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Companhia Energética de Minas Gerais (NYSE:CIG) Q4 2023 Earnings Call Transcript

Companhia Energética de Minas Gerais (NYSE:CIG) Q4 2023 Earnings Call Transcript March 22, 2024

Companhia Energética de Minas Gerais  isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Carolina Senna: Yeah, thank you. Good afternoon, everyone. My name is Carolina Senna. I'm Investor Relations Superintendent of CEMIG. We now start CEMIG’s Fourth Quarter 2023 Earnings Call and Webcast. We have the following executives, Reynaldo Passanezi Filho, CEO; Dimas Costa Commercial VP; Leonardo George de Magalhaes, Chief Financial Officer and Investor Relations officer, Marco Soligo, Chief Participation Officer; Marney Tadeu Antunes, Chief Distribution Officer; and Thadeu Carneiro da Silva, Chief Generation and Transmission Officer. For the initial remarks, I turn the floor over to our CEO, Reynaldo Passanezi Filho.

Reynaldo Passanezi Filho : Good afternoon, everyone. Again, it is a pleasure to be disclosing our earnings. These results we believe were extraordinary. Okay, you can see my video now. I'll repeat. I'll start again. Good afternoon, everyone. It is a pleasure to be here to present our 2023 earnings. These results are extraordinary. And they show the success of our strategy. I think it is very important to give you a summary of the 2023 results, but you have to understand that these are the results of our strategic planning results of the execution of a strategy that is focused on concentrating our activities on the businesses that CEMIG knows. The electricity sector in Minas trading all over Brazil with control efficiency and operating performance.

A hydroelectric plant with a large dam and water flowing through its turbines.
A hydroelectric plant with a large dam and water flowing through its turbines.

So this is the strategy. And this is what justifies our record investment plan of BRL35.6 billion. How are we executing? Well, I think that here we have these bullet items. And we see the consequences of this strategy. The first was concentrating, focusing on the assets that we know and divest from our minority equity stakes of assets, which are basically outside the state of Minas. So we divested from light with diversity from Renova. And we ended up divesting this year from Santo Antôni, Retiro Baixo, Baguari and the first lot of SHPPs. And this was extremely positive not just in terms of the cash inflow because of these divestments. But also because we didn't need to inject capital. You will know that Renova required a capital increase.

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Light also needed a capital increase, Santo Antôni also required a capital increase. So CEMIG if we still have those shareholdings, and if we wanted to keep those share holdings, we would have to inject capital into these companies. So considering the BRL795 million in sale of assets in 2023, so you have to look at this general movement, i.e. divesting from non-strategic assets, where CEMIG make held a minority stake. Now, the cash that we generate, that we that we generate can be reinvested in the business that we know, you see before we had to take part in these capital increases that were required. So the first phase is to focus and concentrate on the assets that we know and divest from minority shareholdings. And this process is well advanced.

So we exited light Renoa, Santo Antôni, Retiro Baixo, Baguari and the first lot of SHPPs. So we changed the company's capital allocation. The second part is trying to remain within regulatory thresholds and targets that is fundamental for us to achieve the EBITDA that we're delivering here. You will all remember that CEMIG was the outside the target of regulatory expenses for distribution, and beyond the regulatory threshold for losses. And today, we are proud to say that we have within those regulatory targets or thresholds. We are compliant with the regulatory PMS sold threshold, and technical and non-technical regulatory losses authorized by the agency. This is also the result of an effort to generate cash because before, the resources that we would use for investments were used to pay for expenses.

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To continue reading the Q&A session, please click here.