Financial Performance - Total net operating revenue for the year ended December 31, 2019, was $6,317 million, an increase from $5,985 million in 2018[23] - Energy sales to final customers amounted to $5,985 million, contributing significantly to the total revenue[23] - Operating costs and expenses totaled $5,593 million for the year ended December 31, 2019, compared to $5,593 million in 2018[23] - The company reported a share of profit from affiliates and jointly-controlled entities of $31 million for the year ended December 31, 2019[23] - Revenue from wholesale supply to other concession holders was $716 million, showing a decrease from $990 million in the previous year[23] - Construction revenue reached $299 million, reflecting a stable performance compared to previous years[23] - The company recognized $355 million in recovery of PIS/Pasep and Cofins taxes credits over ICMS[23] - Total deductions from revenue were $3,069 million, which is consistent with the previous year's figures[23] - Net income for the year was $778 million, a decrease of 75% compared to $3,128 million in the previous year[25] - Comprehensive income for the year was $516 million, a decrease from $2,073 million in the previous year[25] - Basic earnings per common share were $0.53, down from $2.14 in the previous year[25] - The diluted dividends per share for common stock were US$0.13 in 2019, down from US$0.15 in 2018, representing a decline of 13.3%[30] Assets and Liabilities - Total assets amounted to $12,422 million, down from $49,926 million year-over-year[27] - Total current liabilities were $1,968 million, a reduction from $7,913 million in the prior year[27] - Non-current loans, financing, and debentures totaled $2,993 million, down from $12,030 million year-over-year[27] - Total loans, financing, and debentures amounted to R$14,777 million as of December 31, 2019, reflecting a 0.03% increase from R$14,772 million in 2018 and a 2.63% increase from R$14,398 million in 2017[61] - 38.77% of the company's existing loans, totaling R$5,729 million, are due within the next three years, indicating a significant liquidity risk[61] - CEMIG has approximately R$ 10.7 billion of outstanding debt with financial covenant restrictions[51] Regulatory and Compliance Issues - The company adopted IFRS 16, impacting the recognition of lease liabilities and right-of-use assets starting January 1, 2019[18] - The financial statements for the year ended December 31, 2019, are not directly comparable to prior years due to the adoption of IFRS 9 and IFRS 15[19] - CEMIG is subject to penalties of up to 2.0% of revenues for non-compliance with concession agreements[44] - The Brazilian Federal Government has discretionary authority over new concessions and renewals, which could adversely affect CEMIG's operations[47] - Changes in Brazilian tax law could increase CEMIG's tax burden, affecting profitability[48] - The company is subject to various regulatory frameworks, including the Brazilian energy sector laws and the Anticorruption Law, which increases its exposure to compliance risks[113][115] Operational Challenges - The company is closely monitoring the impacts of the Covid-19 pandemic on its operations and financial condition, with potential long-term effects on liquidity and revenue[37] - The company has not yet determined the full extent of potential delays or impacts on its business due to the pandemic, indicating uncertainty in future performance[37] - The company faces risks related to the completion of construction projects, which may incur unexpected costs and delays[73] - The company's operational performance is highly dependent on the availability and quality of its equipment, with potential penalties for service disruptions[58] - The company is engaged in discussions with regulators to ensure adequate liquidity and compliance with contracts in the energy sector supply chain[35] Market and Economic Conditions - The average exchange rate for 2019 was R$3.9440 per US$1.00, compared to R$3.6513 in 2018, indicating a depreciation of the Brazilian Real[33] - The energy demand measured by the Brazilian Interconnected Power Grid (SIN) decreased by 18.3% since March 2020, impacting the company's revenue[35] - Adverse hydrological conditions in Brazil could lead to rationing of water and energy, significantly impacting the company's operations and financial results[90] - The company faces a potential deficit of approximately R$ 8.24 billion in the short-term market due to injunctions preventing full charging of hydrological risk[90] - Political and economic instability in Brazil could lead to increased volatility in the securities market, affecting Gasmig's access to international financial markets[164] Environmental and Social Risks - The risk of dam failures poses significant potential economic, social, and environmental repercussions for the company[81] - The company is subject to various environmental regulations that may impose additional costs and operational restrictions[84] - Changes in environmental regulations could delay project implementation and increase expansion costs, adversely affecting financial results[133] Investment and Divestment Activities - The divestment program initiated in 2017 aims for R$8,046 million in asset sales, with R$2,071 million already sold, but external factors may hinder future sales[62] - CEMIG's subsidiary Renova sold its equity interest in the Alto Sertão II Wind Farm Complex for R$1.15 billion, with potential earn-out provisions of up to R$100 million[211] - CEMIG initiated the sale of its entire equity interest in Light S.A., which was 52.12% at the time, with a significant reduction in its holding to 22.58% after a public offering[215] Internal Control and Governance - CEMIG's internal control over financial reporting was deemed ineffective for the years 2016 to 2019, which may adversely affect its financial condition[116][117] - The company has implemented measures to strengthen internal controls and compliance following identified irregularities in Renova[102] - CEMIG's management has identified material weaknesses in internal controls, raising concerns about accurate financial reporting in the future[117]
CEMIG(CIG_C) - 2019 Q4 - Annual Report