CIG

Business Context and Reporting Period

This Form 6-K filing by Companhia Energética de Minas Gerais (CEMIG) covers the period ending April 28, 2009. The filing primarily presents the company's Annual and Fourth Quarter 2008 financial results, alongside significant corporate governance updates and a major strategic acquisition announced in April 2009. CEMIG operates as a holding company with primary subsidiaries in electricity distribution (Cemig D), generation and transmission (Cemig GT), and natural gas (Gasmig).

Key Financial Metrics (2008 Full Year and 4Q08)

Note: All amounts are in Brazilian Reais (R$) unless otherwise indicated. 2008 Net Income represents an 8.3% increase over 2007.

Material Changes vs. Prior Period

• Revenue Composition: While consolidated net revenue grew slightly (0.8%) in 4Q08, the distribution segment (Cemig D) saw a 7.4% decline due to tariff revision impacts. This was offset by a 6.3% increase in the Generation/Transmission segment (Cemig GT) and a 36.8% surge in the RME (Light) participation.
• EBITDA Performance: Consolidated EBITDA for 4Q08 decreased 13.1% year-over-year, driven primarily by a 37.9% drop in Cemig D's EBITDA. However, Cemig GT EBITDA rose 8.0%.
• Energy Sales: Sales to final consumers increased 6.3% in 4Q08, driven by industrial (+7.9%) and commercial (+7.1%) sectors. Supply sales dropped 20.5% due to lower short-term sales to commercializers.
• Dividends: The company proposed a total dividend distribution of R$944 million for 2008, representing R$1.90 per share.

Guidance, Outlook, and Strategic Developments

Major Acquisition: Terna Participações S.A.

On April 23, 2009, CEMIG announced the acquisition of approximately 65.86% of Terna Participações S.A. (Terna), a major electricity transmission holding company.

• Transaction Value: R$2,330.5 million (approx. R$40.29 per unit).
• Strategic Impact: This acquisition is expected to increase CEMIG's market share in the Brazilian transmission market from 5.4% to 12.6%. It will expand the transmission grid from 5,755 km to 9,508 km.
• Financials: The deal is projected to be accretive, with a real internal rate of return (IRR) of 10.6% (base case) and above 12% with synergies. The transaction is expected to close by September 30, 2009, subject to regulatory approvals (ANEEL) and shareholder ratification.
• Pro-Forma Impact: Post-acquisition, the transmission business is expected to represent 17.6% of consolidated EBITDA (up from 6.6%).

2009 Guidance

Management provided 2009 EBITDA guidance in the range of R$3.8 billion to R$4.2 billion. This guidance excludes the financial impact of the recent Terna acquisition and the acquisition of stakes in three wind farms in Ceará (49% stake for R$213 million).

Operational and Governance Updates

• Capital Increase: Proposed a capital increase of R$620 million via a 25% stock dividend (bonus issue).
• Cost Reduction: Implemented an operational efficiency program targeting R$200 million in annual savings starting in 2010, including a Voluntary Retirement Program (PPD) which had 486 participants by end-2008.
• Debt Management: Maintained a robust cash position of R$2.2 billion. The average debt maturity is 4.3 years, with 70% of debt indexed to CDI and minimal foreign exchange exposure.

Investor Verification Checklist

• Regulatory Approvals: Verify the status of ANEEL and antitrust (CADE) approvals required for the Terna acquisition closing.
• Shareholder Ratification: Confirm the outcome of the Extraordinary General Meeting of Stockholders scheduled for May 13, 2009, regarding the Terna deal and capital increase.
• Pro-Forma Leverage: Assess the impact of the R$2.3 billion acquisition on the Net Debt/EBITDA ratio, which is projected to rise to 2.1x pro-forma.
• Tariff Revisions: Monitor the ongoing impact of tariff revisions on the distribution segment (Cemig D) and the effectiveness of the commercialization strategy in mitigating these effects.
• Wind Farm Integration: Track the integration and operational start of the three acquired wind farms in Ceará (99.6 MW).