Companhia Energetica de Minas Gerais – CEMIG (CIG) Q2 2024 Earnings Name Transcript

Companhia Energetica de Minas Gerais – CEMIG (NYSE:CIG) Q2 2024 Earnings Convention Name August 20, 2024 8:30 AM ET

Firm Members

Carolina Senna – Investor Relations Superintendent
Marcio Luiz Simoes Utsch – Chair of the Board of Administrators
Reynaldo Passanezi Filho – Chief Govt Officer
Fernando Passalio – Secretary of State for Financial Improvement, Authorities of Minas Gerais
Leonardo George de Magalhaes – Chief Finance and Investor Relations Officer
Marney Tadeu Antunes – Vice President of Distribution
Afonso Henriques Moreira Santos – Coordinator, Innovation and Vitality Transition Committee
Marco da Camino Ancona Lopez Soligo – Vice President of Fairness Holdings and Vice President of Technology and Transmission
Carlos Colombo – Chief Govt Officer, Gasmig
Iuri Mendonca – Chief Govt Officer, Cemig SIM
Cristiana Maria Fortini Pinto e Silva – Vice President of Authorized Affairs
Marcus Vinicius de Castro Lobato – Head of Buying and selling Planning and Advertising

Convention Name Members

Bruno Amorim – Goldman Sachs
Victor Burke – JPMorgan
Daniel Travitzky – Banco Safra
Andre Sampaio – Santander
Vladimir Pinto – XP Investimentos

Carolina Senna

Good morning, everybody. We now begin our Cemig Day, the twenty ninth Assembly with Buyers. For these of you that have no idea me, I’m Carolina Senna, Superintendent of RI. It’s a pleasure to have you ever all right here.

I want to greet all of you which can be right here with us on this agenda, and our goal is to deliver to you the principle initiatives of the Firm. It is a particular assembly. For the primary time, it is being held in Sao Paulo, the Monetary Heart in Brazil, getting nearer to the buyers advertising and marketing and in addition bringing with us our Minas Gerais method, the nice and cozy espresso and cheese bread, our particular hospitality and assembly you anyplace. We may have a strategic conferences, networking and a novel alternative to speak to you.

Earlier than we go open our agenda, I want to ask you which have your telephones on mute. Our assembly is also being transmitted by Zoom and thanks all which can be with us on-line. To open our assembly, I’m glad to deliver to the ground the Chair of the Board of Administrators, Marcio Luiz Simoes. Please, Mr. Marcio.

Marcio Luiz Simoes Utsch

Thanks, Carol. Good morning, everybody. Nicely, I do not know the place I ought to take a look at. However anyway, I’ll take 10 minutes to fifteen minutes of your time, on the most, to inform you a little bit bit about our previous after which the place we’re going in the direction of.

I have been with Cemig since Governor Zema began. When he began his time period, I additionally began, and I have been the Chair of the Board since then. When Zema was elected, Cemig’s worth was BRL10 billion. Yesterday, Cemig reached nearly BRL36 billion. However in this time period, as well as, we paid BRL12.7 billion in dividends.

Along with that quantity, we paid dividends within the spirit of time. The PN shares had been up 394% as much as yesterday and had been up 437% as much as yesterday. So, this was constructed when it comes to costs all through this era. However value is one factor, and worth is one thing else. What we have now achieved at Cemig was one thing else. It was the worth.

And this previous that I am speaking about, we have now achieved some mistaken issues. However luckily, we had been in a position to rating a number of objectives. We additionally took some objectives, after all, that is a part of life, however we had been in a position to make it proper, extra occasions than not. So, what had been the errors and the learnings?

Nicely, we took a very long time to promote our asset-light, but it surely did not make sense for us. Renova additionally, it took us some time. It went there, it went again. So, it was an entire deal of issues we had in courtroom reorganization course of. So, we all know that this might be achieved. And we discovered a strategy to do issues another time.

So, after we look again, generally, we expect we might have achieved higher. However what have we achieved that was greatest? It was not even the value, as a result of this was a consequence. However what we have now achieved greatest is one thing that individuals can’t destroy. Once you do one thing good, after which another person is available in and does one thing mistaken.

However the most effective that we have now achieved was folks’s administration. We’ve a really nicely aligned group and the Board. We selected Board members. All of them had been hand-picked. Our Govt Board, the officers, the superintendents, all prime administration of Cemig, everyone seems to be — would deserve a rating 10?

No, after all not. In fact, a few of them would deserve 12 or 13. However what we made proper was far more than what we made mistaken. So, you can not get this kind of figures with a foul group.

I can’t know anybody that wishes to be Alexander, the Common. Everybody needs to be Alexander, the Nice. So, we deliberate great issues, however this planning was simply executed, as a result of we have now at Cemig, people who work with excellence.

In Cemig, we have now folks which were with us for a very long time, clever, sensible folks which can be working very nicely. We’ve new people who got here in later, we have now all the pieces. So, we actually put collectively an exquisite group that had been in a position to ship these outcomes.

So, that is one thing that we made proper. Once we take a look at this group, I am very blissful to see that group. It is a great one. It is a group that appears to the longer term to search out out what will likely be our headline sooner or later.

So, 10 years from now, what Cemig will likely be. This headline will not be written but, however we will work on it proper now. We simply have to attend and skim it sooner or later, so we could be ready for that. I can consider that. In fact, this can be a firm that could be a listed firm, it is not a personal firm but. So, we have now all these points associated of being a state-owned firm, managed by the Minas Gerais state.

So, when the administration adjustments, issues adjustments. However once I look again and take into consideration what we will construct, I am certain that after we look forward, there’s a lot to be achieved. And why do I say that? Nicely, if we left BRL10 billion to BRL36 billion, we paid BRL12.7 billion in dividends.

We had been up 394% in PN shares, 457% up ON shares. Is that the restrict? No, that is not the restrict. There’s loads to be achieved. So, we have now privatizations to be achieved, or higher, there are different corporations that we will monetize, different corporations that we will herald, we will do this. We’ve SHPPs. Issues that we will do to show the capital allocation of Cemig extra environment friendly, our capital allocation that can permit us to develop much more.

So, we have now an enormous market at Cemig Sim, and we have now to make it work. Gasmig has a big space to develop. We’ve right here somebody that simply began with us in a number of days, however he is very skilled, so a really skilled person who he is aware of the sector and he is simply with us proper now and we have now Cemig itself. Once we take a look at Cemig, and I all the time say that, nicely, Cemig needs to be on the heart of the desk.

So, when one thing is nice, it is a behavior, however when one thing is unhealthy, it is a vice. And it simply appears to be like like that aircraft that was going from Sao Paulo to Lisbon, after which there was a Russian flight attendant asking a passenger, I feel, it was a Japanese passenger, his title was Manuel, that are the dinner choices, sure or no, she replied, so very clear. It is a clear possibility, it is sure or no.

You select dinner or not? So, that is how we go. What’s your possibility for electrical power, sure or no? So, in case you do not need to have candles at residence, it’s worthwhile to work with Cemig.

What if it is not a captive market? Folks will select Cemig. That is what we have now to work for sooner or later, to work on these values. When it’s zero of captive shoppers, when everybody can select the place to purchase from, such as you select your cable TV, your telephone service, proper there after which, will we be chosen? If the reply is not any, it is going to be a defeat for this excellent group. And I’ll return. We’re great, however we have now not been in a position to get there to satisfy the needs of the shoppers.

So, I’ve right here the secretary, the event secretary of Minas Gerais, Fernando Passalio, has simply arrived. But when we, sooner or later have the choice, and at the present time will come and other people inform us no, that they do not need us, that group, that was great, it will have been a weak group, as a result of they may not work for Cemig to be a selection, when that selection might be made.

However similar to you select what you’re going to do as we speak, we must be chosen sooner or later. If it is not that, that can have been a defeat. Oh, we weren’t chosen, as a result of we delayed residence service, one other defeat. We weren’t chosen, as a result of we had been an organization that had solely captive shoppers and we didn’t have time. So, one other failure. So, if we are saying that we have now not achieved it as a result of we didn’t have time, it is similar to you are saying that you just had been bitten by a turtle and also you didn’t have time to flee.

So, wanting forward, I’ve to suppose that Cemig will develop, as a result of there are actions within the Firm to plan for the longer term. And also you, the investor within the Firm, have to grasp that it is going to be higher than it’s as we speak, not solely bigger, however higher, and in addition sensible and instant actions, higher capital allocation, higher changes in our investments, that are already massive.

And Reynaldo goes to speak about that in his presentation. However investments which have already been achieved and that had by no means been achieved earlier than. Within the interval that we have now achieved it, Reynaldo has the determine. It is one thing enormous concerning to what had been achieved previously. So, these investments actually will cost for them and they are going to be transferred to the tariffs and that is going to enhance our profitability.

So, after we look forward, there are market alternatives that we’ll soak up, and in addition structural alternatives with investments, belongings, enhancements that can permit the Firm to be higher than it’s as we speak. And what else? Nicely, Governor Zema, because it’s his first time period, he mentioned, and that is public, he says, he mentioned, I need to privatize him.

Once more, his second time period, he mentioned it, he mentioned the identical factor. That is no information. Whether it is information for you, you are not up to date. Once we do, we from Cemig, we agree with him. If we didn’t agree, we’d not be there. So, we’d not be accountable of us. So, nicely, if he needs to denationalise and I am there, and I do not need it, so why would I be there?

However all of us consider that this can be a good possibility. That is an necessary motion. It relies on the controlling shareholders. The Firm is a privatizing object, and the proprietor of that motion is the State Administration.

So, this is essential so that you can know. So, actually there may be this long-term view, you might be pursuing that concept, as a result of this is essential and it might unlock extra worth to the Firm. And what will change in case you have a state-owned firm and a personal firm?

Nicely, if you’re going to have some investments achieved, you must go for a bidding course of, you can not select your supplier. I do know that individuals that work with that and know the way it’s. So, you can not select your supplier.

You’re employed in corporations, in banks, somebody chooses the supplier for you, so that you need to change your IT system, somebody will select that for you. So, not all the time a lower cost or is the most effective service, generally it’s and nice, we make a proper selection. However when it’s not, it is a mistaken selection.

So, in a privatized firm, we will select our suppliers. So, you don’t rent who you need to rent. You must rent people who went by way of the general public examination and that is tremendous, as a result of they studied and so they had been authorized within the examination, however you must allocate the best individual in the best place.

Additionally, generally, you will have the identical take a look at for everybody that’s within the public examination. However so if generally, you do not have an individual that might alter to the profile that you just want. In fact, that there are quite a lot of issues that work nicely, but additionally there are deviations. So, these are enhancements to be held.

So, you additionally should examine what do you, would you acquire any right here, if I can rent my supplier and what if I can rent every individual for every totally different place? So, how agile will or not it’s? How a lot is that this value? This may be there in your guidelines. So, once I do that, that worth unlocks and that will likely be reflecting the Firm greater than that.

And simply concluding my opening speech, the alignment that we have now as we speak of Cemig and the State Administration and ANEEL, to match the outcomes that we have now to account for. DEC, FEC, these are superb figures and they’re rising, they’re bettering. So, we have now an incredible enchancment in the principle indicators and in addition indicators which can be necessary for the controlling shareholders, which is the State of Administration.

So, we’re assembly the indications, we’re surpassing them. A few of the indicators should not at ANEEL, however they’re essential. As an example, the receiving indicator, we obtain greater than what we construct within the month, as a result of we have now late funds that we herald. So, the gathering outcomes for Cemig is excessive, as a result of you’ll be able to pay with pics, with drums, with something that you really want, as a result of there are quite a lot of methods out that, we did not have that possibility earlier than.

So, a number of issues improved. So, that allowed us to cope with it. So, I’ll disconnect your electrical service. So, I needn’t pay, I must pay a selected payment to disconnect the electrical energy, after which I’ve to pay one other payment to attach it once more. So, now, we pay a single payment. And if the individual pays the electrical invoice proper there after which you do not even must disconnect that service.

Now, so far as know-how goes, we didn’t go up a ramp. It was an enormous leap. We weren’t up the ramp, as a result of there have been so many important adjustments in shopper service, with APPs, with the agreements that we had to enhance customer support. And you can not measure that in ramps, you must measure it in leaps. We left the, among the administration, proprietary methods we have now now, particular methods, and that improved our relationship with purchasers, additionally buying methods. We’d buy in a approach that there was no customary, no reference of what was being acquired.

So, now, we see the totally different costs, the totally different codes, and you’ll have work with the competitors with the most effective that you’ve out there, and then you definitely go for the most effective of the most effective, though we do have the restrictions of a state-owned firm. So, there are a variety of enhancements.

So, previously, we had been much less worthwhile, and now we’re extra worthwhile. And so, after we take a look at the longer term, I might be speaking right here for extra half-hour, so folks right here will say, they’ll go into the small print about among the matters I raised. I am certain that’s going to be the topic of the totally different displays and know-how, technology, transmission, human assets.

We’ve quite a lot of new issues and good issues to inform you which can be occurring in all of those areas. So, please some endurance to listen to all of it. It will be a protracted day, however I do know that you should have causes to consider that what Cemig has achieved, it was that Cemig went up and is staying up.

So, once you take a look at Apple’s, Microsoft charts, Walmart charts, anybody that you just need to, there are all the time up and down, ups and downs. However what’s necessary is the ultimate ensuing line, so an enchancment. So, these are enhancements can’t be taken down, you can not change.

I do know if the administration adjustments, you are going to say, okay, now I am going to return to calculating issues manually. So, this began with us and we have now made these adjustments and can stick with us. And we’re certain that we nonetheless have the state-owned administration. And I say nonetheless, as a result of that is not the intention of our Governor. However we’d have to think about that this won’t occur as quickly as we want.

And thanks very a lot and I hope you benefit from the day.

Carolina Senna

Thanks very a lot, Marcio, to your presentation, for opening our occasion. And so, now, I want to deliver to the ground our CEO, Reynaldo Passanezi Filho.

Reynaldo Passanezi Filho

Good morning. Good morning, everybody. Thanks very a lot for being right here with us at one other Cemig Day, our twenty ninth Buyers assembly.

I want to begin greeting Marcio and Fernando, our Financial Improvement Secretary, and thanking them for the help to all this transformation. However what Marcio simply mentioned is our each day exercise, we have now a Board of Administrators that participates, that questions us and our will to usher in these questions and comply with a change course of.

So, what Marcio mentioned right here is rather like a Board assembly, proper? There may be one other Board member right here, Afonso. He was introduced Director, and he actually is aware of the electrical sector. And that is how our Board works. And Fernando and Governor Zema additionally encourage us to search for extra. And that is what we’re bringing to you. It is a story that brings administration bettering effectivity, additionally an exquisite CapEx improve and capital administration and in addition management. That is what we have now been engaged on.

Beginning with folks. I’ll begin then with Marcio’s instance. And simply to indicate you what the Board works like and in addition to present you an instance of that Board help. After I began at Cemig, there was a particular particular scenario, which was all of the leaders, the managers and superintendents wanted to undergo the general public examination, we couldn’t deliver anybody from the market.

And I say not market folks, however people who weren’t working at Cemig. So, we might have officers coming from out of the Firm, however all of the managers and superintendents would have needed to been authorized within the public examination. And they are often nice folks, however generally, it is not the profile that we wish for the place.

So, my concept was to show that course of extra versatile. And to approve with the Board that chance, I wished 30% per place. So, 30% of managers and 30% of superintendents that might come out from out of the Firm, that’s, with no public examination.

And the Board allowed me 40%, not solely 30%, 40%. So, I feel that reveals what we’re wanting when it comes to transformation and what we have now been including when it comes to help. We requested 30% and so they gave us 40%. So, that is the essence of administration.

And this can be a very good slide, as a result of it additionally reveals our function for outcomes. I name it again to the idea. So, we’ll intention at effectivity, and we’ll intention a capital allocation into what we all know and one thing that can present us certain profitability. So, right here, outcomes. Since 2009 to 2018, the Firm was in non-compliance with the regulatory parameters of working effectivity, that’s PMSO and in addition technical losses.

Nicely, the Firm burned BRL15 billion over regulatory. Now, we’re inside the regulatory bills. So, after we add the regulatory work, we have now the capability of producing the worth in line with the regulatory work. Up to now, this could’ve disappeared, as a result of bills had been increased.

So, add BRL15.2 billion in 10 years, you’ll be able to calculate how enormous it’s, that adjustment. So, this can be a very important adjustment. For me, that is the again to the fundamentals. And as Marcia mentioned, we nonetheless have issues to be achieved.

And I will provide you with one other instance, a quite simple instance right here, as a result of right here, it is an instance. I do not bear in mind precisely, however I feel once I began, we have now two rented buildings. When you have been to Cemig, we have now a Avenida Barbacena constructing and one other constructing by it, the place we have now a Banco Inter these days, each of them had been leased. We returned the primary one, the primary constructing.

This was our first effort to scale back bills, to extend effectivity and cut back bills that lowered the rental value. So, what did we do? Three months in the past. We obtained our personal constructing and we returned 5 flooring. At this time, we use 50% of the rented space we had in 2015 for a similar headquarters and producing the identical outcomes, as a result of individuals are nonetheless there.

So, I suppose, that simply offers you a fairly good concept of the way it was and what we’re doing, as a result of the lease instance got here in two waves. We did the primary discount, then the second transfer, and naturally, we continued to pursue alternatives to realize effectivity.

Second, and Marcio additionally touched on that. We offered these belongings that we knew little about and had no management over. And we’re concentrating our investments within the companies that we all know within the State of Minas Gerais.

So, this quantity, to me, means Cemig invested in minority holdings, usually exterior Minas Gerais and Cemig invested near BRL40 billion, BRL39 billion, Gentle, Renova, Santo Antonio, Axxiom, Ativas, Alianca, Belo Monte, BRL39 billion. The web destruction of worth, destruction of financial worth, nearly BRL14 billion.

Once we took over, Marcio, 75% of the time. And I keep in mind that fairly nicely, once I took over. And Belini was going to present me the baton, he mentioned, cautious as a result of 75% of the time is devoted to cope with these minority holdings. Now it is all the way down to zero. The Board is right here. The administration is right here. Now we’re a worthwhile firm. All the issue belongings, the distressed belongings have been divested.

With this, we recovered BRL13 billion by divesting minority curiosity. So as a substitute of spending, we have now a money restoration greater than BRL13 billion. And right here, we’re contemplating gross sales of worth, plus the capital influx as a result of we would have liked to have some money inflows. For those who comply with us, Santo Antonio had a current capital improve. Gentle had quite a lot of capital will increase, Renova, along with some courtroom supervised reorganizations.

Are you able to think about taking part in a courtroom supervised reorganization. For those who’re a combined capital firm. So we divested of all of those minority pursuits. And since we invested loads in minority holdings, we needed to cease investing within the community. So on the time, we invested in distribution lower than the depreciation. Now we’re investing 4 occasions the depreciation.

So now we’re executing the biggest CapEx plan in our historical past, BRL49 billion, and BRL49 billion means 19 plus 28, okay, simply to make our 2024-2028 strategic plan. It’s BRL35.6 billion, proper, Carol? BRL35.6 billion. However right here, we’re speaking about from 2019 to 2028, BRL49 billion. On common, BRL5 billion each year. So nearly all of this in regulated companies that did not get quite a lot of investments for a very long time. So we have now the flexibility to speculate with no threat of refusal by ANEEL.

In fact, we misplaced the vegetation Simao, Jaguara and Miranda, nearly 3-giga. And now we have now the monetary capability to resume the concessions of those vegetation. However I suppose that this offers us a snapshot of what Marcio mentioned. And we’re very happy now as a result of we’re all the time searching for extra. We’re all the time pursuing extra, and that is what drives us as folks, as a group to all the time pursue extra positive factors.

Nevertheless it’s about going again to the fundamentals, being environment friendly, and investing within the enterprise that we perceive and that we have now management throughout. It’s totally tough for a state-owned firm to be a minority shareholder. We had been some minority shareholders, along with the people. It is not straightforward. So we do not know all the pieces, however what we all know, we will do fairly nicely, and that is what we’re doing. So we’re investing BRL49 billion.

We’ve invested already BRL13.6 billion by 2023. And right here, we have now the breakdown. I like a sentence that’s the primary of our strategic planning, which suggests specializing in Minas Gerais and successful. A 100% of those investments happen within the State of Minas Gerais, which is the territory that we all know.

And our controlling shareholder is the State of Minas Gerais. So I suppose it makes quite a lot of sense. Of this quantity, 80% is in regulated enterprise. So if we add distribution, BRL33 billion, transmission, BRL5 billion, pure fuel, BRL2.2 billion. So we’re form of 40 — 80%, BRL40 billion of BRL49 billion. It is regulated sector, regulated market.

So it is what Marcio mentioned, we will enhance service to our clients as a result of, after all, this funding will relate to a significantly better high quality of service. We generally is a firm that will likely be a constructive instrument for the event of Minas Gerais as a result of this attracts investments to Minas, the State of Minas. And we will enhance the bottom and create worth for the shareholders.

So that is an optimum scenario to be in as a result of we could be customer-centric. We are able to help the State of Minas Gerais, which clearly, goes to generate extra load for us and extra taxes for the Authorities of Minas Gerais, and all of that is the bottom, and the bottom is a part of the tariff and we will likely be remunerated accordingly.

So this was the logic. This was the rationale. And after we had been discussing this, I keep in mind that we employed a consulting agency. They ready some good graphs, and there was an possibility, to concentrate on Minas and successful. And there was an alternative choice, which was attempt once more. Why attempt once more? As a result of it labored for Taesa, so we might attempt once more. We mentioned, no. We’re not going to attempt once more.

We do not need to be personal fairness. Personal fairness is for any person else. We’re not a personal fairness to have a minority shareholding. For some folks this works, however not for us. That was not the most suitable choice for us. We mentioned, no, we do not need to go that approach. We need to concentrate on Minas and win.

So that is the funding plan. And of the BRL49 billion, we have now already invested BRL13.6 billion. So we nonetheless have BRL35.6 billion, which is a ’24-’28 plan. And this one piece of knowledge that I feel I ought to share with you. Of the BRL35.6 billion, two-thirds are already contracted. So this is a crucial quantity as a result of as Marcio mentioned, we’re a combined economic system authorized entity. However as a combined economic system authorized entity generally we discover difficulties within the bidding course of.

We all know generally it takes lengthy. It takes lengthy to arrange the bidding course of to undergo with it. So this plan is two-thirds contracted, and there is one other restriction the place it is not a regulated market, we are going to solely make investments if we have now an related PPE, we can’t make investments spot.

And along with this, and I am speaking concerning the funding plan, after all. Clearly, we have now our buying and selling firm, which is extremely profitable. So contemplating the outcomes that we confirmed, of these outcomes after we misplaced the concessions right here, we had been in a position to create an enormous marketplace for the buying and selling firm.

And this was an enormous purpose that the corporate scored. We’re leaders in buying and selling and we need to proceed to be leaders both within the free market or now within the retail market. And we’re all the time customer-focused.

And this can be a factor that we should be, to take a number one position within the energy market. And usually, the facility market will not be targeted on the client. Everyone seems to be used to work as a monopoly, and being customer-centric will not be the common factor. So that’s the plan.

Right here, we deliver you the outcomes of this turnaround. As a result of I wished to discover a phrase in Portuguese, I could not. So, we used the phrase in English. It was a turnaround. Right here, we obtained our opponents, which , that are the listed corporations within the energy sector, and look how a lot we gained when it comes to relative share.

Not solely EBITDA elevated from 3.7% to shut to eight%, and as a share, we elevated from 5.8% to eight.2%. So, we grew vis-a-vis the market. Not simply that we grew in comparison with ourselves, after all, we did develop loads in comparison with ourselves and the way we had been, however we additionally grew in market share.

Web revenue, 5.8%, as much as 16.1% or 1.7 to five. In EBITDA, we, a little bit greater than, doubled and when it comes to web revenue, 3 times, we grew 3 times, when it comes to investments, 5.5 occasions improve from BRL954 million to BRL5.5 billion within the final 12 months, and in share phrases, 3.8% to eight%, we greater than doubled the relative share, after we evaluate to listed corporations.

And we aren’t contemplating all energy corporations, simply the listed ones. Simply to present an concept, that we aren’t solely rising, however we’re rising sooner than the common of the sector and for our financial institution representatives, I would prefer to thank them, as a result of the financial institution representatives have been supporting us loads with the capital market, thanks.

Web debt over EBITDA, this ratio dropped from 3.2 occasions to 1 occasions web debt over EBITDA ratio, so 3.2 occasions to 1 occasions. And Cemig’s ranking, I feel, elevated six notches, six notches on this interval. We’re AA+, and we consider we must be AAA, so Marcio, we nonetheless must pursue that entrance of being a AAA.

Once more, we’re happy, however not sufficient and we are going to obtain a AAA ranking. So, I suppose, that is the muse. We’re administration, targeted on again to the fundamentals, being environment friendly, having worthwhile, regulated investments with a renewed group, an built-in group and right here, we have now the outcomes.

I spoke loads about Cemig, however we have now right here Gasmig. We’ve the entire administration right here. So, please be at liberty. We’ve Colon, Cadu right here. Cadu, I do not even bear in mind your loved ones title. It is Carlos Eduardo Moraes, I remembered. So, at Gasmig, we’re constructing a brand new fuel pipeline till Divinopolis after many, a few years.

So, after we take a look at this, a brand new fuel pipeline after 20 years with out constructing a brand new fuel pipeline, we’re again to investing in technology. We’ve centralized technology. We simply opened a 90-megawatt plant, one other one, with an related buyer, not spot, we have now an related PPA for a few years with an investing technology.

We received an public sale in transmission. We’re bettering and reinforcing the system, which is one thing that did not occur in a very long time, successful an public sale. And in distribution, we have now Marney to talk about this, however we have now loads, quite a lot of investments in substations alone, each week, no, I imply, new substations, we had 110.

I must get an replace from you Marney, as a result of daily, we begin a brand new substation. However after we began, we had 114. We’ve began 110 extra. And the plan is to develop 200 substations, rising 50% the capability.

And as Marcio talked about, there is a group of technological transformation, which is simply superb. We wished to have our working system, it was our personal working system, had a system to regulate the operation that belonged to us. After I joined, this was getting out of date. We had methods from the Nineteen Nineties, and now, we’re updating by way of distributed power.

So, we’re going to be controlling for distributed technology, and never simply the operational management of distribution, however we are going to embody all of the intermittent and distributed technology. So, at any time when there’s a new replace, we will instantly replace the system. So, there was an enormous progress, a quantum leap when it comes to SAP, ADMS.

What, Marcio, you’ll be able to say one thing. That is in relation to corporations listed within the inventory alternate. However all of those displays will likely be out there for you. However the level is, we gained market share in comparison with corporations listed within the inventory alternate. And that is what Marcio talked about. That is the grand finale.

Earlier than the election of Governor Zema, we had been value BRL10.6 billion in market worth. On August 16, it is already greater than that. However on August 16, we had been value BRL35.3 billion, together with extraordinary dividends of Alianca. BRL12.7 billion in dividends paid since 2019, together with extra dividends. So, we have now right here the frequent shares.

And as Marcio mentioned, we’re very excited to proceed with this transformation, with the execution of the most important CapEx plan in historical past, with a self-discipline for value discount and bettering the standard of spending, as a result of that is one other necessary matter. We did not do, for instance, preventive upkeep.

At this time, as a part of our regulatory bills, we will do preventive upkeep, which improves issues loads sooner or later. We’re modernizing governance, decreasing crimson tape. We’ve simply employed a consulting agency to assist us be extra agile and have extra simplicity and agility. We’ve a concentrate on the client, with Marcio as Chairman of the Board, with all the pieces he is achieved in his life with assist regardless, after all, we will likely be 100% customer-centric.

And that is very difficult cultural theme truly, as a result of, nicely, I’m certain that through the use of the power of our model and with us being able to concentrate on the shopper, we will proceed to be leaders within the free and retail market. Lastly and we’re going to have a presentation about that.

As a result of if I begin speaking about power transition, nicely, I will should have one other half an hour, which I consider that Brazil has distinctive alternatives in power transition. We’ve to play a number one position and produce Minas, the State of Minas Gerais, to power transition and appeal to investments to the State of Minas Gerais with innovation. So, that is the second that we live. As Marcio mentioned, we have now loads to do, quite a lot of good issues we have achieved, however we all know that there are quite a lot of issues that should be achieved.

And I would prefer to thank the presence of the Secretary of — the State Secretary of Financial Improvement. And I would like to ask him to return to the stage to inform us the standpoint of the controlling shareholder. Not simply what we have now achieved with the help of Fernando and Governor Zema, but additionally to listen to him inform us concerning the future, future expectations.

Marcio talked about right here. There are numerous themes on the desk, themes associated to the controlling shareholders. So, nothing higher than having the presence of the controlling shareholder, any person who has supported us in each work entrance.

And for us, if we transfer the pinnacle with the privatization, this was public data since day one. Everybody is aware of we need to have an asset that’s increasingly more valued, in order that we have now a chance to denationalise the asset with an excellent market cap. However after all, that is unique accountability of the controlling shareholders. So, I would like to ask Secretary of Financial Improvement, Fernando Passalio. Fernando, thanks very a lot to your presence, for being right here.

Fernando Passalio

Good morning. I want to begin congratulating Cemig and the entire administration right here, represented by Marcio Utsch, Chairman of the Board; and Reynaldo, the CEO, for this Cemig Day, which is already a hit.

We are able to see everybody engaged in social media and all of you attending on website. And I need to briefly say that our Governor, Romeu Zema, and the Vice Governor are very targeted on what Cemig can provide when it comes to growth. It’s now by probability that Cemig is linked to the Secretariat of Financial Improvement.

Every part that was mentioned to this point is funding that brings extra funding. Why do I say this? From 2015 to 2018, and I am speaking about protocols of funding intent. These protocols of funding intention generated near BRL26 billion for a 4 yr plan. The prior administration attracted BRL26 billion in personal investments from enterprise folks unfold all over the world who selected to spend money on the State of Minas Gerais.

And this program to draw investments, for my part, was too small. BRL26 billion is just too little for a State of the dimensions of Minas Gerais. Governor Zema, as a result of he was all the time an entrepreneur and targeted on having the most effective public coverage on this planet, which is creating jobs, he required us to show the important thing of the entire group and to start out attracting investments at a unique tempo.

In the event that they attracted BRL26 billion in 4 years, he mentioned, I need to have BRL150 billion within the subsequent 4. So, he raised the bar rather a lot. And with the Romeu Zema customary of high quality, we had been very proactive. We put Minas Gerais on this planet. Minas Gerais remains to be unknown. The world is aware of Brazil as Sao Paulo, Rio de Janeiro and Brasilia, and never a lot Minas Gerais.

For us, it’s a problem to place Minas Gerais in everybody’s radar. However it labored. This goal of BRL150 billion in personal investments was attained within the first two years. And we had been in a position to shut the 4 yr plan with BRL280 billion. After 1.5 years, we’re at 5.5 years of this administration, we reached BRL440 billion. As a reminder, the prior administration solely attracted BRL26 million.

And these buyers, one of many issues they want essentially the most is infrastructure and energy infrastructure. So after we see Cemig investing each methods, however investing in a possible approach, as a result of let’s remind, let’s keep in mind that in 70 years, Cemig constructed 400 substations.

And now, in three years to 4 years, we have now greater than 100 extra substations constructed, and we are going to construct 217. In different phrases, greater than 50% of what was achieved in 70 years. And all of that in simply six years. It is a daring focus and we’re solely these targeted to win.

And this can be a lucky title. Attempt once more by no means. It’s to focus, to win. I feel that Cemig, throughout an excellent a part of its historical past, that it was Eletrobras. Cemig began shopping for belongings throughout Brazil. And this isn’t our focus. Our focus is in Minas Gerais. Does not make sense to purchase 50% of Gentle in Rio de Janeiro when we have now a state that requires quite a lot of investments whose infrastructure is form of scrap.

And with this, we have now to talk about politics. I’ve to say how Governor Zema is concentrated on the standard of administration. We’ve right here Marcio Luiz. For those who Google him, you will know who he’s, if you do not know him.

And with a CEO like Reynaldo Passanezi and a group of Vice Presidents, that are prime notch, some individuals who actually take into consideration how you can enhance the general public coverage daily, as a result of once you’re the controlling shareholder, when you will have the controlling shareholder mandate, just like the Governor, we have now a view that the general public coverage or the controlling shareholder dictates the general public coverage, however they’re additionally the controlling shareholder. So, this sort of harmonization is feasible.

So, we have now Cemig in distribution with 9 million clients. It is quite a lot of clients with a really excessive satisfaction degree, very excessive satisfaction degree. As time goes by, as these substations are constructed, fewer corporations are ready to have their energy linked. So, the numbers present that they get linked a lot sooner. And this reveals how Cemig has been a accomplice of this public coverage to draw investments.

Somewhat time in the past, the federal government had a program referred to as Gentle for Everybody. And this was an necessary program, as a result of folks did not have electrical energy in some locations within the State of Minas Gerais. And we have now Gentle for Everybody, that was this system. And now, at a unique tempo, we have now Three Section Minas. Gentle for Everybody program was a literal program. It took electrical energy for everybody.

Now, Cemig has a daring program of getting a Three Section provide, the entire rural zone, extra productiveness for the agri-business. So, the agri-business will be capable of scale up their productiveness in a approach that was by no means seen earlier than. So, we have now extra substations being constructed, we have now the Three Section provide program, extra energy, and this BRL49 billion CapEx was our plan, constructed very responsibly and the plan that may be executed, it’s executable and this is essential for the outcomes that we’re reaping now.

And it was solely doable to do that by divesting these minority shareholdings exterior of the state. The present administration is concentrated on a smaller state authorities. We need to have an agile state authorities, an administration that’s as small and as optimized as doable. We will likely be promoting minority shareholders and will likely be privatizing state-owned corporations, in order to make sure higher high quality providers, extra accessible providers to the residents of the State of Minas Gerais, as this was the case with phone providers in Brazil, it’s not, as a result of we have not been in a position to advance this dialogue with the state council about remodeling this firm in an organization. It’s not as a result of we have not been in a position to advance to this point that we’re going to depart this behind. Proof of that’s the numbers that we noticed right here.

We now have an organization that’s completely targeted on the outcomes. We’ve seen a very powerful indicators proven by Reynaldo. We additionally invested in a committee for the governance of state-owned corporations. We’re continuously involved with the Chairs of the Boards of Administration. So, we do this follow-up, in order that we have now all the pieces on the identical web page.

And right here, I am not even speaking about Cemig, however relatively the administration of state-owned corporations and the way Minas Gerais state administration is specializing in the accountable administration. The identical factor that we have now rolled out at Cemig, we’re doing with all of the state-owned corporations of Minas Gerais.

And right here, we have now consolidated outcomes. You see that from 2011 as much as 2014, there’s a peak of BRL5 billion as much as this yr. And the Labor Occasion Administration, you see a fluctuation in values, that is regular to see with state-owned corporations, proper? The tendency, the development is to destroy the state-owned firm, to not privatize them.

And now, you see beneath Zema’s administration, the outcomes, you’ll be able to comply with that up. It is right here the figures are all the time surpassing prior administration. This peak in 2012 right here, it was due to an operation of a non-recurring revenue. So, often, the outcomes are very low and these figures are already deflated.

Okay. Distributed dividends. That is actually odd, actually totally different. Right here, you will see that the prior administration, previous to ours, you see the quantity of dividends paid and take a look at how Cemig is now. It is actually a milking cow available in the market, proper? So, Cemig is investing, is paying dividends. That it is a very enticing firm to the market and nonetheless going through the problem of being a state-owned firm.

So, you don’t select your suppliers. It has totally different homeowners at each 4 years, so you can not select who you are going to rent. And it’s nonetheless working as if it had been a personal firm. If you do not know, this state owns a little bit over 17% of Cemig. So, in case you have no idea, the stake will not be that enormous.

However we have now the very best variety of frequent shares, in order that’s why we have now the management. So, simply to present you an concept of the market worth, in 2011, every share was at BRL1.63. Once we took over, it went as much as BRL5. And now, shares are round BRL10 to BRL12. So, in case you analyze the foundations of the corporate, if that weren’t a state-owned firm, the value share can be skyrocketing. That isn’t contemplating dividends, you are proper. However the profitability of those shares is de facto, actually excessive.

These are investments that deliver extra investments. And that’s my message. We are going to keep that administration, guaranteeing that this can be a certified administration for Cemig, Gasmig, for Cemig Sim. And right here we have now the officers of those corporations. As Reynaldo mentioned, Cemig Sim and Gasmig are additionally investing.

Once we took over workplace in 2019, a little bit over 500 megawatts of photo voltaic power, and now, we have now nearly 9-gigawatts in Minas Gerais. That’s, we’re producing greater than half of Itaipu energy plant of photo voltaic power simply in Minas Gerais. And that is an incredible consequence. We’re absolute leaders in Brazil and we are going to carry on being leaders, as a result of we have now with contemplating this, our goal of photo voltaic power, fixed funding for infrastructure and substations will assistance on that.

However we have already got authorized at ANEEL dozens of initiatives that can carry on putting Minas Gerais at this pole place. So there’s a pure chance right here that’s being reworked into an economic system as financial asset for this firm. So, we have now pipelines within the state for fuel.

And these are investments that deliver extra investments, this can be a firm that may make investments. It has all the pieces it takes to speculate. It is a firm that’s prepared for a future IPO, Gasmig, I imply, and right here we have now investments that I’m certain will assist that area the place the pipelines go by to be a affluent area. And affluent is a phrase that our governor all the time mentions. Herald 900 million employment positions, will appeal to investments and in addition nearly a million of employment positions.

Once we took over we had 8.8% of stake in our nationwide GDP and now we have now 9.5%. The 0.7% means the POE state economic system. So we grew one of many Brazilian states’ economic system. We’ve grown Amapa and Rondonia collectively. So these — that 0.7% is loads. It is not straightforward to get there.

We went over BRL1 trillion in our GDP and after we took over it was a little bit bit over BRL600 billion. So, nicely, good wins to Minas Gerais. I want you all a really productive occasion. You solely have the most effective right here to indicate you what we’re doing and that you’ve an exquisite Cemig Day. Thanks.

Carolina Senna

Thanks very a lot, Reynaldo, for sharing with us this transformation over time, and thanks Fernando Passalio for sharing with us the transformation of Minas Gerais State that’s permitting our state to develop and in addition your view on the state-owned managed belongings. I’ve time for 2 questions. If you wish to ask questions both to our CEO or our Secretary of Improvement, be at liberty to take action.

Daniel Travitzky

Good morning. Daniel Travitzky from Banco Safra. Thanks very a lot for this chance. I’ve one query to Secretary, Fernando Passalio. Mr. Secretary, thanks very a lot for being right here. And my query is concerning the federalization matter from Cemig as was mentioned by the federal administration and in addition by Zema’s administration. So how are these discussions going and the way the Minas Gerais administration is tackling this matter? I’m Daniel Travitzky from Safra Financial institution.

Fernando Passalio

Nicely this can be a matter that was on the headlines for the previous few months. That is an initiative of our Senate Consultant and President, Rodrigo Pacheco, and we all know that there’s excessive debt from the controlling shareholder, and the Governor all the time says that the state can’t be that indebted neighbor with 5 BMWs in his storage.

So we have now to be chargeable for the general public figures, and there’s a deficit there, however the fiscal restoration routine is the one possibility that we have now. Nicely, nonetheless is being mentioned. We do not know if we’re going to have a feed or if, that is going to go, one thing happening in there, and we do not know what is going on to return out, however we’re nonetheless ready for issues to occur. However what we have now as we speak is a fiscal restoration system, which is the most suitable choice as we speak.

The most suitable choice is all the time the one which we have now. And we’re on this fiscal restoration system and our concept is to take away this chance and switch it into the common system, as a result of proper now we’re beneath an injunction and we wish that to be common.

Sure, federalization is likely to be a approach out, however after the regulation is authorized, there’s a journey that could be a very lengthy one, so to come out and notice, it’s a public data, you all know, concerning the Cemig’s tagalongs that may discourage even from the federal administration, the sale of this asset. And actually, we shouldn’t have that, second web page remains to be being developed, and federalization will depend upon the valuations if we come to that stage.

Anyway the IRF needs to be authorized, and if wanted, we will transfer from that and go to Propag. And one thing else that we actually see as a chance is to show Cemig into an organization after which a hypothetic situation.

If we’d have federalization after Cemig turns into an organization, so all the pieces that I mentioned right here of sustaining a technical administration that will likely be insured as soon as within the diffuse management of the company, we find yourself having shares even with a higher worth, we will low cost our debt, and Cemig will carry on investing as it’s investing and in addition selling investments.

Carolina Senna

Thanks very a lot, Fernando Passalio. And now I want to deliver to the ground our CFO and IR Officer, Leonardo George de Magalhaes, and he’ll discuss our leads to the second quarter.

Leonardo George de Magalhaes

Good morning, everybody. Thanks very a lot for being right here. It is a essential second for the corporate. That is the prospect that we have now annually to be right here with all of the administration of the corporate, RI, investments, and monetary outcomes, however we consider this can be a single alternative the place we could be with you.

It is necessary to be right here with buyers. It is a vital second for the corporate. We’re having constant outcomes. It is extremely clear that the market is blissful concerning the firm’s outcomes, however that is very constant for the previous few years and we will seize this chance, and we need to discuss extra to you and be right here out there and be capable of discuss extra about our technique.

Let me discuss concerning the outcomes. As soon as once more constant outcomes. The corporate within the final years was generally 5% decrease than the market consensus and generally 5% over. That is very constant. That makes an enormous distinction and this permits us to have consistency and robustness in our outcomes.

And we have now curiosity fairness in one other quarter, over BRL430 million in June, with out contemplating the extraordinary dividends. We’re amongst one of many most important dividends fee firm and with the extra dividends that we have now posted within the final month, clearly that is, we’re clearly the very best dividends paying firm.

Additionally we have now right here BRL1.9 billion working money technology. We are going to discuss extra about that and despite outcomes being in line, these non-recurring constructive occasions should not impartial, they are going to be producing additional cash to the corporate or they’ve lowered the corporate’s threat associated to some matters that had been in our steadiness sheet, so we strengthen our scenario.

We consider that the non-recurring results, and this can be a enormous instance, they arrive from actions of the administration which have generated outcomes and lowered the danger, and as a side-effect, that additionally improved our base for dividends, fee.

And eventually investments that had been posted within the tariff assessment, this was a vital one, we will spotlight that. And additional on we will likely be listening to the opinion of different Administrators. Possibly Marco Soligo can discuss concerning the tariff assessment. We doubled the bottom for Cemig transmission to BRL2.6 billion.

And on this quarter, we’re within the course of that each one transmission corporations which have related foundation to Cemig comply with, which is to reconcile the money stream that was authorized by the authorized regulator and the money stream that we use in our projections after we invested and registered these belongings in our steadiness sheets, in our monetary statements. We predict this can be a honest assessment. All our investments have been accounted for and we do have the capability of doing investments at a really low value.

We’ve a scale and we’re very optimistic and we’re reconciling right here to examine the consequences of this assessment and they are going to be accounted for within the third quarter. So we’re on this work of reconciling investments, however we consider this was a really constructive tariff assessment for the corporate. Then we’ll discuss extra about transmission investments. They’re very related with a return fee that we perceive to be very enticing producing worth to our shareholders.

Now, shifting ahead, that is our funding program. Reynaldo talked a little bit bit about this additionally Marcio and Fernando Passalio about our investments previously few years. For investments right here, you’ll be able to see, we’re very a lot in line for, we have now invested within the first quarter, nearly 40% of whole investments for the yr and we have now a catch-up in different companies.

However even with investments in technology that’s decrease than what was forecasted, we’re assured that we is likely to be doing investments that had been increased than our goal. I feel we’re going to attain the BRL4.4 billion. And likewise in transmission distributed technology, we consider that we’ll be assembly the forecasted for the yr in addition to fuel and a little bit bit much less in technology as a result of I feel a part of this funding is likely to be transferred to 2025.

However whole, we must be investing near BRL6 billion this yr, very related after we contemplate our historical past, we used to speculate, we invested BRL1 billion in 2018, now we’re going to make investments BRL6 billion in 2024, however when in comparison with final yr, we see 40% increased. So the corporate adjusted itself to the extent of investments that’s a lot increased than what we had previously. And as Reynaldo reminded us, a part of this funding is already contracted.

Now, shifting ahead, right here we have now consolidated outcomes for the second quarter. As we talked about, consolidated EBITDA nearly 30% increased than final yr, together with non-recurring objects, and according to final yr, each within the web revenue in addition to within the EBITDA after we exclude the non-recurring results.

And final yr, the buying and selling firm outcomes for lots of causes, it was very constructive. It is nonetheless constructive this yr, however final yr, due to the convergence of things that had been constructive, it introduced distinctive outcomes, permitting the non-recurring EBITDA to be near 24 to 23, but it surely’s good to spotlight the recurring as nicely. So the assessment of revenue sharing distribution, we had been in a position to revert BRL600 million as a result of we nonetheless have already got an opportunity of successful BRL800 million which can be provisioned in our steadiness sheet.

That is, additionally because of the actions you will have taken, the volunteer dismissal program, nearly 400 workers that enrolled in this system, that even have a really fast return in lower than a yr. We are able to have the payback of this system with the staff which can be right here for longer, they’ll obtain indemnity after which after we can rent workers which can be starting their profession with decrease wages and right here we recycle our group. It helps altering the corporate’s tradition.

We consider that this can be a essential funding. Now, the difficulty associated to PASEP, PIS, and Cofins, we have now returned the BRL6 billion in fiscal positive factors that we had on this lawsuit, and with this refund, we had been in a position to reconcile our updating standards of that obligation. Subsequently, reverting BRL400 million, that refers to web revenue of BRL271 million.

One other non-recurring impact that’s important. There’s a lawsuit that includes buying and selling firm with a big shopper and we’re interesting, however we have now provisioned on this quarter, however we didn’t surrender. We consider that we’d win it again and that is the replace that may generate the money. Cemig few years in the past appealed towards the standards associated to staff’ laws.

That is the employees’ meal program and simply now we had been awarded that lawsuit. So these are impartial, they don’t seem to be impartial, they’re positives as nicely, and in addition they hedge due to the FX went up within the final quarter. We did see an impact in our monetary statements. And keep in mind that the corporate’s hedge has to do with the bonds which have the ultimate installment of BRL380 million now on the finish of the yr.

Now shifting on prices and working bills. If we take away the voluntary dismissal program, our obligations had been up 1.7% a yr when quarterly-on-quarterly comparability decrease than the inflation. And as Reynaldo talked about right here, bills for third events additionally our providers are bettering or rising truly and that is our concern of actually serving the purchasers.

We see the society now could be demanding a greater service and our problem is to spend on the best place, to spend extra within the upkeep operation and fewer in different course of, in a approach that the corporate’s prices are nonetheless disciplined, rising in a disciplined vogue, with no stress within the working effectivity of the corporate and bettering high quality of service to purchasers.

And on the identical time, additionally associated to monetary obligations. We’ve over BRL200 million bills final yr. We’re working internally to scale back these. That implies that with investments we’re in a position to cut back our monetary compensations as a result of we begin offering higher high quality providers.

After which we will additionally lower the charges that we pay to purchasers. Subsequently, we had been in a position to deliver down in six months round BRL38 million in charges associated to regulatory compensations and that is due to ANEEL Decision 1000. That is necessary and we’re constantly working in decreasing these indemnity penalties. That is the money stream of the corporate.

We generate quite a lot of money and we have now quite a lot of investments to be made. We generated BRL3.5 billion on this quarter, and this half of yr, between BRL7 billion to BRL8 billion of annual money technology. That is what we generate when it comes to money yearly and we ended the money with BRL3 billion within the first half of 2024, however we will likely be utilizing that in our operations and investments that will likely be achieved for subsequent month.

That is the consolidated debt profile. That is near one-time the EBITDA, however in a relentless vogue. Now, we go to the market, we have now to deliver funds to the market. So we went to the market to search for assets and our distribution generates between BRL3 billion to BRL3.5 billion in money technology yearly.

So we have now investments of BRL4.5 billion. That’s, we’re going to source funds from the market continuously. That is already rising and it is going to be rising as much as the following assessment, near 2.5 occasions in 2027.

However we consider that we’re very comfy and our goal now could be to show the debt profile extra ample. There’s a extra concentrated progress in ’25 and ’26. And we need to flip this common time period of information that’s extra ample to the upcoming issuances with — and that is the corporate’s goal.

That is Cemig’s D outcomes. With an excellent consequence, we are going to take a look at the following slide, quantity of sale of power. However we see that regarding the prior quarter, these outcomes had been nice, whether or not together with recurring occasions or not, that is an excellent consequence. And there was a month right here the place the outcomes included the tariff changes that occurred in Could 28, however we perceive that Cemig D is at one other degree now.

It had an EBITDA near BRL1 billion in 2018 and now it is an EBITDA near BRL3 billion, BRL3.5 billion. With out contemplating the ramp-up that we’ll have in 2028 with a tariff assessment, that is the power market. We grew 2.9 even with DG rising 33% and we had an enchancment right here of two.9%. If we exclude DG, the market would develop extra.

The Minas Gerais market will not be as elastic when it comes to temperature like Rio and Northeast, however even then it was a major progress. However you’ll be able to see that transported power improved to six%, a small discount within the capital market. However even with the residential rising 7% and the opposite lessons being lowered due to the competitors of DG or GD and in addition retail market.

However even then, in a complete, our market was a market that we perceive that had an enchancment in 3%, and even with the stress of GD, it was a related progress. That is our working effectivity. Contemplating non-recurring results, it was 22% decrease than regulatory one.

However even excluding non-recurring occasions, we had OpEx inside the regulatory OpEx, 2.4%. However bear in mind, final yr the EBITDA ratio right here is 10% decrease than regulatory. We talked about on the time that was momentary and our dedication was that inside the yr we have now our EBITDA that’s increased than the regulatory and that 10% hole is already down 2.4% and we consider that for the following quarters, we’ll be capable of have an EBITDA increased than the regulatory one as we have now achieved within the prior yr since 2021 and OpEx additionally beneath the regulatory restrict.

It is a dedication and they’re essential for us. We need to be inside the regulatory coverages. And even being a state-owned firm, we have now some additional prices that personal corporations shouldn’t have, equivalent to post-employment advantages. That is very particular for the corporate, we pay that. This brings an extra expense to the corporate, however even with these extra prices, they’re coated by our tariffs.

Right here we have now Cemig GT outcomes. As soon as once more, final yr was an distinctive yr for the buying and selling firm, however even excluding the non-recurring results, we see that the outcomes had been very shut in ’24 in comparison with ’23. And final yr, as we mentioned, was the yr the place we had power restriction within the Northeast, subsequently we had been quick within the Southeast market.

We had been in a position to purchase power at a really low value and that elevated the margin of the buying and selling firm. Along with that, the contracts with purchasers had a higher margin than this yr we had already introduced that to the market. And the prior yr, Cemig Day, after we offered the margins for the following years, we’re already displaying that 2023 was an incredible quantity. 2024 additionally can be an incredible quantity, however not as in 2023. In fact, Cemig as we speak is a buying and selling firm that when in comparison with the market is an outlier.

We’ve superior outcomes when in comparison with the common of the market. Contemplating the corporate’s experience and in addition our traits of being not solely a peer-trading firm, but additionally being a producing firm that permits us to have margin ranges a lot increased than our opponents.

Right here we have now our EBITDA per section and that is the great thing about being an organization with plenty of companies and we’ll discuss fuel within the subsequent slide, however this was 1 / 4 that was superb for distributing firm.

Technology was mainly in line right here. We transferred right here the contracts for the buying and selling firm, which had a decrease consequence than final yr. Final yr, as I simply mentioned, had an distinctive consequence, however we consider that 143, if we had been to annualize these outcomes, we’d have a consequence that might be over BRL600 million, however first quarter was a lot increased than that.

We consider that the buying and selling firm will likely be delivering now outcomes which can be very constructive as nicely. After which our Gasoline enterprise, we have now a worse consequence, 7.1%, however right here there are two components. One, the economic market had a discount due to an enormous buyer of Gasmig, decreasing their consumption and this affected the Gasmig income and the regulatory belongings are off steadiness.

That is referred to as compensatory parcel. It is out of the steadiness sheet. And final yr they had been in a position to offset that to construct BRL24 million of this regulatory asset, which made the consequence final yr to be increased, however annualizing it, the EBIT is bigger than BRL900 million, which is extraordinary, an incredible consequence.

An organization that isn’t leveraged, it’s a money cow. An organization with a concession till 2053, with the entire market to be tapped into, and we’re going to hear extra about that, after we communicate extra with the VPs, the officers, and the CEOs of the totally different corporations of the group.

Right here we have now the commitments. It is delivering on our commitments. That is how we’re executing our technique. I discussed to a few of you, in case you entry the Cemig web site and in case you take a look at 2021, the Cemig Day, our presentation in Cemig Day, in case you take a look at our technique and what we have achieved to this point, you’ll clearly see that 2021 was not simply lip service.

We did execute our technique. We mentioned that we invested in regulated belongings. We mentioned that we had been going to spend money on the distribution firm, divest from distressed belongings, the place we did not have any management, that we’d get extra working effectivity, and we had been in a position to ship on all that.

These are the commitments achieved, those in progress, and the longer term challenges and alternatives the place we included applied sciences for power transition. We’ll have a chance to talk extra about this throughout this Cemig Day. So, to conclude, this was 1 / 4 with very stable outcomes for the corporate. We consider that we’re constantly creating worth for our shareholders. Thanks very a lot.

Carolina Senna

Thanks, Leonardo. Now we will have a quick espresso break. Questions associated to our outcomes could be requested throughout the Q&A session with the entire administration. So we will return to any questions you may need. I hope you take pleasure in our Minas espresso. You possibly can style our particular espresso break with Minas merchandise. Thanks.

[Break]

We’re again to proceed with our agenda. Earlier than we start our subsequent presentation, I want to invite all of you to have your smartphones within the silenced mode. I would like to ask our Vice President of Distribution of Cemig, Marney Tadeu Antunes.

Marney Tadeu Antunes

Good morning, everybody. Thanks for being right here with us. We communicate a little bit about distribution, placing it into numbers. In fact, as Dr. Reynaldo mentioned, something we resolve to speak about, we might spend hours speaking about. I will be very transient.

Okay, so how can we function, attempting to be proficient within the largest DisCo of the nation, with greater than 9 million shoppers, 567,000 kilometers — sq. kilometers of our concession space, equal to the dimensions of France, greater than Spain, with greater than 20,000 folks out within the discipline working to function the system and the way we search for working effectivity, contemplating all of that.

Our first technique was very a lot talked about right here to be customer-centric, concentrate on the shopper. Consumer on the heart of all the pieces we do, optimizing income administration, preventing losses, bettering assortment and decreasing delinquency. I all the time say that for the DisCo, we have now to evaluate losses along with delinquency, as a result of one is said to the opposite.

If I don’t disconnect and I begin accumulating from clients, we’ll cut back losses, we’ll be very efficient in assortment, however there will likely be quite a lot of fraud. So these two matters are interrelated and we have now to be doing nicely in each indicators, improve working effectivity, making use of progressive and technological options equivalent to digitalization of all of our methods.

And as established in our strategic plan, we have to induce the event of the State of Minas Gerais, rising market dimension. Along with bettering the standard of what we have already got, we have now to have the ability to join new clients to the grid.

BRL23 billion for the 2024-2028 interval, BRL23 billion in investments and a few numbers. 404 substations will finish 2028 with 615, 19,000 kilometers of strains in 2018. By 2028, 21,950 kilometers of strains. And we have now 3,500 kilometers of 69 kV manufactured from wooden. And we’ll exchange all of them by towers, rising the extent of voltage to 138, in different phrases, bettering reliability and high quality of the facility.

Distribution community 551,000 kilometers in 2018. By 2028, 577,000 kilometers. And there is additionally the three-phase energy, that is one other program. Transformer capability from 10,000 MVAs to 16,000 MVAs.

The substations are operating on the identical proportion of voltage and three-phase community, 130,000 rising to 165,000 will cut back the single-phase networks. We’ll shut the alligator’s mouth, as we are saying it, and municipalities with twin voltage provide, 667 municipalities rising to 774 municipalities. The entire municipalities with twin voltage provide.

There’s a chance to rebalance load in an computerized approach. In some municipalities which can be small, generally they spend two or three days with an influence outage. As a result of, we have now an influence outage as a consequence of storms, poor climate and landslides, issues within the bridges. So, we have now to have dual-voltage provide and digitalization, in order that we will reallocate the municipalities routinely. This may improve high quality, buyer satisfaction, and naturally, the sale of energy.

Sensible meters will finish with 1,785,000 sensible meters. This may assist us loads in working effectivity. I feel to spotlight is along with some great benefits of clients having the ability to monitor their consumption and so forth and so forth, we will reconnect clients on-line remotely.

In the event that they pay the invoice, I can reconnect them as quickly as they request a reconnection. And naturally, we will disconnect them remotely. If they do not pay, we’ll get an order to disconnect them and so they’re disconnected. This may permit us to scale back our delinquency even additional.

Distributed technology connections 152 models of mini DG. Mini DG to remind you is 75 kilowatts up till 75 kilowatts it’s micro. So we’ll finish with 2,800 of mini DG. 377,000 micro DGs. 700,000 clients as we speak profit from some form of DG and it is very important say there’s a market loss, as was talked about earlier than. However we have now actions to keep up an enormous market.

And we’ll discuss power transition to produce the agribusiness of Minas Gerais state. It is a large alternative that we’re envisioning. Speaking about working effectivity, which is our final purpose. First, delinquency, within the BRAD methodology that we comply with and we benchmark with different corporations, we’re among the many greatest corporations of the nation. We’re within the prime three with a ratio of two.3 in — 2.4 truly in 2024. And we will cut back delinquency with a single focus to how folks use that thirteenth wage. We’ve a technique for that. And our assortment will increase within the month of December. So in December of 2024, there will likely be an extra discount of delinquency.

And right here we have now our ARFA. Our Assortment Constructing Index. In 2021, we elevated to 98%, 99%. In some months we did higher than 100% assortment. And this allowed us to have a acquire from ’21 to ’24 of BRL3.4 billion. In fact, there is a large technique behind all this, in order that we will enhance our billing — our income.

I might additionally like to talk about losses. Give me a minute, please. Losses, we’re doing nicely inside a suitable restrict. Loss is 10.85. In regulatory losses, within the final 12 months, we obtained to the vary and we had been in a position to be decrease than the regulatory losses. We’ve to search for know-how inspection and have technique to realize the goal of losses.

Right here, in June of 2024, there was a rise. And I can guarantee you that what improve right here was not losses, however relatively what we didn’t invoice as a result of we modified the billing calendar, given the adjustment we had within the month of Could. So, there may be this improve, they are going to be decreasing by December. In December, we’ll be inside regulatory losses and that is our technique.

One other instance of working effectivity is our income and assortment and the place the channels our clients use to pay their payments, we seemed for lottery homes in additional locations. We developed new applied sciences equivalent to PIX fee. This primary column in June of ’24, 26.2%, that is PIX fee.

In 2022, it was 7.6% and now it is 26.2%. We had been the primary firm to simply accept fee by way of PIX. We labored sooner to tug the set off. Now we’re 26.2%. In lottery homes, the sunshine inexperienced, 42.6%. Now all the way down to 26%. Why am I mentioning the lottery homes, as a result of that is the most costly income, BRL1.45 per invoice that we collected. With PIX fee, BRL0.02.

So make no mistake, this improved — quantity collected improved from BRL0.96 on common, now all the way down to BRL0.64. So we receives a commission in any approach on any channel. In one among our final insights, it’s regular that corporations don’t pay a minimal quantity. If it does not attain BRL30, they do not pay the invoice, they pay the following month. The purpose generally, and on this generally, reduces the quantity collected.

Sure. What? What did you say? Really, reduces the tariff. So, for this, we — for these payments, we embody a QR code after which they find yourself paying the minimal quantity. This is without doubt one of the methods that we adopted to scale back our common value.

A giant problem we have now is DEC. Reliability of energy provide. It is a problem. And why can we name it a problem? As a result of we have to full our plan of 200 substations to scale back DEC. As a result of we had quite a lot of options with greater than 1,500 kilometers. Are you able to think about operating that form of line when there’s a energy outage? It takes a very long time. Typically we do not discover the issue.

We’ve to examine the entire line. Now we’re including automations within the system, such because the reclosers and we’re working to scale back the dimensions of the circuits. So as well as of having the ability to join extra clients, we enhance the standard of energy provide. However to do that, to construct all of those substations, we would have liked to search for new fashions of substations. So we will construct them sooner. And that is why we have now CESI and remoted fuel energy to permit us to do that within the timeframe.

However let me clarify, DEC. 18.15 international DEC. That is DEC obtained by clients. So corporations solely discuss concerning the regulatory portion of the sunshine inexperienced hours is what’s perceived by the client. As a result of that is what our CEO calls for. It’s the buyer on the heart of all of our actions. What’s their notion? So we’re working to scale back general DEC. In fact, all the time maintaining a tally of the regulatory DEC. And we’re doing fairly nicely.

One other fascinating level is the center chart. So, let me clarify. ANEEL, does not need the common common DEC. So what is that this? On the heart of BH, we have now a DEC of 4 hours. However in case you go on the extremes of the state, DEC is 40 or zero hours. And the purchasers pay the identical tariff. In fact, clients is not going to be blissful. As a result of DEC must be the identical high quality all over the place. However we all know. We all know how tough it’s to produce the agricultural zones. And that is why we want community automation.

So ANEEL established that by the tip of 2024, 58% of our units should have a sure high quality of DEC. And, in June of 2024, we achieved 61%. So that is BCA DEC. We’re working in line with our plan. The share of concessions of areas compliant with regulatory DEC.

In TMI, we’re speaking about 40,000 kilometers that we’ll be cleansing this yr. We might go across the globe one time. It is enormous. And naturally, all of it will favor DEC. One other necessary information is that, in Minas Gerais, we have now quite a lot of rural zones.

So we’re sorting DEC, the common time of occurrences, we’re sorting between city and rural. On this chart, we will see that the common outer time was 10 hours, dropped to 9.31. And we’ll get all the way down to 9.12 hours or city TMI 5.02 all the way down to 4.29. So particular administration to serve the agricultural zone.

And as was talked about right here, I feel the Secretary of State talked about, we had very — we used to have little or no preventive upkeep simply in city areas. Not us. We’ve a program referred to as 100% inspection. In six years, we will likely be inspecting and executing upkeep throughout the community.

This may assist us enhance the standard of service and the standard of provide. Right here talking a little bit concerning the DGs. DG models put in capability 3.69 gigawatts put in for Cemig and we may have one other 7 giga by 2027. So that is all signed contracts with clients. And these are DG 1. There may be — there are these advantages of the take a look at.

So all of those purchasers, clients will likely be linked. We’ve the put in capability, 12% of Brazil’s put in capability of DGs. In fact, the mini DGs had been lowered. However the micro DGs proceed, significantly with the brand new ANEEL Decision 1098, which units forth a quick observe, which is connecting shortly, powers of as much as 7.5 kilowatts.

7.5 kilowatt is a family with 1000 kilowatts a hour relying on the situation, daylight, the place of the roof going through the solar. So it will proceed. In order that micros will proceed to be at an accelerated tempo. However the mini DGs will likely be decreasing provided that the market can be rising.

This market, nicely, like I mentioned at first, we had regional hubs and this is a chance to serve the Minas Gerais agribusiness. We’re performing some particular work right here in these areas. We’ve already recognized alternatives of exchanging diesel by electrical energy as a result of we consider that is how power transition begins. The client wants to start out their transition.

Afterward, we’ll have a speaker speaking about this, however this reveals the potential we have already got and the initiatives that we’re engaged on. BRL2.45 billion value of enlargement to serve these agribusiness hubs and contributing to the sustainability of the planet. So this market is the place we need to develop. So we will battle the discount in DG. So we have now a chance of preserving and rising our market.

We additionally heard concerning the Three Section program. We had 6,000 kilometers constructed by June 2024. You see, our rural community may be very single part. 300,000 kilometers in single part? This doesn’t permit farmers to develop their enterprise. They simply do survival agriculture, not agribusiness.

Inside a Three Section Program in Minas will permit for that migration and we’ll assist them in order that they’ll have a greater energy high quality. Single part causes quite a lot of imbalance and this causes some interruptions.

Our Mais Energia Program, this has been talked about in 200 substations that we’ll be constructing. And right here we have now the official opening of the one hundredth substation that delivered simply now in Pampulha Belo Horizonte with the presence of the Governor, Vice Governor, Secretary, Passalio. This was the one hundredth substation delivered. We’ve 110 substations already constructed.

And that is the place I will cease, inside the time that had allotted to me. Thanks very a lot.

Carolina Senna

Thanks, Marney, for the presentation. We’ve time for 2 questions associated to concession and distribution. Please state your title and the place you’re employed.

Victor Burke

I am with JP Morgan, Viktor. A query about this transition from single to 3 part. The query is, will you will have a write-off of belongings? Maybe these belongings should not 100% depreciated. If there’s a fast substitute, you will should write-off belongings from the regulatory standpoint. How are you analyzing this, the progress of three part provide?

Marney Tadeu Antunes

Nicely, that is an fascinating query. This contains cables, isolators. We are able to perceive that these networks since they’re greater than 25 years outdated, lots of them, they’re already depreciated. So we is not going to have that difficulty.

Additionally in general planning, one of many objects is to search for essentially the most depreciated networks as a result of that is the place we have now essentially the most interruptions, given the deterioration of the lamp holes and all of the tools. So it is all beneath management.

Victor Burke

Okay, thanks.

Afonso Henriques Moreira Santos

Sadly, we can’t hear the query. I feel this is a crucial level. Our common depreciation lowered to rather a lot. Certainly, our common depreciation lowered. And I feel Leo offered this 4 occasions our reintegration quota. So we’re working to eradicate these networks which can be all these belongings which can be completely differentiated. Thanks.

Carolina Senna

Thanks, Afonso. Any additional questions? All proper, if we haven’t any extra questions, then thanks, Marney, to your clarification, to your presentation concerning all the pieces we’re doing within the DisCo. And I would like to ask on stage a Member of the Board of Administrators, Coordinator of the Innovation and Vitality Transition Committee, Professor Afonso Santos.

Afonso Henriques Moreira Santos

Let me examine my watch. Everybody says I communicate an excessive amount of and I do communicate an excessive amount of. So I can see very younger folks within the viewers and I really feel within the academia. I am Professor of the Federal College. I have been an Advisor to Gentle for a number of corporations. And I am — I have been a Board Member of Cemig for 4 years. I would prefer to thank Reynaldo for the invitation to talk.

It is a humorous factor, I really feel nervous. I did not anticipate that, however I hope to be comfortable. In order a Board Member, nobody instructed me to talk about the great issues and keep away from the unhealthy issues. I’ll inform you my view with the Board as an Unbiased Board Member. And that is why I used to be invited to hitch the Board.

So let’s discuss Vitality Transition. The Vitality Transition and Innovation Committee has been established a yr in the past. I used to be with Reynaldo. We had been having dinner and discussing a spot to debate this, and Marcio accepted it. I am the Coordinator of this Committee. We meet month-to-month. Some common and a few extraordinary conferences.

And through that interval, we invited related gamers within the Vitality sector, additionally from aboard to talk with us, to deliver us the brand new issues and their opinions. For instance [indiscernible] Skeen, Andre Clark from Siemens. From EDP Worldwide, generally on-line, generally on-site. [indiscernible] is a superb title in Vitality Transition of the Worldwide EDP. And this has been nice interplay as a result of it is making a tradition of Vitality Transition.

However what’s Vitality Transition? What’s Cemig’s position on Vitality Transition? We’ve to grasp what Vitality Transition is all about. Vitality Transition, for my part, is much more than what we’re speaking about as we speak. It begins with the primary oil disaster in 1973. That is the place Vitality Transition started.

It began with an enormous world disaster that promoted renewable energies. That is the place it began. That is the place the know-how started. We do not have an issue of getting solar energy, wind energy, biomass, as a result of we began know-how growth 50 years in the past.

And it is fascinating that Professional Alco program got here quickly after. It was a authorities program. We’re happy with it. We discuss ethanol, we see bio-distillers unfold throughout Brazil and that is virtually 50 years outdated.

However all of that was not born due to value or enterprise as ordinary. We all the time should have a driver, a geopolitical motivation driving the transition. And this isn’t in Brazil. In 1978, we had the PURPA, the US utilities line the US that created the obligatory buy of renewable energy or certified cogeneration.

By no means in Brazil did we have now a obligatory buy of energy. In Europe, we had, in Europe within the yr 2000 and in 1978, essentially the most capitalist nation on this planet had the PURPA regulation. This was necessary for renewable energy. That is the place Enron, Duke and all of those got here to existence. They usually had been essential for the free power market.

Then we had the second oil disaster, consolidating that Chernobyl’s accident led to denuclearization, which was then strengthened with the Fukushima accident in 2011. However Europe, Germany specifically, performed a elementary position, beginning to denuclearize their system, which ended final yr.

They began keeping apart their nuclear energy vegetation. No one believed that they might do it, however they did. So that they began driving solar energy, wind energy in Europe. And in that motion, Germany launched a brand new truth. Hydrogen as a strategy to retailer power, as a strategy to regulate energy variations.

In Brazil, in 1995, we had Regulation 9074, creating the marketplace for renewables, offering incentives. It began with a 100% low cost, the fee went all the way down to 50%. And this turned a elementary issue for what we have now as we speak because the wind energy market. We communicate quite a lot of subsidies in DG, however nobody has extra subsidies than the wind energy vegetation, as a result of they nonetheless have that fifty% low cost, virtually no matter their scale.

And we are actually residing within the Ukraine struggle that’s bringing and can proceed to deliver spectacular transformations. Everybody thought that this was going to deliver an enormous disaster in Europe due to the shortage of fuel of Nord Stream.

And so Europe overcame the issue. It was fairly spectacular. With renewable energy, with power effectivity, with liquefied web pure fuel and with saved pure fuel, it was a formidable transition, which I’ve been following up shut. They usually introduced new applied sciences with all that.

So transition, nicely, what we live now, and I did not point out this earlier than, I did not touch upon a vital level, which is in 1990, we had the primary IPCC report that begins bringing a brand new view to Vitality Transition. They began speaking about Vitality Transition when it comes to survival and due to the local weather problem.

So what are the challenges and alternatives that we see? We’ve a convention of occupied with gasoline and electrical energy. That is how our power matrix is constructed, that is how we take a look at the market.

However, in reality, there’s a new issue now, hydrogen. And I will be talking extra about it. However taking a look at gasoline, usually the entire world construction is predicated on oil. Was coal, now it is oil. The IMF printed a doc some years in the past, speaking concerning the quantity of subsidies going to the oil trade.

So along with this structural reliance, political reliance that we discover arduous to battle when it comes to the subsidies, what’s the problem that we have now to exchange gasoline, fossil fuels? It is an enormous problem, not a lot due to know-how, and it has been confirmed, we have now an abundance of sources, not solely in Brazil, which is large, however in Europe as nicely.

They’ve hydrogen as a result of it’s a method for them to be power unbiased, significantly primarily based on this — in Southern Europe, the Mediterranean area, that may provide the entire of Europe.

We’ve problem in fuels concerning transport. You is likely to be questioning, what do you imply? Transporting gasoline is simple. We’ve the fuel pipelines, but it surely’s a problem in changing that community. That is why I say it is a median problem.

How will we exchange these? How can I introduce new gasoline? How can I introduce biomethane, which is a fad now in Brazil? How will I introduce it within the grid? How can I introduce hydrogen? It is a fair greater problem in Europe is engaged on that. They have already got some market and know-how options, however look fascinating.

However the principle problem in changing gasoline strains within the remaining use. How can we exchange charcoal within the metal trade? Brazil used vegetable coal within the metal trade, however this share is decreasing as a result of coal from Colombia and a few logistic amenities have deliver — have introduced coal at an inexpensive value. And our share of charcoal is decreasing. The final metal mill has severity within the State of Maranhao turned carbon zero.

However that is the most important problem in my opinion. We’ve to have a look at the use. We’ve to think about decarbonization when it comes to use, when it comes to transport, when it comes to the trade or agriculture, the place we have now a particularly excessive carbon footprint.

Electrical energy manufacturing, like I mentioned, has no challenges besides some marginal modernizations. We do have problem in transporting the power, however when it is electrical energy, it is simpler to do. We’ve to construct transmission strains. However how can we deliver electrical energy to a automotive? It is battery-powered. So it is a problem how you can rework electrical energy into one thing transportable. It is a large problem.

As soon as once more, electrical energy, and the way that is going to enter the metal trade, and Cemig has an incredible potential, not solely potential, but it surely has an incredible put in capability. And the market visions correspond to 60% to 65% of metal being supplied and provided. Lets say in 2035, it is going to come from recycling and this can be a nice marketplace for the power corporations as a result of it is going to be by induction of different applied sciences. So we’d be a really electrified metal market.

We are able to additionally take into consideration hydrogen electrolysis to exchange coal or charcoal and that is one thing that may be very a lot mentioned about. And as I mentioned, hydrogen is the hyperlink between gasoline and electrical energy. You possibly can rework pure fuel into electrical energy. You possibly can rework charcoal into electrical energy, however you can not do the opposite approach round.

With hydrogen, you’ll be able to. With hydrogen, you will have an unified power marketplace for you which can be from the monetary market, that makes an enormous distinction. We may have an power integration among the many markets. We will migrate all through the markets.

Hydrogen has this necessary position, however it’s inefficient. I am not wanting about power inefficiency proper now. If that had been the case, we’d not have an alternate present at first.

We’re in search of efficacy proper now, bringing it to using the place I would like, once I need, and for whom I would like, and hydrogen will do this, and we’ll be mitigating these adjustments. Okay, very nicely. When it will occur, you requested me, I do not know, nobody can say it proper now. However that is the promise that we have now, and we have now to be on it.

When Marney talked right here, I am very blissful about it, and I discuss as a Board Member, but additionally shopper in Minas Gerais and a citizen of the state. The revolution that we see occurring within the electrical networks of Cemig is de facto superb. First, as a result of this community was not being labored on as we already mentioned.

Second, as a result of it is also following actually trendy requirements, not solely within the arduous space, but additionally within the smooth space. Director Milani is main a Digital Transformation course of that’s extraordinary on this firm. You can not have Vitality Transition and not using a ready community and I am not the one which was saying it.

The Worldwide Vitality Company final yr was speaking concerning the threats on Vitality Transitions and threats are lack of community. There are 3,000 gigawatts ready to be linked on this planet. What’s occurring in Cemig is not any totally different from every other downside anyplace on this planet.

Clearly, this can be a community firm, plenty of non-depreciated belongings that should be remunerated. So we do have an enormous capability to enter and it relies on community, not solely enlargement, but additionally updating it. That is the best problem.

Our distribution community was outdated completely, and we’re not in a position to handle the totally different power assets and now we’re making ready ourselves, as Reynaldo mentioned, to do it by hiring Schneider system to handle all the fashionable and dispersed power assets.

So distribution community states, if there isn’t any community, we is not going to meet our decarbonization goal concerning to the upper international temperatures. If we shouldn’t have the decarbonization, we’d have to return to utilizing charcoal or fuel, nicely wanted actions. In fact, all of it relies on funding.

However this is essential that it may be utilized to DG. We’ve an outdated regulation. All of us know that I used to be a Director at ANEEL. I participated within the regulation for years. They’ve been speaking a few new regulation for the electrical sector. For the way lengthy this has been happening at ANEEL, it by no means occurs, subsequently, we want a brand new regulation that is ready to seize that and allocate it in the easiest way doable.

I am not towards incentives. As I instructed you, we had incentives within the US, in Europe, all of — everybody does it, however the matter is a extra cheap allocation that can permit the market to be balanced. That is the principle difficulty right here. We’re investing BRL30 billion in community, BRL30 billion.

That will be how a lot? $30 billion, $6 billion and one thing. And we’re speaking right here a few demand of $600 billion of investments and community, not solely in technology, but additionally a change, however strongly in transmission.

And right here we have now one thing that is essential — necessary matter. We’d like provide chains which can be secure and COVID confirmed how frail our provide chains are and we additionally want knowledgeable workforce. There isn’t a certified labor available in the market and if our pension at Cemig will not be sooner, it’s as a result of we shouldn’t have certified labor.

After the pandemic, it was chaotic, however now it is roughly balanced now, but it surely might have been, it might be a lot, significantly better. It is a nice problem, very nicely. Nicely, Vitality Transition, this one which we live by way of now, it means decarbonization and the easiest way to decarbonize is through the use of electrical energy.

We could use biofuels, we could produce other potentialities right here, however electrification is the way in which to go. It is a notable market to be labored on and that is what we have now to focus, and manufacturing, as I mentioned, challenges will likely be there, however this isn’t an enormous problem. We could produce ample power right here.

Are you aware how a lot within the 2022 public sale, A minus 4? What number of initiatives or the variety of the quantity of energy registered at ATE, 75,000 megawatts, not together with DG. So there is a surplus of power. There’s a surplus of power potential for transport. Sure, for this one we do want an incredible change. And right here, I imply, transmission and distribution.

We do want an enormous change right here. That is what we try to do at Cemig and that is what our govt administration is main the method, which is the digitization, in order that we will have the combination, the integralization of the power assets. And what I imply by that’s, it is not me the distributing firm, and also you along with your DG. No, we have now to work in an built-in vogue, working transmission technology, working storage.

With that, we will decentralize it. The A&S mannequin was very good, it lasted, however it’s time to decentralize. And the distributing firm must have the related position within the new operation, which known as Distribution System Operators.

We must have that and the principle problem, nicely, earlier than that, change within the course of, as I mentioned, that is essential, and that is the distinction between power effectivity, which is one thing marginal, one thing that can occur and enhance over time and we have now to show into effectiveness.

Typically I actually have a decrease energy yield with power, however I’ve efficacy, effectiveness, I can get the higher product, I can generate the way in which I would like. So that is the distinction that we have now to work on. And storage is a large problem as a result of we have now the intermittent side of the renewable sources.

We’ve, with intermittents, and we have now solely two methods to go, both retailer or we module consumption, which has all the time a factor forgotten in Brazil. Within the meantime, the EOS manages a regulation for the reason that 80s, so we additionally should work on this. See that distributing corporations basically, they’ve a reactive place.

It is quite common to see that within the transition course of. Typically they do have an opportunistic place. Typically from participant viewpoint and really a lot proactive within the intention quite a lot of the time.

So now let’s take a look at our personal viewpoint. There’s a reactive instance, which is the case of DGs, worldwide distributing corporations had been reactive in Brazil, 8,300 megawatts of DG final yr. The wind, 4.9, photo voltaic utility scale for a 1,000. Actually, you’ll be able to perceive, we misplaced management.

You do not want BNDES loans, you do not want challenge finance, you shouldn’t have something to open, it is one other world, and it will solely develop if we have now community as I discussed. And that is the problem that we have now forward. There isn’t any use of being towards DG. We’ve to be towards the regulation we have now proper now which is archaic.

However we have now to grasp that the solar will rise, we can’t be towards that man that drank an excessive amount of and that does not need to — doesn’t need the day to shine and rise. So the opportunistic place for Cemig and Marcus gave me these charts.

Nicely, the identical factor that’s occurring to DG occurred with incentive-based technology with a reduction, identical response. Marcus is representing DMS right here and the buying and selling arm. He is aware of that, however we had been in a position to flip that into enterprise.

So now our buying and selling firm is the one that’s in the most effective place in incentive-based power in Brazil. We’ve round 1,700 megawatts hour in our portfolio, proper. Common megawatts, proper. It is not hours, it is megawatt common, after all, and that is very fascinating to see.

Wind has obtained a lot subsidies that each one buying and selling corporations will place themselves within the wind and photo voltaic have some room right here, simply as the identical Cemig positioned itself concerning the certificates. This isn’t a Brazilian tradition, however as we speak we have already got a related market. Cemig has not solely the I-REC, but additionally the Cemig REC.

The certificates, proper, by the federal government, and it’s available in the market. So that is an opportunistic place like I name it. Nicely, if that’s going to occur, let’s make the most effective use of it and we did, and the buying and selling firm outcomes present that. It is a examine we ran our group in Itajuba. This was for irrigation, truly, for the Agricultural Nationwide Confederation and we talked about Minas Gerais, the place do you see the best load?

Nicely, it’s a metro area of Belo Horizonte, proper, and the second, most likely the South of Minas Gerais or possibly Juiz de For a or the Metal Valley, however no, the second is the area of Unai or Paracatu. So it’s simply as energy-dense because the metro space of Belo Horizonte. And right here I am not contemplating high-voltage shoppers.

I am getting the mass of shoppers, simply working with the common and low voltages. Have a look at how this — the load is denser in that area, so after we go to the best chart, you see the trigger and the reason and the reason is irrigation. And an irrigation that not solely is a truth, but it surely additionally grows persistently, in a really clear vogue in Minas Gerais.

Now, leaving this area right here, which borders Goias and going into San Francisco Valley, it’s a truth and, with environmental disaster, with the worldwide local weather disaster, irrigation will turn out to be increasingly more necessary. And that is what I name the participative place, that’s Cemig’s place.

We discovered this truth, and as a part of the funding of Cemig Three Section, but additionally it opened in a selected space to usher in this shopper, which is Cemig Agro. Nicely, once I flip diesel engine irrigation to electrical engine irrigation, we have now 10 to fifteen occasions decrease emissions of GHG.

Yeah, I am sticking as much as my time. Nicely, so we have now right here one thing that isn’t going to generate carbon credit to Cemig, however it’s essential for the Vitality Transition. Nicely, within the proactive place, we have now plenty of issues occurring and never as a related vogue but, however we have now the hydrogen heart developed in Itajuba, which had the participation of Cemig, additionally there was ANEEL innovation program for inexperienced hydrogen and Cemig, I feel, submitted three initiatives after which you’ll be able to ask us with extra particulars.

It is a difficult challenge as a result of it calls for an off-taker, which may be very tough. The blokes from hydrogen say, nicely, deliver me an off-taker and I provides you with the world. That is the problem. And the main target additionally on massive transition purchasers and Dimas in his space are getting ready for that. He introduced somebody that used to work at Usiminas to investigate this does make us an necessary issue for this transition.

And likewise we have now the Serra da Saudade challenge. Marney can go into that. We’re going to use right here batteries and the efficient use of distribution. It is not an R&D, it is an N minus 1 of help in that area, the place we have now irrigation growth and the challenge goes very robust.

There are areas during which we will likely be including batteries powered by photo voltaic power and we will likely be catering purchasers and the massive shopper that irrigates fruit. And possibly within the Minas Gerais triangle, which is the fruit area, it is Unai. Yeah, this can be a fruit area, this space. They work with Unai irrigation for effectivity and they’re going — and Cemig goes to put in photo voltaic technology with batteries to serve them.

Nicely, I misplaced myself within the slide. That is not right here. However to conclude there may be or there was a bigger growth of photo voltaic power in Minas Gerais, this north area right here, roughly in Janauba.

There was a big focus of photo voltaic power and there is not any community, whether or not the bottom community or our personal capability for distribution in excessive voltages. So how can we transfer ahead right here? This is without doubt one of the methods of working with a big storage.

And that enormous storage possibly might be a reversible plant related to Itapeva’s plant. Itapeva is Cemig’s plant and we might construct 365 megawatts plant and I might take away 0.1% from the reservoir and have a mega battery of two,000 megawatts that might permit a photo voltaic enlargement on this area of seven,000 or 8,000 megawatts.

This may be disruptive and this may occasionally occur and it solely relies on rules that’s on the arms of ANEEL, relies on authorities initiatives, and it may be an incredible alternative for Cemig.

That is what I needed to deliver to you. Thanks all very a lot.

Carolina Senna

Thanks Afonso for sharing with us your viewpoint as a Board Member and in addition your professor viewpoint about Cemig’s initiatives. Nicely, I want to, earlier than I deliver our Govt Administration to the ground to the Q&A, I want to know in case you have any questions.

So I want to deliver to the ground to start out the Q&A session, our CEO, Reynaldo Passanezi Filho additionally Gasmig CEO, Carlos Colombo; Iuri Mendonca, Cemig SIM’s President; additionally our CFO and IR Officer, Leonardo George de Magalhaes; our Distribution VP, Marney Tadeu Antunes; our VP for Transmission and VP in Participation, Marco da Camino Soligo; Dr. Cristiana Fortini, our Authorized VP and representing our buying and selling space, Marcus Vinicius Lobato.

So in case you have questions associated to the corporate representatives which can be right here on the ground, do increase your hand and we’ll take the microphone to you. However I’ll begin with a query right here after which I will open the ground to the viewers. Only a minute right here so that everybody comes as much as the ground. Very nicely.

Query-and-Reply Session

A – Carolina Senna

I’ll begin with a query. We just lately concluded the sale of Alianca, we shared that with you with the market, on August thirteenth. The conclusion was introduced. So the query is for Marco Soligo, concerning the Taesa sale. We obtained questions and concerning the course of, does it nonetheless make sense for the corporate to divest that asset, contemplating the fluid dividends that we obtained from the corporate?

Marco da Camino Ancona Lopez Soligo

Good morning, everybody. It’s an honor to be right here speaking to you. The corporate has a strategic planning and the strategic plan is yearly reviewed. Taesa sale is on this strategic planning. Subsequently, we’re working to promote it, to get rid of it, and to satisfy what is decided in our strategic planning and that is it. That is what I can inform you. Thanks.

Carolina Senna

One other query earlier than I open to the final viewers. I want to introduce to you Carlos Colombo, our new CEO for Gasmig. And I’ve a query to you, Carlos. At this time, you might be Gasmig CEO and in addition you’re the CEO of the Board of Administrators, and you’ve got been additionally been the CEO of the fuel firm in Rio Grande do Sul. So what can we anticipate out of your administration forward of this asset proper now?

Carlos Colombo

Good morning, everybody. It is a pleasure to be right here. That is my first Cemig Day and I hope it’s the first of many. If I had been to summarize it, that is one thing that Reynaldo and Marcio have already talked about, however we’re right here targeted on the shopper’s, the customer-centricity and this can be a problem that we have now. I might discuss it in numerous segments. In fact, we want to broaden our community in different areas of the state, actually bringing in additional purchasers and in addition engaged on the present community, focusing in our residential and industrial purchasers. That’s the place we discover the [indiscernible] of our margin. It’s a important margin. That is an incredible problem. However that is what we intention to do, to focus our purchasers in order that we will broaden our community and improve the variety of shoppers.

Carolina Senna

Thanks very a lot, Carlos. Subsequent query is for Iuri Mendonca, Cemig SIM’s CEO. So final yr the corporate aimed to develop by way of M&A and your present progress challenge is by Greenfield methods or are we going to proceed with our M&A method? For those who can discuss a little bit bit extra concerning the progress of Cemig SIM and what we will anticipate for the following years and what you’ll be able to inform to the market?

Iuri Mendonca

Nicely, good afternoon. Yeah, Cemig SIM in 2019, had that imaginative and prescient of private and non-private and we had a assessment within the technique afterward and so we present the integrity of our belongings. We’ve Greenfield initiatives. We’ve 159 megawatts peak within the discipline and our goal is to achieve 600 megawatts within the peak. Clearly, the market offers alternatives. We’re additionally analyzing brownfields. Final yr, we had an acquisition of 6.5 megawatts peak in an operation that began final yr. So our progress has diversified, however we need to focus Minas Gerais reaching 600 megawatts peak as much as 2027.

Carolina Senna

Subsequent query for Dr. Cristiana Fortini. On this outcomes for the second quarter, you all might see that we had been profitable within the reversal course of for taxes and we have now different quantity already provisioned concerning the identical matter. For those who can share with us what’s the success expectation that we have now and what we have now happening concerning this taxes matter? Simply so as to add on this progress second, we reached an operation of 224 megawatts peak, but additionally with the leasing energy for belongings, third-party belongings, in order that we might develop. It finally ends up contributing to the ecosystem of DG. And keep in mind that minor GD is complementary to GDE and this Marney talked about this and micro GD is 78% of the market and imply is 22%, and I take advantage of my instance right here. I’ve self-consumption at residence, however I don’t generate the total capability that I would like. So I even have minor DG within the complementary imaginative and prescient. So that is the concept, the complementary understanding, complementary imaginative and prescient, not changing a technique right here.

Cristiana Maria Fortini Pinto e Silva

Good morning, everybody. Really, the authorized space goals to foster the principle companies within the firm and to attempt to acquire extra efficacy positive factors and agility in companies, and so all the pieces that we will in a approach add to the corporate’s life or each day life and that can permit the strategic planning to be consolidated and that may flip an organization into extra agile one is within the expectations that the corporate has, together with its authorized space, which may be very a lot energetic. We celebrated that victory and we have now different views to be winners in different segments that can permit the corporate to be extra agile.

Carolina Senna

And earlier than turning to the viewers, the final query is for Marcus Vinicius. So we all the time ask about provide and demand and the margins. We’ve an incredible lead to 2023. Our leads to the buying and selling firm for 2024 is de facto nice. So what can we anticipate sooner or later? So, Marcus Vinicius, right here is the slide so to discuss possibly a little bit bit about our steadiness sheet and our outcomes and what we will anticipate when it comes to alternatives.

Marcus Vinicius de Castro Lobato

Very nicely, good morning, Carol. Good morning, everybody, and thanks for the query. Nicely, these outcomes are, because of our quantity of gross sales, that’s rising. We see that for ’25, we actually have a increased quantity in ’24 itself. And naturally the totally different margins between buy and promoting costs. 2023 was an distinctive yr. There was a mixture of long-term methods and alternatives within the short-term, our long-term methods to have positions that we will deliver to the marketplace for purchasers within the long-term contracts. However we’re all the time taking note of the short-term actions. And that is what occurred in 2023. We had been in a position to arbitrate actions that had been available in the market. These alternatives should not recurring as they’ve been in 2023. So what we anticipate for the long-term, sure, is a discount when in comparison with ’23, however going again to regular ranges and that is anticipated quantity for the following years. In fact, there are moments the place the outcomes go up or go down, however it’s a very fascinating worth for this yr. And about our steadiness sheet, as you’ll be able to see there as we speak, we have now our gross sales positions for ’25 and ’26 already contracted. And we’re a little bit bit lengthy for these years and due to an expectation of accelerating costs from now to as much as the following month, so we have now been in a position to get the power that’s wanted for the serving ’25, ’26, and ’27.

Carolina Senna

When you have a query. Please increase your hand.

Bruno Amorim

Thanks. I am Bruno Amorim with Goldman Sachs. I’ve a query concerning the distribution enterprise. I would like to listen to from you, what’s the technique to monetize this entire funding that you just’re anticipating for the approaching years within the distribution enterprise, your value as we speak is near the regulatory degree. I would like to grasp in case you suppose there’s any room for value discount and what are the opposite drivers you see to outperform the regulatory EBITDA and ship an ROIC above the regulatory one. Thanks.

Reynaldo Passanezi Filho

Nicely, we’re fairly okay concerning together with this entire funding within the regulatory base. And as we mentioned right here, the bottom may be very a lot depreciated. For a lot of, a few years we invested lower than depreciation. What we have now as we speak is a novel alternative to modernize the grid and so as to add 100% to the regulatory base. And I feel that Afonso put this very well, regardless of the lack of load given distributed technology, disconnection we have been having with the agricultural by changing diesel oil in irrigation has provided us secure load. Once you take a look at the load, I feel, we’re going to lose the load and improve tariff to shoppers. However after we look, our load has been rising rather less than 100%, after all, as a result of a part of it’s in DG. However after we take a look at the agricultural areas, it is spectacular the variety of conditions we nonetheless see operating on diesel oil. When I’ve the Three Section provide, I’ll join them and I’ll permit for this substitute of diesel oil. And in case you bear in mind the remark by the Secretary, Minas elevated our share within the GDP from 8.8% to 9.5% of GDP. So Minas Gerais as a state is rising extra. So from the strict standpoint, I’ve quite a lot of peace of thoughts concerning together with this funding within the base. Our final tariff assessment had zero disallowance. So I consider that this could occur once more. And I perceive that Minas state is rising greater than the nation, and we’re bringing load by these replacements, significantly within the rural areas. And this theme that Afonso talked about storage and batteries. That is a theme that isn’t on this strategic plan. However we might want to transfer ahead when it comes to this matter of energy storage to cope with intermittence. And the DisCos ought to play an necessary position within the operation. And this can be a matter that we’ll have to debate on the regulatory degree, as a result of it is an extra quantity to this one, however which for my part creates quite a lot of worth to society as a result of it helps decarbonization. I can exchange the thermal energy vegetation by batteries and the batteries will likely be fed by wind, photo voltaic, DG energy, not simply utilizing thermal energy vegetation. From the standpoint of regulatory effectivity, I consider that we clearly have a purpose of minimizing our losses. And I feel that there is room for us to be under the regulatory goal. And concerning PMSO, here is what I can say. We’ve to be very cautious concerning the high quality of spending. I do not need to have a PMSO absurdly under regulatory and detriment of the spending. The spending needs to be nicely achieved. This was talked about right here. We had been in a position to meet the regulatory ranges, together with preventive upkeep, which we did not used to have. So the potential we have now, the higher potential we have now of PMSO. An I attempt to have a joke right here. Let’s have a look at. That is associated to authorized liabilities. If we discuss post-employment. If we remedy that, there’s going to be an enormous acquire. It is a structural answer concerning post-employment. And that the joke right here is that Cemig has a novel attribute, which is the quote, unquote skeletons half is constructive. So abruptly we discover the supply that’s reversed. So we do not have simply skeletons or unfavourable surprises that can destroy worth. We’ve plenty of constructive surprises. We had been in a position to remedy the life insurance coverage theme. We’ve simply reversed a provision. Every so often there are some unhealthy ones as Leo talked about. We misplaced the lawsuit within the space of buying and selling. However we have now quite a lot of constructive issues and also you simply have to have a look at the dimensions. There’s a large room for these structural matters to assist us. And I do know this can be a likelihood, however the likelihood that we’ll remedy these points may be very excessive. It is possible in legalese.

Marney Tadeu Antunes

Let me add to that. Our investments. Once we spend money on a unique know-how, for example, we assessment with our particular division the dangers of disallowance. Serra da Saudade, for instance, was talked about right here. The distribution firm may have its first solar energy mill and we’ll have power accumulator. We did the work with Roberta in regulatory, we consulted with NAL to see the danger of disallowance of that form of typology. So we have now a committee that meets month-to-month to guage all of those factors.

Unidentified Firm Consultant

An extra remark so as to add to what Reynaldo and Marney talked about. If we take a look at the success story of DisCos in Brazil, the gamers who’re admired. Nicely, these are corporations that invested in working effectivity and did quite a lot of investments. Cemig, we talked about earlier than, in prior years, had a strategic possibility of investing much less in distribution and investing in companies exterior Minas. Now we’re catching up and this brings plenty of constructive results. Along with the pure market, progress was talked about right here. We’ve the demand to serve irrigation. It is a market that Cemig will be capable of serve with these investments. And there are some byproducts of this funding. We are able to cut back working value. One instance, we will spend money on sensible meters. We do not have to ship any person to disconnect the client. We are able to disconnect or reconnect clients remotely. In order that’s a price discount after we can make investments extra, one other constructive, we cut back the worth of economic compensations. We lowered these by 30 million this yr vis-a-vis final yr. And an excellent half comes from these investments we’re making that may also contribute to scale back the extent of fines and monetary compensations that the corporate has to pay to clients. Once we put all of it collectively, market progress, higher regulatory protection. You possibly can clearly spend extra with operation and upkeep as a result of we’re increasing the grid on the community. We may have an incredible acquire of scale after we can maintain the opposite prices beneath self-discipline. So all of those positive factors that the corporate has direct and oblique alike ensuing from these investments will deliver Cemig D to an entire new degree of effectivity.

Reynaldo Passanezi Filho

And let me construct on what our board members mentioned. Infrastructure is important for Vitality Transition. We simply noticed this 600 billion to be invested each year in community. We’re speaking about irrigation. But when I inform you that Brazil will lead Vitality Transition and that we’ll appeal to information facilities to Brazil, overlook it. We’d like quite a lot of community for that. You realize that as we speak we have now issues at A&S. So it reveals that we have to spend money on the community. Along with the community being depreciated, we want the grid, we want the community to make sure high quality and resilience. And to me, that is what offers me peace of thoughts that we can’t have disallowance. And certainly, if we get america, they’ve quite a lot of information facilities, and information facilities are disproportional, they’re life altering. And we have been engaged on that to have the ability to point out Brazil, to have Brazil seen as a locus for Vitality Transition. If those that want clear power come together with us, we’ll want the community. And that is why we’re investing upfront. We’re leaving the community prepared and on our finish, we’re additionally attempting to draw extra. However after all, this requires public insurance policies. And I significantly see this as a particularly constructive chance for Brazil, a chance. Questions?

Victor Burke

Victor with JPMorgan. Thanks for taking my query. My query is about technology. What has been the technique adopted by the corporate in renewing some concessions, Nova Ponte amongst them? What are the choices on the desk now? And what’s your choice as we speak?

Reynaldo Passanezi Filho

Your title?

Victor Burke

Victor.

Reynaldo Passanezi Filho

Okay, Victor. So the corporate is fascinated with three mills or energy vegetation, truly, and this renewal work is completed along with the federal authorities and the Ministry of Mines and Vitality. There may be all the time this dialogue with the ministry. The corporate has expressed its curiosity in sustaining the vegetation and in a regulatory approach you are able to do this by renewing the concessions by quota. The corporate defined our calls for that might permit us to do that. We might maintain the vegetation, privatizing them, preserving 49% stake, but it surely actually relies on approvals by shareholder’s conferences, and the corporate will not be working with that situation or we might construct a unique answer with the federal authorities that might permit the corporate to maintain the concessions. We’re working to maintain them. And we’re speaking with a granting energy for this to occur. Would you want so as to add to that?

Unidentified Firm Consultant

Nicely, you see, there are 4 methods. One which we do not need to comply with, which is preventing for them in an public sale. We do not need that. I feel that the previous instance is an instance we don’t need to repeat. So the primary is renewing the concession by quota. And we despatched the best messages, the official communications to the ministry. We expressed our curiosity in renewing by quota. And there are the 2 different potentialities, that are to maintain 49% of the SPEs and promote 51% stake. We’d maintain 49% minority curiosity, calculating the lease bonus. And or if there’s a change within the possession construction of the guardian firm. If we alter the possession construction of the guardian firm, nicely, that doesn’t depend upon us. We had Secretary Passalio right here, you will have requested them questions. This might occur. And on this case, we’d have assure of renewal, computerized renewal. Really not computerized renewal. We must pay a concession bonus. However we must contemplate that in comparison with quotas, what’s greatest. Maybe I should not spend any extra money, maintain it out of the free market and put it within the regulated market. The necessary factor, an necessary level is that we’re following the entire steps. We ship the entire communications in the best time. So now we have now the entire choices. We are able to renew concessions by quota, we will renew the SPE or we will renew if there’s a change within the possession construction of the guardian firm. What we are not looking for is to participate within the public sale if it involves that.

Carolina Senna

Sure.

Unidentified Analyst

Congratulations [indiscernible]. And I want to perceive what’s the strategic view for the fuel enterprise wanting on the mid to long-term, as a result of we have now seen some corporations like Copel divesting in that space. They offered Compagas. And I want to know, how does this complement the corporate’s portfolio technique and in addition contemplating sustainability, as a result of Copel divested from Compagas primarily based on the idea that this was dirtying their power matrix. In order that’s my query. What’s the strategic view for Gasmig in Cemig’s portfolio within the coming years?

Reynaldo Passanezi Filho

Nicely, our view is that Carlos will stay with us for a lot of, a few years. That is an oblique reply to your query. Nicely, primary, we can’t promote it, not like Copel. Maybe that is the primary restriction. The structure of the State of Minas Gerais doesn’t permit privatization of electrical energy, fuel and sanitation. The structure even contains pure fuel or fuel distribution. I do not know precisely the wording, however there’s a restriction in our structure concerning that. And as a part of strategic planning, we have now a chance to have an IPO which means an IPO would preserving the management of the corporate. And we see that there are numerous doable synergies within the free market, DG, pure fuel and buying and selling. So we see as constructive the synergy among the many three companies of the group. And I’m loads much less unfavourable concerning decarbonization and naturally with quite a lot of respect for Copel, however it’s a transition and pure fuel replaces different fuels that are far more polluting than pure fuel.

Unidentified Firm Consultant

If I’ll add. In fact, there may be Copel’s approach or their journey, however we had the other. Energisa, they joined as fuel and so they participated within the distribution corporations within the northeast. So I consider that there are numerous doable paths to be adopted. You will need to keep in mind that Gasmig is a distribution firm, a community firm. By probability, it distributes pure fuel. It might additionally distribute different issues like biomethane, inexperienced hydrogen. We’ve to be agnostic concerning how issues can develop in Brazil. I feel that this opens up plenty of choices for Cemig sooner or later in order that the corporate can use us as a accomplice on this Vitality Transition. Though the Vitality Transition began again within the Seventies, we’re nonetheless at incipient factors when it comes to the developments of biomethane, inexperienced hydrogen, biodiesel and plenty of different choices. I suppose that this opens quite a lot of choices to Gasmig.

Carolina Senna

Thanks. One other query.

Daniel Travitzky

I’m Daniel Travitzky with Safra Financial institution. I would prefer to ask a query about capital allocation contemplating that the corporate as we speak has a leverage web debt over EBITDA ratio of one-time. You’ve gotten been paying dividends in a recurring vogue. I simply need to perceive, how do you think about that it will unfold sooner or later? What can be the initiatives that might require extra? There was a query about renewal within the technology concession. Do you will have any concept of how a lot you would need to mobilize when it comes to capital for this challenge? In different phrases, how do you see the leverage of the corporate in capital allocation wanting ahead? Thanks.

Unidentified Firm Consultant

Thanks for the query. As Reynaldo and others confirmed have an enormous funding plan. This yr, 6 billion. However after we think about the 2024 to 2028 of 35 billion, we’re speaking about 7 billion to eight billion investments. So the corporate has quite a lot of leverage now, however continuously we’ll should be going to the capital markets — to the capital market to have the ability to fund these investments. So with this, our leverage, and we’re speaking a few ramp up of our leverage getting, as I discussed earlier than near 2.5 by 2027, which we consider is a leverage that can develop sustainably. However on the identical time, we can’t be sacrificing remuneration to our shareholders. Once we evaluate Cemig with different gamers within the sector, Cemig is at a novel place as a result of we’re positioned to make quite a lot of investments within the regulated market with leverage rising in a smooth approach attending to 2.5 by 2027, which can permit the corporate to participate in an M&A or a enterprise alternative, as a result of we’ll have room in our steadiness sheet for that on the identical time paying good dividends to our shareholders. We consider that this can be a successful technique for the corporate. It is a distinctive second for the corporate in contrast with different gamers. Some gamers are including quite a lot of worth, making quite a lot of investments, however with a better leverage degree than Cemig. Now we spend money on the regulated market and the regulated system. So the corporate will be capable of make investments at moments of imbalance within the free market, investing within the regulated market, sustaining leverage, rising softly, progressively and adequately remunerating the shareholders. And then you definitely ask, will we have now extraordinary dividend payout sooner or later at this second? Like I mentioned, I’ve instructed you earlier than, our Board of Administrators as we speak will give — they provide a steerage for the corporate first to develop in a sustainable vogue. However maybe sooner or later, relying on the investments, after all, the corporate will contemplate dividends, however the common dividends of the corporate already positioned the corporate as one of many largest payers of dividends as compared with different gamers available in the market. Reynaldo?

Reynaldo Passanezi Filho

No, additional feedback, maybe say that if we divest and we have now a unprecedented revenue, after all, it will change this coverage, simply as we have now all the time achieved with the case of Alianca.

Unidentified Analyst

Howdy. Good afternoon. My title is Rafael [indiscernible] with BO Funding. I would prefer to ask a query concerning the power steadiness. Query to Marcus Vinicius. You drew my consideration, your power steadiness from April to now. In April, you will have a brief place of 230 common meg. And now within the presentation for August, you will have longer the 138 for 2025, 168 for 2026. How come this occurred? How are you going to clarify it? How are you seeing all this?

Marcus Vinicius de Castro Lobato

Thanks, Rafael for the query. Nicely, you see, like I mentioned, our consequence relies on long-term actions and short-term actions observing market actions so we will have higher margins, but additionally to guard the corporate. The start of this yr, we had stress on market costs and we had threat limits or thresholds that should be met. So we saved observing that. Because the yr glided by, we thought it will be higher to shut these positions and to be a little bit lengthy for the approaching years as a result of we anticipate to have some outcomes of those positions within the foreseeable future as a result of we anticipate costs to maybe improve a little bit bit extra till September, October, however after that, it is the unknown. So it is all about threat administration and benefit from this ascending second of the market. We thought it will be safer to reverse that. Thanks.

Carolina Senna

Different questions? Sure.

Andre Sampaio

Andre with Santander. Nonetheless on power steadiness, in case you might discuss this lengthy place, do you see any extra room, any must buy extra power to guard not solely from the quick place you had earlier than, but additionally from GSF? And I’ve a second query about distribution.

Marcus Vinicius de Castro Lobato

Yeah, after all, we’re observing each the place of the buying and selling portfolio and in addition publicity of the technology firm. So in 2025, this place is being constructed. Observing these two factors, as we speak, we have now a barely extra pessimistic view of GSF. So we did some power buy for that. Once we’re observing, maybe we’d should broaden that concerning GSF for subsequent yr.

Andre Sampaio

Now, shifting to distribution, going again to the query requested by Bruno concerning CapEx. Within the renewal of the brand new concessions, I do know that this doesn’t have a direct influence on you. However there was a dialogue about together with the investments within the RAB and a few corporations deciphering to incorporate RAB for high quality. Might this have an effect on outdated concessions, outdated contracts?

Marcus Vinicius de Castro Lobato

Are you discussing this concerning the regulatory asset base RAB?

Andre Sampaio

Sure.

Marcus Vinicius de Castro Lobato

We’re evaluating this and we have now a consulting agency serving to us with that to see whether or not it will make sense to hitch this new contract as a result of our renewal have been achieved along with different distribution corporations which have had their renewals, we’re evaluating some great benefits of becoming a member of this new contract format.

Vladimir Pinto

I am Vladimir with XP. My query is in distribution. You talked about sensible meters. There is a perk of 1.8 million of these sensible meters. What’s the expectation by the tip of the plan? And also you talked about which you could disconnect, however do you will have any built-in technique, for instance, of closing a neighborhood, a metropolis or area to have a completely automated grid for that area, metropolis or neighborhood?

Reynaldo Passanezi Filho

Sure, we do have some methods, for instance, changing the out of date meters. However not all out of date meters will likely be changed by sensible meters due to the communication problem. So we are going to restrict a neighborhood to arrange a communication community and we work with that technique. Let me provide you with an instance. We had been going — for us to place sensible meters in buildings it is arduous. So if there’s an out of date meter, usually all meters are form of getting out of date, so we alternate all of them. That is really useful. It is occurring throughout Brazil. Given the problem to entry the meters within the buildings. The buildings are actually changing the doormen by digital management of entrance, so it is arduous to have entry to the meters. So we go to those buildings and we exchange the entire meters by sensible ones. In some locations, we nonetheless set up common meters. At this time we have now 400,000 sensible meters. By 2028 that is after we will get to 1,800,000 sensible meters. At this time, we’re the distribution firm with essentially the most sensible meters already put in.

Unidentified Analyst

I’m Bruno Rivera with [indiscernible] Analysis. Talking about transmission and looking out ahead, how a lot do you consider it’s worthwhile to spend money on reinforcement and enhancements when it comes to the potential, along with what you have already got in authorized investments?

Unidentified Firm Consultant

Nicely, thanks for the query. We’ve an funding of BRL3.5 billion from 2023 to 2027 for enhancements and reinforcements. Reinforcements and enhancements are an excellent enterprise. They create us an inexpensive return on the funding and we work in accordance to what’s printed. We instantly begin a bidding course of, as talked about by Reynaldo, Afonso. We should do as a result of we’re a public firm. So the bidding course of takes extra time. When we have now the authorizations printed, we make the reinforcements and the related enhancements. We do not make any funding if the quantity of the funding is greater than what was printed within the requirement and the request. So in that case, we deliver it to dialogue. We simply authorized an funding of just about BRL400 million. The corporate has hundreds of thousands of depreciated belongings and the shortage of funding that occurred in distribution lately additionally occurred within the section of transmission and in addition within the section of technology. In order nicely to not point out that we’re nonetheless catching up in these two segments.

Carolina Senna

Have one other query? No. We’re closing the Q&A session. We finish the twenty ninth Cemig Buyers Day and I thanks all very a lot for spending your time with us as we speak whether or not right here in individual or on-line. And I want to invite you all to a scrumptious lunch.