CEMIG (CIG) Q3 2026 Earnings Call Transcript

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DATE

Friday, Nov. 13, 2026

CALL PARTICIPANTS

• Investor Relations Superintendent - Carolina Senna
• Chief Executive Officer - Marco Aurelio Martins da Costa Vasconcelos
• Chief Financial Officer and Investor Relations Officer - Leonardo George de Magalhaes
• Chief Information Technology Officer - Luis Claudio Correa Villani
• Chief Distribution Officer - Ernando Antunes Braga
• Chief Trading Officer - Sergio Lopes Cabral
• Chief Legal Officer - Sergio Pessoa de Paula Castro
• Cemig SIM Chief Executive Officer - Yuri Araujo de Mendonca

TAKEAWAYS

• Recurring EBITDA -- BRL 2 billion, representing a 31% increase year over year driven by operating and financial discipline.
• Consolidated Net Income -- BRL 1.7 billion, reflecting a BRL 1.1 billion impact from a reversal of tax provisions following a favorable court ruling on profit-sharing programs.
• Investment Program Execution -- BRL 5.25 billion, or 75% of the total BRL 7 billion annual plan, with BRL 4.1 billion allocated specifically to distribution infrastructure.
• Leverage Ratio -- 2.43 times EBITDA, which management stated is an adequate level to finance the company's stepped-up growth and investment program.
• Cash Position -- BRL 5.4 billion at the end of the third quarter, supported by BRL 6 billion in cash generation during the first nine months of the year.
• Transmission Investments -- BRL 500 million, focusing on reinforcements to drive value for shareholders.
• Cemig-D Net Income -- BRL 500 million, nearly doubling the BRL 269 million reported in the prior-year period.
• Distributed Generation Growth -- 24.8% increase year over year, with these projects now representing approximately 25% of the company's total billed market.
• Residential Market Demand -- 6.9% growth in billed volume, which helped offset declines in the industrial and rural sectors.
• Rural Market Consumption -- 4.5% decrease, reflecting more favorable rainfall patterns that reduced the requirement for irrigation.
• Operating Expense Efficiency -- 16.5% below the regulatory limit, as the company maintained cost growth very close to inflation when excluding nonrecurring items.
• Service Quality Metrics -- 8.61 hours for DEC and 4.8 times for FEC, both of which are currently below the maximum limits established by ANEEL.
• Delinquency Provision -- 53.3% reduction in expected credit losses compared to the third quarter of 2025, reflecting controlled delinquency rates.
• Cemig GT Performance -- 12% increase in EBITDA, although net income fell 6.5% due to lower inflation impacts on regulatory assets.
• Energy Trading EBITDA -- BRL 18 million, a reversal from a negative BRL 37 million in the third quarter of 2025 driven by favorable submarket pricing and rainfall.
• Gasmig Regulatory WACC -- 8.24%, as published by Arsae to remunerate the company's investments in gas distribution.
• Gasmig Project Progress -- BRL 132 million in capital expenditures, primarily for the conclusion of the Centro-Oeste Project.
• Debt Maturity Profile -- Seven years, which management stated provides sustainability for the execution of its multiyear investment plan.
• Third-party Services Cost -- BRL 54 million increase, reflecting investments in quality improvement and responses to extreme climatic events.
• Industrial Market Volume -- 2.5% reduction, attributed to the migration of industrial clients to the free energy market.
• Interest on Equity -- BRL 200 million in forecast, in line with the company's established dividend policies.

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RISKS

• Magalhaes stated, "we know that we are having now extreme climatic events this year because of the Super El Nino, and that has an impact in our OpEx," noting that weather volatility requires higher operational spending for system maintenance.
• Magalhaes indicated that higher interest rates have created a more challenging environment for M&A operations, potentially impacting the execution of growth strategies via brownfield acquisitions.

SUMMARY

Companhia Energética de Minas Gerais - CEMIG (NYSE:CIG) reported a third quarter characterized by the execution of its multiyear BRL 7 billion investment plan and the renewal of core energy concessions. Management confirmed the renewal of the Sa Carvalho plant for 30 years and noted positive expectations regarding the renewal processes for the Nova Ponte and Emborcacao plants currently with the Ministry of Mines and Energy. The company achieved a AAA credit rating from major agencies, which management indicated supports its strategy to finance growth through the capital markets. Financial results were significantly influenced by a reversal of tax provisions and a tariff adjustment that contributed to cash generation in the distribution segment.

• Management indicated that the growth rate of distributed generation is expected to slow as newer projects under GD2 and GD3 regulations are less attractive to consumers than previous iterations.
• Magalhaes stated that the company is currently within its regulatory goal for losses and expects positive reflections from recent infrastructure investments to be concluded by the 2028 tariff review.
• The company reported that the first half of 2026 was a difficult period for its trading business, but the unit has moved into a favorable position for 2027 based on future price curves.
• The CFO noted that the company successfully accessed the capital markets in the second quarter, helping maintain a cash balance of BRL 5.4 billion for future investment execution.
• Chief Executive Officer Vasconcelos stated, "our EBITDA was sound and very consistent, recurring EBITDA of BRL 2 billion, 31% higher year-on-year, reflecting our operating and financial discipline."

INDUSTRY GLOSSARY

• AAA Rating: The highest possible credit rating assigned by a rating agency, indicating an extremely low risk of default.
• ANEEL: Agência Nacional de Energia Elétrica, the federal regulatory agency for the Brazilian electricity sector.
• Arsae: The regulatory agency responsible for water and gas services in the state of Minas Gerais.
• BRL: The Brazilian real, the official currency of Brazil.
• CDI: Certificado de Depósito Interbancário, a benchmark interest rate used for interbank lending and financial contracts in Brazil.
• Cemig-D: The distribution subsidiary of the Cemig Group.
• Cemig GT: The generation and transmission subsidiary of the Cemig Group.
• Cemig SIM: A subsidiary focused on distributed generation, energy efficiency, and technology solutions.
• DEC: Equivalent Duration of Interruption per Consumer, a metric measuring the average duration of power outages for clients.
• DG: Distributed Generation, the production of electricity at or near the point of use, such as solar panels.
• FEC: Equivalent Frequency of Interruption per Consumer, a metric measuring the average number of power outages experienced by clients.
• Gasmig: Companhia de Gás de Minas Gerais, the natural gas distribution subsidiary of Cemig.
• IPCA: Indice Nacional de Preços ao Consumidor Amplo, Brazil's official consumer price index.
• WACC: Weighted Average Cost of Capital, the average rate a company pays to finance its assets, used as a benchmark for regulatory returns.

Full Conference Call Transcript

Carolina Senna: Good morning, everyone. I am Carolina Senna, CEMIG's Investor Relations Superintendent. Welcome to CEMIG's Third 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.cemig.com.br, where you also find the company's presentation. [Operator Instructions] We will now start CEMIG's video conference call with Marco Aurelio Martins da Costa Vasconcelos, CEO; Leonardo George de Magalhaes, CFO and IR Officer; Luis Claudio Correa Villani, Chief Information Technology Officer; Ernando Antunes Braga, Chief Distribution Officer; Sergio Lopes Cabral, Chief Trading Officer; Sergio Pessoa de Paula Castro, Chief Legal Officer; and Yuri Araujo de Mendonca, Cemig SIM CEO.

For the initial remarks, I turn the floor over to our CEO, Marco Aurelio Martins da Costa Vasconcelos, who will start the presentation. Please, the floor is yours.

Marco Aurelio Martins da Costa Vasconcelos: Good morning, everyone. It is a great pleasure to be able to be here with you in this earnings call for the third quarter of 2026. Thank you, Carolina, for your kind words to my officers here present. This is a top-tier team. Thank you for the opportunity of working with you. I just have some brief remarks highlighting the main topics of this third quarter. Our EBITDA was sound and very consistent, recurring EBITDA of BRL 2 billion, 31% higher year-on-year, reflecting our operating and financial discipline. Regarding our concession renewal for Sa Carvalho, we were able to secure another 30 years, and we have great expectations to renew Nova Ponte and Emborcacao.

We know that the Ministry of Mines and Energy is in charge of the process, and we have positive expectations about the process. Another remark and an important highlight is our AAA rating and the main rating agencies in our country. So we are very happy for having achieved the top rate here. Regarding our interest on equity, we are in line with our dividend policies with BRL 200 million in forecast here. And we have also a remark on the reversal of provisions of our profit-sharing program. This was a favorable court ruling in the social security sphere that caused this reversal of tax provisions with an impact of BRL 1.1 billion in this third quarter.

This is stemming from our liability management. I thank our legal officers and also our CFO team who were able to make that possible. Now I will turn the floor to our CFO, Leonardo, who will move on with the presentation.

Leonardo George de Magalhães: Thank you very much for your initial remarks. Good morning, everyone. Thank you for participating in this call. Once again, as our CEO mentioned, these are consistent results in a challenging environment, and we were able to execute our strategy and deliver results. And we understand that we are very optimistic with the company's results after these initial remarks. So let's talk about the investments for CEMIG for this year. These are investments close to BRL 7 billion in 2026. And we are following our strategy with the forecast investments for this year. We have invested approximately 75% of the total amount planned for 2026, and we are optimistic.

Our teams are very much engaged so that they can execute this investment program not only in 2026, but also in '27 according to the distribution tariff cycle, which is very important to us, aiming the tariff review in 2028. We have invested approximately BRL 4.1 billion in distribution. I draw your attention to also investments in transmission, almost BRL 500 million, and that will bring adequate results to our shareholders. The generation results and investments also related to maintenance CapEx, and also Gasmig with BRL 132 million, basically the conclusion of the investments in the Centro-Oeste Project.

And also, we have investments of BRL 258 million for Cemig SIM, and we understand that this is a very important investment as well. As our CEO has mentioned, we were able to renew Sa Carvalho, 1 of the 3 plants that had the concessions due in '26 and '27. We are optimistic about the renewal of all of these concessions of Emborcacao and Nova Ponte, which are the next ones for renewal. We have already a positive opinion from ANEEL in terms of the renewal of these concessions. Now we are talking to the Ministry of Mines and Energy, but we're very optimistic regarding the renewal of these other 2 as well.

So going over the results of this quarter, we have BRL 2.7 billion in EBITDA in this quarter and almost BRL 2 billion -- BRL 1.7 billion in net income in this quarter. And even if we exclude the nonrecurring factors, just as our CEO mentioned, which has a positive impact in the company's dividend for 2027. And this was a result just considering recurring events, 31% in EBITDA higher than 2025 and a net income almost 20% to 17.9% higher than 2025, and that's why we understand it's a reason to celebrate the positive results. And then we are going to go into the details in the next slides, all the contributions for these results.

The debt profile for the company. We are AAA for the first time in history by the main rating agencies. We have the right debt profile. The maturity schedule is almost 7 years. So we do not have major pressure in terms of maturities for the next few years. And that allows the company to have sustainability to continue executing its strategy and to work on our investment plan. Our leverage is 2.43x our EBITDA generation. It's also adequate to this slow growth and stepped-up growth of leverage that we have planned. It's part of our strategy to finance our investment program. We understand that's going to bring return to our shareholders.

Also, we have a balanced debt with maturities and the indexers here, part of that related and indexed to the CDI, and another half of that linked to the IPCA. Here, we have consolidated costs and expenses, which have grown 10.3% compared to 2025, but you see that third-party services had an increase of BRL 54 million, but that has to do with investments that we are making in quality improvement, but also it impacts our OpEx. We know that we are having now extreme climatic events this year because of the Super El Nino, and that has an impact in our OpEx.

But the company in a very disciplined way is able to allocate costs to the operation of the system, reducing costs in other areas of the company. Also, we draw your attention to the fact that the costs in 2025 are slightly lower because of nonrecurring effects that happened in 2025 due to the sale of assets or real estate assets then. So if we consider that, we will see that the variation in expenses of 2026 compared to 2025 is very close to inflation. Now regarding total expenses of the company, we have great news also in other areas, financial compensation, for instance, when clients do not meet some quality indicators, they are reduced.

And so we are able to provide services to our clients with greater quality, also reducing expenses. Therefore, in total expenses, they have increased 4.7% vis-a-vis last year when we did not consider the nonrecurring events because of the legal contingency regarding the tax effect on the profit-sharing program. And thanks to a successful job done by the legal team, we were able to deduct this provision. Therefore, we won't need to have the provision for that lawsuit. Moving on, the cash generation for the company is very robust. We generated around BRL 6 billion in cash in these 9 months of 2026, representing BRL 8 billion if we annualize that result.

And that cash generation is also supported by the financial market funding, and we have the attractiveness of the company because this is a AAA company, a sound company with the right capital allocation, and we also can have a successful access to the capital market in the second quarter. Therefore, the company can execute its strategy to grow. Therefore, we end the quarter with around BRL 5.4 billion in cash, which will guarantee the execution of investments for the next months. Now moving on to Cemig D's results, 54% in the comparison to the second quarter of 2025 and '26 with a cash generation measured by EBITDA cash generation that's very robust.

The third quarter of 2025 was more difficult to the company. And in this quarter, we see the recovery of the market for Cemig-D. We will be showing you in the next slides that has also contributed to the greater cash generation, also the tariff adjustment that happened on May 28 that contributed to a greater cash generation to the company. And about net income, even with the effects because of the debt and the interest rates on the debt, we almost doubled the net income from 1 year to another, BRL 269 million in 2025 to BRL 500 million in net income in this third quarter of '26.

And other favorable effects include the reducing expenses with post-employment, especially with health care plan, thanks to the agreement that we had with the union, we see a positive impact starting this year and also provision for expected credit losses that is controlled by the company. Now the billed market growth in 1% comparing 2025 to '26 in third quarters. And also, you see the difference in the classes, which are important for revenue generation for the company. Residential growing 6.9% and you see rural with a reduction of 4.5%, which is natural because there's a more favorable rainfall time, which reduces irrigation, and that's natural. Industrial going down 2.5%, but that's basically migration of clients to the free market.

And even with this migration, they are still paying the total power tariff for the company. And DG is growing. It already represents almost 25% to our market. In the '28 tariff review, this market is going to be adjusted, but we understand that this growth in DG, which was 24.8% when compared '25 to '26 is going to be reduced considering that as projects come in and start operating, we see that GD2 and GD3 are less attractive and this impact in our market is reduced, but it is significant up to the third quarter of 2026 of almost 1/4 of our total market today is the DG market.

Now moving on, our OpEx, we are at 16.5% below the regulatory limit. This is the commitment of the company with operating efficiency. Once again, BRL 622 million, and the company is aiming to have its costs controlled and a discipline in capital allocation in its investment program in line with our strategy. On the next slide, it's also important to make it clear, and it's always important to have positive financial results, but we also need to be careful about the quality of our services to clients. Our DEC is still lower than the prior year, 8.61 in September of '26, a very significant number to the company, lower than the total DEC of 9.26 by ANEEL.

We have an important goal for DEC for this year. And all of the investments that the company is doing also has this impact in our service, reflecting on the DEC and FEC. FEC at 4.8 lower than 5.37, which is the maximum allowed by the regulation to be executed by the company. Also losses, our delinquency is controlled, provisioned losses in '26 regarding '25, we had a reduction of 53.3%. That is -- we are posting consistent results and quality results that are converging with the company's investments. Now results on Cemig GT, 12% higher in the EBITDA considering 3Q '25, net income is slightly lower, 6.5%. In the next slide, we'll go over that.

You will be able to have an understanding the impact of each one of the businesses in Cemig GT results. Also important for the company was the generation here, 6.9% lower EBITDA compared to 3Q '25, but this is not a reduction of operating efficiency. This reduction is very much explained by lower inflation in the third quarter of '26 compared to '25. And we have important assets, regulatory ones for Cemig GT that are posted and that are updated by the inflation and that generate revenue for Cemig GT. And with lower inflation during this period of time, there was also a drop of these impacts compared to the prior year. The same thing happened in transmission.

Important regulatory assets over BRL 5 billion in transmission assets also updated by inflation, and that has affected the total revenue of our transmission company, but we are still investing in reinforcement and our transmission company is still generating positive impacts and generating value to shareholders, thanks to the execution of its strategies. We are very disciplined, and we can understand that this is a benchmark in the transmission sector when compared to the other Brazilian electric sector companies. And about our trading companies, Cemig SIM and others, we have a positive impact here in 2025.

In the last call for the second quarter, we mentioned that the first half of 2026 was the most difficult period for our trading company because we were closing positions for the year, and we expected the positive results for the second half of 2026. And this is actually happening. Now turning to the consolidated results for trading company that has operations from Cemig GT and also for Cemig Holding, we realized a significant improvement. We went from negative EBITDA of BRL 37 million to BRL 18 million positive EBITDA in 3Q '26. A number of factors helped us here.

Of course, the new strategy to tackle this challenging scenario for energy trading and also the submarket effect, basically low in 2026 against minus BRL 19 million in 2025. And also spot prices help companies closing positions at favorable positions. We have a great more rainfall. Therefore, there was a reduction in energy prices and more positions more favorable to the company. And we now understand that the transmission company is at -- or the trading company is at a favorable position for the next year, considering the closing of price curves in the future, whether for '27 or the upcoming years.

Moving on, now we are getting close to the end of our presentation for the earnings call of this quarter. So Gasmig recurring EBITDA with a slight drop, but that's very important. This is a company that generates BRL 800 million of EBITDA in a year, very important result in the portfolio results of the company. And that's because of client migration to the free market, generating lower margins to the company with an impact in the net income, but still generates sound, consistent and important results for the Cemig Group. And the good news is that the tariff review for Gasmig has not been concluded yet, but the WACC has already been posted.

It's going to be 8.24%, and that has been published by Arsae. We understand that this is a fair and adequate WACC that remunerates investments of Gasmig. So basically, this is our earnings presentation for the third quarter. Once again, a sound and consistent results in a very challenging environment. And we're still executing our strategy in a way that we are very much focused in our investment plan. And thank you all very much, and we now will be available for the Q&A.

Operator: [Operator Instructions] Our first question is from Ricardo Bello from Safra.

Ricardo Bello: Can you talk about your expectation regarding the battery auction and how you see the discussion on the charges definition? What is your appetite for acquisitions now in a tighter interest rate scenario? And finally, what is the visibility of the regulatory agency? And what do you expect to address still this year such as losses?

Carolina Senna: I will turn to Fredson, so that he can start talking about the battery auctions.

Unknown Executive: Good morning, everyone. It's a pleasure to be here with you. For the battery auctions, we expect it to be a very aggressive auction. We have a lot of projects already registered and the demand is not known yet. And we understand that this is going to be a tight competition, especially when we bring into the context the [indiscernible] and the distributions of projects all over Brazil. So we expect it to be an auction that is going to be successful, but very aggressive and competitive prices.

Carolina Senna: Thank you, Fredson. And the other questions, I turn to our CFO, Leonardo.

Leonardo George de Magalhães: About the appetite for acquisitions, we understand that it's a scenario that is more challenging, higher interest rates to close M&A operations. But once again, we have an investment program that is well structured where we prioritize investments in Minas Gerais, especially in our distributing company and also transmission reinforcements, and we intend to execute those for the next years after the tariff review. These are investments that are very important. We are doing them in-house, and we believe that they are going to bring return to shareholders. If there is an opportunity for an M&A that will bring value to shareholders, we'll consider those. But this is a more challenging scenario to execute a growth strategy via brownfield.

About the regulatory agenda, as we have been -- have already mentioned, and this has to do with the losses today, the company's losses are under control. We are within a regulatory goal. We are very proud of that. This is one of the companies in the industry that can keep its losses within the limit established by the regulating agency and also Factor X productivity. We understand that this will be addressed up to the tariff review. And we believe it's going to have positive reflections for the company considering our investments today, we are very optimistic. We expect those to be concluded up to the tariff review.

Carolina Senna: Thank you all for your participation, and we stress that Investor Relations superintendents are available for additional questions by our e-mail. So now we end our third quarter 2026 earnings call for CEMIG. You have a great week, and thank you very much for being with us on this call. [Statements in English on this transcript were spoken by an interpreter present on the live call.]

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