CIG.C Companhia Energetica de Minas Gerais Cemig

2Q19 RESULTS

CEMIG:

2Q19 Ebitda is R$ 1.8 billion

Highlights of 2Q19:

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Conference call

Publication of 2Q19 results

Webcast and Conference call

Tuesday, August 20, 2019, at 10:00 am (Brasília time)

The transmission will have simultaneous translation in English and can be seen by Webcast, at http://ri.cemig.com.br , or by conference call on:

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

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

Password: CEMIG

Cemig’s Executive Investor Relations Team

Maurício Fernandes Leonardo Júnior

Antônio Carlos Vélez Braga

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Disclaimer

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

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

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

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

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

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Our shares

Source: Economática – Adjusted for corporate action, including dividends.

Trading volume in Cemig’s preferred shares (CMIG4) totaled R$ 18.83 billion in the first half of 2019, of which R$ 8.85 billion was traded in the second quarter. The daily average in the half-year is R$ 154.36 million – 87.66% higher than in 1H18.

Average daily trading in the common (ON) shares was R$ 31.54 million in the half-year, and R$ 37.13 million in the second quarter.

By aggregate volume of its common (ON) and preferred (PN) shares, Cemig was the most liquid electricity company traded in Brazil, and among those with the highest trading volume in the Brazilian market.

On the New York Stock Exchange, ADRs for Cemig’s preferred shares (CIG) in 1H19 traded a total volume of US$1.78 billion. We see this as recognition of Cemig by the investor market as a global investment option.

In 1H19 the São Paulo Ibovespa stock index rose 14.88%, closing at 100,967 points; On the São Paulo exchange, Cemig’s common (ON) shares rose 27.78%, and its preferred (PN) shares rose 10.57%. In New York, Cemig’s ADRs also rose in the half-year: the ADRs for the common shares rose 21.41%, and the ADRs for the preferred shares rose 10.43%.

In 2Q19, Cemig’s preferred ADRs (CIG) rose 10.12%, and the preferred shares (CMIG4) rose 10.24%.

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Cemig’s long-term ratings

This tables shows long-term credit risk ratings and outlook for Cemig companies as provided by the principal rating agencies:

Brazilian rating:

Global rating:

Adoption of IFRS

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

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Statements of income

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2Q19 Results

Cemig reports net profit of R$ 2,114,986 for 2Q19, which compares with a net loss of R$ 10,886 for 2Q18.

This higher figure was due to:

Credits of ICMS tax (court ruling that ICMS does not apply to Pasep/Cofins amounts)

On July 16, 2008, Cemig, Cemig GT and Cemig D filed an Ordinary Action for a declaration that it was unconstitutional to include the amount of ICMS value added tax – already paid or charged – inside the total on which the PIS, Pasep and Cofins taxes would be charged; and recognition of these companies’ right to compensation/offsetting of amounts unduly paid for the 10 years prior to the action being filed, with monetary adjustment by the Selic rate. The company and the said subsidiaries were awarded an interim injunction, and began to make escrow deposits into court for the amount represented by the inclusion of ICMS tax balances in the calculation base for the Pasep and Cofins taxes from August 2008 until August 2011. After that date, although they continued with the action challenging the calculation base, they opted to pay the contribution monthly.

In October 2017 the Federal Supreme Court (STF) published its Joint Judgment on the Extraordinary Appeal, in favor of Cemig’s argument. In 2017, based on the opinion of its legal advisers, the Company and its subsidiaries wrote down from liabilities the amounts paid in escrow from 2008 to 2011; and also recognized a liability for reimbursement to their distribution consumers.

On May 8, 2019 the Regional Federal Appeal Court of the First Region gave final judgment (i.e. judgment against which there is no appeal) on the Ordinary Action, deciding in favor of Cemig, Cemig D and Cemig GT, and recognizing their right to exclude the ICMS amounts from the calculation base for Pasep and Cofins taxes, backdated from five years prior to the initial filing of the case – that is, from July 2003.

On June 11, 2019, based on this final judgment, the Companies filed for release of the escrow deposits, in the total amount of R$ 1,423,421: this still awaits court decision. Judgment has also been given, against which there is no further appeal, in favor of the similar applications made by Cemig’s wholly-owned subsidiaries Sá Carvalho, Cemig Geração Distribuída and UTE Barreiro.

Based on the opinion of its legal advisers, the Company believes that a portion of the credits to be received by Cemig D should be repaid to that company’s consumers in respect of a maximum period of 10 years. Thus, the Company constituted a liability corresponding to the credits arising for the last 10 years, that is to say, from June 2009 to May 2019, net of Pasep and Cofins taxes on the finance income gain represented by inflation correction of the total amount.

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The amounts will be repaid to consumers as from the date when the tax credits are in fact received by Cemig or its companies. These are still pending approval by the federal tax authority. The mechanisms and criteria for the repayment will be discussed with Aneel.

https://cemig.infoinvest.com.br/enu/17732/Fato_Relevante_Acao_ICMS_ing.pdf

Cemig’s consolidated electricity market

The Cemig Group sells electricity through its distribution company, Cemig Distribuição (‘Cemig D’), its generation and transmission company, Cemig Geração e Transmissão (‘Cemig GT’), and other wholly-owned subsidiaries: Horizontes Energia, Sá Carvalho, Cemig PCH, Rosal Energia, CE Praias de Parajuru, CE Volta do Rio, Cemig Geração Camargos, Cemig Geração Itutinga, Cemig Geração Salto Grande, Cemig Geração Três Marias, Cemig Geração Leste, Cemig Geração Oeste, and Cemig Geração Sul.

These companies sell electricity to:

In 2Q19 the Cemig group sold a total volume of 13,120,258 MWh, or 6.79% less than in 2Q18. This reflects: re-classifications, in May, of industrial consumers from the captive market to the commercial and residential categories; a lower total for the Free Client segment, due to differences arising from seasonal factors; and lower sales of energy in the Regulated Market, due to ending of sale contracts made at the 15^th Existing Supply Auction.

In June 2019 the Cemig Group invoiced 8,466,721 clients – or 0.6% less than the numerical total of the consumer base in June 2018. Of these, 8,466,370 are final consumers, and/or represent Cemig’s own consumption; and 351 are other agents in the Brazilian electricity sector.

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The chart below itemizes the Cemig Group’s sales to final consumers in the year, by consumer category:

Sales to final consumers, 2Q19 and 2Q18

Total consumption of electricity (GWh)

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The electricity market of Cemig D

Electricity billed to captive clients and electricity transported for Free Clients and distributors with access to Cemig D’s networks totaled 11,198,304 MWh in 2Q19. There are two components of this increase:

Residential

The figure for 2Q19 residential consumption 0.39% lower than in 2Q18 is related to the billing calendar.

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Industrial

The total for the captive market segment was reduced, in the quarter, by reclassification, in May, of approximately 50% of the consumers in the Industrial category to the Commercial and Residential categories. The reduction in the Free Client segment is related to differences in seasonal effects between the second quarters of 2018 and 2019. In spite of the fall in the market, there was an increase in revenue due to different contractual prices, and price adjustments.

Commercial and Services

The figure 2.21% higher than in 2Q18 is associated with the significant increase in consumption by the Free Market, associated with an increase (12.91%) in migration of clients from the captive market.

Rural

The figure for 2Q19 was 4.15% lower YoY, mainly reflecting the lower number of consumers billed in June 2019 than June 2018, and the lower consumption related to irrigation (due to better rainfall).

Number of clients

The Cemig group billed a total of 8,465,537 customers in June 2019 (this excludes the group’s own consumption). Of this total, 1,220 are Free Clients, which use Cemig D’s distribution network.

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Physical totals of transport and distribution – MWh

The electricity market of Cemig GT

Cemig GT billed a total of 6,864,111 MWh in 2Q19, an decrease of 9.15% vs. 2Q18.

Consumption by industrial clients was 10.92% lower year-on-year, due to a higher seasonal effect at the beginning of 2019, in which less power was allocated in the first half and more in the second half of the year. Meanwhile, consumption in the commercial market segment was 27.07% higher year-on-year, due to an increasing number of clients migrating from the captive market to the free market. Cemig GT added 118 commercial clients from June 2018 to June 2019.

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SUPPLY QUALITY INDICATORS – DECi and FECi

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

The charts below show Cemig’s indicators for duration and frequency of outages:

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Consolidated operational revenue

Revenue from supply of electricity:

Total revenue from supply of electricity in 2Q19 was R$ 6,327,737, or 8.39% more than in 2Q18 (R$ 5,838,104).

Final consumers

Total revenue from electricity sold to final consumers, excluding Cemig’s own consumption, in 2Q19 was R$ 5,567,717, or 11.83% more than in 2Q18 (R$ 4,978,835).

The main factors in this revenue were:

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Revenue from Use of the Distribution System (the TUSD charge)

Revenue from the Tariff for Use of the Distribution System (TUSD) in 2Q19 was R$ 635,675, or 44.28% more than in 2Q18 (R$ 440,599) – the higher figure reflects the increase of 65.60% granted for the TUSD, in effect from May 28, 2018 (full effect in 2019), and also the higher volume of energy carried.

CVA and Other financial components in tariff adjustment

In its financial statements Cemig recognizes the difference between actual non-controllable costs (in which the CDE, and electricity bought for resale, are significant components) and the costs that were used as the basis for decision on the rates charged to consumers. In 2Q19 amounts totaling R$ 40,109 to be passed through to the Company in the next tariff adjustment were recognized, compared to R$ 709,516 arising in 2Q18. This difference is mainly due to a lower difference than in 2018 between the cost of energy in 2019 and the cost estimated in the tariff – this difference generates a financial asset to be reimbursed to consumers through the next tariff adjustment.

Changes in balances of CVA-related financial assets and liabilities:

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Revenue from transactions on the Wholesale Trading Exchange (CCEE)

Revenue from transactions in electricity on the CCEE in 2Q19 was R$ 144,821, compared to R$ 25,639 in 2Q18 – an increase of 464.85% year-on-year. This arises mainly from the following items:

Revenue from supply of gas

Revenue from supply of gas in 2Q19 totaled R$ 534,955, compared to R$ 470,908 in 2Q18 – an increase of 13.60%. This mainly reflected the increase in the tariff in 2Q19, and the increase in the passthrough of the cost of gas acquired from Petrobras.