EBITDA: BRL 5 billion in Q3 2024, the highest in the company's history. Capital Gain: BRL 1.6 billion from the sale of Alianca Energia. Transmission Tariff Revision Gain: BRL 1.5 billion. Investment: Over BRL 4 billion invested in the first nine months of 2024. Cash Generation: BRL 1.8 billion in EBITDA for Q3 2024. Net Cash Flow: BRL 5 billion from operating activities in the first nine months of 2024. Debt Issuance: BRL 2.5 billion in debentures with terms of 7 and 12 years. Market Growth: 4.5% increase in energy demand in Minas Gerais. Gasmig Gas Volume: 6.6% reduction in industrial client gas volume. Rating: Achieved AAA rating, the highest in the company's history.

Release Date: November 14, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Cia Energetica DE Minas Gerais - Cemig (NYSE:CIG) achieved the best credit rating in its history, AAA, reflecting strong financial performance. The company reported a record EBITDA of BRL5 billion for the third quarter, driven by successful divestments and tariff revisions. Cemig completed the sale of Alianca Energia, resulting in a capital gain of BRL1.6 billion. The company has a robust investment plan, with over BRL4 billion invested in the first nine months of 2024, indicating a commitment to future growth. Cemig's transparency and quality of financial statements were recognized, enhancing investor confidence.

Negative Points

The trading results were negatively impacted by load restrictions between the northeast and southeast regions, affecting energy prices. Cemig's leverage is expected to increase due to dividend payments and Eurobond settlements, potentially impacting financial flexibility. The company faced challenges with energy trading partners not delivering as promised, leading to contract cancellations and deferrals. There was a drop in EBITDA for Cemig D due to increased expenses in outsourced services and market losses from captive market migration. Gasmig experienced a reduction in gas volume from industrial clients, impacting EBITDA by 1.7%.

Q & A Highlights

Q: Can you explain the rationale behind submitting a bill to turn Cemig into a corporation before the approval of a prior related project? Also, is there any update on Taesa's stakeholder situation? A: The decision to submit the bill is a strategy from the controlling shareholder, Minas Gerais administration. If the bill is approved without the constitutional amendment, a referendum would be required. Regarding Taesa, there are no new updates, and any developments will be communicated through a notice. - Reynaldo Filho, CEO

Story Continues

Q: Could you clarify the increase in energy purchase and sale this quarter? Also, what are your projections for leverage after dividend payments and Eurobond settlements? A: The increase was due to a price difference caused by transmission restrictions between the northeast and southeast. We managed the risk by negotiating with trading companies. Regarding leverage, it is expected to rise due to our investment program and dividend payments, but it will remain sustainable, targeting a leverage of 2 to 2.5 by 2027. - Dimas Costa, Commercialization Director & Leonardo Magalhaes, CFO

Q: What impact did the trading companies' failure to deliver energy have on Cemig's results? A: Some trading companies did not deliver as promised, leading to contract cancellations and renegotiations. The largest impact was deferred to 2025, converting the loss into a price reduction for future contracts. - Dimas Costa, Commercialization Director

Q: How does Cemig plan to manage its debt profile and maintain financial stability? A: We have successfully extended our debt profile with recent debenture issuances, maintaining a low leverage. Our strategy involves financing investments through the capital market while ensuring attractive dividends and sustainable growth. - Leonardo Magalhaes, CFO

Q: What are Cemig's plans for future investments and how will they impact shareholder value? A: We have a significant investment program, particularly in transmission lines, which will enhance shareholder value. These investments are expected to increase cash generation and improve our financial metrics by 2028. - Leonardo Magalhaes, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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