Comp En De Mn Cemig ADS Q4 Earnings Call Highlights

Comp En De Mn Cemig ADS (NYSE:CIG) used its fourth-quarter 2025 earnings call to highlight what executives described as recurring strong operating performance alongside a sharp acceleration in capital spending and a key agreement to restructure post-employment healthcare obligations.

2025 profitability and investment program

Chief Executive Officer Reinaldo Passanezi Filho said the company delivered recurring EBITDA of BRL 7.3 billion in 2025, rising to BRL 8.3 billion when non-recurring items were included. He framed the results as evidence of “very positive” recurring performance across business lines and as support for what management called a record investment cycle.

Chief Financial Officer and Investor Relations Officer Andrea Marques de Almeida said Cemig invested BRL 6.6 billion in 2025, emphasizing that a large portion of spending is directed toward regulated segments with expected returns. She also pointed to growth in capital spending relative to regulatory depreciation as an indicator of the scale of the current expansion.

Operationally, Almeida said distribution was the “flagship” investment area, including:

• 23 new substations
• More than 12,000 km of low- and medium-voltage networks

In generation, the company cited participation in a GSF auction involving around BRL 199 million, with a “delta” reaching BRL 411 million invested in expansion and maintenance. In transmission, Cemig invested BRL 410 million in reinforcements and improvements and said it added allowed annual revenue during 2025.

Outside electricity, Almeida said Gasmig invested BRL 217 million in the Centro-Oeste project, while Cemig SIM invested BRL 361 million and added 19 new solar plants with 68 MW of installed capacity.

Post-employment healthcare agreement shifts liability profile

One of the most significant non-recurring items discussed on the call was a negotiated agreement related to retirees’ and pension holders’ healthcare funding. Passanezi said Cemig reached an agreement with unions that was approved by the Regional Labor Court.

Under the arrangement, Cemig will make payments totaling BRL 1.25 billion (Almeida cited BRL 1.28 billion as the obligation) in six installments, with two installments in 2026 and the remaining installments over subsequent years. Passanezi said the change converts an obligation that carried actuarial risk into a financial debt, which management said reduces uncertainty while supporting the transition for retirees to maintain healthcare coverage.

Almeida said the post-employment adjustment drove much of the difference between recurring and reported results. She added that, beginning in 2026, the company expects to no longer incur an impact of roughly BRL 300 million that was associated with the retirees’ healthcare plan in 2025. She also cited a BRL 1.19 billion impact in EBITDA in 2025 from the adjustment and said net profit saw an approximate BRL 800 million positive effect.

Quarterly drivers: hydrology, trading, and distribution margin

For the fourth quarter, Almeida reported recurring EBITDA of BRL 1.8 billion, and BRL 2.9 billion including non-recurring items, again pointing to the healthcare-related adjustment as the main factor behind the difference.

Management repeatedly cited hydrological risk as a headwind. Almeida said lower GSF levels required the company to purchase energy at higher spot prices, noting prices seen through December at BRL 265 per MW. She said the quarter-over-quarter recurring EBITDA variation of 6.5% was mainly due to the GSF effect (comparing 0.8 versus 0.67), while distribution contributed positively due to Parcel B in May, which she said improved contribution margin by BRL 138 million in the quarter.

On the demand side, she said Cemig saw a 1.4% reduction in the market, which she linked to customer migration.

In trading, a question from Banco Safra focused on a positive BRL 97 million result in the fourth quarter and the company’s short positions. Trading Chief Officer Sergio Lopes Cabral said management acted cautiously in closing positions. He said 2026 positions are already closed, and Cemig is working toward closing 2027. He added that 2027 and 2028 still had open positions being addressed, while from 2029 onward the company expects no open positions. Cabral also said the company sees future prices rising and views that as an opportunity to sell energy starting in 2029, as planned.

Operating metrics, costs, and service quality

Almeida attributed higher operating expenses at Cemig D primarily to headcount additions and outsourced services. She said the company hired 228 new electricians under the “Cemig Agro” program to improve responsiveness for rural and agribusiness clients. She also cited increased outsourced work such as cleaning power line pathways and tree pruning, describing it as part of an intensified preventive maintenance effort.

She said Cemig’s indicators were in line with regulatory expectations, highlighting:

• Credit losses of 0.63% of energy supply revenue in 2025
• Receivables collection index (ARFA) of 99.51%
• Best DEC in the company’s history at 8.97, a 29-minute improvement versus the prior year
• Perceived DEC improvement of 1 hour and 50 minutes

Almeida also said the company reduced financial compensations by 22% quarter-over-quarter, while noting further work remains.

Financing, leverage, and shareholder returns

To fund investments, management emphasized operating cash generation and increased use of third-party financing. Almeida said Cemig reached an average debt tenor of 6.9 years and highlighted that recent debenture issues were priced below sovereign risk. She said the company issued BRL 9.3 billion in debt and repaid BRL 6.5 billion, and also noted BRL 4.3 billion of debentures issued in the fourth quarter.

Leverage ended the period at 2.3. In response to a question on leverage targets, management said it does not have a specific target number but expects leverage to rise through the investment cycle into the 2028 distribution tariff review. The company referenced covenant limits tied to a ratio of 3.5 and said it expects to remain within a range consistent with its credit assessment.

Almeida cited an average nominal cost of debt of 13%, equivalent to 87% of CDI, with debt split 59% inflation-linked (IPCA) and 41% CDI-linked. Passanezi added that because most investments are regulated, management views the cost of debt as below the regulated return assumptions, which it said supports value creation.

On shareholder returns, Passanezi reiterated Cemig’s policy of distributing 50% of net profit and said dividends and interest on equity paid totaled BRL 3.5 billion, which Almeida said corresponded to a 14.9% dividend yield. She also reported total shareholder return of 17.5%. Asked about a potential bonus distribution in 2026, Almeida said the company would analyze the topic during the year and noted such a decision would relate to the size of profit reserves relative to capital stock.

About Comp En De Mn Cemig ADS (NYSE:CIG)

Companhia Energética de Minas Gerais SA (Cemig ADS) is a leading Brazilian energy company primarily engaged in the generation, transmission, distribution and commercialization of electric power. Headquartered in Belo Horizonte, the company operates as a vertically integrated utility, serving residential, commercial and industrial customers across its concession areas. In addition to its core electricity business, Cemig maintains interests in natural gas distribution and distinct energy-related ventures, including renewable sources and infrastructure projects.

In its generation segment, Cemig manages a diversified portfolio that includes hydroelectric, photovoltaic and wind power plants.