Companhia Energetica De Minas Gerais Sa · BMFBOVESPA:CMIG3
Companhia Energetica De Minas Gerais Sa — Energy Co of Minas Gerais — H1 2007 Earnings Presentation
67 slides from Companhia Energetica De Minas Gerais Sa's earnings presentation, Aug 23, 2007
Slide 1: Net income for first half 2007: R$ 922 million
Companhia Energética de Minas Gerais - Cemig Listed company - CNPJ 17.155.730/0001-64 NET INCOME FOR FIRST HALF 2007: R$ 922 MILLION Belo Horizonte, Brasil, August 14, 2007: — Leading Brazilian Electricity Utility Cemig (BOV CMIG4, CMIG3; NYSE CIG, CIG.C; Latibex: XCMIG) today announces first half 2
Slide 2: Management commentary on first half 2007
Board Chairman Marcio Araújo de Lacerda said that “in the first half of 2007 we continued to grow, boosted by the strong expansion of the economy of the state of Minas Gerais, and by our acquisitions. The number of our consumers rose to over 10 million, in almost all the regions of Brazil. As a resu
Slide 3: improvement of our ratings — which further reduces our cost of funding. Balancing investments
improvement of our ratings — which further reduces our cost of funding. Balancing investments and capital expenditure, continuously seeking operational and financial excellence, and maintaining our firm long-term objectives, we ensure growing profits for our stockholders. (All figures below are expr
Slide 4: Cemig in first half 2007 — highlights
Cemig in first half 2007 — highlights Cash flow 53% higher year-on-year, at R$ 1.9 billion. Acquisitions now provide almost 15% of the consolidated result. Net sales revenue 24% higher than in first half 2006. Startup of the Capim Branco II plant (44 MW); Startup of Itutinga-Juiz de Fora (345kV) and
Slide 5: Share price performance and net income
· Share price performance SAO PAULO STOCK EXCHANGE (BOVESPA) NYSE Ticker 1H 07 2006 Ticker 1H 07 2006 CMIG 3 47.15 % 29.0 % CIG 30.93 % 30.8 % CMIG 4 24.44 % 22.5 % CIG.C* 7.25 % — IBOV 19.85 % 32.9 % DJIA 7.59 % 16.3 % IEE 26.26 % 40.8 % * ADRs representing Cemig’s common shares started trading on
Slide 6: Ebitda
· Ebitda Cemig generated Ebitda of R$ 1,904,999 in first half 2007, compared to R$ 1,244,881 in first half 2006, an increase of 53.03%. Adjusted for non-recurring items, Ebitda was 28.70% higher. There were the following extraordinary events in 2007: · A CVA regulatory asset in Purchase and sale of
Slide 7: Ebitda margin and revenue from electricity supply
Higher Ebitda in first half 2007 than first half 2006 is due mainly to increased operational efficiency, and also to nonrecurring items that affected the result in 2006. The better operational performance in 2007 was reflected in Ebitda margin, which was 31.49% in first half 2006, and 38.6% in first
Slide 8: Volume of electricity sold to final consumers
Volume of electricity sold to final consumers (MWh) MWh Consumption by class 1H 07 1H 06 Change, % Residential 4,405,064 3,310,420 33.07 Industrial 11,838,179 11,892,579 (0.46) Commercial, Services, Other 2,815,002 1,947,818 44.52 Rural 933,543 859,973 8.55 Government authorities 484,149 294,581 64.
Slide 9: Grid use and connection revenue
Also included in this balance is the revenue from use of the basic grid, and the revenue from connection to the system — amounts of R$ 194,782 and R$ 100,330 respectively. See Explanatory Note 25 to the consolidated Quarterly Information. In June 2007 Cemig posted a reduction in the revenue from use
Slide 10: Deductions from revenue
split pro rata between electricity concession holders as specified by an ANEEL Resolution. This is a non-controllable cost, and the deduction from revenue corresponds to the amount actually passed through to the tariff. Energy Development Account — CDE The deduction from revenue relating to the CCC
Slide 11: Personnel expenses and electricity purchased
Personnel expenses Personnel expenses in 1H07 were R$ 493,522, compared to R$614,226 in 1H06, a reduction of 19.65%. This lower expense mainly reflects the provision of R$ 177,425 made in June 2006 for indemnity to employees of future “anuênios”, partially offset by the wage increase of 4% given to
Slide 12: Post-employment obligations and operational provisions
Post-employment obligations The expense on post employment obligations in 1H07 was R$ 60,263 compared to R$75,055 in first half of 2006, a reduction of 19.71%. These expenses basically represent the interest applicable to Cemig’s actuarial obligations, net of the investment yield expected from the a
Slide 13: Gas purchased and financial revenues (expenses)
Gas purchased for resale The cost of gas purchased for resale was R$ 62,181 in first half of 2007, 18.61% lower than in the first half of 2006 (R$ 76,399). This change was mainly due to the reduction in the amount purchased in the periods compared, 164,678,000m3 in first half 2007, vs. 198,101,000m3
Slide 14: Financial expenses and loans
from R$ 47,149, at the end of first half 2006, to R$ 136,929 at the end of first half 2007. See Explanatory Note 29 to the Consolidated Quarterly Information. • Expenses on charges for loans and financings totaled R$ 409,356 in the first half of 2007, vs. R$ 319,877 in the same period of 2006, 27.97
Slide 15: Disclaimer
Disclaimer Some statements and assumptions in this document are projections based on the viewpoint and assumptions of management, and involve risks and uncertainties both known and unknown. Future outcomes may differ materially from those expressed or implicit in such statements. Contact: Agostinho
Slide 16: Statement of Results (Consolidated)
Chart I Statement of Results (Consolidated) Values in millions of reais 2nd Q. 2007 1st Q. 2007 1st H. 2007 2nd Q. 2006 1st H. 2006 2006 Net Revenue 2.584 2.336 4.920 1.919 3.953 9.681 Operating Expenses (1.747) (1.647) (3.394) ; (1.537) (3.011) (7.341) EBIT 837 689 1.526 382 942 2.340 EBITDA &n bsp
Slide 17: Operating Expenses (consolidated)
Chart III Operating Expenses (consolidated) Values in millions of reais 2nd Q. 2007 1st Q. 2007 1st H. 2007 2nd Q. 2006 1st H. 2006 2006 Purchased Energy 651 600 1.251 467 1.001 2.113 Personnel/Administrators/Councillors/Employee Participation 276 260 536 415 653 1.298 Depreciation and Amortization
Slide 18: Financial Result Breakdown
Chart V Financial Result Breakdown Values in millions of reais 2nd Q. 2007 1st Q. 2007 1st H. 2007 2nd Q. 2006 1st H. 2006 2006 Financial Revenues 444 304 748 284 631 1.392 Income from Investments 53 42 95 49 99 184 Fines on Energy Accounts 26 24 50 66 84 134 CRC Contract/State (interest + monetary
Slide 19: Related party transactions and share ownership
Chart VI Related party transactions Values in millions of reais State of Minas Gerais Government 2nd Q. 2007 1st Q. 2007 ASSETS Current Assets Customers and distributors 2 2 Tax Recoverable - — — State VAT recoverable 8 24 Noncurrent assets — — Accounts receivable from Minas Gerais State 1.746 1.705
Slide 20: Balance Sheets - Assets
Chart VIII BALANCE SHEETS ASSETS Values in millions of reais 2007 2nd Q. 1st Q. CURRENT ASSETS 7.418 7.282 Cash and Cash Equivalents 1.639 1.883 Consumers and Distributors 2.066 2.093 Consumers — Rate Adjustment 268 351 Dealership - Energy Transportation 453 406 Dealers - Transactions on the MAE 71
Slide 21: Balance Sheets - Liabilities and Shareholders' Equity
Chart VIII BALANCE SHEETS LIABILITIES AND SHAREHOLDERS’ EQUITY Values in millions of reais 2007 2nd Q. 1st Q. CURRENT LIABILITIES 6.126 6.202 Suppliers 836 799 Taxes payable 1.388 1.117 Loan, Financing and Debentures 1.357 1.120 Payroll and related charges 244 216 Interest on capital and dividends 6
Slide 22: Cash flow statement (consolidated)
Chart IX Income Statement (consolidated) Values in million of Reais 2nd Q. 2007 1st Q. 2007 1st H. 2007 2nd Q. 2006 1st H. 2006 2006 Cash at start of period 1.884 1.376 1.376 1.440 1.344 1.344 Cash from operations 713 728 1.441 425 836 2.101 Net income 515 407 922 325 665 1.719 Depreciation and amor
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Slide 25: First half 2007 results: Acquisitions boost Cemig's growth
FIRST HALF 2007 RESULTS Acquisitions boost Cemig’s growth
Slide 26: Disclaimer
Disclaimer Some statements in this presentation are regarded under U.S. Securities law as forward-looking statements, i.e., statements that are subject to risks and uncertainties. Forward-looking statements are forecasts which may differ materially from the final figures and which are not under our
Slide 27: Agenda
Agenda Highlights of the first half Márcio Araújo de Lacerda Expansion of business Djalma Bastos de Morais Financial management Luiz Fernando Rolla First half 2007 results Agostinho Faria Cardoso Corporate vision oriented for sustainability Márcio Araújo de Lacerda
Slide 28: Agenda
Agenda Highlights of the first half Márcio Araújo de Lacerda Expansion of business Djalma Bastos de Morais Financial management Luiz Fernando Rolla The first half 2007 results Agostinho Faria Cardoso Corporate vision oriented for sustainability Márcio Araújo de Lacerda
Slide 29: Highlights of first half 2007
Highlights of first half 2007 Financial: result reflects solidity of Cemig’s fundamentals Net income: R$ 922 million, R$ 1.90 per share Up 38.65% year-on-year Acquisitions provide 13% of net income EBIDTA: R$ 1.9 billion Up 53.01% year-on-year Acquisitions provide 12% of Ebitda Sales: growth in elec
Slide 30: Highlights of first half 2007: regulation, governance, quality
Highlights of first half 2007 Regulation: Generation concessions renewed for nine hydro plants (1,735 MW): 20 years UHE Emborcação 1,192 MW •PCH Pandeiros, 4.20 MW UHE Nova Ponte 510 MW PCH Rio das Pedras, 9.28 MW PCH Poço Fundo, 9.16 MW •PCH São Bernardo, 6.82 MW PCH Xicão, 1.81 MW •PCH Luiz Dias,
Slide 31: Agenda
Agenda Highlights of the first half Márcio Araújo de Lacerda Expansion of the business Djalma Bastos de Morais Financial management Luiz Fernando Rolla The first half 2007 results Agostinho Faria Cardoso Corporate vision oriented for sustainability Márcio Araújo de Lacerda
Slide 32: Expansion of our business
Expansion of our business We seek the best opportunities for investment of our stockholders Conclusion of financial modeling to expand generation in short term Value adding through: Projects with attractive return Reduction of operational costs Complying with the principle of sustainability Projects
Slide 33: Our assets: growth
Our assets: growth Generation capacity MW 6900 580 44 6,737 6700 17% 6500 6300 164 6100 178 5900 5,771 5700 5500 2003 2004 2005 2006 2Q2007 TOTAL Year Capacity added, MW Total Description Barreiro, PCH Pai Joaquim, 2004 178 5,949 Queimado, Rosal 2005 164 6,113 Aimorés 2006 580 6,693 Irapé, RME, Capi
Slide 34: Capital expenditure
Capital expenditure Achieved Planned (million Reais) Business 2005 2006 2Q07 2007 Cemig Geração e Transmissão 417 157 97 480 Generation 397 99 87 385 Transmission - basic grid 20 58 10 95 Cemig Distribuição 691 1,229 537 1,131 Sub-transmission 26 83 32 178 Distribution 665 1,146 505 953 Expansion an
Slide 35: Generation: short-term opportunities
Generation: creative solutions make short-term opportunities possible Capim Branco II hydroelectric plant (capacity 210 MW) – First rotor (70 MW) started up March 9, 2007 – Second rotor (70 MW) started up April 6, 2007 – Third rotor (70 MW) started up July 4, 2007 • Baguari hydro plant (140 MW) – To
Slide 36: Transmission, Distribution: expansion ensures service with quality
Transmission, Distribution: expansion ensures service with quality • Transmission – Work started on Charrúa-Nueva Temuco transmission line, 205km, capex US$ 63.4 million • Distribution – 156,000 new consumers connected in first half 2007 – The Universalization Program • Connection of 177,000 consume
Slide 37: Respect for the environment: one of our corporate values
Respect for the environment: one of our corporate values We have deployed R$ 285 million in environmental actions and programs in the last three years Our programs for efficiency and conservation of energy, participation in projects using gas, solar energy and small-scale hydroelectric plants, and o
Slide 38: Agenda
Agenda Highlights of first half Márcio Araújo de Lacerda Expansion of business Djalma Bastos de Morais Financial management Luiz Fernando Rolla The first half 2007 results Agostinho Faria Cardoso Corporate vision oriented for sustainability Márcio Araújo de Lacerda
Slide 39: Growth through acquisitions: strategy confirms value creation
Growth through acquisitions: strategy confirms value creation 2Q2007 revenue from sales to final consumers up R$ 1,233 billion 26% higher than in first half 2006 Light S.A. added revenue of R$ 1 billion –81% of the total growth Conversion by BNDES of Light S.A. debentures reduced Cemig’s stake in Li
Slide 40: Financial fundamentals improved by intelligent expansion financing
Financial fundamentals improved by intelligent expansion financing solutions Contracts signed with Inter-American Development Bank, completing Transchilefinancial structure BNDES financing model for projects in alternative energy sources, already in place for the Minas PCH (Small Hydro Plant) Progra
Slide 41: New capital structure
New capital structure: effective process provides tranquility for investors Proportionate stockholding structure unchanged 50% stock bonus in April, reverse split in July, increase our stock’s attractiveness to retail investors With split in ADRs, and new ADR program for ON shares, São Paulo and New
Slide 42: Cemig Distribuição provides 44% of consolidated net income
Cemig Distribuição provides 44% of consolidated net income Net profit, by company - 1H2007 - R$ '000 Company Net profit Ebitda Cemig Geração/Transmissâo 382,145 784,078 Cemig Distribuição 435,638 817,564 RME (Light) 103,205 188,625 Gasmig 22,562 29,781 Sá Carvalho 11,587 16,237 EATE 7,411 14,263 Cap
Slide 43: Diversification of business adds value to results
Diversification of business adds value to results Electricity Net revenue Ebitda Debt sales Consumers Employees R$ million R$ million R$ million GWh Cemig GT 15,382 1,208 784 3,113 173 2,344 Cemig D 10,177 2,797 818 2,751 6,353,217 8,293 (3) (3) RME (25%) 2,429 689 189 453 3,845,266 4,368 TBE - 33 3
Slide 44: Indicators show superior credit quality
Indicators show superior credit quality Debt management obeys these guidelines: Keep long-term credit quality at sufficient levels for a low risk rating Reduce exposure to FX risk Lengthen debt maturities Conversion by BNDES of debentures into stake in Light reduces debt by R$ 178 million Indictor C
Slide 45: Excellence in debt management
Excellence in debt management captures benefits of lower interest rates Consolidated data onJune 30, 2007 Main indexors CDI/Selic 75% Dollar Others 8% Igpm 1% Yen Urtj RGR/Finel 8% 1% 2% 5% Average cost (% p.a.) 12.09 11.67 9.15 9.47 8.56 dez/04 dez/05 dez/06 Mar-07 Jun-07 Maturities R$ million 1500
Slide 46: Strong cash flow ensures expansion
Strong cash flow ensures expansion Cash Flow Statement (consolidated) R$ million 2Q 1Q 2Q 1H2007 1H2006 2007 2007 2006 Cash at start of period 1,884 1,376 1,376 1,440 1,344 Cash generated by operations 713 728 1,441 425 836 Net income 515 407 922 325 665 depreciation and amortization 200 179 379 152
Slide 47: Ebitda establishes new, higher, level
Ebitda establishes new, higher, level Consolidated Ebitda margin (%) 39,7 40,6 37,2 39,9 33 34,8 33,6 32,2 29 30 31,3 27 27,1 23,4 Ebitda (R$ million) 1037 905 908 868 871 814 686 711 606 535 563 562 534 117 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 Growth reflects solidity of fundamentals Ebitda in last f
Slide 48: Agenda
Agenda Highlights of first half Márcio Araújo de Lacerda Expansion of business Djalma Bastos de Morais Financial management Luiz Fernando Rolla The first half 2007 results Agostinho Faria Cardoso Corporate vision oriented for sustainability Márcio Araújo de Lacerda
Slide 49: Expansion of consolidated net income
Expansion of consolidated net income Result shows growth consistent with the solidity of our fundamentals Growing productivity in all areas Continuous improvement in operational margins Diversification of the risk inherent to each business through integrated structure Consolidated Income statement R
Slide 50: Adjusted consolidated results: net income, Ebitda
Adjusted consolidated results: net income, Ebitda R$ million 1H 07 1H 06 % Net income 922 665 6 38. (a) CVA adjustment -TUST - 62 -(b) "Anuênio" - 117 -(c) Reversal of RGR provision - (43) -(d) CVA - purchase of energy (19) - -(e) Revision of transmission revenue 20 - -(f) Fiscal Credit Recognition
Slide 51: Consolidated net revenue
Consolidated net revenue Growth in net revenue reflects diversification of business, and positive effects of acquisitions (RME/Light S.A. and TBE companies) Cemig Distribution provides 58% of total net revenue Consolidated operational revenues R$ million 1H 1H 1st half 2Q 1st half 2007 2007 2007 200
Slide 52: Sales revenue: by company, and consolidated
Sales revenue: by company, and consolidated Cemig Distribuição 1st half 2007 sales GWh Industrial 2,401 Residential 3,425 Rural 927 Commercial 2,050 Other 1,374 Subtotal 10,177 Wholesale supply -Total 10,177 Cemig GT 1st half 2007 sales GWh Free Consumers 8,634 Wholesale electricity sales 6,748 To C
Slide 53: Growth reflects stake in Light S.A.
Growth reflects stake in Light S.A. Industrial consumption was affected by lower sales of short-term electricity to Free Clients Total sales of electricity 1st half - consolidated (MWh) *2007 2006 Change, % Residential 4,405 3,310 33.1 Industrial 11,800 11,893 -0.8 Commercial 2,815 1,948 44.5 Rural
Slide 54: Growth in operational expenses reflects cost of electricity
Growth in operational expenses reflects growing cost of electricity Consolidated operational expenses, R$ million 2Q 1Q 2Q 1st half 2007 1st half 2006 2007 2007 2006 Energy bought 651 600 1,251 467 1,001 Personnel/managers/Board members/employee profit shares 276 260 536 415 653 Depreciation and amo
Slide 55: Growing productivity in main businesses
Growing productivity in main businesses Consolidated Income statement R$ million Cemig H Cemig D Cemig GT 2Q07 2Q06 2Q07 2Q06 2Q07 2Q06 Net revenue 2,584 1,919 1,500 1,329 621 570 Operational expenses (1,747) (1,537) (1,153) (1,151) (278) (278) Operational profit 837 382 347 178 343 292 Ebitda 1,037
Slide 56: Cemig Geração e Transmissão
Cemig Geração e Transmissão Increasing profitability, on growth in sales and containment of expenses Income statement R$ million 2Q 1Q 2Q 1st half 2007 1st half 2006 2007 2007 2006 Net revenue 621 587 1,208 570 1,053 Operational expenses (278) (257) (535) (278) (498) Operational profit 343 330 673 2
Slide 57: CEMIG GT: Growing sales, consolidating new consumer profile
CEMIG GT: Growing sales, consolidating new consumer profile Quarterly changes Cemig Geração e Transmissão Sales in GWh 8.007 7.533 7,497 6,993 7,227 7,688 7,694 4,370 6,761 6,800 4.000 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 Volume of electricity sold 6.5% higher year-on-year in 1H 2007
Slide 58: Cemig Distribuição
Cemig Distribuição Growth in sales, with reduction of operational costs • In the quarter: Revenue up 15.65% from previous quarter Practically no growth in operational expenses High growth in operational profit Strong growth in Ebitda In the half-year : – 3,40% of growth in revenue from previous half
Slide 59: Cemig D: Sales resume seasonal pattern
Cemig D: Sales resume seasonal pattern after migration of Free Clients Cemig Distribuição Sales, GWh Total energy transported * 8,971 9,067 9,184 8,906 9,193 9,353 9,252 9,033 9,704 8,234 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 * Electricity sales to captive market + TUSD market. Electrici
Slide 60: Agenda
Agenda • Highlights of first half – Márcio Araújo de Lacerda • Expansion of business – Djalma Bastos de Morais • Financial management – Luiz Fernando Rolla • The first half 2007 results – Agostinho Faria Cardoso • Corporate vision oriented for sustainability – Márcio Araújo de Lacerda
Slide 61: Sustainability as a main corporate guideline
Sustainability as a main corporate guideline • Sustainability is one of our corporate values, and results from our long-term commitment to the environment, social responsibility and respect for the interests of our shareholders – This year our Sustainability Report is published in accordance with th
Slide 62: Market recognition for Cemig's sustainable results
Market recognition for Cemig’s sustainable results Net profit CAGR = 15% R$ million 1H03 –1H07 1,042 922 665 535 557 1H03 1H04 1H05 1H06 1H07 CAGR = 28% Ebitda 1H03 –1H07 R$ million 1,905 1,685 1,245 1,142 711 1H03 1H04 1H05 1H06 1H07 CAGR = compound annual growth rate Commitment to growth and addit
Slide 63: We are consolidating leadership in Brazil
We are consolidating leadership in Brazil Wholesale supply 6,403 GWh 38 distributors 01 industrial client 27 GWh 01 industrial client 05 GWh 01 industrial client 3 GWh 01 industrial client 16 GWh PCHs 10 MW 36 GWh 05 industrial clients 898 GWh Generating capacity 115 MW Sales 2,429 GWh 03 industrial
Slide 64: Achieving world-class corporation status
Achieving world-class corporation status • Total assets: R$ 24.4 billion • Stockholders’ equity: R$ 8.4 billion • Consolidated debt: R$ 7.6 billion • Consolidated net sales (1H07) : R$ 4.9 billion We are preparing the company for the consolidation of Brazil’s electricity sector Operational excellenc
Slide 65: CEMIG
CEMIG A Melhor Energia do Brasil. ao Gee Pi Latibex Ox NYSE NYSE Tin AMERICA TN © Dow Jones Sustainability Indexes ua |sE 41/41
Slide 66: Glossary
Glossary Aneel: The Brazilian electricity sector regulator. An independent federal regulatory agency. BRGAAP –Accounting Principles Generally Accepted in Brazil. CRC –The Results Compensation Account: Prior to 1993 Brazilian electricity concession holders were guaranteed by law a rate of return on i
Slide 67: Glossary
Glossary Payout – Percentage of net income distributed as dividends. P/E – Price/Earnings. RTE –The “Extraordinary Tariff Recomposition”: This is a tariff adjustment granted in December 2001 to the distributors and generators of the regions that were under rationing at that time. It is settled in th
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