CMIG3

Companhia Energética de Minas Gerais – CEMIG was incorporated on May 2, 1952 with the goal of providing the State of Minas Gerais with the infrastructure needed for development in the power generation, transmission, and distribution segments. Throughout the 1950s and 1960s, the company inaugurated its first hydropower plants, such as Tronqueiras, Itutinga, and Salto Grande, and began transmission and distribution operations, consolidating its presence in the Brazilian electricity sector. In the following decades, it expanded its generation park with plants such as São Simão and Emborcação and, in the 1980s, created Gasmig, in addition to adopting its current name, Companhia Energética de Minas Gerais – CEMIG. During this period, it also launched programs to expand service to low-income populations, environmental protection initiatives, and research into alternative energy sources, reinforcing its role as a public utility company with significant involvement in public policy.

From the 1990s onward, CEMIG intensified its partnerships with the private sector to build hydropower plants, such as the Igarapava Plant, which came online in 1998. In 2000, it simultaneously built the Porto Estrela, Queimado, and Funil hydropower plants and was added to the Dow Jones Sustainability Index, where it has remained ever since. In 2001, it built 12 new hydropower plants and had its shares listed directly on the New York Stock Exchange (NYSE), and in 2002 it began trading on Latibex, a segment of the Madrid Stock Exchange. In 2004, the company implemented the corporate unbundling of its operations, creating wholly owned subsidiaries Cemig Geração e Transmissão S.A. (Cemig GT) and Cemig Distribuição S.A. (Cemig D), and began operating as a holding company responsible for the group’s control and strategic coordination. CEMIG shares, traded on B3 under the tickers CMIG3 and CMIG4, represent ownership in a group that has consolidated over decades as one of the main players in Brazil’s power sector.

The current structure of the CEMIG Group is composed of the holding company Cemig H; the subsidiaries Cemig GT, Cemig D, Companhia de Gás de Minas Gerais (Gasmig), Sete Lagoas Transmissora de Energia S.A., and Cemig Soluções Inteligentes em Energia S.A. (Cemig SIM); as well as several subsidiaries and jointly controlled entities. In total, there are 87 companies and 44 consortia, with assets and businesses in several Brazilian states, although its operating focus is concentrated in Minas Gerais. The business model covers generation, transmission, distribution, sales and trading of electricity, as well as natural gas distribution and energy solutions. In 2024, consolidated net revenue was R$ 39.8 billion, with no significant concentration in any single customer, since no individual billing exceeded 10% of that amount, indicating a diversified base of consumers and counterparties across its different business segments.

In power generation, CEMIG operates a 100% renewable portfolio composed of hydro, wind, and solar assets. On December 31, 2024, Cemig GT held interests in 48 centralized generation plants, consisting of 36 hydropower plants, 10 solar photovoltaic plants, and 2 wind farms, located in the states of Ceará, Espírito Santo, Minas Gerais, Pará, and Rio de Janeiro, with total installed capacity of 4,679 MW. The generation matrix is predominantly hydro-based, accounting for 96.8% of generation in 2024, complemented by wind (2.5%) and solar (0.7%) sources. The group monitors plant availability through the FID (Availability Factor) indicator, which reached 96.44% in December 2024, a result associated with more efficient scheduled maintenance outages and low rates of unscheduled events. CEMIG’s share of total installed generation capacity in Brazil is 2.21%, according to ANEEL, underscoring its importance in the National Interconnected System (SIN).

In transmission, Cemig GT operates and maintains 42 own extra-high-voltage substations and approximately 5,060 km of transmission lines at 230, 345, and 500 kV, integrated into the SIN Basic Network. These assets represent about 2.95% of the total 171,640 km of transmission lines in the Brazilian system, according to data from the National System Operator (ONS). In addition to its own assets, the company provides operation and maintenance services for substations and transmission lines owned by other entities, maintaining contracts with 10 companies across 14 substations and 95 km of lines. Transmission is regulated by ANEEL and operated in a coordinated manner by the ONS, in an environment with strong state oversight and remuneration based on annual allowed revenues, subject to periodic reviews and compliance with availability and quality standards.

In the distribution segment, run by Cemig D, the group holds the largest power distribution concession in Brazil in terms of number of customers and energy distributed, according to ANEEL reports. The concession area covers about 567,478 km², approximately 97% of the territory of Minas Gerais, with a 574,606 km network spanning urban and rural areas, in addition to distribution lines. In December 2024, the market served totaled 9.404 million customers, including captive consumers in the Regulated Contracting Environment (ACR) and eligible consumers in the free market (ACL). The company also serves about 1.320 million beneficiaries of the social tariff, equivalent to around 17% of the residential class, placing Cemig D among the concessionaires with the highest number of low-income customers served. Distribution revenues come from both the sale of energy to the captive market and remuneration for use of the distribution system by free consumers.

Beyond the traditional electricity value chain, CEMIG maintains operations in energy trading, energy solutions, and natural gas. In the free market, it operates through Cemig Trading S.A. and Empresa de Serviços de Comercialização de Energia Elétrica S.A. (ESCEE), offering power purchase and sale services for free and special consumers, price and consumption scenario analysis, representation before the CCEE, contract structuring, and technical consulting. In 2024, CEMIG maintained its leadership in serving the free market, with a share of around 14%, with customers in every state, especially in Minas Gerais, São Paulo, and Rio Grande do Sul. The company also trades renewable energy certificates, such as Cemig REC and I-REC, and reached 1,746 average MW of incentivized energy sold, equivalent to almost 15% of this segment, according to CCEE data.

The energy solutions and natural gas activities complement the group’s portfolio. Cemig SIM, created in 2019, operates in distributed generation, energy efficiency, cogeneration, electric mobility, and other innovative energy solutions, focusing on commercial, industrial, and service-sector customers. In 2024, it invested R$ 342 million in photovoltaic plants and reached 35.5 thousand subscription-based solar consumer units. Gasmig, in which CEMIG holds 99.57% of capital, is the exclusive distributor of piped natural gas in Minas Gerais, with a concession extended until 2053. In 2024, it distributed about 2.8 million m³ per day to 103.8 thousand customers in 49 cities, covering industrial, commercial, CNG fueling stations, cogeneration companies, and more than 100 thousand residential units, with R$ 358.4 million invested in expanding the network by an additional 211 km of gas pipelines. All these operations, combined with the strong regulatory framework of the electricity and piped gas sectors, shape CEMIG’s risk and return profile, and its CMIG3 and CMIG4 shares traded on B3 reflect investors’ exposure to an integrated public utility group with a significant presence in Brazil’s energy market.

The regulatory environment is central to CEMIG. Its generation, transmission, and distribution activities depend on concessions, authorizations, and permits granted by the federal government, under the supervision of the Ministry of Mines and Energy (MME), the National Electric Energy Agency (ANEEL), the National System Operator (ONS), and other authorities. Laws such as the Concessions Law (Law 8,987), Law 9,074, Law 9,648, and Law 10,848 established unbundling, concession auctions, open access to distribution and transmission systems, and the regulated and free contracting models. These regulations, as well as subsequent amendments, directly affected revenues, concession terms, and the economic conditions of Cemig GT and Cemig D contracts, including a significant reduction in allowed transmission revenues in 2013 and processes to indemnify undepreciated assets. In addition, the company benefits from tax incentives for projects located in the Sudene area, with a 75% reduction in income tax. These amounts are accounted for as government grants and allocated to a tax incentives reserve, adding another relevant regulatory component to its results.