are directly linked to the Company’s transmission system;

 

  b) to prepare the planning of generation and transmission;

 

  d) to operate and maintain the generation and transmission systems and the associated systems of supervision and remote control;

 

  d) to carry out environmental programs and actions within the scope of this Chief Officer’s Department;

 

  e) to develop and manage hydro-meteorological activities of interest to the Company;

 

  f) to manage the operations arising