Companhia Energética de Minas Gerais SA Q3 FY2024 earnings call

Management Statement and Operational Highlights:

• Received AAA rating, the best in company history, due to consistent results, cash generation, and EBITDA over net debt.
• Concluded sale of Alianca Energia, receiving BRL2.7 billion and recording BRL1.6 billion capital gain.
• Positive results from transmission tariff revision, gaining BRL1.5 billion in IFRS.
• Achieved best EBITDA in history at BRL5 billion in Q3.
• Investment growth: Almost 20% growth vs Q3 2023, with over BRL4 billion invested in nine months, aiming to exceed BRL4.8 billion from last year.
• CFO change: Andrea Almeida to replace Leonardo George de Magalhaes; Leonardo thanked for his work, Andrea Almeida welcomed with extensive industry experience.
• Controlling shareholder submitted bill to make Cemig a corporation, initiating process with legislative assembly.

Segment Performance:

• Distribution: Had a drop in EBITDA compared to Q3 2023 due to higher outsourced services expenses (e.g., over 40,000 kilometers of right-of-way clearing) and market losses from captive market to DG. However, the average tariff adjustment was 7.32%, market growth 4.5%, and expected year-end result is favorable.
• GT (Cemig GT): Posted BRL1.6 billion capital gain from sale of Alianca Energia and positive results from tariff review. EBITDA for IFRS was higher, but recurring results affected by trading activity.
• Trading: Negatively impacted by load restrictions between Northeast and Southeast in October, but improved in November and December due to rain. Revenue contribution percentages weren't explicitly stated, but absolute figures mentioned include BRL1.8 billion EBITDA in Q3 from operations, and BRL1.6 billion capital gain from Alianca sale.

Guidance:

• Expect to invest over 90% of BRL6.2 billion forecast for 2024, with over 65% realized by Q3.
• Leverage to grow due to large investment program, dividends, and Eurobond payments, but expected to be between 2-2.5 by 2027, then decrease with Cemig Distribution tariff review in 2028.
• Dividends: Plan to pay 50% of IFRS results, with attractive dividends expected, and strategy to generate value for shareholders while maintaining investment and credit quality.

Risks:

• Impact of distributed generation on captive clients in the distribution segment, causing migration and affecting results.
• Regulatory changes, such as ongoing legislative processes related to Cemig becoming a corporation, which could introduce uncertainties.
• Market fluctuations, including price differences in energy trading due to regional load restrictions and weather impacts (e.g., rain effects on trading business).

Q: What's the reasoning behind sending the bill to make Cemig a corporation before prior project approval, and any news on Taesa's stakeholding?

A: Best answered by Minas Gerais administration, the controlling shareholder; it's a strategy from them. Regarding Taesa, no new information, and any updates will be published.

Q: Explain energy trading in Q3 and leverage projection.

A: Energy trading in Q3 affected by price differences due to load restrictions, with a deferral to 2025 from a trading company. Leverage expected to grow due to large investment program, dividends, and Eurobond payments, projected to be 2-2.5 by 2027, then decrease with Cemig Distribution tariff review in 2028.