Comp En De Mn Cemig ADS American Depositary Shares

Good afternoon, everyone.

I am Carolina Sena, CEMIG's Investor Relations Superintendent. Welcome to CEMIG's first quarter 2026 earnings video conference call. Please note that this video conference is being recorded. and it will be available on the company's IR website at ri.semi.com.br, where you will also find the company's presentation. Should you need simultaneous interpretation, the feature is available by clicking on the globe icon located on the center bottom of the screen. Upon choosing interpretation, select your language of choice. Portuguese or English. Should you choose to follow the call in English, you may also select mute original audio. During the company's presentation, all participants will have their microphones disabled. After that, we will open a Q&A session. Before turning to the results presentation, we would like to inform you that the appointment of Alexandre Ramos Peixoto as the new CEO of Semigi has been approved as of yesterday. Alexandre Ramos Peixoto replaces Reinaldo Patanesi, to whom the company recognizes and expresses its gratitude for the work carried out. Under his management, Semigi conducted a consistent financial recovery process resumed investment levels and developed a strategic plan worth approximately $70 billion through 2030. During this period, the company has strengthened its infrastructure, expanded the number of substations, modernized the grid, and eliminated historical bottlenecks. It also resumed sustainable growth and achieved the highest market value in its history, increasing it from $8 billion to $45 billion. The departure stems from the term limit restriction provided for the state-owned enterprises law, law number 13303-36. It is precisely to give continuity to this trajectory that Alexandre Ramos Peixoto comes in, a career employee of the company with solid experience in the Brazilian electric sector. He's an engineer by training. He holds a degree. and quality engineering management from Putsch University, and a degree in management and strategic planning from the University of Minas Gerais. In addition to specializations of an MBA in related areas, he related to generation and planning in the sector as well. His career, he has worked at Darnell, MME, and TV, and has immediately self-served as Regulatory and Institutional Relations Office. Since May 2023, she has chaired the Board of Directors of CEP.

So, now we will start the conference.

And with us, we will have Andrea Marques Almeida, CFO and IR Officer, Luiz Claudio Correia Abilani, Information Technology Officer, Marco da Camino and Luana Lopes Solis, Chief Generation and Transmission Officer, Marneita Deus Antunes, Chief Distribution Officer, Yuri Araujo de Mendoza, and Marcus Vinicius de Castro Lobato, Trading Planning Superintendent. For the initial remarks, we would like to bring to the floor Andrea Marques de Almeida. She is going to be making the presentation. Good morning and good afternoon to all of you. It's a pleasure to be here again to bring you the results for CEMIG, and we are very proud of that.

We always start talking about the quarterly highlights.

Sanegi has the benefit of being a diversified company, which is maintaining its results consistently. These are the operating results, and this quarter, it is just like the others. Of course, we reached results of $1.79 billion in EBITDA and $979 billion a profit and I usually say that we have to balance out all the place here and we have worked on our investment plan here of $1.48 billion. We also have shareholders remuneration, another important topic for our strategy, $658 million. And we had small acquisitions, SPH, FIPOCA, and that we acquired in the quarter. Also, we talked about this at the end of the year about the post-employment. employment agreement and all the impact that we reported at the time. But this is an agreement that, in fact, is going to allow us to have effects over time, and we can already see a reduction in our expenses in the amount of $80 million, and that's an important highlight as well. Now we have a snapshot of the quarter. The total of 1.48 is in the main area here, and distribution is always higher. carrying the highest representativeness of our investment with $1.28 billion for distribution. We have more energy, minus three phase. We are delivering through substations, six new substations, and one substation that was modernized in the more energy program, and now, so 765 of low and average voltage network. And transmission, we usually grow in reinforcements and improvements, and it was just like that, that we have investments in the quarter, 103 million, which added, in terms of RAP, the annual permitted revenue, and that was $15 million for our cash generation portfolio. For generation, I think we have lower amounts, as MIG is still moving on with its project, and the Midwest is the most relevant one, and to MIG's team. Here we start seeing that in our chart as a relevant investment with seven new solar photovoltaic plants and added 19 megawatts capacity to our portfolio. The quarter results are in line with the results of last year, considering that the highlights of the distributing company, the positive highlight here is that we effectively had in May the rebuilding of parcel B, which was 7.78%. So comparing quarter to headquarters is the main impact in the distributing company. And we also had an increase in residential consumption, which is positive. And in terms of challenges, also known already by the market, we had the fact of price that starting 2025, energy prices are more volatile. And as you know, we have positions that need to be closed over time, and with the higher prices, the positions closing ended up having negative results in the trading company and the generating company. Also, the main effect was GSF, and if we compare year against year, we had 0.92 in the first quarter of 2026, and the purchase of energy to tackle the hydrological risk allowed us to have impact in the EBITDA of 49 million. Now, we go into the details of what I just mentioned. We have the level of prices, and clearly we can see the change in the price volatility that started in the beginning of 2025. From January to March of 25, the prices were around 59 reals per megawatt, and then they went up. And last year, we also had a GSF close to 1, which is no longer the reality in 2026 when we have a lower GSF, and the price is much higher. So we reached levels of 382 rounds per megawatt, impacting the management of the hydrological risk. That's an impact of 49 million. Now, turning into a zoom to our costs and expenses, the main item, and it has been in the other quarters also, it was the same, so it is a recurrence. It is third-party costs. services this quarter maybe we had higher expenses and preventive main maintenance as well as corrective maintenance and obviously we have the right-of-way cleaning and all of these services are in order to deliver a better quality of services to our clients so they come with all the investments that we are making on the investment branch Sorry, distribution branches. So this is to provide better services for our clients, and we'll go over that when we discuss our GEP and other expenses. Also with this large investment program, we have the commissions, and we have a disposal of assets, which has been part of our management. We are disposing of assets that in the past, had some use for SEMIEG, but no longer have. Now, talking about the impacts already, the post-employment restructuring that we had up to December of last year, we see that if we compare that growth, including the post-employment, the fact that the growth is then 2.5% quarter on quarter. We will also be discussing how this increase can be seen in regards to the network kilometers of patients, which is also important for the distributing company. Now we talk about our debt profile and all the work that we have been doing to match the profile of the debt with the profile of our investments. We know that we have five years of investments in the distributing company up to the tariff review, that's going to happen in 2028. That's why we are increasing to extend our debt. And so we reached 6.6 years of average maturity. And also important is that 76%, that is the bulk of our debt, is due after the tariff review rebuilding. in 2028 so this that profile is being extended so that also it matches with the recovery time of the parents that we'll have in the future the last funding that we had in the quarter was at the venture combined with a loan of four one three one in the last issue they have been made lower than the sovereign risk, and we were able to include $2.6 billion to the distributing company in this quarter. We reached the leverage of $2.45 net debt over recurring EBITDA, very healthy, and this leveraged debt also includes the financing of the investment program, but this leveraged is always going to be at very healthy levels over the whole program that, of course, will peak in 2028 when we are going to have That cost also is very reasonable. It's 89% of the CDI. Of course, interest rates are high for everyone, but this is a cost that's very positive for the company. Now, going over the operating cash generation and how it has been used over the quarter, we start on the EBITDA of 1%. and we discount the non-cash. In fact, we reached the EBITDA of 1.6. We have the effect of the CVA, Parcel A Variation Account, which has had a relevant impact because of the higher price, the distributing price. Company has a cash impact that is going to be recovered next year. Dividends received, the working capital with a positive effect, and then we reach the operating cash flow of 1.5 billion and how we have used it over the quarter. Income tax, social contribution, interest, leases, and our investments, which is the most representative share here of 1.6. Cash delta was negative, and we showed that in the cash availability that we have from one quarter to another. Now, going into the details of these companies, as we said, Semic B had a representative performance in EBITDA, an increase of 26.6, reaching $1.1 billion. and the quarter, especially because of the fact I already mentioned of that adjustment of 7.78. And also, we had an increase in the residential market. This is nice. It is representative, significant for us. As we know, residential tariffs are higher, so that has a good impact in our revenue.

Now here we have our energy market.

We have been saying that in the past quarters that there is a migration in the case of the transported energy from two clients to the basic network. We will no longer see the drop effect after the second or third quarter. We will no longer be seeing these effects because it will then have been integrated in the quarters, but we do see that reduction.

And

We also talked about the positive effect that we had in the residential area, but we did have a period with a lot of rainfall and milder temperatures, and we see rural with a significant drop, especially because of the rainfall period. And we still see the effect of GD, the super generation, impacting Minas Gerais. And a piece of information, is that DG represents 26% and the captive market is very representative in our region. Regarding operating efficiency for CEMIG-D, we have already mentioned. I believe that the main effects have already been offset. We are working on an efficient management strategy. and we have been working on the management of right-of-way cleaning and everything that we need to do to provide a better service to clients, and we are under the regulatory limits as we should. Now, for operating efficiency, our indicators for CMB are within the regulatory limits, indicators for losses.

See here, you have the losses indicator for our spot price.

We did have a changing criteria in 2025. We went from 24 to 35 months, and that's why we had a positive effect. And over the period, it balances out. So this was just because of a changing criteria. but we see that our delinquency is very low. We have positive indicators. And here, you know, we are very proud to bring you these results. Our DEC of 875, the best one in our history, and also FEC that has a positive performance, bringing better services and better conditions to our clients. For CEMIG-GT, as I mentioned, and it's important to stress CEMIG-GT today, obviously it has generation, transmission, and it also has a share of the contracts coming from the trading companies. So the main effects, and we already mentioned, and I'll talk more about them, but the main one is here as the management of hydrological risk achieved. But when we break it down for business, four generations, in fact, a year we had that hydrological risk and energy purchase at a much higher price. And in transmission, we had a lower IPCA, and we know that our contract asset is remunerated by IPCA or inclusion, and that's the impact in the transmission company. Now, turning to the trading area here, we see the main challenge in the quarter, and the main impact has been... the closing of positions and that was because we did not fulfill contracts that were not delivering P90 and some contracts that we were able to recover part of this amount at the end of the year because some of the positions have been sold and also because of some credit events and I believe the whole market is seeing that. But the main effect here, yes, is really price. Semixim, so Semixim is adding capacity to its portfolio, and it did have a significant increase in recurring EBITDA of around 100%. That's very nice to see Semixim's growth and the addition of new operations. that will be bringing more energy to our portfolio. And GASME, this quarter, also posted this effect. As clients migrate to the free market, this margin is reduced, and that is the main effect that we see in GASME. We will be seeing that happening over time because, there is a migration of clients to the free market. And now we end the presentation very proudly honoring our electricians. They are the heart of CEMIG. We do exist because of them. They represent us, and they were the winners of the Road EU champion team in Costa Rica. We went there. For the competition, we did compete. We were the winners, and we did not have any safety failure, and this is the main message. We want to be efficient. We want to provide the best services to our clients, but we also want to deliver services in a safe way, so special... of congratulations to our champions, because they move energy. So thank you all very much. And now we will open the floor for the Q&A session. We will right now start. the Q&A session. To ask your question, click on the Q&A icon located in the bottom of your screen and type your name to get into the queue. When you have your name announced, you will receive a request to enable your microphone. By accepting it, you can ask your question live. Please ask all your questions at once and wait for the company's reply. For the session's dynamics, the names of participants will be announced so that they can ask their questions live. you will see a request to enable your microphone, and then you should open your microphone to ask your question. Participants also may send their questions on the chat, and those will be organized according to the time available. Bom, reforço aqui mais uma vez que estamos, again, I would like to say that all of us here are available to take any questions you might have.

Well, our first question is from André Sampaio, Southside, from Santander Bank.

André, please, you can ask your question live.

I'm going to read his question. André's question is, I would like to understand how the discussion on the plant renewal is going.

I will turn that question to Marco da Camino. Hello, André. Thank you very much for your question and the discussion about the concessions A renewal of Sacra Vale, Emburcação e Nova Ponte is going well. We have great contact and interaction with the Ministry of Energy and ANEL, and we expect to renew these concessions in the next few months before they are due.

Thank you. Okay, so a question to our...

Marcos Oligo. So the question is from Marcos and Marcos Vinicius. How can we reduce hydrological risk with alternative energy so that we can address these deficiencies?

Good afternoon.

Thank you very much for your question.

Well, to reduce hydrological risk, if we diversify our portfolio, we are able to avoid the dependency of a single generation.

So our portfolio is already designed like that. We have our hydrological plants, but also we have other a wind and solar component. so we do have the GSF impact, but we believe that this is at a lower proportion rather than if we have everything concentrated on HPPs. The other way of managing that is really to hire ahead of time, and we are paying attention to that. There was a reduction of GSF in the beginning of the year, But the second half of the year, that would concern us, and just that could be at a lower level, but we already have an adequate reserve for that. to avoid significant impacts over the years. Thank you very much, Marcos. I have two questions to our CFO and our officer, Andrea Almeida. The first question is, what can we expect from the next tariff review in 2028? And the second question is related to the increase of the debt vis-a-vis the investments, considering that we have a two-digit Well, talking about the tariff review, obviously, we are making the most effective investments according to our plans in the distributing company, and we are sure that these investments will be well acknowledged in our tariff review. And, of course, and we will know that in the future, but we take into consideration the increase of the asset base, discount the depreciation, and we will see the impact of the rebuilding of the average based on what we will see in the five years. Maybe we will have $22 billion. So considering these investments, we will have a... rebuilding of the base, we reduce depreciation, and then we will get to a variation that's going to vary the level of the EBITDA in 2028. We are very optimistic about the recognition of this investment because we are very cautious in our investment. And thank you for your questions. I forgot to... Thank you. Now, moving to the other question on the leverage. Canadian finds itself at a very healthy leverage stage, and we do believe that over the investment program, leverage tends to grow so that we can carry out the investment program of 44 billion in the next five years. Leverage tends to increase, to grow up to 2028 when it's going to come down. And, of course, with the tariff review of the distributing company. So always considering very healthy levels. And so... much so that we got another AAA. So now we have two AAA ratings by Pitch and Moody's, proving that CEMIG's credit quality is very positive. So, yes, we have high interest rates right now in the country, but we do have a return on our investments that are higher than CEMIG. And that's why we are focusing investments, especially in the regulated sectors of distribution and transmission. And, yes, we do believe that these investments generate value for shareholders, and this leverage is at a level that is very comfortable for the company. Thank you, Andrea. Our next question. For Marcos Vinicius, first from Ricardo Bella from SACRA. He would like to understand which are the possible impacts with the change of the risk parameter of SAVAR in the price curve. Is that already impacting you at the trading level? Thank you for your question. We are following up this discussion. We did have a public hearing, and the SMA is going to discuss the change of these parameters for next year. There is an initial assessment of maintaining them, but we have seen that in the public hearing, a lot of contributions arose considering possibility to reduce the levels of CFR. Considering that we already have a more controlled situation and simulations show that it is possible to have a risk level, the right protection at a lower price.

So we would not be so risk averse.

So if that changes, of course, we are going to have prices impact, and the prices could be lower, and that would be beneficial for our position because we still have open positions. We have long positions for 27, 28, which are the colder years and the ones that will be more affected in the spot price. If that happens, and we are observing this movement, it might be interesting for us to start closing these positions.

Obrigada, Marco. Thank you, Marcos.

Next question for you, again, from Rafael Correa. He would like to understand, he wants us to talk more about the strategy of the company's trading branch and considering that for 2026 we have a challenging GSF and what are going to be the impacts on the market. Thank you.

2026 is a challenging year for us. And

We did discuss that in our semi-page, because we did have a development of our margins in Tennessee that would be the lower margin of our history. is going to recover in the future. But in 2026, because of the history of prices in the market, we contracted ahead of time, and we know that we had a decrease in the contracts, and the contracts had a reduced margin.

And in addition to that, we have short-term elements that could reduce results.

So difference in sub-market prices that are high in the beginning of the year, we expect them to drop for the rest of the year, but that's an impact, also a reduction in some contracts. So there are situations, factors that could turn this year into a more challenging one. But our vision is that in the future, these impacts will come down because of the systemic progress and our margin because of the prices of the market also is going to evolve. So the hydrological risk, once again, we had in the first quarter.

a realization that was lower than the expectation.

So for the challenging situation usually comes in the second quarter. We believe that's going to happen according to what we are planning in a way that in the second half of the year that's not going to be an impact as we had in the first quarter. Thank you, Marcos. Another question now coming from João Fagundes from Banco Bradesco. Can you tell us how is the season profile of our plants, if it's like MRE? And what is our discussion in the respirators? You already talked about this, right? Well, our seasonality is very close to MRE. We did have the smallest difference in January. Maybe we suffered this effect a little bit more because it's compensated. and the rest of the year, but it is very close. And about Sevar, as I mentioned, there is a perception that you can see... Because of the contributions from the public hearing, we see that there is room for a reduction. We had 45 contributions, and two-thirds of them were forth of our parameters that were not averse or less averse to risk. So we might have a review, and by having a review, we will see this beneficial effect to close the positions, as I mentioned. Thank you, Marcos Vinicius, and we thank you all very much for your participation. The IR superintendents are available for any other questions you might have. So we end the video conference for the earnings of the first quarter of 2026 for CEMIG. Have a nice afternoon.