Business Context and Reporting Period
This Form 6-K filing by Energy Company of Minas Gerais (Cemig) covers the period ending January 19, 2005. The document primarily details the minutes of an Extraordinary General Meeting (EGM) held on December 30, 2004, and a market announcement dated January 4, 2005, regarding preliminary 2004 financial results. The company is a Brazilian listed utility undergoing a significant corporate restructuring to comply with new electricity sector laws.
Key Financial Metrics (2004 Preliminary Results)
- Net Revenue: Approximately R$ 6.749 billion.
- Net Profit: R$ 1.493 billion (R$ 9.21 per thousand shares), representing a 24.6% increase over 2003.
- EBITDA: R$ 2.390 billion, a 33% increase over 2003.
- Capital Expenditure (2004): R$ 888.9 million, including a R$ 134 million acquisition of Rosal Energia S.A.
- Electricity Sales: Approximately 35.966 GWh, a 3.1% increase over 2003.
- Capital Expenditure (2005 Guidance): Approved program of R$ 1.2897 billion.
Material Changes and Corporate Restructuring
The EGM approved a major stockholding restructuring to adapt to Law 10848/2004. Cemig will transition into a holding company, transferring its generation, transmission, and distribution assets to two new wholly-owned subsidiaries:
- Cemig Geração e Transmissão S.A.: Receiving fixed assets valued at R$ 3.835 billion (net of depreciation) and monetary obligations of R$ 1.576 billion (net negative).
- Cemig Distribuição S.A.: Receiving fixed assets valued at R$ 4.143 billion (net of depreciation) and monetary obligations of R$ 3.668 billion (net negative).
The transfer includes assets, rights, obligations (including tax and labor), employees, and clientele. The subsidiaries will increase their registered capital through the issuance of new shares subscribed by Cemig.
Outlook, Risks, and Unusual Items
Unusual Items in 2004 Results:
- Regulatory assets of R$ 342.7 million related to the recovery of Cofins tax.
- Capital gain of R$ 102.2 million from the sale of 40% of Gasmig.
- Operational expense adjustment of R$ 51 million due to CVA credits.
2005 Outlook and Projects:
- Capital expenditure of R$ 1.2897 billion allocated to generation/transmission (R$ 564.8M), distribution (R$ 552.7M), and holding investments (R$ 172.2M).
- Special projects approved: "Luz Para Todos" (R$ 575.1M) funded by federal sources, and medium/low-voltage works (R$ 123M) funded by consumers.
Risks and Contingencies:
- Legal Disputes: Ongoing litigation regarding the Stockholders' Agreement between the State of Minas Gerais and Southern Electric Brasil Participações Ltda. The State of Minas Gerais argues the agreement has been annulled by court decisions, while Southern Electric noted the provisional nature of past bylaw changes.
- Regulatory Approval: The restructuring requires prior approval from the National Electricity Agency (Aneel).
- Financial Results: 2004 figures are preliminary and unaudited, subject to change upon final auditor validation.
Investor Verification Checklist
- Verify the final audited 2004 financial statements to confirm the preliminary net profit and EBITDA figures.
- Monitor the status of the Aneel approval for the corporate unbundling and asset transfer.
- Track the resolution of the legal dispute regarding the Stockholders' Agreement between the State of Minas Gerais and Southern Electric.
- Confirm the funding sources and execution timeline for the "Luz Para Todos" project and the 2005 capital expenditure program.
- Review the final valuation opinions by SETAPE and Deloitte Touche Tohmatsu regarding the asset transfers to the new subsidiaries.