Companhia Energética de Minas Gerais

IR officer Leonardo Jorge de Magalhães, and he's going to talk about our results in the second quarter. Good morning, everyone. Thank you very much for being here. This is a very important moment for the company. This is the chance that we have once a year to be here with all the management of the company, our investments and financial area, but we believe this is a single opportunity. away can be with you. It's important to be here with investor. It's a very important moment for the company. We are having consistent results. It is very clear that the market is happy about the company's results, but this is very consistent for the past few years. and we can seize this opportunity. And we want to talk more to you and be here available and be able to talk more about our strategy. Let me talk about the results. Once again, consistent results. The company in the last years was sometimes 5% lower than the market consensus, sometimes 5% over. This is very consistent. That makes a big difference. And this allows us to have consistency and robustness in our results. And we have interest equity in another quarter over 430 million in June without considering the extraordinary dividends. We are among the one of the main dividends payment company and with the additional dividends that we have posted in the last month clearly we are clearly the highest dividends paying company. Also, we have here 1.9 billion operating cash generation. We will talk more about that. And despite the results being in line, these non-recurring positive events are not neutral. They will be generating more cash to the company or they have reduced the company's risk related to some topics. that were in our balance sheet. So we strengthen our situation. We believe that the non-recurring effects, and this is a huge example, they come from actions of the management that have generated results. and reduce the risk as a side effect that also improve our base for dividends payment. And finally, investments that were posted in the tariff review. This was a very important one. We can highlight that. And further on, we will be hearing the opinion of other directors. Maybe Marco Soli can talk about tariff review. We doubled the... base for CEMIG transmission to 2.6 billion. And in this quarter, we are in the process that all transmission companies that have similar basis to CEMIG follow, which is to reconcile the cash flow that was approved by the approved regulator and the cash flow that we use in our projections when we invest it. and registered these assets in our balance sheets, in our financial statements. We think this is a fair review. All our investments have been accounted for and we do have the capacity of doing investments at a very low cost. We have a scale and we are very optimistic and we are reconciling here to check the effects of this review, and they will be accounted for in the third quarter. So we are in this work of reconciling the investments, but we believe this was a very positive tariff review for the company. Then we'll talk more about transmission investments. They are very relevant with the return rate that we understand to be very attractive, generating value to our shareholders. Now, moving forward, this is our investment program. Reynaldo talked a little bit about this. uh marcio and fernando pasalio about our investments in the past few years for investments here you can see we are very much in line for we have invested in the first quarter almost 40 percent of total investments for the year and we have a catch-up in other businesses but even with investments in generation that is lower than what was forecasted we are confident uh that we might be doing investments uh that were higher than our target i think we are going to reach the 4.4 billion and also in transmission distributed generation we believe that we will be meeting the forecasted for the year as well as gas and a little bit less in generation because i think part of this investment might be transferred to 2025. But total, we should be investing close to 6 billion this year. Very relevant when we consider our history. We invested 1 billion in 2018. Now we are going to invest 6 billion in 2024. But when compared to last year, we see 40% higher. So the company adjusted itself to the level of investments that is much higher than what we had in the past. And as Reynaldo reminded us, part of this investment is already contracted. Now moving forward, here we have consolidated results for the second quarter. As we mentioned, consolidated EBITDA almost 30% higher than last year, including non-recurring items. And in line with last year, both in the net profit as well as in the EBITDA, when we exclude the non-recurring effects. And last year, the trading company results for a lot of reasons, it was very positive. It's still positive this year, but last year, because of the convergence of factors that were positive, it brought exceptional results, allowing the non-recurring EBITDA to be close to 24 to 23. it's good to highlight the recurring as well so the review of profit sharing distribution we were able to revert 600 million because uh we in steel already have a chance of winning more 800 million that are provisioned and are balance sheeted. This is also thanks to the actions we have taken. The volunteer dismissal program, almost 400 employees that enrolled in the program that also have a very quick return in less than a year. We can have the payback of the program. with the employees that are here for longer, they receive an indemnity, and then when we can hire employees that are beginning their career with lower wages, and here we recycle our team. It helps changing the company's culture. We believe that this is a very important investment. Now, the issue related to we have returned the 6 billion rounds in fiscal gains that we had in this lawsuit. And with this refund, we were able to reconcile our updating criteria of that obligation, therefore reverting 400 million, that refers to net profit of 271 million. Another non-recurring effect that is significant, that there is a lawsuit that involves a trading company with a large client and we are appealing but we have provisioned in that in this quarter but we did not give up we believe that we might win it back and this is the update that can generate cash some a few years ago appealed against the criteria related to workers legislation. This is the workers meal program and just now we were awarded that uh lawsuits so these are neutral if they're not neutral there are positives as well and also the hatch because of the effects that went up in the last quarter we did see an effect in our financial statements and we might remember that the company's hatch has to do with the bonds that have the final installment of 380 million dollars now at the end of the year Now, moving on, costs and operating expenses. If we remove the voluntary dismissal program, our obligations were up 1.7% a year when quarterly and quarterly comparison, lower than the inflation. And as Reynaldo mentioned, here, expenses for third parties are also services improving or increasing, actually. and this is our concern of really serving the clients we see the society now is demanding a better service and our challenge is to spend on the right place to spend more in the maintenance operation and less in other process in a way that the company's costs are still disciplined growing in a disciplined fashion with no pressure in the operating efficiency of the company and improving quality of service to clients and at the same time also related to financial obligations we have over 200 million expenses last year we are working internally to reduce those that means that with investments we are able to reduce our financial compensations because we start providing better quality services. And then we can also decrease the fees that we pay to clients. Therefore, we were able to bring down in six months around 38 million fees related to regulatory compensations. And this is because of now Resolution 1000. This is important and we are continuously working in reducing these indemnity penalties. This is the cash flow of the company. We generated a lot of cash and we have a lot of investments to be made. We generated 3.5 billion. in this quarter, in this half of year, between 7 to 8 billion of annual cash generation. This is what we generate in terms of cash annually. And we ended the cash with 3 billion in the first half of 2024, but we will be using that in our operations and investments that will be done for next months. This is the consolidated debt profile. This is close to one time the EBITDA. But in a constant fashion, now we go to the market. We have to bring funds to the market. So we went to the market to look for resources, and our distribution generates between 3 to 3.5 billion in cash generation annually, so we have investments of 4.5 billion. That is, we are going to source funds from the market constantly. This is already increasing, and it will be increasing up to the next half review close to 2.5 times. in 2027, but we believe that we are very comfortable, and our objective now is to turn that profile more adequate. There is a more concentrated growth in 2025 and 2026, and we want to turn this average term of debt that is more adequate to the upcoming issuances, and this is the company's objective. This is SEMEX-D results. It was a good result. We'll look at the next slide, the volume of sale of energy. But we see that in regards to the prior quarter, these results were great, whether including recurring events or not. That's a good result. And there was a month here where the results included the tariff adjustments that happened in May 28, but we understand that CMICD is at another level now. It had an EBITDA close to 1 billion in 2018, and now it's an EBITDA close to 3.5 billion, without considering the ramp-up that we will have in 2028 with a tariff review. This is the energy market. We grew 2.9 Even with DG growing 33% and we had an improvement here of 2.9%, if we exclude DG, the market would grow more. Minimalized market is not as elastic in terms of temperature like Rio and Northeast, but even then it was a significant growth. But you can see that transported energy improved to 6%, a small reduction in the capital market. But even with the residential growing 7% and the other classes being reduced because of the competition of the GD and also retail market. But even then in a total market, uh was a market that we we understand that had an improvement in three percent and it even with the pressure of gd it was a relevant growth this is our operating efficiency considering non-recurring effects it was 22 percent lower than a regulatory one but even excluding non-recurring events we had opex within the regulatory op-ed, 2.4%. But remember, last year, the EBITDA ratio here is 10% lower than the regulatory we mentioned at the time that that was temporary and our commitment was that within the year we have our EBITDA that is higher than that regulatory and that 10% gap is already down 2.4% and we believe that for the next quarters we'll be able to have an EBITDA higher than the regulatory one as we have done in the prior year since 2021 and OPEX also under the regulatory limit. This is a commitment and they are very important for us we want to be within the regulatory coverages and even being a state-owned companies we have some extra costs that private companies do not have such as post-employment benefits that's very specific for the company we pay that this brings an additional expense to the company but even with these additional classes they are covered by our tariffs Here we have some IGT results. Once again, last year was an exceptional year for the trading company, but even excluding the non-recurring effects, we see that the results were very close in 24 compared to 23. And last year, as we said, was the year where we had energy restriction in the Northeast, therefore, we were short in the southeast market we were able to acquire energy at a very low price and that increased the margin of the trading company in addition to that the contracts with clients had a greater margin than this year we had already announced that to the market and uh the prior a year when we presented the margins for the next years, we were already showing that 2023 was an amazing number. 2024 also would be a great number, but not as in 2023. Of course, CEMIG today is a trading company that when compared to the market is an outlier. We have superior results when compared to the average of the market, considering the company's expertise and also our characteristics of being not only a pure trading company, but also being a generating company that allows us to have margin levels much higher than our competitors. Here we have our EBITDA per segment. And this is the beauty of being a company with a number of businesses. And we'll talk about glass in the next slide. But this was a quarter that was very good for distributing company. A generation was basically in line here. We transferred here. the contracts for the trading company, which had a lower result than last year. Last year, as I just said, had an exceptional result, but we believe that 143, if we were to annualize this result, we would have a result that would be over 600 million, but first quarter was much higher than that. We believe that, and the trading company will be delivering now results that are very positive as well. And then our gas business.

We have a worse result, 7.1%, but here there are two factors. One, the industrial market had a reduction because of a big customer of GASMIG reducing their consumption, and this affected the GASMIG revenue, and the regulatory assets are off balance. This is called compensatory parcel. It's out of the balance sheet. And last year, they were able to offset that to build 24 million of this regulatory asset, which made the result last year to be higher. But annualizing it, the EBIT is greater than 900 million, which is extraordinary. A great result. A company that is not leveraged. It is a cash cow. accompanied with a concession until 2053, with the whole market to be tapped into. And we are going to hear more about that. when we speak more with the VPs and the officers and the CEOs of the different companies of the group. Here we have the commitments. It's delivering on our commitments. This is how we are executing our strategy. I mentioned to some of you, if you access the CEMIG website and if you look at 2021, the CEMIG day, Our presentation in CEMIG day, if you look at our strategy and what we've achieved so far, you will clearly see that 2021 was not just lip service. We did execute our strategy. We said that we invested in regulated assets. We said that we were going to invest in the distribution company, divest from distressed assets where we didn't have any control, that we would get more operating efficiency and we were able to deliver. on all that. These are the commitments achieved, the ones in progress, and the future challenges and opportunities where we included technologies for energy transition. We'll have an opportunity to speak more about this during this summit day. So to conclude, this was a quarter with very solid results for the company. We believe that we are continuing