Cemig Fourth Quarter 2025 Earnings Call - Record BRL 6.6bn CapEx Funded by Strong EBITDA and Aaa Rating

Carolina Senna, Investor Relations Superintendent, Cemig: Good morning everyone, and thank you for waiting. I’m Carolina Senna, Cemig’s Investor Relations Superintendent. Welcome to Cemig’s fourth quarter 2025 earnings video conference call. We inform you that this video conference is being recorded and will be available on the company’s IR website at ri.cemig.com.br, where you’ll 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 your 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 the presentation, we’ll start the Q&A session.

Reinaldo Passanezi Filho, Chief Executive Officer (CEO), Cemig: We now start Cemig’s video conference with Reinaldo Passanezi Filho, our CEO, Andrea Marques de Almeida, CFO and IR officer, Luis Cláudio Correa Villani, Chief Information Officer, Marco da Camino Ancona Lopez Soligo, Chief Generation and Transmission Officer, Marney Tadeu Antunes, Chief Distribution Officer, Sergio Lopes Cabral, Chief Trading Officer, Sérgio Pessoa de Paula Castro, Chief Legal Officer, Marcos Montes Cordeiro, Institutional Officer, Carlos Camargo de Colón, Gasmig CEO, and Iuri Mendonça, Cemig SIM CEO. For the initial remarks, I’ll turn the floor to our CEO, Reinaldo Passanezi Filho. Good morning everyone. Welcome to our fourth quarter video conference call. Also talking about the results for 2025. We may turn to the highlights of the presentation. I would like to go over the main figures.

Carolina Senna, Investor Relations Superintendent, Cemig: They show the recurrence of very positive results of Cemig in this full transformation process, which has allowed a cash generation that is very significant to face a record investment program. This is what we see in these two first topics. Recurring EBITDA of BRL 7.3 billion, very consistent with the different sectors, with very consistent results in all of the sectors. This amount goes up to BRL 8.3 billion when we include the non-recurring ones. That is what allows us to finance this record investment program for Cemig. Over the year, we had BRL 6.6 billion, probably one of the most successful investments in Cemig’s history. This is a major transformation when we compare to the past. Some years ago, Cemig was investing less than BRL 1 billion a year. Now we are investing BRL 6.6 billion.

As all of you know, basically we’re investing in regulated sector with a warranted profitability. We have the works that are guaranteeing our profitability. Some of them already show in the results and all the other ones, which we will see in the tariff review times, but they are already here. You can see them as accumulated results because we already have almost BRL 10 billion accumulated in the distribution area, for instance, which are not yet open or s-posted on this value because they will show in the next tariff review. It’s exactly this combination of cash generation that is very consistent with investments that will generate revenue in regulated sectors that are very stable that allow us to have this result. We are very happy to see our credit quality. Moody’s just raised Cemig’s rating to triple A in September.

This is a huge transformation. We have increased and grown almost 7 notches in less than 3 years. This is a historical result. Very few companies have this type of speed of credit rating transformation. Now we have a triple A from Moody’s, as we already have that kind of rating from other companies. Also relevant, an important topic for this quarter was the solution of the post-employment liability regarding our retirees. We had a relevant topic regarding the liabilities of the company, which was the funding of the healthcare plan of retirees and pension holders. Cemig had a responsibility for part of that funding. We were able to come to an agreement with the union. This agreement was approved by the Regional Labor Court, and we have a contribution here.

We will have 6 installments that will total BRL 1.25 billion. We will have 2 installments this year and then 2 installments every year for the next years until the end of the process. That changes the contribution of Cemig in this funding of the healthcare plan, and it turns to a financial debt. That’s important because we no longer have an actuarial risk. Now we have a financial debt, and that’s going to support the transition of the retirees to make sure that. That’s crucial for us to guarantee that they have a healthcare plan. That also, as part of our results. You know that we have a policy of sharing our 50% of our net profit, so we paid in dividends and JCP of BRL 3.5 billion. This is a public policy.

It’s in our bylaws, the distribution of 50% of our net profit. That shows that our dividend yield is double because 50% is being reinvested. When we look at other companies that distribute 100%, we see how much this is a significant result. The company is a good company for dividend payments. More than that, it reinvests 50% of that result to generate value. We see that value generation because our capital cost is much lower than the WACC of the regulated sectors, where we are making a larger part of our investments. The last topic that we have here is also something very important to us. We have some concessions that were due, and we were able to extend these concessions. That’s very positive.

We have a very clear objective to extend all our concessions, and we were able to extend Irapé, Queimado, and Pai Joaquim in an auction that we had also in 2025. In the Trindade chamber, we participated in the auction, and we were awarded these three concessions. I would say that these are the main highlights. We are very happy once again to have these results. They do show Cemig’s strength and resilience and the way we prepare ourselves to the future, not only the resilience of the results, but especially building the future. I stress this. We already have BRL 10 billion in investments for distribution after 2023, and we are moving on in this process. This is a record process for investments and distribution. We have our distribution officer by me here because these are cautious investments.

Moderator/Unidentified Speaker, Conference Moderator, Cemig: In fact, they are supporting Minas Gerais’ development. We have new loads coming in. There is an improvement in the quality of service, so we feel fine about the quality of these investments and its remuneration, and by the time we have our tariff review. These are my initial remarks. We will be open for your questions later. Now I will turn the floor to Andrea. Once again, I would like to thank you all for being here with us in this video conference. Good morning, everyone. It’s a pleasure to be here bringing to you the results of another year that ends. Sustainable results and results that make us very proud to be delivering. We are delivering not only figures, but also what we are delivering to society, to our clients, our stakeholders. These are very nice results. Moving on.

Carolina Senna, Investor Relations Superintendent, Cemig: After what Ronaldo already mentioned in terms of the main highlights, here we have a snapshot of the BRL 6.6 billion of investments that were made in 2025. Of course, our flagship here is distribution, as Ronaldo mentioned. Within this whole framework of investments that we’re making, we had 23 new substations over 12,000 km in low and medium voltage networks, and that, of course, will bring this energy to our clients and the capacity of the state to grow after that. For generation, also mentioned by Ronaldo, we had the GSF auction, which involved around BRL 199 million, and we had a delta in this amount that reaches BRL 411 million that was invested in expansion and maintenance.

In transmission, our main investment is in reinforcements and improvements, and last year we invested BRL 410 million. That’s a very relevant amount. I believe Minas Gerais is at the heart of Brazil, so it has a huge opportunity in this area. Therefore, we also show that we were able to add an allowed annual revenue in 2025. For Gasmig, we had the Centro-Oeste project, BRL 217 million being invested in the project. Cemig SIM, we had BRL 361 million with 19 new solar plants and 68 MW installed capacity. I also think it’s very important to show you the development and distribution. We show how much CapEx regarding our regulatory depreciation has grown. It’s good to see this number four. This is a very relevant figure. It’s a highlight for Cemig as well.

Now, going over consolidated results year-over-year, comparing to 2024, we had a recurring EBITDA of BRL 7.3 billion, as Ronaldo mentioned, and a full EBITDA of BRL 8.3 billion. The main difference between the two is really the effect of the adjustment in the post-employment liabilities. The variations in these years, the main effect here that represent this drop in 4% were mainly GSF, because we had to address the hydrological risk and the generating company. We purchased energy at higher spot prices. We are seeing a scenario of higher prices. We also had, in the trading company, the main effect year-over-year, which was the difference in prices among submarkets. That was negative BRL 234 million.

Now, turning to the recurring net profit of BRL 4.2 and the non-recurring of BRL 4.9, once again, that is the main difference here of the adjustment of post-employment and also the impact of the net profit in addition to the ones that we already mentioned. Also, we are taking debts to finance our investments, therefore that generates higher financial expenses, so we have higher leverage with higher financial expenses in the year when that compares to the prior years. Looking at the non-recurring effects, you see that we had effects last year that were very relevant. We already talked about those over the year. The main effect now for 2025 was a very positive one, and we will go over it in detail.

As Reinaldo mentioned, this was an intense negotiation, but it allowed us to bring a sustainable healthcare plan to our pension holders, especially thinking about the ones that have lower income. That is important for the company because it allows us to have a financial balance. If we look at the expenses that we posted in the results in 2024 and 2025 regarding the post-employment, whether for pension plan or healthcare plan, the amounts were very relevant. Now, starting in 2026, we expect to no longer have this impact of BRL 300 million that we had last year regarding the healthcare plan.

This is the impact that we expect to see from now on, in addition to the impact that we had in the year, which was BRL 1.19 billion in the EBITDA, and then the net profit around BRL 800 million, also with a positive effect in our net profit. As Reynaldo mentioned, we now have to contribute to this new healthcare plan, a compensation. That’s an obligation of BRL 1.28 billion to be paid in six installments. Now, turning to our OpEx focused on Cemig D, we see two larger effects that are from headcount and outsourced services.

For headcount, we are gonna go into the details further on, but we have been adding new personnel in bases that we consider important for Cemig Agro to be closer to our rural clients who are agribusiness clients, so that we can deliver better services to them. We do have this responsibility, and we have to improve the service. This was very important. The item of outsourced services, we have all the work that the distributing company does of cleaning of power line pathways and pruning trees, and these are services that will allow us to have a better quality delivery to our clients. This is. These are the main impacts here.

Now, turning to the right of the chart, we know that we have a robust investment plan, which has added kilometers of network and substations to provide this capacity to our clients. Now, comparing this performance of OpEx against the assets that we are adding to our portfolio, you can see that these percentages are much lower. Therefore, we should say that when we increase the assets base, we have to have a service associated to that to keep delivering the deserved quality to our clients. In terms of operational efficiency of Cemig D, we are abiding by all indicators. Another year that we deliver indicators as expected by the regulatory agencies, whether it is in total losses, credit losses that are expected that have reduced year-on-year.

Those represent, in 2025, 0.63% of the revenue from energy supply. That’s a very low figure, very good result. For collection also, a strong work by Cemig trying to bring in this collection to the digital channels, which are the most efficient ones in terms of cost, and also, they are easier for our clients, and we have been able to increase collection by these channels over time. In addition to that, our ARFA indicator, the receivables collection index, shows that our delinquency is very low, and it’s now at 99.51%. This is some of the results of all the services that we mentioned that we are looking for. We had higher OpEx, but it’s there to deliver a better quality to our clients.

We can bring to you the best DEC of history, the best average outage duration per consumer unit. That’s 8.97. That’s a reduction of 29 minutes compared to the prior year. The perceived DEC, it was even a higher reduction of 1 hour and 50 minutes. That’s very important for us at Cemig, and we are very proud of it. How are we financing our investment program? In addition to the operating cash generation in the company, we also have outsourced or third-party financing, and we are working to increase the average tenure of this debt so that it can be extended. We have 5 years between the investment and revenue and the tariff review for the distribution company, so it’s a long period of time, of course. We only see that posted back in the tariff review.

We have to comply with it, and we are able to reach 6.9 years of average tenure by the last issues that we had in the market, which were of 9.3 million of debentures, all of them priced under the sovereign risk, which is something else that makes us very proud. We are able, in spite of high interest rates, and all of us know that, we can price our operations lower than the sovereign risk. Of course, with the investment plan and with the leverage to support this plan, we reach at a leverage level of 2.3. As Reynaldo mentioned, part of the revenue will only be posted or recognized in 2028 by the time we have the tariff review. Part of the investment of that already happened.

Now, looking at our debt index, we had 87% of the CDI of the average cost, and we have a distribution of our debt between IPCA and CDI of 59% and 41%. Now, balancing out all the issues here, and this is a company’s responsibility, of course, we are also delivering great shareholder return. We got to a dividend yield of 14.9%, BRL 3.5 billion, 835. Our profit reserve to be realized from past periods. We announced part of this amount still last year, and we paid those in 2025, and part of that will come now to be paid to our shareholders in the next shareholders meeting. Also, Cemig has delivered a total shareholder return of 17.5% to our investors. Also a level very compatible with our market peers.

Now, let’s focus on the deliveries of the quarter. Recurring EBITDA of BRL 1.8 billion and equivalent EBITDA with non-recurring items of BRL 2.9 billion. We already mentioned the healthcare plan as the main effect. We issued in the quarter BRL 4.3 billion in debentures. This was the quarter in which we were able to bring together all the unions to the same agreement for the healthcare plan. We had an elimination of ownership crossover at Cemig in companies where we had smaller stakes, so now we have 100% of our own equity interest at Cemig Zinc, and we added 37 MWp in the quarter. Also, we had an impact in generation. We had an increase in energy purchase due to hydrological risk. We had to manage that because the hydrological risk was lower than the prior year. Therefore, we had to purchase energy at higher prices.

Now, talking about the results, I already mentioned the recurring EBITDA variation in the quarter of 6.5% was mainly due to GSF effect that measures one quarter against the other as 0.8 against 0.67. Also, you see that the adjustment of the post-employment liabilities. Sorry. About distribution that had a positive impact. We had our Parcel B in May that added a higher contribution margin in the distribution company. To the negative side, a reduction of 1.4% in the market. We already talked about that because some of the clients migrated to the base network. Now, recurring net profit, similar effects. Once again, we have some of the effects of higher financial expenses on net profit and also higher depreciation because of investments that we are making over time.

Now, here we show GSF, as I mentioned, and this is the difference between 2025 GSF compared to 2024 GSF. Effectively, we worked at lower GSF rates, and we had to purchase to manage this hydrological risk at much higher prices. These are the prices that we have seen over 2025, ending December, at BRL 265 per MW. Once again, here in consolidated operating costs and expenses, we had a similar effect that we already mentioned. In the year for personnel, we added to what we call our Cemig Agro program, 228 new electricians. These are people that will be there. They will be able to take actions quicker in places where needed and places that are further away.

We are in a large state with lots of towns scattered in the state, so we need to have people close to clients to be able to cater them effectively and efficiently. For outsourced services, we do have intensified the preventive maintenance. We believe this is better than the corrective maintenance, of course, so we are working on cleaning of power line pathways and pruning. Because of this expense cost also, we have effects that we already see, such as in the financial compensations. We were able to reduce quarter-on-quarter 22%, and this does not stop there. This is an intense work we are doing, and the financial compensation is something that we still need to work on in the future.

Now, bringing to you how our EBITDA turns into cash and the cash pays the bills, right? We start at the EBITDA of BRL 8.3 billion. We have the non-cash effect, the post-employment obviously. We got to an EBITDA of BRL 7.2 billion. We had the CVA effect, the value of variation account, prices that are higher than expected. We know that the CVA we can recover next year, but it is impacting the cash, our cash in the current year. We have dividends received from companies of the group, such as Taesa, and also we had an impact of the working capital of around BRL 1 billion, reaching an operating cash flow of BRL 5.7 billion.

The other effects, taxes, interest, investments, net financings from issuance BRL 9.3 billion issued and with the repayment of the debt, BRL 6.5 billion. Cash before IOE and dividends payments, BRL 4.3 billion. With the payment of IOE and dividends, we have the cash generated of BRL 270 million. We have the cash availability for 2024 and 2025 in the chart to our right. I think we talked a lot already, so I’ll go quickly here. At Cemig D, as I mentioned, we had the effect of Parcel B, an improvement in the contribution margin in the quarter, BRL 138 million. Also we had a reduction of 1.4% in the market, including DG.

In the net profit, of course, this investment program requires a higher debt to be financed, and then we have financial expenses that are higher. Here we have a snapshot of the market. Whether this is the transported energy market that we mentioned that we have lost some clients to the basic network or total energy. This is the performance. When we add the drop of the market with DG, we come to a reduction of 1.4%. That’s basically it. For Cemig GT, once again, we have the effect from the management of hydrological risk of BRL 81 million reduction here. That’s the main effect quarter-on-quarter. For Gasmig, the EBITDA is in line, and the net profit was affected by the increase of interest on equity with a higher limit of long-term interest rate.

Of course, we’re using this limit to have a higher net profit. We already mentioned the program, the Midwest Gas Pipeline Project. The opening of this Midwest Gas Pipeline marks the arrival of piped gas in the cities, such as Betim, Itaúna, Divinópolis. This was a very important event in the quarter as well. Well, here we have our awards for sustainability. Cemig is very proud of those results because we always have a lot of awards. For the Dow Jones Sustainability Index, this was the 25th consecutive year that we got this award, and maybe the only company that has been at Dow Jones for such a long time. Also, the S&P Global Sustainability Yearbook 2025, we are there as well. CDP, we are in the A list. To reach the A list, we met 10 of the 16 criteria.

Most of these criteria analyze our real plans to come to net zero for 2040. We also have 5.4 million renewable energy certificates issued in 2025. We are also in B3 Sustainability Index for B3. In Sustainalytics, we have the risk of our economic value arising from ESG factor, and we had a score of low risk. This range goes from 10 to 20. Here we have other awards, the market recognition by Cemig’s work. Two recognitions from companies that like Best Company in the Year, one coming from Veja Negócios, another one of Best Company in the Sector. CFO and CEO were also recognized by Época Negócios 2025 magazine. We were the fifth most innovative company in the electric sector. That’s something that is really valuable to us, and it’s very important award.

We are very happy about this award. Our financial team, we are very proud of our financial team because it got an award for Best Financial Team in the Infrastructure and Energy Sector in Brazil by Filosa. We had the ANEFAC Transparency Trophy and a second ANEFAC ESG Award, the transformative stage. I end the presentation here, and now I open the session for the Q&A session. I turn the floor to Carolina, who will help us there. Thank you, Andrea. We will now start our Q&A session. To ask a question, click on the Q&A icon on the bottom of your screen and write your name to be on the queue. Upon being announced, a request to enable your microphone will pop up on your screen. By accepting it, you can ask your question live.

Please ask all your questions at once and hold for the company’s reply. For the session, your names will be announced so you can ask your questions live. Then a request to enable your microphone will pop up on your screen, and it should be accepted so that you can ask your questions. You may also send your questions via chat on the platform, and they will be organized and answered according to the time available. Our first question is from Banco Safra. Ricardo Bello, you may enable your microphone to ask your question, Ricardo. I will read the question while you adjust the microphones. The question was about the trading result in the fourth quarter, which was positive in BRL 97 million. Can you revert or reduce the short positions that you had, and what is the gain? What is the current perspective of your energy balance? Good morning.

Andrea Marques de Almeida, Chief Financial Officer (CFO) and IR Officer, Cemig: This is Ricardo Bello. Thank you for your question. I think the results show that. We were very cautious when we closed the positions this year. We are still working on it. 2026, the positions are already closed, and we are now aiming to close 2027 as well. We are analyzing that very cautiously. This was a result of something that we just showed in this quarter, our balance sheet. By 2027, still has an open position that we are closing. Also another position in 2028. Starting in 2029, we no longer have any open positions, and we see future prices going up. This is a good opportunity for us to sell this energy starting in 2029, as we were planning to do. Thank you, Sergio. Our next question is from Luiz Eduardo.

Moderator/Unidentified Speaker, Conference Moderator, Cemig: What is the ideal level of leverage for the company, and what is the annual percentage of interest in the debt? I don’t think we have a target number, but we know that our leverage is going to increase over this investment cycle. We are fine at 2.3 now. We believe that it will grow over the cycle up to 2028 when we have the tariff review of D. The contract covenants that we have that read limit the s-ratio to 3.5. You know, I believe that within this range, we will be very well-placed when Moody’s evaluates Cemig and gives us a Aaa. It is evaluating us through the cycle.

Reinaldo Passanezi Filho, Chief Executive Officer (CEO), Cemig: In fact, that they know about the investment program, they know about the increase in leverage, and so we are in a very good place. We believe that we are going to be within the expected triple A rating and of course increasing over 2.3 over the cycle and reducing again this leverage in 2028 when we in fact receive the impact of the tariff of D in the tariff review and the process that we are doing throughout this period in terms of average interest rate. We mentioned here we have 13% of nominal cost, and that corresponds to 87% of the CDI. It is an average cost that is very good for a utilities company.

Carolina Senna, Investor Relations Superintendent, Cemig: Once again, remember that we have been pricing all our debts that are debentures in the local market lower than the sovereign risk. Andrea, just adding to your answer, I think it’s important to mention how much this debt is generating value to the company because we have an average that is financed at 87% of the CDI with an investment which is more than 90% regulated, and you know what is the amount of the debt and the calculation of the respective WACCs. We see that this debt is much lower than what we see in the WACC calculation, therefore, it is generating value to the company. Our next question is about if there are any plans to pay bonus to shareholders in 2026. I’ll turn the floor to Andrea. Thank you for your question.

Moderator/Unidentified Speaker, Conference Moderator, Cemig: Actually, that happens when our profit reserve goes higher than the capital stock. We will analyze this over the year to see if it’s going to happen. Of course, you can follow Cemig’s figures, and as soon as we know we have anything new on that topic, we will let you know. Well, thank you all very much for your questions. Since there are no other questions, we thank you very much for participating in this call. We would like to say that the investor relations superintendent is available to provide you additional comments, should you need them. Thank you all very much and have a nice day.