The amounts of PIS/Pasep and Cofins
taxes to be refunded to customers refer to the credits to be received by the Cemig D following the inclusion of the ICMS value added tax
within the taxable amount for calculation of those taxes, in amount of R$3,160,947, as described in Note 8 (a). Until September 2021,
a total of R$ 1,142,320, has been reimbursed to clients.
The Cemig D has a liability corresponding
to the credits to be refunded to its customers, which comprises the period of the 10 years, from June 2009 to May 2019, net of PIS/Pasep
and Cofins taxes over monetary updating.
The Company started the reimbursement
of the amounts to its customers, as follows:
Although the definitive criteria
for the refunding of PIS/Pasep and Cofins taxes to customers are pending, awaiting conclusion of discussions with Aneel and the mechanisms
and criteria for reimbursement, when actual offsetting of the tax credits takes place.
Additionally, as per Note 8 (a),
the subsidiary Gasmig recognized the amounts of the PIS/Pasep and Cofins taxes credits over ICMS for the periods covered by the legal
action that argues this matter, in the amount of R$221,542. In the absence of a court judgment against which there is no further appeal,
the subsidiary recorded a liability in the amount of R$191,624, corresponding to the amounts to be refunded to its customers, based on
10 years period, from the date of the end of the quarter. The 10 years period refers to the maximum amount possibly subject to restitution,
to be validated after complementary analyses of the court decisions that will be issued, and the legislation in effect when the case
was ruled against which there is no further appeal.
The debentures issued by the subsidiaries
are non-convertible, there are no agreements for renegotiation, nor debentures held in treasury.
There are early maturity clauses
for cross-default in the event of non-payment by Cemig GT or by the Company, of any pecuniary obligation with individual or aggregate
value greater than R$50 million (“cross default”).
On July 19, 2021 Cemig GT launched
a Cash Tender Offer to acquire its debt securities issued in the external market, maturing in 2024, with 9.25% annual coupon, up to a
principal amount of US$500 million. The price to be paid in the Cash Tender was 116.25%, or US$1,162.50 per US$1,000 of the principal
amount.
On July 30, 2021, offers had been
received from holders of Notes representing a total of US$774 million. Since the aggregate principal of all the Notes validly offered,
until the Early Offer Date, exceeded the maximum amount, Cemig accepted the Notes offered on a pro rata basis until the ceiling amount
of U$500 million.
In addition to the total acquisition
amount, holders of validly offered notes that were accepted for purchase also received accumulated interest not yet paid since and including
the last interest payment date, until but not including the Initial Settlement Date (August 5, 2021).
The financial settlement and cancellation
of notes occurred on August 05, 2021 and the offers closing date is scheduled for August 13, 2021. The effects related to the repurchase
of bonds are described below:
(*) Difference between the dollar
PTAX on the purchase date (R$5.137) and the financial instrument – NDF, protecting against foreign exchange, with the dollar purchase
cap of R$5.0984.
The composition of loans, financing
and debentures, by currency and index, with the respective amortization, is as follows:
The principal currencies and
index used for monetary updating of loans and financings had the following variations:
The subsidiaries Cemig D and
Gasmig considered the costs of loans and financing linked to construction in progress as construction costs of intangible and concession
contract assets, as follows:
The amounts of the capitalized borrowing
costs have been excluded from the statement of cash flows, in the additions to cash flow of investment activities, as they do not represent
an outflow of cash for acquisition of the related asset.
The Company and its subsidiaries
have contracts with financial covenants as follows:
On September 30, 2021, the Company
and its subsidiaries were compliant with the covenants.
The information on the derivative
financial instruments (swaps) contracted to hedge the debt servicing of the Eurobonds (principal, in foreign currency, plus interest),
and the Company’s exposure to interest rate risks, are disclosed in Note 30.
Amounts recorded as current liabilities
refer to contributions to be made by Cemig and its subsidiaries in the next 12 months for the amortization of the actuarial liabilities.
The amounts reported as ‘Expense
recognized in the Statement of income’ refer to the costs of post-employment obligations, totaling R$324,905 (R$334,238 on September
30, 2020), plus the finance expenses and monetary updating on the debt with Forluz, in the amounts of R$50,272 (R$33,978 on September
30, 2020).
On September 30, 2021, the Company
and its subsidiaries have recognized an obligation for past actuarial deficits relating to the pension fund in the amount of R$406,173
on September 30, 2021 (R$472,559 on December 31, 2020). This amount has been recognized as an obligation payable by Cemig and its subsidiaries,
and will be amortized until June of 2024, through monthly installments calculated by the system of constant installments (known as the
‘Price’ table), and adjusted by the IPCA (Expanded National Customer Price) inflation index (published by the Brazilian Geography
and Statistics Institute – IBGE) plus 6% per year. The Company is required to pay this debt even if Forluz has a surplus, thus,
the Company maintain recorded the debt in full, and record the effects of monetary updating and interest in finance income (expenses)
in the statement of income.
Forluz and the sponsors Cemig, Cemig
GT and Cemig D have signed a Debt Assumption Instrument to cover the deficit of Plan A for the years of 2015, 2016 e 2017. On September
30, 2021 the total amount payable by Cemig as a result of the Plan A deficit is R$538,460 (R$540,142 on December, 31, 2020, referring
to the Plan A deficits of 2015, 2016 and 2017). The monthly amortizations, calculated by the constant installments system (Price Table),
will be paid until 2031 for the 2015 and 2016 deficits, in the amount of R$356,670, and up to 2033 for the 2017 deficit, in the amount
of R$181,790. Remuneratory interest applicable to the outstanding balance is 6% p.a., plus the effect of the IPCA. If the plan reaches
actuarial surplus before the full period of amortization of the debt, also Company will not be required to pay the remaining installments
and the contract will be extinguished.
In December, 2020, in accordance
with the applicable legislation, Forluz proposed to Cemig a new Debt Assumption Instrument to be signed, if approved, by Forluz, Cemig,
Cemig GT and Cemig D, in accordance with the plan to cover the deficit of Plan A, which occurred in 2019. The total amount to be paid
by the Company to cover the deficit, without considering parity of contribution, is R$160,425, through 166 monthly installments. The remuneration
interest rate over the outstanding balance is 6% per year, plus the effect of the IPCA. If the plan reaches actuarial balance before the
full period of amortization of the debt, the Company will not be required to pay the remaining installments and the contract will be extinguished.
The Company acknowledged the legal
obligation in relation to the deficit of Plan A corresponding to 50% of the minimum amount, and, thus, obeying the contribution parity
rule, made payments of R$4,465 in consignment, corresponding from April to September 2021, to remain at the disposal of Forluz to be redeemed
at an account with an official bank. Due to the refusal by Forluz to receive this amount, on May 26, 2021 the Company proposed an Action
of Consignment in Payment, which is in its initial pleading phase.
Due to the Debt Assumption Instrument
not being signed for coverage of the minimum amount proposed in the plan for solution of the Plan A actuarial deficit for 2019, and the
refusal of the payments in consignment made by the Company, on April 27, 2021 Forluz filed legal action against sponsors Cemig, Cemig
GT and Cemig D, applying for approval and confirmation of the request to ensure compliance with the contracting of the debt for coverage
of the deficit of Plan A, in the amount of R$160,425, for the 2019 business year. The chances of loss have been assessed as ‘possible’,
due to the action still being at the instruction phase, and there being no decisions on the merit. Also, the application by Forluz for
emergency writ was refused.
24.
PROVISIONS
Company and its subsidiaries
are involved in certain legal and administrative proceedings at various courts and government bodies, arising in the normal course of
business, regarding employment-law, civil, tax, environmental and regulatory matters, and other issues.
Company and its subsidiaries
recorded provisions for contingencies in relation to the legal actions in which, based on the assessment of the Company’s management
and its legal advisors, the chances of loss are assessed as ‘probable’ (i.e. an outflow of funds to settle the obligation
will be necessary), as follows:
The Company and its subsidiaries’
management, in view of the extended period and the Brazilian judiciary, tax and regulatory systems, believes that it is not practical
to provide information that would be useful to the users of this
interim financial information in relation to the the timing of any cash outflows, or any possibility of reimbursements.
The Company and its subsidiaries
believe that any disbursements in excess of the amounts provisioned, when the respective claims are completed, will not significantly
affect the Company and its subsidiaries’ result of operations or financial position.
The main provisions and contingent
liabilities are provided below, with the best estimation of expected future disbursements for these contingencies:
Company and its subsidiaries are
involved in various legal claims filed by its employees and by employees of service providing companies. Most of these claims relate to
overtime and additional pay, severance payments, various benefits, salary adjustments and the effects of such items on a supplementary
retirement plan. In addition to these actions, there are others relating, complementary additions to or re-calculation of retirement pension
payments by Forluz, and salary adjustments.
The aggregate amount of the contingency
is approximately R$1,516,377 (R$1,386,147 at December 31, 2020), of which R$417,520 (R$427,515 at December 31, 2020) has been recorded
– the amount estimated as probably necessary for settlement of these disputes.
On December 2020 the Federal
Supreme Court gave partial judgment in favor of two actions for declaration of constitutionality, and ruled that monetary adjustment applied
to employment-law liabilities should be by the IPCA-E index until the stage of service of notice in a legal action, and thereafter by
application of the Selic rate, and the Reference Rate (TR) is not applicable to any employment-law obligations as well. The effects of
this decision were modulated as follows:
Company and its subsidiaries
are involved in various civil actions relating to indemnity for moral injury and for material damages, arising, principally, from allegations
of irregularity in measurement of consumption, and claims of undue charging, in the normal course of business, totaling R$168,852 (R$142,481
at December 31, 2020), of which R$24,203 (R$22,089 at December 31, 2020) has been recorded – this being the probable estimate for
funds needed to settle these disputes.
Company and its subsidiaries
are involved in various civil actions claiming indemnity for moral and material damages, among others, arising from incidents occurred
in the normal course of business, in the amount of R$434,284 (R$359,122 at December 31, 2020), of which R$38,864 (R$32,495 at December
31, 2020) has been recorded – the amount estimated as probably necessary for settlement of these disputes.
Company and its subsidiaries
are involved in numerous administrative and judicial claims actions relating to taxes, including, among other matters, subjects relating
to the Urban Property Tax (Imposto sobre a Propriedade Territorial Urbana, or IPTU); the Rural Property Tax (ITR); the Tax on Donations
and Legacies (ITCD); the Social Integration Program (Programa de Integração Social, or PIS); the Contribution to
Finance Social Security (Contribuição para o Financiamento da Seguridade Social, or Cofins); Corporate Income tax
(Imposto de Renda Pessoa Jurídica, or IRPJ); the Social Contribution (Contribuição Social sobre o Lucro
Líquido, or CSLL); and motions to tax enforcement. The aggregate amount of this contingency is approximately R$206,151 (R$166,348
at December 31, 2020), of which R$18,002 (R$13,505 at December 31, 2020) has been recorded – the amount estimated as probably necessary
for settlement of these disputes.
In addition to the issues above the
Company and its subsidiaries are involved in various proceedings on the applicability of the IPTU Urban Land Tax to real estate properties
that are in use for providing public services. The aggregate amount of the contingency is approximately R$85,092 (R$84,525 at December
31, 2020). Of this total, R$3,357 has been recognized (R$3,844 at December 31, 2020) – this being the amount estimated as probably
necessary for settlement of these disputes. The company has been successful in its efforts to have its IPTU tax liability suspended, winning
judgments in favor in some cases – this being the principal factor in the reduction of the total value of the contingency.
The amount of the contingencies is
approximately R$1,413,326 (R$1,520,054 on December 31, 2020), of which R$1,254,610 has been provisioned from January to September 30,
2021 (R$1,275,808 on December 31, 2020), this being the estimate of the probable amount of funds to settle these disputes. The significant
change in the amount of contingencies is due, among other factors, to a judgment given in favor of the Company in one of the administrative
cases relating to social security contributions, for the period January to October 2010, which resulted in cancellations of tax debits,
according to calculations made by the tax authority (Receita Federal).
The federal tax authority did not
ratify the Company’s declared offsetting, in Corporate income tax returns, of carry-forwards and undue or excess payment of federal
taxes – IRPJ, CSLL, PIS/Pasep and Cofins – identified by official tax deposit receipts (‘DARFs’ and ‘DCTFs’).
The Company and its subsidiaries is contesting the non-homologation of the amounts offset. The amount of the contingency is R$197,658
(R$202,975 at December 31, 2020), of which R$1,143 (R$1,130 at December 31, 2020), has been provisioned, since the relevant requirements
of the National Tax Code (CTN) have been complied with.
The Company and its subsidiaries
are involved in numerous administrative and judicial proceedings, challenging, principally: (i) tariff charges in invoices for use of
the distribution system by a self-producer; (ii) alleged violation of targets for continuity indicators in retail supply of energy; and
(iii) the tariff increase made during the federal government’s economic stabilization plan referred to as the ‘Cruzado Plan’,
in 1986. The aggregate amount of the contingency is approximately R$368,307 (R$345,475 at December 31, 2020), of which R$51,017 (R$51,660
at December 31, 2020) has been recorded as provision – the amount estimated as probably necessary for settlement of these disputes.
The Company and its subsidiaries
are involved in disputes alleging losses suffered as a result of supposed breaches of contract at the time of provision of services of
cleaning of power line pathways and firebreaks. The amount recorded is R$52,543 (R$46,312 at December 31, 2020), this being estimated
as the likely amount of funds necessary to settle this dispute.
The Company is a party in disputes
alleging losses suffered by third parties as a result of supposed breach of contract at the time of implementation of part of the rural
electrification program known as the ‘Luz Para Todos’. The estimated amount of the contingency is approximately R$400,760
(R$356,236 on December 31, 2020). Of this total, R$773 (R$687 on December 31, 2020) has been provisioned the amount estimated as probably
necessary for settlement of these disputes.
The Company and its subsidiaries
are involved in numerous administrative and judicial proceedings in relation to taxes. Below are details of the main claims:
In 2006 the Company and its
subsidiaries paid an indemnity to its employees, totaling R$177,686, in exchange for rights to future payments (referred to as the Anuênio)
for time of service, which would otherwise be incorporated, in the future, into salaries. The Company and its subsidiaries did not pay
income tax and Social Security contributions on this amount because it considered that those obligations are not applicable to amounts
paid as an indemnity. However, to avoid the risk of a future fine, the Company obtained an injection, which permitted to make an escrow
deposit of R$121,834, which updated now represents the amount of R$288,346
(R$285,836 at December 31, 2020). The updated amount of the contingency is R$298,794 (R$294,613 at December 31, 2020) and, based on the
arguments above, management has classified the chance of loss as ‘possible’.
The federal tax authority
issued a tax assessment against Cemig as a jointly responsible party with its jointly-controlled entity Parati S.A. Participações
em Ativos de Energia Elétrica (Parati), relating to withholding income tax (Imposto de Renda Retido na Fonte, or IRRF) allegedly
applicable to returns paid by reason of a capital gain in a shareholding transaction relating to the purchase by Parati, and sale, by
Enlighted, at July 7, 2011, of 100.00% of the equity interests in Luce LLC (a company with head office in Delaware, USA), holder of 75.00%
of the shares in the Luce Brasil equity investment fund (FIP Luce), which was indirect holder, through Luce Empreendimentos e Participações
S.A., of approximately 13.03% of the total and voting shares of Light S.A. (Light). The amount of the contingency is approximately R$237,295
(R$234,113 at December 31, 2020), and the loss has been assessed as ‘possible’.
The federal tax authority
issued a tax assessment against the Company and its subsidiaries for the years of 2012 and 2013, alleging undue non-addition, or deduction,
of amounts relating to the following items in calculating the social contribution tax on net income: (i) taxes with liability suspended;
(ii) donations and sponsorship (Law 8,313/91); and (iii) fines for various alleged infringements. The amount of this contingency is R$444,306
(R$425,023 at December 31, 2020). The Company has classified the chances of loss as ‘possible’, in accordance with the analysis
of the case law on the subject.
From December 2019 to March 2021,
the Tax Authority of Minas Gerais State issued infraction notices against the subsidiary Gasmig, in the total amount of R$96,790, relating
to reduction of the calculation base of ICMS tax in the sale of natural gas to its customers over the period from December 2014 to December 2016,
alleging a divergence between the form of calculation used by Gasmig and the opinion of that tax authority. The claims comprises: principal
of R$30,639, penalty payments of R$49,364 and interest of R$16,787.
Considering that the State of Minas
Gerais, over a period of more than 25 years, has never made any allegations against the methodology of calculation by the Company, Management
and Company’s legal advisors, believe that there is a defense under Article 100, III of the National Tax Code, which removes claims
for penalties and interest; and that the contingency for loss related to these amounts is ‘remote’. In relation to the argument
on the difference between the amount of ICMS tax calculated by Gasmig and the new interpretation by the state tax authority, the probability
of loss was considered ‘possible’. On September 30, 2021 the amount of the contingency for the period relating to the rules
on expiry by limitation of time is R$130,820 (R$107,000 on December 31, 2020). In July 2021, Gasmig filed an lawsuit for annulment of
a tax debit, against the State of Minas Gerais, and this proceeding suspended the tax claim referred to above.
The Company filed an application
for mandamus, with interim relief, requesting the right to deduct, from the basis of calculation of corporate income tax and Social Contribution
tax, the expense relating to payment of Interest on Equity in 4Q20 calculated on the basis of prior periods (the first and second quarters
of 2020), and for cancellation of the demand for new supposed credits of corporate income tax and the Social Contribution relating to
the amount that was not paid as a result of the deduction of the said financial expense, with application of fines. The amount of the
contingencies in this case is approximately R$59,199 on September 30, 2021, and the chances of loss were assessed as ‘possible’,
based on analysis of current judgments by the Brazilian courts on the theme.
The Brazilian tax authority (Receita
Federal do Brasil) issued two infringement notices relating to calculation of the PIS/Pasep and Cofins taxes, from August 2016 to December
2017, alleging insufficiency of payment of these contributions due to supposed undue credits deduction of the expenses on the Proinfa
charge, and absence of reversal of the credits related to non-technical losses. The Company is contesting these infringement notices.
On September 30, 2021 the amount of the contingency is R$ 159,376 and the Company has classified the chances of loss as ‘possible’,
due to the scarcity of case law on the subject.
Cemig and Cemig D are defendants
in several public civil claims (class actions) requesting nullity of the clause in the Electricity Supply Contracts for public illumination
signed between the Company and the various municipalities of its concession area, and restitution by the Company of the difference representing
the amounts charged in the last 20 years, in the event that the courts recognize that these
amounts were unduly charged. The actions are grounded on a supposed error by Cemig in the estimation of the period of time that was used
in calculation of the consumption of energy for public illumination, funded by the Public Lighting Contribution (Contribuição
para Iluminação Pública, or CIP).
The Company believes it has
arguments of merit for defense in these claims, since the charge at present made is grounded on Aneel Normative Resolution 456/2000. As
a result it has not constituted a provision for this action, the amount of which is estimated at R$1,215,519 (R$1,072,398 at December
31, 2020). The Company has assessed the chances of loss in this action as ‘possible’, due to the Customer Defense Code (Código
de Defesa do Consumidor, or CDC) not being applicable, because the matter is governed by the specific regulation of the energy sector,
and because Cemig complied with Aneel Resolutions 414 and 456, which deal with the subject.
In a claim dating from August 2002,
AES Sul Distribuidora challenged in the court the criteria for accounting of energy sale transactions in the wholesale energy market (Mercado
Atacadista de Energia, or MAE) (predecessor of the present Power Trading Chamber – Câmara de Comercialização
de Energia Elétrica, or CCEE), during the period of rationing. It obtained a favorable interim judgment on February 2006, which
ordered the grantor (Aneel), working with the CCEE, to comply with the claim by AES Sul and recalculate the settlement of the transactions
during the rationing period, not considering the grantor (Aneel) Dispatch 288 of 2002.
This should take effect in the CCEE
as from November 2008, resulting in an additional disbursement for Cemig GT, related to the expense on purchase of energy in the spot
market on the CCEE, in the approximate amount of R$416,969 (R$376,228 at December 31, 2020). On November 9, 2008 Cemig GT obtained an
interim decision in the Regional Federal Appeal Court (Tribunal Regional Federal, or TRF) suspending the obligatory nature of the
requirement to pay into court the amount that would have been owed under the Special Financial Settlement made by the CCEE. Cemig GT has
classified the chance of loss as ‘possible’, since this action deals with the General Agreement for the Electricity Sector,
in which the Company has the full documentation to support its arguments.
The Federal Public Attorneys’
Office filed a class action against the Company and the grantor (Aneel), to avoid exclusion of customers from classification in the Low-income
residential tariff sub-category, requesting an order for Cemig D to pay twice the amount paid in excess by customers. A decision was
given in favor of the plaintiffs, but the Company and the grantor (Aneel) have filed an interlocutory appeal and await judgment. The amount
of the contingency is approximately R$394,812 (R$356,907 at December 31, 2020). Cemig D has classified the chances of loss as ‘possible’
due to other favorable decisions on this matter.
The Public Attorneys’ Office
of Minas Gerais State has filed class actions requiring the formation of a Permanent Preservation Area (APP) around the reservoir of the
Capim Branco hydroelectric plant, suspension of the effects of the environmental licenses, and recovery of alleged environmental
damage. Cemig GT, based on the opinion of its legal advisers in relation to the changes that have been made in the new Forest Code and
in the case law on this subject, Cemig GT has classified the chance of loss in this dispute as ‘possible’. The estimated value
of the contingency is R$117,793 (R$105,552 at December 31, 2020).
The Company is involved in an administrative
proceeding at the Audit Court of the State of Minas Gerais which challenges: (i) a difference of amounts relating to the discount offered
by Cemig for early repayment of the credit owed to Cemig by the State under the Receivables Assignment Contract in relation to the CRC
Account (Conta de Resultados a Compensar, or Earnings Compensation Account) – this payment was completed in the first quarter
of 2013; and also (ii) possible undue financial burden on the State after the signature of the Amendments that aimed to re-establish the
economic and financial balance of the Contract. The amount of the contingency is approximately R$481,593 (R$448,066 at December 31, 2020),
and, based on the Opinion of the Public Attorneys’ Office of the Audit Board of the State of Minas Gerais (Tribunal de Contas),
the Company believes that it has met the legal requirements. Thus, it has assessed the chances of loss as ‘possible’, since
it believes that the adjustment was made in faithful obedience to the legislation applicable to the case.
Cemig D is party in other disputes
arising from alleged non-compliance with contracts in the normal course of business, for an estimated total of R$188,872 (R$167,168 at
December 31, 2020). Cemig D has classified the chance of loss as ‘possible’, after analysis of the case law on this subject.
A receivables investment fund filed
an application for Override of Legal Identity (Incidente de Desconsideração da Personalidade Jurídica – IDPJ)
in relation to certain companies of the Renova group, aiming to include some shareholders of Renova, including the Company and its subsidiary
Cemig GT, as defendants jointly and severally liable. The amount involved in this dispute is estimated at R$87,345 at September 30, 2021.
The chances of loss have been assessed as ‘possible’.
25.
EQUITY AND REMUNERATION TO SHAREHOLDERS
On September 30, 2021 and December
31, 2020, the Company’s issued and share capital is R$8,466,810, represented by 566,036,634 common shares and 1,127,325,434 preferred
shares, both of them with nominal value of R$5.00 (five Reais).
The Annual General Meeting held on
April, 30, 2021 approved Management's proposal for allocation of the profits for 2020, published in the 2020 financial statements, and
a capital increase from R$7,593,763 to R$8,466,810 as per Article 199 of the Brazilian Corporate Law (Law 6,404/76), since the profit
reserves at December 31, 2020 (excluding tax-incentive amounts and Unrealized profit reserve) exceeded the share capital, by R$1,529,371.
The capital increase was made through
capitalization of the balance of R$873,047 in the Retained Earnings reserve, by issuance of a share bonus of 174,609,467 new shares (with
par value R$5.00, as per the by-laws), of which 58,366,345 are common shares and 116,243,122 are preferred shares.
Due to the capital increase, on April
30, 2021, with issuance of 174,609,467 new shares, without a corresponding entry of funds into the Company, the basic and diluted profit
per share are presented, retrospectively, considering the new number of Company’s shares.
The number of shares included in
the calculation of basic and diluted earnings per share, is described in the table below:
The purchase and sale options of
investments in SAAG, issued by Cemig GT, could potentially dilute basic profit (loss) per share in the future; however, they have not
caused dilution of earnings per share in the periods presented here.
Revenues are measured at the fair
value of the consideration received or to be received and are recognized on a monthly basis as and when: (i) Rights and obligations of
the contract with the customer are identified; (ii) the performance obligation of the contract is identified; (iii) the price for each
transaction has been determined; (iv) the transaction price has been allocated to the performance obligations defined in the contract;
and (v) the performance obligations have been complied.
These items are recognized upon delivery
of supply, based on the tariff specified in the contractual terms and approved by the grantor for each class of customer or in effect
in the market. Unbilled supply of energy, from the period between the last billing and the end of each month, is estimated based on the
supply contracted. For the distribution concession contract, the unbilled supply is estimated based on the volume of energy delivered
but not yet billed.
These are recognized upon the distribution
infrastructure become available to customers, and the fair value of the consideration is calculated according to the TUSD tariff of those
customers, set by the grantor. The total amount of energy transported, in MWh, is as follows:
The margin defined for each performance
obligation from the transmission concession contract is as follows:
Represents the inflation adjustment
using the IPCA inflation index, plus interest, on the Concession Grant Fee for the concession awarded as Lot D of Auction 12/2015. See
Note 13.
In the third quarter of 2021, part
of the energy purchase contracts of the subsidiary Cemig GT were transferred to the Company, beginning the process of segregation of the
commercialization business, in order to provide a more accurate view of this business segment results. Segregation of the commercialization
business does not affect the Company’s corporate strategy, of serving the market, with the purpose of delivery of energy to its
clients.
Corresponds to the negotiation with a free customer that
resulted in a revenue recognition related to trading services provided in advance by the subsidiary ESCEE.
27.
OPERATING COSTS AND EXPENSES
The operating costs and expenses
of the Company and its subsidiaries are as follows:
|
|
Consolidated
|
Parent company
|
|
Jan to Sep, 2021
|
Jan to Sep, 2020
(restated)
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
Personnel (a)
|
912,598
|
940,884
|
12,439
|
14,328
|
|
Employees’ and managers’ profit sharing
|
104,481
|
108,882
|
2,840
|
12,605
|
|
Post-employment benefits – Note 23
|
324,905
|
334,239
|
36,521
|
35,911
|
|
Materials
|
70,078
|
57,480
|
38
|
167
|
|
Outsourced services (b)
|
1,041,543
|
904,465
|
12,717
|
22,497
|
|
Energy bought for resale (c)
|
11,719,653
|
8,528,412
|
51,017
|
-
|
|
Depreciation and amortization (1)
|
763,482
|
733,538
|
1,334
|
2,308
|
|
Operating provisions and adjustments for operating losses (d)
|
169,496
|
255,123
|
13,666
|
54,059
|
|
Charges for use of the national grid
|
2,101,761
|
1,157,241
|
-
|
-
|
|
Gas bought for resale
|
1,428,052
|
750,664
|
-
|
-
|
|
Construction costs (e)
|
1,338,097
|
1,122,636
|
-
|
-
|
|
Other operating expenses, net (f)
|
229,432
|
194,631
|
13,556
|
7,026
|
|
|
20,203,578
|
15,088,195
|
144,128
|
148,901
|
|
|
(1)
|
Net of PIS/Pasep and
Cofins taxes applicable to amortization of the Right of Use, in the amount of R$1,681 in the statements and R$19 in the Parent company
statements (R$1,606 and R$105 on September 30, 2020).
|
|
|
Consolidated
|
Parent company
|
|
Jul to Sep, 2021
|
Jul to Sep, 2020
(restated)
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
|
Personnel (a)
|
262,275
|
290,095
|
4,721
|
3,216
|
|
Employees’ and managers’ profit sharing
|
55,292
|
75,602
|
2,801
|
6,573
|
|
Post-employment benefits – Note 23
|
108,934
|
110,512
|
12,205
|
11,926
|
|
Materials
|
23,876
|
22,714
|
3
|
67
|
|
Outsourced services (b)
|
354,468
|
302,775
|
6,823
|
6,704
|
|
Energy bought for resale (c)
|
5,302,305
|
2,958,679
|
51,017
|
-
|
|
Depreciation and amortization (1)
|
283,318
|
245,089
|
434
|
756
|
|
Operating provisions (reversals) and adjustments for operating losses (d)
|
76,117
|
(101,606)
|
4,527
|
5,073
|
|
Charges for use of the national grid
|
653,534
|
534,788
|
-
|
-
|
|
Gas bought for resale
|
560,010
|
207,361
|
-
|
-
|
|
Construction costs (e)
|
552,536
|
438,960
|
-
|
-
|
|
Other operating expenses, net (f)
|
74,852
|
67,953
|
1,483
|
1,484
|
|
|
8,307,517
|
5,152,922
|
84,014
|
35,799
|
|
|
(1)
|
Net of PIS/Pasep and
Cofins taxes applicable to amortization of the Right of Use.
|
2021 Programmed
Voluntary Retirement Plan (‘PDVP’)
On May 2021, the Company
approved the Programmed Voluntary Retirement Plan for 2021 (‘the 2021 PDVP’). All the employees are eligible to join the
program, except as provided for in the Program, from May 10 to 31, 2021. The program will pay the standard legal payments for voluntary
termination of employment and a bonus, as an indemnity, which is calculated by the application of a percentage determined by the length
of time the employee has worked for Cemig, on the current remuneration, for each year of employment, according to the Program terms,
and, for those employees whose job tenure in Cemig is longer than 36 years, the value of 10.5 remunerations.
The total of R$35,238
has been recorded as expense related to this program, corresponding to the enrollment of 324 employees. In April, 2020, has been appropriated
as expense, including severance payments, a total of R$58,850 (396 employees).
|
|
Consolidated
|
Parent company
|
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
Meter reading and bill delivery
|
97,821
|
95,354
|
-
|
-
|
|
Communication
|
111,070
|
82,605
|
158
|
345
|
|
Maintenance and conservation of electrical facilities and equipment
|
339,790
|
324,850
|
14
|
13
|
|
Building conservation and cleaning
|
52,490
|
45,595
|
147
|
106
|
|
Security services
|
12,559
|
13,700
|
-
|
-
|
|
Auditing and consulting services
|
29,664
|
29,218
|
4,915
|
16,619
|
|
Information technology
|
72,990
|
36,664
|
1,378
|
771
|
|
Disconnection and reconnection
|
59,289
|
21,514
|
-
|
-
|
|
Legal services
|
18,057
|
14,473
|
4,032
|
881
|
|
Tree pruning
|
33,762
|
39,740
|
-
|
-
|
|
Cleaning of power line pathways
|
71,305
|
56,421
|
-
|
-
|
|
Copying and legal publications
|
12,218
|
14,547
|
173
|
271
|
|
Inspection of customer units
|
24,199
|
23,772
|
-
|
-
|
|
Other expenses
|
106,329
|
106,012
|
1,900
|
3,491
|
|
|
1,041,543
|
904,465
|
12,717
|
22,497
|
|
|
Consolidated
|
Parent company
|
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
|
Meter reading and bill delivery
|
34,629
|
30,186
|
-
|
-
|
|
Communication
|
33,134
|
28,103
|
31
|
106
|
|
Maintenance and conservation of electrical facilities and equipment
|
108,668
|
94,854
|
6
|
4
|
|
Building conservation and cleaning
|
18,408
|
14,825
|
62
|
29
|
|
Security services
|
4,650
|
4,947
|
-
|
-
|
|
Auditing and consulting services
|
10,925
|
11,130
|
2,114
|
4,819
|
|
Information technology
|
24,463
|
11,732
|
552
|
185
|
|
Disconnection and reconnection
|
23,195
|
6,236
|
-
|
-
|
|
Legal services
|
8,616
|
4,616
|
3,511
|
290
|
|
Tree pruning
|
10,695
|
15,404
|
-
|
-
|
|
Cleaning of power line pathways
|
21,693
|
22,488
|
-
|
-
|
|
Copying and legal publications
|
4,134
|
4,388
|
7
|
24
|
|
Inspection of customer units
|
10,383
|
11,154
|
-
|
-
|
|
Other expenses
|
40,875
|
42,712
|
540
|
1,247
|
|
|
354,468
|
302,775
|
6,823
|
6,704
|
|
|
c)
|
Energy purchased for resale
|
|
|
Consolidated
|
Parent company
|
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
Supply from Itaipu Binacional
|
1,447,247
|
1,483,596
|
-
|
-
|
|
Physical guarantee quota contracts
|
616,841
|
576,970
|
-
|
-
|
|
Quotas for Angra I and II nuclear plants
|
183,433
|
227,226
|
-
|
-
|
|
Spot market
|
1,163,634
|
826,871
|
-
|
-
|
|
Proinfa Program
|
286,500
|
233,799
|
-
|
-
|
|
‘Bilateral’ contracts
|
306,411
|
248,534
|
-
|
-
|
|
Energy acquired in Regulated Market auctions
|
4,251,173
|
2,334,514
|
-
|
-
|
|
Energy acquired in the Free Market (1)
|
3,655,574
|
2,885,932
|
56,217
|
-
|
|
Distributed generation (‘Geração distribuída’)
|
867,393
|
485,347
|
-
|
-
|
|
PIS/Pasep and Cofins credits
|
(1,058,553)
|
(774,377)
|
(5,200)
|
-
|
|
|
11,719,653
|
8,528,412
|
51,017
|
-
|
|
|
(1)
|
The energy acquired in the Free Market by the
parent company arises from the contracts transferred by Cemig GT, as a result of the process of partial segregation of the Company’s
energy commercialization business. For more information, see Note 26(g).
|
|
|
Consolidated
|
Parent company
|
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
|
Supply from Itaipu Binacional
|
479,619
|
531,183
|
-
|
-
|
|
Physical guarantee quota contracts
|
215,325
|
197,520
|
-
|
-
|
|
Quotas for Angra I and II nuclear plants
|
61,144
|
75,742
|
-
|
-
|
|
Spot market
|
800,388
|
193,868
|
-
|
-
|
|
Proinfa Program
|
95,500
|
77,933
|
-
|
-
|
|
‘Bilateral’ contracts
|
111,317
|
85,142
|
-
|
-
|
|
Energy acquired in Regulated Market auctions
|
2,091,386
|
766,561
|
-
|
-
|
|
Energy acquired in the Free Market (1)
|
1,596,409
|
1,142,123
|
56,217
|
-
|
|
Distributed generation (‘Geração distribuída’)
|
338,612
|
157,551
|
-
|
-
|
|
PIS/Pasep and Cofins credits
|
(487,395)
|
(268,944)
|
(5,200)
|
-
|
|
|
5,302,305
|
2,958,679
|
51,017
|
-
|
|
|
(2)
|
The energy acquired in the Free Market by the
parent company arises from the contracts transferred by Cemig GT, as a result of the process of partial segregation of the Company’s
energy commercialization business. For more information, see Note 26(g).
|
|
|
d)
|
Operating provision (reversals)
|
|
|
Consolidated
|
Parent company
|
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
Estimated losses on doubtful accounts receivables (Note 7) (1)
|
79,463
|
58,271
|
-
|
-
|
|
Estimated losses on other accounts receivables (2)
|
(11,000)
|
(164)
|
-
|
(164)
|
|
Estimated losses on doubtful accounts receivable from related (3)
|
-
|
37,361
|
-
|
37,361
|
|
|
|
|
|
|
|
Contingency provisions (reversals) (Note 24) (2)
|
|
|
|
|
|
Labor claims
|
33,724
|
48,751
|
10,146
|
9,606
|
|
Civil
|
33,381
|
29,949
|
485
|
2,139
|
|
Tax
|
(16,765)
|
42,186
|
4,983
|
4,325
|
|
Other
|
14,358
|
5,723
|
(1,948)
|
792
|
|
|
64,698
|
126,609
|
13,666
|
16,862
|
|
|
133,161
|
222,077
|
13,666
|
54,059
|
|
Adjustment for losses
|
|
|
|
|
|
Put option – SAAG (Note 30)
|
36,335
|
33,046
|
-
|
-
|
|
|
36,335
|
33,046
|
-
|
-
|
|
|
169,496
|
255,123
|
13,666
|
54,059
|
|
|
Consolidated
|
Parent company
|
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
Jul to
Sep, 2021
|
Jul to Sep, 2020
|
|
Estimated losses on doubtful accounts receivables (Note 7) (1)
|
37,295
|
(156,829)
|
-
|
-
|
|
Estimated losses on other accounts receivables (1)
|
-
|
(164)
|
-
|
(164)
|
|
|
|
|
|
|
|
Contingency provisions (reversals) (Note 24) (2)
|
|
|
|
|
|
Labor claims
|
(6,410)
|
18,063
|
1,728
|
3,466
|
|
Civil
|
10,742
|
7,259
|
354
|
137
|
|
Tax
|
2,209
|
17,747
|
1,685
|
815
|
|
Other
|
9,304
|
2,072
|
760
|
819
|
|
|
15,845
|
45,141
|
4,527
|
5,237
|
|
|
53,140
|
(111,852)
|
4,527
|
5,073
|
|
Adjustment for losses
|
|
|
|
|
|
Put option – SAAG (Note 30)
|
22,977
|
10,246
|
-
|
-
|
|
|
22,977
|
10,246
|
-
|
-
|
|
|
76,117
|
(101,606)
|
4,527
|
5,073
|
|
|
(1)
|
The expected losses on receivables are presented as selling expenses in
the Statement of Income.
|
|
|
(2)
|
The provisions for contingencies of the holding
company are presented in the consolidated profit and loss account for the period as operating expenses.
|
|
|
(3)
|
Estimated losses on amounts receivable from
Renova, as a result of the assessment of credit risk.
|
|
|
e)
|
Construction infrastructure costs
|
|
Consolidated
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
Personnel and managers
|
66,654
|
62,108
|
|
Materials
|
738,425
|
554,783
|
|
Outsourced services
|
473,354
|
417,176
|
|
Others
|
59,664
|
88,569
|
|
|
1,338,097
|
1,122,636
|
|
Consolidated
|
Jul a Sep, 2021
|
Jul to Sep, 2020
|
|
Personnel and managers
|
31,286
|
21,663
|
|
Materials
|
332,135
|
217,485
|
|
Outsourced services
|
175,763
|
177,216
|
|
Others
|
13,352
|
22,596
|
|
|
552,536
|
438,960
|
|
|
f)
|
Other operating expenses, net
|
|
|
Consolidated
|
Parent company
|
|
Jan to Sep, 2021
|
Jan to Sep, 2020
(restated)
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
Leasing and rentals (recovery of costs)
|
3,975
|
4,227
|
(2)
|
581
|
|
Advertising
|
4,635
|
4,031
|
13
|
92
|
|
Own consumption of energy
|
18,404
|
15,902
|
-
|
-
|
|
Subsidies and donations
|
12,224
|
10,073
|
-
|
-
|
|
Onerous concession
|
2,570
|
2,094
|
-
|
-
|
|
Insurance
|
22,152
|
17,943
|
2,912
|
2,118
|
|
CCEE annual charge
|
4,430
|
4,419
|
1
|
1
|
|
Net loss (gain) on deactivation and disposal of assets
|
52,923
|
26,876
|
-
|
157
|
|
Forluz – Administrative running cost
|
23,582
|
22,404
|
1,167
|
1,102
|
|
Collection agents
|
63,691
|
64,021
|
-
|
-
|
|
Obligations deriving from investment contracts (1)
|
8,233
|
10,569
|
-
|
-
|
|
Taxes and charges
|
15,388
|
6,673
|
3,830
|
793
|
|
Other expenses (recovery of expenses)
|
(2,775)
|
5,399
|
5,635
|
2,182
|
|
|
229,432
|
194,631
|
13,556
|
7,026
|
|
|
Consolidated
|
Parent company
|
|
Jul to Sep, 2021
|
Jul to Sep, 2020
(restated)
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
|
Leasing and rentals (recovery of costs)
|
1,898
|
(1,007)
|
4
|
154
|
|
Advertising
|
909
|
1,154
|
-
|
61
|
|
Own consumption of energy
|
7,017
|
5,152
|
-
|
-
|
|
Subsidies and donations
|
7,444
|
6,756
|
-
|
-
|
|
Onerous concession
|
892
|
707
|
-
|
-
|
|
Insurance
|
7,832
|
5,939
|
980
|
707
|
|
CCEE annual charge
|
1,446
|
1,445
|
1
|
-
|
|
Net loss (gain) on deactivation and disposal of assets
|
23,702
|
14,907
|
-
|
-
|
|
Forluz – Administrative running cost
|
8,017
|
7,548
|
397
|
371
|
|
Collection agents
|
20,799
|
21,628
|
-
|
-
|
|
Obligations deriving from investment contracts (1)
|
(779)
|
10,569
|
-
|
-
|
|
Taxes and charges
|
1,822
|
450
|
80
|
64
|
|
Other expenses (recovery of expenses)
|
(6,147)
|
(7,295)
|
21
|
127
|
|
|
74,852
|
67,953
|
1,483
|
1,484
|
|
|
(1)
|
This refers to the contractual obligations to
the investee Aliança Geração, corresponding to contingencies resulting from events before the closing of the transaction
which resulted in contribution of assets by Cemig and Vale S.A. to this investee in exchange for an equity interest. The total value of
the contingencies is R$127 million (R$119 million at December 31, 2020), of which Cemig GT’s portion is R$50 million (R$41 million
on December, 31, 2020).
|
|
|
28.
|
FINANCE INCOME AND EXPENSES
|
|
|
Consolidated
|
Parent company
|
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
FINANCE INCOME
|
|
|
|
|
|
Income from financial investments
|
162,071
|
61,991
|
46,738
|
2,825
|
|
Interest on sale of energy
|
350,401
|
282,568
|
-
|
-
|
|
Monetary variations
|
58,981
|
14,678
|
7,817
|
1
|
|
Monetary variations – CVA (Note 13)
|
28,252
|
31,281
|
-
|
-
|
|
Monetary updating of escrow deposits
|
15,134
|
54,312
|
2,308
|
6,497
|
|
PIS/Pasep and Cofins charged on finance income (1)
|
(76,972)
|
(38,286)
|
(46,153)
|
(16,896)
|
|
Gains on financial instruments –swap (Note 30)
|
-
|
1,803,611
|
-
|
-
|
|
Charges on related parties receivables
|
1,752
|
20,234
|
1,752
|
17,395
|
|
Monetary updating on PIS/Pasep and Cofins taxes credits over ICMS (Note 8) (2)
|
18,554
|
34,288
|
4,081
|
4,517
|
|
Others
|
52,660
|
53,504
|
2,329
|
1,285
|
|
|
610,833
|
2,318,181
|
18,872
|
15,624
|
|
FINANCE EXPENSES
|
|
|
|
|
|
Charges on loans and financings (Note 21)
|
(883,413)
|
(895,711)
|
(1,380)
|
(1,222)
|
|
Cost of debt – amortization of transaction cost (Note 21)
|
(18,870)
|
(10,910)
|
(55)
|
(161)
|
|
Foreign exchange variations - loans and financing (Note 21)
|
(212,221)
|
(2,409,658)
|
-
|
-
|
|
Discount and premium on repurchase of debt securities (Eurobonds) (Note 21)
|
(491,036)
|
-
|
-
|
|
|
Foreign exchange variations – Itaipu Binacional
|
(10,461)
|
(72,138)
|
-
|
-
|
|
Monetary updating – loans, financings and debentures (Note 21)
|
(220,992)
|
(81,620)
|
-
|
-
|
|
Monetary updating – onerous concessions
|
(7,476)
|
(5,752)
|
-
|
-
|
|
Charges and monetary updating on post-employment obligations (Note 23)
|
(50,272)
|
(33,977)
|
(2,473)
|
(1,672)
|
|
Loss on financial instruments –swap (Note 30)
|
(577,129)
|
-
|
-
|
-
|
|
Leasing – Monetary variation (Note 18)
|
(18,580)
|
(20,401)
|
(185)
|
(225)
|
|
Others
|
(62,565)
|
(46,696)
|
(267)
|
(60)
|
|
|
(2,553,015)
|
(3,576,863)
|
(4,360)
|
(3,340)
|
|
NET FINANCE INCOME (EXPENSES)
|
(1,942,182)
|
(1,258,682)
|
14,512
|
12,284
|
|
|
Consolidated
|
Parent company
|
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
|
FINANCE INCOME
|
|
|
|
|
|
Income from financial investments
|
69,250
|
22,401
|
18,514
|
703
|
|
Interest on sale of energy
|
112,579
|
105,745
|
-
|
-
|
|
Monetary variations
|
44,894
|
5,949
|
6,145
|
-
|
|
Monetary variations – CVA (Note 13)
|
21,325
|
5,593
|
-
|
-
|
|
Monetary updating of escrow deposits
|
8,190
|
270
|
1,725
|
(3,675)
|
|
PIS/Pasep and Cofins charged on finance income (1)
|
(27,669)
|
(22,474)
|
(13,859)
|
(14,860)
|
|
Gains on financial instruments –swap (Note 30)
|
35,636
|
2,651
|
-
|
-
|
|
Charges on related parties receivables
|
1,752
|
16,751
|
1,752
|
16,592
|
|
Monetary updating on PIS/Pasep and Cofins taxes credits over ICMS (2)
|
427
|
7,196
|
2,022
|
1,028
|
|
Others
|
12,443
|
21,286
|
(1,265)
|
443
|
|
|
278,827
|
165,368
|
15,034
|
231
|
|
FINANCE EXPENSES
|
|
|
|
|
|
Charges on loans and financings (Note 21)
|
(294,081)
|
(312,605)
|
(682)
|
(280)
|
|
Cost of debt – amortization of transaction cost (Note 21)
|
(6,264)
|
(3,809)
|
-
|
(57)
|
|
Foreign exchange variations - loans and financing (Note 21)
|
(504,600)
|
(247,294)
|
-
|
-
|
|
Discount and premium on repurchase of debt securities (Eurobonds) (Note 21)
|
(491,036)
|
-
|
-
|
|
|
Foreign exchange variations – Itaipu Binacional
|
(17,752)
|
(5,672)
|
-
|
-
|
|
Monetary updating – loans, financings and debentures (Note 21)
|
(78,413)
|
(45,642)
|
-
|
-
|
|
Monetary updating – onerous concessions
|
(422)
|
(3,970)
|
-
|
-
|
|
Charges and monetary updating on post-employment obligations
|
(16,124)
|
(12,228)
|
(793)
|
(602)
|
|
Leasing – Monetary variation
|
(6,101)
|
(6,664)
|
(61)
|
(72)
|
|
Others
|
(19,524)
|
(24,103)
|
(22)
|
(57)
|
|
|
(1,434,317)
|
(661,987)
|
(1,558)
|
(1,068)
|
|
NET FINANCE INCOME (EXPENSES)
|
(1,155,490)
|
(496,619)
|
13,476
|
(837)
|
|
|
(1)
|
The PIS/Pasep and Cofins
expenses apply to Interest on Equity.
|
|
|
(2)
|
The updating of the tax credits for the court judgment on PIS, Pasep, Cofins / ICMS tax, and the related
liability to be refunded to customers, is presented at net value.
|
|
|
29.
|
RELATED PARTY TRANSACTIONS
|
Cemig’s main balances and transactions
with related parties and its jointly-controlled entities are as follows:
|
COMPANY
|
ASSETS
|
LIABILITIES
|
REVENUE
|
EXPENSES
|
|
Sep. 30, 2021
|
Dec. 31, 2020
|
Sep. 30, 2021
|
Dec. 31, 2020
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
Shareholder
|
|
|
|
|
|
|
|
|
|
Minas Gerais State Government
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Customers and traders (1)
|
246,845
|
334,824
|
-
|
-
|
78,949
|
96,829
|
-
|
-
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
Accounts Receivable – AFAC (2)
|
13,366
|
11,614
|
-
|
-
|
1,752
|
16,592
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Affiliated (3)
|
|
|
|
|
|
|
|
|
|
Madeira Energia
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
7,127
|
2,173
|
177,388
|
92,054
|
72,681
|
19,760
|
(1,294,797)
|
(872,741)
|
|
|
|
|
|
|
|
|
|
|
|
Jointly-controlled entity (3)
|
|
|
|
|
|
|
|
|
|
Aliança Geração
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
1,360
|
-
|
17,855
|
14,297
|
35,423
|
31,133
|
(145,932)
|
(130,266)
|
|
Provision of services (5)
|
486
|
323
|
-
|
-
|
3,966
|
3,617
|
-
|
-
|
|
Interest on Equity, and dividends
|
-
|
114,430
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Contingency (6)
|
-
|
-
|
49,610
|
41,376
|
-
|
-
|
(8,233)
|
(10,569)
|
|
|
|
|
|
|
|
|
|
|
|
Baguari Energia
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
-
|
-
|
999
|
922
|
117
|
-
|
(6,556)
|
(6,255)
|
|
Provision of services (5)
|
287
|
211
|
-
|
-
|
432
|
716
|
-
|
-
|
|
Interest on Equity, and dividends
|
10,835
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Norte Energia
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
1,975
|
130
|
35,451
|
25,154
|
19,871
|
21,049
|
(248,852)
|
(197,161)
|
|
|
|
|
|
|
|
|
|
|
|
Lightger
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
-
|
-
|
2,091
|
1,646
|
-
|
-
|
(21,474)
|
(17,636)
|
|
|
|
|
|
|
|
|
|
|
|
Hidrelétrica Pipoca
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
-
|
-
|
3,051
|
2,728
|
-
|
-
|
(27,706)
|
(17,670)
|
|
Interest on Equity, and dividends
|
1,313
|
2,680
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Retiro Baixo
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
-
|
-
|
632
|
144
|
4,637
|
3,945
|
(4,479)
|
3,421
|
|
Interest on Equity, and dividends
|
3,929
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Hidrelétrica Cachoeirão
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
-
|
-
|
-
|
-
|
1,442
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Renova
|
|
|
|
|
|
|
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
Loans from related parties (7)
|
-
|
-
|
-
|
-
|
-
|
803
|
-
|
(37,361)
|
|
|
|
|
|
|
|
|
|
|
|
Taesa
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Transactions with energy (4)
|
-
|
-
|
9,521
|
7,979
|
187
|
104
|
(87,504)
|
(70,284)
|
|
Provision of services (5)
|
150
|
289
|
-
|
-
|
908
|
669
|
-
|
-
|
|
Interest on Equity, and dividends
|
6
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Hidrelétrica Itaocara
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Adjustment for losses (8)
|
-
|
-
|
28,972
|
29,615
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Axxiom
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Provision of services (9)
|
|
-
|
642
|
3,782
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Other related parties
|
|
|
|
|
|
|
|
|
|
FIC Pampulha
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
COMPANY
|
ASSETS
|
LIABILITIES
|
REVENUE
|
EXPENSES
|
|
Sep. 30, 2021
|
Dec. 31, 2020
|
Sep. 30, 2021
|
Dec. 31, 2020
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
|
Cash and cash equivalents
|
225,410
|
171,373
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Marketable securities
|
2,335,761
|
3,355,688
|
-
|
-
|
32,579
|
10,100
|
-
|
-
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
Marketable securities
|
679,879
|
754,555
|
-
|
-
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Forluz
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Post-employment obligations (10)
|
-
|
-
|
175,080
|
158,671
|
-
|
-
|
(150,397)
|
(154,338)
|
|
Supplementary pension contributions – Defined contribution plan (11)
|
-
|
-
|
-
|
-
|
-
|
-
|
(54,876)
|
(54,843)
|
|
Administrative running costs (12)
|
-
|
-
|
-
|
-
|
-
|
-
|
(23,580)
|
(22,403)
|
|
Operating leasing (13)
|
171,979
|
166,926
|
23,867
|
21,754
|
-
|
-
|
(2,524)
|
(2,579)
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
Post-employment obligations (10)
|
-
|
-
|
2,711,285
|
2,749,824
|
-
|
-
|
-
|
-
|
|
Operating leasing (13)
|
-
|
-
|
163,492
|
156,207
|
-
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cemig Saúde
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Health Plan and Dental Plan (14)
|
-
|
-
|
174,730
|
154,152
|
-
|
-
|
(192,869)
|
(180,589)
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
Health Plan and Dental Plan (14)
|
-
|
-
|
3,279,901
|
3,229,265
|
-
|
-
|
-
|
-
|
The main conditions and characteristics
of interest with reference to the related party transactions are:
|
|
(1)
|
Refers to sale of energy supply to the Minas
Gerais State government. The price of the supply is set by the grantor (Aneel) through a Resolution relating to the annual tariff adjustment
of Cemig D. In 2017 the government of Minas Gerais State signed a debt recognition agreement with Cemig D for payment of debits relating
to the supply of power due and unpaid, in the amount of R$113,032, up to November 2019. These receivables have guarantee in the form of
Cemig’s right to retain dividends and Interest on Equity otherwise payable to the State (in proportion to the State’s equity
interest in the Company), for as long as any payments are overdue or in default. On September, 30, 2021, Cemig D obtained authorization
from the Minas Gerais State Finance Secretary to offset part of the ICMS tax payable to the state against the debt owed by the State government
to the company, under State Law 23,705/2020. The amount is to be offset in 21 equal monthly installments of approximately R$10.5 million.
Until September 30, 2021, six installments had been offset.
|
|
|
(2)
|
This refers to the recalculation of the inflation
adjustment of amounts relating to the Advance against Future Capital Increase (AFAC), which were returned to the State of Minas Gerais.
These receivables have guarantee in the form of Cemig’s right to retain dividends and Interest on Equity otherwise payable to the
State (in proportion to the State’s equity interest in the Company), for as long as any payments are overdue or in default. However,
the Minas Gerais State government is contesting the signature of the TARD, on the grounds that it was signed without obeying the legal
requirements for validity of administrative acts, and notified the Company to return the two installment payments that had been made,
and also the amounts of the dividends retained. For more information, see Note 10.
|
|
|
(3)
|
The relationship between Cemig and its investees
are described in Note 15 – Investments.
|
|
|
(4)
|
The transactions in sale and purchase of energy
between generators and distributors take place through auctions in the Regulated Market, and are organized by the federal government.
In the Free Market, transactions are made through auctions or through direct contracting, under the applicable legislation. Transactions
for transport of energy, on the other hand, are carried out by transmission companies and arise from the centralized operation of the
National Grid, executed by the National System Operator (ONS).
|
|
|
(5)
|
Refers to a contract to provide plant operation
and maintenance services.
|
|
|
(6)
|
This refers to the aggregate amounts of legal actions realized and legal actions provisioned arising from
the agreement made between Aliança Geração, Vale S.A. and Cemig. The action is provisioned in the amount of R$127
million (R$119 million on December 31, 2020), of which Cemig’s portion is R$50 million (R$41 million on December 31, 2020).
|
|
|
(7)
|
On November 25, 2019, December 27, 2019 and January 27, 2020, DIP loan contracts under court supervised
reorganization proceedings, referred to as ‘DIP’ and ‘DIP 2’, “DIP 3’ were entered into between the
Company and Renova Energia S.A., in the amounts of R$10 million, R$6.5 million and R$20 million, respectively. The contracts specify interest
equal to 100% of the accumulated variation in the DI rate, plus an annual spread, applied pro rata die (on 252-business-days basis), of
1.083% for the DIP contract, 2.5% for the DIP2 contract and 1.5% for the DIP3, until the date of respective full payment. The Company
recognized an impairment loss for the receivables from Renova, of its total carrying amount of R$37,361, in the second semester of 2020.
For further information, see Note 15 (c).
|
|
|
(8)
|
A liability was recognized corresponding to the Company’s interest in the share capital of Hidrelétrica
Itaocara, due to its negative equity (see Note 15).
|
|
|
(9)
|
This refers to a contract for development of
management software between Cemig D and Axxiom Soluções Tecnológicas S.A., instituted in Aneel Dispatch 2657/2017;
|
|
|
(10)
|
The contracts of Forluz are updated by the Expanded
Customer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA) calculated by the Brazilian Geography
and Statistics Institute (IBGE) plus interest of 6% p.a. and will be amortized up to the business year of 2031 (see Note 23).
|
|
|
(11)
|
The Company’s contributions to the pension
fund for the employees participating in the Mixed Plan, and calculated on the monthly remuneration, in accordance with the regulations
of the Fund.
|
|
|
(12)
|
Funds for annual current administrative costs
of the Pension Fund in accordance with the specific legislation of the sector. The amounts are estimated as a percentage of the Company’s
payroll.
|
|
|
(13)
|
Rental of the Company’s administrative
head offices, in effect until August 2024 (able to be extended every five years, up to 2034), with annual inflation adjustment by the
IPCA index and price reviewed every 60 months. On April, 27, the Company signed with Forluz a contract amendment due to the transfer of
Cemig Sim e Gasmig facilities to Júlio Soares building, reducing the Company’s rent expenses. On September 20, 2021 the lease
contract was adjusted upward by 9.68%, corresponding to accumulated IPCA inflation over the prior 12 months.
|
|
|
(14)
|
Post-employment obligations relating to the
employees’ health and dental plan (see Note 23).
|
Dividends receivable
|
Dividends receivable
|
Consolidated
|
Parent company
|
|
Sep. 30, 2021
|
Dec. 31, 2021
|
Sep. 30, 2021
|
Dec. 31, 2021
|
|
Cemig GT
|
-
|
-
|
479,093
|
891,998
|
|
Cemig D
|
-
|
-
|
310,834
|
309,434
|
|
Centroeste
|
-
|
-
|
11,038
|
-
|
|
Light
|
71,206
|
71,206
|
71,206
|
71,206
|
|
Taesa
|
6
|
-
|
6
|
-
|
|
Aliança Geração
|
-
|
114,430
|
-
|
-
|
|
Others (1)
|
16,089
|
2,691
|
1,023
|
240
|
|
|
87,301
|
188,327
|
873,200
|
1,272,878
|
|
|
(1)
|
The subsidiaries grouped in ‘Others’ are identified in the table
above under “Interest on Equity, and Dividends”.
|
Guarantees on loans, financing and debentures
Cemig has provided guarantees
on loans, financing and debentures of the following related parties – not consolidated in the interim financial information because
they relate to jointly-controlled entities or affiliated companies:
|
Related party
|
Relationship
|
Type
|
Objective
|
Sep. 30, 2021
|
Maturity
|
|
Norte Energia (NESA)
|
Affiliated
|
Surety
|
Financing
|
2,556,431
|
2042
|
|
Norte Energia (NESA)/Light (1)
|
Affiliated
|
Counter-guarantee
|
Financing
|
683,615
|
2042
|
|
Santo Antônio Energia S.A. (2)
|
Jointly-controlled entity
|
Surety
|
Debentures
|
484,938
|
2037
|
|
Santo Antônio Energia S.A.
|
Jointly-controlled entity
|
Guarantee
|
Financing
|
1,071,496
|
2034
|
|
Norte Energia (NESA)
|
Affiliated
|
Surety
|
Debentures
|
73,281
|
2030
|
|
|
|
|
|
4,869,761
|
|
|
|
(1)
|
Counter-guarantee to Light, related to execution of guarantees of the Norte
Energia financing.
|
|
|
(2)
|
Corporate guarantee given by Cemig to Saesa.
|
At September 30, 2021, Management
believes that there is no need to recognize any provisions in the Company’s interim financial information for the purpose of meeting
any obligations arising under these sureties and/or guarantees.
Cash
investments in FIC Pampulha – the investment fund of Cemig and its subsidiaries and affiliates
Cemig and its subsidiaries and jointly-controlled
entities invest part of their financial resources in an investment fund which has the characteristics of fixed income and obeys the Company’s
cash investment policy. The amounts invested by the fund are presented in Marketable securities line in current and non-current assets,
or presented deducted from the Debentures line in current and non-current liabilities, in proportion to the Company’s participation
in the fund, of 98.23%, on September, 30, 2021.
The funds applied are allocated only
in public and private fixed income securities, subject only to credit risk, with various maturity periods, obeying the unit holders’
cash flow needs.
Remuneration of key management
personnel
The total costs of key personnel,
comprising the Executive Board, the Fiscal Council, the Audit Committee and the Board of Directors, are within the limits approved at
a General Shareholders’ Meeting, and the effects on the income statements of the in period ended September 30, 2021 and 2020, are
as follows:
|
|
Sep. 30, 2021
|
Sep. 30, 2020
|
|
Remuneration
|
20,682
|
20,067
|
|
Profit sharing
|
2,435
|
7,419
|
|
Pension plans
|
1,453
|
-
|
|
Health and dental plans
|
139
|
1,269
|
|
Life insurance
|
2
|
-
|
|
Total
|
24,711
|
28,755
|
|
|
30.
|
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
|
|
|
a)
|
Financial instruments classification and fair value
|
The main financial instruments, classified
in accordance with the accounting principles adopted by the Company, are as follows:
|
|
Level
|
Sep. 30, 2021
|
Dec. 31, 2020
|
|
Balance
|
Fair value
|
Balance
|
Fair value
|
|
Financial assets
|
|
|
|
|
|
|
Amortized cost (1)
|
|
|
|
|
|
|
Marketable securities – Cash investments
|
2
|
1,091,318
|
1,091,318
|
1,213,875
|
1,213,875
|
|
Customers and Traders; Concession holders (transmission service)
|
2
|
5,059,159
|
5,059,159
|
4,534,044
|
4,534,044
|
|
Restricted cash
|
2
|
42,872
|
42,872
|
63,674
|
63,674
|
|
Accounts receivable from the State of Minas Gerais (AFAC)
|
2
|
13,366
|
13,366
|
11,614
|
11,614
|
|
Concession financial assets – CVA (Parcel ‘A’ Costs Variation Compensation) Account and Other financial components
|
3
|
1,921,926
|
1,921,926
|
132,681
|
132,681
|
|
Reimbursement of tariff subsidies
|
2
|
85,400
|
85,400
|
88,349
|
88,349
|
|
Low-income subsidy
|
2
|
44,979
|
44,979
|
43,072
|
43,072
|
|
Escrow deposits
|
2
|
1,150,331
|
1,150,331
|
1,055,797
|
1,055,797
|
|
Concession grant fee – Generation concessions
|
3
|
2,710,769
|
2,710,769
|
2,549,198
|
2,549,198
|
|
|
|
12,120,120
|
12,120,120
|
9,692,304
|
9,692,304
|
|
Fair value through profit or loss
|
|
|
|
|
|
|
Cash equivalents – Cash investments
|
|
774,027
|
774,027
|
1,587,337
|
1,587,337
|
|
Marketable securities
|
|
|
|
|
|
|
Bank certificates of deposit
|
2
|
99,165
|
99,165
|
545,366
|
545,366
|
|
Treasury Financial Notes (LFTs)
|
1
|
400,684
|
400,684
|
730,806
|
730,806
|
|
Financial Notes – Banks
|
2
|
1,436,312
|
1,436,312
|
1,635,016
|
1,635,016
|
|
|
|
2,710,188
|
2,710,188
|
4,498,525
|
4,498,525
|
|
|
|
|
|
|
|
|
Derivative financial instruments (Swaps)
|
3
|
1,302,639
|
1,302,639
|
2,948,930
|
2,948,930
|
|
Derivative financial instruments (Ativas and Sonda Put options)
|
3
|
3,646
|
3,646
|
2,987
|
2,987
|
|
Concession financial assets – Distribution infrastructure
|
3
|
678,362
|
678,362
|
559,241
|
559,241
|
|
Reimbursements receivable – Generation
|
3
|
816,202
|
816,202
|
816,202
|
816,202
|
|
|
|
5,511,037
|
5,511,037
|
8,825,885
|
8,825,885
|
|
|
|
17,631,157
|
17,631,157
|
18,518,189
|
18,518,189
|
|
Financial liabilities
|
|
|
|
|
|
|
Amortized cost (1)
|
|
|
|
|
|
|
Loans, financing and debentures
|
2
|
(11,351,253)
|
(11,351,253)
|
(15,020,558)
|
(15,020,558)
|
|
Debt with pension fund (Forluz)
|
2
|
(406,173)
|
(406,173)
|
(472,559)
|
(472,559)
|
|
Deficit of pension fund (Forluz)
|
2
|
(538,460)
|
(538,460)
|
(540,142)
|
(540,142)
|
|
Concessions payable
|
3
|
(26,537)
|
(26,537)
|
(23,476)
|
(23,476)
|
|
Suppliers
|
2
|
(3,370,554)
|
(3,370,554)
|
(2,358,320)
|
(2,358,320)
|
|
Leasing transactions
|
2
|
(254,816)
|
(254,816)
|
(226,503)
|
(226,503)
|
|
Sector financial liabilities
|
2
|
(98,537)
|
(98,537)
|
(231,322)
|
(231,322)
|
|
|
|
(16,046,330)
|
(16,046,330)
|
(18,872,880)
|
(18,872,880)
|
|
Fair value through profit or loss
|
|
|
|
|
|
|
SAAG put options
|
3
|
(572,490)
|
(572,490)
|
(536,155)
|
(536,155)
|
|
|
|
(572,490)
|
(572,490)
|
(536,155)
|
(536,155)
|
|
|
|
(16,618,820)
|
(16,618,820)
|
(19,409,035)
|
(19,409,035)
|
|
|
(1)
|
On September 30, 2021 and December 31, 2020, the book values of financial instruments reflect their fair
values.
|
At initial recognition the Company
measures its financial assets and liabilities at fair value and classifies them according to the accounting standards currently in effect.
Fair value is a measurement based on assumptions that market participants would use in pricing an asset or liability, assuming
that market participants act in their economic best interest. The information applied in the fair value valuation techniques is classified
in three levels of fair value hierarchy, as follows:
§
Level 1 – Active market – Quoted prices: A financial instrument is considered to be quoted in an active market if
the prices quoted are promptly and regularly made available by an exchange or organized over-the-counter market, by operators, by brokers
or by a market association, by entities whose purpose is to publish prices, or by regulatory agencies, and if those prices represent regular
arm’s length market transactions made without any preference.
§
Level 2 – No active market – Valuation technique: For an instrument that does not have an active market, fair value
should be found by using a method of valuation/pricing. Criteria such as data on the current fair value of another instrument that is
substantially similar, or discounted cash flow analysis or option pricing models, may be used. Level 2 is based on information that is
observable, either directly or indirectly. The objective of the valuation technique is to establish what would be the transaction price
on the measurement date in an arm’s-length transaction motivated by business model.
§
Level 3 – No active market – No observable inputs: Fair value is determined based on generally accepted valuation techniques,
such as on discounted cash flow analysis or other valuation techniques, including non-observable data, such as the measurement at New
Replacement Value (Valor novo de reposição, or VNR). Non-observable data should be used to measure fair value where
significant observable data is not available, admitting situations in which there is little or no market activity at the measurement date.
Non-observable data are developed using the best possible information available in the circumstances, which may include the entity’s
own data.
The fair value hierarchy prioritizes
information (inputs) from valuation techniques, and not the valuation techniques used for measurement of fair value. In some cases information
is used from different hierarchy levels in measurement of fair value, and this is classified entirely in the same level of the fair value
hierarchy applicable to the significant information of a lower level. For assets and liabilities that are recognized at fair value on
a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization.
Fair value calculation
of financial positions
Distribution infrastructure concession
financial assets: These are measured at New Replacement Value (Valor novo de reposição, or VNR), according to
criteria established by the Concession-granting power (‘Grantor’), based on fair value of the concession assets in service
and which will be revertible at the end of the concession, and on the weighted average cost of capital (WACC) defined by the Grantor,
which reflects the concession holder’s return on the operations of the concession. The VNR and the WACC are public information disclosed
by the Grantor and by Cemig respectively. The gas distribution assets are measured at the construction cost adjusted by the General Market
Prices Index (Índice Geral de Preços de Mercado – IGPM). Changes in concession financial assets are disclosed in Note
13.
Indemnifiable receivable
– generation: measured at New Replacement Value (VNR), as per criteria set by regulations of the grantor power, based on the
fair value of the assets to be indemnify at the end of the concession. For more information, see Note 13.2.
Marketable securities:
Fair value of marketable securities is determined taking into consideration the market prices of the investment, or market information
that makes such calculation possible, considering future interest rates and exchange of investments to similar securities. The market
value of the security is deemed to be its maturity value discounted to present value by the discount rate obtained from the market yield
curve.
Put options: The Company adopted
the Black-Scholes-Merton method for measuring fair value of the Ativas and Sonda options. The fair value of these options was calculated
on the basis of the estimated exercise price on the day of exercise of the option, less the fair value of the underlying shares, also
estimated at same date, brought to present value at the reporting date of interim financial information.
Swaps: Fair value was calculated
based on the market value of the security at its maturity adjusted to present value by the discount rate from the market yield curve.
Other financial liabilities:
Fair value of its loans, financing and debentures were determined using 131.33% of the CDI rate – based on its most recent funding.
For the loans, financing, debentures and debt renegotiated with Forluz, with annual rates between IPCA + 4.10% to 6.20% and CDI + 0.53%
to 3.14%, Company believes that their carrying amount is approximated to their fair value.
|
|
b)
|
Derivative financial instruments
|
Put options
On September 30, 2021 and December
31, 2020, the options values were as follows:
|
|
Sep. 30, 2021
|
Dec. 31, 2020
|
|
Put option – SAAG
|
572,490
|
536,155
|
|
Put options – Ativas and Sonda
|
(3,646)
|
(2,987)
|
|
|
568,844
|
533,168
|
Put option – SAAG
Option contracts were signed between
Cemig GT and the private pension entities that participate in the investment structure of SAAG (comprising FIP Melbourne, Parma Participações
S.A. and FIP Malbec, jointly, ‘the Investment Structure’), giving those entities the right to sell units in the Funds that
comprise the Investment Structure, at the option of the Funds, in the 84th (eighty-fourth) month from June 2014. The exercise
price of the Put Options corresponds to the amount invested by each private pension plan in the Investment Structure, updated pro rata
temporis by the Expanded National Customer Price (IPCA) index published by the IBGE, plus interest at 7% per year, less such dividends
and Interest on Equity as shall have been paid by SAAG to the pension plan entities. This option was considered to be a derivative instrument
until the early exercise of the option (for further details, see the next topic of this Note), of accounted at fair value through profit
and loss, measured using the Black-Scholes-Merton (“BSM”) model.
A liability of R$572,490 was recorded
in the Company’s interim financial information, for the difference between the exercise price and the estimated fair value of the
assets. Considering the early liquidation of Funds, and early maturity of put option, this amount was classified as current liabilities.
The changes in the value of the options are as follows:
|
|
Consolidated
|
|
Balance at December 31, 2020
|
536,155
|
|
Adjustment to fair value
|
36,335
|
|
Balance at September 30, 2021
|
572,490
|
This option can potentially dilute
basic earnings per share in the future, however, they have not caused dilution of earnings per share in the years presented.
Early liquidation of Funds, and
early maturity of put option
On September 9, 2020, the administrator
of the FIP funds, Banco Modal S.A., notified its unit holders of the beginning of the early liquidation process of the funds Melbourne,
Parma Participações S.A. and FIP Malbec, due to expiration of the period of 180 days from its resignation, and the resignation
of the manager of the Fund, from their respective positions, without there having been any indication of new service providers, as specified
in the Fund’s Regulations.
As established by contract, funds
liquidation is one of the events that would result in expiration date of the option, which the private pension plan entities stated interest
in exercising in the period from September 9 to October 2, 2020.
However, the Company’s management
believes that the premises and conditions that were the grounds for the investment in Santo Antônio Energia and the legal structure
of the various contracts signed for this purpose underwent substantial changes which resulted in the options imbalance.
Thus, using the contractual prerogative
contained in the option instruments, the Company invoked the contractual mechanism of Amicable Resolution for the contractual terms negotiation
with the private pension plan entities. Since the amicable negotiation did not succeed, the Company invoked the arbitration clause for
resolution of conflict between the parties, which awaits the decision of the Brazil Canada Chamber of Commerce of the State of São
Paulo.
The Company recorded the accounting
effects of this contract in accordance with the contracts original terms.
Sonda and Ativas options
The Company , as successor
of CemigTelecom, and Sonda Procwork Outsourcing Informática signed a Purchase Option Agreement (issued by Cemig Telecom) and a
Sale Option Agreement (issued by Sonda), which resulted in the Company simultaneously having a right (put option) and an obligation (call
option) related to the shares held by the investee Ativas Datacenter S.A. (“Ativas”). The exercise price of the put option
and the call option is equivalent to fifteen times and seventeen times, respectively, the adjusted net income of Ativas in the period
prior to the exercise date. Both options, if exercised, result in the sale of the shares in Ativas, currently owned by the Company, and
the exercise of one of the options results in nullity of the other. The options may be exercised as from January 1, 2021.
The put and call options in Ativas
(‘the Ativas Options’) were measured at fair value and posted at their net value, i.e. the difference between the fair values
of the two options on the reporting date of the interim financial information of September 30, 2021.
The measurement has been made using
the Black-Scholes-Merton (BSM) model. In the calculation of the fair value of the Ativas Options based on the BSM model, the following
variables are taken into account: closing price of the underlying asset on September 30, 2021; the risk-free interest rate; the volatility
of the price of the underlying asset; the time to maturity of the option; and the exercise prices on the exercise date.
The valuation base date is
September 30, 2021, the same date as the closing of the Company’s interim financial information, and the methodology used to calculate
the fair value of the company is discounted cash flow (DCF) based on the value of the shares transaction of Ativas by Sonda, occurred
on October 19, 2016. Maturity was calculated assuming exercise date between January 1, 2022 and March 31, 2022.This is the first opportunity
for the exercise of the option, which will be available at the same period of the following years, since the option grants the Company
the right of selling to Sonda its interests held in Ativas, as of 2021.
Considering that the exercise
prices of the options are contingent upon the future financial results of Ativas, the estimated exercise prices on the maturity date was
based on statistical analyses and information of comparable listed companies.
Swap transactions
Considering that part of the loans
and financings of the Company’s subsidiaries is denominated in foreign currency, the companies use derivative financial instruments
(swaps and currency options) to protect the servicing associated with these debts (principal plus interest).
The derivative financial instruments
contracted have the purpose of protecting the operations against the risks arising from foreign exchange variation and are not used for
speculative purposes.
In 2021, Cemig GT began studies and
contracted services in order to take measures aimed to diligent managing its liabilities, and reducing liquidity risk and exposure to
foreign currency. In this context, on July 19, 2021, Cemig GT opened a Tender Offer to acquire, for cash, foreign market debt securities
it had issued, maturing in 2024, in the principal amount of US$500 million.
In alignment with Cash tender offer
process, on June 7 and 8, 2021 the derivative financial instruments contracted, corresponding to US$500 million, were partially dismantled.
As a result, the Company reported a gain of R$774,409.
To mitigate foreign exchange exposure
until the date of repurchase, on June 4, 2021 the Company contracted a short-term hedge against variation in the value of the US dollar
for a volume of US$600 million, locking in an exchange rate of R$5.0984/US$. The instrument contracted was a non-deliverable forward (NDF),
which does not include physical delivery of the currency, providing the Company with a pre-agreed rate at the maturity, which was August
3, 2021. For more details, see Note 21.
The half-yearly settlement of interest
in the swap took place on June 7, 2021, with a positive effect of R$271,053, resulting in a net cash inflow to Cemig GT of R$230,395.
The total amount of hedge settlement until September 30, 2021 was R$1,045,462, with net cash inflow of R$888,642. The results from the
settlement of the NDF was R$ 23,700, with net cash inflow of R$ 23,699.
|
Assets
|
Liability
|
Maturity period
|
Trade market
|
Notional amount
|
Realized gain / loss
|
|
Sep. 30, 2021
|
Dec. 31, 2020
|
|
US$ exchange variation +
Rate (9.25% p.y.)
|
Local currency + R$ 150.49% of CDI
|
Interest:
Half-yearly
Principal:
Dec. 2024
|
Over the counter
|
US$1,000,000
|
954,841
|
328,817
|
|
US$ exchange variation +
Rate (9.25% p.y.)
|
Local currency + R$125.52% of CDI
|
Interest:
Half-yearly
Principal:
Dec. 2024
|
Over the counter
|
US$500,000
|
90,621
|
165,884
|
|
US$ exchange variation higher R$5.0984
|
US$ exchange variation lower R$5.0954
|
August 03, 2021
|
Over the counter
|
US$600,000
|
23,700
|
-
|
|
|
1,069,162
|
494,701
|
The notional amount of derivative
transactions are not presented in the statement of financial position, since they refer to transactions that do not require cash as only
the gains or losses actually incurred are recorded. The net result of those transactions on September 30, 2021 was a negative adjustment
of R$577,129 (positive adjustment of R$1,803,611 on September 30, 2020), which was posted in finance income (expenses).
The counterparties of the derivative
transactions are the banks Bradesco, Itaú, Goldman Sachs and BTG Pactual and Cemig is guarantor of the derivative financial instruments
contracted by Cemig GT. The counterparts of the NDF was the banks Deutsche Bank, Bradesco, XP Inc. and Goldman Sachs.
This table presents the derivative
instruments as of September 30, 2021 and December 31, 2020.
|
Assets
|
Liability
|
Maturity period
|
Trade market
|
Notional amount (2)
|
Unrealized gain / loss
|
Unrealized gain / loss
|
|
Carrying amount
Sep. 30, 2021
|
Fair value
Sep. 30, 2021
|
Carrying amount
Dec. 31, 2020
|
Fair value
Dec. 31, 2020
|
|
US$ exchange variation +
Rate (9.25% p.y.) (1)
|
Local currency + R$ 150.49% of CDI
|
Interest:
Half-yearly
Principal:
Dec. 2024
|
Over the counter
|
US$500,000
|
913,014
|
748,600
|
1,772,477
|
2,110,490
|
|
US$ exchange variation +
Rate (9.25% p.y.) (1)
|
Local currency + R$125.52% of CDI
|
Interest:
Half-yearly
Principal:
Dec. 2024
|
Over the counter
|
US$500,000
|
617,922
|
554,039
|
587,945
|
838,440
|
|
|
1,530,936
|
1,302,639
|
2,360,422
|
2,948,930
|
|
Current asset
|
|
152,802
|
|
522,579
|
|
Non-current asset
|
|
1,149,837
|
|
2,426,351
|
|
|
1)
|
For the US$1 billion Eurobond issued on December
2017: (i) for the principal, a call spread was contracted, with floor at R$ 3.25/US$ and ceiling at R$ 5.00/US$; and (ii) a swap
was contracted for the total interest, for a coupon of 9.25% p.a. at an average rate equivalent to 150.49% of the CDI. In July 20 21,
Cemig GT dismantled a total of US$500 million of the original hedge issued. For the additional US$500 issuance of the same Eurobond issued
on July 2018: (1) a call spread was contracted for the principal, with floor at R$ 3.85/US$ and ceiling at R$ 5.00/US$; and
(2) a swap was contracted for the interest, resulting in a coupon of 9.25% p.a., with an average rate equivalent to 125.52% of the CDI
rate. The upper limit for the exchange rate in the hedge instrument contracted by the Company for the principal of the Eurobonds is R$ 5.00/US$.
The instrument matures in December 2024. If the USD/BRL exchange rate is still over R$5.00 in December 2024, the company will disburse,
on that date, the difference between the upper limit of the protection range and the spot dollar on that date. The Company is monitoring
the possible risks and impacts associated with the dollar being valued above R$5.00, and assessing various strategies for mitigating the
foreign exchange risk up to the maturity date of the transaction. The hedge instrument fully protects the payment of six-monthly interest,
independently of the USD/BRL exchange rate.
|
In accordance with market practice,
Cemig GT uses a mark-to-market method to measure its derivatives financial instruments for its Eurobonds. The principal indicators for
measuring the fair value of the swap are the B3 future market curves for the DI rate and the dollar. The Black & Scholes model is
used to price the call spread, and one of parameters of which is the volatility of the dollar, measured on the basis of its historic record
over 2 years.
The fair value at September 30, 2021
was R$1,302,639 (R$2,948,930 on December 31, 2020), which would be the reference if Cemig GT would liquidate the financial instrument
on that date, but the swap contracts protect the Company’s cash flow up to the maturity of the bonds in 2024 and they have carrying
amount of R$1,530,936 at September 30, 2021 (R$2,360,422 on December 31, 2020).
Cemig GT is exposed to market risk
due to having contracted this hedge, the principal potential impact being a change in future interest rates and/or the future exchange
rates. Based on the futures curves for interest rates and dollar, Cemig GT prepare a sensitivity analyses and estimates that in a probable
scenario its results at September 30, 2022, would be positively affected by the swap and call spread at the end of the period in the amount
of R$74,961. The fair value of the financial instrument will be R$1,377,600, in which R$1,117,169 refers to the option (call spread) and
R$260,431 refers to the swap.
Cemig GT has measured the effects
on its net income of reduction of the estimated fair value for the ‘probable’ scenario, analyzing sensitivity for the risks
of interest rates, exchange rates and volatility changes, by 25% and 50%, as follows:
|
Parent Company and Consolidated
|
Base scenario Sep. 30, 2021
|
‘Probable’
scenario:
|
‘Possible’ scenario
exchange rate depreciation and interest rate increase 25%
|
‘Remote’ scenario:
exchange rate depreciation and interest
rate increase 50%
|
|
|
|
|
Swap (asset)
|
4,332,428
|
4,219,079
|
3,716,225
|
3,241,481
|
|
|
Swap (liability)
|
(4,003,495)
|
(3,958,648)
|
(4,049,877)
|
(4,137,753)
|
|
|
Option / Call spread
|
973,706
|
1,117,169
|
774,253
|
287,545
|
|
|
Derivative hedge instrument
|
1,302,639
|
1,377,600
|
440,601
|
(608,727)
|
|
The same methods of measuring marked
to market of the derivative financial instruments described above were applied to the estimation of fair value.
|
|
c)
|
Financial risk management
|
Corporate risk management
is a management tool that is part of the Company’s corporate governance practices, and is aligned with the process of planning,
which sets the Company’s strategic business objectives.
The Company monitor the financial
risk of transactions that could negatively affect the Company’s liquidity or profitability, recommending hedge protection strategies
to minimize the Company’s exposure to foreign exchange rate risk, interest rate risk, and inflation risks, which are effective,
in alignment with the Company’s business strategy.
The main risks to which the Company
is exposed are as follows:
Exchange rate risk
The Company and its subsidiaries
are exposed to the risk of appreciation in exchange rates, with effect on loans and financing, suppliers (energy purchased from Itaipu)
and cash flow. For Cemig GT debt denominated in foreign currency, were contracted a derivative financial instrument that protects the
risks associated with the interest and principal, in the form of a swap and a call spread, respectively, in accordance with the hedge
policy of the Company. The Cemig GT exposures to market risk associated to this instrument is described in the topic “Swap transaction”
of this Note. The risk exposure of Cemig D is mitigated by the account for compensation of variation of parcel A items (CVA).
The net exposure to exchange rates
is as follows:
|
Exposure to exchange rates
|
Sep. 30, 2021
|
Dec. 31, 2020
|
|
Foreign currency
|
R$
|
Foreign currency
|
R$
|
|
US dollar
|
|
|
|
|
|
Loans and financing (Note 21)
|
(1,034,763)
|
(5,628,489)
|
(1,513,592)
|
(7,865,684)
|
|
Suppliers (Itaipu Binacional) (Note 19)
|
(59,259)
|
(322,334)
|
(62,593)
|
(325,277)
|
|
|
(1,094,022)
|
(5,950,823)
|
(1,576,185)
|
(8,190,961)
|
|
Net liabilities exposed
|
|
(5,950,823)
|
|
(8,190,961)
|
Sensitivity analysis
Based on finance information from
its financial consultants, the Company estimates that in a probable scenario the variation of the exchange rates of foreign currencies
in relation to the Real on September 30, 2022 will be an deppreciation of the dollar by 1.64%, to R$5.35. The Company has prepared a sensitivity
analysis of the effects on the Company’s net income arising from depreciation of the Real exchange rate considering the increase
of 25%, and 50%, in relation to this ‘probable’ scenario.
|
Risk: foreign exchange rate exposure
|
Base Scenario
|
‘Probable’ scenario
US$=R$5.35
|
‘Possible’ scenario
US$= R$6.69
|
‘Remote’ scenario
US$=R$8.03
|
|
US dollar
|
|
|
|
|
|
Loans and financings (Note 21)
|
(5,628,489)
|
(5,535,981)
|
(6,922,563)
|
(8,309,146)
|
|
Suppliers (Itaipu Binacional) (Note 19)
|
(322,334)
|
(317,036)
|
(396,443)
|
(475,851)
|
|
|
(5,950,823)
|
(5,853,017)
|
(7,319,006)
|
(8,784,997)
|
|
|
|
|
|
|
|
Net liabilities exposed
|
(5,950,823)
|
(5,853,017)
|
(7,319,006)
|
(8,784,997)
|
|
Net effect of exchange rate fluctuation
|
|
97,806
|
(1,368,183)
|
(2,834,174)
|
Company has entered into swap operations
to replace the exposure to the US dollar fluctuation with exposure to fluctuation in the CDI Rate, as described in more detail in the
item ‘Swap Transactions’ in this Note.
Interest rate risk
The Company and its subsidiaries
are exposed to the risk of decrease in Brazilian domestic interest rates on September 30, 2021. This risk arises from the effect of variations
in Brazilian interest rates on net financial income comprised by financial revenues from cash investments made by the Company, and also
to the financial assets related to the CVA and other financial components, net of the effects on financial expenses associated to loans,
financings and debentures in Brazilian currency, and also sectorial financial liabilities.
Part of the loans and financings
in Brazilian currency comprises financings obtained from various financial agents that specify interest rates taking into account basic
interest rates, the risk premium compatible with the companies financed, their guarantees, and the sector in which they operate.
The Company does not contract derivative
financial instruments for protection from this risk. Variations in interest rates are continually monitored with the aim of assessing
the need for contracting of financial instruments that mitigate this risk.
This exposure occurs as a result
of net assets (liabilities) indexed to variation in interest rates, as follows:
|
Risk: Exposure to domestic interest rate changes
|
Sep. 30, 2021
|
Dec. 31, 2020
|
|
Assets
|
|
|
|
Cash equivalents – Cash investments (Note 5) – CDI
|
774,027
|
1,587,337
|
|
Marketable securities (Note 6) – CDI / SELIC
|
3,027,479
|
4,125,063
|
|
Restricted cash – CDI
|
42,872
|
63,674
|
|
CVA and in tariffs (Note 13) – SELIC
|
1,921,926
|
132,681
|
|
|
5,766,304
|
5,908,755
|
|
Liabilities
|
|
|
|
Loans, financing and debentures (Note 21) – CDI
|
(1,592,187)
|
(2,310,590)
|
|
Loans, financing and debentures (Note 21) – TJLP
|
(26,008)
|
(72,726)
|
|
Sector financial liabilities (note 13)
|
(98,537)
|
(231,322)
|
|
|
(1,716,732)
|
(2,614,638)
|
|
Net assets exposed
|
4,049,572
|
3,294,117
|
Sensitivity analysis
In relation to the most significant
interest rate risk, Company estimates that, in a probable scenario, at september 30, 2022 Selic and TJLP rates will be 8.75% and 5.75%,
respectively. The Company has made a sensitivity analysis of the effects on its net income arising from increases in rates of 25% and
50% in relation to the ‘probable’ scenario. Fluctuation in the CDI rate accompanies the fluctuation of Selic rate.
|
Risk: Increase in Brazilian interest rates
|
Sep. 30, 2021
|
Sep. 30, 2022
|
|
Book value
|
‘Probable’ scenario
Selic 8.75%
TJLP 5.75%
|
‘Possible’ scenario
Selic 6.56%
TJLP 4.31%
|
‘Remote’ scenario
Selic 4.38%
TJLP 2.88%
|
|
Assets
|
|
|
|
|
|
Cash equivalents (Note 5)
|
774,027
|
841,754
|
824,803
|
807,929
|
|
Marketable securities (Note 6)
|
3,027,479
|
3,292,383
|
3,226,082
|
3,160,083
|
|
Restricted cash
|
42,872
|
46,623
|
45,684
|
44,750
|
|
CVA and Other financial components – SELIC (Note 13)
|
1,921,926
|
2,090,095
|
2,048,004
|
2,006,106
|
|
|
5,766,304
|
6,270,855
|
6,144,573
|
6,018,868
|
|
Liabilities
|
|
|
|
|
|
Loans and financing (Note 21) – CDI
|
(1,592,187)
|
(1,731,503)
|
(1,696,634)
|
(1,661,925)
|
|
Loans and financing (Note 21) – TJLP
|
(26,008)
|
(27,503)
|
(27,129)
|
(26,757)
|
|
Sector financial liabilities (Note 13)
|
(98,537)
|
(104,203)
|
(102,784)
|
(101,375)
|
|
|
(1,716,732)
|
(1,863,209)
|
(1,826,547)
|
(1,790,057)
|
|
|
|
|
|
|
|
Net assets exposed
|
4,049,572
|
4,407,646
|
4,318,026
|
4,228,811
|
|
Net effect of fluctuation in interest rates
|
|
358,074
|
268,454
|
179,239
|
Increase in inflation risk
The Company and its subsidiaries
are exposed to the risk of increase in inflation index on September 30, 2021. A portion of the loans, financings and debentures as well
as the pension fund liabilities are adjusted using the IPCA (Expanded National Customer Price). The revenues are also adjusted using the
IPCA and IGP-M index, mitigating part of the Company risk exposure. This table presents the Company’s net exposure to inflation
index:
|
Exposure to increase in inflation
|
Sep. 30, 2021
|
Dec. 31, 2020
|
|
Assets
|
|
|
|
Concession financial assets related to Distribution infrastructure - IPCA (1)
|
678,362
|
559,241
|
|
Receivable from Minas Gerais state government (AFAC) – IGPM (Note 10 and 29)
|
13,366
|
11,614
|
|
Concession Grant Fee – IPCA (Note 13)
|
2,710,769
|
2,549,198
|
|
|
3,402,497
|
3,120,053
|
|
|
|
|
|
Liabilities
|
|
|
|
Loans, financing and debentures – IPCA and IGP-DI (Note 21)
|
(4,166,278)
|
(4,863,087)
|
|
Debt with pension fund (Forluz) – IPCA (Note 23)
|
(406,173)
|
(472,559)
|
|
Deficit of pension plan (Forluz) – IPCA (Note 23)
|
(538,460)
|
(540,142)
|
|
|
(5,110,911)
|
(5,875,788)
|
|
Net liabilities exposed
|
(1,708,414)
|
(2,755,735)
|
(1) Portion of the concession financial
assets relating to the Regulatory Remuneration Base of Assets ratified by the grantor (Aneel) after the 4rd tariff review cycle.
Sensitivity analysis
In relation to the most significant
risk of reduction in inflation index, reflecting the consideration that the Company has more assets than liabilities indexed to inflation
indexes, the Company estimates that, in a probable scenario, at September 30, 2022 the IPCA inflation index will be 4.81% and the IGPM
inflation index will be 4.50%. The Company has prepared a sensitivity analysis of the effects on its net income arising from a reduction
in inflation of 25% and 50% in relation to the ‘probable’ scenario.
|
Risk: increase in inflation index
|
Sep. 30, 2021
|
Sep. 30, 2022
|
|
Amount
Book value
|
‘Probable’ scenario
IPCA 4.81%
IGPM 4.50%
|
‘Possible’ scenario
(25%)
IPCA 3.61%
IGPM 3.38%
|
‘Remote’ scenario
(50%)
IPCA 2.41%
IGPM 2.25%
|
|
Assets
|
|
|
|
|
|
Concession financial assets related to Distribution infrastructure – IPCA (1)
|
678,362
|
710,886
|
719,003
|
727,181
|
|
Accounts receivable from Minas Gerais state government (AFAC) – IGPM index (Note 10 and 29)
|
13,366
|
13,967
|
14,119
|
14,268
|
|
Concession Grant Fee – IPCA (Note 13)
|
2,710,769
|
2,841,157
|
2,873,686
|
2,906,487
|
|
|
3,402,497
|
3,566,010
|
3,606,808
|
3,647,936
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
Loans, financing and debentures – IPCA and IGP-DI (Note 21)
|
(4,166,278)
|
(4,366,676)
|
(4,416,671)
|
(4,467,083)
|
|
Debt agreed with pension fund (Forluz) – IPCA (Note 23)
|
(406,173)
|
(425,710)
|
(430,584)
|
(435,499)
|
|
Deficit of pension plan (Forluz) (Note 23)
|
(538,460)
|
(564,360)
|
(570,821)
|
(577,337)
|
|
|
(5,110,911)
|
(5,356,746)
|
(5,418,076)
|
(5,479,919)
|
|
Net liabilities exposed
|
(1,708,414)
|
(1,790,736)
|
(1,811,268)
|
(1,831,983)
|
|
Net effect of fluctuation in IPCA and IGP–M indexes
|
|
(82,322)
|
(102,854)
|
(123,569)
|
(1)
Portion of the Concession financial assets relating to the Regulatory Remuneration Base of Assets ratified by the grantor (Aneel) after
the 4rd tariff review cycle.
Liquidity risk
Cemig has sufficient cash flow to
cover the cash needs related to its operating activities.
The Company manages liquidity risk
with a group of methods, procedures and instruments that are coherent with the complexity of the business, and applied in permanent control
of the financial processes, to guarantee appropriate risk management.
Cemig manages liquidity risk
by permanently monitoring its cash flow in a budget-oriented manner. Balances are projected monthly, for each one of the companies, over
a period of 12 months, and daily liquidity is projected over 180 days.
Short-term investments must
comply with investing principles established in the Company’s Cash Investment Policy. These include applying its resources in private
credit investment funds, without market risk, and investment of the remainder directly in bank CDs or repo contracts which earn interest
at the CDI rate.
In managing cash investments, the
Company seeks to obtain profitability through a rigid analysis of financial institutions’ credit risk, applying operational limits
for each bank, based on assessments that take into account their ratings, exposures and balance sheet. It also seeks greater returns on
investments by strategically investing in securities with longer investment maturities, while bearing in mind the Company’s minimum
liquidity control requirements.
Any reduction in the Company’s
ratings could result in a reduction of its ability to obtain new financing and could also make refinancing of debts not yet due more difficult
or more costly. In this situation, any financing or refinancing of the Company’s debt could have higher interest rates or might
require compliance with more onerous covenants, which could additionally cause restrictions to the operations of the business.
The flow of payments of the Company’s
obligation to suppliers, debts with the pension fund, loans, financing and debentures, at floating and fixed rates, including future interest
up to contractual maturity dates, is as follows:
|
Consolidated
|
Up
to 1 month
|
1
to 3 months
|
3
months to 1 year
|
1
to 5 years
|
Over
5 years
|
Total
|
|
Financial
instruments at (interest rates):
|
|
|
|
|
|
|
|
-
loating rates
|
|
|
|
|
|
|
|
Loans,
financing and debentures
|
54,797
|
424,660
|
1,605,126
|
9,987,301
|
930,332
|
13,002,216
|
|
Onerous
concessions
|
299
|
590
|
2,822
|
12,781
|
15,696
|
32,188
|
|
Debt
with pension plan (Forluz) (Note 23)
|
13,357
|
26,868
|
122,928
|
300,725
|
-
|
463,878
|
|
Deficit
of the pension plan (FORLUZ) (Note 23)
|
5,915
|
11,894
|
54,497
|
315,531
|
484,460
|
872,297
|
|
|
74,368
|
464,012
|
1,785,373
|
10,616,338
|
1,430,488
|
14,370,579
|
|
-
Fixed rate
|
|
|
|
|
|
|
|
Suppliers
|
2,768,576
|
601,978
|
-
|
-
|
-
|
3,370,554
|
|
|
2,842,944
|
1,065,990
|
1,785,373
|
10,616,338
|
1,430,488
|
17,741,133
|
Parent company
|
Up
to 1 month
|
1
to 3 months
|
3
months to 1 year
|
1
to 5 years
|
Over
5 years
|
Total
|
|
Financial
instruments at (interest rates):
|
|
|
|
|
|
|
|
-
Floating rates
|
|
|
|
|
|
|
|
Loans,
financing and debentures
|
-
|
-
|
53,368
|
-
|
-
|
53,368
|
|
Debt
with pension plan (Forluz) (Note 23)
|
657
|
1,322
|
6,048
|
14,796
|
-
|
22,823
|
|
Deficit
of the pension plan (FORLUZ) (Note 23)
|
291
|
585
|
2,681
|
15,524
|
23,835
|
42,916
|
|
|
948
|
1,907
|
62,097
|
30,320
|
23,835
|
119,107
|
|
-
Fixed rate
|
|
|
|
|
|
|
|
Suppliers
|
58,104
|
242
|
-
|
-
|
-
|
58,346
|
|
|
59,052
|
2,149
|
62,097
|
30,320
|
23,835
|
177,453
|
Credit risk
The distribution concession contract
requires levels of service on a very wide basis within the concession area, and disconnection of supply of defaulting customers is permitted.
Additionally, the Company uses numerous tools of communication and collection to avoid increase in default. These include: telephone contact,
emails, text messages, collection letters, posting of customers with credit protection companies, and collection through the courts.
The risk arising from the possibility
of Cemig and its subsidiaries incurring losses as a result of difficulty in receiving amounts billed to its customers is considered to
be low. The credit risk is also reduced by the extremely wide customers’ base.
The allowance for doubtful accounts
receivable recorded on September 30, 2021, considered to be adequate in relation to the credits in arrears receivable by the Company and
its subsidiaries was R$802,392.
Company and its subsidiaries manage
the counterparty risk of financial institutions based on an internal policy, applied since 2004.
This Policy assesses and scales the
credit risks of the institutions, the liquidity risk systemic risk related to macroeconomic and regulatory conditions, the market risk
of the investment portfolio and the Treasury operational risk.
All investments are made in financial
securities that have fixed-income characteristics, always indexed to the CDI rate, and may be of public or private capital as well as
financial or non-financial entities. The Company does not carry out any transactions in variable income securities or that would bring
volatility risk into its interim financial information.
As a management instrument, the Company
and its subsidiaries divide the investment of its funds into direct purchases of securities (own portfolio) and investment funds. The
investment funds invest the funds exclusively in fixed income products, having companies of the Group as the only unit holders. They obey
the same policy adopted in the investments for the Company’s directly-held own portfolio.
The minimum requirements for concession
of credit to financial institutions are centered on three items:
|
|
1.
|
Minimum Brazilian long-term
rating of ‘BBB’ (bra), ‘brBBB’ or ‘Baa2’ by any of the agencies: Fitch Ratings, Moody’s or Standard
& Poor’s.
|
|
|
2.
|
Equity greater than R$800 million.
|
3.
Basel ratio one percentage point above the minimum set
by the Brazilian Central Bank.
The quality of the financial institutions’
credit portfolio is another indicator that is monitored, and may result in reduction of the institution’s limit.
Banks that exceed these thresholds
are classified in three groups, in accordance with their equity value, plus a specific segment comprising those whose credit risk is associated
only with federal government, and within this classification, limits of concentration by group and by institution are set:
|
|
|
Limit per bank (% of equity) (1) (2)
|
|
Group
|
Equity
|
AAA
|
AA
|
A
|
BBB
|
|
Federal Risk
|
-
|
10%
|
10%
|
10%
|
10%
|
|
A1
|
Equal or over R$10 billion
|
9%
|
8%
|
7%
|
6%
|
|
A2
|
Between R$5 billion and R$10 billion
|
8%
|
7%
|
6%
|
5%
|
|
A3
|
Between R$2 billion and R$5 billion
|
7%
|
6%
|
5%
|
4%
|
|
A4
|
Between R$800 million and R$2 billion
|
6%
|
5%
|
4%
|
-
|
|
|
1.
|
The percentage assigned to each bank depends
on individual assessment of indicators, e.g. liquidity, and quality of the credit portfolio.
|
|
|
2.
|
When the institution has different ratings from
different risk rating agencies, the rating that is most favorable for the institution is taken into account.
|
Further to these points, Cemig
also sets two concentration limits:
|
|
1.
|
No bank may have more than
30% of the Group’s portfolio.
|
|
|
2.
|
The banks in the ‘Federal
risk’, ‘A1’ and ‘A2’ groups must concentrate at least 50% of the total of the funds available, comprising
investments held in the Investment Funds and in the own portfolio, excluding public securities.
|
The Company only permits investments
in securities of non-financial companies that have a rating equal to or higher than the most recent rating of the Cemig parent company
published by the risk rating agencies Fitch Rating, Moody’s or Standard & Poor’s.
COVID-19 Pandemic – Risks
and uncertainties related to Cemig’s business
The Company’s assessment concerning
the risks and potential impacts of Covid-19 are disclosed in Note 1b.
Risk of over-contracting and under-contracting
of energy supply
Sale or purchase of energy supply
in the spot market to cover a positive or negative exposure of supply contracted, to serve the captive market of Cemig D, is an inherent
risk to the energy distribution business. The regulatory agent limits for 100% pass-through to customers the exposure to the spot market,
valued at the difference between the distributor’s average purchase price and the spot price (PLD), is only the margin between 95%
and 105% of the distributor’s contracted supply. Any exposure that can be proved to have arisen from factors outside the distributor’s
control (‘involuntary exposure’) may also be passed through in full to customers. Company’s management is continually
monitories its contracts for purchase of energy supply to mitigate the risk of exposure to the spot market.
On April 07, 2020, Aneel expanded
the limit of total amount of energy that can be declared by energy distributors in the process of the mechanism for the sale of surplus
(‘Mecanismo de Venda de Excedentes’ - MVE), during 2020, from 15% to 30%, for the purpose of facilitating contractual reductions,
considering the scenario caused by Covid-19 pandemic.
On May 18, 2020, the Decree 10,350/2020
authorized the creation and management of the Covid Account by the CCEE (Power Trading Chamber), whose purposes includes the coverage
of the financial effects of over contracting caused by the pandemic. The amount estimated for this coverage was R$212,473. The Decree
also added a sub-item to Article 3 of the Decree 5,163/2004, reducing the charge arising from the effects of the Covid-19 pandemic, calculated
in accordance with an Aneel regulation, as one of the possible items to be treated as involuntary over contracting, and as a result passed
through to customers.
Risk of continuity of the concession
The risk to continuity of the distribution
concession arises from the new terms included in the extension of Cemig D’s concession for 30 years from January 1, 2016, as specified
by Law 12,783/13. The extension introduced changes to the present contract, conditional upon compliance by the distributor with new criteria
for quality, and for economic and financial sustainability.
Non-compliance with the quality criteria
for three consecutive years, or the minimum parameters for economic/financial sustainability for two consecutive years, results in opening
of proceedings for termination of the concession.
The efficiency criteria for continuity
of supply and for economic and for financial management, required to maintain the distribution concession, were met in the period ended
September 30, 2021.
Hydrological risk
The greater part of the energy sold
by the Company’s subsidiaries is generated by hydroelectric plants. A prolonged period of drought can result in lower water volumes
in the reservoirs of these plants, which can lead to an increase in the cost of acquisition of energy, due to replacement by thermoelectric
generation, or reduction of revenues due to reduction in consumption caused by implementation of wide-ranging programs for saving of energy.
Prolongation of the generation of energy using the thermal plants could pressure costs of acquisition of supply for the distributors,
causing a greater need for cash, and could result in future increases in tariffs.
The Company continuously monitors
the position of its energy balance and the risk position of power purchase contracting, in order to ensure that transactions are consistent
with its objectives and corporate strategy.
The period from October 2020 to April
2021 recorded the worst level of rainfall of the last 91 years, resulting in the need to produce energy from thermal sources to compensate
for the low level of reservoirs. In August 2021, in response to the scenario of generation increased costs, arising from the scarcity
of water in reservoirs, the government created a new level in the ‘Tariff Flag’ system, and launched the Program to Encourage
Voluntary Reduction of Electricity Consumption (‘Programa de Incentivo à Redução Voluntária do Consumo
de Energia Elétrica’). The charge under the ‘Water Scarcity’ flag tariff is R$ 14.24 per 100 kWh consumed,
and applies to all customers of the national grid, from September 2020 to April 2022, with the exception of customers registered to pay
the Social Tariff, who continue to pay at the ‘Flag’ rate published monthly by Aneel. The average increase in residential
tariff expected to result from the change of the Flag system is 6.78%.
The Program to Encourage Voluntary
Reduction of Electricity Consumption, in effect from September to December 2021, reflecting the critical period when the rainy season
begins, was created to encourage customers to save energy. It is an emergency government measure, aiming to ensure continuity and security
of energy supply in the country. Customers who reduce consumption in the months from September to December 2021, so that the sum of their
energy consumption in the period is between 10% and 20% less than in the same period of the previous year, will be given a bonus of R$0.50
per kilowatt-hour (kWh) on the total of the energy saved. The bonus will be stated on the first energy bill received after calculation
of the consumption for the month of December 2021, and credited as a reduction in the subsequent energy bill. According to the Ministry
of Mining and Energy (MME), the bonus is likely to cost approximately R$ 339 million per month, to be financed by the System Service
Charge (ESS). The payment of the bonus has a lower cost than the extra expenditure on dispatching of thermal plants would have had
if there were no reduction in consumption.
Risk of debt early maturity
The Company’s subsidiaries
have loan contracts with restrictive covenants normally applicable to this type of transaction, related to compliance with a financial
index. Non-compliance with these covenants could result in earlier maturity of debts.
On September, 30, 2021, the Company
and its subsidiaries was compliant with all the covenants for financial index requiring half-yearly and annual compliance. More details
in Note 21.
Capital management
This table shows comparisons
of the Company’s net liabilities and its equity:
|
|
Consolidated
|
Parent company
|
|
Sep. 30, 2021
|
Dec. 31, 2020
|
Sep. 30, 2021
|
Dec. 31, 2020
|
|
Total liabilities
|
32,849,311
|
36,605,732
|
1,906,712
|
2,589,817
|
|
(–) Cash and cash equivalents
|
(827,784)
|
(1,680,397)
|
(73,591)
|
(422,647)
|
|
(–) Restricted cash
|
(42,872)
|
(63,674)
|
(358)
|
(349)
|
|
Net liabilities
|
31,978,655
|
34,861,661
|
1,832,763
|
2,166,821
|
|
|
|
|
|
|
|
Total equity
|
20,267,355
|
17,477,348
|
20,262,155
|
17,472,666
|
|
Net liabilities / equity
|
1.58
|
2.00
|
0.09
|
0.12
|
The operating segments of the Company
and its subsidiaries reflect their management and their organizational structure, used to monitoring its results. They are aligned with
the regulatory framework of the Brazilian energy industry. The Company also operates in the gas market, through its subsidiary Gasmig,
and in other businesses with less impact on the results of its operations.
As from 1° quarter of 2021, the
Executive Board has begun to make a separate performance evaluation of the energy trading activity, using information on its results to
support decisions on application of funds to this sector of the business. This change in the separation of details by operational segment
as disclosed by the Company arises from the growing importance of the activity of this segment in the energy market for complying with
and maintaining the Company’s contractual obligations, especially after the reduction of the Company’s own generation capacity
– hence this decision on criteria for segregation, to obtain separate information on the profit and loss of this segment. The energy
trading activity, as an operational segment, comprises purchase and sale of energy in the Free and Regulated markets, and the activities
related to its commercial and market procedures, including transactions on the Power Trading Exchange (CCEE).
In a further separation of segmented
management and analysis, we are now monitoring and evaluating the results of the affiliated and jointly-controlled companies overseen
by the department of the Chief Officer for Holdings (‘CemigPar’) as a single segment, evaluating Cemig’s non-controlling
shareholdings, in line with the Company’s business strategies. The main aim of separation of this segment is to monitor compliance
with the targets established by these companies, to ensure sustainability and maximization of their return for the company. The results
of the subsidiaries Gasmig and Cemig Sim are also included in this segment, since their management and analysis of performance, too, is
linked to the CemigPar management unit (the office of the Chief Officer for Holdings).
Thus, as from 1° quarter of 2021,
the segment information started be presented separately into the following 5 reportable segments:
Generation: Comprise production
of energy from hydroelectric and wind facilities.
Transmission: Comprise construction,
operation and maintenance of transmission lines and substations.
Commercialization:
Comprise commercialization of energy and provision of related services. As per Note 26(g), in the
third quarter of 2021 the Company began the process of segregation of the commercialization business, with partial transfer from Cemig
GT to the parent company. There was no change in the Company’s corporate strategy of serving the market with the purpose of energy
delivery to its clients.
Distribution: Comprise provision
of energy distribution services, including operation and maintenance of the related infrastructure and services.
Investees: Comprise management
of the equity interests in which the company does not have shareholding control, in line with the Company’s business strategies.
The results of the subsidiaries Gasmig and Cemig Sim are also included in this segment, since their management, too, is linked to the
CemigPar management unit (the office of the Chief Officer for Holdings).
Transfer of energy from the generation
activity to the trading activity comprises a transaction between segments, since it consists of obtaining of revenue from the sale of
energy generated, and costs for purchase of energy to be traded – these are measured at sale prices estimated in accordance with
criteria based on the Company’s model for management of these businesses, using market prices as a reference.
This table shows the segment information in the new segmentation
base, for the period end September 30, 2021 and 2020, on a consolidated basis:
INFORMATION BY SEGMENT AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 2021
|
|
ACCOUNT/DESCRIPTION
|
ENERGY
|
INVESTEES
|
TOTAL
|
INTER SEGMENT TRANSACTIONS (1)
|
RECONCILIATION (2) (3)
|
TOTAL
|
|
GENERATION
|
TRANSMISSION
|
TRADING
|
DISTRIBUTION
|
|
NET REVENUE
|
2,137,635
|
716,026
|
4,836,650
|
15,754,015
|
2,044,670
|
25,488,996
|
(1,183,134)
|
(316,472)
|
23,989,390
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF ENERGY AND GAS
|
(571,507)
|
(213)
|
(4,296,855)
|
(10,409,492)
|
(1,428,052)
|
(16,706,119)
|
1,183,134
|
273,519
|
(15,249,466)
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES (3)
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
(112,864)
|
(81,723)
|
(15,068)
|
(624,359)
|
(78,584)
|
(912,598)
|
-
|
-
|
(912,598)
|
|
Employees’ and managers’ profit sharing
|
(12,044)
|
(10,791)
|
(2,021)
|
(74,167)
|
(5,458)
|
(104,481)
|
-
|
-
|
(104,481)
|
|
Post-employment obligations
|
(30,174)
|
(27,311)
|
(5,044)
|
(219,207)
|
(43,169)
|
(324,905)
|
-
|
-
|
(324,905)
|
|
Materials, outsourced services and others expenses (revenues)
|
(146,308)
|
(65,208)
|
(9,146)
|
(1,086,463)
|
(76,881)
|
(1,384,006)
|
-
|
42,953
|
(1,341,053)
|
|
Depreciation and amortization
|
(179,035)
|
(2,578)
|
(389)
|
(500,923)
|
(80,557)
|
(763,482)
|
-
|
-
|
(763,482)
|
|
Operating provisions and impairment
|
(12,643)
|
(8,050)
|
(14,108)
|
(75,844)
|
(58,851)
|
(169,496)
|
-
|
-
|
(169,496)
|
|
Construction costs
|
-
|
(101,728)
|
-
|
(1,205,933)
|
(30,436)
|
(1,338,097)
|
-
|
-
|
(1,338,097)
|
|
Total cost of operation
|
(493,068)
|
(297,389)
|
(45,776)
|
(3,786,896)
|
(373,936)
|
(4,997,065)
|
-
|
42,953
|
(4,954,112)
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES
|
(1,064,575)
|
(297,602)
|
(4,342,631)
|
(14,196,388)
|
(1,801,988)
|
(21,703,184)
|
1,183,134
|
316,472
|
(20,203,578)
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodic tariff review, net
|
-
|
217,063
|
-
|
-
|
-
|
217,063
|
-
|
-
|
217,063
|
|
Renegotiation of hydrological risk (Law 14,052/20), net
|
1,031,809
|
-
|
-
|
-
|
-
|
1,031,809
|
-
|
-
|
1,031,809
|
|
Gains arising from the sale of non-current asset held for sale
|
-
|
-
|
-
|
-
|
108,550
|
108,550
|
-
|
-
|
108,550
|
|
Equity in earnings of unconsolidated investees, net
|
31,095
|
-
|
-
|
-
|
407,703
|
438,798
|
-
|
-
|
438,798
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES)
|
2,135,964
|
635,487
|
494,019
|
1,557,627
|
758,935
|
5,582,032
|
-
|
-
|
5,582,032
|
|
Finance net income (expenses)
|
(681,225)
|
(350,485)
|
12,655
|
13,064
|
(936,191)
|
(1,942,182)
|
-
|
-
|
(1,942,182)
|
|
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX
|
1,454,739
|
285,002
|
506,674
|
1,570,691
|
(177,256)
|
3,639,850
|
-
|
-
|
3,639,850
|
|
Income tax and social contribution tax
|
(384,302)
|
(74,339)
|
(136,079)
|
(430,925)
|
176,262
|
(849,383)
|
-
|
-
|
(849,383)
|
|
NET INCOME FOR THE PERIOD
|
1,070,437
|
210,663
|
370,595
|
1,139,766
|
(994)
|
2,790,467
|
-
|
-
|
2,790,467
|
|
Equity holders of the parent
|
1,070,437
|
210,663
|
370,595
|
1,139,766
|
(2,141)
|
2,789,320
|
-
|
-
|
2,789,320
|
|
Non-controlling interests
|
-
|
-
|
-
|
-
|
1,147
|
1,147
|
-
|
-
|
1,147
|
(1) The only inter-segment transactions are from the generation
to the trading segment, as explained above.
(2) The reconciliation between the published amounts for
the segments and the accounting information on revenue and costs indicates the transactions between the consolidated companies (eliminations).
(3) The information on operational costs and expenses separated
by type is segregated in accordance with the internal business model, which has immaterial differences in relation to the accounting information.
|
INFORMATION BY SEGMENT AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 2020
|
|
ACCOUNT/DESCRIPTION
|
ENERGY
|
INVESTEES
|
TOTAL
|
INTER SEGMENT TRANSACTIONS (1)
|
RECONCILIATION (2) (3)
|
TOTAL
|
|
GENERATION
|
TRANSMISSION
(RESTATED)
|
TRADING (1)
|
DISTRIBUTION
|
|
|
NET REVENUE
|
4,788,992
|
537,373
|
-
|
11,723,189
|
1,157,215
|
18,206,769
|
-
|
(243,485)
|
17,963,284
|
|
COST OF ENERGY AND GAS
|
|
|
|
|
|
|
|
|
|
|
Energy bought for resale
|
(2,853,191)
|
-
|
-
|
(5,731,631)
|
-
|
(8,584,822)
|
-
|
56,410
|
(8,528,412)
|
|
Charges for use of the national grid
|
(148,489)
|
(134)
|
-
|
(1,191,308)
|
-
|
(1,339,931)
|
-
|
182,690
|
(1,157,241)
|
|
Gas bought for resale
|
-
|
-
|
-
|
-
|
(750,664)
|
(750,664)
|
-
|
-
|
(750,664)
|
|
Total
|
(3,001,680)
|
(134)
|
-
|
(6,922,939)
|
(750,664)
|
(10,675,417)
|
-
|
239,100
|
(10,436,317)
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
Personnel
|
(140,408)
|
(85,490)
|
-
|
(651,632)
|
(63,354)
|
(940,884)
|
-
|
-
|
(940,884)
|
|
Employees’ and managers’ profit sharing
|
(18,299)
|
(8,931)
|
-
|
(69,047)
|
(12,605)
|
(108,882)
|
-
|
-
|
(108,882)
|
|
Post-employment obligations
|
(39,651)
|
(32,012)
|
-
|
(226,664)
|
(35,912)
|
(334,239)
|
-
|
-
|
(334,239)
|
|
Materials, outsourced services and others expenses (revenues)
|
(143,726)
|
(31,471)
|
-
|
(922,945)
|
(62,819)
|
(1,160,961)
|
-
|
4,385
|
(1,156,576)
|
|
Depreciation and amortization
|
(151,357)
|
(3,701)
|
-
|
(496,350)
|
(82,130)
|
(733,538)
|
-
|
-
|
(733,538)
|
|
Operating provisions and impairment
|
(47,286)
|
(19,307)
|
-
|
(133,341)
|
(55,189)
|
(255,123)
|
-
|
-
|
(255,123)
|
|
Construction costs
|
-
|
(115,709)
|
-
|
(968,413)
|
(38,514)
|
(1,122,636)
|
-
|
-
|
(1,122,636)
|
|
Total cost of operation
|
(540,727)
|
(296,621)
|
-
|
(3,468,392)
|
(350,523)
|
(4,656,263)
|
-
|
4,385
|
(4,651,878)
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES
|
(3,542,407)
|
(296,755)
|
-
|
(10,391,331)
|
(1,101,187)
|
(15,331,680)
|
-
|
243,485
|
(15,088,195)
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodic tariff review, net
|
-
|
479,703
|
-
|
-
|
-
|
479,703
|
-
|
-
|
479,703
|
|
Fair value of business combination
|
-
|
51,736
|
-
|
-
|
-
|
51,736
|
-
|
-
|
51,736
|
|
Impairment (reversals) of assets held for sale
|
-
|
-
|
-
|
-
|
(270,267)
|
(270,267)
|
-
|
-
|
(270,267)
|
|
Equity in earnings of unconsolidated investees, net
|
32,136
|
-
|
-
|
-
|
230,162
|
262,298
|
-
|
-
|
262,298
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES)
|
1,278,721
|
772,057
|
-
|
1,331,858
|
15,923
|
3,398,559
|
-
|
-
|
3,398,559
|
|
Finance expenses
|
(1,181,705)
|
(137,437)
|
-
|
28,003
|
32,457
|
(1,258,682)
|
-
|
-
|
(1,258,682)
|
|
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX
|
97,016
|
634,620
|
-
|
1,359,861
|
48,380
|
2,139,877
|
-
|
-
|
2,139,877
|
|
Income tax and social contribution tax
|
(6,425)
|
(169,940)
|
-
|
(513,989)
|
143,293
|
(547,061)
|
-
|
-
|
(547,061)
|
|
NET INCOME FOR THE PERIOD
|
90,591
|
464,680
|
-
|
845,872
|
191,673
|
1,592,816
|
-
|
-
|
1,592,816
|
|
Equity holders of the parent
|
90,591
|
464,680
|
-
|
845,872
|
190,904
|
1,592,047
|
-
|
-
|
1,592,047
|
|
Non-controlling interests
|
-
|
-
|
-
|
-
|
769
|
769
|
-
|
-
|
769
|
|
|
(1)
|
The results of the Trading business are presented
in the Generation segment, since in 2020 this activity was considered to be an element of the generation business, and segregating it
using the assumptions of the new segmentation base is impracticable. Thus, for 3Q20 we do not present the trading segment and there are
no inter-segment transactions.
|
|
|
(2)
|
The reconciliation between the published amounts
for the segments and the accounting information on revenue and costs indicates the transactions between the consolidated companies (eliminations).
|
|
|
(3)
|
The information on operational costs and expenses
separated by type is segregated in accordance with the internal business model, which has immaterial differences in relation to the accounting
information.
|
The information for assets by segment
is not presented, because this is not part of the information made available to the Company’s management.
As stated in Note 2.3, the
effects of the retrospective application adjustments in balances for September 30, 2020 only affected the transmission segment.
|
|
32.
|
ASSETS AND LIABILITIES AS HELD FOR SALE
|
On December 31, 2020 assets and liabilities
classified as held for sale, and the results of discontinued and continuing operations, were as follows:
|
Consolidated and Parent company – Statements of financial position
|
Jun. 30, 2021
|
Dec. 31, 2020
|
|
Assets held for sale – investment in an affiliate
|
-
|
1,258,111
|
Sale of retained investment
in Light on January 2021
On January 22, 2021, the public offering
of common shares in Light was completed. This offering comprises: (a) primary distribution of 68,621,264 new common shares in Light (“the
Primary Offering”); and (b) a secondary distribution, of the Company shares, with restricted placement efforts. The Company sold
its entire holding of shares in Light at R$20.00 per share for a total of R$1,372,425.
As a result, the Company recognized,
in January, 2021, the gain before taxes of R$108,550, considering the carrying amount of the non-current asset held for sale at the transaction
date. The fiscal cost of the investment was adjusted for the tax calculation, pursuant to tax law, considering the equity value of the
investment, plus the goodwill and the excess of net fair value of the investee’s identifiable assets and liabilities over the cost
paid in the step-acquisitions.
|
Consolidated and Parent company
|
|
|
Cemig’s shares
|
68,621,263
|
|
Sale price of the shares – January 21, 2021
|
20.00
|
|
Total value
|
1,372,425
|
|
Estimated cost to sell (0.42%) (1)
|
(5,764)
|
|
Fair value, less cost to sell on 01/22/2021
|
1,366,661
|
|
Non-current asset held for sale carrying amount in 12/31/2020
|
(1,258,111)
|
|
Gains arising from the sale of non-current asset held for sale
|
108,550
|
|
IRPJ and CSLL
|
(36,907)
|
|
Gain after taxes
|
71,643
|
|
|
(1)
|
The estimated cost to sell includes financing, accounting and legal advices
services.
|
33.
NON-CASH TRANSACTIONS
On September 30, 2021 and 2020, the
Company had the following transactions not involving cash, which are not reflected in the Cash flow statement:
|
|
§
|
Capitalized financial costs of R$5,701 on
the period enden on September 30, 2021 (R$22,848 on September 30, 2020);
|
|
|
§
|
Except for the cash arising from the business combination, in the amount of R$27,110, and the payment
of R$44,775, the acquisition of the Centroeste’s remaining equity interest did
not generate effects in the Company’s cash flow, in the 1st quarter of 2020;
|
|
|
§
|
Lease addition in the amount of R$10,734 on September 30, 2021
(R$3,366 on September 30, 2020).
|
34.
PARLIAMENTARY COMMITTEE OF INQUIRY (‘CPI’)
On June 17, 2021, the Legislative
Assembly of Minas Gerais has established a Parliamentary Committee of Inquiry (‘CPI’) to investigate management acts of Cemig
since 2019. At an ordinary meeting held on June 24, 2021, the Legislative Assembly of the State of Minas Gerais appointed the members
of the CPI. The Committee has powers, for 120 days from appointment of its Chair and Deputy Chair, to conduct investigations on the reports
that form the basis of the application for it to be constituted.
The ‘CPI’ requested,
through application, several documents and information related, mainly, to acquisition and disposal of equity interest, human resources
management and procurement processes that were considered to be exempt from mandatory bidding. The Company has complied with the requests,
including the deadlines.
At an extraordinary meeting held
on October 26, 2021, the Legislative Assembly of Minas Gerais State decided to extend its CPI by an additional 60 days. Due to the parliamentary
recess, which begins in December, the effect of CPI will continue until February 21, 2022.
The Company reaffirms its commitment
to provide all the information necessary for full understanding and clarification of its management decisions.
35.
SUBSEQUENT EVENTS
|
|
a)
|
Gasmig tariff adjustment
|
Through Resolution 61 of October
28, 2021, the Minas Gerais State Economic Development Department (‘Secretaria de Estado de Desenvolvimento Econômico de
Minas Gerais’- SEDE) approved new tariffs to be applied by Gasmig for the Industrial, Co-generation, Compressed Natural Gas
and Liquid Natural Gas user categories from November 1, 2021. This resulted in an average increase of 3% over the tariffs in effect since
August 2021. This increase related to the variation in the cost of gas acquired by Gasmig.
|
|
b)
|
Agreement of sale of interest
in Renova
|
On
November 11, 2021, Cemig GT signed a Share Purchase Agreement with AP Energias Renováveis Fundo de Investimento em Participações
Multiestratégia, an Angra Partners’ investment vehicle, administered and managed by Mantiq Investimentos Ltda, including
the sale of the whole equity interest held in Renova S.A – In-Court Supervised Reorganization (“Renova”) and the assignment,
for consideration, of all credits owed to Cemig GT by Renova Comercializadora de Energia S.A. – In-Court Supervised Reorganization,
for total consideration of R$60 million. The contract establishes the Cemig GT right to an earn-out, depending on certain future events.
The agreement specifies others terms
and conditions for the closing of the transaction, and is subject to compliance with certain precedent conditions that are usual in similar
transactions, including prior approval by the grantor authorities, the creditors holding asset guarantees listed in Renova’s Court
Supervised Reorganization Plan and the counterparties in certain commercial contracts. In the event of the Transaction being completed,
there will be potential for Cemig GT to benefit from certain tax credits.
The equity interest held in Renova,
which carrying amount is zero, was not classified as an asset held for sale since, at the end of these interim financial statements reporting
period, its sale did not achieve the conditions to be considered highly probable, according to IFRS 5/CPC 31 – Non-current Asset
held for Sale and Discontinued Operation, once it has not been approved by the governance body that has the authority to do so, and,
according to IAS 10/CPC 24 – Events After the Reporting Period, the classification of assets as held for sale in accordance
with IFRS 5/CPC 31 is a non-adjusting event after the reporting period.
CONSOLIDATED RESULTS
(Figures in R$ ’000 unless
otherwise indicated)
Net income for the period
From January to September 2021, Cemig
reports profit of R$2,790,467, compared to a loss of R$1,592,816 (restated) in the same period in 2020, an increase of 75.17%. The improvement
in the result is due, basically, to recognition of the gains arising from renegotiation of hydrological risk, disposal of assets held
for sale (Light) and the increase in gross margin in the 2H2021. The following items describe the main variations between the two periods
in revenues, costs, expenses and financial items.
Ebitda (Earnings before interest,
tax, depreciation and amortization)
Cemig’s consolidated adjusted
Ebitda, with the removal of non-recurrent items, higher in 19.07% from January to September 2021 compared to the same period of 2020,
whereas the adjusted Ebitda margin higher from 20.76% to 18.51%. Consolidated Ebitda higher 53.57% from January to September 2021 compared
to the same period of 2020, whereas the Ebitda margin was 23.00% from January to September 2021 to 26.45% on the same period of 2021.
|
EBITDA - R$’000
|
Jan to Sep 2021
|
Jan to Sep 2020 (Restated)
|
Charge %
|
|
Net income for the period
|
2,790,467
|
1,592,816
|
75.19
|
|
+ Income tax and Social Contribution tax
|
849,383
|
547,061
|
55.26
|
|
+ Net financial revenue (expenses)
|
1,942,182
|
1,258,682
|
54.30
|
|
+ Depreciation and amortization
|
763,482
|
733,538
|
4.08
|
|
= Ebitda according to “CVM Instruction 527” (1)
|
6,345,514
|
4,132,097
|
53.57
|
|
Non-recurrent items
|
|
|
|
|
+ Non-controlling interests
|
(1,147)
|
(769)
|
-
|
|
+ Impairment (reversals) of assets held for sale (Note 32)
|
-
|
270,267
|
-
|
|
+ Periodic Tariff Review adjustments
|
(217,063)
|
(479,703)
|
(54.75)
|
|
+ Gains arising from the sale of non-current asset held for sale (Note 32)
|
(108,550)
|
-
|
-
|
|
+ Reversal of tax provisions
|
(89,493)
|
-
|
-
|
|
+ Impairment loss – Receivables from Renova
|
-
|
37,361
|
-
|
|
+ Renegotiation of hydrological risk costs (Law 14,052/20), net
|
(1,031,809)
|
-
|
-
|
|
+ Renegotiation of hydrological risk costs (Law 14,052/20), net - investees
|
(308,460)
|
-
|
-
|
|
+ Advances for services provided, net *
|
(148,350)
|
-
|
-
|
|
+ Result of business combination (note 15)
|
-
|
(51,736)
|
-
|
|
+ Reversal of losses expected on receivables from Minas Gerais State (net of provisions made)
|
-
|
(178,028)
|
-
|
|
Ebitda Adjusted (2)
|
4,440,642
|
3,729,489
|
19.07
|
* The amount refers to early payment of amounts for provision
of services of the subsidiary ESCEE to a free customer, net of PIS/Pasep and Cofins taxes.
** On September 30, 2021 the jointly-controlled
subsidiaries Nesa and Aliança Energia, and the affiliated company Madeira, recognized amounts of R$30,454, R$149,136 and R$128,870,
respectively, arising from renegotiation of hydrological risk.
|
|
(1)
|
Ebitda is a non-accounting measure
prepared by the Company, reconciled with its consolidated interim financial information in accordance with the specifications in CVM Circular
SNC/SEP 01/2007 and CVM Instruction 527 of October 4, 2012. It comprises: net income adjusted for the effects of net financial revenue
(expenses), depreciation, amortization and income tax and the social contribution tax. Ebitda is not a measure recognized by Brazilian
GAAP nor by IFRS; it does not have a standard meaning; and it may be non-comparable with measures with similar titles provided by other
companies. Cemig publishes Ebitda because it uses it to measure its own performance. Ebitda should not be considered in isolation or as
a substitution for net income or operational profit, nor as an indicator of operational performance or cash flow, nor to measure liquidity
nor the capacity for payment of debt.
|
|
|
(2)
|
The Company adjusts the EBITDA
measured according to CVM Instruction 527 removing non-current items, which, because of their nature, do not contribute towards information
on the potential of future cash generation, since they are extraordinary items.
|
The higher adjusted Ebitda from January
to September 2021 than the same period of 2020 mainly from the gains arising from renegotiation of hydrological risk, in the amount of
R$1,031,809, as per the table above. The higher Ebitda calculated in accordance with CVM Instruction 527/2012 results, mainly, reflects
net revenue 33.55% higher year-on-year, partially offset by operational costs, excluding depreciation and amortization, 35.78% higher
YoY.
The main items affecting the revenue in the period, are
as follow:
Revenue from supply of energy
Revenue from supply of energy from
January to September 2021 was R$21,529,782, 11.09% higher than the same period in 2020 (R$19,380,363).
Final customers
Revenue from energy sold to final
customers, excluding Cemig’s own consumption, from January to September 2021 was R$19,389,531, or 14.94% higher than the figure
in the same period of 2020, R$16,868,660.
Cemig’s energy market
The total for sales in Cemig’s
consolidated energy market comprises sales to: (i) Captive customers in Cemig’s concession area in the State of Minas Gerais; (ii)
Free Customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação
Livre, or ACL); (iii) other agents of the energy sector – traders, generators and independent power producers, also in the Free
Market; (iv) Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and (v) the
Power Trading Chamber (Câmara de Comercialização de Energia Elétrica – CCEE), eliminating
transactions between companies of the Cemig Group.
This table details Cemig’s market and the changes
in sales of energy by customer category, comparing the period from January to September 2021 to the same period in 2020:
Revenue from supply of energy
|
|
Jan to Sep 2021
|
Jan to Sep 2020
|
Charge %
|
|
MWh
(2)
|
R$
|
Average price billed (R$/MWh)
(1)
|
MWh
(2)
|
R$
|
Average price billed (R$/MWh)
(1)
|
MWh
|
R$
|
|
Residential
|
8,399,020
|
8,137,611
|
968.88
|
8,095,031
|
7,275,465
|
898.76
|
3.76
|
11.85
|
|
Industrial
|
12,122,951
|
3,869,098
|
319.15
|
9,609,659
|
3,044,259
|
316.79
|
26.15
|
27.09
|
|
Commercial, Services and Others
|
6,116,435
|
3,947,505
|
645.39
|
6,410,602
|
3,703,102
|
577.65
|
(4.59)
|
6.60
|
|
Rural
|
3,089,080
|
1,928,039
|
624.15
|
2,810,932
|
1,616,856
|
575.20
|
9.90
|
19.25
|
|
Public authorities
|
526,237
|
405,600
|
770.76
|
535,169
|
392,207
|
732.87
|
(1.67)
|
3.41
|
|
Public lighting
|
928,034
|
535,882
|
577.44
|
991,695
|
441,318
|
445.01
|
(6.42)
|
21.43
|
|
Public services
|
1,061,925
|
630,718
|
593.94
|
1,022,593
|
543,341
|
531.34
|
3.85
|
16.08
|
|
Subtotal
|
32,243,682
|
19,454,453
|
603.36
|
29,475,681
|
17,016,548
|
577.31
|
9.39
|
14.33
|
|
Own consumption
|
24,667
|
-
|
-
|
24,935
|
-
|
-
|
(1.07)
|
-
|
|
Unbilled retail supply, net
|
-
|
(64,922)
|
-
|
-
|
(147,888)
|
-
|
-
|
(56.10)
|
|
|
32,268,349
|
19,389,531
|
600.88
|
29,500,616
|
16,868,660
|
571.81
|
9.38
|
14.94
|
|
Wholesale supply to other concession holders (3)
|
7,848,816
|
2,161,689
|
275.42
|
9,776,846
|
2,406,532
|
246.15
|
(19.72)
|
(10.17)
|
|
Wholesale supply not yet invoiced, net
|
-
|
(21,438)
|
-
|
-
|
105,171
|
-
|
-
|
-
|
|
Total
|
40,117,165
|
21,529,782
|
536.67
|
39,277,462
|
19,380,363
|
495.76
|
2.14
|
11.09
|
|
|
(1)
|
The calculation of the average price does not include revenue from supply
not yet billed.
|
|
|
(2)
|
Data not audited by external auditors. .
|
|
|
(3)
|
Includes Regulated Market Energy Sale Contracts (CCEARs) and ‘bilateral
contracts’ with other agents.
|
The following factors that contributed
significantly to the higher of 2.14% on the volume of energy sold are:
|
|
§
|
Volume of energy sold to the
industrial segment 26.15% higher, mainly reflecting migration of captive customers to the Free Market, and new contracts for sales to
free clients, starting supply in January 2021.
|
|
|
§
|
Energy sold
to residential customers 3.76% higher from January to September 2021, mainly reflecting the number of customers 2.5% higher YoY and average
monthly consumption 1.26% higher, as well as the the price of energy 7.8% higher in the same period of 2020.
|
|
|
§
|
Volume of energy
sold to the rural customers category 9.90% higher, mainly reflecting the fact that consumption for irrigation was higher, due to the lower
volume of rains in the current period.
|
|
|
§
|
Decrease of 4.59% in the volume
of supply sold to the commercial customer category, mainly because of the significant migration of customers to Distributed Generation
and the Free Market. In addition, this customer category still suffers the impact of the pandemic on economic activity, and thus on consumption.
|
|
|
§
|
The average
price of energy was 8.77% higher from January to September, 2021 than the same period of 2020, mainly reflecting the increase for energy
sale contracts in the Regulated Market, of 4.05%, and also the higher incidence of ‘Tariff Flag’ extra charges in the tariffs
of Cemig D. The higher average price of energy in the Free Market reflects shorter-term sales to traders than the same period of 2020,
resulting from lower market prices in the period. Also, contracts in effect in 2020 and 2021 undergo annual price adjustments in accordance
with the inflation indexes (IPCA or IGP-M) established in the contracts.
|
|
|
§
|
Global increase of 8.25% in
the energy price, mainly due to the increase in the ‘flag’ tariff rates applied in the period.
|
Revenue from Use of Distribution
Systems (TUSD)
This is revenue from charging Free
Customers the Tariff for Use of the Distribution System (TUSD), on the volume of energy distributed. From January to September 2021, this
was R$2,544,329, compared to R$2,192,806 in the same period of 2020 - increase of 16.03%.
The volume of energy transported
from January to September 2021 was 12.62% higher than the same period of 2020, due to: (i) the increase in consumption for irrigation
by rural customers; (ii) the migration of commercial customers to Free Market; and (iii) growth in the industrial market in 2021, due
to the recovery of the economy.
Additionally, this variation mainly
arises from the Company’s annual tariff adjustment, in effect of 10.16% for free clients, applied from June 30, 2020, which respectively
affected Free Clients with increases 5.74%, on August 19, 2020. The effect of the Company’s annual tariff adjustment of 2021, applicable
from May 28, 2021, was 2.40% for free clients, having an impact on the increase as well.
|
|
MWh
|
|
Jan to Sep, 2021
|
Jan to Sep, 2020
|
Charge %
|
|
Industrial
|
15,280,809
|
13,629,894
|
12.11
|
|
Commercial
|
1,104,780
|
907,221
|
21.78
|
|
Rural
|
31,831
|
21,941
|
45.08
|
|
Public service
|
2,631
|
-
|
-
|
|
Concessionaires
|
242,979
|
236,110
|
2.91
|
|
Total
|
16,663,030
|
14,795,166
|
12.62
|
CVA and Other financial components
in tariff adjustments
These items are the recognition of
the difference between actual non-controllable costs (in which the contribution to the CDE – the Energy Development Account and
energy bought for resale, are significant components) and the costs that were used in calculating rates charged to customers. The amount
of this difference is passed through to customers in the next tariff adjustment of Cemig D (the distribution company).
From January to September 2021 this
represented a revenue of R$1,908,899, whereas in the same period of 2020 it produced a revenue of R$98,844. The difference mainly reflects
a higher recognition of CVA and Other financial components from January to September 2021, compairing with the prior period, due to the
increase in the cost of energy acquired in regulated market and transmission costs. Also, the realization of amounts approved in the current
tariff cycle was lower than in the prior cycle.
For further details, see Note 13.
Transmission concession revenue
Transmission revenue from Cemig GT
and Centroeste comprises the sum of revenues recorded for construction, reinforcements, improvements, operation and maintenance, as specified
in the transmission contracts. Under the concession contracts, Annual Permitted Revenues (RAPs) of the existing electricity system, and
those involved in tenders. These are updated annually, based mainly on the inflation index specified in the contract (the IPCA and IGP-M
indexes). Subsequently, all reinforcements and improvements works that are implemented upon specific authorization by Aneel result in
the constitution of a new component of RAP.
The main items in revenue in the period, are as follow:
|
|
§
|
The infrastructure
operation and maintenance revenue was R$236,337 from January to September 2021, or 4.03% more than the same period of 2020 (R$227,175
- Restated);
|
|
|
§
|
The revenues
posted for construction, strengthening and enhancement of infrastructure totaled R$137,828 from January to September 2021, 17.67% less
than the same period of 2020 (R$167,419 - Restated). This mainly reflects the lower investments in transmission, as a result of new decisions
on investments in small-scale improvements, due to the alterations in regulatory rules and the suspension of contracts with suppliers
of reinforcements works; and
|
|
|
§
|
At the same
time, revenues from financial remuneration of transmission contract assets were 99.73% higher from January to September 2021, at R$462,422,
compared to R$231,529 (restated) results for the same period of 2020 – mainly reflecting the increase in the remuneration base of
the assets linked to contracts, as from the Periodic Tariff Review (RTP) ratified the contract 006/97 by Aneel on June 30, 2020, adjusted
on April, 2021, and the contract 079/00 on December 30, 2020.
|
More details in Note 14.
Revenue from transactions in the
Power Trading Chamber (CCEE)
Revenue from transaction with energy
on the CCEE (Power Trading Chamber) was R$533,590 from January to September 2021, compared to R$90,701 in the same period of 2020, an
increase of 488.30%. This higher amount is due to excess of energy from January to September 2021, compared to deficit positions in the
same period of 2020. From January to September 2021, short-term bilateral sales were made that increased the Company’s exposure
on the CCEE.
Additionally,
there was an increase of 187.37% in the average spot price (PLD) in the Southeast and Center-West regions, which was R$327.91/MWh from
January to September 2021, compared to R$118.35/MWh in the same period of 2020, due to the water scarcity.
Revenue from supply of gas
Cemig reports revenue from supply
of gas totaling R$2,492,309 from January to September 2021, compared to R$1,390,827 in the same period of 2020 – 79.20% higher YoY.
This basically reflects the increase on volume of gas sold was in fact 64.37% higher (at 1,037,785m³ from January to September 2021,
vs. 631,353m³ in the same period of 2020), – under the influence, mainly, of the thermoelectric power generation, which consumption
was 499.76% higher.
Construction revenue
Infrastructure construction revenue
of distribution from January to September 2021 was R$1,236,369, compared to R$1,006,927 in the same period of 2020. This variation is
mainly due to the execution of a larger proportion of the Investment Plan budget in assets related to distribution concession infrastructure,
especially those related to the sub-transmission networks, in expansion, strengthening and enhancement of high-voltage infrastructure.
This revenue is fully offset by Construction
costs, of the same amount, and corresponds to the Company’s investments in assets of the concession in the period.
The construction revenues of the
Transmission segment have been dealt with in topic Transmission Concession Revenues.
Revenue arising from advances for services provided
Revenue in the amount of R$153,970 arising from
the negotiation with a free customer that resulted in a revenue recognition related to trading services provided in advance by the subsidiary
ESCEE, on June 2021.
Other operating revenues
The other operating revenues line
for the Company and its subsidiaries from January to September 2021 totaled R$1,282,877, compared to R$1,301,073 in the same period of
2020 – 1.40% lower YoY. See Note 27 for a breakdown of other operating revenues.
Taxes and regulatory charges
reported as Deductions from revenue
The taxes and charges that are recorded
as deductions from operating revenue totaled R$9,986,014 from January to September 2021, or 16.75% more than the same period of 2020 (R$8,553,424
- restated).
Customer charges
– the ’Flag Tariff’ system
The ‘Flag
Tariff’ bands are activated as a result of low levels of water in the system’s reservoirs – tariffs are temporarily
increased due to scarcity of rain. The ‘Red’ band has two levels – Level 1 and Level 2. Level 2 comes into effect when
scarcity is more intense. Activation of the flag tariffs generates an impact on billing in the subsequent month.
From January to September, 2021 these
charges produced a credit of R$137,307, which compares to an expense of R$59,672 in the same period of 2020. The difference is basically
due to activation of the ‘Red’ flag tariff in the months of December 2020 and in May through August 2021 (affecting billing
in January and June through September, 2021). In the other months of this year, the ‘Flag tariff’ activated was ‘Yellow’.
For comparison, in 2020 the ‘yellow’ flag was activated only in December 2019 and January 2020 (affecting billing in January
and February 2020); and ‘Flag Tariff’ was not charged in the other months, as part of the effort to mitigate the effects of
the Covid-19 pandemic.
The Energy Development Account
– CDE
The amounts of payments to the Energy
Development Account (CDE) are determined by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities (reimbursements
of costs of assets), tariff subsidies, and the subsidy for balanced tariff reduction, the low-income-customer subsidy, the coal consumption
subsidy, and the Fuels Consumption Account (CCC).
CDE charges from January to September
2021 totaled R$1,992,361, 9.07% more than the same period of 2020 (R$1,826,713). This mainly reflects (a) higher contracted demand, and
(b) the start of charging of the ‘Covid Account CDE’ in May 2021, ratified by Dispatch 939 of April 5, 2021, under Normative
Resolution 885 of June 23, 2020.
This is a non-manageable cost: the difference between
the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.
Other taxes and charges on revenue
The deductions and charges with the
most significant impact on revenue are mainly taxes, calculated as a percentage of sales revenue. Thus their variations are, substantially,
in proportion to the variations in revenue.
Operating costs and expenses
(excluding financial income/expenses)
Operating costs and expenses totaled
R$20,203,578 from January to September 2021, or 33.90% more than the same period of 2020 (R$15,088,195 - restated). See more on the breakdown
of Operating costs and expenses in Note 27.
The following paragraphs comment
on the main variations:
Personnel
The expense on personnel from January
to September 2021 was R$912,598, or 3.01% less than the same period of 2020 (R$940,884). This variation results, mainly:
|
|
§
|
Reduction of
4.26% in the avarage number of employees from January to September 2021, compared to the same period of 2020, 5,102 and 5,329, respectively;
|
|
|
§
|
Recognition, in 1H21, of a cost of R$35,238 on voluntary retirement plans, compared to R$58,850 in 1H20;
and
|
|
|
§
|
Salary increase of 4.77% under the Collective Work Agreement, as from November 2020.
|
Outsourced services
The expense on outsourced services
from January to September 2021 was R$1,041,543, or 15.16% more than the expense of R$904,465 in the same period of 2020. The following
paragraphs comment on the main variations:
|
|
§
|
Expenses on information technology 99.08%
higher from January to September 2021, at R$72,990, compared to R$36,664 in the same period of 2020. This increase reflects new contracts
and investments in IT security signed and made in 2021.
|
|
|
§
|
Expenses on conservation and cleaning of power line pathways, access roads and firebreaks of Cemig D were
26.38% higher year-on-year, at R$71,305 from January to September 2021 vs. R$56,421 in the same period of 2020.
|
|
|
§
|
Expenses on disconnection and reconnection 175.58% higher from January to September 2021, at R$59,289,
compared to R$21,514 in the same period of 2020. This reflects resumption of the services, after the energy supply suspension due to default
was once again allowed for certain classes of customers.
|
Energy purchased for resale
The expense on energy purchased for
resale from January to September 2021 was R$11,719,653, or 37.42% more than in 2020 (R$8,528,412). The difference is mainly:
|
|
§
|
expenses on energy acquired at auction in the regulated market by Cemig D were 82.10% higher, at R$4,251,173,
compared to R$2,334,514 in the same period of 2020. This increase many arises from higher variable costs in energy trading contracts in
the Regulated Market, due to higher dispatching of thermal plants;
|
|
|
§
|
The expense
on purchase of supply at the spot price was higher 40.73% from January to September 2021, at R$1,163,634, compared to the same period
of 2020 (R$826,871). This change is mainly due to the increase, in 2021, of charges costs and Itaipu effects, physical guarantee quotas
and renegotiation of hydrological risk. These costs are directly affected by the higher average spot price (R$327.91 from
January to September 2021, compared to R$118.35 in the same period of 2020), and to the GSF reduction.
|
|
|
§
|
Higher expenses on distributed generation (‘geração distribuída’) of
78.72%: R$867,393 from January to September 2021, compared to R$485,347 in the same period of 2020. This reflects the higher number of
generation units installed (100,632 on September 2021, compared to 56,856 on September 2020); and the higher volume of energy injected
into the grid (1,360,509 MWh from January to September 2021, compared to 700,793 MWh in the same period of 2020);
|
|
|
§
|
Costs on energy acquired in the Free
Market 26.67% higher, at R$ 3,655,574 from January to September, compared to R$ 2,885,932 in the prior period, mainly associated
with new purchase contracts made to mitigate the exposure risk and the replenishment of incentive-bearing energy sources in energy balance.
|
This is a non-manageable cost: the
difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the
subsequent tariff adjustment. For more details please see Note 13.
Charges for use of the transmission network and
other system charges
Charges for use of the transmission
network from January to September 2021 totaled R$2,101,761, compared with R$1,157,241 in the same period of 2020, an higher of 81.62%.
These charges are payable by energy
distribution and generation agents for use of the facilities that are components of the national grid. The amounts to be paid are set
by a Resolution from the Grantor (Aneel).
The difference is mainly due to lower
transmission charges in 2Q20, resulting in lower cash outflow from distributors during the Covid-19 pandemic. The charges were increased
by approximately 40% as from July 2020. Also, there was higher dispatching of thermal plants outside the ‘merit order’, for
energy security of the system, in 2021, and consequently their high cost increased the System Service Charge (CCEE-ESS).
This is a non-manageable cost in
the distribution activity: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred
is compensated for in the subsequent tariff adjustment. More details see note 13.
Operating provisions
Operating provisions from January
to September 2021 totaled R$169,496, or 33.56% less than the same period of 2020 (R$255,123). This arises mainly from the following factors:
|
|
§
|
Expected losses
on doubtful receivables from clients 36.37% higher, at R$79,463 from January to September 2021, compared to R$58,271 in the same period
of 2020, mainly reflecting the resumption of irregular consumption billing, which has a lower probability of being paid, the greater difficulty
in receipt of older debts compared to 2020, in which the Company had greater success negotiating larger debts, as well as the worsening
of the macroeconomic scenario after the pandemic and the pressures which increased energy bills, including activation of ‘Flag tariff’
rates.
|
|
|
§
|
Difference
in the provisions for tax contingencies, with a net reversal of R$16,765 from January to September 2021, compared to a positive amount
(constitution of new provisions) of R$42,186 in the same period of 2020. The improvement resulted, among other factors, from a judgment
given in favor of the Company in one of the administrative cases relating to social security contributions, which resulted in cancellations
of tax debits, according to calculations by the tax authority (Receita Federal).
|
|
|
§
|
Constitution
of estimated provisions for losses on loans to related parties, from January to September 2021, referring to credits owed by Renova totaling
R$37,361.
|
For further details, please see Note
24.
Construction cost
Infrastructure construction costs
from January to September 2021 totaled R$1,338,097, or 19.19% more than the same period of 2020 (R$1,122,636). The difference mainly arises
the higher volume of investments in distribution on January to September 2021, compared to the same period of 2020, especially in sub-transmission,
in expansion, reinforcement and improvement of high-voltage infrastructure.
This line records the Company’s
investment in assets of the concession in the period, and is fully offset by the line Construction revenue, in the same amount.
Gas bought for resale
From January to September 2021, the
Company recorded an expense of R$1,428,052 on acquisition of gas, 90.24% more than its comparable expense of R$750,664 in the same period
of 2020. This basically reflects the increase of volume of gas sold was in fact 64.37% higher (at 1,037,785m³ on January to September
2021, vs. 631,353m³ in the same period of 2020), – under the influence, mainly, of the thermoelectric power generation, which
consumption was 499.76% higher.
Share of profit (loss) of associates
and joint ventures, net
The result of equity method valuation
of interests in non-consolidated investees was a gain of R$438,798 from January to September 2021, compared to a gain of R$262,298 in
the same period of 2020, which is 67.29% higher from January to September 2021 compared to the same period of 2020. The difference is
mainly due to the equity income from the investee Aliança Geração 237.31% higher and lower losses in the investees
Amazônia Energia and Aliança Norte (shareholders of Norte Energia S.A. – NESA), which posted negative equity income
of R$ 42,315 from January to September of 2021, compared to R$ 63,944 in the prior period, reflecting recognition of renegotiation
of hydrology risk (GSF); and also an increase of 24.43% in the result from the investee Taesa.
The breakdown of
the results from the investees recognized under this line is given in detail in Note 15.
Net financial revenue (expenses)
Cemig reports net financial expenses
from January to September 2021 of R$1,942,182, compared to net financial expenses of R$1,258,682 in the same period of 2020 (increase
of 54.30%). The main factors are:
|
|
§
|
Appreciation
of the dollar against the real from January to September 2021 of 4.67%, compared to appreciation, of 39.94%, in the same period of 2020
– generating a posting of revenues of R$212,850 from January to September 2021, vs. expenses, of R$2,415,000, in the same period
of 2020;
|
|
|
§
|
Negative variation
in the fair value of the financial instrument contracted to hedge the risks of the Eurobond from January to September 2021, in contrast
to the positive effect at September 30, 2020. From January to September 2021, the variation in the fair value of the hedge instrument
generated an expense of R$577,129, compared to a gain of R$1,803,611 in the same period of 2020. The reduction in the fair value of the
hedge instrument from January to September arises from the higher future interest curve;
|
|
|
§
|
Recognition
of the premium on repurchase of debt securities in the amount of R$491,036 as a result of the partial buyback of its Eurobonds –
Tender Offer. For further information, see Note 21.
|
For a breakdown
of financial revenues and expenses please see Note 28.
Income tax and social contribution
tax
From January to September 2021, the
expense on income tax and the social contribution tax totaled R$849,383, on pre-tax profit of R$3,639,850, an effective rate of 23.34%.
From January to September 2020, the expense on income tax and the social contribution tax was R$547,061 (restated), on pre-tax loss of
R$2,139,877 (restated) an effective rate of 25.57%.
These effective rates are reconciled with the nominal
tax rates in Note 9c.
Results for the quarter
From 3Q21, Cemig reports profit of
R$421,477, compared to a profit of R$579,299 (restated) in the same period in 2020, a reduction of 27.24%. The lower Ebitda calculated
in accordance with CVM Instruction 527/2012 results, basically, the increase in the cost of energy purchased for resale. The following
items describe the main variations between the two periods in revenues, costs, expenses and financial items.
Ebitda (Earnings before interest,
tax, depreciation and amortization)
Cemig’s consolidated adjusted
Ebitda, with the removal of non-recurrent items, higher in 6.37% on 3Q21 compared to the same period of 2020, whereas the adjusted Ebitda
margin lower from 21.49% to 15.41%. Consolidated Ebitda higher 29.50% on 3Q21 compared to the same period of 2020, whereas the Ebitda
margin was 22.97% on 3Q20 to 20.05% on the same period of 2021.
|
EBITDA - R$’000
|
Jul to Sep 2021
|
Jul to Sep 2020 (Restated)
|
Charge %
|
|
Net income for the period
|
421,477
|
579,299
|
(27.24)
|
|
+ Income tax and Social Contribution tax
|
49,710
|
153,921
|
(67.70)
|
|
+ Net financial revenue (expenses)
|
1,155,490
|
496,619
|
132.67
|
|
+ Depreciation and amortization
|
283,318
|
245,089
|
15.60
|
|
= Ebitda according to “CVM Instruction 527” (1)
|
1,909,995
|
1,474,928
|
29.50
|
|
Non-recurrent items
|
|
|
|
|
+ Non-controlling interests
|
(426)
|
(312)
|
36.54
|
|
+ Impairment (reversals) of assets held for sale (Note 32)
|
-
|
136,244
|
-
|
|
+ Renegotiation of hydrological risk costs (Law 14,052/20), net
|
(122,208)
|
-
|
-
|
|
+ Renegotiation of hydrological risk costs (Law 14,052/20), net – investees
|
(308,460)
|
-
|
-
|
|
+ Reversal of tax provisions
|
(11,132)
|
-
|
-
|
|
+ Reversal of losses expected on receivables from Minas Gerais State (net of provisions made)
|
-
|
(230,935)
|
-
|
|
Ebitda Adjusted (2)
|
1,467,769
|
1,379,925
|
6.37
|
* On September 30, 2021 the jointly-controlled
subsidiaries Nesa and Aliança Energia, and the affiliated company Madeira, recognized amounts of R$ 30,454, R$ 149,136
and R$ 128,870, respectively, arising from renegotiation of hydrological risk.
|
|
(1)
|
Ebitda is a non-accounting measure
prepared by the Company, reconciled with its consolidated interim financial information in accordance with the specifications in CVM Circular
SNC/SEP 01/2007 and CVM Instruction 527 of October 4, 2012. It comprises: net income adjusted for the effects of net financial revenue
(expenses), depreciation, amortization and income tax and the social contribution tax. Ebitda is not a measure recognized by Brazilian
GAAP nor by IFRS; it does not have a standard meaning; and it may be non-comparable with measures with similar titles provided by other
companies. Cemig publishes Ebitda because it uses it to measure its own performance. Ebitda should not be considered in isolation or as
a substitution for net income or operational profit, nor as an indicator of operational performance or cash flow, nor to measure liquidity
nor the capacity for payment of debt.
|
|
|
(2)
|
The Company adjusts the EBITDA
measured according to CVM Instruction 527 removing non-current items, which, because of their nature, do not contribute towards information
on the potential of future cash generation, since they are extraordinary items.
|
The higher adjusted Ebitda in 3Q21
than 3Q20 mainly reflects the positive effects on revenues in 3Q21, and posting of the gains arising from renegotiation of hydrological
risk, in the amount of R$308,460, for the investess NESA, Aliança Energia and Madeira. The higher Ebitda – calculated in
accordance with CVM Instruction 527/2012 – mainly reflects net revenue 48.33% higher year-on-year, partially offset by operational
costs, excluding depreciation and amortization, 63.50% higher YoY.
The main items affecting revenue in the period, are as
follow:
Revenue from supply of energy
Revenue from supply of energy on
3Q21 was R$7,740,212, 15.65% higher than the same period in 2020 (R$6,692,911).
Final customers
Revenue from energy sold to final
customers, excluding Cemig’s own consumption, on 3Q21 was R$6,912,454, or 19.49% higher than the figure in the same period of 2020,
R$5,785,202.
Cemig’s energy market
The total for sales in Cemig’s
consolidated energy market comprises sales to: (i) Captive customers in Cemig’s concession area in the State of Minas Gerais; (ii)
Free Customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação
Livre, or ACL); (iii) other agents of the energy sector – traders, generators and independent power producers, also in the Free
Market; (iv) Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and (v) the
Power Trading Chamber (Câmara de Comercialização de Energia Elétrica – CCEE), eliminating
transactions between companies of the Cemig Group.
This table details Cemig’s market and the changes
in sales of energy by customer category, comparing on 3Q21 to the same period in 2020:
Revenue from supply of energy
|
|
Jul to Sep 2021
|
Jul to Sep 2020
|
Charge %
|
|
MWh
(2)
|
R$
|
Average price billed (R$/MWh)
(1)
|
MWh
(2)
|
R$
|
Average price billed (R$/MWh)
(1)
|
MWh
|
R$
|
|
Residential
|
2,757,428
|
2,857,041
|
1,036.13
|
2,652,121
|
2,408,833
|
908.27
|
3.97
|
18.61
|
|
Industrial
|
4,263,189
|
1,389,273
|
325.88
|
3,282,736
|
1,062,910
|
323.79
|
29.87
|
30.70
|
|
Commercial, Services and Others
|
2,017,714
|
1,363,317
|
675.67
|
1,938,028
|
1,125,855
|
580.93
|
4.11
|
21.09
|
|
Rural
|
1,169,780
|
764,005
|
653.12
|
1,139,551
|
632,227
|
554.80
|
2.65
|
20.84
|
|
Public authorities
|
167,875
|
140,233
|
835.34
|
149,154
|
112,958
|
757.32
|
12.55
|
24.15
|
|
Public lighting
|
257,999
|
174,829
|
677.63
|
327,039
|
145,863
|
446.01
|
(21.11)
|
19.86
|
|
Public services
|
362,058
|
238,744
|
659.41
|
347,469
|
186,818
|
537.65
|
4.20
|
27.79
|
|
Subtotal
|
10,996,043
|
6,927,442
|
629.99
|
9,836,098
|
5,675,464
|
577.00
|
11.79
|
22.06
|
|
Own consumption
|
7,835
|
-
|
-
|
7,559
|
-
|
-
|
3.65
|
-
|
|
Unbilled retail supply, net
|
-
|
(14,988)
|
-
|
-
|
109,738
|
-
|
-
|
-
|
|
|
11,003,878
|
6,912,454
|
628.18
|
9,843,657
|
5,785,202
|
587.71
|
11.79
|
19.49
|
|
Wholesale supply to other concession holders (3)
|
2,520,569
|
757,429
|
300.5
|
3,150,749
|
818,168
|
259.67
|
(20.00)
|
(7.42)
|
|
Wholesale supply not yet invoiced, net
|
-
|
70,329
|
-
|
-
|
89,541
|
-
|
-
|
(21.46)
|
|
Total
|
13,524,447
|
7,740,212
|
568.22
|
12,994,406
|
6,692,911
|
499.73
|
4.08
|
15.65
|
|
|
(1)
|
The calculation of the average price does not include revenue from supply
not yet billed.
|
|
|
(2)
|
Data not audited by external auditors.
|
|
|
(3)
|
Includes Regulated Market Energy Sale Contracts (CCEARs) and ‘bilateral
contracts’ with other agents.
|
The following factors that contributed
significantly to the increased of 4.08% on the volume of energy sold are:
|
|
§
|
the volume of energy sold to
the industrial customer category was 29.87% higher, mainly reflecting migration of captive customers to the Free Market, and new contracts
for sales to free clients, starting supply in January 2021.
|
|
|
§
|
increase of 4.11% in the volume
of supply sold to the commercial customer category, associated with growth in the base of captive and free clients.
|
|
|
§
|
Volume of energy
sold to the rural customer category 2.65% higher YoY, mainly due to increased consumption for irrigation, the largest factor in rural
users’ consumption, reflecting the lower rainfall in 3Q21 than in 3Q20.
|
|
|
§
|
The average
price of energy was 13.71% higher in 3Q21 than the same period of 2020, mainly reflecting the increase for energy sale contracts in the
Regulated Market, of 5.68%, and also the higher incidence of ‘Tariff Flag’ extra charges in the tariffs of Cemig D. The higher
average price of energy in the Free Market reflects shorter-term sales to traders than the same period of 2020, resulting from lower market
prices in the period Also, contracts in effect in 2020 and 2021 undergo annual price adjustments in accordance with the inflation indexes
(IPCA or IGP-M) established in the contracts.
|
|
|
§
|
Supply of energy to other concession holders
20.00% lower, mainly due to the high volume of spot sales to traders in the early months of 2020, and also the difference in volume contracted
with Trader clients.
|
Revenue from Use of Distribution
Systems (TUSD)
This is revenue from charging Free
Customers the Tariff for Use of the Distribution System (TUSD), on the volume of energy distributed. On 3Q21, this was R$886,721, compared
to R$793,698 in the same period of 2020 - increase of 11.72%.
The volume of energy transported
on 3Q21 was 7.86% higher than the same period of 2020, due to: (i) the increase in consumption for irrigation by rural customers; (ii)
the migration of commercial customers to Free Market; and (iii) growth in the industrial market in 2021, due to the recovery of the economy.
Additionally, the effect the Company’s
annual tariff adjustment 2021, applied from May 28, 2021, was 2.40% which affected Free Clients, having an impact on the increase as well.
|
|
MWh
|
|
Jul to Sep, 2021
|
Jul to Sep, 2020
|
Charge %
|
|
Industrial
|
5,179,727
|
4,879,603
|
6.15
|
|
Commercial
|
381,813
|
299,125
|
27.64
|
|
Rural
|
11,484
|
7,667
|
49.78
|
|
Public service
|
1,080
|
-
|
-
|
|
Concessionaires
|
118,642
|
91,645
|
29.46
|
|
Total
|
5,692,746
|
5,278,040
|
7.86
|
CVA and Other financial components
in tariff adjustments
These items are the recognition of
the difference between actual non-controllable costs (in which the contribution to the CDE – the Energy Development Account and
energy bought for resale, are significant components) and the costs that were used in calculating rates charged to customers. The amount
of this difference is passed through to customers in the next tariff adjustment of Cemig D (the distribution company).
On 3Q21 this represented a gain (posted
in revenue) of R$1,116,248, whereas in the same period in 2020 it produced a gain of R$17,192. This difference mainly reflects a higher
posting of CVA and Other financial components in tariff adjustments in 3Q21, compared to 3Q20, due to the increase in the costs of energy
purchased in the regulated market, and transmission costs. Also, realization of amounts approved in the current tariff cycle was lower
than in the prior cycle.
For further details, see Note 13.
Transmission concession revenue
Transmission revenue from Cemig GT
and Centroeste comprises the sum of revenues recorded for construction, reinforcement, improvement, operation and maintenance, as specified
in the transmission contracts. Under the concession contracts, Annual Permitted Revenues (RAPs) of the existing electricity system, and
those involved in tenders. These are updated annually, based mainly on the inflation index specified in the contract (the IPCA and IGP-M
indexes). Subsequently, all reinforcement and improvementworks that are implemented upon specific authorization by Aneel result in the
constitution of a new component of RAP.
The main items in revenue in the period, are as follow:
|
|
§
|
The infrastructure
operation and maintenance revenue was R$72,139 on 3Q21, or 19.72% less than the same period of 2020 (R$89,863 - Restated);
|
|
|
§
|
The revenues
posted for construction, reinforcement and improvement of infrastructure totaled R$75,695 on 3Q21, 19.46% more than the same period of
2020 (R$63,363 - Restated). This mainly reflects the lower investments in transmission, as a result of new decisions on investments in
small-scale improvements, due to the alterations in regulatory rules and the suspension of contracts with suppliers of reinforcement works;
and
|
|
|
§
|
At the same
time, revenues from financial remuneration of transmission contract assets were 42.16% higher on 3Q21, at R$165,300, compared to R$116,277
recognized in (Restated) results for the same period of 2020 – mainly reflecting the increase in the remuneration base of the assets
linked to contracts, as from the Periodic Tariff Review (RTP) ratified the contract 006/97 by Aneel on June 30, 2020, adjusted on April,
2021, and the contract 079/00 on December 30, 2020.
|
More details in Note 14.
Revenue from supply of gas
Cemig reports revenue from supply
of gas totaling R$948,680 on 3Q21, compared to R$427,940 in the same period of 2020 – 121.69% higher YoY. This basically reflects
the increase on volume of gas sold was in fact 81.79% higher (at 360,083m³ on July to September 2021, vs. 198,080m³ in the same
period of 2020), – under the influence, mainly, of the thermoelectric power generation, caused by the current low level of hydroelectric
reservoirs.
Construction revenue
Infrastructure construction revenue
of distribution on 3Q21 was R$497,932, compared to R$397,295 in the same period of 2020. This variation is mainly due to the execution
of a larger proportion of the Investment Plan budget in assets related to distribution concession infrastructure, especially those related
to the sub-transmission networks, in expansion, strengthening and enhancement of high-voltage infrastructure.
This revenue is fully offset by Construction
costs, of the same amount, and corresponds to the Company’s investments in assets of the concession in the period.
The construction revenues of the
Transmission segment have been dealt with in topic Transmission Concession Revenues.
Other operating revenues
The other operating revenues line
for the Company and its subsidiaries on 3Q21 totaled R$433,111, compared to R$414,461 in the same period of 2020 – 4.50% higher
YoY. See Note 26 for a breakdown of other operating revenues.
Taxes and regulatory charges
reported as Deductions from revenue
The taxes and charges that are recorded
as deductions from operating revenue totaled R$3,644,128 on 3Q21, or 27.47% more than the same period of 2020 (R$2,858,810 - restated).
Customer charges
– the ‘Flag Tariff’ system
The ‘Flag
Tariff’ bands are activated as a result of low levels of water in the system’s reservoirs – tariffs are temporarily
increased due to scarcity of rain. The ‘Red’ band has two levels – Level 1 and Level 2. Level 2 comes into effect when
scarcity is more intense. Activation of the flag tariffs generates an impact on billing in the subsequent month.
In 3Q21 these charges produced a
credit of R$130,290, which compares to an expense of R$16 in 3Q20. This significant change arises from activation of the ‘Red Level
2’ flag tariff from June to August 2021 (affecting billing from July to September 2021), compared to no flag tariff being activated
in the same period of 2020, as part of the measures to mitigate the impacts of the Covid-19 pandemic.
The Energy Development Account
– CDE
The amounts of payments to the Energy
Development Account (CDE) are decided by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities (reimbursements
of costs of assets), tariff subsidies, and the subsidy for balanced tariff reduction, the low-income-customer subsidy, the coal consumption
subsidy, and the Fuels Consumption Account (CCC).
CDE charges in 3Q21 totaled R$667,763,
9.68% more than in 3Q20 (R$608,848). This mainly reflects (a) higher contracted demand, and (b) the start of charging of the ‘Covid
Account CDE’ in May 2021, ratified by Dispatch 939 of April 5, 2021, under Normative Resolution 885 of June 23, 2020.
This is a non-manageable cost: the difference between
the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.
Other taxes and charges on revenue
The deductions and charges with the
most significant impact on revenue are mainly taxes, calculated as a percentage of sales revenue. Thus their variations are, substantially,
in proportion to the variations in revenue.
Operating costs and expenses
(excluding financial income/expenses)
Operating costs and expenses totaled
R$8,307,517 on 3Q21, or 61.22% more than the same period of 2020 (R$5,152,922 - restated). See more on the breakdown of Operating costs
and expenses in Note 27.
The following paragraphs comment
on the main variations:
Personnel
The expense on personnel on 3Q21
was R$262,275, or 9.59% less than the same period of 2020 (R$290,095).
This variation results, mainly, reduction
of 4.05% in the avarage number of employees from July to September 2021, compared to the same period of 2020.
Outsourced services
The expense on outsourced services
in 3Q21 was R$354,468, or 17.07% more than the expense of R$302,775 in 3Q20. The main impacts arise from the factors detailed below:
|
|
§
|
Expenses on information technology 108.52%
higher in 3Q21, at R$24,463, compared to R$11,732 in 3Q20. This increase reflects new contracts and investments in IT security signed
and made in 2021.
|
|
|
§
|
Expenses on disconnection and reconnection 271.95% higher in 3Q21, at R$23,195, compared to R$6,236 in
3Q20. This reflects resumption of the services, after the energy supply suspension due to default was once again allowed for certain classes
of customers.
|
Energy purchased for resale
The expense on energy purchased for
resale on 3Q21 was R$5,302,305, or 79.21% more than in 2020 (R$2,958,679). The difference is mainly:
|
|
§
|
expenses on energy acquired at auction in the regulated market by Cemig D were 172.83% higher, at R$2,091,386,
compared to R$766,561 in the same period of 2020. This increase many arises from higher variable costs in energy trading contracts in
the Regulated Market, due to higher dispatching of thermal plants;
|
|
|
§
|
The expense on purchase of supply at the spot price was higher 312.85% on 3Q21, at R$800,388, compared
to the same period of 2020 (R$193,868). The result expressed for spot-price supply is the net balance between revenues and expenses of
transactions on the Power Trading Chamber (CCEE). The lower figure is mainly due to the increase, in the third quarter of 2021, of charges
costs and Itaipu effects, physical guarantee quotas and renegotiation of hydrological risk. These costs are directly affected by the higher
average spot price (R$581,71 in the third quarter of 2021, compared to R$91,68 in the prior period) and
to the GSF reduction;
|
|
|
§
|
Higher expenses on distributed generation (‘geração distribuída’) of
114.92%: R$338,612 in 3Q21, compared to R$157,551 in 3Q20. This reflects the higher number of generation units installed and the higher
volume of energy injected into the grid (494,016 MWh in 3Q21, compared to 273,184 MWh in 3Q20).
|
This is a non-manageable cost: the
difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the
subsequent tariff adjustment. For more details please see Note 13.
Charges for use of the transmission network and
other system charges
Charges for use of the transmission
network on 3Q21 totaled R$653,534, compared with R$534,788 in the same period of 2020, an higher of 22.20%.
These charges are payable by energy
distribution and generation agents for use of the facilities that are components of the national grid. The amounts to be paid are set
by a Resolution from the Grantor (Aneel).
The difference is, mainly, there
was higher dispatching of thermal plants outside the ‘merit order’, for energy security of the system, in 2021, and consequently
their high cost and dollar US$ increased the System Service Charge (CCEE-ESS), which is also part of this account line. The charges were
increased by approximately 40% as from July 2020.
This is a non-manageable cost in
the distribution activity: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred
is compensated for in the subsequent tariff adjustment. More details see note 13.
Operating provisions
Operating provisions on 3Q21 totaled
R$76,117, or 174.91% less than the same period of 2020 (R$101,606). This arises mainly from the following factors:
|
|
§
|
Expected losses
on doubtful receivables from clients, at losses of R$37,295 on 3Q21, compared to losses of R$156,829 in the same period of 2020. This
mainly reflects the negotiation of a long-standing debt from the State of Minas Gerais government. For further information, see Note 7.
|
|
|
§
|
Provisions
for the SAAG put option higher YoY: a R$22,977 in 3Q21, compared to posting of a provision of R$10,246 in 3Q20. For more information on
the criteria and variables for calculation of these options, please see Note 30b;
|
|
|
§
|
Provisions
for employment-law contingencies lower year-on-year: net reversal of R$6,410 were made in 3Q21, compared to net new provisions of R$18,063
made in 3Q20. This was mainly the result of recalculation of employment-law contingencies due to a Federal Supreme Court decision which
changed the inflation index applying to employment-law liabilities with application of the Selic rate.
|
For further details, please
see Note 24.
Construction cost
Infrastructure construction costs
on 3Q21 totaled R$552,536, or 25.87% more than the same period of 2020 (R$438,960). The difference mainly arises the higher volume of
investments in distribution on 3Q21, compared to the same period of 2020, especially in sub-transmission, in expansion, reinforcement
and improvement of high-voltage infrastructure.
This line records the Company’s
investment in assets of the concession in the period, and is fully offset by the line Construction revenue, in the same amount.
Gas bought for resale
On 3Q21, the Company recorded an
expense of R$560,010 on acquisition of gas, 170.07% more than its comparable expense of R$207,361 in the same period of 2020. This basically
reflects the increase of volume of gas sold was in fact 81.79% higher (at 360,083m³ on 3Q21, vs. 198,080m³ in the same period
of 2020), – under the influence, mainly, of the thermoelectric power generation, which increased significantly.
Share of profit (loss) of associates
and joint ventures, net
The result of equity method valuation
of interests in non-consolidated investees was a gain of R$287,319 on 3Q21, compared to a gain of R$97,822 in the same period of 2020,
which is 193.72% lower on 3Q21, compared to the same period of 2020. The change mainly reflects net profit of the investee Aliança
Geração being 994.82% higher, and lower losses in the investees Amazônia Energia and Aliança Norte (shareholders
in Norte Energia S.A. – ‘NESA’) and Santo Antônio Energia, due to the recognition of renegotiation of hydrological
risk (GSF).
The breakdown of
the results from the investees recognized under this line is given in detail in Note 15.
Net financial revenue (expenses)
Cemig reports net financial revenues
on 3Q21 of R$1,155,490, compared to net financial expenses of R$496,619 in the same period of 2020. The main factors are:
|
|
§
|
The dollar
appreciated by 8.74% against the Real in 3Q21, compared to appreciation of 3.01% in 3Q20, resulting in a expense arising from FX variations
from debt in foreign currency of R$504,600 in 3Q21, compared to an expense of R$247,050 in 3Q20;
|
|
|
§
|
Positive variation
in the fair value of the financial instrument contracted to hedge the risks of the Eurobond in 3Q21, in contrast to the positive effect
at September 30, 2020. In 3Q21 the variation in the fair value of the hedge instrument generated a gain of R$35,636, compared to a gain
of R$2,651 in 3Q20. The reduction in the fair value of the hedge instrument in 3Q21 arises from the higher future interest curve;
|
|
|
§
|
Recognition
of the premium on repurchase of debt securities in the amount of R$491,036. For further information, see Note 21.
|
For a breakdown
of financial revenues and expenses please see Note 28.
Income tax and social contribution
tax
On 3Q21, the expense on income tax
and the social contribution tax totaled R$49,710, on pre-tax profit of R$471,187, an effective rate of 10.55%. On 3Q20, the expense on
income tax and the social contribution tax was R$153,921 (restated), on pre-tax profit of R$733,220 (restated) an effective rate of 20.99%.
These effective rates are reconciled with the nominal
tax rates in Note 9c.
OTHER INFORMATION
THAT THE COMPANY BELIEVES TO BE MATERIAL
Board of Directors
Meetings
The Board of Directors met 18 times
up to September 30, 2021, to discuss strategic planning, projects, acquisition of new assets, various investments, and other subjects.
Membership, election and period
of office
The present period of office began
with the EGM on July 31, 2020, with election by the multiple voting system.
The periods of office of the present
members of the Board of Directors expire at the Annual General Meeting of Shareholders to be held in 2022.
The composition of the Board of Directors
will be assessed annually by the Board of Directors itself, aiming to implement a gradual change with a view to increase diversity –
for which targets may possibly be established.
Principal responsibilities and duties:
Under the by-laws, the Board of Directors
has the following responsibilities and duties, as well as those conferred on it by law:
|
|
§
|
Decision on any sale of assets, loans or financings, charge on the company’s property, plant or
equipment, guarantees to third parties, or other legal acts or transactions, with value equal to 1% or more of the Company’s total
Shareholders’ equity.
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|
|
§
|
Authorization for issuance of securities in the domestic or external market to raise funds;
|
|
|
§
|
Approval of the Long-term Strategy and the Multi-year Business Plan, and alterations and revisions to
them, and the Annual Budget.
|
Qualification and remuneration
The Board of Directors of the Company
comprises 9 (nine) sitting members and the same number of substitute members. One is the Chair, and another Deputy Chair. The members
of the Board of Directors are elected for concurrent periods of office of 2 (two) years, and may be dismissed at any time, by the General
Meeting of Shareholders. Re-election for a maximum of 3 (three) consecutive periods of office is permitted, subject to any requirements
and prohibitions in applicable legislation and regulations.
A list with the names of the members
of the Board of Directors and their résumés is on our website at: http://ri.cemig.com.br.
The Audit Committee
The Audit Committee is an independent,
consultative body, permanently established, with its own budget allocation. Its objective is to provide advice and assistance to the Board
of Directors, to which it reports. It also has the responsibility for such other activities as are attributed to it by legislation.
The Audit Committee has four members,
the majority of them independent, nominated and elected by the Board of Directors in the first meeting after the Annual General Meeting
for periods of office of three years, not to run concurrently. One re-election is permitted.
Under the by-laws, the Audit Committee
of Cemig has the following duties, among others:
|
|
§
|
to supervise the activities of the external auditors, evaluating their independence, the quality of the
services provided and the appropriateness of such services to the Company’s needs;
|
|
|
§
|
to supervise activities in the areas of internal control, internal audit and preparation of the financial
statements;
|
|
|
§
|
to evaluate and monitor, jointly with the management and the Internal Audit Unit, the appropriateness
of the transactions with related parties.
|
Executive Board
The Executive Board has 7 (seven)
members, whose individual functions are set by the Company’s bylaws. They are elected by the Board of Directors, for a period of
office of two years, subject to the applicable requirements of law and regulation, and may be re-elected up to three times.
Members are allowed
simultaneously also to hold non-remunerated positions in the management of wholly-owned subsidiaries, subsidiaries or affiliates of
Cemig, upon decision by the Board of Directors. They are also,
obligatorily under the by-laws, members, with the same positions, of the Boards of Directors of Cemig GT (Generation and Transmission)
and Cemig D (Distribution). The period of office of the present Chief Officers expires at the first meeting of the Board of Directors
held after the Annual General Meeting of 2022.
The composition of the Executive
Board will be assessed annually by the Board of Directors itself, aiming to implement a gradual change with a view to increase diversity
– for which targets may possibly be established.
The members of the Executive Board
and their résumés are on our website: http://ri.cemig.com.br.
The members of the Executive Board
(the Company’s Chief Officers) have individual responsibilities set by the Board of Directors and the by-laws. These include:
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|
§
|
Current management of the Company’s business, subject to compliance with the Long-term Strategy,
the Multi-year Business Plan, and the Annual Budget, prepared and approved in accordance with these by-laws.
|
|
|
§
|
Authorization of the Company’s capital expenditure projects, signing of agreements or other legal
transactions, contracting of loans and financings, and creation of any obligation in the name of the Company, based on an approved Annual
Budget, which individually or in aggregate have values less than 1% (one per cent) of the Company’s Shareholders’ equity,
including injection of capital into wholly-owned or other subsidiaries, affiliated companies, and the consortia in which the Company participates.
|
|
|
§
|
The Executive Board meets, ordinarily, at least two times per month; and, extraordinarily, whenever called
by the Chief Executive Officer or by two Executive Officers with at least two days’ prior notice in writing or by email or other
digital medium, such notice not being required if all the Executive Officers are present. The decisions of the Executive Board are taken
by vote of the majority of its members, and in the event of a tie the Chief Executive Officer shall have a casting vote.
|
Audit
Board
§
The Audit Board held ten meetings through the third quarter of 2021.
Membership,
election and period of office
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|
§
|
We have a permanent Audit Board, made up of five sitting members and their respective substitute members.
They are elected by the Annual General Meeting of Shareholders, for periods of office of two years.
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|
|
§
|
Nominations to the Audit Board must obey the following:
|
|
|
a)
|
The following two groups of shareholders each have the right to elect one member, in separate votes, in
accordance with the applicable legislation: (i) the minority holders of common shares; and (ii) the holders of preferred shares.
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|
|
b)
|
The majority of the members must be elected by the Company’s controlling shareholder; at least one
must be a public employee, with a permanent employment link to the Public Administration.
|
|
|
§
|
The members of the Audit Board are listed on our website: http://ri.cemig.com.br.
|
Under the by-laws, the Audit Board
has the duties and competencies set by the applicable legislation and, to the extent that they do not conflict with Brazilian legislation,
those required by the laws of the countries in which the Company’s shares are listed and traded.
Qualification and remuneration
The global or individual compensation
of the members of the Audit Board is set by the General Meeting of Shareholders which elects it, in accordance with the applicable legislation.
Résumé information
on its members is on our website: http://ri.cemig.com.br.
Corporate risk management and
internal controls
As a part of Cemig’s corporate
governance practices, corporate risk management overall objective is to build and maintain a structure capable of providing material information
to senior management to support making of decisions, creating and protecting the company’s value. The process of risk management
enables the risk of the business’s objectives to be managed effectively, making it possible to influence and align strategy and
performance in all the areas of the company.
Since 2016 Cemig’s corporate
risk management activity is subordinated to the office of the CEO. In 2019, a separate senior management unit, Compliance, Corporate Risks
and Internal Controls, was created, bringing the processes of risk management and internal controls together under a single administration.
This change underlines the intention to increase the synergy between these processes, and the independence from other processes –
so as to supply senior management with independent information for decision-making, preserving the value of the company.
Thus, in 2019, the Executive Board
and the Board of Directors approved the ‘Top Risks’ corporate risk matrix, for the years 2019/2020, which comprehends business
such as Generation, Transmission, Distribution, Trading, Distributed Generation (‘Geração Distribuída’),
Holding as well as ordinary business risks.
These risks, related to execution
of strategy and scenarios, and also risks of conflicts of interest, fraud and corruption are under responsibility of the Chief Officers
and they are monitored and reported periodically to the Management.
Each Chief Officer’s Department
has responsibility for monitoring and managing the Company’s exposure to these risks as they relate to execution of strategy and
scenarios, and also risks of conflicts of interest, fraud and corruption. The Chief Officers report on this monitoring periodically to
senior management.
In 2019, the Company hired an expert
consulting firm to support the review of internal control and risk matrix as well as to monitor periodically the execution and sufficiency
of controls, analysis of failure/weakness and to support the remediation plans development and execution.
The matrix of internal controls is
also revised and approved annually. The Risk Management and Internal Controls Unit tests and monitors the controls design. The internal
audit, in its turn, monitors independently the internal control practices by testing control effectiveness. The conclusion of this assessment
is reported periodically to the Board of Directors, the Audit Board, and the Audit Committee.
The internal controls provide reasonable
assurance that errors and frauds that might cause an impact on the performance are detected and prevented, aimed at:
|
|
§
|
Operational
effectiveness and efficiency
|
|
|
§
|
Reliable financial
reporting
|
|
|
§
|
Compliance
with laws, regulations and policies.
|
The controls linked to mitigation
of risks associated with preparation and publication of the financial statements are a part of Cemig’s Risks and Internal Controls
Matrix. The financial statements are issued in accordance with Section 404 of the Sarbanes-Oxley Law and the rules of the US Public Company
Accounting Oversight Board (PCAOB), included as part of the annual 20-F Report filed with the US Securities and Exchange Commission (SEC).
Cemig obtained the first certification of its internal controls for the business year of 2006, filed with the US Securities and Exchange
Commission (SEC) on July 23, 2007.
Statement of Ethical Principles
and Code of Professional Conduct
On May 11, 2004 Cemig’s Board
of Directors approved the Statement of Ethical Principles and Code of Professional Conduct, which aims to orient and discipline everyone
acting in the name of, or interacting with, Cemig, to ensure ethical behavior at all times, and always in accordance with the law and
regulations. The code can be seen at http://ri.cemig.com.br. It was updated in 2018 and in 2019 to comply with the laws n. 12,486/2013
and n. 13,303/2016. Annually, the Company provide training on Statement of Ethical Principles and Code of Professional Conduct for all
its employees.
The Ethics Committee
This was created on August 12, 2004,
and is responsible for coordinating action in relation to management (interpretation, publicizing, application and updating) of the Statement
of Ethical Principles and Code of Professional Conduct,
including assessment of and decision on any possible non-compliances with Cemig’s Code of Ethics.
The Committee has eight sitting members.
It may be contacted through our Ethics Channel – the anonymous reporting channel on the corporate Intranet, or by email, internal
or external letter or by an exclusive phone line – these means of communication are widely publicized internally to all staff. These
channels enable both reports of adverse activity and also consultations. Reports may result in opening of proceedings to assess any non-compliances
with Cemig’s Statement of Ethical Principles and Code of Professional Conduct.
The Ethics Channel
Cemig installed this means of communication,
available on the internal corporate Intranet, in December 2006.
Through it the Ethics Committee can
receive anonymous reports or accusations that can enable Cemig to detect irregular practices that are contrary to its interest, such as:
financial fraud, including adulteration, falsification or suppression of financial, tax or accounting documents; misappropriation of goods
or funds; receipt of undue advantages by managers or employees; irregular contracting; and other practices considered to be illegal.
It is one more step in improving
Cemig’s transparency, compliance with legislation, and alignment with best corporate governance practices. It improves the management
of internal controls and dissemination of the ethical culture to Cemig’s employees in the cause of optimum compliance by our business.
Anti-fraud Policy
In its business
and activities, Cemig does not accept the practice and concealment of acts of fraud or corruption in all its forms. Suspicions and allegations
of such acts are rigorously assessed and where proven, apply disciplinary procedures set out in the internal rules of the Company, as
well as lawsuits and criminal charges, when applicable.
Thus, in
2012, Cemig consolidated its Anti-Fraud Policy is applicable to all members of the Board of Directors and Fiscal Officers, employees and
contractors. The policy underscores the Company's commitment to the Global Compact principles on the subject, particularly the principle
of number ten, which deals with combating corruption in all its forms, including extortion and bribery.
SHAREHOLDING POSITION OF HOLDERS
OF
MORE THAN 5% OF THE VOTING STOCK
ON SEPTEMBER 30, 2021
|
|
COMMON SHARES
|
%
|
PREFERRED SHARES
|
%
|
TOTAL SHARES
|
%
|
|
State of Minas Gerais
|
288,485,632
|
50.97
|
13,143
|
-
|
288,498,775
|
17.04
|
|
Other entities of Minas Gerais State
|
23,094
|
-
|
12,376,443
|
1.10
|
12,399,537
|
0.73
|
|
FIA Dinâmica Energia S.A.
|
151,115,628
|
26.70
|
69,731,458
|
6.18
|
220,847,086
|
13.05
|
|
BNDES Participações
|
63,082,911
|
11.14
|
30,438,020
|
2.70
|
93,520,931
|
5.52
|
|
BlackRock
|
-
|
-
|
123,325,741
|
10.94
|
123,325,741
|
7.28
|
|
Others
|
63,329,369
|
11.19
|
891,440,629
|
79.08
|
954,769,998
|
56.38
|
|
In Brazil
|
46,878,321
|
8.28
|
155,455,326
|
13.79
|
202,333,647
|
11.95
|
|
Foreign shareholders
|
16,451,048
|
2.91
|
735,985,303
|
65.29
|
752,436,351
|
44.43
|
|
Total
|
566,036,634
|
100.00
|
1,127,325,434
|
100.00
|
1,693,362,068
|
100.00
|
CONSOLIDATED SHAREHOLDING POSITION
OF
THE CONTROLLING SHAREHOLDERS AND
MANAGERS, AND FREE FLOAT,
ON SEPTEMBER 30, 2021
|
|
January to September 2021
|
|
ON
|
PN
|
|
Controlling shareholder
|
288,485,632
|
13,143
|
|
Board of Directors
|
-
|
81,252
|
|
Executive Board
|
11,498
|
9,291
|
|
Shares in Treasury
|
79
|
650,817
|
|
Free float
|
277,539,425
|
1,126,570,931
|
|
TOTAL
|
566,036,634
|
1,127,325,434
|
Investor Relations
In 2019 we expanded Cemig’s
exposure to the Brazilian and global capital markets, through strategic actions intended to enable investors and shareholders to make
a correct valuation of our businesses and our prospects for growth and addition of value.
We maintain a constant and proactive
flow of communication with Cemig’s investor market, continually reinforcing our credibility, seeking to increase investors’
interest in the Company’s shares, and to ensure their satisfaction with our shares as an investment.
Our results are published through
presentations transmitted via video webcast and telephone conference calls, with simultaneous translation in English, always with members
of the Executive Board present, developing a relationship that is increasingly transparent and in keeping with best corporate government
practices.
To serve our shareholders –
who are spread over more than 40 countries – and to facilitate optimum coverage of investors, Cemig has been present in and outside
Brazil at a very large number of events, including seminars, conferences,
investor meetings, congresses, roadshows, and events such as Money Shows; as well as holding phone and video conference calls with analysts,
investors and others interested in the capital markets.
On April 2021, we held our 26rd Annual
Meeting with the Capital Markets, where market professionals had the opportunity to interact with the Company’s directors and principal
executives. In 2021 the event was held online, due to the Covid-19 pandemic.
Corporate governance
Our corporate governance model is
based on principles of transparency, equity and accountability, focusing on clear definition of the roles and responsibilities of the
Board of Directors and the Executive Board in the formulation, approval and execution of policies and guidelines for managing the Company’s
business.
We seek sustainable development of
the Company through balance between the economic, financial, environmental and social aspects of our enterprises, aiming always to improve
the relationship with shareholders, customers, and employees, the public at large and other stakeholders.
Cemig’s preferred and common
shares (tickers: CMIG4 and CMIG3 respectively) have been listed at Corporate Governance Level 1 on the São Paulo Stock Exchange
since 2001. This classification represents a guarantee to our shareholders of optimum reporting of information, and also that shareholdings
are relatively widely dispersed. Because Cemig has ADRs (American Depositary Receipts) listed on the New York Stock Exchange, representing
its preferred (PN) shares (ticker CIG) and common (ON) shares (ticker CIG.C), it is also subject to the regulations of the US Securities
and Exchange Commission (SEC) and the New York Stock Exchange Listed Company Manual. Our preferred shares have also been listed on the
Latibex of the Madrid stock exchange (with ticker XCMIG) since 2002.
In June 11, 2018 an Extraordinary
Meeting of Shareholders approved alterations to the Company’s bylaws, to maintain best corporate governance practices, and adapt
to Law 13,303/2016 (also known as the State Companies Law).
The improvements now formally incorporated
in the by-laws include:
|
|
§
|
Reduction of
the number of members of the Board of Directors from 15 to 9, in line with the IBGC Best Corporate Governance Practices Code, and the
Corporate Sustainability Evaluation Manual of the Dow Jones Sustainability Index.
|
|
|
§
|
Creation of
the Audit Committee (Comitê de Auditoria). The Audit Board (Conselho Fiscal) remains in existence.
|
|
|
§
|
The Policy
on Eligibility and Evaluation for nomination of a member of the Board of Directors and/or the Executive Board in subsidiary and affiliated
companies.
|
|
|
§
|
The Related
Party Transactions Policy.
|
|
|
§
|
Formal designation
for the Board of Directors to ensure implementation of and supervision of the Company’s systems of risks and internal controls.
|
|
|
§
|
Optional power
for the Executive Board to expand the technical committees (on which members are career employees), with autonomy to make decisions in
specific subjects.
|
|
|
§
|
The CEO now
to be responsible for directing compliance and corporate risk management activities.
|
|
|
§
|
Greater emphasis
on the Company’s control functions: internal audit, compliance, and corporate risk management.
|
|
|
§
|
Adoption of
an arbitration chamber for resolution of any disputes between the Company, its shareholders, managers, and/or members of the Audit Board.
|
* * * * * * * * * * * *
(The original is signed by
the following signatories)
|
Reynaldo Passanezi Filho
|
Dimas Costa
|
Leonardo George de Magalhães
|
|
Chief Executive Officer
|
Chief Trading Officer
|
Chief Finance and Investor Relations Officer
|
|
|
|
|
|
Marney Tadeu Antunes
|
|
Maurício Dall’Agneses
|
|
Chief Distribution Officer
|
|
Chief Officer Cemigpar
|
|
|
|
|
|
Thadeu Carneiro da Silva
|
|
Eduardo Soares
|
|
Chief Generation and Transmission Officer
|
|
Chief Regulation and Legal
|
|
|
|
|
|
Mário Lúcio Braga
|
|
Carolina Luiza F. A. C. de Senna
|
|
Controller
CRC-MG 47.822
|
|
Financial Accounting and Equity Interests
Manager
Accountant – CRC-MG 77.839
|
|
Edifício Phelps Offices Towers
Rua Antônio de Albuquerque, 156
11º andar - Savassi
30112-010 - Belo Horizonte - MG - Brasil
Tel: +55 31 3232-2100
Fax: +55 31 3232-2106
ey.com.br
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A free translation from Portuguese into English of Independent Auditor’s
Report on Financial Statements prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International
Financial Reporting Standards (IFRS), issued by International Accounting Standards Board – IASB
Independent Auditor’s Review Report
on Quarterly Information - ITR
To the Shareholders and Management of
Companhia Energética de Minas Gerais - CEMIG
Belo Horizonte - MG
Introduction
We have reviewed the accompanying individual and consolidated
interim financial information, contained in the Quarterly Information Form (ITR) of Companhia Energética de Minas Gerais –
Cemig (the “Company”), for the quarter ended September 30, 2021, comprising the statement of financial position as at September
30, 2021, and the related statements of profit or loss, of comprehensive income for three and nine-month periods then ended, and of changes
in equity and cash flows for the nine-month period then ended, including the explanatory notes.
Management is responsible for preparation of the individual
and consolidated interim financial information in accordance with Accounting Pronouncement NBC TG 21 – Interim Financial Reporting
and IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair
presentation of this information in conformity with the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable
to the preparation of the Quarterly Information Form (ITR). Our responsibility is to express a conclusion on this interim financial information
based on our review.
Scope of review
We conducted our review in accordance with Brazilian
and international standards on review engagements (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information performed by the
Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of
persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion on the individual and consolidated interim
financial information
Based on our review, nothing has come to our attention
that causes us to believe that the accompanying individual and consolidated interim financial information included in the quarterly information
referred to above are not prepared, in all material respects, in accordance with NBC TG 21 and IAS 34, applicable to the preparation of
Quarterly Information Form (ITR), and presented consistently with the rules issued by the Brazilian Securities and Exchange Commission
(CVM).
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Edifício Phelps Offices Towers
Rua Antônio de Albuquerque, 156
11º andar - Savassi
30112-010 - Belo Horizonte - MG - Brasil
Tel: +55 31 3232-2100
Fax: +55 31 3232-2106
ey.com.br
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Emphasis of matters
Restatement of corresponding figures
As described in Note 2.3, due to the impacts on the
statement of profit and loss of the adjustments in discounts rates of the financial inflows of the concession contract related to the
transmission segment and the respective impact on the construction margin allocation, the quarter and the three and nine-month period
ended September 30, 2020, presented for comparative purposes, are being restated in accordance with NBC TG 23 - Accounting Policies, Changes
in Accounting Estimates and Errors. Additionally, as described in Note 25, due to the increase in the number of shares as a result of
capitalization of reserves, the Company adjusted the earnings per share and the respective explanatory notes for the three and nine-month
period ended September 30, 2020. Our conclusion is not modified in respect to this matter.
Risk regarding the ability of the jointly-controlled entity Renova Energia
S.A. to continue as a going concern
As described in Note 15 to the individual and consolidated
interim financial information, on December 18, 2020 were approved in the General Meeting of Creditors and ratified by the 2nd State of
São Paulo In-Court Reorganization and Bankruptcy Court, the court-supervised reorganization plans of the jointly-controlled entity
Renova Energia S.A. – in-court supervised reorganization and some of its subsidiaries, which accounting effects were recorded in
the financial statements of the jointly-controlled entity for the year ended December 31, 2020. Although the in-court reorganization plans
effects have been approved and recorded, there are events or conditions together with other matters described in referred note that may
indicate significant doubt about its ability to continue as a going concern. Our conclusion is not modified in respect to this matter.
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Edifício Phelps Offices Towers
Rua Antônio de Albuquerque, 156
11º andar - Savassi
30112-010 - Belo Horizonte - MG - Brasil
Tel: +55 31 3232-2100
Fax: +55 31 3232-2106
ey.com.br
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Other matters
Statements of value added
The above mentioned quarterly information include the
individual and consolidated statements of value added (SVA) for the nine-month period ended September 30, 2021, prepared under Company’s
Management responsibility and presented as supplementary information by IAS 34. These statements have been subjected to review procedures
performed together with the review of the quarterly information with the objective to conclude whether they are reconciled to the interim
financial information and the accounting records, as applicable, and if its format and content are in accordance with the criteria set
forth by NBC TG 09 – Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe
that they were not prepared, in all material respects, consistently with the overall individual and consolidated interim financial information.
Belo Horizonte (MG), November 11, 2021.
ERNST & YOUNG
Auditores Independentes S.S.
CRC-2SP015199/O-6
Shirley Nara S. Silva
Accountant CRC-1BA022650/O-0
2. Earnings Release for the quarter ended September 30, 2021.
3. Material Announcement Dated November 12, 2021: Agreement for
Sale of Interest in Renova.
COMPANHIA ENERGÉTICA DE MINAS GERAIS
– CEMIG
CNPJ
17.155.730/0001-64 – NIRE 31300040127
CEMIG GERAÇÃO E TRANSMISSÃO
S.A.
CNPJ
06.981.176/0001-58 – NIRE 31300020550
MATERIAL ANNOUNCEMENT
Agreement for sale of interest in Renova
In accordance with CVM Resolution 44
of August 23, 2021, which revoked CVM Instruction 358 of January 3, 2002:
Cemig (Companhia Energética de Minas
Gerais, listed in São Paulo, New York and Madrid), and Cemig Geração e Transmissão S.A. (‘Cemig
GT’), a wholly-owned listed subsidiary of Cemig, hereby inform the public, the Brazilian Securities Commission (CVM),
the São Paulo Stock Exchange (B3) and the market in general, as follows:
On November 11, 2021 Cemig
GT signed a Share Purchase Agreement (‘the Agreement’) with AP Energias Renováveis Fundo de Investimento em
Participações Multiestratégia, CNPJ 43.373.568/0001-60, administered and managed by Mantiq Investimentos Ltda.
(manager of the Angra Partners group), CNPJ 13.183.720/0001-81, including the following terms (‘the Transaction’):
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(i)
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Sale of all Cemig GT’s equity interest
in Renova Energia S.A. – In Judicial Recovery (‘Renova’), and
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(ii)
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Assignment, for consideration, of all credits owed to Cemig GT by Renova Comercializadora
de Energia S.A. – In Judicial Recovery,
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–
for total consideration of R$ 60,000,000.00 (sixty million Reais).
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(iii)
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Cemig GT will have also the right to an earn-out, depending on certain future events.
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Closing of the Transaction is subject
to compliance with certain conditions precedent that are usual in similar transactions, specified in the Agreement, including prior approval
by the competent regulatory bodies, the creditors holding asset guarantees listed in Renova’s Judicial Recovery Plan, and the counterparties
in certain commercial contracts. In the event of the Transaction being completed, there will be potential for Cemig GT to benefit
from certain tax credits.
Continued >
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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Disinvestment of Cemig GT’s interest
in Renova has been part of Cemig’s Disinvestment Program, announced to the market in July 2017. It is also in line with the
provisions of Cemig’s strategic planning for 2021–2025, based primarily on:
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(i)
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Cemig’s strategic decision to concentrate its activities on companies in
core businesses in which it has majority stockholdings, to achieve integration and capture operational synergies;
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(ii)
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the need to redirect management efforts and allocation of capital to improvement
of the quality of Cemig’s electricity generation, transmission and distribution services in the state of Minas Gerais; and
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(iv)
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the policy of taking advantage of market opportunities for disposal of assets and
optimization of the structure of the group’s stockholding interests.
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Cemig and Cemig GT
reiterate their commitment to keep stockholders, the market and other stakeholders duly and timely informed on developments in the Transaction,
in accordance with the applicable regulation, the requirements of CVM rules, and other applicable law.
Belo Horizonte, November 12, 2021
Leonardo George de Magalhães
Chief Finance and Investor Relations Officer
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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4. Material Announcement dated November 16, 2021: CEMIG in DJSI
World Index for 22nd year running.
COMPANHIA ENERGÉTICA DE MINAS GERAIS –
CEMIG
LISTED COMPANY
– CNPJ 17.155.730/0001-64 – NIRE 31300040127
MARKET NOTICE
Cemig in DJSI World Index for 22nd year
running
In its commitment to best corporate governance
practices, Cemig (Companhia Energética de Minas Gerais – listed and traded on the stock exchanges of São Paulo,
New York and Madrid), reports to stockholders and the market:
Cemig has again been
selected for inclusion in the Dow Jones Sustainability World Index (the ‘DJSI World’), for 2021–2022 –
for the twenty-second consecutive year: it has now been included in the DJSI World every year since the index was created in 1999.
Cemig also continues to be
the only electricity company outside Europe in the DJSI World – which selected only 7 companies in the electric power industry
from the 63 it evaluated, worldwide. Cemig’s score in the categories of the index increased by 3 points from last year, earning
the maximum points (12) in 28 of the aspects evaluated.
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The
DJSI World is an index of the world’s largest companies that stand out in their sectors for performance in sustainability and
adaptation to market trends, and are able to create value for stockholders in the medium and long term. It is used as a worldwide benchmark
for investors and international financial agents in decision-making on socially responsible investments.
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The composition of the DJSI
World is updated every year: this year it contains 322 companies, from 29 countries, selected from 3,455 companies in 60
sectors and industries, on the basis of their responses to a questionnaire, and public information.
The selection is made by S&P
Dow Jones Indices (‘S&P DJI’), a company specializing in asset management and supply of products and services related
to sustainable investments. The overall process is audited by Deloitte.
Cemig’s inclusion
in the DJSI World for 22 consecutive years reflects the Company’s determination to maintain sustainable practices
in relationships with employees and suppliers, creating value for its stockholders, and contributing to the wellbeing of society.
There is more information on
Cemig’s social and environmental practices in the Company’s Sustainability Reports, which are on the Cemig website: www.cemig.com.br
.
Belo Horizonte, November 16, 2021
Leonardo George de Magalhães
Chief Finance and Investor Relations Officer
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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5. Material Announcement dated December 1, 2021: Renova: Sale
of Brasil PCH completed.
COMPANHIA ENERGÉTICA DE MINAS GERAIS
–
CEMIG
LISTED COMPANY
– CNPJ 17.155.730/0001-64 – NIRE 31300040127
MATERIAL ANNOUNCEMENT
Renova: Sale of Brasil PCH completed for
R$ 1.1 bn
In compliance
with CVM Instruction 44/2002 of August 23, 2021, which repealed CVM Instruction 358 of January 3, 2002, Cemig (Companhia Energética
de Minas Gerais, listed in São Paulo, New York and Madrid), reports to the Brazilian Securities Commission (CVM), the
São Paulo Stock Exchange (B3), the market and the public that its affiliated company
Renova Energia S.A. (‘Renova’)
has today published the following Material Announcement:
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“
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Complementing Material Announcements published on August 5 and September
14, 2021, and in compliance with CVM Instruction 44/2021, Renova Energia S.A. – In Judicial Recovery (RNEW3; RNEW 4 and
RNEW11) (‘the Company’ or ‘Renova’), reports to its stockholders and the market as follows:
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Today Renova concluded the
sale of its Isolated Productive Unit (UPI) Brasil PCH, in accordance with the terms of the public tender for this UPI and the Judicial
Recovery Plan of the Renova Group. In this Transaction Renova transferred all of its shares (common, book-entry shares without
par value) in Brasil PCH S.A. to the other shareholders of Brasil PCH S.A. – BSB Energética S.A. and Eletroriver
S.A. – for consideration of R$ 1,100,000,000.00 (One billion one hundred million Reais).
With the proceeds of the Transaction,
the Company has made early settlement of the DIP (Debtor in Possession) Loan contracted by its subsidiary Chipley SP Participações
S.A. – In Judicial Recovery, with co-obligations of Renova and Renova Participações S.A. –
In Judicial Recovery under a Bank Credit Note structured by structured by Quadra Gestão de Recursos S.A. (‘Quadra Capital’),
as reported in the Material Announcement of March 5, 2021.
As well as settling the DIP loan,
the proceeds will be used for: payment of certain creditors inside and outside the Judicial Recovery agreement; compliance with other
obligations under the Judicial Recovery Plan; completion of the works of Phase A of the Alto Sertão III Wind Farm Complex; and
other operational activities of the Company and its subsidiaries.
Conclusion of this Transaction is
one more important landmark in the Company’s recovery, enabling the aggregate debt of the Renova Group to be reduced by approximately
R$ 740,000,000.00 (seven hundred and forty million Reais).
Renova
reiterates its commitment to keep stockholders and the market in general duly and timely informed in accordance with the applicable legislation.
”
Belo Horizonte, December 1, 2021.
Leonardo George de Magalhães
Chief Finance and Investor Relations Officer
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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6. Material Announcement dated December 9, 2021: CEMIG in São
Paulo’s ISE sustainability index for 17th year running.
COMPANHIA ENERGÉTICA DE MINAS GERAIS –
CEMIG
LISTED COMPANY
– CNPJ 17.155.730/0001-64 – NIRE 31300040127
MARKET ANNOUNCEMENT
Cemig in São Paulo’s ISE sustainability
index for 17th year running
sustainability
As part of its commitment to best corporate governance
practices, Cemig (Companhia Energética de Minas Gerais – listed in São Paulo, New York and Madrid),
hereby reports to its stockholders and the market:
For the 17th year
running, Cemig has been selected for inclusion in the ISE Corporate Sustainability Index (Índice de Sustentabilidade
Empresarial) of the São Paulo stock exchange (B3), for 2022.
The ISE index is a tool for
comparison of performance of companies listed on the B3 in terms of corporate sustainability – based on economic efficiency, environmental
balance, social fairness and corporate governance.
The new index includes 34 shares,
of 15 sectors, with total market capitalization of R$ 2 trillion – or 44% of the total market capitalization of all the shares
traded on the B3 (at Nov. 30, 2021).
Cemig earned the maximum
score in aspects such as quality of life and benefits, action on climate change, conduct in relation to conflicts of interest, and privacy
of client data.
The fact that Cemig
remains in the ISE Index is testimony to the company’s continuous commitment to best ESG (environment, social and governance) practices
– determining factors for sustainable growth – aiming to create sustainable value for its stockholders, employees, suppliers
and the public.
For the full composition of the ISE
index, and more details, see: www.iseb3.com.br
Belo Horizonte, December 9, 2021
Leonardo George de Magalhães
Chief Finance and Investor Relations Officer
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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7. Notice to Stockholders Dated December 9, 2021 Payment of Interest
on Equity and Dividends: December 29.
COMPANHIA ENERGÉTICA DE MINAS GERAIS
- CEMIG
CEMIG
LISTED COMPANY
– CNPJ 17.155.730/0001-64
NOTICE TO STOCKHOLDERS
Payments of
Interest on Equity and dividends: December 29
Cemig advises its stockholders that on
December 29, 2021 it will make the following payments of Interest of Equity and dividends, as advised by the Notice
to Stockholders of April 30, 2021:
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a)
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R$ 276,744,000, corresponding to R$ 0.18228802764 per common or preferred share,
being the second tranche of Interest on Equity for the 2020 business year.
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This payment will be subject to retention
of income tax, at 15%, except in the case of stockholders exempt from this retention under the current legislation.
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b)
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R$ 464,329,000, corresponding to R$ 0.30584806747 per common or preferred share,
being the second tranche of dividends for the 2020 business year.
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We also advise stockholders that the fractions
resulting from the stock bonus authorized by the Annual and Extraordinary Meetings held on April 30, 2021 were aggregated, and were sold
on September 30, 2021, as follows:
11,014 ON (common) shares –
for average price of R$ 17.0573706192 per ON share; and
87,251 PN (preferred) shares –
for average price of R$ 14.0114593529 per PN share.
The proceeds of these sales will be paid, proportionately,
together with the payments stated above, on December 29, 2021.
Stockholders
whose bank details are up to date with the Custodian Bank for Cemig’s nominal shares (Banco Itaú Unibanco S.A.) will
have their credits posted automatically on the first day of payment.
Any
stockholder not receiving the said credit should visit a branch of Banco Itaú Unibanco S.A. to update their Investor Registry details.
Payments relating to shares deposited in custody at CBLC (Companhia Brasileira de Liquidação e Custódia –
the Brazilian Settlement and Custody Company) will be credited to that entity and the Depositary Brokers will be responsible for
paying the amounts to holders.
Belo Horizonte, December 9, 2021
Leonardo George de Magalhães
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
Page 1 of 1
This text is a translation, provided for information
only. The original text in Portuguese is the legally valid version.
8. Notice to Stockholders Dated December 10, 2021: Declaration
of Interest on Equity.
COMPANHIA ENERGÉTICA DE MINAS GERAIS
– CEMIG
LISTED COMPANY
– CNPJ 17.155.730/0001-64 – NIRE 31300040127
NOTICE TO STOCKHOLDERS
Declaration
of Interest on Equity
We advise stockholders that the Board of Directors
of Cemig has declared payment of Interest on Equity, as follows:
R$ 955,282,000.00 (nine
hundred fifty five million two hundred eighty two thousand Reais).
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2.
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Gross amount per share:
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R$ 0.56435026590 per
share, as part of the minimum mandatory dividend for 2021, subject to withholding of income tax at 15%, at source (except for stockholders
exempt from this retention under current legislation).
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3.
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This is payable to holders of shares in Cemig on December 21, 2021.
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December 22, 2021
Two (2) equal installments, by June
30, 2022 and December 30, 2022.
For stockholders whose shares are not held in
custody by CBLC and whose registration details are not up to date, we recommend visiting any branch of Banco Itaú Unibanco S.A.
(the institution which administers Cemig’s Nominal Share Registry System), with their identification documents, for the necessary
updating.
Belo Horizonte, December 10, 2021.
Leonardo George de Magalhães
Chief Finance and Investor Relations Officer
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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9. Material Announcement dated December 13, 2021: ABIL wind farm
(of Alto Sertão III) starts operation.
COMPANHIA ENERGÉTICA DE MINAS GERAIS
–CEMIG
LISTED
COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127
MATERIAL ANNOUNCEMENT
ABIL wind farm (of Alto Sertão III) starts
operation
Cemig (Companhia Energética de
Minas Gerais, listed in São Paulo, New York and Madrid), in compliance with CVM Instruction 44/2002 of August 23, 2021 (repealing
CVM Instruction 358 of January 3, 2002), reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange
(B3) and the market as follows:
Today Cemig’s affiliated
company Renova Energia S.A. (‘Renova’) published the following Material Announcement:
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“
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In compliance with CVM Resolution 44/2021 (repealing Instruction 358) Renova
Energia S.A. – In Judicial Recovery (RNEW3, RNEW 4, and RNEW11) (‘Renova’) hereby reports to
its stockholders and the public:
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The first seven rotors of the ABIL
wind farm, with total installed capacity of 21 MW, part of Phase A of the Alto Sertão III wind farm complex –
have begun test operations.
All of the power produced by ABIL
will supply the Reserve Energy Contract awarded in the Reserve Energy Auction of 2013.
The start of operations of this
plant reiterates Renova’s commitment to comply with the operational start dates specified in its Judicial Recovery Plan.
Renova will keep stockholders
and the market fully and timely informed in accordance with the applicable legislation. ”
Belo Horizonte, December 13, 2021.
Leonardo George de Magalhães
Chief Finance and Investor Relations Officer
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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10. Material Announcement dated December
18, 2021: Taesa wins contract for 363 km transmission line.
COMPANHIA ENERGÉTICA DE MINAS GERAIS
–CEMIG
LISTED
COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127
MATERIAL ANNOUNCEMENT
Taesa wins contract for 363 km transmission line
In compliance with CVM Instruction 44/2002 of August
23, 2021, (repealing Instruction 358 of January 3, 2002), Cemig (Companhia Energética de Minas Gerais, listed in
São Paulo, New York and Madrid), hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock
Exchange (B3) and the market:
On December 17, 2021 Cemig’s
affiliated company Transmissora Aliança de Energia Elétrica S.A. (‘Taesa’) published the following Material
Announcement:
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Transmissora Aliança de Energia Elétrica
S.A. (B3: TAEE3, TAEE4 and TAEE11) (‘Taesa’) hereby reports to the market and stakeholders that it has been
awarded Lot 1 in Transmission Auction 02/2021 held by the Brazilian electricity regulator, Aneel:
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Lot 1
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Winning offer for RAP
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R$ 129,900,000.00
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Discount
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47.76%
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Location – Brazilian States:
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São Paulo, Paraná
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Length
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363 km
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Structure
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Double circuit
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Substations
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–
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Capex – Aneel
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R$ 1,750,054,467.15
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Construction period (Aneel)
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60 months
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The award of this lot
has important synergies. It benefits from Taesa’s existing Operation and Maintenance structure, as well as expected optimizations
of capex, and early delivery of the project, which Taesa has habitually achieved.
The result of this auction
consolidates Taesa’s strategic positioning as one of Brazil’s largest electricity transmission companies, and underlines its
focus on the three strategic pillars of sustainable growth, generation of value, financial discipline and operational efficiency, backed
by Taesa’s commitment to transmit power with reliability, transparency and safety for the whole of society, respecting the environment
and the interests of all stakeholders. ”
Belo Horizonte, December 18, 2021
Leonardo George de Magalhães
Chief Finance and Investor Relations Officer
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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11. Material Announcement dated December 23, 2021: Acquisition
of Sete Lagoas 4 Substation completed.
COMPANHIA ENERGÉTICA DE MINAS GERAIS
–
CEMIG
LISTED COMPANY
– CNPJ 17.155.730/0001-64 – NIRE 31300040127
MATERIAL ANNOUNCEMENT
Acquisition of Sete Lagoas 4 substation
completed
Complementing
its Material Announcement of July 27, 2021, and in accordance with CVM Resolution 44/2021 of August 23, 2021 (repealing Instruction 358
of Jan. 3, 2002), Cemig (Companhia Energética de Minas Gerais – listed with securities traded in São
Paulo, New York and Madrid), hereby informs the public, the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange
(B3), and the market as follows:
Today Cemig concluded
acquisition of 100% of the shares in SLTE (Sete Lagoas Transmissora de Energia S.A.). from Cobra Brasil Serviços,
Comunicações e Energia S.A. and Cobra Instalaciones y Servicios S.A.
Total consideration for the
transaction was R$ 48,054,792.02 (forty eight million, fifty four thousand seven hundred ninety two Reais and two centavos) –
the result of application, up to the closing date, of the price adjustment mechanisms agreed in the share purchase agreement.
SLTE won the concession
for Lot H – construction and operation of the Sete Lagoas 4 substation in Sete Lagoas, Minas Gerais State – in Aneel
Auction 008 of 2010.
The
substation began operation in July 2014; the concession contract expires in June 2041.
This transaction expresses and
underlines Cemig’s strategy of sustainable growth, with commitment to create value by investment in projects that contribute
to expansion of its electricity transmission system.
Belo Horizonte, December 23, 2021.
Maurício Dall’Agnese
Acting Chief Finance and Investor Relations
Officer
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This text is a translation, provided for information only. The
original text in Portuguese is the legally valid version.
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