Executive Summary / Key Takeaways

• Strategic Reinvigoration and Record Performance: Companhia Energética de Minas Gerais (CIG) has undergone a profound transformation since 2018, culminating in record-breaking financial results in 2024, including its highest-ever EBITDA of BRL 11.3 billion and net profit of BRL 7.12 billion, alongside a prestigious AAA credit rating from Fitch. This turnaround is driven by a disciplined focus on regulated infrastructure investments in Minas Gerais and a commitment to operational efficiency.
• Massive Investment Program and Sustainable Funding: CIG is executing its largest investment program in history, projecting BRL 6.3 billion in capital expenditures for 2025 as part of a BRL 59.1 billion plan through 2028. These investments, primarily in regulated distribution, transmission, and gas networks, are strategically funded through successful debenture issuances, maintaining a healthy leverage profile and extending debt maturity.
• Technological Edge and Operational Efficiency: The company is leveraging advanced technologies like new ADMS and SAP S4/HANA systems, alongside smart meter deployment and digital collection channels, to enhance service quality, optimize operations, and reduce costs. These initiatives are crucial for improving grid resilience, managing distributed generation, and maintaining regulatory compliance.
• Shareholder Returns and Future Outlook: CIG maintains a consistent dividend policy of 50% of IFRS net profit, offering attractive yields to investors. Management anticipates continued strong cash generation, with leverage expected to normalize post-2028 tariff review, while actively pursuing strategic divestments and concession renewals to optimize its portfolio.
• Competitive Resilience Amidst Sector Dynamics: CIG's diversified portfolio, extensive infrastructure, and strong regional focus provide a robust competitive moat against both direct and indirect rivals. While facing challenges from energy submarket volatility and regulatory uncertainties, its strategic positioning and commitment to efficiency are designed to ensure long-term value creation.

A New Dawn for Minas Gerais: Cemig's Strategic Resurgence

Companhia Energética de Minas Gerais (CIG), incorporated in 1952, stands as a diversified utilities powerhouse in Brazil, deeply embedded in the generation, transmission, distribution, and sale of energy across Minas Gerais. The company has orchestrated a remarkable turnaround since 2018, shedding its past as an underinvested entity to emerge as a financially robust and growth-oriented leader. This transformation is anchored in a clear strategic vision: an unwavering focus on Minas Gerais, aggressive investment in regulated infrastructure, and a relentless pursuit of operational efficiency.

CIG's strategic emphasis on Minas Gerais is a cornerstone of its competitive positioning. By concentrating 100% of its investments within its concession territory, the company leverages deep regional knowledge and existing synergies, a distinct advantage over competitors with broader, less focused footprints. This localized strategy allows CIG to tailor its services and infrastructure development to the specific needs and growth drivers of the state, particularly its burgeoning agribusiness sector through programs like "Minas 3-phase."

The Brazilian energy sector is undergoing significant shifts, driven by increasing electrification, the imperative of energy transition, and the rapid expansion of distributed generation (DG). Investments in network infrastructure are paramount for this transition, with CIG recognizing that approximately one-third of energy investments globally are directed towards network development. The company's strategic plan, dedicating over 75% of its BRL 59.1 billion investment program (2019-2028) to network infrastructure in distribution, transmission, and gas, directly addresses these macro trends. This focus on regulated assets provides inherent stability and guaranteed profitability, differentiating CIG from peers more exposed to market volatility.

In the competitive landscape, CIG stands out through its diversified energy portfolio, encompassing hydroelectric, wind, solar, and gas distribution, alongside a robust transmission and distribution network. This breadth offers greater operational resilience and adaptability compared to rivals like Eletrobras (EBR), which has a heavier reliance on hydroelectric assets, or CPFL Energia (CPL), with its more regionally concentrated electricity focus. While CIG may not always lead in the sheer scale of national projects like Eletrobras, its integrated service offerings, including telecommunications and energy efficiency, provide a unique value proposition for bundled solutions. Against specialized renewable players like Engie Brasil, CIG's balanced mix ensures reliability during market shifts, though it must continue to enhance its renewable capabilities to match the pace of innovation. Similarly, while AES Brasil may excel in cost management through a streamlined approach, CIG's comprehensive infrastructure aims for broader scope and reliability, positioning it for integrated energy delivery.

Technological Edge and Operational Evolution

Cemig's commitment to innovation and modernization forms a critical part of its competitive moat, driving both efficiency and enhanced service quality. The company is actively implementing advanced technological solutions to streamline operations and meet evolving customer demands. A significant initiative is the deployment of a new Advanced Distribution Management System (ADMS) and the migration to SAP S4/HANA. These systems are designed to improve IT/OT (Information Technology/Operational Technology) integration, simplify processes, and enhance overall efficiency and service quality. Management anticipates a "wonderful effect in terms of cost and in terms of improving in the quality of services" from the new ADMS, expected to be operational next year.

Beyond core systems, CIG is making tangible investments in smart grid technologies. The continuous installation of smart meters is a key component of its strategy to reduce regulatory losses and improve operational control. This initiative, coupled with extensive customer inspections and efforts to convert illegal connections into legal ones, directly contributes to maintaining regulatory compliance and enhancing revenue assurance. The company's focus on digitalizing customer interactions is also noteworthy, with 67.5% of collections in Q2 2025 occurring through digital channels, including Pix, leading to a significant 50% reduction in tariff costs and an impressive Receivables Collection Index (ARFA) of approximately 99%.

CIG's innovation extends to its R&D initiatives, exemplified by the Cemig Inova lab, an open innovation program. This platform fosters the exploration of new technologies for energy transition, ensuring CIG remains at the forefront of industry advancements. The company's Advogado Eduardo Soares photovoltaic plant, with a 35-year term and a CapEx of BRL 464 million, underscores its commitment to clean energy generation and significant CO2 reduction potential. These technological differentiators not only enhance CIG's operational effectiveness but also strengthen its competitive position by enabling more reliable, efficient, and sustainable energy solutions for its diverse customer base.

Financial Strength and Strategic Capital Deployment

Cemig's financial performance in 2024 marked a historic high, reflecting the successful execution of its turnaround strategy. The company achieved its highest-ever EBITDA of BRL 11.3 billion and net profit of BRL 7.12 billion. This robust performance was significantly bolstered by non-recurring events, including a BRL 1.5 billion positive impact from the transmission tariff review and a BRL 1.6 billion capital gain from the sale of Alianca Energia in Q3 2024. The company's operating cash flow reached BRL 5.5 billion in 2024, with free cash flow at BRL 4.58 billion, underscoring its strong liquidity.

The distribution segment (Cemig D) has been a key driver of growth and efficiency. In Q2 2025, Cemig D's adjusted EBITDA grew by 39% (excluding non-recurring effects), largely due to the reimbursement of tariff subsidies. The company successfully implemented a 7.78% tariff adjustment in Q2 2025. Despite a 3.3% drop in the energy market in Q2 2025 due to industrial client migration and a 20% surge in distributed generation, Cemig D's operational efficiency initiatives, such as clearing 40,000 kilometers of right-of-way in Q3 2024 to mitigate climate-related interruptions, have led to a 2.5-hour reduction in its DEC indicator in Q4 2024. The segment's OpEx was BRL 156 million lower than regulatory limits in 2024, demonstrating effective cost management.

The generation and transmission segment (Cemig GT) also contributed, albeit with some volatility. While Q3 2024 IFRS EBITDA was 380% higher due to the Alianca sale and tariff review, recurring EBITDA was down 19% due to trading activity. In Q2 2025, Cemig GT secured concession extensions for Irapé, Joaquim, and Queimado power plants through a GSF auction for BRL 200 million, extending operations to 2044. Gasmig, the gas distribution arm, reported in-line EBITDA and significantly higher net profit in Q2 2025, driven by efficient cost management and debenture issuance. The Central West gas pipeline project, spanning over 100 kilometers, is nearing completion, marking a significant investment in expanding its network.

The trading segment faced headwinds, particularly from energy submarket price differences. In Q1 2025, EBITDA was impacted by BRL 133 million due to this volatility, with a negative BRL 76 million impact in Q2 2025. Management, however, projects these submarket differences to "tend to be close to zero" in the second half of 2025, contingent on ONS criteria review and greater interchange. Cemig is actively working to close its short positions for 2027-2028, aiming for the "lowest exposure possible" and exploring mitigation tools, though acknowledging the high cost of such instruments.

Cemig's robust investment program, projected at BRL 6.3 billion for 2025, is strategically funded. The company successfully issued BRL 5 billion in debentures in Q1 2025, extending its average debt tenure to 6 years by Q2 2025, while maintaining a AAA credit rating from Fitch. Its net debt over adjusted EBITDA stood at a conservative 1.59 in Q2 2025. While leverage is expected to increase to 2-2.5 times by 2027 due to ongoing investments, it is projected to decrease in 2028 following Cemig D's tariff review, reflecting a sustainable capital structure. The company remains committed to its dividend policy of paying 50% of IFRS net profit, having distributed BRL 5 billion in dividends in 2024, if approved, and declared additional Interest on Equity for 2025 totaling R$1.138 billion (R$0.39772475462 per share), payable in two installments by June and December 2026.

Outlook, Risks, and the Path Forward

Cemig's forward-looking strategy is characterized by continued investment, operational optimization, and a proactive approach to market and regulatory dynamics. The company forecasts BRL 6.3 billion in investments for 2025, an 18% increase from 2024, with a long-term plan of BRL 59.1 billion through 2028. These investments are largely concentrated in regulated sectors, ensuring a predictable return profile. Management anticipates that the negative impacts from energy submarket differences will diminish in the latter half of 2025, moving towards a near-zero effect.

However, CIG operates within a dynamic environment, presenting several key risks. Regulatory uncertainties persist, particularly regarding the final ruling on PIS/COFINS and ICMS, which could impact the company's financial statements. The next tariff review for Cemig D in 2028 is a critical juncture, and while management is focused on efficiency, the broader discussion around CDEs, subsidies, and charges could influence future profitability. Legal challenges, such as the injunction against the auction of four small-scale power plants and the previously suspended collection lawsuit by Forluz concerning a supplementary pension plan deficit, highlight ongoing legal and financial liabilities that require careful management.

A significant development is the Minas Gerais government's proposal to cease being Cemig's controlling party, aiming to transform the company into a corporation. This political initiative, currently under discussion in the legislative assembly, could fundamentally alter CIG's ownership structure and strategic direction, potentially requiring a popular referendum if only the bill of law is approved. While this presents a potential for increased market-driven governance, it also introduces a period of uncertainty.

Cemig's commitment to sustainability is a strategic advantage, evidenced by its recognition as one of the top ten most sustainable companies on B3 and its 20th consecutive year in the ISE B3 portfolio. Its 100% clean energy matrix and initiatives like planting 1 million trees in 2024 reinforce its ESG credentials, appealing to a growing segment of environmentally conscious investors. The company's ongoing efforts in digital transformation, concession renewals, and exploration of new energy transition technologies position it for long-term growth and resilience.

Conclusion

Companhia Energética de Minas Gerais (CIG) has unequivocally demonstrated its capacity for transformation and value creation. From a period of underinvestment, it has emerged as a financially robust utility, achieving record-breaking EBITDA and net profit in 2024, underpinned by a strategic focus on regulated infrastructure and operational efficiency. The company's massive investment program, coupled with prudent financial management and a consistent dividend policy, paints a compelling picture for long-term investors.

CIG's technological advancements, from smart grid deployment to advanced IT systems, are not merely operational upgrades but fundamental drivers of its competitive edge, enhancing service quality and cost efficiency. While the company navigates inherent sector risks, including market volatility and regulatory shifts, its diversified portfolio, strong regional presence in Minas Gerais, and proactive approach to challenges position it for sustained performance. The potential shift in control to a corporation, if realized, could unlock further value by aligning the company more closely with market dynamics. For discerning investors, Cemig represents a resilient and strategically positioned utility, poised to capitalize on Brazil's energy transition and deliver consistent shareholder returns through disciplined execution and technological leadership.