Business Context and Reporting Period
Company: Energy Company of Minas Gerais (Cemig)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Third Quarter 2011 (ended September 30, 2011) and Nine Months ended September 30, 2011.
Business Overview: Cemig operates as a holding company with subsidiaries engaged in the generation, transmission, distribution, and sale of electric energy, as well as natural gas distribution and telecommunications. The company is listed on the BM&FBovespa, NYSE, and Latibex.
Key Financial Metrics (Nine Months Ended Sept 30, 2011)
| Metric | Value (R$ '000) | YoY Change |
|---|---|---|
| Net Operational Revenue | 11,472,952 | +12.76% |
| Net Profit for the Period | 1,706,455 | +7.54% |
| Earnings Per Share (Basic) | R$ 2.50 | +7.30% |
| EBITDA | 4,061,072 | +17.22% |
| EBITDA Margin | 34.05% | -1.35 pp |
| Net Debt | 19,969,440 | +4.55% |
| Cash and Cash Equivalents | 3,851,624 | +29.26% |
| Net Debt / Adjusted Capital | 1.52x | Improved from 1.66x |
Material Changes vs. Prior Period
- Revenue Growth: Driven by a 7.31% increase in electricity sales volume (due to higher industrial activity) and a 31.33% increase in revenue from the use of distribution systems (TUSD) due to migration of captive clients to the Free Market.
- Cost Increases: Operational costs rose 9.72%, primarily due to higher costs for electricity bought for resale (+19.58%) and outsourced services. Post-retirement benefit expenses increased 79.07% due to the increased proportional equity interest in the subsidiary Light.
- Financial Expenses: Net financial expenses increased 59.14% to R$ 833 million, driven by higher interest rates (CDI/Selic) and foreign exchange losses (USD and EUR appreciation against the Real).
- Acquisitions: Completed the acquisition of Abengoa assets (transmission lines) via subsidiary Taesa for approximately R$ 1.16 billion. Acquired a 9.77% stake in Norte Energia S.A. (Belo Monte Hydroelectric Plant) for R$ 118.7 million.
Guidance, Outlook, and Material Events
- Dividends: The Board declared an extraordinary dividend of R$ 850 million (R$ 1.25 per share), payable on December 28, 2011.
- Strategic Bids: Submitted a binding bid to acquire a 21.35% stake in Energias de Portugal S.A. (EDP).
- Debt Management: Authorized the issuance of commercial promissory notes up to R$ 6.5 billion to strengthen cash position and fund asset acquisitions.
- Regulatory: Aneel approved a 6.57% tariff adjustment for subsidiary Light SESA, effective November 2011.
- Risks: Management highlights exposure to foreign exchange rates (USD/EUR), interest rate fluctuations (Selic/CDI), and energy scarcity risks due to reliance on hydroelectric generation.
Investor Verification Checklist
- Dividend Payment: Confirm receipt of the R$ 850 million extraordinary dividend payment scheduled for late December 2011.
- EDP Acquisition: Monitor the outcome of the binding bid for the 21.35% stake in EDP and the creation of the transaction vehicle.
- Debt Covenants: Verify compliance with the strategic plan targets: Debt/EBITDA < 2.0x and Net Debt/(Net Debt + Equity) < 40%.
- FX Exposure: Assess the impact of continued USD/EUR appreciation on financial expenses and net debt valuation.
- Abengoa Integration: Review the operational integration and revenue contribution of the newly acquired transmission assets from Abengoa.