INFORMATION BY SEGMENT FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 2019
|
109
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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025
This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
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DESCRIPTION
|
ENERGY
|
GAS
|
OTHER
|
ELIMINATIONS
|
TOTAL
|
GENERATION
|
TRANSMISSION
|
DISTRIBUTION
|
SEGMENT ASSETS (1)
|
14,748,832
|
4,112,858
|
25,616,174
|
2,688,670
|
3,887,602
|
(1,127,084)
|
49,927,052
|
INVESTMENTS IN SUBSIDIARIES AND JOINTLY-CONTROLLED ENTITIES (1)
|
4,133,104
|
1,237,177
|
-
|
-
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29,110
|
-
|
5,399,391
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INVESTMENTS IN AFFILIATES CLASSIFIED AS HELD FOR SALE (1)
|
-
|
-
|
1,258,111
|
-
|
-
|
-
|
1,258,111
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ADDITIONS TO THE SEGMENT
|
36,374
|
82,989
|
363,167
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19,397
|
-
|
-
|
501,927
|
|
|
|
|
|
|
|
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CONTINUING OPERATIONS
|
|
|
|
|
|
|
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NET REVENUE
|
3,804,889
|
329,457
|
7,785,779
|
902,123
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254,645
|
(146,922)
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12,929,971
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COST OF ENERGY AND GAS
|
|
|
|
|
|
|
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Energy bought for resale
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(1,699,161)
|
-
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(3,455,727)
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-
|
-
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34,688
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(5,120,200)
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Charges for use of the national grid
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(92,252)
|
-
|
(713,263)
|
-
|
-
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104,344
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(701,171)
|
Gas bought for resale
|
-
|
-
|
-
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(725,162)
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-
|
-
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(725,162)
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Total
|
(1,791,413)
|
-
|
(4,168,990)
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(725,162)
|
-
|
139,032
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(6,546,533)
|
|
|
|
|
|
|
|
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OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
|
|
Personnel
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(108,721)
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(60,092)
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(463,651)
|
(23,130)
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(21,478)
|
-
|
(677,072)
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Employees’ and managers’ profit sharing
|
(24,743)
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(17,588)
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(120,976)
|
-
|
(11,208)
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-
|
(174,515)
|
Post-employment obligations
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(24,447)
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(18,184)
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(134,323)
|
-
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(21,745)
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-
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(198,699)
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Materials
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(8,022)
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(2,135)
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(29,102)
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(907)
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(103)
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13
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(40,256)
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Outsourced services
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(58,556)
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(20,422)
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(486,762)
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(9,265)
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(13,823)
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2,859
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(585,969)
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Depreciation and amortization
|
(111,236)
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(2,699)
|
(325,019)
|
(37,921)
|
(2,424)
|
-
|
(479,299)
|
Operating provisions (reversals)
|
(733,237)
|
(9,781)
|
(194,748)
|
(1,520)
|
(39,093)
|
-
|
(978,379)
|
Construction costs
|
-
|
(82,989)
|
(363,167)
|
(19,069)
|
-
|
-
|
(465,225)
|
Other operating expenses, net
|
(10,615)
|
(7,550)
|
(81,049)
|
(4,582)
|
4,924
|
5,018
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(93,854)
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Total cost of operation
|
(1,079,577)
|
(221,440)
|
(2,198,797)
|
(96,394)
|
(104,950)
|
7,890
|
(3,693,268)
|
|
|
|
|
|
|
|
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OPERATING COSTS AND EXPENSES
|
(2,870,990)
|
(221,440)
|
(6,367,787)
|
(821,556)
|
(104,950)
|
146,922
|
(10,239,801)
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated investees, net
|
3,347
|
100,567
|
-
|
-
|
(414)
|
-
|
103,500
|
|
|
|
|
|
|
|
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OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES)
|
937,246
|
208,584
|
1,417,992
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80,567
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149,281
|
-
|
2,793,670
|
Finance income
|
946,898
|
65,550
|
1,250,669
|
50,880
|
308,991
|
-
|
2,622,988
|
Finance expenses
|
(409,417)
|
(45,928)
|
(329,796)
|
(12,320)
|
(18,500)
|
-
|
(815,961)
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INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAXES
|
1,474,727
|
228,206
|
2,338,865
|
119,127
|
439,772
|
-
|
4,600,697
|
Income tax and social contribution tax
|
(680,745)
|
(59,037)
|
(771,698)
|
(39,593)
|
(137,399)
|
-
|
(1,688,472)
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NET INCOME (LOSS) FOR THE PERIOD
|
793,982
|
169,169
|
1,567,167
|
79,534
|
302,373
|
-
|
2,912,225
|
|
|
|
|
|
|
|
|
Equity holders of the parent
|
793,982
|
169,169
|
1,567,167
|
79,159
|
302,373
|
-
|
2,911,850
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Non-controlling interests (note 25)
|
-
|
-
|
-
|
375
|
-
|
-
|
375
|
|
793,982
|
169,169
|
1,567,167
|
79,534
|
302,373
|
-
|
2,912,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(1)
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Balance at December 31, 2019.
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The following is a breakdown
of the revenue of the Company by activity:
110
|
Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025
This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
|
Jan to Jun 2020
|
ENERGY
|
GAS
|
OTHER
|
ELIMINATIONS
|
TOTAL
|
GENERATION
|
TRANSMISSION
|
DISTRIBUTION
|
Revenue from supply of energy
|
3,440,383
|
-
|
9,286,600
|
-
|
-
|
(39,531)
|
12,687,452
|
Revenue from Use of Distribution Systems (the TUSD charge)
|
-
|
-
|
1,410,801
|
-
|
-
|
(11,693)
|
1,399,108
|
CVA and Other financial components in tariff adjustment
|
-
|
-
|
81,652
|
-
|
-
|
-
|
81,652
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Transmission concession revenue
|
-
|
525,379
|
-
|
-
|
-
|
(102,278)
|
423,101
|
Transmission construction revenue
|
-
|
74,044
|
-
|
-
|
-
|
-
|
74,044
|
Reimbursement revenue – Transmission
|
-
|
316,218
|
-
|
-
|
-
|
-
|
316,218
|
Distribution construction revenue
|
-
|
-
|
581,744
|
27,888
|
-
|
-
|
609,632
|
Adjustment to expectation of cash flow from Financial assets of distribution concession to be indemnified
|
-
|
-
|
(955)
|
-
|
-
|
-
|
(955)
|
Gain on inflation updating of Concession Grant Fee
|
146,412
|
-
|
-
|
-
|
-
|
-
|
146,412
|
Sale transaction in CCEE (i)
|
31,598
|
-
|
-
|
-
|
1
|
(1)
|
31,598
|
Mechanism for the sale of surplus
|
-
|
-
|
104,814
|
-
|
-
|
-
|
104,814
|
Supply of gas
|
-
|
-
|
-
|
962,892
|
-
|
(5)
|
962,887
|
Fine for violation of continuity indicator
|
-
|
-
|
(29,117)
|
-
|
-
|
-
|
(29,117)
|
Other operating revenues
|
3,471
|
16,001
|
812,854
|
10
|
55,463
|
(1,187)
|
886,612
|
Sector / Regulatory charges reported as Deductions from revenue
|
(626,967)
|
(184,162)
|
(4,692,662)
|
(192,011)
|
(4,027)
|
-
|
(5,699,829)
|
Net operating revenue
|
2,994,897
|
747,480
|
7,555,731
|
798,779
|
51,437
|
(154,695)
|
11,993,629
|
Jan to Jun 2019
|
ENERGY
|
GAS
|
OTHER
|
ELIMINATIONS
|
TOTAL
|
GENERATION
|
TRANSMISSION
|
DISTRIBUTION
|
Revenue from supply of energy
|
3,423,710
|
-
|
9,542,996
|
-
|
-
|
(37,552)
|
12,929,154
|
Revenue from Use of Distribution Systems (the TUSD charge)
|
-
|
-
|
1,276,741
|
-
|
-
|
(11,022)
|
1,265,719
|
CVA and Other financial components in tariff adjustment
|
-
|
-
|
80,241
|
-
|
-
|
-
|
80,241
|
Transmission concession revenue
|
-
|
336,060
|
-
|
-
|
-
|
(93,317)
|
242,743
|
Transmission construction revenue
|
-
|
82,989
|
-
|
-
|
-
|
-
|
82,989
|
Reimbursement revenue – Transmission
|
-
|
90,420
|
-
|
-
|
-
|
-
|
90,420
|
Distribution construction revenue
|
-
|
-
|
363,167
|
19,069
|
-
|
-
|
382,236
|
Adjustment to expectation of cash flow from Financial assets of distribution concession to be indemnified
|
-
|
-
|
8,967
|
-
|
-
|
-
|
8,967
|
Gain on inflation updating of Concession Grant Fee
|
176,151
|
-
|
-
|
-
|
-
|
-
|
176,151
|
Transactions in energy on the CCEE
|
404,037
|
-
|
(6,601)
|
-
|
1
|
-
|
397,437
|
Supply of gas
|
-
|
-
|
-
|
1,131,248
|
-
|
(15)
|
1,131,233
|
Fine for violation of continuity indicator
|
-
|
-
|
(35,510)
|
-
|
-
|
-
|
(35,510)
|
PIS/Pasep and Cofins taxes credits over ICMS
|
424,636
|
-
|
830,333
|
-
|
183,594
|
-
|
1,438,563
|
Other operating revenues
|
75,435
|
12,998
|
677,012
|
34
|
77,121
|
(5,016)
|
837,584
|
Sector / Regulatory charges reported as Deductions from revenue
|
(699,080)
|
(193,010)
|
(4,951,567)
|
(248,228)
|
(6,071)
|
-
|
(6,097,956)
|
Net operating revenue
|
3,804,889
|
329,457
|
7,785,779
|
902,123
|
254,645
|
(146,922)
|
12,929,971
|
For further details of operating revenue, see Note
26.
111
|
Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025
This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
|
|
32.
|
ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS
|
On June 30, 2020 and December
31, 2019 assets and liabilities classified as held for sale, and the results of discontinued operations, were as follows:
Consolidated and Parent company – Statements of financial position
|
Jun. 30, 2020
|
Dec. 31, 2019
|
Assets held for sale – investment in an affiliate
|
1,124,088
|
1,258,111
|
Consolidated and Parent company – Statements of income
|
Jun. 30, 2020
|
Jun. 30, 2019
|
Loss for write-down of non-current assets held for sale arising from continuing operations, before taxes
|
(134,023)
|
-
|
Deferred taxes arising from non-current assets held for sale, recognized in continuing operations
|
45,568
|
-
|
Loss after taxes
|
(88,455)
|
-
|
Disposal of interest in
and control of Light
On November 27, 2018, the
Board of Directors of the Company decided, in the context of Cemig’s disinvestment program, to maintain as a priority for
2019 the firm commitment to sale of the shares in Light S.A. owned by Cemig, on conditions that are compatible with the market
and also in accordance with the interests of shareholders.
Additionally, the Company
has concluded that its investment in Light now meets the criteria of CPC 31 – Non-current assets held for sale and discontinued
operations; and that its sale in the near future is highly probable. The Company has also evaluated the effects on the investments
held in the companies LightGer, Axxiom, Guanhães and UHE Itaocara, which are jointly controlled by the Company and by Light.
On July 17, 2019, together
with the public offering of shares by Light, the Company sold 33,333,333 shares that it held in that investee, at the price per
share of R$18.75, in the total amount of R$625,000.
Additionally, with completion
of the public offering of shares by Light, the Company’s equity interest in the total capital of this investee was reduced
from 49.99% to 22.58%, corresponding to 68.621.263 shares of a total of 303.934.060, this limited its right of voting in meetings
of shareholders, and consequently its ability to direct material activities of the investee.
Thus, as from
that date, with the alteration of the equity interest in Light, the Company ceased to have the power ensuring it control over that
investee. In these circumstances, the Company wrote down the values of assets and liabilities of its former subsidiary, and recognized,
at fair value, its remaining equity interest as an investment in an affiliate or jointly-controlled entity, in accordance with
IFRS 10 / CPC 36 (R3) – Consolidated financial
statements.
112
|
Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025
This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
|
Since the Company maintains
its firm commitment to dispose of the remaining equity interest in Light, the investment in that company continues to be classified
in Assets held for sale, in accordance with CPC 31 / IFRS 5 – Non-current assets held for sale, and discontinued
operations, at its fair value, subtracting the cost of sale. The difference between the book value of the remaining equity
interest and its fair value was recognized in the net income for the period from discontinuing operations.
The Company also wrote down,
on the date of the sale of the control, the assets and liabilities of the former subsidiaries Itaocara, Guanhães, LightGer
and Axxiom, and recognized its remaining equity interest in these investees at fair value as investments in jointly-controlled
subsidiaries, valued by the equity method. These investments, which are jointly controlled with Light, were not classified under
Held for sale and Discontinued operations, since the company does not have the intention of selling these interests. For more information,
see Note 15.
The restatement of the remaining
equity interest in Light at fair value used the sale price of the shares on the date of the loss of control (Level 1 in the fair
value hierarchy), of R$18.75 per share, less the estimated costs for the sale estimated at R$28,538.
Maintenance of the interest
in Light as an asset held for sale
In 2019, Management has not
completed the process of disinvestment of the entire investment in Light due to external factors, beyond its control and to unfavorable
market conditions.
Company’s management
continues to have a firm commitment to dispose of the remaining equity interest in Light and estimates that conclusion of the process
in 2020 is highly probable. Considering that it is an investment in an affiliate, it was classified as an asset held for sale,
but no longer as a discontinued operation, in accordance with the provisions established in CPC 31/IFRS 5 – Non-current
assets held for sale, and discontinued operations.
On March 31, 2020, the market
conditions have deteriorated as a result of Covid-19 situation and the Company reduced the carrying amount of the asset to its
market value less estimated costs to sell, resulted in the recognition of an impairment loss of R$609 million in profit or loss
from continuing operations.
On
June 30, 2020, with the partial recovery in the stock market, the Company remeasured the fair value of the shares held, using the
closing price on that date, of R$ 16.58, less estimated cost to sell, based on the most likely disposal process in the current
scenario, of 1.2% on the total negotiated. The impairment of the asset held for sale, accumulated until June 30, 2020, recognized
in the net income from continuing operations, totals R$ 134 million, corresponding to the difference between the fair values of
Light interest, as valued at December 31, 2019 and June 30, 2020, less cost to sell. Thus, the recovery in the market price of
the investee in the second quarter of 2020 resulted in a reversal of R$ 475 million in the impairment constituted in the first
quarter of 2020.
113
|
Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025
This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
|
The equity value of the interest
held by Cemig in Light is R$1,506,620 (R$1,406,857 on December 31, 2019), corresponding to the Company’s shareholding of
22.58% in Light total equity of R$6,672,366 (R$6,230,544 on December 31, 2019).
33.
NON-CASH TRANSACTIONS
On the period ended June 30,
2020 and 2019, the Company had the following transactions not involving cash, which are not reflected in the Cash flow statement:
|
§
|
Capitalized financial costs of R$22,515 on
June 30, 2020 (R$22,822 on June 30, 2019);
|
|
§
|
Except for the cash arising from the business combination, in the amount of R$27,110, and the payment
of R$44,775, the acquisition of the Centroeste’s remaining equity interest
did not generate effects in the Company’s cash flow;
|
|
§
|
Except for the cash arising from the merger of the subsidiaries RME and LUCE, in April 24, 2019,
amounting R$ 22,444, this transaction did not generate effects in the Company’s cash flow.
|
34.
SUBSEQUENT EVENTS
Offsetting of receivables
from the State of Minas Gerais against ICMS tax payable
On July 31, 2020, Cemig D
filed an application to the tax authority of State of Minas Gerais to offset debts for energy consumption and service owed by the
Direct and indirect administrations of Minas Gerais State, using amounts of ICMS tax payable, under Article 3 of State of Minas
Gerais Decree 47,908/2020, which regulated State Law 47,891/2020.
The main criteria applying
to offsetting of these debts, under that Decree, are:
|
§
|
Offsetting
in at least 12 installments. The maximum value of installments is limited to the number of months counted from the month following
the request granting, until December, 2022;
|
|
§
|
Relinquishing
by the creditor of the financial updating (arreas interest, fines, updating of the amounts of the installments, and legal fees,
if any);
|
|
§
|
Offsetting
starts from the first month after acceptance of the request.
|
Debts from the State of Minas
Gerais that qualify for offsetting are those past due at June 30, 2019, which amount approximately R$ 240 million. The Company’s
expects to begin the offsetting in the third quarter of 2020, after acceptance of its request
114
|
Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025
This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
|
CONSOLIDATED
RESULTS
(Figures in R$ ’000
unless otherwise indicated)
Net income for the period
From January to June 2020,
Cemig reports profit of R$986,691, compared to a profit of R$2,912,225 in the same period in 2019. This variation in Company’s
income was due, mainly, to the recognition, in the same period of 2019, of PIS/Pasep and Cofins taxes credits over ICMS, in the
amount of R$1,984,069 (see note n. 8), which was partially offset by the recognition of an impairment loss for receivables from
Renova, in the amount of R$688,031 (see note n. 27).
For the first semester of
2020, we highlight the recognition of (i) the positive adjustments of Periodic Reset of Permitted Annual Revenue in the amount
of R$283,694 (net of taxes), (ii) an impairment loss of R$88,455 (net of taxes) related to the Light equity interest classified
as asset held for sale, and (iii) the negative result arising from the debt in foreign currency (Eurobonds) and its corresponding
hedge instrument, which was R$242,213 (net of taxes). The main variations in revenues, costs, expenses and financial items are
described in the following pages.
Ebitda (Earnings before
interest, tax, depreciation and amortization)
Cemig’s consolidated
adjusted Ebtida, with the removal of non-recurrent items, reduced in 8.54% in 1H20 compared to 1H19, whereas the adjusted Ebtida
margin decreased from 21.95% to 19.95%. Consolidated Ebtida, measured according to CVM Instruction 527, decreased 20.04% % in 1H20
compared to 1H19, whereas the Ebtida margin was 25.31% in 1H19 and 22.63% in 1H20.
Ebitda – R$ ’000
|
Jan to Jun 2020
|
Jan to Jun 2019
|
Var %
|
Net income for the period
|
987,148
|
2,912,225
|
(66.10)
|
+ Income tax and Social Contribution tax
|
379,556
|
1,688,472
|
(77.52)
|
+ Net financial revenue (expenses)
|
762,063
|
(1,807,027)
|
(142.17)
|
+ Depreciation and amortization
|
488,449
|
479,299
|
1.91
|
= Ebitda according to “CVM Instruction 527” (1)
|
2,617,216
|
3,272,969
|
(20.04)
|
Non-recurrent items
|
|
|
|
+ Non-controlling interests
|
(457)
|
(375)
|
21.87
|
+ PIS/Pasep and Cofins over ICMS
|
-
|
(1,438,563)
|
(100.00)
|
+ Impairment loss – Receivables from Renova
|
37,361
|
688,031
|
(94.57)
|
+ Impairment (reversals) of assets held for sale (note 32)
|
134,023
|
-
|
-
|
+ Result of business combination (note 15)
|
(51,736)
|
-
|
-
|
+ RTP adjustments
|
(429,840)
|
-
|
-
|
Ebitda Adjusted (2)
|
2,306,567
|
2,522,062
|
(8.54)
|
|
(1)
|
Ebitda is a non-accounting measure prepared
by the Company, reconciled with the consolidated Interim financial information in accordance with CVM Circular SNC/SEP 1/2007 and
CVM Instruction 527 of October 4, 2012. It comprises Net income adjusted by the effects of net financial revenue (expenses), Depreciation
and amortization, and Income tax and 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 EBTIDA 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.
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The lower adjusted Ebtida
in 1H20 than in 1H19 mainly reflects the increase of 3.84% in the adjusted operational costs, partially offset by the 0.63% rise
in adjusted net revenue. The consolidated LAJIDA, on the other hand, reduced mostly because of the recognition of revenue
with PIS/Pasep and Cofins taxes credits, in an amount of R$1,438,563, in 1H19.
The main items in revenue in the period:
Revenue from supply of
energy
Revenue from sales of energy
in 1H20 were R$12,687,452 and R$12,929,154 in 1H19, a decrease of 1.87%.
Final customers
Total revenue from energy
sold to final customers in the 1H20 was R$11,083,458 – or 3.53% lower compared to 1H19 (R$11,489,454).
The main factors in this revenue
were:
|
§
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The
annual tariff adjustment for Cemig D, effective May 28, 2019 (full effect in 2020) resulting in an average increase in customer
tariffs of 8.73%; and
|
|
§
|
Volume of energy invoiced to captive and free industrial clients 15.8% lower in 1H20 than in 1H19,
mainly due to the measures to contain the Covid-19 pandemic.
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Cemig’s energy market
The total for sales in Cemig’s
consolidated energy market comprises sales to: (i) Captive customers in Cemig’s concession area in the State of Minas Gerais;
(ii) Free Customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação
Livre, or ACL); (iii) other agents of the energy sector – traders, generators and independent power producers, also in
the Free Market; (iv) Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and
(v) the Power Trading Exchange (Câmara de Comercialização de Energia
Elétrica – CCEE), eliminating transactions between companies of the Cemig Group.
This table details Cemig’s market and the
changes in sales of energy by customer category, comparing the period of 1H20 to 1H19:
Revenue from supply
of energy
|
Jan to Jun 2020
|
Jan to Jun 2019
|
Charge %
|
|
MWh
(2)
|
R$
|
Average price billed (R$/MWh)
(1)
|
MWh
(2)
|
R$
|
Average price billed (R$/MWh)
(1)
|
MWh
|
R$
|
Residential
|
5,442,910
|
4,866,632
|
894.12
|
5,291,676
|
4,665,228
|
881.62
|
2.86
|
4.32
|
Industrial
|
6,583,436
|
1,981,349
|
300.96
|
7,819,238
|
2,295,328
|
293.55
|
(15.80)
|
(13.68)
|
Commercial, services and others
|
4,594,310
|
2,577,247
|
560.96
|
4,654,040
|
2,619,879
|
562.93
|
(1.28)
|
(1.63)
|
Rural
|
1,671,865
|
984,629
|
588.94
|
1,775,702
|
917,625
|
516.77
|
(5.85)
|
7.30
|
Public authorities
|
386,015
|
279,249
|
723.42
|
455,643
|
311,737
|
684.17
|
(15.28)
|
(10.42)
|
Public lighting
|
664,656
|
295,455
|
444.52
|
685,933
|
291,353
|
424.75
|
(3.10)
|
1.41
|
Public services
|
675,124
|
356,523
|
528.09
|
679,065
|
333,397
|
490.96
|
(0.58)
|
6.94
|
Subtotal
|
20,018,316
|
11,341,084
|
566.54
|
21,361,297
|
11,434,547
|
535.29
|
(6.29)
|
(0.82)
|
Own consumption
|
17,376
|
-
|
-
|
17,230
|
-
|
-
|
0.85
|
-
|
Unbilled retail supply, net
|
-
|
(257,626)
|
-
|
-
|
54,907
|
-
|
-
|
(569.20)
|
|
20,035,692
|
11,083,458
|
553.19
|
21,378,527
|
11,489,454
|
537.43
|
(6.28)
|
(3.53)
|
Wholesale supply to other concession holders (3)
|
6,626,096
|
1,588,364
|
239.71
|
5,499,766
|
1,458,670
|
265.22
|
20.48
|
8.89
|
Wholesale supply not yet invoiced, net
|
-
|
15,630
|
-
|
-
|
(18,970)
|
-
|
-
|
182.39
|
Total
|
26,661,788
|
12,687,452
|
475.87
|
26,878,293
|
12,929,154
|
479.69
|
(0.81)
|
(1.87)
|
|
(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 volume of energy sold
to the industrial sector decreased 15.80% compared to 1H19, due, mainly, to the Covid-19 pandemic restrictive measures. The following
factors also contributed significantly:
|
§
|
Residential
consumption 2.86% higher YoY in 1H20, mainly reflecting the increase of 1.8% in the number of customers.
|
|
§
|
Decrease
of 5.85% in the volume of energy sold to the rural customer category compared to 1H19, mainly due to the higher rainfall in 1Q20
than 1Q19, which reduced consumption for irrigation.
|
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§
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Supply
to other concession holders 20.48% higher YoY, due to the higher volume of sales to traders in the early months of 2020, due to
the lower consumption by clients due to the economic activity contraction resulting from the pandemic – partially offset
by sales in the Regulated Market 1.5% lower YoY, due to differences in the seasonalization profile of the distributors.
|
Revenue from Use of Distribution
Systems (the TUSD charge)
This is revenue from charging
Free Customers the Tariff for Use of the Distribution System (TUSD), on the volume of energy distributed. In 1H20, this was R$1,399,108,
compared to R$1,265,719 in 1H19 - an increase of 10.54%. This difference mainly arises from the Company’s annual tariff adjustment,
in effect from May 28, 2019 (full effect in 2020), which was an increase of 15.47% for free clients, partially offset by volume
of energy transported in 1H20 1.26% lower than in 1H19.
|
MWh
|
Jan to Jun 2020
|
Jan to Jun 2019
|
Var %
|
Industrial
|
8,750,291
|
8,844,838
|
(1.07)
|
Commercial
|
608,096
|
646,291
|
(5.91)
|
Rural
|
14,274
|
5,682
|
151.20
|
Concessionaires
|
144,465
|
165,230
|
(12.57)
|
Total
|
9,517,126
|
9,662,041
|
(1.50)
|
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),
represented a gain of R$81,652 in 1H20, whereas in 1H19 it produced a revenue gain of R$80,241.
Additions to the CVA account
were higher in In 1H20 compared to 1H19, mainly due to (i) higher costs of energy from Itaipu, as a result of the increase in the
dollar exchange rate, and (ii) the effects of overcontracting, resulting from the reduction of consumption in the context of the
Covid-19 pandemic. These effects on revenue were offset by the passthrough of excess funds in the Energy Reserve Account (CONER)
in 1H20 and by the tariff adjustment of 2019, which was significantly higher than the amount awarded in the previous year.
For further details, see Note 13.
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Transmission concession revenue
Cemig GT’s transmission
revenue comprises the sum of the revenues of all the transmission assets. The concession contracts establish the Permitted Annual
Revenue (Receita Anual Permitida, or RAP) for the assets of the existing system, updated annually based on the variation in the
IPCA inflation index. Whenever there is an upgrade or adaptation to an existing asset, made under specific authorization from Aneel,
an addition is made to the RAP.
This revenue was 74.30% higher
in 1H20 compared to 1H19, being R$423,101 and R$242,743 respectively. The higher figure arises, mainly, from the periodic reset
of RAP, ratified by Aneel in June 30, 2020, resulting in an adjustment of R$198,714. More details see note 14.
Additionally, these revenues
were impacted by the increase in annual RAP, in July 2019 – this includes the effects of inflation and also new revenues
resulting from investments authorized. They also include an adjustment to expectation of cash flow from financial assets, arising
from change in the fair value of the Regulatory Remuneration Base of Assets (BRR).
Transmission reimbursement revenue
As specified in the sector
regulations, the Company reports in each period the amount of the inflation/monetary adjustment applicable to the amount of indemnity
receivable, based on the IPCA inflation index, which has a two-month delay, and the average regulatory cost of capital.
The revenue from reimbursements
of transmission assets in 1H20 was R$316,218, – or 249.72% higher than in 1H19 (R$90,420). This higher figure mainly reflects
the upward adjustment to the economic portion of the indemnity base, as a result of the Periodic Reset of RAP, which was remeasured
in accordance with the applicable regulatory rules, resulting in an increase of R$ 231,126 in the Company’s income at
June 30, 2020. More details see note 14.
At the beginning of the tariff
cycle, which occurs in July of each year, the amounts received, plus the adjustment made for the cycle, corresponding to the amortization
of the debtor balance up to the end of the period, are excluded from the remuneration base, reducing the amounts of the monetary
updating and the remuneration on the remaining balance. The amounts of the reimbursements are being received through RAP, since
July 2017, over a period of 8 years.
For more details see Notes
13 and 14.
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Revenue from transactions
in the Power Trading Exchange (CCEE)
Revenue from transactions
in energy on the CCEE in 1H20 was R$31,598, or 92.05% lower than in 1H19, which was R$397,437. This reduction is primarily due
to the deficit position on the CCEE assumed by Cemig GT in 1H20, compared to 1H19, due to: (i) lower allocation of its own generation;
(ii) lower GSFs; and (iii) higher sales through spot-market bilateral contracts. On the other hand, in 1Q19 Cemig had a high excess
of supply to be sold on the CCEE, arising from higher allocation of its own output, associated with higher GSFs and a lower volume
of bilateral sales. Additionally, there was a reduction of 37.51% in the average spot price (PLD), which was R$ 131.68/MWh
in 1H20, compared to R$ 210.73/MWh in 1H19.
The revenue from the mechanism
for the sale of energy surplus (MVE) were R$ 104,814 in 1H20, relating to offers of supply made at the end of 2019 by Cemig
D. The MVE enables distributors to sell excesses of supply and, for sales related to amounts of the regulatory limit or involuntary
exposure, enables part of the benefit gained to be passed through to the customers tariffs in the tariff adjustments.
Revenue from supply of
gas
Cemig reports revenue from
supply of gas totaling R$962,887 in 1H20, compared to R$1,131,233 in 1H19 – a decrease of 14.88%. This basically reflects
the reduction in the price of gas, which was passed through to customers – since the volume of gas sold was in fact 20% lower
(at 433,273 m³ in the first half of 2020, vs. 537,346 m³ in same period of 2019), – under the influence, mainly,
of the thermoelectric power generation and industrial sector, in which consumption was 45% and 13% lower, respectively. The effect
of lower volume of gas sold was partially offset by the increase from application of the IGP-M inflation index to distribution
costs, which occurs annually in February: the resulting increases were: 6.74% in 2019, and 7.81% in 2020, beyond Tariff Adjustment.
Construction revenue
Infrastructure construction
revenue in 1H20 was R$683,676, or 46.96% higher compared to 1H19 (R$465,225).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 medium- and low- voltage and sub-transmission networks. For the assets related to transmission infrastructure the difference
arises mainly arises from the suspension of three implementation contracts, halting their financial realization – they will
be re-tendered – and also the reductions resulting from the Covid-19 pandemic.
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.
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PIS/Pasep and Cofins taxes
credits over ICMS
The credits of PIS/Pasep and
Cofins taxes (previously erroneously charged to include the amounts of ICMS taxes paid or due), totaling R$1,438,563, resulted
from the success in the Company’s legal action questioning the inclusion of ICMS tax in these amounts, and is backdated to
July 2003. For more information please see Note 8.
Other operating revenues
The other operating
revenues line for the Company and its subsidiaries in first half of 2020 totaled R$886,612, compared to R$837,584 in the same period
of 2019 – 5.85% 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$5,699,829 from January to June 2020, or 6.53% less than the same period
in 2019 (R$6,097,956).
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). Charges for the CDE in 1H20 were R$1,217,865, compared
to R$1,331,366 in 1H19 – 8.53% lower YoY, due, primarily, to the Regulated Market Account (ACR), in August, 2019.
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.
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.
Customer
charges were, from January to June, 2020, at R$59,656, than the same period in 2019 (R$19,868) – or 200,26% higher year-on-year.
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The
difference reflects the application of the ‘yellow’ tariff flag in December 2019 (affecting the billing of January
2020), and January 2020. There were no flag tariffs activated in the other months of 1H20. For comparison, in 1H19 the yellow flag
was activated only in May (influencing billing in June 2019) and there was no activation of flags in the other months. Additionally,
the increase also reflects re-invoicing in 2020 of invoices from previous periods.
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
from January to June 2020 totaled R$9,947,051, or 2.86% less than the same period in 2019 (R$10,239,801). For more on the components
of Operating costs and expenses see Note 27.
The following paragraphs comment
on the main variations:
Employee profit sharing
The expense on employees’
and managers’ profit sharing was R$650,789 in 1H20, compared to R$677,072 in 1H19, 3.88% lower
YoY. This arises mainly from the following factors:
|
§
|
The average number of employees was 4.87% lower in 1H20, at 5,467, compared to 5,747 in 1H19, parcially
offset by the events described bellow.
|
|
§
|
Recognition, in 1H20, of a cost of R$58,850 on voluntary retirement plans, compared to R$21,495
in 1H19.
|
|
§
|
Salary increase of 2.55% under the Collective Work Agreement, as from November 2019.
|
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Energy purchased for
resale
This expense was R$5,569,733
in 1H20, or 8.78% higher year-on-year, compared to R$5,120,200 in 1H19. This arises mainly from the following items:
-
Expense on supply from Itaipu
was 37.20% higher, at R$952,413 in 1H20, compared to R$694,177 in 1H19. The difference is mainly due to the increase of 29.79%
in the average dollar quotation in 1H20 compared to 1H19 (R$5.01 and R$3.86, respectively), which has contributed to the rise in
dollar energy price per KW (US$28.41/KW in 1H20 and US$27.71/KW in 1H19);
|
§
|
Expenses on supply acquired through physical guarantee quota contracts
4.14% higher, at R$379,450 in 1H20, compared to R$364,358 in 1H19. This is mainly due to the average price per MWh being 6.52%
higher year-on-year in 1H20 (at R$108.62, compared to R$ 101.97 in 1H19).
|
|
§
|
Expenses
on supply acquired at auction 12.35% higher: R$1,567,953 in 1H20, compared to R$1,395,566 in 1H19. This increase reflects volume
of energy acquired.
|
|
§
|
Higher expenses on distributed generation (‘geração
distribuída’): R$327,796 in 2H20, compared to R$82,858 in 1H19. This reflects the higher number of generation units
installed (49,339 in June 2020, compared to 17,906 in June 2019); and the higher volume of energy injected into the grid (426,761
MWh in 1H20, compared to 179,833 MWh in 1H19).
|
§
The expense on purchase of supply
at the spot price was lower in 1H20, at R$ 633,003, than in 1H19 (R$ 762,267). 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 average spot price (PLD) being 37.51% lower, at R$ 131.68/MWh in 1H20, compared to R$ 210.73/MWh in 1H19,
and also the position assumed by Cemig D in 1H20, which was a creditor due to the lower consumption caused by the pandemic, contrasting
with the position assumed in 1H19.
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 27.
Charges for use of the transmission network
Charges for use of the transmission
network in 1H20 totaled R$622,453, a lower of 11.23% compared to 1H19 (R$701,171).
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 Regulator (Aneel).
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The lower figure is due to
the adjustment for the national grid – which was negative – being brought forward from July to April 2020, to financially
support distributors agents during the Covid-19 pandemic, generating discounts in April, May and June 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.
Operating provisions
Operating provisions in 1H20
totaled R$356,729, or 63.54% less than 1H19 (R$978,379). This arises mainly from the following factors:
|
§
|
Recognition,
in 1H19, of an estimated loss on realization of the receivables from Renova, in the amount of R$688,031, compared to R$37,361 in
1H20.
|
|
§
|
Net
additional provisions for third-party liability legal actions were higher – at R$22,690, in 1H20, compared to 1H19, of R$1,076.
The difference mainly arises from provisions made for legal actions for third party liability, claiming payment of indemnity for
pain and suffering, and material and aesthetic damage, caused by accidents involving the electricity network.
|
|
§
|
Losses
expected on doubtful receivables from clients 69.40% higher, at R$215,100 in 1H20, compared to R$126,978 in 1H19. This difference
mainly reflects an exponential increase in default by clients in the Public Authorities category, and also, worsening of
performance in the Residential and Industrial category, because the Covid-19 pandemic.
|
|
§
|
provisions
for employment-law legal actions amounting R$106,558 in 1H19, compared to provisions of R$30,688 in 1H20. The difference was recognized
for application of the IPCA-E inflation index instead of the TR reference rate in monetary adjustment for employment-law legal
actions dealing with debts arising from March 25, 2015 to November 10, 2017. These are at the advanced execution phase and now
have chances of loss assessed as ‘probable’. For further information, see Note 24.
|
Construction cost
Infrastructure construction
costs in 1H20 totaled R$683,676, or 46.96% more than 1H19 (R$465,225). 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.
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Gas bought for resale
In 1H20, the Company recorded
an expense of R$543,303 on acquisition of gas, 25.08% less than its comparable expense of R$725,162 in 1H19. This is basically
due to volume of gas sold 20% lower (at 433,273 m³ in 1H20, compared to 537,346 m³ in 1H19), – under the influence,
mainly, of the thermoelectric power generation and industrial sector, in which consumption was 45% and 13% lower in 1H20, respectively.
The effect of lower volume of gas sold was partially offset by the increase from application of the IGP-M inflation index to distribution
costs, which occurs annually in February: the resulting increases were: 6.74% in 2019, and 7.81% in 2020, beyond Tariff Adjustment.
Post-employment obligations
The Company’s post-retirement
obligations in 1H20 is R$223,727 and R$198,699 in 1H2019. This is mainly the result of higher in the discount rate used in the
actuarial calculation – which increased the amount of the actuarial liabilities, and consequently the scale of the expense
reported.
Asset held for sale impairment
The Company recognized an
impairment loss related to its equity interest in Light, classified as asset held for sale, in the amount of R$134,023. The market
conditions have deteriorated as a result of Covid-19 situation and, in such circumstances, the fair value of equity interest in
Light decreased significantly. For further information, see Note 32.
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$164,476 in 1H20, an increase of 58.91% compared to 1H19, as
a result, mainly, of the increase of 71.47% in the investee TAESA’s result, which was R$97,719 in 1H19 and R$167,556 in 1H20.
In Addition, the loss of the associate Madeira decreased 56.97%, from (R$70,882) in 1H19 to (R$45,156) in 1H20.
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 June, 2020 of R$762,063, compared to the same period in 2019 (R$1,807,027). The main factors are:
|
§
|
Recognition
of financial updating of PIS/Pasep and Cofins taxes credits in 1H19, in the amount of R$1,553,112 (see note 8).
|
|
§
|
Net
negative effect of R$ 366,990 in 1H20 in the Eurobonds transaction and its corresponding hedge instrument – compared
to a net gain of R$ 677,297 in 1H19. The difference mainly reflects (i)
the dollar appreciated by 35.86% against the Real in the 1H20, compared to appreciation of 1.10% in 1H19. This resulted in negative
effects on the principal of the Eurobond debt in both periods: R$2,167,950 in 1H20, vs. R$63,904 in 1H19; (ii) Variation in the
fair value of the financial instrument contracted to hedge the risks of the Eurobond lower than the depreciation of the exchange
rate, at March 31, 2020, in contrast to the positive effect at March 31, 2019. In 1H20 the variation in the fair value of the hedge
instrument resulted in a gain of R$1,800,960, compared to R$613,394 in 1H19. The
higher figure was the result of the dollar future curve moving upward, resulting in both the call spread and the asset becoming
more valuable; and also due to the curve for the future DI interest rate (the liability side of the transaction) moving downward,
and contributing to an increase in fair value.
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For a breakdown of financial revenues and expenses
please see Note 28.
Income tax and social
contribution tax
In 1H20, the expense on income
and the Social Contribution taxes totaled R$379,556, on pre-tax profit of R$1,366,704, an effective rate of 27.77%. In 1H19, the
expense on income and the Social Contribution taxes was R$1,688,472, on pre-tax profit of R$4,600,697 an effective rate of 36.70%.
These effective rates are
reconciled with the nominal tax rates in Note 9(c).
Results for the quarter
In 2Q20, Cemig reports profit
of R$1,043,994, compared a profit of R$2,114,986 in 2Q19. The negative year-on-year comparison in the Company’s net profit
is mainly due to the recognition in 2Q19 of non-recurring recovery of PIS/Pasep and Cofins taxes credits over ICMS tax, totaling
(net of tax) R$ 1,984,069 – resulted from the success in the Company’s and its subsidiaries legal, subject to
no further appeal – partially offset by the write-down of R$ 688,031 for doubtful credits receivable from the investee
Renova (see Note 27).
The net income of 1H20 was
also significantly impacted by the recognition of the positive adjustment arising from the periodic reset of RAP in the amount
of R$283,694 (net of taxes) and by the partial reversal, in the amount of R$313,590 (net of taxes), and the impairment of R$ 402,046
(net of taxes) recorded in 1Q20 for the value of the investment in Light, classified as held for sale.
There was also a positive
net gain of R$ 486,720 in Net financial revenue (expenses) from the net effect of FX variation on the Eurobond debt in foreign
currency and its corresponding hedge transaction. See more information in Notes 21 and 30.
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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 EBTIDA, with the removal of non-recurrent items reduced in 11.30% in 2Q20 compared to 2Q19, whereas the adjusted Ebtida
margin decreased from 19.02% to 17.10%. Consolidated Ebtida, measured according to CVM Instruction 527, decreased 0.15% % in 2Q20
compared to the same period last year, whereas the Ebtida margin was 25.82% in 2Q19 and 32.86% in 2Q20.
Ebitda – R$ ’000
|
Apr to Jun 2020
|
Apr to Jun 2019
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Var %
|
Net income for the period
|
1,043,994
|
2,114,986
|
(50.64)
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+ Income tax and Social Contribution tax
|
483,986
|
1,356,983
|
(64.33)
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+ Net financial revenue (expenses)
|
35,317
|
(1,908,587)
|
(101.85)
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+ Depreciation and amortization
|
245,697
|
248,403
|
(1.09)
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= Ebitda according to “CVM Instruction 527” (1)
|
1,808,994
|
1,811,785
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(0.15)
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Non-recurrent items
|
|
|
|
+ Non-controlling interests
|
(188)
|
(212)
|
(11.32)
|
+ PIS/Pasep and Cofins over ICMS
|
-
|
(1,438,563)
|
(100.00)
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+ Impairment loss – Receivables from Renova
|
37,361
|
688,031
|
(94.57)
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+ Impairment (reversals) of assets held for sale (note 32)
|
(475,137)
|
-
|
-
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+ RTP adjustments
|
(429,840)
|
-
|
-
|
Ebitda Adjusted (2)
|
941,190
|
1,061,041
|
(11.30)
|
|
(1)
|
Ebitda is a non-accounting measure prepared
by the Company, reconciled with the consolidated Interim financial information in accordance with CVM Circular SNC/SEP 1/2007 and
CVM Instruction 527 of October 4, 2012. It comprises Net income adjusted by the effects of net financial revenue (expenses), Depreciation
and amortization, and Income tax and 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 EBTIDA 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 lower adjusted Ebtida
in 2Q20, 2020 than 2Q19 mainly adjusted net revenue 1.32% lower, and adjusted operational costs 2.03% higher. The consolidated
Ebtida, on the other hand, reduced mostly because of the recognition in 2Q19 of the gain of PIS/Pasep and Cofins taxes credits
over ICMS in the amount R$1,438,563 – partially offset by (i) recognition in 2Q20 of a gain of R$429,840 resulting from the
periodic reset of RAP, and (ii) the reversal of impairment of Light, classified as held for sale, in the amount of R$475,137.
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The main items in revenue in the period:
Revenue from supply of
energy
Revenue from sales of energy
in 2Q20 were R$5,920,014, compared to R$6,327,737 in 2Q19 – a decrease of 6.44%.
Final customers
Total revenue from energy
sold to final customers in 2Q20 was R$5,332,353 – or 4.23% lower than 2Q19 (R$5,567,717), because the annual tariff adjustment
for Cemig D, effective May 28, 2019 (full effect in 2020) resulting in an average increase in customer tariffs of 8.73%.
Cemig’s energy market
The total for sales in Cemig’s
consolidated energy market comprises sales to: (i) Captive customers in Cemig’s concession area in the State of Minas Gerais;
(ii) Free Customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação
Livre, or ACL); (iii) other agents of the energy sector – traders, generators and independent power producers, also in
the Free Market; (iv) Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and
(v) the Power Trading Exchange (Câmara de Comercialização de Energia
Elétrica – CCEE), eliminating transactions between companies of the Cemig Group.
This table details Cemig’s market and the
changes in sales of energy by customer category, comparing 2Q20 to 2Q19:
Revenue from supply
of energy
|
Apr to Jun 2020
|
Apr to Jun 2019
|
Charge %
|
|
MWh
(2)
|
R$
|
Average price billed (R$/MWh)
(1)
|
MWh
(2)
|
R$
|
Average price billed (R$/MWh)
(1)
|
MWh
|
R$
|
Residential
|
2,657,910
|
2,307,578
|
868.19
|
2,547,878
|
2,206,790
|
866.13
|
4.32
|
4.57
|
Industrial
|
3,105,644
|
934,197
|
300.81
|
3,947,233
|
1,154,786
|
292.56
|
(21.32)
|
(19.10)
|
Commercial, services and others
|
2,085,089
|
1,136,848
|
545.23
|
2,374,683
|
1,280,841
|
539.37
|
(12.20)
|
(11.24)
|
Rural
|
896,651
|
511,810
|
570.80
|
915,078
|
460,746
|
503.50
|
(2.01)
|
11.08
|
Public authorities
|
169,009
|
121,381
|
718.19
|
231,943
|
158,145
|
681.83
|
(27.13)
|
(23.25)
|
Public lighting
|
325,162
|
142,679
|
438.79
|
333,969
|
140,508
|
420.72
|
(2.64)
|
1.55
|
Public services
|
339,650
|
177,860
|
523.66
|
339,954
|
165,901
|
488.01
|
(0.09)
|
7.21
|
Subtotal
|
9,579,115
|
5,332,353
|
556.66
|
10,690,738
|
5,567,717
|
520.8
|
(10.40)
|
(4.23)
|
Own consumption
|
7,970
|
-
|
-
|
7,247
|
-
|
-
|
9.98
|
-
|
Unbilled retail supply, net
|
-
|
(104,793)
|
-
|
-
|
80,721
|
-
|
-
|
(229.82)
|
|
9,587,085
|
5,227,560
|
545.27
|
10,697,985
|
5,648,438
|
527.99
|
(10.38)
|
(7.45)
|
Wholesale supply to other concession holders (3)
|
3,401,541
|
726,004
|
213.43
|
2,422,273
|
641,532
|
264.85
|
40.43
|
13.17
|
Wholesale supply not yet invoiced, net
|
-
|
(33,550)
|
-
|
-
|
37,767
|
-
|
-
|
(188.83)
|
Total
|
12,988,626
|
5,920,014
|
466.44
|
13,120,258
|
6,327,737
|
473.26
|
(1.00)
|
(6.44)
|
|
(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.
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The variations are primarily
due to the following events:
|
§
|
Volume
of energy sold to industrial clients 21.32% lower, and to commercial clients 12.20% lower, mainly due to the Covid-19 restrictive
measures, under which non-essential commercial facilities were closed, industrial companies were shut down for part of the period,
in-person school classes were canceled, and public bodies with in-loco activities were reduced or shut down.
|
|
§
|
Increase
of 4.32% in the volume of energy sold to the residential category, related to the addition in the number of customers.
|
Revenue from Use of Distribution
Systems (the TUSD charge)
This is revenue from charging
Free Customers the Tariff for Use of the Distribution System (TUSD), on the volume of energy distributed. In 2Q20, this was R$674,737,
compared to R$635,675 in the same period 2019 - increase of 6.14%. This difference mainly arises from the Company’s annual
tariff adjustment, in effect from May 28, 2019 (full effect in 2020), which was an increase of 15.47% for free clients, partially
offset by volume of energy transported in 1H20 5.61% lower than in 1H19.
|
MWh
|
Apr to Jun 2020
|
Apr to Jun2019
|
Var %
|
Industrial
|
4,247,588
|
4,455,679
|
(4.67)
|
Commercial
|
259,661
|
315,065
|
(17.58)
|
Rural
|
7,045
|
2,670
|
163.87
|
Concessionaires
|
72,652
|
86,206
|
(15.72)
|
Total
|
4,586,946
|
4,859,620
|
(5.61)
|
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),
represented a gain of R$136,254 in 2Q20, whereas in the same period in 2019 it produced a revenue gain of R$40,109.
This variation is due, primarily,
to the high amount of revenue recognized in 2Q20 mainly because of the increase in the Itaipu energy cost, caused by the rise in
the dollar exchange rate compared to 2Q19, and due to the overcontracting effects resulting from the energy consuption reduction,
leading to a increment in the Company net financial asset. These effects on revenue were offset by the passthrough of excess funds
in the Energy Reserve Account (CONER), determined by the Aneel Order (‘Despacho’) n. 986/2020
For further details, see Note 13.
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Transmission concession revenue
Cemig GT’s transmission
revenue comprises the sum of the revenues of all the transmission assets. The concession contracts establish the Permitted Annual
Revenue (Receita Anual Permitida, or RAP) for the assets of the existing system, updated annually based on the variation in the
IPCA inflation index. Whenever there is an upgrade or adaptation to an existing asset, made under specific authorization from Aneel,
an addition is made to the RAP.
This revenue was R$299,832
in 2Q20, compared to 2Q19 (R$125,564) – or 138.79% higher year-on-year. The higher figure arises from the reameasurement
of the base of remuneration arising from the periodic reset of RAP, ratified by Aneel in June 30, 2020, resulting in an adjustment
of R$198,714. More details see note 14.
Additionally, these revenues
were impacted by the increase in annual RAP, in July 2019 – this includes the effects of inflation and also new revenues
resulting from investments authorized. They also include an adjustment to expectation of cash flow from financial assets, arising
from change in the fair value of the Regulatory Remuneration Base of Assets (BRR).
Transmission reimbursement revenue
As specified in the sector
regulations, the Company reports in each period the amount of the inflation/monetary adjustment applicable to the amount of indemnity
receivable, based on the IPCA inflation index, which has a two-month delay, and the average regulatory cost of capital.
The revenue from reimbursements
of transmission assets in 2Q20 was R$259,680 – or 348.33% higher than the same period in 2019 (R$57,921). This higher figure
mainly reflects the upward adjustment to the economic portion of the indemnity base, as a result of the Periodic Reset of RAP,
which was remeasured in accordance with the applicable regulatory rules, resulting in an increase of R$ 231,126 in the Company’s
income at June 30, 2020. More details see note 14.
At the beginning of the tariff
cycle, which occurs in July of each year, the amounts received, plus the adjustment made for the cycle, corresponding to the amortization
of the debtor balance up to the end of the period, are excluded from the remuneration base, reducing the amounts of the monetary
updating and the remuneration on the remaining balance. The amounts of the reimbursements are being received through RAP, since
July 2017, over a period of 8 years.
For more details see Note
13 – Financial assets of the concession.
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Revenue from transactions
in the Power Trading Exchange (CCEE)
Revenue from transactions
in energy on the CCEE in 2Q20 was R$7,074, or 95.12% lower than the same period in 2019, which was R$144,821. This reduction is
principally due to the deficit position on the CCEE assumed by Cemig GT in the first quarter of 2020, when compared to the same
period 2019, due to: (i) lower allocation of its own generation; (ii) lower GSFs; and (iii) higher sales through spot-market bilateral
contracts. On the other hand, in first quarter of 2019 Cemig had a high excess of supply to be sold on the CCEE, arising from higher
allocation of its own output, associated with higher GSFs and a lower volume of bilateral sales.
The revenue from the mechanism
for the sale of energy surplus (MVE) were R$41,514 in 2Q20, relating to offers of supply made at the end of 2019 by Cemig D. The
MVE enables distributors to sell excesses of supply and, for sales related to amounts of the regulatory limit or involuntary exposure,
enables part of the benefit gained to be passed through to the customers tariffs in the tariff adjustments.
Revenue from supply of
gas
Cemig reports revenue from
supply of gas totaling R$403,227 in 2Q20, compared to R$534,955 in the same period in 2019 – 24.62% lower YoY. This basically
reflects the reduction in the price of gas, which was passed through to customers – since the volume of gas sold was in fact
17.55% lower (at 183,138 m³ in the second quarter of 2020, vs. 222,106m³ in same period of 2019), – under the influence,
mainly, of the industrial sector, in which consumption was 21.75% lower in the second quarter of 2020. The effect of lower volume
of gas sold was partially offset by the increase from application of the IGP-M inflation index to distribution costs, which occurs
annually in February: the resulting increases were: 6.74% in 2019, and 7.81% in 2020, beyond Tariff Adjustment.
Construction revenue
Infrastructure construction
revenue in 2Q20 was R$373,405, or 40.32% more than the same period in 2019 (R$266,107). This variation is mainly due to the major
capital expenditure in 2Q20.
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.
PIS/Pasep and Cofins taxes
credits over ICMS
The credits of PIS/Pasep and
Cofins taxes (previously erroneously charged to include the amounts of ICMS taxes paid or due), totaling R$1,438,563, resulted
from the success in the Company’s legal action questioning the inclusion of ICMS tax in these amounts, and is backdated to
July 2003. For more information please see Note 8.
Other operating revenues
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The other operating
revenues line for the Company and its subsidiaries in 2Q20 totaled R$473,142, compared to R$396,386 in the same period of 2019
– 19.36% lower 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$2,687,389 in 2Q20, or 9.10% less than the same period in 2019 (R$2,956,432).
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). Charges for the CDE in 2Q20 were R$608,155, compared
to R$679,017 in the same period in 2019 – 10.44% lower YoY, primarily, due to the Regulated Market Account (ACR), in August,
2019.
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.
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.
Customer
charges were, in 2Q20, at R$73, than the same period in 2019 (R$8,712) – or 99.16% lower year-on-year.
The variation is mostly because
there were no flag tariffs activated in the 2Q20. In comparison, in the 2Q19, the yellow flag was activated in May (influencing
billing in June 2019).
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.
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Operating costs and
expenses (excluding financial income/expenses)
Operating costs and expenses
in 2Q20 totaled R$4,928,788, or 10.22% less than the same period in 2019 (R$5,489,685). For more on the components of Operating
costs and expenses see Note 27.
The following paragraphs comment
on the main variations:
Employee profit sharing
The expense on employees’
and managers’ profit sharing was R$339,183 in 2Q20, compared to R$312,031 in the same period in 2019, 8.70%
higher YoY. This arises mainly from the recognition, in the second quarter of 2020, of a cost of R$58,850 on voluntary retirement
plans and salary increase of 2.55% under the Collective Work Agreement, as from November 2019.
Energy purchased for
resale
This expense in 2Q20 was R$2,755,238,
or 9.07% higher year-on-year, compared to R$2,526,019 in the same period in 2019. This arises mainly from the following items:
|
§
|
Expense on supply from Itaipu was 45.31%
higher, at R$524,601 in the second quarter of 2020, compared to R$361,021 in the same period of 2019. The difference is mainly
due to the increase of 37.76% in the average dollar quotation in the second quarter of 2020 compared to the same period last year
(R$3.92 and R$5.40, respectively), which has contributed to the rise in dollar energy price per KW (US$28.41/KW in the year of
2020 and US$27.71/KW in 2019);
|
|
§
|
Expenses on supply acquired through physical guarantee quota contracts
2.26% higher, at R$189,617 in 2Q20, compared to R$185,427 in the same period of 2019. This is mainly due to the average price per
MWh being 7.2% higher year-on-year in 2Q20 (at R$109.36, compared to R$101.93 in 2Q19);
|
|
§
|
Expenses
on supply acquired at auction 9.31% higher: R$748,514 in 2Q20, compared to R$684,774 in the same period of 2019. This increase
reflects volume of energy acquired approximately 10% higher year-on-year, added to the effect of upward adjustment in power purchasing
agreements in the Regulated Market (CCEARs) taking place at the moment of the distributors’ tariff adjustment.
|
|
§
|
Higher expenses on distributed generation (‘geração
distribuída’): R$154,315 in 2Q20, compared to R$44,892 in
2Q19. This reflects the higher number of generation units installed and the higher volume of energy injected into the grid (232,076
MWh in 2Q20, compared to 95,965 MWh in 2Q19).
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Lower expense on purchase of supply
in the spot market, R$251,066 in 2Q20 compared to R$278,055 in the same period of 2019. 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 average spot price (PLD) being 42.55% lower, at R$75.47/MWh in 2Q20 compared to
R$131.37/MWh in 2Q19, and also the position assumed by Cemig D in 2Q20, which was a creditor due to the lower consumption caused
by the Covid-19 pandemic, contrasting with the position assumed in 2Q19. This effect was partially offset by the increase in the
Cemig GT consolidated expenses on purchase of supply in the spot market, mostly because of the deficit assumed in CCEE in 2Q20.
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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 27.
Charges for use of the transmission network
Charges for use of the transmission
network in 2Q20 totaled R$257,441, a lower of 29.92% compared with the same period in 2019 (R$367,375).
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 Regulator (Aneel).
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.
Operating provisions
Operating provisions in 2Q20
totaled R$197,613, or 77.27% less than the same period in 2019 (R$869,373). This arises mainly from the following factors:
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§
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Recognition,
in the 2Q19, of an estimated loss on realization of the receivables from Renova, in the amount of R$688,031, compared to R$37,361
in 2Q20.
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§
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Losses
expected on doubtful receivables from customers 142.22% higher, at R$115,360 in 2Q20, compared to R$47,627 in 2Q19. This difference
mainly reflects an exponential increase in default by clients in the Public Authorities category, and also, worsening of
performance in the Residential and Industrial category, because the Covid-19 pandemic.
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Provisions
for employment-law legal actions amounting R$105,122 in 2Q2019, compared to provisions of R$23,375 in 2Q20. The difference was
recognized for application of the IPCA-E inflation index instead of the TR reference rate in monetary adjustment for employment-law
legal actions dealing with debts arising from March 25, 2015 to November 10, 2017. These are at the advanced execution phase and
now have chances of loss assessed as ‘probable’. For further information, see Note 24.
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Construction cost
Infrastructure construction
costs in 2Q20 totaled R$373,405, or 40.32% higher than 2Q19 (R$266,107). 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
In 2Q20, the Company recorded
an expense of R$231,378 on acquisition of gas, 29.92% less than its comparable expense of R$330,180 in the same period in 2019.
This is basically due to volume of gas sold 14.61% lower (at 185,852m³ in the second quarter of 2020, compared to 217,646m³
in the same period of 2019).
Post-employment obligations
The Company’s post-retirement
obligations in 2Q20 is R$118,322 and R$97,790 in 2019. This is mainly the result of higher in the discount rate used in the actuarial
calculation – which increased the amount of the actuarial liabilities, and consequently the scale of the expense reported.
Asset held for sale impairment
The market conditions have
deteriorated as a result of Covid-19 situation and, in such circumstances, the fair value of equity interest in Light decreased
significantly. The Company recognized an impairment loss related to its equity interest in Light, classified as asset held for
sale, in the amount of R$609,160 in 1Q20, which was reversed in 2Q20 due to the shares price recovery, resulting in a positive
effect of R$475,137 on net income for 2Q20. For further information, see Note 32.
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$82,534 in 2Q20, an increase of 127.52% compared to the same
period of 2019, as a result, mainly, of the increase of 39.39% in the investee TAESA’s result, which was R$64,858 in the
second quarter of 2019 and R$90,404 in same period of 2020.
The breakdown of the
results from the investees recognized under this line is given in detail in Note 15.
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Net financial revenue
(expenses)
Cemig reports net financial
expenses in 2Q20 of R$35,317, compared to net financial income of R$1,908,587 in the same period in 2019. The main factors are:
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§
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Recognition
of the financial updating of PIS/Pasep and Cofins taxes credits over ICMS in the amount of R$1,553,112 in 2Q19 (see note n. 8).
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§
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The
dollar appreciated by 5.33% against the Real in the 2Q20, compared to appreciation of (1.66%) in 2Q19. This resulted in negative
effects on the principal of the Eurobond debt in both periods: R$415,950 in 2Q20, vs. R$96,750 in 2Q19.
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§
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In 2Q20,
the variation in the fair value of the hedge instrument resulted in a gain of R$486,720, which was partially offset by the positive
effect of R$70,770. In 2Q19, the variation in the fair value of the hedge instrument resulted in a gain of R$461,083, plus the
positive debt exchange rate variation of R$96,750, which was partially offset by the positive effect of R$557,833. The higher figure
was the result of the dollar future curve moving upward, resulting in both the call spread and the asset becoming more valuable;
and also due to the curve for the future DI interest rate (the liability side of the transaction) moving downward.
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For a breakdown of financial revenues and expenses
please see Note 28.
Income tax and social
contribution tax
In 2Q20, the expense on income
and the Social Contribution taxes totaled R$483,986, on pre-tax profit of R$1,474,802, an effective rate of 31.67%. In the same
period in 2019, the expense on income and the Social Contribution taxes was R$1,356,983, on pre-tax profit of R$3,471,969 an effective
rate of 39.08%.
These effective rates are
reconciled with the nominal tax rates in Note 9(c).
OTHER INFORMATION
THAT THE COMPANY BELIEVES TO BE MATERIAL
Board of Directors
Meetings
The Board of Directors met
11 times up to June 30, 2020, 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 June 11, 2018, with election by the multiple voting system.
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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 2020.
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:
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§
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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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§
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Authorization for issuance of securities in the domestic or external market to raise funds;
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§
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Approval of the Long-term Strategy and the Multi-year Business Plan, and alterations and revisions
to them, and the Annual Budget.
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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:
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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;
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§
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to supervise activities in the areas of internal control, internal audit and preparation of the
financial statements;
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§
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to evaluate and monitor, jointly with the management and the Internal Audit Unit, the appropriateness
of the transactions with related parties.
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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 2020.
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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§
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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.
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§
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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.
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§
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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.
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Audit
Board
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§
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The Audit Board held seven meetings through the first half 2020.
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Membership,
election and period of office
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§
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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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§
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Nominations to the Audit Board must obey the following:
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a)
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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)
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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.
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§
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The members of the Audit Board are listed on our website: http://ri.cemig.com.br.
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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.
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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:
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§
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Operational
effectiveness and efficiency
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§
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Reliable
financial reporting
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§
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Compliance
with laws, regulations and policies.
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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.
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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 JUNE 30, 2020
|
COMMON SHARES
|
%
|
PREFERRED SHARES
|
%
|
TOTAL SHARES
|
%
|
Estado de Minas Gerais
|
248,516,953
|
50.96
|
11,323
|
-
|
248,528,276
|
17.04
|
FIA Dinâmica Energia S/A
|
48,772,500
|
10.00
|
49,914,344
|
5.14
|
102,394,844
|
7.02
|
BNDESPAR
|
54,342,992
|
11.14
|
26,220,938
|
2.70
|
80,563,930
|
5.52
|
CONSOLIDATED SHAREHOLDING
POSITION OF
THE CONTROLLING SHAREHOLDERS
AND MANAGERS, AND FREE FLOAT,
ON JUNE 30, 2020
|
January to June 2020
|
ON
|
PN
|
Controlling shareholder
|
248,516,953
|
11,323
|
Board of Directors
|
-
|
16,600
|
Executive Board
|
1
|
10,400
|
Shares in Treasury
|
69
|
560,649
|
Free float
|
239,097,190
|
970,539,416
|
TOTAL
|
487,614,213
|
971,138,388
|
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.
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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.
At the end of May 2019, we
held our 24rd Annual Meeting with the Capital Markets, in Belo Horizonte, Minas Gerais – where market professionals had the
opportunity to interact with the Company’s directors and principal executives.
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:
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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.
|
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§
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The
Related Party Transactions Policy.
|
|
§
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Formal
designation for the Board of Directors to ensure implementation of and supervision of the Company’s systems of risks and
internal controls.
|
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§
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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.
|
|
§
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The
CEO now to be responsible for directing compliance and corporate risk management activities.
|
|
§
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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.
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* * * * * * * * * *
* *
(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 cumulatively with charge of Controller
CRC-MG 53,140
|
|
|
|
Ronaldo Gomes de Abreu
|
|
Rafael Falcão Noda
|
Chief Distribution Officer
|
|
Chief Officer Cemigpar
|
|
|
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Paulo Mota Henriques
|
|
Eduardo Soares
|
Chief Generation and Transmission Officer
|
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Chief Regulation and Legal
|
|
|
|
|
Carolina Luiza F. A. C. de Senna
|
|
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Financial Accounting and Equity
Interests Manager
Accountant – CRC-MG 77,839
|
|
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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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|
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A free translation
from Portuguese into English of Independent Auditor’s Review Report on Quarterly Information 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 - CEMIGBelo 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 June 30, 2020, comprising the statements of financial
position as at June 30, 2020, and the related statements of profit or loss, of comprehensive income for the three and six month
periods then ended, and of changes in equity and cash flows for the six-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.
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This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
|
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).
Emphasis of matters
Risks related to compliance with laws and
regulations
As mentioned in Note 15 to the individual and
consolidated interim financial information, currently investigations and other legal measures are being conducted by public authorities
in connection with the Company and certain investees regarding certain expenditures and their allocations, which involve and also
include some of its other shareholders and certain executives of the Company and of these other shareholders. The governance bodies
of the Company have authorized engaging a specialized company to analyze the internal procedures related to these certain investments
and to ascertain such claims. The internal and independent investigation was completed, and the corresponding report was delivered
on May 8, 2020, with the conclusion that no evidence has been identified to support the preliminarily investigated allegations.
Thus far, it is not possible to predict future developments arising from investigations conducted by public authorities, or their
possible impact on the interim financial information of the Company and its subsidiaries. Our conclusion is not modified in respect
of this matter.
Risk regarding the ability of jointly-controlled
entity Renova Energia S.A. to continue as a going concern
As disclosed in Note 15 to the individual and
consolidated interim financial information, on December 17, 2019, under the terms of Law No. 11101/05, the jointly-controlled entity
Renova Energia S.A. and some of its subsidiaries filed its first court-supervised reorganization plan, and on July 7,2020 two others
reorganization plans were filed. The reorganization plan of the jointly-controlled entity is still in progress on the second State
of São Paulo Bankruptcy and Court-Supervised Reorganization Court. The jointly-controlled entity shall submit the court-supervised
reorganization plan to the General Meeting of Creditors approval in accordance with the terms and conditions established by the
referred Law. The jointly-controlled entity is in the process of discussing such plan and up to the present date has not measured
the possible effects on its accounting balances. In addition, the jointly-controlled entity has incurred recurring losses and,
as at June 30, 2020, has negative net working capital, equity deficit and negative gross margin. These events or conditions indicate
the existence of relevant uncertainty that may raise significant doubt about the ability of this jointly-controlled entity to continue
as a going concern. Our conclusion is not modified in respect of this matter.
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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025
This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
|
Other matters
Statements of value added
The above mentioned quarterly information include
the individual and consolidated statements of value added (SVA) for the six-month period ended June 30, 2020, 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), August 14, 2020.
ERNST & YOUNG
Auditores Independentes S.S.
CRC-2SP015199/O-6
Shirley Nara S. Silva
|
Accountant CRC-1BA022650/O-0
|
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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025
This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.
|
|
9.
|
Market Notice Dated December 4, 2020: Resignation of Director of CemigPar
|
COMPANHIA ENERGÉTICA DE MINAS
GERAIS –
CEMIG
LISTED
COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127
MARKET
NOTICE
Resignation of director of CemigPar
In accordance with best corporate governance
practices, Cemig (Companhia Energética de Minas Gerais, listed in São Paulo, New York and Madrid),
hereby informs the public as follows:
On December 3, 2020,
Cemig received a letter of resignation as director of CemigPar from Mr. Rafael Falcão Noda.
The post will be filled
in accordance with the procedure specified in the Company’s by-laws.
The management of Cemig
thanks Mr. Rafael Falcão Noda for his services as an executive of the Company and wishes him every success in his future
endeavors.
Belo Horizonte, December 4, 2020
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.
|
10.
|
Presentation of 3Q 2020 Results.
|
|
11.
|
Earning Release - 3Q 2020.
|
PUBLICATION OF 3Q20 RESULTS
CEMIG REPORTS EBITDA
OF R$ 1.42 BILLION
ADJUSTED EBITDA R$
1.33 BILLION (+24.3% x 3Q19)
Highlights of 3Q20:
|
§
|
Signs
of recovery in the economy are reflected in adjusted Ebitda 41% higher than in 2Q20
|
|
§
|
Cemig
D distributed 1.4% more energy in 3Q20 than in 3Q19
|
o
Captive market: 3.6% lower
o
Transport for clients: 7.8% higher
|
§
|
Reversal
of R$ 231 million in allowance for doubtful receivables from Minas Gerais State
|
|
§
|
PMSO:
4.7% lower than in 3Q19 (excludes profit shares)
|
|
§
|
Cemig
D: Opex lower than the regulatory limit for the first time (R$ 127 million below)
|
|
§
|
Bonds:
Negative item of R$ 244 million in Net financial revenue (expenses)
|
|
§
|
Restatement
of asset held for sale (Light):
|
o
Negative effect of R$ 136 million = R$ 90
million net of tax effects
|
§
|
DEC
outage indicator: Below 10; 9.32 in last 12 months
|
|
§
|
Fitch
and Moody’s increase Cemig’s ratings; S&P upgrades outlook to Positive
|
|
§
|
Solid
cash position: R$ 5.5 billion
|
Indicators (GWh)
|
3Q20
|
3Q19
|
Change, %
|
Electricity sold (excluding CCEE)
|
12,994
|
13,856
|
-6.2%
|
Total energy carried
|
5,278
|
4,896
|
7.8%
|
Indicators – R$ million
|
3Q20
|
3Q19
|
Change, %
|
Sales on CCEE
|
59.1
|
9.8
|
503.1%
|
Net revenue
|
6,369.4
|
6,070.8
|
4.9%
|
Ebitda (IFRS)
|
1,423.5
|
195.4
|
628.5%
|
Adjusted Ebitda*
|
1,328.5
|
1,068.7
|
24.3%
|
Net profit
|
545.4
|
-281.8
|
-
|
Adjusted Ebitda margin
|
20.86%
|
17.60%
|
3,26% p.p.
|
Ebitda of companies (R$ mn)
|
3Q20
|
3Q19
|
Change, %
|
Ebitda Cemig D
|
802.8
|
-145.3
|
-
|
Adjusted Ebitda D
|
571.9
|
618.4
|
-7.5%
|
Ebitda Cemig GT
|
538.7
|
75.6
|
612.6%
|
Adjusted Ebitda GT
|
538.7
|
334.2
|
61.2%
|
Debt (R$ mn)
|
3Q20
|
2019
|
Change, %
|
Net debt
|
10,587.4
|
13,486.6
|
-21.5%
|
Net debt (excluding hedge)
|
7,303.2
|
11,795.6
|
-38.1%
|
* Cemig adjusts the Ebitda calculated in accordance with CVM Instruction
527/2012 to exclude items which by their nature do not contribute to information on the potential for gross cash flow generation,
since they are extraordinary items
Conference call
Publication
of 3Q20 results
Webcast
and Conference call
November
16 (Monday), at 2:30 PM a.m. (Brasília time)
The transmission
will have simultaneous translation in English and can be seen by Webcast, at http://ri.cemig.com.br,
or through the links:
https://vcasting.voitel.com.br/?transmissionId=8731
(Portuguese)
https://vcasting.voitel.com.br/?transmissionId=8735
(English)
or by voice
conference call on:
+
(55) 11 3127 4971
+
(1) 516 3001066
Playback
of Video Webcast:
http://ri.cemig.com.br
Click on the banner and download. Available for 90 days.
|
Playback
of Conference call:
Tel:
(55-11) 3127-4999
(Available
from
November
16 to November 22, 2020)
|
Cemig Investor Relations
Tel.:
+55 (31) 3506 5024
Fax: +55 (31) 3506 5025
Cemig’s Executive
Investor Relations Team
|
§
|
Chief Finance and Investor Relations Officer
|
Leonardo
George de Magalhães
|
§
|
General Manager, Investor Relations
|
Antônio
Carlos Vélez Braga
Contents
Conference call
|
2
|
Cemig Investor Relations
|
2
|
Cemig’s Executive Investor Relations Team
|
2
|
Contents
|
3
|
Disclaimer
|
4
|
INCOME STATEMENT
|
5
|
Results separated by business segment – 3Q20
|
6
|
3Q20 Results
|
7
|
Taxes and charges on revenue
|
12
|
Operational costs and expenses
|
14
|
Default – Cemig D
|
17
|
Share of profit (loss) in associates and joint ventures
|
19
|
EBITDA
|
20
|
EBITDA Cemig GT
|
21
|
EBITDA Cemig D
|
21
|
Financial revenue and expenses
|
21
|
The electricity market of Cemig D
|
23
|
Physical totals of transport and distribution – MWh
|
25
|
The electricity market of Cemig GT
|
26
|
SUPPLY QUALITY INDICATORS – DECi and FECi
|
26
|
Investments
|
27
|
DEBT
|
27
|
Covenants – Eurobonds
|
29
|
Cemig’s long term ratings
|
29
|
Our shares
|
30
|
Appendices
|
33
|
Sources and uses of power – billed market
|
33
|
Losses
|
34
|
Plants
|
35
|
RAP – 2020-2021 cycle
|
36
|
Profit (loss) with Cemig’s monitoring adjustments
|
37
|
Cemig D – Tables (R$ million)
|
38
|
Cemig GT – Tables (R$ million)
|
40
|
Cemig Consolidated – Tables (R$ million)
|
41
|
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. 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.
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).
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)
INCOME STATEMENT
Results separated by business
segment – 3Q20
3Q20 Results
In thousands of Reais,
unless otherwise stated.
For the third quarter
of 2020 (3Q20) Cemig reports net profit of R$ 545,376, which compares to a net loss of R$ 281,834 in 3Q19.
Leading factors in the
3Q20 result:
|
§
|
Cemig GT's EBITDA of 538,702 in 3Q20, still influenced by the pandemic, shows strong growth in relation to the adjusted
EBITDA in 2Q20, but with indications that the most critical moment has passed.
|
|
§
|
Cemig
GT posted an expense of R$ 244,399 in Net financial revenues (expenses), related
to the debt in Eurobonds and the related hedge instrument. In 3Q19 the combined effect
of the debt and the hedge on Net financial revenue (expenses) was R$ 12,464 negative.
|
|
§
|
Reversal
in 3Q20 of R$ 230,935 in the provision for amounts owed by the
Direct and Indirect Administration of Minas Gerais State for power consumption and
services, due to the State tax authority’s acceptance of Cemig’s proposal to offset the amount against ICMS tax balances
due to the State.
|
|
§
|
The investment in Light was recognized at market value on September 30, 2020. This restatement had a negative effect
of R$ 136,244 in 3Q20, corresponding to a net amount after tax effects of R$ 89,921.
|
|
§
|
Lower PMSO costs: down 4.7% year-on-year (YoY) excluding profit shares –which were higher, reflecting the profit in
3Q20, compared to a reversal in profit shares in 3Q19, due to the loss in that quarter.
|
|
§
|
Gain in 3Q19 of R$ 309,144 – R$ 204,067 net of tax effects – from disposal of shares in Light,
and re-measurement of the remaining holding.
|
|
§
|
Recognition in 3Q19 of a tax contingency in a total amount of R$ 862.313, for legal actions
arguing the applicability of Social Security contributions to payments of profit shares.
|
Consolidated operational
revenue
Revenue from supply
of electricity:
Total revenue from supply
of electricity was R$ 6,692,911 in 3Q20, 2.65% less than in 3Q19 (R$ 6,875,079).
|
3Q 2020
|
3Q 2019
|
Change, %
|
|
MWh
(2)
|
R$
|
Average price billed –
R$/MWh
(1)
|
MWh
(2)
|
R$
|
Average price billed –
R$/MWh
(1)
|
MWh
|
R$
|
Residential
|
2,652,121
|
2,408,833
|
908.27
|
2,557,935
|
2,458,671
|
961.19
|
3,68
|
(2.03)
|
Industrial
|
3,282,736
|
1,062,910
|
323.79
|
3,972,454
|
1,239,412
|
312.00
|
(17,36)
|
(14.24)
|
Commercial, Services, Others
|
1,938,028
|
1,125,855
|
580.93
|
2,290,720
|
1,336,909
|
583.62
|
(15,40)
|
(15.79)
|
Rural
|
1,139,551
|
632,227
|
554.80
|
1,054,770
|
593,821
|
562.99
|
8,04
|
6.47
|
Public authorities
|
149,154
|
112,958
|
757.32
|
205,123
|
158,343
|
771.94
|
(27,29)
|
(28.66)
|
Public lighting
|
327,039
|
145,863
|
446.01
|
348,476
|
167,642
|
481.07
|
(6,15)
|
(12.99)
|
Public services
|
347,469
|
186,818
|
537.65
|
315,588
|
195,474
|
619.40
|
10,10
|
(4.43)
|
Subtotal
|
9,836,098
|
5,675,464
|
577.00
|
10,745,066
|
6,150,272
|
572.38
|
(8,46)
|
(7.72)
|
Own consumption
|
7,559
|
-
|
-
|
11,012
|
-
|
-
|
(31,36)
|
-
|
Retail supply not yet invoiced, net
|
-
|
109,738
|
-
|
-
|
(2,403)
|
-
|
-
|
(4.666.71)
|
|
9,843,657
|
5,785,202
|
587.71
|
10,756,078
|
6,147,869
|
571.57
|
(8,48)
|
(5.90)
|
Wholesale supply to other concession holders (3)
|
3,150,749
|
818,168
|
259.67
|
3,099,633
|
755,593
|
243.77
|
1,65
|
8.28
|
Wholesale supply not yet invoiced, net
|
-
|
89,541
|
-
|
-
|
(28,383)
|
-
|
-
|
(415.47)
|
Total
|
12,994,406
|
6,692,911
|
499.73
|
13,855,711
|
6,875,079
|
498.41
|
(6,22)
|
(2.65)
|
|
(1)
|
The calculation of the average price does not include
revenue from supply not yet billed.
|
|
(2)
|
Information in MWh has not been
reviewed by external auditors.
|
|
(3)
|
Includes Regulated Market Electricity
Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.
|
Final consumers
Revenue from energy
sold to final consumers in 3Q20 was R$ 5,785,202, compared to R$ 6,147,869 in 3Q19: 5.90% lower YoY.
This was due in
particular to consumption by industrial clients 17.36% lower, and by commercial clients 15.40% lower, due to the
Covid pandemic – partly offset by residential consumption 3.68% higher, and rural consumption 8.04% higher.
Revenue from Use of the Distribution
System (the TUSD charge)
This
is revenue from charging Free Consumers the Tariff for Use of the Distribution System (TUSD) on the volume of energy distributed.
In 3Q20 this revenue was R$ 793,698, or 11.6% more than in 3Q19 (R$ 711,185). The higher revenue mainly reflects the Company’s
annual tariff adjustment in effect from June 1, 2019, which for Free Clients resulted in an increase of approximately 10.16% (effect
up to August 18, 2020). After the tariff adjustment was recalculated to include the return of R$ 714,339 to consumers, this
impact was an increase of 5.71% for Free Clients as from August 19, 2020. Also, the volume of energy transported in 3Q20 was 7.80%
higher than in 3Q19.
CVA and Other
financial components in tariff adjustments
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 3Q20 this
item comprised a gain of R$ 17,192, compared with an negative item of R$ 35,122 in 3Q19. This difference mainly reflects
higher additions to CVA revenue in 3Q20, due mainly to: (i) higher costs of supply from Itaipu, due to the higher dollar exchange
rate than in 3Q19; and (ii) expenses on the National Grid approximately 40.5% higher than in 3Q19 after the revision in July 2020.
These effects were partially offset by lower CDE charges, due to finalization of the ACR (Regulated Market) account in August 2019,
and the result of the 2019 tariff adjustment, which was approved at a significantly higher level than in the previous year. The
Company’s CVA result for the quarter was R$ 331,376 negative, after receipt of part of the funds from the Covid account
in 3Q20.
Changes in balances of
financial assets and liabilities:
|
R$ ’000
|
Balance at June 30, 2019
|
1,130,865
|
Net constitution of financial assets
|
201,653
|
Realized
|
-236,775
|
Payments from the Flag Tariff Centralizing Account
|
-27,594
|
Updating – Selic rate
|
31,825
|
Balance at September 30, 2019
|
1,099,974
|
|
|
Balance at June 30, 2020
|
926,183
|
Net constitution of financial assets
|
-86,013
|
Realized
|
103,205
|
Payments from the Flag Tariff Centralizing Account
|
0
|
Receipt of funds from the Covid Account
|
-1,280,344
|
Updating – Selic rate
|
5,593
|
Balance at September 30, 2020
|
-331,376
|
Transmission concession revenue
Cemig GT’s revenue
from transmission comprises the sum of the revenues from all the transmission assets. The concession contracts establish the Permitted
Annual Revenue (Receita Anual Permitida, or RAP) for the assets of the existing system, updated annually, based mainly on
the variation in the IPCA index (the IPCA index is applied to the contracts of Cemig GT, and the IGP–M index is applied to
the contract of Cemig Itajubá). Whenever there is strengthening, improvement or adaptation of an existing asset made under
a specific authorization from Aneel, an addition is made to the RAP.
This revenue was R$ 134,328
in 3Q20, compared to R$ 132,134 in 3Q19, 1.66% higher YoY, mainly as a result of the adjustment to annual RAP made in July
2020, of 3.69%, which includes the effects of inflation and also new revenues related to investments that have been authorized.
It also includes an adjustment to expectation of cash flow from financial assets, due to the change in the fair value of the Regulatory
Remuneration Base of Assets (BRR).
Transmission reimbursement
revenue
The Company records the
updating of the balance receivable for the indemnity (reimbursement of asset value) based on the IPCA inflation index, and the
average Regulatory cost of capital, as specified in the regulation for the sector. The transmission indemnity revenue in 3Q20 was
21.99% higher than in 3Q19 – at R$ 41,035, compared to R$ 33,637 in 3Q19.
These revenues were mainly
affected by the increase of remuneration at average cost of capital, which, as well as increasing from 6.64% in 3Q19 to 7.71% in
3Q20, as from June 30, 2020 began to be calculated on the re-measured Regulatory Remuneration Base (BRR), as a result of the periodic
review of RAP.
At the beginning of the
tariff cycle, which takes place in July of each year, the amounts received for the adjustment set for the cycle, corresponding
to the amortization of the debtor balance up to the end of the period, are excluded from the remuneration base for updating, reducing
the remuneration. The indemnity (reimbursement) is being received through the RAP (Permitted Annual Revenue) since 2017, over a
period of 8 years, for the financial portion, and for the remaining period of the useful life of the assets, for the economic portion.
Revenue from power
trading transactions on the Power Trading Exchange (CCEE)
Revenue
from transactions in electricity on the CCEE in 3Q20 was R$ 59,103, compared to R$ 9,811 in 3Q19 – an increase
of 502.42% year-on-year. This increase mainly reflects higher allocation of Cemig GT’s own energy in 3Q20 than in 3Q19, associated
with higher GSFs (Generation Scaling Factors), with a counterpart in the lower Spot price. Also, clients’ consumption was
lower due to the coronavirus crisis, resulting in a surplus of energy sold in the CCCE in 3Q20.
Period
|
Spot price
|
GSF
|
Sub-market
|
R$/MWh
|
2020
|
2019
|
2020
|
2019
|
July
|
Southeast/Center-West
|
89.04
|
185.52
|
0.689
|
0.546
|
August
|
Southeast/Center-West
|
85.15
|
237.29
|
0.628
|
0.488
|
September
|
Southeast/Center-West
|
100.84
|
219.57
|
0.662
|
0.531
|
Revenue
from transactions in the Surpluses Sales Mechanism (MVE)
The
revenues from transactions in the Surpluses Sales Mechanism (Mecanismo de Venda de Excedentes – MVE) were R$ 47,690
in 3Q20, relating to offers of supply made at the end of 2019 by Cemig D. The MVE enables distributors to sell excesses of supply
and, for sales related to amounts of the regulatory limit or involuntary overcontracting, enables part of the benefit gained to
be restituted to the consumer in the tariff adjustment process.
Revenue from supply of gas
The Company reports revenue
from supply of gas 26.45% lower YoY in 3Q20, at R$ 427,940, compared to R$ 581,869 in 3Q19. The lower amount basically
reflects volume of gas sold 30.19% lower, at 198,080m³ in 3Q20, compared to 283,724m³ in 3Q19, mainly due to a reduction
to of 99.70% YoY in the supply to thermoelectric generation plants, with near-zero consumption in the quarter, and a figure for
the industrial sector 23.78% lower year-on-year. The effect of lower volume of gas sold was partially offset by the increase from
application of the IGP-M inflation index to distribution costs, which occurs annually in February: the resulting increases were:
6.74% in 2019, and 7.81% in 2020.
Market (thousand m³/day)
|
2015
|
2016
|
2017
|
2018
|
2019
|
9M20
|
9M19
|
|
|
Residential
|
1.04
|
3.38
|
11.44
|
17.73
|
21.28
|
25.45
|
21.01
|
|
Commercial
|
22.42
|
24.68
|
32.67
|
39.37
|
47.7
|
46.95
|
44.22
|
|
Industrial
|
2,422.78
|
2,173.76
|
2,453.22
|
2,400.41
|
2,085.32
|
1,922.70
|
2,142.86
|
|
Other
|
119.87
|
120.19
|
126.15
|
155.14
|
148.44
|
114.18
|
150.24
|
|
Total, excluding
thermoelectric
generation
|
2,566.11
|
2,322.01
|
2,623.47
|
2,612.65
|
2,302.74
|
2,109.28
|
2,358.33
|
|
Thermoelectric generation
|
1,309.13
|
591.52
|
990.89
|
414.04
|
793.94
|
194.92
|
649.25
|
|
Total
|
3,875.24
|
2,913.53
|
3,614.36
|
3,026.69
|
3,096.69
|
2,304.20
|
3,007.58
|
|
Supply of gas to the
residential market began in 2013. In September 2020, a total of 55,693 households were supplied and billed. The number of
clients in the commercial sector of the market continues to expand.
Number of clients
|
2015
|
2016
|
2017
|
2018
|
2019
|
3Q 2020
|
|
|
Residential
|
3,820
|
14,935
|
30,605
|
41,377
|
50,813
|
55,693
|
|
Commercial
|
218
|
394
|
591
|
756
|
981
|
1003
|
|
Industrial
|
113
|
112
|
107
|
109
|
109
|
99
|
|
Other
|
62
|
49
|
50
|
57
|
61
|
64
|
|
Thermoelectric generation
|
2
|
2
|
2
|
2
|
2
|
2
|
|
Total
|
4,215
|
15,492
|
31,355
|
42,301
|
51,966
|
56,861
|
|
Taxes and charges on revenue
The total of these
taxes and charges reported as deductions from revenue in 3Q20 was R$ 2,858,090, or 8.07% less than in 3Q19 (R$ 3,109,043).
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, the subsidy for balanced tariff reduction, the low-income-consumer
subsidy, the coal consumption subsidy, and the Fuels Consumption Account (CCC). The charges for contribution to the CDE in 3Q20
were R$ 608,848 in 3Q20, compared to R$ 638,919 in 3Q19, or 4.71% lower, mainly due to the termination of the Regulated
Market Account (‘the ACR Account’), in August 2019.
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.
Consumer 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.
Charges to the
consumer arising from the ‘Flag Tariff’ system in 3Q20 were 99.98% lower year-on-year – at R$ 16 in 3Q20,
vs. R$ 73,474 in 3Q19. The lower figure reflects non-application of the ‘flag’ system in July through September
2020, due to the exceptional temporary suspension of its systematic application, with the ‘flag’ set at ‘green’
up to December, 31, 2020, by Aneel dispatch 1511 of May 26, 2020.
The ‘Flag’ Tariff – history
|
June 2020
|
Green
|
Jun. 2019
|
Green
|
July 2020
|
Green
|
July 2019
|
Yellow
|
Aug. 2020
|
Green
|
Aug. 2019
|
Red 1
|
Sep. 2020
|
Green
|
Sep. 2019
|
Red 1
|
Operational costs and expenses
Operational costs and
expenses in 3Q20 totaled R$ 5,152,565, or 20.56% less than in 3Q19 (R$ 6,486,375).
The following paragraphs comment on
the main variations in expenses:
People
The expense on personnel
in 3Q20 was R$ 290,095, or 4.68% lower than in 3Q19 (R$ 304,350). The lower figure reflects the number of employees being
6.90% lower, at 5,363 in 3Q20, compared to 5,733 in 3Q19, and the salary increase of 2.55% from November 2019, under the Collective
Work Agreement.
Number of employees
– by company
Employees’ and
managers’ profit shares
The expense on employees’
and managers’ profit shares in 3Q20 was R$ 75,602, compared to a reversal of R$ 14,572 in 3Q19.
Electricity purchased
for resale
The expense on electricity
bought for resale in 3Q19 was R$ 2,958,679, or 2.49% less than in 3Q19 (R$ 3,034,108). This arises mainly from the following
items:
|
§
|
Expenses on supply from Itaipu
42.68% higher, at R$ 531,183 in 3Q20, than in 3Q19 (R$ 372,296). The difference mainly reflects the average US dollar exchange
rate 34.44% higher in 3Q19 – at R$ 5.43 in 3Q20, compared to R$ 4.04 in 3Q19; and the higher price of energy in
US dollars, at R$ 28.41/kW for the whole of 2020, compared with US$ 27.71/kW for 2019.
|
|
§
|
Expenses on energy acquired at auction 6.08% lower in 3Q20, mainly reflecting the lower average price of power contracts
in the auctions.
|
|
§
|
Lower expense on purchase of
supply at the spot price: R$ 193,868 in 3Q20, compared to R$ 486,177 in 3Q19. This lower figure is mainly due to the
average spot price being 61.83% lower, at R$ 91.67/MWh in 3Q20, compared to R$ 214.12/MWh in 3Q 19; and also to the creditor
position assumed by Cemig D in 3Q20, higher than the position assumed in 3Q19, due to lower consumption caused by the Covid-19
pandemic.
|
For Cemig D, purchased
energy 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.
Consolidated
|
3Q20
|
3Q19
|
Change
|
R$ ’000
|
Supply from Itaipu Binacional
|
531,183
|
372,296
|
42.7%
|
Physical guarantee quota contracts
|
197,520
|
163,052
|
21.1%
|
Quotas for Angra I and II nuclear plants
|
75,742
|
67,293
|
12.6%
|
Spot market
|
193,868
|
486,177
|
-60.1%
|
Proinfa
|
77,933
|
95,308
|
-18.2%
|
Individual (‘bilateral’) contracts
|
85,142
|
79,750
|
6.8%
|
Electricity acquired in Regulated Market auctions
|
766,561
|
816,193
|
-6.1%
|
Acquired in Free Market
|
1,142,123
|
1,168,392
|
-2.2%
|
Distributed generation
|
157,551
|
54,491
|
189.1%
|
Credits of PIS, Pasep and Cofins taxes
|
-268,944
|
-268,844
|
0.0%
|
|
2,958,679
|
3,034,108
|
-2.5%
|
Cemig D
|
3Q20
|
3Q19
|
Change
|
R$ ’000
|
Supply from Itaipu Binacional
|
531,183
|
372,296
|
42.7%
|
Physical guarantee quota contracts
|
207,776
|
192,498
|
7.9%
|
Quotas for Angra I and II nuclear plants
|
75,742
|
67,294
|
12.6%
|
Spot market – CCEE
|
163,903
|
420,843
|
-61.1%
|
Individual (‘bilateral’) contracts
|
85,142
|
79,750
|
6.8%
|
Acquired in Regulated Market auctions
|
775,023
|
805,067
|
-3.7%
|
Proinfa
|
77,933
|
95,308
|
-18.2%
|
Distributed generation
|
157,551
|
54,491
|
189.1%
|
Credits of PIS, Pasep and Cofins taxes
|
-164,901
|
-161,575
|
2.1%
|
|
1,909,352
|
1,925,972
|
-0.9%
|
Charges for use of the transmission
network
Charges for use of the
national grid in 3Q20 were R$ 534,788, or 42.15% higher than in 3Q19 (R$ 376,216). This expense is payable by electricity
distribution and generation agents for use of the facilities that are components of the national grid. The amounts to be paid are
set by an Aneel Resolution.
The higher figure reflects
the annual adjustment in charges for the National Grid, normally applied in July, which had an effect of approximately 41% in 3Q20.
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.
Gas bought for resale
In 3Q20 the Company’s
expense on acquisition of gas was R$ 207,361, 44.72% less than its comparable expense of R$ 375,140 in 3Q19. This basically
reflects volume of gas purchased 30.93% lower, at 197,315m³ in 3Q20, compared to 285,686m³ in 3Q19.
Post-retirement obligations
The impact on operational
profit of the Company’s post-retirement obligation was an expense of R$ 110,512 in 3Q20, compared to an expense of R$ 105,397
in 3Q19. This is mainly the result of reduction in the discount rate used in the actuarial calculation – which increased
the amount of the actuarial liabilities, and consequently the scale of the expense reported.
Operational provisions
The Company posted a
reversal of R$ 101,606 in operational provisions in 3Q20, compared to inclusion of new provisions totaling R$ 1,297,003
in 3Q19. This arises mainly from the following items:
|
§
|
In 3Q19
the Company posted net contingency provisions for tax legal actions of R$ 1,175,896 – while in 3Q20 it posted provisions
of only R$ 17,747 in the same category: the major item in 3Q19 was a provision of R$ 1,182,613, based on the opinion
of the Company’s legal advisers, for probability of loss in legal actions arguing for application of Social Security contributions
to payment of profit shares without prior agreement on productivity indicator targets.
|
|
§
|
Reversal,
totaling R$ 156,829, of losses expected from doubtful receivables, in 3Q20, compared to posting of new provisions of R$ 101,383
in 3Q19. This comprises mainly a reversal of a provision of R$ 231 million for debt owed to the Company by the State of Minas
Gerais; non-realization of the loss expected in the second quarter from effects of the Covid-19 pandemic; and good acceptance by
clients of the rules for negotiation approved by the Company, which reduced default in 3Q20.
|
Default – Cemig D
The start of 2020 was
marked by a high degree of uncertainty in the social and economic spheres both in Brazil and worldwide, with the proliferation
of the public health crisis caused by the Covid-19 coronavirus, and its arrival in Brazil.
To try to mitigate the
impacts of the pandemic and help sustain its clients’ payment capacity, Cemig is launched special payment conditions to help,
principally, low-income clients, hospitals and micro-companies. New channels of payment, such as new debit and credit cards, were
put in place, to expand consumers’ payment options.
New channels of communication,
such as WhatsApp, have been put in place, as well as campaigns to enrich the client registry information. These were adopted in
April. These measures aim to expand the scope and efficiency of the tools for approaching consumers, including approach for negotiations.
After Aneel's authorization
to resume disconections in August for residential customers, which were not classified as low income, Cemig intensified the cuts
of non-paying customers, having made 237 thousand cuts between August and October.
The measures adopted
by the company contributed to avoid a further increase in default and made possible an improvement after the period between April
and June 2020.
Share of profit (loss) in
associates and joint ventures
For its interests in
non-consolidated investees the Company posted a gain of R$ 97,822 by the equity method in the quarter. This figure was 69.30%
higher than in 3Q19, mainly reflecting a higher contribution from Taesa, of R$ 135,976 in 3Q20, compared to R$ 77,027 in 3Q19.
Note: The result of Companhia
de Transmissão Centroeste de Minas is no longer included in this account (equity income), following conclusion of purchase
by the Company of the remaining stake in Centroeste in January 2020.
Gain (loss) in non-consolidated
investees
(equity method)
|
3Q20
|
3Q19
|
Taesa
|
135,976
|
77,027
|
Aliança Geração
|
15,560
|
1,011
|
Baguari Energia
|
4,517
|
4,891
|
Retiro Baixo
|
4,452
|
4,730
|
Hidrelétrica Cachoeirão
|
4,138
|
4,189
|
Hidrelétrica Pipoca
|
2,358
|
1,476
|
Corinto photovoltaic plant – generation
|
631
|
0
|
Janaúba Photovoltaic Plant – distributed generation
|
338
|
480
|
Manga Photovoltaic Plant – distributed generation
|
208
|
0
|
Ativas Data Center
|
120
|
502
|
Centroeste
|
0
|
1,438
|
LightGer
|
-57
|
-549
|
Itaocara
|
-120
|
-21,900
|
Guanhães Energia
|
-136
|
-208
|
Axxiom Soluções Tecnológicas
|
-5,141
|
-900
|
Aliança Norte (Belo Monte plant)
|
-9,338
|
14,162
|
Amazônia Energia (Belo Monte Plant)
|
-14,320
|
24,612
|
FIP Melbourne (Santo Antônio Plant)
|
-18,509
|
-24,005
|
Madeira Energia (Santo Antônio plant)
|
-22,855
|
-29,176
|
Total
|
97,822
|
57,780
|
EBITDA
Cemig’s consolidated
Ebitda in 3Q20 was 628.7% higher than in 3Q19; adjusted Ebitda was 24.3% higher. Ebitda margin was 3.2% in 3Q19, compared to 22.3%
in 3Q20. Adjusted Ebitda margin was 17.6% in 3Q19, compared to 20.9% in 3Q20.
Ebitda – R$ ’000
|
3Q2020
|
3Q19
|
Change, %
|
Profit (loss) for the period
|
545,376
|
-281,834
|
-
|
+ Income tax and Social Contribution
|
136,446
|
-622
|
-
|
+ Net financial revenue (expenses)
|
496,619
|
233,791
|
112.4%
|
+ Depreciation and amortization
|
245,089
|
244,023
|
0.4%
|
= Ebitda as per CVM Instruction 527 (1)
|
1.423.530
|
195,358
|
628.7%
|
Non-recurring and non-cash effects
|
|
|
|
+ Profit/loss from discontinued operations (Light)
|
-
|
-309,144
|
-
|
+ Net profit attributed to non-controlling stockholders
|
-312
|
-152
|
105.3%
|
+ Reversal of losses expected on receivables from Minas Gerais State (net of provisions made)
|
-230,935
|
-
|
-
|
+ Impairment of assets held for sale (Light)
|
136.244
|
-
|
-
|
+ Tax provisions – INSS tax on profit shares
|
-
|
1,182,613
|
-
|
Adjusted Ebitda (2)
|
1,328,527
|
1,068,675
|
24.3%
|
|
(1)
|
Ebitda is a non-accounting measure prepared
by the Company, reconciled with the consolidated Interim financial information in accordance with CVM Circular SNC/SEP 1/2007 and
CVM Instruction 527 of October 4, 2012. It comprises Net income adjusted by the effects of net financial revenue (expenses), Depreciation
and amortization, and Income tax and 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 EBTIDA 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.
|
EBITDA Cemig GT
Ebitda – R$ ’000
|
3Q2020
|
3Q19
|
Change, %
|
Profit (loss) for the period
|
3,005
|
-133,952
|
-
|
+ Income tax and Social Contribution
|
-10,665
|
-60,481
|
-82,4%
|
+ Net financial revenue (expenses)
|
495,479
|
212,713
|
132,9%
|
+ Depreciation and amortization
|
50,883
|
57,296
|
-11,2%
|
= Ebitda as per CVM Instruction 527 (1)
|
538.702
|
75,576
|
612,8%
|
Non-recurring and non-cash effects
|
|
|
|
+ Tax provisions – INSS tax on profit shares
|
-
|
258,625
|
-
|
Adjusted Ebitda (2)
|
538.702
|
334,201
|
61,2%
|
EBITDA Cemig D
Ebitda – R$ ’000
|
3Q2020
|
3Q19
|
Change, %
|
Profit (loss) for the period
|
458,373
|
-315,548
|
-
|
+ Income tax and Social Contribution
|
180,554
|
-19,033
|
-
|
+ Net financial revenue (expenses)
|
-3,348
|
25,331
|
-
|
+ Depreciation and amortization
|
167,217
|
163,993
|
2.00%
|
= Ebitda as per CVM Instruction 527 (1)
|
802.796
|
-145,257
|
-
|
+ Reversal of losses expected on receivables from Minas Gerais State (net of provisions made)
|
-230,935
|
-
|
-
|
+ Tax provisions – INSS tax on profit shares
|
-
|
763,728
|
-
|
Adjusted Ebitda (2)
|
571.861
|
618,471
|
-7.50%
|
Financial revenue and expenses
The Company reports Net
financial expenses in 3Q20 of R$ 496,619, which compares with R$ 233,791 in 3Q19. This reflects two main factors:
|
§
|
Lower
variation in the fair value of the hedge instrument in 3Q20, totaling R$ 2,651, compared to a negative FX effect on the principal
of the debt in foreign currency (Eurobonds), of R$ 247,050 – generating a net negative variation of R$ 244,399.
|
|
§
|
In 3Q19,
there was (a) a positive YoY increase in the fair value of the hedge instrument, of R$ 485,836, and (b) an expense from FX
variation of the debt in foreign currency, of R$ 498,300,
generating a net negative variation of R$ 12,464.
|
R$ ’000
|
3Q20
|
3Q19
|
Gain on hedge
|
2,651
|
485,836
|
Effect on the principal of the Eurobond debt
|
247,050
|
498,300
|
Total effect on Financial revenue (expenses)
|
-244,399
|
-12,464
|
Cemig’s consolidated
electricity market
The Cemig Group
makes its sales of 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, the Praias de Parajuru and Volta do Rio
wind farms, Cemig Geração Camargos, Cemig Geração Itutinga, Cemig Geração Salto Grande,
Cemig Geração Três Marias, Cemig Geração Leste, Cemig Geração Oeste, and Cemig
Geração Sul.
This market comprises
sales of electricity to:
|
(I)
|
captive consumers in Cemig’s concession area in the State of Minas Gerais;
|
|
(II)
|
Free Consumers in both the State of Minas Gerais and other States of Brazil, in the Free Market
(Ambiente de Contratação Livre, or ACL);
|
|
(III)
|
other agents of the electricity sector – traders, generators and independent power producers,
also in the ACL; and
|
|
(IV)
|
Distributors, in the Regulated Market (Ambiente de Contratação Regulada –
ACR).
|
The Cemig group
traded a total of 12,994,406 MWh on the CCEE in 3Q20, 6.2% less than in 3Q19. Sales of electricity to final consumers, plus Cemig’s
own consumption, totaled 9,843,657 MWh, or 8.5% less than in 3Q19. Sales to distributors, traders, other generating companies and
independent power producers in 3Q20 were 3,150,749 MWh – or 1.6% more than in 3Q19.
In September 2020
the Cemig Group invoiced 8,669,868 clients – a growth of 1.9% in the consumer base since September 2019. Of these, 8,669,487
were in the group comprising final consumers and Cemig’s own consumption; and 381 were other agents in the Brazilian power
industry.
This chart shows
the percentages of the Cemig Group’s sales to final consumers:
Total consumption
of electricity (GWh): down 6.2% YoY in 3Q
The electricity market of
Cemig D
Electricity
billed to captive clients and electricity transported for Free Clients and distributors with access to Cemig D’s networks
in 3Q20 totaled 11,319,188 MWh, or 1.4% more than in 3Q19. This increase has two components: consumption of the captive market
3.6% lower YoY, and use of the network by Free Clients 7.8% higher YoY.
Captive clients +
Transmission service (MWh)
Captive clients + Transmission service (MWh)
|
3Q20
|
3Q19
|
Change, %
|
Residential
|
2,652,121
|
2,557,935
|
3.7%
|
Industrial
|
5,341,739
|
5,060,476
|
5.6%
|
Commercial, Services and Others
|
1,259,852
|
1,513,968
|
-16.8%
|
Rural
|
1,142,610
|
1,058,560
|
7.9%
|
Public authorities
|
149,154
|
205,123
|
-27.3%
|
Public lighting
|
327,039
|
348,477
|
-6.2%
|
Public services
|
347,469
|
315,588
|
10.1%
|
Concession holder (Distribution company)
|
91,645
|
91,201
|
0.5%
|
Own consumption
|
7,559
|
11,012
|
-31.4%
|
Total
|
11,319,188
|
11,162,340
|
1.4%
|
Residential
Residential consumption,
comprising 23.4% of the energy distributed by Cemig D in 3Q20, was 3.7% higher than in 3Q19. This increase is related to the addition
of 168,914 new consumer units since September 2019; and also to an increase in average monthly consumption per consumer of approximately
1.2%.
Industrial
Consumption by the industrial
consumer category was 47.2% of the total volume of electricity distributed by Cemig D, and totaled 5,341,739 MWh in 3Q20, or 5.6%
more than in 3Q19. Energy consumed by captive clients totaled 462,136 MWh in 3Q20, 19.4% less than in 3Q19. The volume of energy
transported for industrial Free Clients was 43.1% of the total of energy distributed, and was 4,879,603 MWh in 3Q20, 8.7% more
than in 3Q19.
Commercial and Services
Energy distributed to
the commercial category of clients was strongly impacted by the pandemic and the resulting restriction on functioning of
companies, and did not recover to the same degree as other client categories in 3Q20, but was 16.8% lower than in 3Q19.
Volume was down 20.0%
YoY in the captive market, and down 4.40% YoY in the Free Market. The total energy used by captive clients plus energy transported
for Free Clients in the category totaled 11.1% of the energy distributed by Cemig D in 3Q20.
Rural
Consumption by the rural
category increased 7.9% compared to 3Q19, as the sector remains in full activity even in the face of the pandemic and due to less
rainfall.
Number of clients
A total of 8,669,160
consumers were billed in September 2020, or 163,299 more than in September 2019. Of this total, 1,683 were Free Clients using the
distribution network of Cemig D.
Cemig D
|
Number of clients
|
Change, %
|
3Q20
|
3Q19
|
Residential
|
7,086,929
|
6,918,015
|
2.4%
|
Industrial
|
29,711
|
29,797
|
-0.3%
|
Commercial, Services and Others
|
772,864
|
768,469
|
0.6%
|
Rural
|
690,837
|
701,915
|
-1.6%
|
Public authorities
|
65,958
|
65,421
|
0.8%
|
Public lighting
|
6,867
|
6,542
|
5.0%
|
Public services
|
13,604
|
13,604
|
0.0%
|
Own consumption
|
707
|
726
|
-2.6%
|
|
8,667,477
|
8,504,489
|
1.92%
|
Total energy carried
|
|
|
|
Industrial
|
813
|
680
|
19.6%
|
Commercial
|
851
|
682
|
24.8%
|
Rural
|
16
|
7
|
128.6%
|
Concession holders
|
3
|
3
|
0.0%
|
|
1,683
|
1,372
|
22.7%
|
Total
|
8,669,160
|
8,505,861
|
1.9%
|
Physical totals of transport
and distribution – MWh
Metered market
|
MWh
|
Change
|
3Q2020
|
3Q19
|
%
|
Volume carried
|
|
|
|
Transported for distributors (metered)
|
93,632
|
91,229
|
2.63%
|
Transported for Free Clients (metered)
|
5,118,928
|
4,778,136
|
7.13%
|
Own load + Distributed generation (1)(2)
|
8,278,134
|
8,141,957
|
1.67%
|
Consumption by captive market – Billed supply
|
6,041,148
|
6,266,263
|
-3.59%
|
Losses in distribution network
|
2,236,986
|
1,875,694
|
19.26%
|
Total volume carried
|
13,490,694
|
13,011,322
|
3.68%
|
|
(1)
|
Includes Distributed Microgeneration.
|
|
(2)
|
Includes own consumption.
|
The electricity market of
Cemig GT
Cemig GT billed a total
of 6,985,906 MWh in 3Q20 – 8.3% less than in 3Q19.
Energy billed to industrial
clients was 17.0% lower than in 3Q19, and energy delivered to commercial clients was 10.3% lower.
Cemig GT
|
(MWh)
|
Change, %
|
3Q20
|
3Q19
|
Free Clients
|
|
|
|
Industrial
|
2,820,599
|
3,399,353
|
-17.0%
|
Commercial
|
977,301
|
1,089,600
|
-10.3%
|
Rural
|
4,608
|
862
|
434.5%
|
Free Market – Free contracts
|
2,657,656
|
2,609,505
|
1.8%
|
Regulated Market
|
493,093
|
490,128
|
0.6%
|
Regulated Market – Cemig D
|
32,648
|
32,538
|
0.3%
|
Total
|
6,985,906
|
7,621,986
|
-8.3%
|
SUPPLY QUALITY INDICATORS
– DECi and FECi
Cemig is continuously
taking action to improve operational management, organization of the logistics of its emergency services, and has a permanent routine
of preventive inspection and maintenance of substations and 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 – DECi (Average Outage Duration per Consumer, in hours), and
FECi (Average Outage Frequency per Consumer, in number of outages), since January 2016.
Quality indicators are
linked to the new concession contract of Cemig D (distribution), signed in 2015.
Note: Figures for 2016
and 2017 are according to recalculation presented by the Company to Aneel.
Investments
R$ million
|
Planned
|
Realized in 9M20
|
Generation
|
|
|
Investment program
|
81
|
64
|
|
|
|
Capital injections
|
|
|
Volta do Rio
|
136
|
12
|
Parajuru
|
14
|
-
|
Aliança Norte
|
1
|
-
|
Amazônia
|
1
|
-
|
Itaocara
|
29
|
-
|
|
|
|
Transmission
|
|
|
Investment program
|
158
|
121
|
|
|
|
Distribution
|
|
|
Investment program
|
1,498
|
960
|
|
|
|
Holding company
|
|
|
Capital injections
|
|
|
Cemig Sim
|
71
|
20
|
Acquisitions
|
|
|
Centroeste
|
43
|
43
|
|
|
|
TOTAL
|
2,032
|
1,219
|
DEBT
The Company’s
consolidated gross debt on September 30, 2020 was R$ 16,106,701, or R$ 1,330,710 higher than at the end of 2019, mainly
reflecting the loss in value of the Real, which resulted in an increase of the dollar-denominated debt, in Reais, of R$ 2.4
billion in the period. It is important to note that the Company also records a net positive balance on hedge transactions for
the Eurobond issue, in the total amount of R$ 3,284,142: R$ 1,606,656 for the principal of the debt, and R$ 1,677,486
for the interest. The total net asset value of the hedge is R$ 1,593,198 greater than at the end of 2019.
In the first nine months
of 2020 a total of R$ 2,187,264 in debt was amortized. During the period new funds of R$ 850,000 were raised, by Cemig,
through its 8th debenture issue, in September 2020.
Cemig H
R$ ’000
|
September 30, 2020
|
2019
|
Change, %
|
Gross debt
|
16,106,741
|
14,776,031
|
9.01%
|
Cash and equivalents + Securities
|
5,519,388
|
1,289,438
|
328.05%
|
Net debt
|
10,587,353
|
13,486,593
|
-21.50%
|
Debt in foreign currency
|
8,728,333
|
6,061,097
|
44.01%
|
|
|
|
|
Cemig GT
R$ ’000
|
Sep. 30, 2020
|
2019
|
Change, %
|
Gross debt
|
9,948,859
|
7,886,783
|
26.15%
|
Cash and equivalents + Securities
|
1,763,598
|
585,203
|
201.37%
|
Net debt
|
8,185,261
|
7,301,580
|
12.10%
|
Debt in foreign currency
|
8,712,222
|
6,043,046
|
44.17%
|
|
|
|
|
Cemig D
R$ ’000
|
Sep. 30, 2020
|
2019
|
Change, %
|
Gross debt
|
5,148,058
|
5,794,922
|
-11.16%
|
Cash and equivalents + Securities
|
3,271,606
|
344,611
|
849.36%
|
Net debt
|
1,876,452
|
5,450,311
|
-65.57%
|
Debt in foreign currency
|
16,112
|
18,051
|
-10.74%
|
Covenants – Eurobonds
Cemig’s long term
ratings
Cemig’s ratings
were upgraded by Moody’s in September, and by Fitch in October.
In its review in July,
2020 S&P upgraded its Outlook to Positive.
This table shows long-term
credit risk ratings and outlook for the Company as provided by the principal rating agencies:
Our shares
Security
|
Ticker
|
Currency
|
Sep 30, 2020
|
Close of 2019
|
Change,
%
|
Cemig PN
|
CMIG4
|
R$
|
10.10
|
12.87
|
-21.52%
|
Cemig ON
|
CMIG3
|
R$
|
10.70
|
14.56
|
-26.51%
|
ADR PN
|
CIG
|
US$
|
1.83
|
3.11
|
-41.16%
|
ADR ON
|
CIG.C
|
US$
|
1.91
|
3.78
|
-49.47%
|
Ibovespa
|
IBOV
|
–
|
94,603
|
115,645
|
-18.20%
|
Power industry index
|
IEEX
|
–
|
68,569
|
76,627
|
-10.52%
|
Source: Economática – Adjusted
for corporate action, including dividends.
Trading volume
in Cemig’s preferred shares (CMIG4) in 9M20 was R$ 24.7 billion, of which R$ 7.5 billion was traded in the third
quarter, corresponding to a daily average of R$ 115.28 million – 14.66% lower than in 3Q19. Trading volume in Cemig
common shares in 9M19 was R$ 4.4 billion, with daily trading volume of R$ 22.86 million in the third quarter.
By volume (aggregate
of common (ON) and preferred (PN) shares), Cemig’s shares were the third most liquid in Brazil’s electricity sector
in the period, and among the most traded in the whole Brazilian equity market. On the New York Stock Exchange the volume traded
in ADRs for Cemig’s preferred shares (CIG) in 9M20 was US$1.81 billion.
We see this as
reflecting recognition by the investor market of Cemig as a global investment option.
The Ibovespa index
of the São Paulo Stock Exchange (B3) was down 18.20% in the first nine months of 2020, still under the influence of the
Covid-19 epidemic, closing September at 94,603 points. Cemig’s shares accompanied the index: the common (ON) shares were
down 26.51% in 9M19, and the preferred (PN) shares down 21.52%. In New York the ADRs for Cemig’s common shares were down
49.47% in the period, and the ADRs for the preferred shares were down 41.16%.
The ‘Covid Account’
On May 18, 2020, in response
to the state of public calamity caused by the Covid-19 pandemic, Decree 10350/2020 authorized creation of the ‘Covid Account’,
the purpose of which was to cover deficits, or anticipate revenue, of holders of concessions or permissions to distribute electricity
– the basis of the financial flows of the electricity sector, especially related to: (i) overcontracting of supply; (ii)
the CVA (‘Portion A’ Variation Compensation Account); (iii) neutrality of sector charges; (iv) postponement until June
30, 2020 of the results of tariff review processes for distributors ratified up to that date; and (v) bringing forward of the regulatory
asset relating to Portion B, as per an Aneel regulation and timetable decided by the distributor.
On June 23, 2020 Aneel
issued Normative Resolution 885/2020, setting the criteria and procedures for management of the Covid Account, and also regulating
use of the CDE tariff charge. Under this Resolution, the amounts transferred to each distributor are reverted as negative financial
components in tariff adjustment processes of 2021 and 2022, duly updated by the Selic rate, with neutrality assured.
Cemig D accepted the
financial offsetting mechanism of the Covid Account, with a view to strengthening its cash position, enabling compliance with its
financial obligations even during the reduction of revenue caused by the severe economic downturn.
On July 9, 2020, Aneel
announced the total of funds in the ‘Covid Account’ to be allocated to Cemig D: R$ 1,404,175. This is being paid
in stages.
In the third quarter
of 2020 Cemig D received R$ 1,280,345 – comprising R$ 1,186,390 on July 31, R$ 50,945 on August 12, and R$ 43,010
on September 14, 2020.
Of the rest, R$ 33,549
was received on October 13, 2020, and the remaining total of R$ 90,281 will be paid in three tranches in November 2020 through
January 2021.
Appendices
Sources and uses of power
– billed market
Losses
Plants
RAP – 2020-2021 cycle
Profit (loss) with Cemig’s
monitoring adjustments
Cemig D – Tables (R$
million)
Cemig GT – Tables
(R$ million)
Cemig Consolidated –
Tables (R$ million)