Cemig 2Q 2026 Earnings Call - Trading Losses Offset by Strong Distribution Growth and Steady Dividend Payout

Carolina Sena, Investor Relations Superintendent, Cemig: Good morning, everyone. I am Carolina Sena, Cemig’s Investor Relations Superintendent. Welcome to Cemig’s second 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 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 bottom of the screen. Upon choosing interpretation, select the language of your 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 start the Q&A session. We now start Cemig’s video conference with Alexandre Ramos Peixoto, CEO. Leonardo George de Magalhães, CFO, and IR Officer. Luis Cláudio Correa Villani, Chief Information Technology Officer.

Demétrio Alexandre Ferreira, Chief Generation and Transmission Officer. Ernando Antunes Braga, Chief Distribution Officer. Sergio Lopes Cabral, Chief Trading Officer. Sérgio Pessoa de Paula Castro, Chief Legal Officer. Yuri Araujo de Mendonca, Cemig’s CEO, and Ronaldo Xavier Moreira Jr., Cemig CFO and IR Officer. For the initial remarks, I now turn the floor to Alexandre Ramos Peixoto, our CEO, who will start the presentation. Please, Alexandre, the floor is yours. Thank you, Carol. Good morning, everyone. It is a real pleasure to be here with you on my first earnings call as a CEO ahead of our dear Cemig Group. I take on this role with great confidence. Confidence in the company we have built, also confidence in the quality of our people, the excellence of our professionals, and above all, in the great potential that lies ahead. I would like to start with a very clear message.

Alexandre Ramos Peixoto, CEO, Cemig: We have a sound company. We deliver consistent results, and we know how to execute, and that consistency comes from a well-defined strategy, disciplined management, and a real ability to turn plans into tangible outcomes. It is important to make it very clear right now, the quality of the service provided to our clients, that will always be at the core of our priorities. We want to be recognized not only by our financial results, but also by the excellence of our operation and the quality of the experience we deliver to the millions of clients we serve. Over 9.5 million consuming units. That is why we will continue executing a relevant cycle of investments, especially in distribution.

We have over 22 billion BRL in our tariff review cycle for May of 2028, and we are investing to turn these networks more robust, modern, resilient, and prepared for the new demands of our clients and also for the transformations in the electric sector, highlighting the full opening of the electric power market in Brazil, which should happen in November 25th, 2028. As all of you know, the electric sector is undergoing a deep transformation, and I can tell you that we are very well positioned to be part of this future. We have quality assets, knowledge, investment capacity, and an experienced team, and very well-prepared one to execute our strategy. We have an important advantage. We are an integrated company. The combination of our businesses gives us scale, complementarity, and also a privileged view of the sector’s changes.

That integration strengthens our ability to navigate different cycles, seize opportunities, and create value in a sustainable fashion. The message I would like to convey to all of you in this first earnings call is of confidence and continuity of the implementation and the success strategy in the long-term view. A management with financial discipline, consistent results, and responsibility in our businesses, therefore, meeting our commitments and generating value to our shareholders. Today, we have a strong company, and we are working, and we will keep on working hard so that it can be even stronger. With that long-term vision, customer focus and discipline in execution and commitment with results that I start this new cycle, I will continue working on this new cycle of this management ahead of this company.

Having said that, I thank you very much for the opportunity to be addressing you, and I turn the floor to our Chief Finance Officer, Leonardo George de Magalhães, to start the presentation of the results of the second quarter. Thank you very much. Thank you very much, Alexandre, for your message. Good morning, everyone. Thank you for being here with us in this video conference call for the second quarter’s results. We will start with the highlights of this 2Q. We have had very consistent sound results with an operating performance of BRL 2.5 billion in the quarter, a recurring EBITDA that reflects our soundness in terms of results for the company. Our company, as Alexandre has mentioned, is integrated to a number of businesses that support our cash generation as well as our results at every quarter, bringing you consistent results.

Leonardo George de Magalhães, CFO and IR Officer, Cemig: Also, we have funding of BRL 4.6 billion also in this quarter. This was very relevant, and this was to support our investment program. In the next slide, we will talk more about that. This is an investment program that is very relevant, especially our distributing company that will be generating value for the next years. For shareholder remuneration, historically, this is a company that has a great remuneration to its shareholders, and we had interest on capital of BRL 631 million that represents BRL 0.22 per share. Growth strategy, our CapEx is of BRL 1.8 billion. We are going to go over that figure. Also, we had a tariff adjustment for Cemig Distribution with 6.5% of average tariff impact to Cemig’s consumers.

On this slide, we have the planned investment for the year, which is BRL 6.7 billion, and up to the first six months, we were able to invest BRL 3.3 billion, 49% of the total amount. The message is that we are in line with the investments forecasted for the year. As also we had estimated and we are communicating to the market, we have a large investment in our distribution branch, BRL 2.6 billion in these first six months, investment in generation of BRL 275 million in Cemig GT. Also, a significant highlight of BRL 227 million in Gasmig, making BRL 92 million in investments, especially here in the Midwest project and with 33.5 kilometers of network built in the quarter. Now, going over the investments of our distribution branch.

Here, the company, we see that with these investments, the company is adding a lot of value, not only thinking about the remuneration base that we expect to be included in the next tariff review in 2028, but also in the quality of service that we provide our clients, which surely will be positively affected by all of these investments. In transmission also, we have relevant investments, and these are investments that are bringing in additional revenue. Just for additional RAP in this quarter, we have BRL 36 million thanks to investments that have been concluded, and they are already bringing revenue to the company. In summary, the company is frequently being transparent, bringing to the market its investment program, and we are in line with the investments that we have forecasted for the next years. In this quarter, it has been no different.

Now we have the consolidated results for the company. These are good results, 9.3% year recurring result for EBITDA compared to the prior year. Net income 15.6% here. It was impacted by financial expenses because of the fundings that the company had to be able to provide support to its investment programs. This was already in our strategic plan. Here we highlight some non-recurring effects. Here, the voluntary dismissal program has an impact in the beginning, but in the long term, it will bring benefits to the company because it is a process where we’re naturally replacing our employees, and employees that are with us for a longer period of time, they get incentives to leave the company and new employees come in to help in our culture and our performance. Also, we have a free market customer arbitration.

There were some questions about some contract clauses, and this is being concluded now. Because of the maturity and the current stage of this process, the company considered to be necessary to have a provision of BRL 191 million for the outcome regarding this topic. This does not have a cash effect as of now, but right now we had to have provisions for that. In the prior year, we had a few adjustments, non-recurring as well because of RBSE remeasurement and also the remeasurement of post-employment liabilities. We should highlight as well that the provision for losses for the company because of delinquency and the company adjusted its criteria according to ANEEL and the market’s benchmark, and so that generated expected credit losses reversal of BRL 232 million with a positive effect in this quarter. Moving on.

We have here consolidated costs and expenses, which had an increase of 15.5% in this quarter. This was very relevant, but it’s important to highlight that we have seasonal effects. This is because of the investments that we had in this period in improving the quality of the network. All of this is very important so that we can improve our service to clients and also to tackle possible contingencies. Now we are talking about El Niño that we’ll be seeing now in the second half of 2026. In any case, we believe that we did have seasonal effects, and we do not expect to have a variation or to see a reduction in this variation when we complete 12 months and we compare 2026 to 2025.

But in this quarter, we did have a specific impact that was a one-time off impact. Therefore, this variation was of 15.5%, but the company’s costs are being controlled because we have financial discipline, and we are balancing out the improvement of the network, the investment in the processes that might help the company to serve the clients better. And we are keeping costs at a very disciplined level. Moving on. We have the debt profile. The company still has a high quality of credit. We are AAA in two ratings agencies and AA+ at S&P Global. And here we have our maturity schedule. The debt has a very adequate profile for the upcoming years, and leverage reaches 2.58 in the second quarter of 2026.

And we understand that considering our current investment plan, this leverage is right, and that corresponds to our expectation when we think that we have a tariff review in 2028. Therefore, our leverage has a growth up to 2027. But in 2028 it will come down because of the tariff review in our distribution company. But the company is still accessing the capital market in a frequent fashion, and it has great access to the market at also very competitive costs. On the next slide, we have our cash generation. We have a strong cash generation. Even with the adjusted EBITDA, you see that the EBITDA is reflected in the cash, in the operating cash here in this half of the year, close to BRL 4 billion.

So if you double it, we are generating operating cash of almost BRL 8 billion in the year, and that’s very strong to provide support to this investment program. And here we also have the third-party capital that helps the company in the distribution segment. And here we have this five-year cycle from 2023 to 2028. Now we’re turning to Cemig D and Cemig DG results. Cemig D has positive results, 21% up in EBITDA when compared to 2Q25. Recurring net income is in line, 8.9% down, but as we mentioned, also there was an impact of issues involving higher financial expenses because of the interest rates, which are high, and also the natural debt to provide for our investment programs. I also talked about the tariff adjustments. We had an average impact of 6.5% and the 4.9% correction in portion B.

Here, there is an increase of 2.7% in residential market. We also talked about the ECL reversal, estimated losses here. It has to do with current delinquency of our consumers. This is very much controlled by Cemig D. And here we have the energy market. It is down 1.6% when compared second quarter of 2026 to 2025. You see that the total power carried has increased a little bit, and we have 3.8% of drop in the captive market, because we had large clients leaving Cemig’s distribution network this year, and that did have an impact when we compare that to 2Q25. And when we compare the different consumers classes, we have residential growing 2.7%. And we also can highlight the rural class with a reduction of 11% because of the rainy season, which was greater in the second half of the year.

Therefore, there’s lower consumption by the rural segment. Cemig DG has a relevant impact. It now represents 25.8% of captive market of Cemig Distribution. Moving on. The company is still very much disciplined in its costs. As I mentioned, our OPEX today is BRL 416 million lower than the regulatory limit in this first quarter of 2026. Operating efficiency, also this is very important, and we see great financial results, consistent results for Cemig D. Also they are in line with operating efficiency. All the investments that the company is making, they have provided improvements in our quality indicators. Our FEC is 8.43 lower than the regulatory limit, so in a downward trend. FEC also 4.86 compared to 5.37, which is the regulatory indicator, that’s the limit established by Agência Nacional de Energia Elétrica, so we have good room here.

That is thanks to the investments that the company has been making in the past few years, which are bringing results in these indicators that prove that we have a good quality of service to our clients. Regulatory losses are still low, and lower than the real losses. We have already talked about the reversals for expected credit losses in this half of year. So the quality indicators for the company are in a upward trend, a positive trend. Now talking about Cemig GT, also we have great results, 10.6% vis-a-vis the prior year in EBITDA and recurring net income, with a reduction of 11.4% because of the increase of financial expenses as highlights. We have increased revenue from sales to end customers, 124 megawatts average, and also inflation adjustment on RBO revenue for plants that receive by quota.

There was an adjustment of BRL 29 million because we had a cumulative IPCA inflation here, and all of them are related to these grants. Now we have a breakdown for Cemig Geração e Transmissão S.A., and then return of the business for generation. Here we have a positive result, both in EBITDA as well as in recurring net income. EBITDA up 13.3%, and recurring net income also up, but here 3.6%. Average GSF here was better than what we had in 2025, and that has reflected in higher revenue that we have seen in 2026 compared to the prior year. For transmission, very positive results with an added RAP and also the regulatory assets of transmission that allowed our transmission results were 50% higher when measured by EBITDA compared to 2025, and recurring net income to 50%, BRL 190 million compared to BRL 120 million in the prior year.

Moving on, the Cemig trading results were BRL 180 million negative recurring EBITDA compared to the prior year. We talked about this provision of BRL 191 million. This is a one-time off result, stems from a specific action related to a major industrial client, which has generated an effective provision in the second quarter. This is not cash effect right now. Right now, it’s only a provision. So this is still being discussed. This negative effect in the second quarter stems from positions that have been settled and higher prices of energy purchased. This was already expected by the company. Also, the effects that have been related to sub-markets, especially regarding the South.

We understand that the trading company effects that generated this impact of -BRL 180 million have been very much concentrated in the first half of the year. We understand that the trading company results in the second half of the year will have positive results compared to the first half of the year, which we already knew. This was already planned. We knew it would have that type of effect, especially because of the company’s positions. But for the second half of the year, we understand that we are going to have a more favorable environment, both in hydrology and also because we have already settled positions that were needed for the year of 2026. On the next slide, we have Gasmig results, still sound results.

This reduction that we see both in EBITDA as well as in recurring net income for Gasmig, it was already expected because we had migration of clients to the free market. Therefore, we have a lower margin affecting the EBITDA and net income of the company. Also, that had an impact of the reduction of the volume distributed of 17%. All of these factors combined brought this reduction in the results. Gasmig has a tariff review that should happen by the end of the year. We are very optimistic about the project, and Gasmig should be bringing sound and consistent results to the group in the next quarters. Basically, these were the main highlights of our presentation. We understand that these were consistent and sound results in the different Cemig businesses. We understand that, especially in the trading company, it was a more difficult half of the year.

But we have a positive outlook for the next 6 months, and we will continue executing our investment program that will generate a lot of value to Cemig in the next few years, considering the tariff review that we will have ahead. I turn the floor now to Carolina so that we can start our Q&A session. Thank you very much, Leonardo. Right now, we will start our Q&A session. You may click on the Q&A icon on the bottom of your screen, and then you can write your name, and you can send your question by writing. Please send all the questions at once and wait for the company’s answer. During the session, we will be announcing the names of participants, and we will be reading the questions so that the company can answer them.

Carolina Sena, Investor Relations Superintendent, Cemig: Our first question is from Marco Aurelio, and the question is: Considering that there was an increase in tariffs only in 2028 and with the increase of the indebtedness and the debt cost, what will be the direct impact on the profits or the net income reduction for 2027, and what will be the impact in the shareholders’ remuneration? Thank you for your question. It is important to mention that Cemig has always been a great dividends payer in the electric sector. This is a company that we can say that has been one of the best in paying dividends. In our bylaws, by our bylaws, we have as a minimum mandatory dividends of 50% of net income. This is a relevant payout.

Leonardo George de Magalhães, CFO and IR Officer, Cemig: We understand that right now, in 2026, this is the year where the company’s results, because of higher financial expenses, will be relevant results, very positive ones, both for EBITDA as well as net income. We believe that we will keep on bringing positive dividend yields, whether now or in the next few years. We are going to have a tariff review in 2028. We will have a positive impact on results. Even in the next years, 2026 and 2027, considering the current payout of the company established by the bylaws of 50% of net income, that is a very attractive remuneration to our shareholders, even considering an adverse scenario to all the market. We understand that this dividend yield will continue being relevant and positive for our shareholders this year and also in 2027. Next question is from Ricardo Bezerra at Safra.

Carolina Sena, Investor Relations Superintendent, Cemig: How is your perspective for El Niño effects in the different areas of businesses? Are you going to have CapEx, a prepayment in the distribution and transmission companies to avoid possible incidents? For this question, we will have our Chief Distribution Officer to answer. Ernando. Please, Ernando. Good morning, everyone. Thank you very much for your question. El Niño requires a robust planning, which we have. For a maintenance plan, we have a contingency plan. Considering that we have the largest investment plan in history, we are executing our maintenance plan, also the largest one in history, our OPEX. We have AMI meters, automation, the electric system. For the second half of 2026, we are fully prepared for El Niño impacts. In addition to these investments, we have the penetration of our structure in the state as a whole to face this diversity.

Ernando Antunes Braga, Chief Distribution Officer, Cemig: In summary, we will have no impact in our budget because of El Niño. Thank you, Ernando. Now, to talk about generation and transmission, I would like to ask our Chief Generation and Transmission Officer, Demétrio, to take that question. Good morning, everybody. For generation and transmission, starting by generation, we have a permanent routine to manage these assets that is based in risks. We need to guarantee the availability of different pieces of equipment during higher demand. We run periodic tests for all the plants to make sure that when they are demanded, they will be working. We do not have above-the-average rainfall with El Niño, so we should have more rainfall for the South, not for the Southeast region.

Demétrio Alexandre Ferreira, Chief Generation and Transmission Officer, Cemig: In our point of view, we do not need contingency plans that are just more elaborated than the ones that we already have to our large plants and reservoirs. For storms, for the small plants that have smaller reservoirs, we are reviewing our contingency plans to guarantee access to them and also to control flooding. That is what we have for generation. We are fine about it. For transmission, we do have assets of high resilience. This is thanks to work that we have been developing for preventive maintenance, modernization, management based on risks. This contingency plan that we have in transmission is very robust. We maintain vegetation at low levels in the right of ways. We also have weather forecasts that will issue alerts in case that is needed, so that we can tackle all the contingencies if needed. We have devices all over the state.

These are previously placed in the state of Minas Gerais. In case of contingencies, we can return the lines at a lower period of time. So prevention is the key word here, and we are prepared for any problems that might happen in terms of contingencies, both for generation and transmission. Thank you, Demetrio. We have another question. Now, regarding auctions, I will ask our CFO and IR Officer to answer. The question is if we are interested in taking part in transmission auctions. Then Sergio Lopes is going to talk about the auctions for batteries. Please, Leonardo. Regarding auctions, yes. The company is considering transmission auctions and the last ones that happened in the country, we were following. It’s important to highlight the company’s discipline in allocating capital. We studied, we considered all these auctions.

Leonardo George de Magalhães, CFO and IR Officer, Cemig: If we understand that the return is interesting, we take part in them. But if the return is not attractive, the company rather allocates its capital and assets where we understand that we will have more value for shareholders. So the answer is yes, we are still keeping an eye on them, but we have discipline in capital allocation, and we will just be winners in the areas where we are sure that we will be generating value to the company, considering that we have several businesses and this is one of the key areas of the company, and we can diversify our capital allocation. Right now, as I have already mentioned, we understand that the regulated businesses and investing in reinforcements, even in transmission, they have been bringing more value, and they are very important in the value generation to our shareholders.

About data centers, I will turn the floor to Sergio. He can talk more about it. But we will also be analyzing the battery auctions, always taking into consideration the return to our shareholders in value generation. This is something that is key to us. Good morning, everyone. I will talk about data centers. Of course, we are talking to some market players to understand the segment and to see how we can turn profitable the sale of energy or the participation of Cemig in this process. We understand that there is an opportunity in the market, but it has to be analyzed cautiously, and we want to extract the best and the greatest value of this opportunity, understanding the assets and what are the benefits that they bring to the company.

Sergio Lopes Cabral, Chief Trading Officer, Cemig: So data centers are assets that we are considering, but cautiously, and how we can bring profit to Cemig and shareholders in this investment. Thank you, Sergio. The next question is about the maturity of the concessions. He’s asking how the process is going because the next maturity of Sá Carvalho. I’ll turn the floor to Leonardo. The market knows that we have three concessions that will have the maturity closed in 2026, Sá Carvalho, and two others in 2027. We may say that the process is moving forward. We have already a favorable note from ANEEL. Now this is being discussed in the Ministry of Mines and Energy. What we can tell you that we are very optimistic about the process.

Leonardo George de Magalhães, CFO and IR Officer, Cemig: Of course, we have to wait for the granting power approval, but we believe that is going to have a positive result for the company in this concession renewals process. Our next question is about the trading area. I will turn the floor to Sergio Lopes. It is about the losses that we had, that negative impact in the trading company’s results. How is the company prepared to overcome this loss, and what is its future outlook? Thank you for your question. I think we can go back to last year and this year and then talk about the future. The trading company is undergoing a moment when it has to settle positions. There was a moment when we had price model change and scenario changes, and we have been working in a very cautious way. Last year, we did have net income.

Sergio Lopes Cabral, Chief Trading Officer, Cemig: Maybe in the market, we were one of the few companies that were able to have this result. This year, we expected a possible negative EBITDA. Also, we had situations where we had a detachment of the south sub-market. This was an unprecedented case. I think this was the first time that this is happening. We were able to purchase energy, although it is expensive, and we are settling positions. We did that anyhow, so we exchanged positions with generation, and therefore, this remained in the group itself. Although we posted negative results in the trading company, it became positive in the generation company. The final impact was zero. We were able to end this year, and for 2027, 2028, we have brought down our position.

Of course, we have to be patient, and we have to be cautious to be able to settle these positions in the best time possible. We have been able to do that. For 2028, we already expect significant results for the trading companies. We have results of around BRL 1 billion, BRL 1.8 billion. That is what we expect to reach. We understand that we are prepared to undergo this moment. Right now, we are applying the best practices and the best strategies to serve the market. The whole market is having a hard time because of a structural issue, and we are having better results than our competitors, thanks to our strategies. For the future, we believe we will have good results. This is a difficult moment now.

Carolina Sena, Investor Relations Superintendent, Cemig: Again, this was expected, and we are looking at the best time to close, to settle positions, reduce losses, and also to have gains as we had last year. Thank you, Sergio. For the final remarks, I turn the floor to Leonardo. Once again, I would like to thank you all very much for being here in this call for the second quarter of 2026. I came back to the company in June, but when I was in the company from 2020 to 2024, we have always been very transparent in our strategies, which is to divest in complex and non-core assets and prioritize investments in the regulated sectors, especially our distributing company, always investing in operating efficiency. This strategy is already bringing results to the company. This is a winning strategy.

Leonardo George de Magalhães, CFO and IR Officer, Cemig: This is delivering value to shareholders, also to our clients, and we have the best quality indicators. We thank our investors for their trust, and we are very optimistic about the strategy for the continuity of implementation of this strategy in the company, greater operating efficiency, and discipline in capital allocation. Thank you very much. Thank you very much for your participation in this video conference call. The investor relations superintendent is available to take any further questions that you might have. Therefore, we conclude Cemig’s second quarter 2026 earnings conference call. Have a nice day. Thank you.