Business Context and Reporting Period
This Form 6-K filing covers the period ending March 31, 2010, for Energy Company of Minas Gerais (CEMIG) and its subsidiaries, Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A. The document primarily consists of summaries of Board of Directors meetings held between December 2009 and March 2010, alongside market announcements regarding debt issuance and redemption.
Key Financial Metrics and Capital Activities
The filing does not provide consolidated revenue, profit, cash flow, or margin figures for the reporting period. However, it details significant capital market activities:
- Debt Issuance: Cemig Geração e Transmissão S.A. completed the public distribution of R$ 2.7 billion (270,000 debentures) in non-convertible, unsecured debentures. The issue was split into two series:
- First Series: R$ 1.586 billion (156,600 debentures), 2-year maturity, interest based on DI rate + 0.90% spread.
- Second Series: R$ 1.162 billion (113,400 debentures), 5-year maturity, interest based on IPCA + 7.6796% fixed rate.
- Debt Redemption: Proceeds from the new debenture issuance were used to fully redeem 270 Commercial Promissory Notes (Third Issue) totaling R$ 2.7 billion, which were due April 28, 2010. Early redemption occurred on March 10, 2010.
- Credit Rating: The new debentures received a risk rating of Aa.1.br from Moody's Latin America.
- Registered Capital: As of the issue date (January 15, 2010), the registered capital of Cemig Geração e Transmissão S.A. was R$ 3,296,785,358.90.
Material Changes and Strategic Decisions
Several strategic decisions were approved by the Board of Directors during the reporting period:
- Light S.A. Acquisition: The Board authorized the acquisition of approximately 13.03% of the voting stock of Light S.A. from Andrade Gutierrez Concessões S.A. (AGC). Additionally, the Board approved the acquisition of between 53.51% and 55.41% of the holding in a new entity (Newco) resulting from the split of Equatorial Energia S.A., which indirectly holds an interest in Light S.A. equivalent to approximately 6.97% to 7.22% of Light's stock.
- Operational Contracts: Cemig Distribuição S.A. approved the "Light for Everyone, Phase III" project and authorized direct contracting with the Brazilian Postal Service for invoice distribution and administrative collection services.
- Budget Approval: The Annual Budget for 2010 was approved by the Boards of both CEMIG and Cemig Distribuição S.A.
Outlook, Risks, and Contingencies
The filing outlines specific risks and contingencies associated with the new debt issuance and corporate structure:
- Default Events: The debenture issue deed defines default events including bankruptcy, failure to pay pecuniary obligations, early redemption of other debts exceeding R$ 50 million, or termination of concession contracts representing 30% or more of net operational revenue.
- Privatization Risk: A specific default event is triggered if the Guarantor (CEMIG) or the Government of the State of Minas Gerais ceases to hold at least 50% plus one share of the voting stock of the Issuer or Guarantor, respectively.
- Liquidity: No fund was constituted to maintain liquidity or stabilize the price of the debentures.
- Use of Proceeds: The company explicitly stated that net proceeds from the debenture offering would be applied in full to redeem existing commercial promissory notes, indicating a refinancing strategy rather than expansionary capital expenditure for this specific tranche.
Investor Verification Checklist
- Verify the final closing of the Light S.A. share acquisitions and the resulting total ownership percentage.
- Confirm the successful early redemption of the R$ 2.7 billion Commercial Promissory Notes on March 10, 2010.
- Monitor the execution of the "Light for Everyone, Phase III" project and associated government funding.
- Review the impact of the new debt structure on the company's leverage ratios and interest coverage, noting the mix of floating (DI) and inflation-linked (IPCA) rates.
- Check for any updates regarding the privatization or change in control of CEMIG or the State of Minas Gerais, as these are defined default events for the new debt.