CEMIG Q1 2026 Earnings Call - Grid Investments and Trading Headwinds Define Q1

Carolina Sena, Investor Relations Superintendent, CEMIG: 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.cemig.com.br, where you will also find the company’s presentation. Should you need a 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 CEMIG has been approved as of yesterday. Alexandre Ramos Peixoto replaces Reynaldo Passanezi Filho, to whom the company recognizes and expresses its gratitude for the work carried out. Under his management, CEMIG conducted a consistent financial recovery process, resumed investment levels, and developed a strategic plan worth approximately BRL 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 BRL 8 billion to BRL 45 billion. His departure stems from the term limit restriction provided for in the State-Owned Enterprises Law Nº 13,303/2016.

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 is an engineer by training. He holds a degree in quality engineer and management from PUC Minas and a degree in management and strategic planning from the Universidade Federal de Minas Gerais. In addition to specializations of an MBA in related areas related to generation and planning in the sector. Throughout his career, he has worked at ANEEL, MME, and EBE, and at CEMIG itself served as Regulatory and Institutional Relations Officer. Since May 2023, he has chaired the board of directors of CEP. Now we will start the conference. With us, we will have Andrea Marques de Almeida, CFO and IR Officer. Luis Cláudio Correa Villani, Chief Information Technology Officer.

Marco da Camino Ancona Lopez Soligo, Chief Generation and Transmission Officer. Marney Tadeu Antunes, Chief Distribution Officer. Yuri Araujo de Mendonca, CEMIG’s CEO. Marcos Vinícius 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.

Andrea Marques de Almeida, CFO and IR Officer, CEMIG: 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. CEMIG 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 BRL 1.79 billion in EBITDA and BRL 979 in profit.

I usually say that we have to balance out all the plays here, we have worked on our investment plan, here of BRL 1.48 billion. We also have shareholders’ remuneration, another important topic of our strategy, BRL 658 million. We have a small acquisition, PCH Pipoca and Temacu in Mesquita, 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 impacts that we recorded at the time. 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 BRL 80 million, and that’s an important highlight as well. Now we have a snapshot of the quarter.

The total of BRL 1.48 is in the main area here. Distribution is always carrying the highest representativeness of our investment here with BRL 1.28 billion for distribution. We have More Energy, main delivery phase. We are delivering substations. six new substations and one substation that was modernized in the More Energy Program. Now, 765 of low and average voltage network. As transmission, we usually grow in reinforcement and improvements. It was just like that we have investments in the quarter, BRL 103 million, which added in terms of our RAP is the Annual Permitted Revenue. That was BRL 15 million for our cash generation portfolio. For generation, I think we have a lower amount as CEMIG is still moving on with its project in the Midwest as the most relevant one.

Cemig Wind, here we start seeing that in our charts as a relevant investment with seven new solar photovoltaic plants and added 19 MW 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 Parcela B, which was 7.78%. Comparing quarter to quarter, this is the main impact in the distributing company. We also had an increase in residential consumption, which is positive. In terms of challenges, also known already by the market, we had the effect of price that starting 2025, energy prices are more volatile. As you know, we have positions that need to be closed over time.

With the higher prices, the positions closing, ended up having negative results in the creating company, in the generating company. The main effect was GSF. If we compare year against year, we had 0.92 in the first quarter of 2026. The purchase of energy to tackle the hydrological risk allowed us to have impact in the EBITDA of BRL 49 million. We go into the details of what I just mentioned. We have the level of prices, clearly we can see the change in the price volatility that started in the beginning of 2025. We started from January to March of 2025. The prices were around BRL 59 per megawatt, then they went up.

Last year we also had a GSF close to one, which is no longer the reality in 2026 when we have a lower GSF and the price is much higher. We reached levels of BRL 382 per megawatt, impacting the management of the hydrological risk. That’s an impact of BRL 49 million. Turning into a zoom to our cost and expenses, the main item, and it has been, and in the other quarters also it was the same, so it is a recurrence, it is third party services. This quarter maybe we had higher expenses in preventive maintenance as well as corrective maintenance. Obviously we had the right of way cleaning. All of these services are in order to deliver a better quality of services to our clients.

They come with all the investments that we are making on the investment branch, on, sorry, distribution branch. This is to provide better services for our clients, and we’ll go over that when we discuss our GAC and other expenses. Also, with this large investment program, we have decommissions, and we have a disposal of assets which has been part of our management. We are disposing of assets that in the past has been used for CEMIG but no longer have. Now, talking about the impact, 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 effect, 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 stations, 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 investment. We know that we have five years of investment in the distributing company up to the tariff review that’s going to happen in 2028. That’s why we are increasing to expand our debt. We reached 6.6 years of average maturity. Also important is that 76%, that is the bulk of our debt, is due after the tariff review rebuilding in 2028.

This debt profile is being extended so that also it matches with the recovery time of the tariff that we’ll have in the future. The last funding that we had in the quarter was a debenture combined with a loan of Law 4,131. They have been made lower than the sovereign risk, and we were able to include BRL 2.6 billion to the distributing company in this quarter. We reached the leverage of 2.45, net debt over recurring EBITDA. It’s very healthy. This is a leverage that also includes the financing of the investment program. This leverage 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 tariff review. 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. Going over the operating cash generation and how it has been used over the quarter, we start on the EBITDA of BRL 1.79, we discount among cash. In fact, we reached the EBITDA of BRL 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 company has a cash impact that is going to be recovered next year. Dividends received, working capital with a positive effect, we reach the operating cash flow of BRL 1.5 billion, how we have used it over the quarter.

Income tax, social contribution, interests, leases, and our investments, which is the most representative share here of 1.6. The cash delta was negative, and we show that in the cash availability that we have from one quarter to another. Going into the details of these companies, as we said, Cemig D, it had a representative performance in EBITDA, an increase of 26.6%, reaching BRL 1,000,000,010 of EBITDA in the quarter, especially because of the fact I already mentioned of that adjustment of 7.78%. Also, we have an increase in the residential market. This is nice. It is representative, significant for us. As we know, residential tariffs are higher, that has a good impact in our revenue. 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 this drop effect after the second or third quarter. We will no longer be seeing these effects because it will be then have been integrated in the quarters, but we do see that reduction. We also talked about the positive effect that we had in the residential area. 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. We still see the effect of GD, distributed generation, impact in Minas Gerais. A piece of information is that DG represents 26% in the captive market. It’s 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, 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 client, we are under the regulatory limits as we should. For operating efficiency, our indicators for Cemig D are within the regulatory indicators for losses. Here you have the losses indicator for our spot price. We did have a change in criteria in 2025. We went from 24 to 35 months, that’s why we had a positive effect. Over the period, it balances out. This was just because of a change in criteria, we see that our delinquency is very low. We have positive indicators.

Here, you know, we are very proud to bring you these results. Our DEC of 8.75, 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, it’s important to stress Cemig GT today, obviously it has generation, transmission, and it also has a share of the contract coming from the trading company. The main effects, we already mentioned, I’ll talk more about them, but the main one is here, as the management of hydrological risk achieved. When we break it down per business for generations, in fact, here we had that hydrological risk and energy purchase at a much higher price.

In transmission, we had a lower IPCA, and we know that our contract asset is remunerated by IPCA or inflation, and that’s the impact in the transmission company. Turning to the trading area here, we see the main challenge in the quarter, and the main impact has been the closing of positions. That is because we did not fulfill contracts, that we’re not delivering T90 in some contracts, that we are able to recover part of this amount at the end of the year because some of the positions have been closed and also because of some credit events. I believe the whole market is seeing that. The main effect here, yes, is really price. Cemig SIM. Cemig SIM is adding capacity to its portfolio, and it did have a significant increase in recurring EBITDA of around 100%.

That’s a very nice to see Cemig SIM’s growth and the addition of new operations that will be bringing more energy to our portfolio. Gasmig, this quarter also boasted this effect. As clients migrate to the free market, this margin is reduced, and that is the main factor that we see in Gasmig. We will be seeing that happening over time because there is a migration of clients to the free market. Now we end the presentation of 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 Rodeo 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. 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. A special congratulations to our champions because they move energy, CEMIG’s energy.

Carolina Sena, Investor Relations Superintendent, CEMIG: 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 item 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. Once again, I would like to say that all of us here are available to take any questions you might have. Our first question is from André Sampaio, South Side 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 of this.

Marco da Camino Ancona Lopez Soligo, Chief Generation and Transmission Officer, CEMIG: Hello, André. Thank you very much for your question and the discussion about the concessions renewal, Sá de Carvalho and Emborcação and Nova Ponte is going well. We have great contact and interaction with the Ministry of Energy and ANEEL, we expect to renew these concessions in the next few months before they are due. Thank you.

Carolina Sena, Investor Relations Superintendent, CEMIG: Okay. A question to our Marco Soligo, the question is from Marco and Marcos Vinícius. How can we reduce hydrological risk with alternative energy so that we can address these efficiencies?

Marcos Vinícius de Castro Lobato, Trading Planning Superintendent, CEMIG: Good afternoon. Thank you very much for your question. To reduce hydrological risk, if we diversify our portfolio, we are able to avoid the dependency of a single generation. Our portfolio is already designed like that. We have our hydrological plants, but also we have other wind and solar components. We do have the GSF impact, but we believe that this is at a lower proportion, rather than if we have everything concentrated on HPP.

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 GSF could be at a lower level. We already have an adequate reserve for that to avoid significant impacts over the years.

Carolina Sena, Investor Relations Superintendent, CEMIG: Thank you very much, Marcos Vinícius. I have two questions to our CFO and IR Officer, Andrea Almeida. The first question is, what can we expect from the, for the next tariff review in 2028? The second question is related to the increase of the debt vis-à-vis the investments, considering that we have a two-digit interest rate.

Andrea Marques de Almeida, CFO and IR Officer, CEMIG: Talking about the tariff review, obviously, we are making the most effective investment according to our plans in the distributing company. We are sure that these investments will be well acknowledged in our tariff review. Of course, 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 EBITDA based on what we will see in the five years. Maybe we will have BRL 22 billion. Considering these investments, we will have a rebuilding of the base. We reduce depreciation, 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.

Thank you for your questions. I forgot to thank you. Moving to the other question on the leverage. CEMIG finds itself at a very healthy leverage stage. We do believe that over the investment program, leverage tends to grow so that we can carry out the investment program of BRL 44 billion in the next five years. Leverage tends to grow up to 2028, when it’s going to come down, and of course, with the tariff review of the distributing company. Always considering very healthy levels. Much so that we got another AAA. Now we have two AAA ratings by Fitch Ratings and Moody’s, proving that CEMIG’s credit quality is very positive.

Yes, we have high interest rates right now in the country, but we do have a return on our investments that are higher than. That’s why we are focusing investments, especially in the regulated sectors of distribution and transmission. 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.

Carolina Sena, Investor Relations Superintendent, CEMIG: Thank you, Andrea. Our next questions are for Marcos Vinícius. First, from Ricardo Bella from Sasa. He would like to understand which are the possible impacts with the change of the risk parameter of CVaR in the price curve. Is that already impacting you at the trading level?

Marcos Vinícius de Castro Lobato, Trading Planning Superintendent, CEMIG: 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. 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. We would not be so risk averse. 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 2027, 2028, 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.

Carolina Sena, Investor Relations Superintendent, CEMIG: Thank you, Marcos. Next question is for you again. From Rafael Corrêa. 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.

Marcos Vinícius de Castro Lobato, Trading Planning Superintendent, CEMIG: Thank you. 2026 is a challenging year for us. We did discuss that in our Cemig Day because we did have a development of our margins in 2022 that would be the lower margin of our history, and it’s going to recover in the future. In 2026 because of the history of prices in the market, we contract ahead of time, and we know that we had a decrease in the contracts and the contracts have reduced the margin. In addition to that, we have short-term elements that could reduce results.

Difference in submarket prices that are high in the beginning of the year. We expect them to drop for the rest of the year. As an impact, also reduction in some contracts. There are situations, factors that could turn this year into a more challenging one. 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. The hydrological risk, once again, we had in the first quarter a realization that was lower than the expectation. The challenging situation usually comes in the first 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.

Carolina Sena, Investor Relations Superintendent, CEMIG: 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? What is our discussion in the risk parameters? You already talked about this, right?

Marcos Vinícius de Castro Lobato, Trading Planning Superintendent, CEMIG: Well, our seasonality is very close to MRE. We did have smallest difference in January. Maybe we suffered this effect a little bit more because it’s concentrated in the rest of the year. It is very close. About the VaR, as I mentioned, there is a perception that you can see and 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 of our parameters that were not averse or less averse to risk. We might have a review, and by having a review, we will see this beneficial effect to close the positions as I mentioned.

Carolina Sena, Investor Relations Superintendent, CEMIG: Thank you, Marcos Vinícius. We thank you all very much for your participation. The IR superintendents are available for any other questions you might have. We end the via conference for the earnings of the first quarter of 2026 for CEMIG. Have a nice afternoon.