Companhia Energética de Minas Gerais SA Q2 FY2024 earnings call

Management Statement and Operational Highlights:

• Turnaround Efforts: Divested minority holdings outside Minas Gerais, reducing net destruction of value by almost BRL14 billion. Reduced debt, improved EBITDA, and increased market share relative to listed power companies.
• Investments: BRL49 billion CapEx plan focused on Minas Gerais, with 80% in regulated businesses. Over BRL13.6 billion invested by 2023, with 100% of investments in the state of Minas Gerais.
• Team Alignment: Well-aligned management and board, with a focus on customer-centricity. Technological transformations include digitalization of systems, improving customer service via apps and enhanced purchasing systems.
• Dividends: Paid BRL12.7 billion in dividends since 2019, with PN shares up 394% and ON shares up 437%.
• Efficiency Improvements: Reduced operating expenses, improved collection methods (e.g., increased PIX payments to 26.2% in June 2024), and achieved regulatory compliance in losses and collection.

Segment Performance:

• Distribution: Over BRL23 billion investment planned for 2024-2028, focusing on customer-centric approach, reducing delinquency (BRAD ratio of 2.4), improving collection (ARFA increased to 99% in some months), and investing in 404 substations, 21,950 km of lines, and 1,785,000 smart meters. Distributed generation connections and three-phase supply initiatives aim to enhance service quality and market sale.
• Trading Company: Showed EBITDA growth, with market share gains relative to listed power companies. Despite prior exceptional years, results remained positive with strategic positioning in the power market.
• Gas: Gasmig has a concession until 2053 but was affected by industrial customer consumption reduction. However, it has potential for growth through pipeline expansion (e.g., new pipeline to Divinopolis) and new plant operations (90-megawatt plant).

Guidance:

• Aim to maintain and improve market share, with a focus on energy transition initiatives.
• Expect to achieve a AAA rating, continuing with the large CapEx plan of BRL49 billion.
• Focus on reducing net debt over EBITDA ratio further, from 3.2 times to 1 times, and continue strategic investments in regulated assets in Minas Gerais.

Risks:

• Regulatory changes affecting tariff adjustments and investment plans.
• Federalization impact on privatization plans and company operations.
• Market competition from distributed generation and other energy providers.
• Supply chain and labor challenges related to energy transition and infrastructure investments.

Q: About transition from single to three phase supply and asset write-offs.

A: Marney Tadeu Antunes mentioned that assets are often depreciated and under control in planning, with focus on most depreciated networks where interruptions are highest.

Q: About Taesa sale process.

A: Marco da Camino Soligo stated that Taesa sale is part of annual strategic planning and ongoing efforts to align with the company's strategic goals.

Q: Expectations from Gasmig under Carlos Colombo's management.

A: Carlos Colombo emphasized customer-centricity, network expansion in Minas Gerais, and focus on residential and commercial clients to enhance margin and growth.