Business Context and Reporting Period
This Form 6-K filing by Energy Company of Minas Gerais (CEMIG) covers material events and board decisions occurring between May 6, 2015, and July 2, 2015. The report details corporate governance actions, significant litigation outcomes regarding hydroelectric plant concessions, capital market activities, and strategic divestitures by affiliated companies.
Key Financial Metrics and Capital Actions
- Dividend Distribution: On June 30, 2015, CEMIG paid the first portion of Interest on Equity for 2014 totaling R$ 115,000,000 (approx. R$ 0.0914 per share).
- Debt Issuance: The Board authorized a surety guarantee for a debenture issue by subsidiary Cemig GT up to R$ 1 billion. Proceeds are designated for debt payment and cash replenishment. The issue targets a minimum rating of AA (Fitch/S&P) or Aa2 (Moody's).
- Debt Ratio Targets: The Board authorized exceeding the consolidated debt ratio target of 42% up to a limit of 47% for 2015, subject to BNDES consent.
- Short-term Financing: Authorized a surety guarantee for a R$ 600 million working capital loan from Banco do Brasil for Cemig GT, with a term of up to 90 days.
- Share Capital Adjustments: Approved capital increases for subsidiaries EATE (to R$ 495.6 million) and ENTE (to R$ 239.7 million) without issuing new shares.
Material Changes and Litigation Outcomes
The filing highlights significant legal setbacks regarding hydroelectric plant concessions:
- Jaguara Plant: On June 24, 2015, the Higher Appeal Court (STJ) rejected CEMIG's application for a mandamus to extend the concession for the Jaguara Hydroelectric Plant (6 votes to 2). The company respects the decision and is evaluating further legal steps.
- São Simão Plant: On June 30, 2015, following the Jaguara ruling, the STJ revoked the interim injunction that allowed CEMIG to continue operating the São Simão Hydroelectric Plant. The concession extension application was effectively denied.
- Market Reaction: CEMIG attributed atypical trading volume and price variations in late June to these judicial decisions. Management stated they are taking steps to ensure financial equilibrium in the event of concession loss.
Guidance, Outlook, and Strategic Transactions
- Redentor Energia: CEMIG noted a proposal by minority shareholders of Redentor Energia (in which CEMIG has an interest) to sell shares via a public offer at R$ 6.00 per share to delist the company. The controlling shareholder is evaluating the proposal.
- Light/Renova Transaction: Affiliated company Light S.A. proposed selling its 15.87% stake in Renova Energia S.A. to SunEdison, Inc. for US$ 250 million, payable in SunEdison stock. The transaction is subject to regulatory approval and waiver of lock-up restrictions.
- Taesa Negotiations: Negotiations between FIP Coliseu (a controlling block member of Taesa) and Empresas Públicas de Medellín (EPM) regarding the sale of 35.71% of Taesa's common shares were terminated on July 2, 2015, due to unmet conditions precedent.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from predictions due to risks outlined in the most recent Form 20-F.
Investor Verification Checklist
- Verify the financial impact of the revoked interim injunction for the São Simão plant and the rejected Jaguara concession extension on future revenue streams.
- Monitor the status of the R$ 1 billion debenture issuance by Cemig GT and the final interest rates determined via bookbuilding.
- Track the progress of the Light/Renova divestiture, specifically the waiver of the 4-year lock-up period and regulatory approvals required.
- Assess the implications of the terminated Taesa sale negotiations on CEMIG's growth strategy through acquisitions.
- Review the consolidated debt ratio trajectory to ensure it remains within the authorized 47% limit for 2015.