CEMIG(US:CIG)2023-09-11 16:00Form 6-K Filing Details This section details the Form 6-K filing, including registrant information, forward-looking statements, and official signatures Filing Information This section provides the standard cover page for the Form 6-K filing, identifying the registrant as Companhia Energética de Minas Gerais (Cemig) and the filing month as September 2023 - The document is a Form 6-K filing for Companhia Energética de Minas Gerais (Cemig), filed for the month of September 202332 Forward-Looking Statements This section includes a standard disclaimer regarding forward-looking statements, noting that actual results may differ materially due to various known and unknown risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from expectations2934 Signatures The report is duly signed on behalf of the registrant by Leonardo George de Magalhães, Chief Finance and Investor Relations Officer, dated September 12, 2023 - The report is signed by Leonardo George de Magalhães, Chief Finance and Investor Relations Officer, on September 12, 20233035 Notices to the Market This section details significant market announcements, including changes in shareholding, concession extensions, asset sales, and privatization updates Pzena - Change in Significant Shareholding (July 11, 2023) Cemig announced that Pzena Investment Management, LLC's clients reduced their stake in Cemig's preferred shares from 5.07% to 4.99%, holding 73,103,089 preferred shares - Pzena Investment Management, LLC's clients reduced their stake in Cemig preferred shares from 5.07% to 4.99%41 Pzena Investment Management, LLC Shareholding Change (July 11, 2023) | Metric | Previous Stake (%) | Current Stake (%) | | :---------------------- | :------------- | :------------- | | Total Preferred Shares | 5.07 | 4.99 | | Number of Preferred Shares | - | 73,103,089 | Pzena - Change in Significant Shareholding (July 14, 2023) Cemig reported that Pzena Investment Management, LLC's clients increased their stake in Cemig's preferred shares from 4.99% to 5.00%, now holding 73,283,989 preferred shares - Pzena Investment Management, LLC's clients increased their stake in Cemig preferred shares from 4.99% to 5.00%16 Pzena Investment Management, LLC Shareholding Change (July 14, 2023) | Metric | Previous Stake (%) | Current Stake (%) | | :---------------------- | :------------- | :------------- | | Total Preferred Shares | 4.99 | 5.00 | | Number of Preferred Shares | - | 73,283,989 | Material Fact - Sá Carvalho HPP Concession Extension (July 20, 2023) Cemig Geração e Transmissão S.A. (Cemig GT) filed an expression of interest with the Ministry of Mines and Energy and ANEEL for the extension of the Sá Carvalho HPP concession, and reiterated interest for Emborcação and Nova Ponte HPPs, under the Physical Guarantee Quotas regime - Cemig GT expressed non-binding interest in extending the concession of Sá Carvalho HPP (78 MW) and reiterated interest for Emborcação and Nova Ponte HPPs under the Physical Guarantee Quotas regime19 - The Sá Carvalho HPP concession agreement 01/2004 matures on August 27, 202619 Pzena - Change in Significant Shareholding (July 31, 2023) Cemig announced that Pzena Investment Management, LLC's clients reduced their stake in Cemig's preferred shares from 5.00% to 4.54%, holding 66,566,916 preferred shares - Pzena Investment Management, LLC's clients reduced their stake in Cemig preferred shares from 5.00% to 4.54%21 Pzena Investment Management, LLC Shareholding Change (July 31, 2023) | Metric | Previous Stake (%) | Current Stake (%) | | :---------------------- | :------------- | :------------- | | Total Preferred Shares | 5.00 | 4.54 | | Number of Preferred Shares | - | 66,566,916 | CEMIG Conducts Bid to Sell 15 SHPPs / HGPs (August 10, 2023) Cemig and Cemig GT held a bidding process to sell 15 small hydroelectric generation plants (SHPPs/HGPs) in a single lot. The winning bid was R$100.5 million, representing a 108.6% goodwill over the starting bid - Cemig and Cemig GT sold 15 SHPPs/HGPs for R$100.5 million, achieving a 108.6% goodwill over the R$48.2 million starting bid103 - The sale aligns with Cemig's Strategic Planning to optimize its portfolio and capital allocation103 BlackRock - Change in Significant Shareholding (August 16, 2023) BlackRock, Inc. informed Cemig that its aggregate stake in the Company's total capital decreased from 10.01% to 9.88% as of August 11, 2023, holding 217,550,174 preferred shares and 12,662,091 derivative financial instruments - BlackRock, Inc. reduced its total capital stake in Cemig from 10.01% to 9.88% as of August 11, 2023649 BlackRock, Inc. Shareholding Change (August 16, 2023) | Metric | Previous Stake (%) | Current Stake (%) | | :---------------------- | :------------- | :------------- | | Total Capital | 10.01 | 9.88 | | Preferred Shares | 15.04 | 14.84 | | Number of Preferred Shares | - | 217,550,174 | | Derivative Instruments | - | 12,662,091 | - BlackRock stated its equity interest is strictly for investment purposes and does not aim to change Cemig's control or administrative structure649 Minas Gerais Government Files PEC for Privatization (August 21, 2023) The State Government of Minas Gerais filed a Proposed Amendment to the Constitution (PEC) to streamline the privatization process of state-controlled companies, simplifying approval requirements and removing the obligation for a public consultation - The State Government of Minas Gerais filed a PEC to simplify privatization processes for public companies651 - The PEC aims to reduce the required quorum for approving corporate structure changes and remove the obligation for a public consultation (referendum) on privatizations651 News Article Published in the Media (August 30, 2023) Cemig clarified a news article regarding a potential IPO of its piped natural gas distributor, Gasmig, stating that while studies for such an IPO are not new, no formal decision has been made by the Company - Cemig clarified that studies for a potential IPO of Gasmig are ongoing but no formal decision has been made11021120 - Any decision on a Gasmig IPO is subject to corporate approvals, favorable market conditions, and investor interest1120 2Q23 Results Presentation This section presents Cemig's second-quarter 2023 financial results, highlighting key performance indicators, ESG initiatives, and strategic outlook Disclaimer This section provides a disclaimer stating that certain statements and estimates may represent expectations about future events or results, which are subject to known or unknown risks and uncertainties. Financial amounts are in R$ million unless otherwise stated - The presentation contains forward-looking statements based on present assumptions and analyses, subject to known and unknown risks and uncertainties7 - Financial amounts are presented in R$ million unless otherwise stated, reflecting the adoption of IFRS7 Highlights of 2Q23 Cemig delivered solid and consistent results in 2Q23, marked by robust adjusted EBITDA, increased adjusted net profit, successful execution of its investment program, and unqualified auditors' approval for SOX certification - Cemig achieved SOX certification with unqualified auditors' approval, strengthening internal controls8 2Q23 Key Financial Highlights | Metric | 2Q23 Value (R$ billion) | YoY Change (%) | | :--------------------- | :---------------------- | :--------- | | Adjusted EBITDA | 1.9 | +3.8 | | Adjusted Net Profit | 1.2 | +6.6 | | Investments (1H23) | 1.7 | +43 | - The company declared R$851 million in Interest on Equity in 2023, with R$427 million in June and R$424 million in March568 ESG Actions Cemig is committed to ESG actions, including issuing sustainable bonds, investing in network modernization with social impacts, disclosing climate change-related financial information (TCFD Report), reestablishing vegetation to remove CO2, and building a diverse and inclusive culture - Cemig issued the largest-ever sustainable bonds in the Brazilian power industry, investing R$2 billion in network modernization with social impacts549 - The company removed 10,156 tons of CO2 by planting/replanting vegetation in Brazil's Cerrado and Atlantic Forest biomes549 - Cemig launched a Diversity Program, including a Diversity Census and training, and issued Renewable Energy Certificates (RECs) for 2,047,000 MWh and I-RECs for 1,456,000 MWh565 Consolidated Financial Performance Cemig's consolidated results for 2Q23 showed growth in adjusted EBITDA and net profit, alongside a decrease in operating costs and consistent cash generation. The company maintained a low debt and leverage profile, ensuring financial sustainability EBITDA and Net Profit Consolidated adjusted EBITDA increased by 3.8% year-over-year to R$1.878 billion, while adjusted net profit grew by 6.6% year-over-year to R$1.214 billion, reflecting solid performance Consolidated EBITDA and Net Profit (2Q23 vs 2Q22) | Metric | 2Q22 (R$ million) | 2Q23 (R$ million) | YoY Change (%) | | :-------------- | :---------------- | :---------------- | :--------- | | IFRS EBITDA | 354 | 1,878 | +430.5 | | Recurring EBITDA| 1,810 | 1,878 | +3.8 | | IFRS Net Profit | 50 | 1,245 | +2,390.0 | | Recurring Net Profit | 1,139 | 1,214 | +6.6 | - Adjustments to IFRS figures include gains on asset disposal, write-offs of financial assets, provisions for PIS, Pasep, Cofins taxes on ICMS, use of distribution infrastructure, reversal of Santo Antônio provision, and FX exposure hedge583 Operational Costs and Expenses PMSO (Personnel, Materials, Services, and Other expenses) costs increased by 9.0% year-over-year, primarily due to higher outsourced services for preventive maintenance and an increase in the Regulatory Remuneration Base (RAB). However, overall operating costs and expenses decreased by 13.8% year-over-year Consolidated Operating Costs and Expenses (2Q23 vs 2Q22) | Category | 2Q22 (R$ million) | 2Q23 (R$ million) | YoY Change (%) | | :------------------------------------- | :---------------- | :---------------- | :--------- | | PMSO Costs | 1,051 | 1,146 | +9.0 | | Other Costs (Energy purchases, provisions) | 7,433 | 6,167 | -17.0 | | Total Operating Costs and Expenses | 8,484 | 7,313 | -13.8 | - Lower personnel costs were achieved due to the 2022 Voluntary Severance Program, which saw 297 employees participate554 - Higher outsourced services costs were attributed to increased investment in preventive maintenance585 Cash Flow Cemig demonstrated consistent cash generation in 1H23, contributing to the execution of its investment program and maintaining strong liquidity. Operational cash flow, including CVA and PIS/Pasep/Cofins tax restitution, significantly supported this - Consistent cash generation contributed to the investment program and company liquidity586 Consolidated Cash Flow (1H23 vs 1H22) | Metric | 1H22 (R$ million) | 1H23 (R$ million) | | :----------------------------------- | :---------------- | :---------------- | | Cash + Operational | 3,864 | 3,319 | | CVA Restitution of PIS, Pasep, Cofins tax credits to consumers | 1,257 | 1,388 | | Interest on Equity | 912 | 780 | | Loans obtained/paid | 2,038 | 1,43 | | Settlement of SAAG put option | - | 780 | | Investment activities | 1,388 | 780 | | Cash + Securities generation | 4,001 | 1,257 | Debt Profile Cemig maintained a low debt and leverage profile, with net debt at R$7.9 billion and total net debt (net of hedge) at R$7.7 billion. The average debt tenor was 2.9 years, and the company holds strong credit ratings - Net debt (Debt - Cash and securities) was R$7.9 billion, and Total net debt (Net debt - Hedge) was R$7.7 billion574 - The average debt tenor was 2.9 years, with debt in USD protected by hedge instruments587 Consolidated Debt Profile (1H23) | Metric | Value (R$ billion) | | :----------------------------------- | :----------------- | | Net Debt | 7.9 | | Total Net Debt (Net of Hedge) | 7.7 | | Average Tenor | 2.9 years | | Leverage (Net Debt / Recurring EBITDA) | 2.70 | - Cemig holds credit ratings of AA from FitchRatings, A+ from S&P Global Ratings, and AA from Moody's587 Segmental Performance Cemig's segments demonstrated varied performance in 2Q23. Distribution (Cemig D) significantly improved net profit and operational efficiency. Generation and Transmission (Cemig GT) saw a decrease in EBITDA and net profit but is pursuing concession renewals. Gasmig achieved strong profit growth, and Distributed Generation continued its expansion with new solar projects Cemig D (Distribution) Cemig D reported a significant turnaround in net profit, moving from a loss in 2Q22 to a profit in 2Q23. The segment achieved operational efficiency, keeping energy losses below regulatory limits and improving its collection/billing ratio, supported by a tariff review Cemig D Financial Performance (2Q23 vs 2Q22) | Metric | 2Q22 (R$ million) | 2Q23 (R$ million) | YoY Change (%) | | :-------------- | :---------------- | :---------------- | :--------- | | IFRS Net Profit | -900 | 365 | +140.6 | | Recurring Net Profit | -145 | 329 | +326.9 | | Recurring EBITDA| 602 | 688 | +14.3 | - Cemig D's 5th 5-year Tariff Review resulted in an average increase of 13.3%, effective May 28, 2023, and the Net Regulatory Remuneration Base (BRR) increased from R$8.9 billion to R$10.2 billion609 - The billed market and energy transported for clients grew by 0.7% YoY in 2Q23, with a notable 3.3% growth in energy transported from large free consumers594610 - The Collection/Billing ratio (ARFA) reached 100.31% in 1H23, strengthened by collections from Medium Voltage, Hospitals, and Public Services, and increased digital payment adoption (14.03% via PIX)598615 - Operational expenses (Opex) remained 6.6% below the regulatory level, with R$135 million in efficiency gains616 Cemig GT (Generation & Transmission) Cemig GT experienced a decline in EBITDA and net profit in 2Q23 compared to 2Q22. However, it secured a R$1.143 billion RAP for 2023-24, is progressing with works in renewable generation, and has applied for the renewal of concessions for three hydroelectric plants Cemig GT Financial Performance (2Q23 vs 2Q22) | Metric | 2Q22 (R$ million) | 2Q23 (R$ million) | YoY Change (%) | | :-------------- | :---------------- | :---------------- | :--------- | | IFRS EBITDA | 863 | 629 | -27.1 | | Recurring EBITDA| 804 | 629 | -21.8 | | IFRS Net Profit | 590 | 459 | -22.2 | | Recurring Net Profit | 450 | 428 | -4.9 | - Permitted Transmission Revenue (RAP) is R$1.143 billion for 2023-24, a 23.5% increase incorporating inflation and network improvements604637 - Cemig GT applied for renewal of concessions for Sá Carvalho, Emborcação, and Nova Ponte hydroelectric plants637 - Works in progress for renewable generation sources have R$360 million already invested637 Gasmig (Gas Distribution) Gasmig demonstrated strong profit growth in 2Q23, with significant increases in both EBITDA and net profit. The company is actively executing its investment program, with R$73 million invested in 1H23 and substantial planned capex for network expansion Gasmig Financial Performance (2Q23 vs 2Q22) | Metric | 2Q22 (R$ million) | 2Q23 (R$ million) | YoY Change (%) | | :-------------- | :---------------- | :---------------- | :--------- | | EBITDA | 160 | 255 | +59.4 | | Net Profit | 83 | 163 | +96.4 | - Gasmig's 2Q23 profit reflects higher consumption and a tariff review49 - R$73 million was invested by June 2023, with R$367 million planned by the end of 2023639 - Planned capex for Gasmig is R$780 million, including building 300 km of network in 8 municipalities50620 Distributed Generation (DG) Cemig's Distributed Generation (DG) portfolio is expanding, with 52 MWp currently in operation and significant capacity under construction and development. The company has completed competitive tenders for new solar plants, contributing to its renewable energy goals Distributed Generation Capacity (2Q23) | Status | Capacity (MWp) | | :-------------- | :------------- | | In operation | 52 | | In construction | 168 | | In development | 274 (floating) | - Competitive tenders were completed for the construction of 23 solar plants, adding 89 MWp with an estimated R$412 million capex, gradually coming into operation from 202451 Strategic Investments & Future Outlook Cemig is executing a robust investment program, with R$1.7 billion invested in 1H23, a 43% increase YoY. Key strategic areas include digital transformation, strengthening Cemig D's investment program, and expanding renewable generation sources. Future challenges involve concession renewals and continued investment in network modernization - R$1,709 million was invested in 1H23, a 43% increase compared to 1H22, with a planned R$5,451 million for 202310 - Strategic pillars include client service quality, business productivity through automation and data, IT efficiency with agile methodologies, and increased resilience of information and networks24 - The 'Minas Three-phase program 2022-2027' involves a total investment of R$1.8 billion to convert networks from single-phase to three-phase and improve operational flexibility672673 - The 'Mais Energia' Program plans R$3 billion in investments for new substations and structural improvements by 2027628645674 - Future challenges include renewals of concessions and continued investment in renewable floating generation sources624642 2Q23 Interim Financial Information This section presents Cemig's detailed interim financial statements for 2Q23, including balance sheets, income statements, cash flows, and comprehensive notes Basis of Preparation This section outlines the foundational principles for preparing Cemig's interim financial information, including its corporate structure, compliance with accounting standards, the impact of new pronouncements, and adjustments made to the income statement for clarity The Company Companhia Energética de Minas Gerais (Cemig) is a Brazilian publicly held company, listed on B3, NYSE, and Latibex, primarily engaged in electric power commercialization and as a holding company for generation, transmission, distribution, gas distribution, and energy efficiency services - Cemig is a publicly held company listed on B3, NYSE, and Latibex, operating in electric power commercialization and as a holding company for various energy sector activities248249 Statement of Compliance The individual and consolidated interim financial information has been prepared in accordance with IAS 34 (Interim Financial Reporting) and CVM Resolution 44/2021, consistent with the principles adopted for the December 31, 2022 financial statements, except for new rules effective January 1, 2023 - Interim financial information is prepared in accordance with IAS 34 and CVM Resolution 44/2021, consistent with 2022 financial statements, except for new rules effective January 1, 20237678 New Pronouncements and Revisions Alterations to CPC 23/IAS 8, CPC 26/IAS 1, CPC 32/IAS 12, and the application of CPC 50, effective January 1, 2023, had no impact on Cemig's individual and consolidated interim financial information - New accounting pronouncements and revisions applied for the first time in 2023 had no impact on the Company's interim financial information711 Regrouping of Income Statement Items Starting in 3Q22, Cemig adjusted the classification of expenses in its income statement to group certain items more accurately by function, without affecting margins or indicators. Corresponding information for 1H22 is presented using the same criteria for comparability - The Company regrouped income statement items for better accuracy, effective 3Q22, without affecting margins or indicators140744 Statements of Financial Position As of June 30, 2023, Cemig's consolidated total assets increased to R$54.54 billion from R$53.67 billion at December 31, 2022, while total liabilities decreased to R$30.93 billion from R$31.89 billion, reflecting changes in current and non-current assets and liabilities Consolidated Statements of Financial Position (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :----------------- | :------------ | :------------ | | Total Current Assets | 13,540,429 | 13,465,203 | | Total Non-Current Assets | 41,002,635 | 40,205,634 | | Total Assets | 54,543,064| 53,670,837| | Total Current Liabilities | 10,127,642 | 11,205,178 | | Total Non-Current Liabilities | 20,800,787 | 20,682,393 | | Total Liabilities| 30,928,429| 31,887,571| | Total Equity | 23,614,635 | 21,783,266 | Statements of Income Cemig's consolidated net income for the six-month period ended June 30, 2023, significantly increased to R$2.64 billion from R$1.51 billion in the same period of 2022, driven by higher gross income and improved net finance income (expenses) Consolidated Statements of Income (Jan to Jun, R$ thousands) | Metric | Jan to Jun, 2023 (R$ thousands) | Jan to Jun, 2022 (R$ thousands) | | :----------------------------------- | :--------------- | :--------------- | | Net Revenue | 17,466,454 | 16,060,828 | | Gross Income | 4,104,202 | 2,251,974 | | Operating income before financial income (expenses) and taxes | 3,434,976 | 1,698,578 | | Net Finance Income (Expenses) | (66,104) | (556,786) | | Income before income tax and social contribution tax | 3,368,872 | 1,141,792 | | Current Income tax and social contribution tax | (563,031) | (370,689) | | Deferred income tax and social contribution tax | (162,253) | 734,344 | | NET INCOME FOR THE PERIOD | 2,643,588 | 1,505,447 | | Basic and diluted earnings per preferred share - R$ | 1.20 | 0.68 | Statements of Comprehensive Income Cemig's consolidated comprehensive income for the six-month period ended June 30, 2023, was R$2.68 billion, an increase from R$1.51 billion in the same period of 2022, primarily due to higher net income and remeasurement gains on post-retirement liabilities Consolidated Statements of Comprehensive Income (Jan to Jun, R$ thousands) | Metric | Jan to Jun, 2023 (R$ thousands) | Jan to Jun, 2022 (R$ thousands) | | :----------------------------------- | :--------------- | :--------------- | | NET INCOME FOR THE PERIOD | 2,643,588 | 1,505,447 | | Post retirement liabilities - remeasurement of obligations of the defined benefit plans | 61,208 | - | | Income tax and social contribution tax on remeasurement of defined benefit plans | (20,811) | - | | Equity gain (loss) on other comprehensive income in subsidiary and jointly controlled entity | - | 393 | | COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAXES | 2,683,985 | 1,505,840 | | Attributed to Equity holders of the parent | 2,682,618 | 1,505,102 | | Attributed to Non-controlling interests | 1,367 | 738 | Statements of Changes in Shareholders' Equity Cemig's total equity increased to R$23.61 billion as of June 30, 2023, from R$21.78 billion at December 31, 2022, primarily driven by net income for the period and other comprehensive income, partially offset by interest on equity Consolidated Statements of Changes in Shareholders' Equity (R$ thousands) | Metric | Dec. 31, 2022 (R$ thousands) | Jun. 30, 2023 (R$ thousands) | | :-------------------------- | :------------ | :------------ | | AS OF DECEMBER 31, 2022 | 21,777,356 | 21,777,356 | | Net income for the period | - | 2,642,221 | | Other comprehensive income | - | 40,397 | | Interest on equity | - | (850,924) | | Non-controlling interests | 5,910 | 5,585 | | AS OF JUNE 30, 2023 | 21,783,266| 23,614,635| Statements of Cash Flows Cemig's consolidated net cash from operating activities for the six-month period ended June 30, 2023, was R$2.74 billion, a decrease from R$3.00 billion in the same period of 2022. Investing activities resulted in a net cash outflow of R$2.47 billion, while financing activities generated R$476.77 million Consolidated Statements of Cash Flows (Jan to Jun, R$ thousands) | Metric | Jan to Jun, 2023 (R$ thousands) | Jan to Jun, 2022 (R$ thousands) | | :----------------------------------- | :--------------- | :--------------- | | Net Cash from Operating Activities | 2,735,789 | 3,004,155 | | Net Cash from (used in) Investing Activities | (2,470,396) | (1,003,470) | | Net Cash Used in Financing Activities | 476,765 | (958,112) | | Net (decrease) increase in cash and cash equivalents | 742,158 | 1,042,573 | | Cash and cash equivalents at the end of the period | 2,182,819 | 1,867,781 | Statements of Added Value Cemig's consolidated total added value to be distributed for the six-month period ended June 30, 2023, increased to R$10.55 billion from R$10.33 billion in the prior year, with significant portions distributed to taxes, employees, and capital remuneration Consolidated Statements of Added Value (Jan to Jun, R$ thousands) | Metric | Jan to Jun, 2023 (R$ thousands) | Jan to Jun, 2022 (R$ thousands) | | :----------------------------------- | :--------------- | :--------------- | | Revenues | 23,585,565 | 23,254,955 | | Inputs Acquired from Third Parties | (13,849,260) | (14,134,384) | | Gross Value Added | 9,736,305 | 9,120,571 | | Net Added Value Produced by the Company | 9,130,376 | 8,548,642 | | Added Value Received by Transfer | 1,414,869 | 1,778,840 | | ADDED VALUE TO BE DISTRIBUTED | 10,545,245 | 10,327,482 | | Distribution to Employees | 965,526 | 1,018,811 | | Distribution to Taxes | 6,012,092 | 6,303,698 | | Remuneration of External Capital | 924,039 | 1,499,526 | | Remuneration of Own Capital | 2,643,588 | 1,505,447 | Notes to the Financial Statements This section provides detailed explanatory notes to Cemig's interim financial statements, covering specific accounts, accounting policies, and significant events. It offers granular insights into the company's financial position, performance, and cash flows, including information on assets, liabilities, equity, revenues, expenses, and risk management Cash and Cash Equivalents (Note 4) Consolidated cash and cash equivalents increased to R$2.18 billion as of June 30, 2023, from R$1.44 billion at December 31, 2022, reflecting the company's liquidity position Consolidated Cash and Cash Equivalents (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Cash and cash equivalents | 2,182,819 | 1,440,661 | Marketable Securities (Note 5) Consolidated marketable securities decreased to R$1.68 billion as of June 30, 2023, from R$1.88 billion at December 31, 2022, comprising current and non-current investments in instruments like bank certificates of deposit, financial notes, and treasury financial notes Consolidated Marketable Securities (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Current Investments | 1,542,983 | 1,744,546 | | Non-Current Investments | 138,802 | 133,631 | | Total Investments | 1,681,785 | 1,878,177 | - The Company classifies interest from marketable securities as investing activities145 Receivables from Customers, Traders and Concession Holders (Note 6) Consolidated receivables from customers, traders, and concession holders slightly decreased to R$4.74 billion as of June 30, 2023, from R$4.81 billion at December 31, 2022. The expected credit losses are considered sufficient to cover potential losses, with a balance of R$862.62 million Consolidated Receivables from Customers, Traders and Concession Holders (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Current Assets | 4,688,726 | 4,769,431 | | Non-Current Assets | 46,665 | 43,449 | | Total Receivables | 4,735,391 | 4,812,880 | | Expected Credit Losses | (862,620) | (820,324) | - Expected credit losses are considered sufficient to cover potential losses in accounts receivable121 Expected Credit Losses Movement (R$ thousands) | Metric | Amount (R$ thousands) | | :-------------------------- | :-------------------- | | Balance at December 31, 2022| 820,324 | | Additions, net (Note 26) | 29,192 | | Amounts written off | 13,104 | | Balance at June 30, 2023 | 862,620 | Recoverable Taxes (Note 7) Consolidated recoverable taxes decreased to R$2.38 billion as of June 30, 2023, from R$3.27 billion at December 31, 2022, primarily due to offsets of PIS/Pasep and Cofins tax credits against federal taxes Consolidated Recoverable Taxes (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Current | 1,163,202 | 1,916,701 | | Non-Current | 1,213,329 | 1,357,846 | | Total | 2,376,531 | 3,274,547 | - In 1H23, R$837.924 million in PIS/Pasep and Cofins tax credits were offset against payable federal taxes148 - The Company holds current and non-current tax credits of PIS/Pasep and Cofins over ICMS, totaling R$697.101 million and R$578.345 million respectively, updated by the Selic rate172 Income and Social Contribution Taxes (Note 8) Consolidated income tax and social contribution tax liabilities decreased to R$111.67 million as of June 30, 2023, from R$239.67 million at December 31, 2022. Deferred tax assets, net of liabilities, decreased to R$2.01 billion from R$2.19 billion, with a consolidated effective tax rate of 21.53% for 1H23 Consolidated Income Tax and Social Contribution Tax Payable (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Income tax | 80,448 | 197,619 | | Social contribution tax | 31,219 | 42,055 | | Total Current | 111,667 | 239,674 | Consolidated Deferred Income Tax and Social Contribution Tax (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Deferred tax assets | 4,410,327 | 4,709,687 | | Deferred tax liabilities| (2,403,262) | (2,522,400) | | Total, net | 2,007,065 | 2,187,287 | Consolidated Effective Tax Rate (Jan to Jun) | Metric | Jan to Jun, 2023 (R$ thousands) | Jan to Jun, 2022 (R$ thousands) | | :---------------------- | :--------------- | :--------------- | | Income before tax | 3,368,872 | 1,141,792 | | Effective rate | 21.53% | (31.85)% | Accounts Receivable from the State of Minas Gerais (Note 9) Cemig holds a non-current receivable of R$13.37 million from the State of Minas Gerais, related to the return of an administrative deposit for a dispute on inflation correction of an advance against future capital increase (AFAC) - Cemig has a non-current receivable of R$13,366 thousand from the State of Minas Gerais related to an AFAC inflation correction dispute756 Escrow Deposits (Note 10) Consolidated escrow deposits totaled R$1.21 billion as of June 30, 2023, slightly up from R$1.21 billion at December 31, 2022, primarily related to tax contingencies Consolidated Escrow Deposits (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Tax contingencies | 875,534 | 843,870 | | Other | 112,318 | 103,431 | | Total | 1,214,964 | 1,206,595 | Reimbursement of Tariff Subsidies (Note 11) Cemig recognized R$554.62 million in subsidies revenue in 1H23, reimbursed through the Energy Development Account (CDE). The company has a current receivable of R$124.34 million for these subsidies - In 1H23, R$554,619 thousand was recognized as subsidies revenue, reimbursed via the Energy Development Account (CDE)759 - Cemig D has a current receivable of R$117,184 thousand and Cemig GT R$7,159 thousand for these subsidies, totaling R$124,343 thousand157 Concession Financial and Sector Assets and Liabilities (Note 12) Consolidated concession financial assets increased to R$5.33 billion as of June 30, 2023, from R$5.05 billion at December 31, 2022. This includes energy and gas distribution concessions, generation indemnity receivables, and concession grant fees. Sector financial assets, primarily related to CVA and other financial components, decreased to R$890.81 million Consolidated Concession Financial and Sector Assets (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Concession Financial Assets | 5,330,648 | 5,048,475 | | Sector Financial Assets | 890,809 | 944,090 | | Total | 6,221,457 | 5,992,565 | - The concession grant fee for 18 hydroelectric plants (Auction 12/2015) was R$2,216,353 thousand, recognized as a financial asset measured at amortized cost741 - The balance of generation indemnity receivable is R$737,406 thousand, representing management's best estimate for cash from the regulator186 CVA and Other Financial Components (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Total Assets | 890,809 | 944,090 | | Total Financial Components | 890,809 | 944,090 | Concession Contract Assets (Note 13) Consolidated concession contract assets increased to R$7.73 billion as of June 30, 2023, from R$6.70 billion at December 31, 2022, driven by additions in distribution and transmission infrastructure. The 5th Periodic Tariff Review for Cemig D resulted in an average tariff increase of 13.27% Consolidated Concession Contract Assets (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Distribution - Infrastructure assets under construction | 2,785,768 | 1,849,853 | | Transmission - National Grid ('BNES') | 1,862,666 | 1,927,040 | | Transmission - Assets remunerated by tariff | 2,928,732 | 2,810,949 | | Total | 7,734,476 | 6,704,824 | - Cemig D's 5th Periodic Tariff Review established an average tariff increase of 13.27% for consumers, effective from May 28, 2023166218 - The Periodic Tariff Review for transmission concessions was postponed, with the time limit for ratification of RAP set for July 1, 2024199 Investments in Subsidiaries, Associates and Joint Ventures (Note 14) Consolidated investments in subsidiaries, associates, and joint ventures decreased to R$4.82 billion as of June 30, 2023, from R$5.11 billion at December 31, 2022. This includes the sale of Cemig GT's stake in Mesa and acquisitions of photovoltaic plants by Cemig Sim, aligning with portfolio optimization and distributed generation growth Consolidated Investments in Subsidiaries, Associates and Joint Ventures (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Total of investments | 4,821,254 | 5,105,724 | - Cemig GT completed the sale of its direct and indirect ownership interest in Mesa to Furnas Centrais Elétricas S.A. for R$55,390 thousand, recognizing a capital gain262263 - Cemig Sim acquired 100% of the shares in the Montes Claros photovoltaic plant and the remaining 51% interests in four SPCs (G2 Olaria 1, G2 Campo Lindo 1, G2 Campo Lindo 2, SPE G2 Olaria 2), adding 13 MWp capacity269273274 - The Company injected R$39,216 thousand into UFV Três Marias S.A. for the construction of a 78 MW floating photovoltaic complex and a 1.5 MW photovoltaic plant243 Property, Plant and Equipment (Note 15) Consolidated property, plant, and equipment (PP&E) increased to R$2.61 billion as of June 30, 2023, from R$2.41 billion at December 31, 2022, with significant additions in assets in progress, including investments in solar plants Consolidated Property, Plant and Equipment (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | In service | 1,948,689 | 2,030,665 | | In progress | 659,375 | 378,686 | | Net PP&E | 2,608,064 | 2,409,351 | - Additions in 1H23 totaled R$338,980 thousand, including investments in Boa Esperança (R$112,367 thousand) and Jusante (R$118,693 thousand) photovoltaic solar plants277299 Intangible Assets (Note 16) Consolidated net intangible assets remained stable at R$14.62 billion as of June 30, 2023, primarily comprising concession assets and assets of concession - GSF, with additions in assets in progress Consolidated Intangible Assets (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | In service | 14,468,373 | 14,415,514 | | In progress | 152,263 | 206,339 | | Net Intangible Assets | 14,620,636| 14,621,853| Leasing (Note 17) Consolidated right-of-use assets increased to R$386.16 million as of June 30, 2023, from R$329.08 million at December 31, 2022. Leasing liabilities also increased to R$416.07 million from R$354.63 million, with cash flows primarily updated by the IPCA inflation index Consolidated Right-of-Use Assets (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Real estate property | 215,216 | 213,645 | | Vehicles | 170,940 | 115,432 | | Total | 386,156 | 329,077 | Consolidated Leasing Liabilities (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Current liabilities | 75,495 | 57,438 | | Non-current liabilities | 340,578 | 297,195 | | Total | 416,073 | 354,633 | - Leasing cash flows are mostly updated annually by the IPCA inflation index286 Suppliers (Note 18) Consolidated suppliers decreased to R$2.49 billion as of June 30, 2023, from R$2.83 billion at December 31, 2022, primarily due to lower energy and gas purchases for resale Consolidated Suppliers (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Energy purchased for resale | 1,055,249 | 1,162,009 | | Gas purchased for resale| 203,463 | 277,750 | | Materials and services | 637,497 | 801,838 | | Total | 2,492,971 | 2,832,049 | Taxes Payable and Amounts to be Refunded to Customers (Note 19) Consolidated taxes payable remained stable at R$913.26 million as of June 30, 2023. Amounts to be refunded to customers for PIS/Pasep and Cofins taxes decreased to R$2.11 billion from R$3.30 billion, with R$5.20 billion already reimbursed to clients Consolidated Taxes Payable (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Current | 543,570 | 544,146 | | Non-Current | 369,686 | 370,168 | | Total | 913,256 | 914,314 | Consolidated Amounts to be Refunded to Customers (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Current PIS/Pasep and Cofins | 1,164,003 | 1,154,798 | | Non-Current PIS/Pasep and Cofins | 607,684 | 1,808,074 | | Current ICMS | 340,800 | 340,800 | | Total | 2,112,487 | 3,303,672 | - R$5,200,878 thousand has been reimbursed to clients for PIS/Pasep and Cofins taxes until June 30, 2023314 Loans and Debentures (Note 20) Consolidated loans and debentures increased to R$11.83 billion as of June 30, 2023, from R$10.58 billion at December 31, 2022, primarily due to a new R$2 billion debenture issue by Cemig D. The company manages its debt profile with various currencies and indexes, and monitors restrictive covenants Consolidated Loans and Debentures (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Total Loans and Financings | 3,663,528 | 3,962,185 | | Total Debentures | 8,167,518 | 6,617,313 | | Overall Total | 11,831,046| 10,579,498| - Cemig D concluded its 9th issue of unsecured non-convertible debentures, raising R$2 billion (net R$1,988,311 thousand) with CDI + 2.05% remuneration, maturing in 2026294319339 - The company has various guarantees on its debt, including Eurobonds, debentures, and shares, and monitors financial covenants to avoid early maturity320327341347 Regulatory Charges (Note 21) Consolidated regulatory charges increased slightly to R$586.75 million as of June 30, 2023, from R$575.61 million at December 31, 2022, comprising various liabilities such as Global Reversion Reserve (RGR), Energy Development Account (CDE), and Energy Efficiency Program (EEP) Consolidated Regulatory Charges (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Global Reversion Reserve (RGR) | 27,888 | 28,245 | | Energy Development Account (CDE) | 136,408 | 127,870 | | Energy Efficiency Program | 199,322 | 220,802 | | Research and development (R&D) | 148,378 | 125,864 | | Total | 586,752 | 575,607 | Post-Employment Obligations (Note 22) Consolidated net liabilities for post-employment obligations decreased slightly to R$3.29 billion as of June 30, 2023, from R$3.31 billion at December 31, 2022. This includes pension plans, health, and dental plans, with a curtailment event in 1H23 leading to an actuarial gain Consolidated Post-Employment Obligations (R$ thousands) | Metric | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Pension plans and supplement plans | 3,289,171 | 3,313,138 | | Health plan | 5,249,788 | 5,691,985 | | Dental plan | 60,487 | 136,059 | | Net Liabilities | 3,289,171 | 3,313,138 | - A curtailment event related to a new Premium Health Plan offered to employees resulted in an actuarial gain of R$60,274 thousand for the health plan and R$934 thousand for the dental plan352389 - The total amount payable by Cemig and its subsidiaries for Plan A deficits (2015, 2016, 2017) was R$542,106 thousand as of June 30, 2023365 Provisions (Note 23) Consolidated provisions for contingencies increased to R$2.11 billion as of June 30, 2023, from R$2.03 billion at December 31, 2022, covering labor, civil, tax, and regulatory matters. The company also has significant possible contingencies not provisioned Consolidated Provisions for Contingencies (R$ thousands) | Category | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Labor | 416,869 | 414,809 | | Civil | 87,764 | 77,504 | | Tax | 1,546,974 | 1,474,690 | | Regulatory | 49,508 | 47,493 | | Others | 10,125 | 14,525 | | Total | 2,111,240 | 2,029,021 | Consolidated Possible Contingencies (Not Provisioned) (R$ thousands) | Category | Jun. 30, 2023 (R$ thousands) | Dec. 31, 2022 (R$ thousands) | | :---------------------- | :------------ | :------------ | | Labor | 1,352,040 | 1,198,657 | | Customer relations | 259,519 | 280,919 | | Other civil actions | 570,328 | 537,197 | | Tax | 2,562,900 | 2,149,475 | | Regulatory | 3,461,158 | 2,976,485 | | Others | 1,646,267 | 1,361,004 | | Total | 9,852,212 | 8,453,737 | - The probability of loss for social security contributions on income sharing payments was reassessed from 'possible' to 'probable' for some portions402 - The estimated contingency for the 'Luz Para Todos' program is R$500,169 thousand, with a 'possible' chance of loss428 Equity and Remuneration to Shareholders (Note 24) Cemig's share capital remained at R$11.01 billion, represented by 735.85 million common shares and 1.47 billion preferred shares. Basic and diluted earnings per preferred share increased to R$1.20 for 1H23. The Executive Board declared R$850.92 million in Interest on Equity during 1H23 - Share capital is R$11,006,853 thousand, represented by 735,847,624 common shares and 1,465,523,064 preferred shares, each with a nominal value of R$5.00461 Basic and Diluted Earnings Per Share (R$) | Metric | Jan to Jun, 2023 (R$) | Jan to Jun, 2022 (R$) | | :----------------------------------- | :--------------- | :--------------- | | Total earnings (A) | 2,642,221 | 1,504,709 | | Total shares (B) | 200,524,524 | 200,524,524 | | Basic and diluted earnings per common share (A/B) | 1.20 | 0.68 | - The Executive Board declared R$424,226 thousand in Interest on Equity on March 22, 2023, and R$426,698 thousand on June 20, 2023, totaling R$850,924 thousand464100 Revenue (Note 25) Consolidated net revenue for 1H23 increased to R$17.47 billion from R$16.06 billion in 1H22, driven by higher distribution construction revenue and TUSD, despite a decrease in energy supply revenue due to ICMS rate reductions Consolidated Net Revenue (Jan to Jun, R$ thousands) | Metric | Jan to Jun, 2023 (R$ thousands) | Jan to Jun, 2022 (R$ thousands) | | :----------------------------------- | :--------------- | :--------------- | | Revenue from supply of energy | 14,623,983 | 16,148,608 | | Revenue from use of the electricity distribution systems (TUSD) | 2,098,765 | 1,772,420 | | Distribution construction revenue | 1,592,270 | 1,136,536 | | Supply of gas | 2,197,133 | 2,069,435 | | Deductions on revenue | (6,149,276) | (7,575,238) | | Net operating revenue | 17,466,454 | 16,060,828 | - Revenue from energy supply decreased by 4.03% in 2Q23 due to ICMS rate reductions934935 - Distribution construction revenue increased by 31.59% in 2Q23 due to higher investment plan execution and increased material/service costs919 - Deductions on revenue decreased by 20.02% in 2Q23, mainly reflecting the reduction of the ICMS tax rate943 Operating Costs and Expenses (Note 26) Consolidated total operating costs and expenses for 1H23 decreased to R$13.36 billion from R$13.81 billion in 1H22. This reduction was primarily driven by lower operating provisions and expected credit losses, despite increases in infrastructure and construction costs Consolidated Operating Costs and Expenses (Jan to Jun, R$ thousands) | Metric | Jan to Jun, 2023 (R$ thousands) | Jan to Jun, 2022 (R$ thousands) | | :----------------------------------- | :--------------- | :--------------- | | Cost of energy and gas | 9,504,736 | 9,233,889 | | Infrastructure and construction cost | 1,667,521 | 1,262,422 | | Operating costs | 2,189,995 | 3,312,543 | | Total Operating Costs | 13,362,252 | 13,808,854 | | Expected credit losses | (29,192) | (133,458) | | General and administrative expenses | (327,843) | (358,389) | | Other operating expenses | (534,513) | (582,445) | - Operating provisions were R$132,503 thousand in 2Q23, significantly lower than R$1,420,370 thousand in 2Q22, due to a large provision in 2Q22 related to Law No. 14,385/22954 - Expected credit loss decreased by 76.47% in 2Q23 due to revised loss measurement rules and increased settlement of regular debts955 Finance Income and Expenses (Note 27) Cemig's consolidated net finance income (expenses) significantly improved to R$(66.10) million for 1H23 from R$(556.79) million in 1H22, driven by lower finance expenses, particularly from foreign exchange variations and losses with financial instruments Consolidated Finance Income and Expenses (Jan to Jun, R$ thousands) | Metric | Jan to Jun, 2023 (R$ thousands) | Jan to Jun, 2022 (R$ thousands) | | :----------------------------------- | :--------------- | :--------------- | | Finance Income | 825,136 | 917,511 | | Finance Expenses | (891,240) | (1,474,297) | | NET FINANCE INCOME (EXPENSES) | (66,104) | (556,786) | - Net financial expense with the restatement of tax credits related to PIS/Pasep and Cofins decreased to R$16,779 thousand in 2Q23 from R$356,213 thousand in 2Q22978 - Foreign exchange variations on loans and debentures generated R$301,310 thousand in income in 1H23, compared to R$342,500 thousand in 1H22507 Related Party Transactions (Note 28) Cemig engages in various transactions with related parties, including energy transactions, service provision, and financial arrangements. The company also provides guarantees on loans and debentures for jointly controlled entities and affiliates, and manages cash investments in a related investment fund Key Related Party Transactions (Jan to Jun, R$ thousands) | Related Party | Assets (Jun. 30, 2023, R$ thousands) | Liabilities (Jun. 30, 2023, R$ thousands) | Revenues (Jan to Jun, 2023, R$ thousands) | Expenses (Jan to Jun, 2023, R$ thousands) | | :---------------------- | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Aliança Geração | 4,245 | 17,181 | 24,519 | (106,184) | | Norte Energia | 2,389 | 29,750 | 13,952 | (134,538) | | Governo do Estado de Minas Gerais | 42,697 | - | 87,050 | - | | FIP Melbourne | 240,860 | - | - | - | | FORLUZ (Post-employment obligations) | - | 212,657 | - | (136,059) | | Cemig Saúde (Health Plan) | - | 223,529 | - | - | Guarantees on Loans and Debentures for Related Parties (Jun. 30, 2023, R$ thousands) | Related Party | Relationship | Type of Guarantee | Amount (R$ thousands) | | :---------------------- | :----------- | :---------------- | :---------- | | Norte Energia (NESA) | Affiliated | Surety | 2,597,565 | | Norte Energia (NESA)/Light | Affiliated | Counter-guarantee | 683,615 | | Norte Energia (NESA) | Affiliated | Surety | 81,620 | | Total | | | 3,362,800 | - The total remuneration of key management personnel for 1H23 was R$14,795 thousand521 Financial Instruments and Risk Management (Note 29) Cemig manages various financial risks, including exchange rate, interest rate, and liquidity risks. The company uses derivative financial instruments (swaps, currency options, NDFs) to hedge foreign currency exposure, particularly for Eurobonds. Sensitivity analyses are performed for interest rate and inflation risks, and capital management focuses on maintaining low net liabilities relative to equity Consolidated Financial Assets and Liabilities at Fair Value (R$ thousands) | Metric | Jun. 30, 2023 (Book Value, R$ thousands) | Jun. 30, 2023 (Fair Value, R$ thousands) | | :---------------------- | :------------------------- | :------------------------- | | Total Financial Assets | 16,592,525 | 16,592,525 | | Total Financial Liabilities | (15,591,240) | (15,591,240) | - Cemig GT settled the SAAG put option for R$780 million on May 12, 2023, with an additional R$25 million effect posted in 2Q23547 - The company uses derivative financial instruments (swaps, currency options, NDFs) to protect against foreign exchange variation risks, not for speculative purposes[830](index=830&type=