20-F

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Annual Report and Form 20-F 2023 CEMIG Logo

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report: N/A

Commission file number 1-15224

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

(Exact name of Registrant as specified in its charter)

ENERGY CO OF MINAS GERAIS

(Translation of Registrant’s name into English)

BRAZIL

(Jurisdiction of incorporation or organization)

1200, Avenida Barbacena; Belo Horizonte/MG, Brazil CEP 30190-131

(Address of principal executive offices)

Leonardo George de Magalhães

Chief Officer for Finance and Investor Relations

ri@cemig.com.br | +55 31 3506-5024

1200, Avenida Barbacena; Belo Horizonte/MG, Brazil CEP 30190-131

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol (s)	Name of exchange on which registered:
Preferred Shares, R$5.00 par value	CIG	New York Stock Exchange*
American Depositary Shares, each representing 1 Preferred Share, without par value	CIG	New York Stock Exchange
Common Shares, R$5.00 par value	CIG.C	New York Stock Exchange*
American Depositary Shares, each representing 1 Common Share, without par value	CIG.C	New York Stock Exchange

*Not for trading but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common share as of the close of the period covered by the annual report:

735,847,624 Common Shares

1,465,523,064 Preferred Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☒ No ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ☒	Accelerated filer ☐	Non accelerated filer ☐	Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ☐	International Financial Reporting Standards as issued by the International Accounting Standards Board	☒	Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 ☐ Item 18 ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ☐ No ☒

    Table of Contents

   


PART I
Item 1. Identity of Directors, Senior Management and Advisers		12
Item 2. Offer Statistics and Expected Timetable		12
Item 3. Key Information		12
Item 4. Information on the Company		40
Item 4A. Unresolved Staff Comments		94
Item 5. Operating and Financial Review and Prospects		95
Item 6. Directors, Senior Managers and Employees		112
Item 7. Major shareholders and related party transactions		124
Item 8. Financial Information		126
Item 9. The Offer and Listing		133
Item 10. Additional Information		139
Item 11. Quantitative and Qualitative Disclosures about Market Risk		159
Item 12. Description of Securities Other than Equity Securities		163
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies		165
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds		165
Item 15. Controls and procedures		165
Item 16. [Reserved]		166
Item 16A. Audit Committee Financial Expert		166
Item 16B. Code of Ethics		166
Item 16C. Principal Accountant Fees and Services		166
Item 16D. Exemptions from the Listing Standards for Audit Committees		167
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers		167
Item 16F. Change in Registrant’s Certifying Accountant		167
Item 16G. Corporate Governance		167
Item 16H. Mine Safety Disclosure		168
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		169
Item 16J. Insider trading policies		169
Item 16K. Cybersecurity		169
PART III
Item 17. Financial Statements		171
Item 18. Financial Statements		171
Item 19. Exhibits		172


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PRESENTATION OF FINANCIAL INFORMATION

The Companhia Energética de Minas Gerais – CEMIG (or Company) is a state-controlled mixed capital company (‘sociedade por ações, de economia mista’) organized under the laws of the Federative Republic of Brazil, or Brazil. References in this annual report to ‘CEMIG’, the ‘CEMIG Group’, the ‘Company’, ‘we’, ‘us’, ‘our’ and ‘ourselves’ are to Companhia Energética de Minas Gerais – CEMIG and its consolidated subsidiaries, and references to ‘CEMIG Holding’ are to Companhia Energética de Minas Gerais – CEMIG on an individual basis, except when the context otherwise requires. References to the ‘Real,’ ‘Reais’ or ‘R$’ are to Brazilian Reais (plural) and the Brazilian Real (singular), the official currency of Brazil. References to ‘U.S. Dollars’, ‘Dollars’ or ‘US$’ are to United States Dollars.

We maintain our books and records in Reais. We prepare our statutory financial statements in accordance with the accounting practices adopted in Brazil, and with the International Financial Reporting Standards (‘IFRS’), as issued by the International Accounting Standards Board (‘IASB’). For purposes of this annual report, we prepared our consolidated financial statements in accordance with the IFRS, as issued by the IASB.

This annual report contains translations of certain Real amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise indicated, such U.S. dollar amounts have been translated from Reais at an exchange rate of R$4.8521 to US$1.00, as certified for customs purposes by the U.S. Federal Reserve Board as of December 29, 2023. We cannot guarantee that U.S. dollars can be converted into Reais, or that Reais can be converted into U.S. dollars, at the above rate or at any other rate.

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals and/or subtotals in certain tables may not be an arithmetic aggregation of the figures that precede them.


ANNUAL REPORT AND FORM 20-F \| 2023	5

MARKET POSITION AND OTHER INFORMATION

The information contained in this annual report regarding our market position is, unless otherwise indicated, presented for the year ended December 31, 2023. It is based on, or derived from, reports issued by the Brazilian National Electric Energy Agency (Agência Nacional de Energia Elétrica, ‘Grantor’, or ‘ANEEL’), and by the Brazilian Electric Power Trading Chamber (Câmara de Comercialização de Energia Elétrica, or ‘CCEE’).

Certain terms are defined the first time they are used in this annual report. As used herein, all references to ‘GW’ and ‘GWh’ are to gigawatts and gigawatt hours, respectively, references to ‘MW’ and ‘MWh’ are to megawatts and megawatt-hours, respectively, and references to ‘kW’ and ‘kWh’ are to kilowatts and kilowatt-hours, respectively.

References in this annual report to the ‘common shares’ and ‘preferred shares’ are to our common shares and preferred shares, respectively. References to ‘Preferred American Depositary Shares’ or ‘Preferred ADSs’ are to American Depositary Shares, each representing one preferred share. References to ‘Common American Depositary Shares’ or ‘Common ADSs’ are to American Depositary Shares, each representing one common share. Our Preferred ADSs and Common ADSs are referred to collectively as ‘ADSs’, and our Preferred American Depositary Receipts, or Preferred ADRs, and Common American Depositary Receipts, or Common ADRs, are referred to collectively as ‘ADRs’.

The Preferred ADSs are evidenced by Preferred ADRs, issued pursuant to a Second Amended and Restated Deposit Agreement, dated as of August 10, 2001, as amended on June 11, 2007 and on April 15, 2022, by and among us, Citibank N.A., as depositary, and the holders and beneficial owners of Preferred ADSs evidenced by Preferred ADRs issued thereunder (the ‘Second Amended and Restated Deposit Agreement’). The Common ADSs are evidenced by Common ADRs, issued pursuant to a Deposit Agreement, dated as of June 12, 2007, as amended on April 15, 2022, by and among us, Citibank, N.A., as depositary, and the holders and beneficial owners of Common ADSs evidenced by Common ADRs issued thereunder (the ‘Common ADS Deposit Agreement’ and, together with the Second Amended and Restated Deposit Agreement, the ‘Deposit Agreements’).


ANNUAL REPORT AND FORM 20-F \| 2023	6

FORWARD-LOOKING INFORMATION

This annual report includes certain forward-looking statements, mainly in “Item 3. Key Information”, “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk”. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and contingencies including, but not limited to, the following:

•

General economic, political and business conditions, principally in Brazil, the State of Minas Gerais (‘Minas Gerais’), as well as other states in Brazil;

•

Inflation and fluctuations in exchange rates and in interest rates;

•

Increases in the costs of projects and delays or the failure to successfully complete projects;

•

Result in the failure of facilities to operate or generate income in accordance with our expectations;

•

Existing and future governmental regulation as to energy rates, energy usage, competition in our concession area and other matters;

•

Existing and future policies of the Federal Government of Brazil, which we refer to as the Federal Government;

•

On-going high-profile anticorruption investigations in Brazil;

•

Our expectations and estimates concerning future financial performance and financing plans;

•

Our level, or maturity profile, of indebtedness;

•

Our ability to comply with financial covenants;

•

The likelihood that we will receive payment in connection with accounts receivable;

•

Our capital expenditure plans;

•

Our ability to implement our divestment program;

•

Failure or hacking of our security and operational infrastructure or systems;

•

Our ability to renew our concessions, approvals and licenses on terms as favorable as those currently in effect or at all;

•

Our ability to integrate the operations of companies we have acquired and that we may acquire;

•

Changes in volumes and patterns of customer energy usage;

•

Competitive conditions in Brazil’s energy generation, transmission and distribution markets, and related services;

•

Trends in the energy generation, transmission and distribution industry in Brazil, and related services, particularly in Minas Gerais;

•

Changes in rainfall and the water levels in the reservoirs used to run our hydroelectric power generation facilities;

•

Existing and future policies of the government of Minas Gerais (the ‘State Government’), including policies affecting its investment in us and its plans for future expansion of energy generation, transmission and distribution, and related services, in Minas Gerais; and

•

Other risk factors identified in “Item 3. Key Information—Risk Factors”.


ANNUAL REPORT AND FORM 20-F \| 2023	7

The words ‘believe,’ ‘may,’ ‘could,’ ‘will,’ ‘plan,’ ‘estimate,’ ‘continue,’ ‘anticipate,’ ‘seek,’ ‘intend,’ ‘expect’ and similar words are intended to identify forward-looking statements. We do not undertake to publicly update or revise any forward-looking statements because of new information, future events or otherwise. Considering these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not materialize as described. Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.

SUMMARY OF RISK FACTORS

The Company’s business, results of operations, financial conditions and cash flows are subject to, and could be materially adversely affected by a number of risks and uncertainties, including risks relating to the nature of the Company's business and its operations in Brazil. The following list summarizes some, but not all, of these risks. Please read the information in the section entitled “Risk Factors” for a more thorough description of these and other risks.

Risks Relating to the Company’s Business

•

We are not certain whether new concessions or authorizations, as applicable, will be obtained, nor that our present concessions or authorizations will be extended on terms similar to those currently in effect, nor that any compensation we receive in the event of non-extension will be sufficient to cover the full value of our investment.

•

Our subsidiaries might suffer intervention by Brazilian public authorities to ensure adequate levels of service or be sanctioned by ANEEL for non-compliance with their concession agreements, or the authorizations granted to them, which could result in fines, other penalties and/or, depending on the severity of the non-compliance, legal termination of concession agreements or revocation of authorizations.

•

We are subject to extensive and governmental legislation and regulation which may be subject to change, and any changes to such legislation and regulation could have a material adverse effect on our business, results of operations and financial condition.

•

Changes in Brazilian tax law or conflicts regarding its interpretation may adversely affect us.

•

We are subject to restrictions on our ability to make capital expenditures ('capex') and to incur indebtedness, which could adversely affect our business, results of operations and financial condition.

•

A reduction in our credit risk rating or in Brazil’s sovereign credit ratings could adversely affect the availability of new financing and/or increase our cost of capital.

•

Disruptions in the operation of, or deterioration of the quality of, our services, or those of our subsidiaries, could adversely affect our business, operating results and financial condition.

•

We have a considerable amount of debt, and we are exposed to limitations on our liquidity – a factor that might make it more difficult for us to obtain financing for investments that are planned and might negatively affect our financial condition and our results of operations.

•

We cannot guarantee the speed of our capacity for innovation and our responses to the changes that the energy sector is going through with the advancement of technology.

•

Our strategy for maximizing value for CEMIG’s shareholders depends on external factors that could impede its successful implementation.

•

We may be unable to implement our long-term strategic plans within the desired timeframe, or without incurring unforeseen costs, which could have adverse consequences for our business, results of operations and financial condition.


ANNUAL REPORT AND FORM 20-F \| 2023	8

•

The operating and financial results of our subsidiaries, jointly controlled entities and affiliates, non-controlling or from any companies which we may acquire in the future, may negatively affect our strategies, operating results and financial condition.

•

Delayed completion of construction projects or late capitalization of new investments in our generation, transmission and distribution companies could adversely affect our business, operating results and financial condition.

•

The level of default by our customers could adversely affect our business, operating results and/or financial condition, as well as those of our subsidiaries.

•

CEMIG D’s (Cemig Distribuição S.A or Cemig D) economic and financial sustainability is directly related to the effectiveness of the actions to control energy losses, and the regulatory limits established for it. If CEMIG D fails in successfully controlling energy loss, its business, operations, profit and financial condition could be substantially and adversely affected.

•

Dams are part of the critical and essential infrastructure in the Brazilian energy sector. Dam failures can cause serious damage to affected communities and to the Company.

•

We might be held responsible for impacts on our own workforce, on the population and the environment, due to accidents related to our generation, transmission and distribution systems and facilities.

•

Requirements and restrictions imposed by environmental agencies might require the Company to incur additional costs.

•

Cyberattacks, or violation of the security of our data might lead to an interruption of our operations, or a leak of confidential information either of the Company, or of our customers, third parties or interested parties, might cause financial losses, legal exposure, damage to reputation or other severe negative consequences for the Company.

•

Failures in the security of our databases containing customer personal data, as well as events related to non-compliance with data privacy and protection legislation may have an adverse effect on our business, results of operations and reputation.

•

Increases in energy generated by distributed generation (‘MMGD’) in Cemig D's concession area could cause an imbalance in its cash flows and financial results.

•

Increases in energy purchase prices could cause an imbalance in CEMIG D’s cash flows.

•

Brazil’s supply of energy is heavily dependent on hydroelectric plants, which in turn depends on climatic conditions to produce energy. Adverse hydrological conditions that result in lower generation of hydroelectric power could adversely affect our business, results of operations and financial condition.

•

The rules for energy trading and market conditions may affect the sale prices of energy.

•

We are subject to anti-corruption, anti-bribery, anti-money laundering, and antitrust laws and regulations in Brazil.

•

We may be exposed to behaviors that are incompatible with our standards of ethics and compliance, and we might be unable to prevent, detect or remedy them in time, which might cause material adverse effects on our business, results of operations, financial condition and reputation.

•

A member of our board of directors is party to judicial proceedings.

•

The multiple uses of water and the various interests related to this natural resource might give rise to conflicts of interest between CEMIG and the society, which might cause losses to our business, results of operations or financial condition.


ANNUAL REPORT AND FORM 20-F \| 2023	9

•

We are controlled by the government of the State of Minas Gerais, which might have interests that are different from the interests of our other investors, or even of the Company.

•

Our processes of governance, risk management, compliance and internal controls might fail to avoid regulatory penalties, damages to our reputation, or other adverse effects on our business, results of operations or financial condition.

•

Potential shortages of skilled personnel in operational areas could adversely affect our business and results of operations.

•

Our ability to distribute dividends is subject to limitations.

•

ANEEL has discretion to establish the rates that distributors charge their customers. These rates are determined by ANEEL in such a way as to preserve the economic and financial balance of concession contracts entered into with the Federal Union.

•

ANEEL through concessions contracts establish the Permitted Annual Revenue (Receita Anual Permitida or ‘RAP’) of our transmission companies; if any adjustments result in a reduction of the RAP, this could have a material adverse effect on our results of operations and financial condition.

•

We have strict liability for any damages caused to third parties resulting from inadequate provision of energy services.

•

We may incur losses and reputational damage in connection with pending litigation.

•

Environmental regulations require us to perform environmental impact studies on future projects and obtain regulatory permits.

•

We operate without insurance policies against catastrophes and third-party liability.

•

The insurance contracted by us might be insufficient to reimburse costs of damage.

•

Strikes, work stoppages or labor unrest by our employees or by the employees of our suppliers or contractors could adversely affect our results of operations and our business.

•

A substantial portion of the Company’s assets is tied to the provision of public services and would not be available for attachment as collateral for the enforcement of any court decision.

•

Climate change can have significant impacts on our distribution, generation and transmission activities.

•

Failure to comply with ESG guidelines could adversely affect our business, reputation and results of operations.

•

The outbreak of disease and health epidemics, such as the Covid-19 pandemic, could adversely affect our business, operational results and financial condition.

•

The ongoing military conflict between Russia and Ukraine and the Israel - Hamas conflict, or any widening of either of these conflicts, may have a material adverse effect on the global economy, certain material and commodity prices and potentially on our business.

Risks Relating to Brazil

•

Political and economic instability in Brazil could have effects on the economy and affect us.

•

The Brazilian Federal Government has exercised, and continues to exercise, significant influence on the Brazilian economy. Political and economic conditions can have a direct impact on our business, financial condition, results of operations and prospects.

•


ANNUAL REPORT AND FORM 20-F \| 2023	10

recurrence of volatility affecting our foreign currency-linked receivables and obligations as well as increases in prevailing market interest rates.

•

Inflation and certain government measures aimed to control it might contribute significantly to economic uncertainty in Brazil and could have a material adverse effect on our business, results of operations, financial condition and the market price of our shares.

Risks relating to the Preferred and Common Shares, and the Preferred and Common ADSs

•

Instability of the exchange rate could adversely affect the value of remittances of dividends outside Brazil, and the market price of the ADSs.

•

Changes in economic and market conditions in other countries, especially Latin American and emerging market countries, may adversely affect our business, results of operations and financial condition, as well as the market price of our shares, preferred ADSs and common ADSs.

•

The relative volatility and illiquidity of the Brazilian securities market may adversely affect our shareholders.

•

Holders of the preferred and common ADSs, and holders of our shares, may have different shareholders’ rights than holders of shares in U.S. companies.

•

Exchange controls and restrictions on remittances from Brazil might adversely affect holders of preferred and common ADSs.

•

Foreign shareholders may be unable to enforce judgments given in non-Brazilian courts against the Company, or against members of its Board of Directors or Executive Board.

•

Exchange of preferred ADSs or common ADSs for underlying shares may have adverse consequences.

•

An investor of our common shares or preferred shares and common or preferred ADSs might be unable to exercise preemptive rights and tag-along rights with respect to our shares.

•

Judgments of Brazilian courts with respect to our shares will be payable only in Reais.

•

Sales of a substantial number of shares, or the perception that such sales might take place, could adversely affect the prevailing market price of our shares, or of the preferred or common ADSs.

•

The preferred shares and preferred ADSs generally do not have voting rights, and the common ADSs can only be voted by proxy by providing voting instructions to the depositary.

•

Future equity issuances may dilute the holdings of current holders of our shares or ADSs and could materially affect the market price for those securities.

•

The Brazilian Government may assert that the ADS taxation for Non- Resident Holders shall be payable in Brazil.


ANNUAL REPORT AND FORM 20-F \| 2023	11

PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

[Reserved]

Not applicable.

Capitalization and Indebtedness

Not applicable.

Reasons for the Offer and Use of Proceeds

Not applicable.

Risk Factors

The investor should take into account the risks described below, and the other information contained in this Annual Report, when evaluating an investment in our Company.

Risks Relating to CEMIG

We operate most of our power generation, transmission and distribution activities, and related services under concession agreements entered into with the Brazilian Federal Government or pursuant to authorizations granted to companies of the CEMIG Group. The Brazilian Constitution determines that all concessions related to public services must be granted through a bidding process. In 1995, in order to implement these constitutional provisions, the Brazilian Federal Government adopted certain laws and regulations, which are collectively known as the ‘Concessions Law,’ which governs bidding procedures in the electric power industry.

On September 11, 2012, the Brazilian Federal Government issued Provisional Act 579 (‘PA 579’), later converted into Law 12,783 of January 11, 2013 (‘Law 12,783/13’), which governs the extensions of concessions granted prior to Law 9,074/95. Law 12,783/13 determines that, as of September 12, 2012, concessions prior to Law 9,074/95 can be extended once, for up to 30 years, provided that the concession operators accept and meet certain conditions described in such Law. With respect to generation activities, the Company chose not to accept the mechanism offered to extend the generation concessions that would expire in the period from 2013 to 2017. These concessions were: Três Marias, Salto Grande, Itutinga, Volta Grande, Camargos, Peti, Piau, Gafanhoto, Tronqueiras, Joasal, Martins, Cajuru, Paciência, Marmelos, Dona Rita, Sumidouro, Poquim and Anil.

Following publication of the tender documents for Generation Auction 12/2015, on October 7, 2015 (‘Auction 12/2015’), which was held under the revised regulatory structure for renewal of concessions of existing power plants as set forth in Law 13,203 of December 8, 2015 (‘Law 13,203/15’), the Company’s Board of Directors authorized CEMIG Geração e Transmissão S.A. (CEMIG GT) to bid at an auction, held on November 25, 2015, in which CEMIG GT was successful. In the auction, CEMIG GT won the concessions for the 18 hydroelectric plants comprising ‘Lot D’, for 30


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years: Três Marias, Salto Grande, Itutinga, Camargos, Cajuru, Gafanhoto, Martins, Marmelos, Joasal, Paciência, Piau, Coronel Domiciano, Tronqueiras, Peti, Dona Rita, Sinceridade, Neblina and Ervália. The total installed capacity of these plants is 699.5 MW, and their offtake guarantee is 420.2 MW average.

On September 9, 2020, Law 14,052 was issued, changing Law 13,203/2015 and establishing new conditions for renegotiation of hydrological risk in relation to the portion of costs incurred due to the Generation Scaling Factor (‘GSF’) (Fator de ajuste da energia), borne by the holders of hydroelectric plants participating in the Energy Reallocation Mechanism (‘MRE’) since 2012, when there was a serious crisis in water sources. The compensation to the holders of hydroelectric were granted through the extension of the concession period for generation plants and were recognized as an intangible asset in exchange for a compensation of electricity costs. This renegotiation represents important progress for the electricity sector, reducing levels of litigation – and for CEMIG, in that it enables extension of the periods of its generation concessions. The periods of extension approved by ANEEL through normative resolutions 2,919/2021 and 2,932/2021 are shown in the table below:


Power plant	Capacity (MW)		Concession extension (days)		New Term of Concession
Emborcação		1,192		672	05/26/2027
Nova Ponte		510		750	08/12/2027
Irapé		399		934	09/19/2037
Três Marias		396		2,555	01/03/2053
Salto Grande		102		2,555	01/03/2053
Sá Carvalho		78		635	08/28/2026
Rosal		55		1,314	12/13/2035
Others (1)		353		-	-

Includes 20 power plants, of which 3 are owned by CEMIG GT, 1 is owned by CEMIG PCH, 3 are owned by Horizontes and the others belong to CEMIG affiliates. The average concession extension in days varies between 252 and 2,555 days.

Considering the degree of discretion granted to the Brazilian Federal Government in relation to new concession contracts or new authorizations, as applicable, and renewal of existing concessions and authorizations, and due to Law 12,783/13 and amendments, for renewals of generation, transmission and distribution concession agreements, we cannot guarantee that: (i) new concessions and authorizations will be obtained; (ii) our existing concessions and authorizations will be extended on terms similar to those currently in effect; nor (iii) the compensation received in the event of non-extension of a concession or authorization will be in an amount sufficient to cover the full value of our investment. Our inability to obtain new or extended concessions or authorizations could have a material adverse effect on our business, results of operations and financial condition. For more information about the renewal of our concessions and authorizations, see “Item 8. Financial Information – Legal and Administrative Proceedings”.

We conduct our generation, transmission and distribution activities pursuant to concession agreements entered into with the Brazilian Federal Government, through ANEEL, and pursuant to authorizations granted to companies of the CEMIG Group, as the case may be. ANEEL may impose penalties or revoke a concession or authorization if we fail to comply with any provision of the concession agreements or authorizations, including those relating to compliance with the established quality standards.

Depending on the severity of the non-compliance, these penalties could include:

•

Fines for breach of contract of up to 2.0% of the concession holder’s revenues in the financial year immediately prior to the date of the breach;

•

Injunctions related to the construction of new facilities and equipment;

•

Temporary suspension from participating in bidding processes for new concessions for a period of up to two years;


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•

Intervention by ANEEL in the management of the concession holder that is in breach;

•

Revocation of the concession; and

•

Execution of the guarantees related to the concession.

Furthermore, the Brazilian Federal Government can revoke any of our concessions or authorizations before the expiration of the concession term, in the event of bankruptcy or dissolution, or by legal termination, if determined to be in the public interest. It can also intervene in concessions to ensure adequate provision of the services, full compliance with the relevant provisions of agreements, authorizations, regulations and applicable law; and where it has concerns about the operations of the facilities of the Company.

Delays in the implementation and construction of new energy infrastructure can trigger the imposition of regulatory penalties by ANEEL, which, under ANEEL’s Normative Resolution 846 of June 11, 2019, can vary from warnings to the termination of concessions or withdrawal of authorizations. Any compensation we may receive upon rescission of the concession agreement or revocation of an authorization may not be sufficient to compensate us for the full value of certain investments. If we are responsible for the rescission of any concession agreement, the effective amount of compensation could be lower, due to fines or other penalties. The imposition of fines or penalties or the early termination or revocation by ANEEL of any of our concession agreements or authorizations, or any failure to receive sufficient compensation for investments we have made, may have a material adverse effect on our business, financial condition and results of operations, and on our ability to meet our payment obligations.

Rules under the Fifth Amendment to the distribution concession contract came into effect in 2016. They contain new targets for service quality, and requirements related to CEMIG Distribuição S.A. (or Cemig D)’s economic and financial sustainability. These targets must be complied with over the 30 years of the concession. Compliance with these targets is assessed annually, and non-compliance could result in an obligation for CEMIG to inject capital into CEMIG D or a limitation on distribution of dividends or the payment of interest on equity by CEMIG D to CEMIG. According to ANEEL regulations, in case of failure to comply with global annual targets for collective continuity indicators for two consecutive years, or three times in five years, or at any time in the last five years of the agreement term, distribution of dividends or payment of interest on equity may be limited until compliance is resumed.

Also, our Gasmig S.A. (or Gasmig)’s Concession contract establishes that in the event of non-compliance with any provision of the Concession Contract, including delays or non-compliance with targets specified in it, the State of Minas Gerais may impose penalties on Gasmig. Depending on the severity of the non-compliance, the applicable penalties include warnings and intervention. Gasmig cannot guarantee that it will not be penalized for non-compliance with its concession contract, nor that its concession contract will not be revoked in the future. The indemnity to which this subsidiary is entitled in the event of revocation of its concession may be insufficient for recovery of the full value of certain assets. Consequently, imposition of sanctions on Gasmig or revocation of its concession could result in a material adverse effect on the financial condition and results of operations of Gasmig, and of the Company.

Our operations are highly regulated and supervised by the Brazilian Federal Government, through the MME, ANEEL, the National System Operator (Operador Nacional do Sistema, or ‘ONS’), and other regulatory authorities. These authorities have a substantial degree of influence on our business. MME, ANEEL and ONS have discretionary authority to implement and change policies, interpretations and rules applicable to different aspects of our business, particularly operations, maintenance, health and safety, consideration to be received and inspection. Any significant regulatory measure implemented by such authorities may result in a significant burden on our activities, which may have a material adverse effect on our business, results of operations and financial condition.


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The Brazilian Federal Government has been implementing policies that have a far-reaching impact on the Brazilian energy sector. As part of the restructuring, Law 10,848, of March 15, 2004 introduced a new regulatory regime for the Brazilian energy industry. This regulatory structure has undergone several changes in recent years, the most recent being the changes added by PA 579 (which was converted into Law 12,783/2013), which governs the extension of some concessions governed by Law 9,074/1995. Under this law, such concessions can, from September 12, 2012, be extended only once, for up to 30 years, at the option of the concession authority.

Draft law PL 414/2021 (formerly PLS 232/2016) is being discussed in the Chamber of Deputies. This bill proposes amendments to important legislation in the electricity sector, aiming to improve the regulatory and commercial model of the electricity sector with a view to expanding the free market, among other measures.

In addition, we cannot guarantee that measures taken in the future by the Brazilian Federal Government, in relation to development of the Brazilian energy system, will not have a negative effect on our activities. Further, we are unable to predict to what extent such measures might affect us. If we are required to conduct our business and operations in a way that is substantially different from that specified in our business plan, our business, results of operations or financial position may be negatively affected.

Changes in Brazilian tax law or conflicts regarding its interpretation may adversely affect us.

The Brazilian Federal, state and municipal governments regularly implement changes in tax policies that affect us. These changes include the creation and alteration of taxes and charges, permanent or temporary, related to specific purposes of the government. Some of these governmental measures can increase our tax burden, which could affect our profitability, and consequently our financial condition. We cannot guarantee that we will be able to maintain our cash flow and profitability after an increase in taxes and charges that apply to us, and this might result in a material adverse effect on the Company.

Our ability to carry out our capital expenditure program is dependent upon several factors, including our ability to charge adequate rates for our services, access to the domestic and international capital markets, and a variety of operational and other factors. Further, our plans to expand our generation and transmission capacity are subject to compliance with competitive bidding processes. These bidding processes are governed by Law 13,303/2016 (the ‘State Companies Law’).

In relation to loans from third parties: (i) as a state-controlled company, we are subject to rules and limits relating to the level of credit applicable to the public sector, including rules established by the National Monetary Council (Conselho Monetário Nacional, or ‘CMN’), and by the Brazilian Central Bank; and (ii) we are subject to the rules and limits established by ANEEL that regulate indebtedness for companies in the energy sector. Also, although we may access both the international and local capital markets, we, as a state-controlled company, can only be financed with funds extended by local commercial banks if such debt is guaranteed by receivables, as well as with funds extended by Brazilian federal banks in transactions with the purpose of refinancing financial obligations contracted with entities of the Brazilian financial system. Furthermore, we are subject to certain contractual conditions under our existing debt instruments, and we may enter into new loans that contain restrictive covenants or similar clauses that could restrict our operational flexibility. These restrictions might also affect our ability to obtain new loans that are necessary for financing our activities and our growth strategy, and for meeting our future financial obligations when they become due, and this could adversely affect our ability to comply with our financial obligations. We have financing contracts and other debt obligations containing restrictive covenants, including Brazilian local market debentures and Eurobonds on international market.

As of December 31, 2023, we had R$9.6 billion of outstanding debt with financial covenant restrictions, and any breach could have severe negative consequences to us.


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If, for example, we breach a financial covenant under the CEMIG GT’s 9.25% Senior Notes due 2024 (the ‘Eurobonds’), we would be subject to an interest increase or acceleration of certain debt as a result of cross-default provisions under certain of our outstanding debt agreements. Similarly, if the Company violates a covenant under our debenture issuance, the debenture holders may accelerate the maturity of the debt in a meeting organized by the Fiduciary Agent (‘Trustee’), unless 75% of the debenture holders decide not to do so. Any acceleration of our outstanding debt could have a material adverse effect on our financial condition and may trigger cross-default clauses in other financial instruments. In the event of a default and acceleration, our assets and cash flow might be insufficient to repay amounts due, or to comply with the servicing of such debt. In the past, we have, on certain occasions, failed to comply with certain financial covenants that had conditions that were more restrictive than those currently in place. Although we were able to obtain waivers from our creditors in relation to past non-compliance, we cannot guarantee that we will be successful in obtaining any particular waiver in the future.

A reduction in our credit risk rating or in Brazil’s sovereign credit ratings could adversely affect the availability of new financing and increase our cost of capital.

The credit risk rating agencies Standard and Poor’s, Moody’s and Fitch Ratings attribute a rating to the Company and its debt securities on a Brazilian basis, and also a rating for the Company on a global basis. Ratings reflect, among other factors, the outlook for the Brazilian energy sector, the hydrological conditions of Brazil, the political and economic conditions, country risk, and the rating and outlook for the Company controlling shareholder, the State of Minas Gerais. In the event of a downgrade due to any external factors, our operational performance or high levels of debt, our cost of capital could increase and our ability to comply with existing financial covenants in the instruments that regulate our debt could be adversely affected. Further, our operating or financial results and the availability of future financing could be adversely affected. In addition, reductions in Brazilian sovereign ratings could adversely affect the perception of risk in relation to securities of Brazilian issuers, and, as a result, increase the cost of any future issuance of debt securities. Any reductions in our ratings or Brazil’s sovereign ratings could adversely affect our operating and financial results, and our access to future financing.

Disruptions in the operation of, or deterioration of the quality of, our services, or those of our subsidiaries, could adversely affect our business, operating results and financial condition.

The operation of a complex system that interconnects numerous power generation plants with large transmission lines and distribution networks involves various risks, operational difficulties and unexpected interruptions, caused by accidents, equipment failure, underperformance or disasters (such as explosions, fires, climate events, floods, landslides, sabotage, terrorism, vandalism and other similar events). In the event of any such occurrence, the insurance coverage for operational risks may be insufficient to fully repay the asset damage or service interruption costs incurred. In addition, National Grid Operator decisions, Regulatory Agency acts, and Environmental Authority demands could adversely affect our business.

The Company's income is highly dependent on equipment availability, service quality and regulatory compliance of the assets and facilities it builds, operates and maintains. Failure to comply may lead to business and operating losses. For example, the distribution business may be penalized in the tariff revision process with a higher "X-factor", would reducing its expected annual revenue requirement; the transmission business may have its annual permitted revenue reduced due to any asset unavailability; and the generation business may have its earnings affected if a power plant does not meet minimum availability levels, because in the event that hydro generation does not fully meet previously contracted energy levels, the equivalent shortfall has to be acquired at the spot price, which is highly volatile. Penalties and financial compensation are applicable depending on the scope, severity and duration of the service or equipment unavailability. Thus, disruptions in power plants, transmission and distribution facilities, substations or networks, may have a material adverse effect on our business, financial condition and operating results.


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In order to finance the capital expenditures needed to meet our long-term growth objectives, we have incurred a substantial amount of debt. As of December 31, 2023, our total loans and debentures (including interest) were R$9,831 million; a decrease of 7.1% compared to the R$10,580 million reported as of December 31, 2022 and, which 2022 amount represented a decrease of 6.9% compared to R$11,364 million reported as of December 31, 2021. As of December 31, 2023, 53.4% of our existing loans and debentures - totaling R$5,247 million, have maturities in the next two years. To meet our growth objectives, maintain our ability to fund our operations and comply with scheduled debt maturities, we will need to raise debt capital from a range of funding sources. To service its debt after meeting the capital expenditure targets, the Company has relied upon a combination of cash flows provided by its operations, sale of assets, drawdowns under its available credit facilities, its cash and short-term financial investments balance and the incurrence of additional indebtedness.

Any lowering of our credit ratings may have adverse consequences on the Company’s ability to obtain financing or may affect its cost of financing, also making it more difficult or costly to refinance maturing obligations. If, for any reason, the Company were to face difficulties in accessing debt financing, this could hamper its ability to make capital expenditures in the amounts needed to maintain its current level of investments or its long-term targets and could impair its ability to timely meet its principal and interest payment obligations with its creditors. A reduction in the Company’s capital expenditure program or the sale of assets could significantly and adversely affect its results of operations.

We cannot guarantee the speed of our capacity for innovation and our responses to the changes that the energy sector is going through with the advancement of technology.

The electrical energy sector is undergoing significant transformations due to constant technological advancement. Innovations such as renewable energy sources, advanced energy storage and smart transmission technologies are changing the industry landscape. The main risks of not innovating or not innovating at the appropriate speed are:

•

Competitiveness and Market Share: The inability to keep up with innovations can result in the loss of competitiveness and market share for more agile and technologically advanced companies.

•

Impact on Operational Efficiency: Lack of innovation can affect operational efficiency, resulting in higher costs and reduced profit margin.

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Brand Reputation: A brand image associated with a lack of innovation can affect the trust of stakeholders, including customers, investors and regulators.

If we have difficulties in adapting to changes in the sector by incorporating innovations in a timely manner, our business, financial condition and results of operations could be adversely affected.

Our strategy for maximizing value for CEMIG’s shareholders depends on external factors that could impede its successful implementation.

CEMIG’s strategy to maximize shareholder value in the Company is based on three pillars:

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Divestments: non-strategic or assets with low synergy or return, and opportunistic offerings;

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Expansion: mainly through investments in our distribution and transmission concessions, greenfield projects in renewable sources and with the renewing of power generation concessions; and

•

Management: synergy improvement, capital structure and distribution policy and governance enhancing.


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All of these pillars may be affected by external factors that are beyond the control of the Company, in particular any divestment transactions which must take into consideration particular risks associated with each relevant business, such as performance (technical, operational, commercial and financial), market risks, sectorial risks and national and international macroeconomic risks (e.g., market volatility). Furthermore, any closing of divestment transactions will depend on the favorable development of negotiations with potential investors regarding the conditions of the possible transactions. The Company cannot provide any assurances that factors outside of its control will not hinder the implementation of its strategies to maximize shareholder value.

Our ability to meet our strategic objectives depends, largely, on successful, cost-effective and timely implementation of our Long-term Strategy and our Multi-year Business Plan. The following are some of the factors that could negatively affect the implementation of our strategic plans:

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Inability to generate cash flow, or obtain the future financing, necessary for implementation of the particular projects or strategic objectives;

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Inability to obtain necessary governmental licenses and approvals;

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Unexpected engineering and environmental problems;

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Unexpected delays in the processes of eminent domain and establishment of servitude rights;

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Unavailability of the necessary workforce or equipment;

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Labor strikes;

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Delays in delivery of equipment by suppliers;

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Delays resulting from failures of suppliers or third parties to comply with their contractual obligations;

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Delays or stoppages caused by climate factors, or environmental restrictions;

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Changes in the environmental legislation creating new obligations and causing additional costs for projects;

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Legal instability caused by political issues; and

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Substantial changes in economic, regulatory, hydrological or other conditions.

The occurrence of the above factors, separately or taken together, could lead to a significant increase in costs, and might delay or impede the implementation of initiatives, and consequently compromise the execution of our strategic plans and negatively affect our operating and financial results.

Furthermore, as we are a mixed-capital company controlled by the State of Minas Gerais, we are subject to changes to our board of directors and executive officers because of changes in the Executive Branch of the State government from time to time, as a result of elections and political instability. These types of changes may adversely affect the continuity of the Company’s strategy.

The operating and financial results of our subsidiaries, jointly controlled entities and affiliates, non controlling or from any companies which we may acquire in the future, may negatively affect our strategies, operating results and financial condition.

We own equity in and do business through various subsidiaries and investees, including companies with assets in the energy generation and transmission sectors, energy and natural gas distribution sectors and other related business. The future development of our subsidiaries, jointly controlled entities and affiliates, such as Transmissora Aliança de


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Energia Elétrica S.A. (‘Taesa’) and Aliança Geração de Energia S.A. (‘Aliança’), and Norte Energia S.A. (‘NESA’) could have a significant impact on our business and operating results. The Company’s ability to meet its financial obligations is correlated, in part, to the cash flow and the profits of its subsidiaries and investees, and the distribution to the Company by such companies of profits in the form of dividends or other advances or payments. If these companies’ abilities to generate profits and cash flows are reduced, this may cause a reduction of dividends and interest on capital paid to the Company, which could have a material adverse effect on our results of operations and financial position.

In addition, the investees may not achieve the results expected when they were acquired. The process of integration for any acquired business could subject the Company to certain risks, such as, for example, the following: (i) unexpected expenses; (ii) inability to integrate the activities of the companies acquired with a view to obtaining the expected economies of scale and efficiency gains; (iii) possible delays related to integration of the operations of companies; (iv) exposure to potential contingencies; (v) legal claims made against the acquired business that were unknown at the time of its acquisition; (vi) environmental licensing and liabilities, (vii) hydrological risk, (viii) power system operation and control, and (ix) general claims. The Company might be unsuccessful in dealing with these or other risks, or problems related to any other operation of a future acquisition and be negatively affected by the companies acquired or which may be acquired in the future.

Furthermore, some of our subsidiaries and investees might, in the future, enter into agreements with creditors that could restrict dividend payments or other transfers of funds to the Company. These subsidiaries are separate legal entities. Any rights that we may have in relation to the receipt of assets or other payments in the event of liquidation or reorganization of any subsidiary, could be structurally subordinated to the demands of the creditors of such subsidiary (including tax authorities, commercial creditors and lenders to those subsidiaries). Any deterioration in the operating results or financial conditions of these subsidiaries, and any sanctions or penalties imposed on them, could have a material adverse effect on the Company’s business results of operations or financial condition.

We are constantly engaged in the construction and expansion of our plants, transmission lines, distribution networks and lines and substations, and regularly consider other potential expansion projects. The Company’s ability to complete projects within deadlines and on budget, without adverse economic effects, is subject to various risks. For instance, we may encounter the following:

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Complications in the planning and execution stages of expansion of the electrical system projects and other new investments may occur, such as strikes, lagging suppliers of materials and services, delays in tender processes, embargos on work, unexpected geological and climate conditions, political and environmental uncertainties, financial instability of our partners, contractors and subcontractors, shortage of qualified labor in the market;

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Regulatory or legal challenges that delay the start-up of operations of new assets;

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New assets might operate below planned capacity, or cost related to their operation or installation may be higher than planned;

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Difficulty in obtaining adequate working capital to fund expansion projects;

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The unintentional shutdown of transmission assets during execution of the expansion projects can reduce the revenue of the Transmission business;

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ONS’s (‘Operador Nacional do Sistema’, Brazil’s ISO) refusal to authorize the execution of work on the transmission grid, due to power system restrictions; and

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Environmental demands and claims by local communities during construction of power generation plants, transmission lines, distribution lines, distribution networks and substations.


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If faced with any of these or similar issues related to the new investments or to the expansion of our generation, transmission or distribution capacity, the Company might incur increased costs or lower profitability than originally expected for the projects.

The level of default by our customers could adversely affect our business, operating results and/or financial condition, as well as those of our subsidiaries.

On December 31, 2023, the past-due receivables from our customers were R$1,810 million compared to R$1,825 million in 2022. In 2023, we recorded a provision for expected credit losses in the amount of R$867 million, compared to R$820 million in 2022.

There is a possibility that we may be unable to collect all of the receivable amount from our customers, which are in arrears due to events beyond the control of the Company, such as limiting the performance of the suspension of energy supply by the regulatory body of the sector.

If we are unable to collect all or a portion of our past-due receivables or incur losses in excess of our allowance for doubtful accounts, our results of operations and financial condition may be materially adversely affected.

CEMIG D’s economic and financial sustainability is directly related to the effectiveness of the actions to control energy losses, and the regulatory limits established for it. If CEMIG D fails in successfully controlling energy loss, its business, operations, profit and financial condition could be substantially and adversely affected.

The energy losses of a distribution company comprise two types of losses: technical losses and non-technical (commercial) losses. Technical losses are inherent to the process of transporting and the transformation of electric power and occur in the cables and equipment of the energy system. Non-technical losses comprise energy that is supplied and not invoiced, which may be the result of illegal connections (theft), fraud, metering errors or failures in internal processes.

CEMIG D’s Total Losses Index as of December 31, 2023, using a 12-month window, was 10.71%. This percentage is in relation to the total energy injected into the distribution system (the total volume of losses was 6,239 GWh). Of that percentage, 8.31% comprised technical losses, and 2.40% comprised non-technical losses. This result was 0.40 percentage points lower than the result for December 2022 (11.11%), and below the regulatory target set by ANEEL for 2023 (10.84%).

From a regulatory point of view, ANEEL has been increasingly rigorous in establishing target caps for distribution losses. The target caps for non-technical losses are set based on a benchmarking model that compares using an index, which measures the social-economic complexity of each concession area and how efficient the distributors are in combating non-technical energy losses.

For the targets of technical losses, ANEEL uses metering and power flow software. In light of this complex scenario involving regulatory uncertainties, even with the implementation of a strategy to reduce technical and commercial losses, CEMIG cannot guarantee that the target caps for losses established by ANEEL will be met in the short term, and this could affect the Company’s financial condition and operating results, since the portion of a distribution company’s power losses that exceeds the regulatory cap cannot be passed through to customers as an expense in the form of an increase in tariffs.

Dams are part of the critical and essential infrastructure in the Brazilian energy sector. Dam failures can cause serious damage to affected communities and to the Company.

There is an intrinsic risk of dam failure, due to factors that may be internal or external to the structure (such as, for example, failure of a dam upstream from the site). The scale, and nature, of the risk are not entirely predictable. Thus, we are subject to the risk of a dam failure that could have repercussions far greater than the loss of hydroelectric generation capabilities. The failure of a dam could result in economic, social, regulatory, and environmental damage


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and potential loss of human life in the communities downstream from dams, which could have a material adverse effect on the Company’s image, business, results of operations and financial condition.

We might be held responsible for impacts on our own workforce, on the population and the environment, due to accidents related to our generation, transmission and distribution systems and facilities.

Our operations, especially those related to transmission and distribution lines, present risks that may lead to accidents, such as electrocutions, explosions and fires. These accidents may be caused by natural occurrences, human errors, technical failures and other factors. As a significant part of our operations is conducted in urban areas, the population is a factor to be constantly considered. Any incident that occurs at our facilities or in human occupied areas, whether regularly or irregularly, can result in serious damages such as loss of life, environmental and material damage, loss of production and liability in civil, criminal and environmental lawsuits. These events may also result in reputational damage, financial damages, penalties for the Company and its officers and directors, and difficulties in obtaining or maintaining concession contracts and operating licenses.

Requirements and restrictions imposed by environmental agencies might require the Company to incur additional costs.

Our operations relating to generation, distribution and transmission of energy and distribution of natural gas are subject to various Federal, state and municipal laws and regulations, and to numerous requirements relating to the protection of health and the environment. Delays by the environmental authorities, or the refusal of license requests by them, or any inability on our part to meet the requirements set by these bodies during the environmental licensing process, may result in additional costs, or even, depending on the circumstances, prohibit or restrict the construction or maintenance of these projects.

Any non-compliance with environmental laws and regulations, such as construction and operation of a potentially polluting facility without a valid license or authorization, could give rise to the obligation to remedy any damages that are caused (third party liability) and result in criminal and administrative sanctions. Under Brazilian legislation, criminal penalties, such as imprisonment and restriction of rights, may be applied to individuals (including managers of legal entities), and penalties such as fines, restriction of rights or community service may be applied to companies. With respect to administrative sanctions, depending on the circumstances, the environmental authorities may: (i) impose warnings, or fines, ranging from R$50,000 to R$50 million; (ii) require partial or total suspension of activities; (iii) suspend or restrict tax benefits; (iv) cancel or suspend lines of credit from governmental financial institutions; or (v) prohibit us from contracting with governmental agencies, companies or authorities.

Any of these actions could adversely affect our business, results of operations and financial condition. We are also subject to Brazilian legislation that requires payment of compensation if our activities have polluting effects. According to Federal Law 9,985/2000, Federal Decree 6,848/2009, and Minas Gerais State Decree 45,175/2009, up to 0.5% of the total amount invested in the implementation of a project that causes significant environmental impact should be used to pay for offsetting, based on the project’s specific level of pollution and environmental impact. State Decree 45,175/2009 (‘Decree 45,175’) also indicated that the compensation rate will be applied retroactively to projects implemented prior to promulgation of the present legislation.

Among the provisions of law that can lead to operating investments and expenses, one is compliance with the Stockholm Convention on Persistent Organic Pollutants, to which Brazil is a signatory. Brazil has prohibited the production, import and sale of PCBs since 1981 and it has been making efforts towards the Stockholm Convention ('SC') goals. At Cemig, almost all of the large equipment contaminated with PCB has been removed from the electrical system and incinerated. The few large items of equipment contaminated with PCB still in operation will be properly disposed of within the deadlines of the SC. Cemig is identifying small equipment contaminated with PCB, according to the statistical criteria of the Brazilian legislation and aiming to attend the SC goals and deadlines. There were two new peices of legislation related to the theme: Law 14250/2021 and Interministerial Ordinance MMA/ MME 107/2022. Cemig has adjusted its practice and need to complete its inventory by PCB, according to this legislation. Further efforts may be required if there are new changes in the legislation. If we are unable to meet the technical requirements


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established by the environmental agencies during the process of licensing, this might prejudice the installation and operation of our projects, or make carrying out of our activities more difficult, which could negatively affect our business, financial, condition and results of operations. Finally, the adoption or implementation of new safety, health and environmental laws, new interpretations of existing laws, increased rigidity in the application of the environmental laws, or other developments in the future might require us to make additional capital expenditures or incur additional operating expenses in order to maintain our current operations. They might also restrain our production activities or demand that we take other action that could have an adverse effect on our business, results of operations or financial condition.

We manage and store personal and sensitive or confidential data related to our business. Our information technology systems may be vulnerable to a variety of and cybersecurity breaches and incidents. Computer hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of third parties, create system disruptions, or cause shutdowns. Computer hackers also may be able to develop and deploy viruses, worms and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our products. The costs we may incur to eliminate or address the security problems and security vulnerabilities before or after a cyber-related incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and loss of existing or potential customers that may impede our critical functions.

Successful cybersecurity attacks, breaches, employee malfeasance, or human or technological error may result in unauthorized access to, disclosure, modification, improper use, loss or destruction of data or systems, including those belonging to us, our customers or third parties; theft of sensitive, regulated or confidential data including personal information; the loss of access to critical data or systems through ransomware, destructive attacks or other means; transaction errors; business delays; and service or system disruptions. We have observed an increase in cybersecurity attacks worldwide in recent years.

In the event of such actions, we, our customers or other third parties could be exposed to risk of loss or improper use of this information, resulting in litigation and potential liability, damage to our brand and reputation, or other harm to our business. In addition, we rely on third-party infrastructure providers whose potential security vulnerabilities could have an impact on our business. The regulatory environment with regards to cybersecurity, privacy and data protection issues is increasingly complex and may have impacts on our business, including increased risk, costs and expanded compliance obligations. In 2023, we did not experience any cybersecurity incidents or data breaches that had a material impact on the Company, its business, results of operations or financial condition.

Failures in the security of our databases containing customer personal data, as well as events related to noncompliance with data privacy and protection legislation may have an adverse effect on our business, results of operations and reputation.

We have databases containing collected personal data from our customers, partners and collaborators. Any improper use of this data, or failures in the correct use of our security protocols may negatively affect the integrity of those databases. Unauthorized access to information concerning our customers, or unauthorized disclosure of sensitive information, may subject us to lawsuits, and as consequence, we might incur financial liabilities, penalties and reputational damage.

The Brazil General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or ‘LGPD’), was signed into law in August 2018 and came into effect on September 18, 2020, with the exception of the administrative sanctions, which came into effect in August 2021. LGPD establishes rules and obligations regarding the collection, processing, storage and use of personal data and impacts all economic sectors including the relationship between customers and suppliers of goods and services, employees and employers and other relationships in which personal data is collected, whether in a digital or physical environment.


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Violations of the LGPD carry financial risks due to penalties for data breach or improper processing of personal data. The new legislation establishes penalties for non-compliance that include application of fines of up 2% of revenues, limited to R$50 million, for the most serious infringements. An increased number of data protection laws the globe may continue to result in increased compliance costs and risks. The potential costs of compliance with or imposed by new or existing regulations and policies that are applicable to us may affect our business and could have a material adverse effect on our results of operations.

Increases in energy generated by distributed generation ('MMGD') in Cemig D's concession area could cause an imbalance in its cash flows and financial results.

The tariffs of the distribution companies in Brazil carry numerous benefits aimed at specific sectors, subsidies that have been increasing the charges passed on to final consumers. In the case of subsidies to renewable generation (through what we call ‘TUSD/TUST Discounts’), the approval of Law 14,300/2022 defined a deadline for granting those benefits, thereby limiting such benefits. Furthermore, the state of Minas Gerais (Cemig D’s concession area) has two other factors that stimulate the implementation of projects characterized as distributed generation (‘MMGD’): (i) tax exemption on the purchase of solar generation equipment and on the energy consumed from the grid but that was netted against the injected energy (ii) large area with great insolation that benefits photovoltaic electricity generation. These points have led to an exponential growth in the implementation of photovoltaic plants in Cemig D's concession area.

With the expansion of MMGD connections in Cemig D's concession area, regulated customer consumption will be partially supplied by this distributed generation, rather than the energy supply contracts purchased by the Company. This has created an excess of energy above the regulatory limit (5%). However, there are regulatory mechanisms that allow distributors to exchange energy, enabling Cemig D to reduce its energy purchases in years where the excess is above the permitted limit when possible. Additionally, Federal Law 14,300/22 guarantees that the costs associated with this excess will be passed on to tariffs in the following year. Despite these mechanisms, energy purchases must be invoiced and the surplus is valued at the short-term price, typically lower than acquisition costs. This difference can create a cash flow mismatch, since the pass-through to tariffs only occurs in the next tariff cycle.

In addition, the customers in question are using a billing method called "net metering" (‘NEM’). This means that if a customer's energy generation exceeds their on-site needs and is exported back to the grid, they will receive a bill credit. This credit will be applied to their monthly bill at the same retail rate that they would have paid for energy consumption according to their normal rate structure. While this benefits the customer by reducing their costs, it could cause a cash flow concern for the Company as it is effectively subsidizing the excess energy generated by the customer.

Increases in energy purchase prices could cause an imbalance in CEMIG D’s cash flows.

The expense for purchase of power from the distributors is currently strongly linked to the Differences Settlement Price (Preço de Liquidação de Diferenças, or ‘PLD’) (Availability Contracts, Physical Guarantee quotas, and Itaipu Hydroelectric Plant quotas) and to MRE’s adjustment factor (Physical Guarantee quotas, Itaipu quotas and Hydrological Risk of the plants that have been renegotiated). Therefore, an adverse period in terms of rainfall may result in high spot prices and lower hydro generation that may affect the cash flow.

The ‘Flag Account’ (Conta Centralizadora de Recursos de Bandeiras Tarifárias – CCRBT or ‘Conta Bandeira’) was created to stabilize this issue. This account manages the additional funds that are collected from captive customers of distribution concession. This additional payment is defined monthly based on the assessment made by the ISO based on the supply condition of the system. Based on this analysis, ANEEL defines in which flag baseline (green, yellow, red 1 and red 2) the tariffs will be adjusted. Raises in the tariffs are indicated from the yellow flag baseline, indicating that the costs to purchase energy raised. The methodology of the Tariff Flag system is reviewed every year; however, under the present methodology, when very adverse conditions occur the system may not respond sufficiently, resulting in negative effects on distributors’ cash position. This factor could have an adverse effect on our business, operating results and financial condition.


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At the end of 2022, the hydrological conditions were very good, generating positive impacts on energy costs. The Flag Account reached a surplus at the end of 2023 of R$7.4 billion. As 2023 was a positive year for precipitation, there was no need to apply a new surcharge, with a green flag in every month.

Hydroelectric generation is predominant in Brazil. The advantages of hydroelectric power have also been widely publicized due to it being a renewable resource and avoids substantial expenditures on fuels in thermal generation plants. At the same time, the main risk related to the use of this resource arises from the variability of the flows to the plants. There are substantial seasonal variations in monthly and annual flows, which depend fundamentally on the volume of rain that falls in each season. Adverse hydrological conditions in the Brazilian southeast region caused drought and water scarcity in the states of São Paulo, Minas Gerais and Rio de Janeiro in the past. These conditions might become worse during the dry period, which occurs from April through September. This could cause rationing of water consumption and/or energy, which could have a material adverse effect on the Company’s business and results of operations.

To deal with this difficulty, the Brazilian system has a complementary component of thermoelectric generation plants, and a growing portfolio of wind farms and Photovoltaic solar farms. It also has accumulation reservoirs, the purpose of which is to secure water from the rainy to the dry period and from one year to the next. However, these mechanisms are not able to absorb all the adverse consequences of a prolonged hydrological shortage, like the one that we have seen in the recent past.

The National Energy System Operator (Operador Nacional do Sistema, or ‘ONS’) coordinates the operation of the Brazilian energy system. Its primary function is to achieve optimal operation of the resources available, minimizing operating costs, and the risks of energy shortage. In periods when the hydrological condition is adverse, a decision by the ONS might, for example, reduce generation by hydroelectric plants and increase thermal generation, which results in higher costs for the hydroelectric generating agents, as happened in 2014. In the distributors, this increase in costs generates an increase in the purchase price of energy that is not always passed through to the customer at the same moment, generating mismatches in cash flows, with an adverse effect on the business and financial condition of those distributors. In addition, in extreme cases of scarcity of energy due to adverse hydrological conditions, the system might undergo rationing, which could result principally in reduction of cash flow.

The MRE aims to mitigate the impact of the variability of generation of the hydroelectric plants. This mechanism shares the generation of all the hydroelectric plants in the system in such a way as to supplement the shortage of generation of one plant with excess generation by another. However, this mechanism is not able to eliminate the risk of the generation players, because when there is an extremely unfavorable hydrological condition, to the extent that all the plants in aggregate are unable to reach the sum of their Physical Guarantee levels of energy output, this mechanism makes an adjustment to the Physical Guarantee of each plant through the Physical Guarantee Adjustment Factor (Fator de Ajuste da Garantia Física, or ‘GSF’), resulting in the generating companies being exposed to the short-term (‘spot’) market. The company transferred to captive customers the hydrological risk related to Queimado and Irapé power plants (Regulated Market Contracts), in exchange for payment of a ‘risk premium’, while also receiving indemnity for the losses suffered in 2015. In the free market, we do not have the same process, since even with the payment of the premium, generation companies would have had to continue assuming the hydrological risk at moments of critical hydrology. Thus, no plant that sells energy in the free market signed up for any renegotiation of hydrological risk. Those operators that did not subscribe to the renegotiation continued to have injunctions preventing charging of the hydrological risk in full. These injunctions are causing a deficit of R$1.124 billion in the short-term market as of December 2022. This position increases the level of default calculated by the CCEE, thus reducing the amounts received by creditor agents in the short-term market. To avoid this effect, some creditor agents filed for further injunctions to acquire the right to priority in receipt. This effect leads to uncertainty in the market, reduction of liquidity, increase of default, and reduction in amounts received in the short-term market, representing a risk for the Company.


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Any substantial seasonal variation in the monthly flows and in the total of flows over the year could limit hydroelectric generation, making it necessary to use alternative generation systems, which could have a significant adverse effect on the Company’s costs, including court fees and expenses relating to the subject.

Law 14,052/2020 and Resolution 895/2020 proposed the reimbursement of agents holding the concession of hydraulic plants in the MRE of the effects: (i) generation in disregard of the merit order which means dispatching energy to the grid in disregard of the ascending price ranking for energy generation, (ii) anticipation of delivery of firm energy to the system of relevant power plants, and (iii) restriction to the supply of energy to the grid due to delay in the transmission system. These effects were calculated retroactively from 2012 to 2020, updated and remunerated at the ANEEL rate of 9.63%. The amount has been paid through extension of the plants' concession. With this new agreement, injunctions are expected to be withdrawn and market deficits to be settled. In this way, the liquidity of the market in the short term and the default in the CCEE should return to their historical values.

The rules for energy trading and market conditions may affect the sale prices of energy.

Under applicable laws, our generation companies are not allowed to sell energy directly to distributors. Thus, the power generated by our companies is sold in the Regulated Market (Ambiente de Contratação Regulado, or ‘ACR’) – also referred to as the ‘Pool’ – through public auctions held by ANEEL, or through the Free Market (Ambiente de Contratação Livre, or ‘ACL’) through bilateral negotiations with customers and traders. The applicable legislation allows distributors that sign contracts for existing energy supply (‘energia existente’) with generation companies in the Regulated Market to reduce the quantity of energy contracted by up to 4%, per year, in relation to the amount of the original contract, for the entire period of the contract. This exposes our generation companies to the risk of not selling the de-contracted supply at adequate prices.

We conduct trading activities through power purchase and sale agreements, mainly in the Free Market, through our generation and trading companies. Contracts in the Free Market may be entered into with other generating entities, energy traders, or mainly, with ‘free customers.’ In 2023, free customers are customers with a demand of 0.5 MW or more: they are allowed to choose their energy supplier. This limit was reduced from 1.0 MW to 0.5 MW in 2023 and by January 01, 2024 all consumers connected to high voltage lines (Ordinance 50, published by the Ministry of Mines and Energy in September 2022). Some contracts have flexibility in the amount sold, allowing the customer to consume a higher or lower amount (5% on average) from our generating companies than the original amount contracted, which might cause an adverse impact on our business, operating results and/or financial condition. Other contracts do not allow for this kind of flexibility in the purchase of energy, but increased competition in the Free Market could influence the occurrence of this type of arrangement in purchase contracts. In addition to the free customers referred to above, there is a category of customers referred to as ‘Special Customers’, which are those with contracted demand between 0.5 MW and 1.0 MW. Special Customers are eligible to participate in the Free Market provided they buy energy from incentive-bearing alternative sources, such as Small Hydroelectric plants, biomass plants or wind farms. As envisaged by the Ordinance 50/2022, by 2024 there will be no demand restriction for free customers connected to high voltage lines and in light of that there will be no more separation of free and special consumers. The Company has conducted sales transactions for this category of energy from specific energy resources in particular companies of the CEMIG Group and, since 2009, the volume of these sales has gradually increased.

The Company has formed a portfolio of purchase contracts, which now occupies an important space in the Brazilian energy market for incentive-bearing alternative power sources. Contracts for the sale of energy to these customers have specific flexibilities to serve their needs, and these flexibilities of greater or lesser consumption are linked to the historic behavior of these loads. Higher or lower levels of consumption by these customers may cause purchase or sale exposures to spot prices, which can have an adverse impact on our business, operating results and/or financial condition. Market variations, such as variations of prices for signature of new contracts, and of volumes consumed by our customers in accordance with flexibilities previously contracted, can lead to spot market positions, which can potentially have a negative financial impact on our results.

The MRE aims to reduce the exposure of generators of hydroelectric power, such as our generation companies, to the uncertainties of hydrology. It functions as a pool of hydroelectric Generation Companies, in which the generation of


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all the plants participating in the MRE is shared in such a way as to meet the demand of the pool. When the totality of the plants generates less than the amount demanded, the mechanism reduces the assured offtake levels of the plants, causing a negative exposure to the short-term (‘spot’) market and, therefore, the need to purchase power supply at the spot price. Correspondingly, when the total generation of the plants is higher than the volume demanded, the mechanism increases the guaranteed offtake level of the plants, leading to a positive exposure, permitting the liquidation of power at the Differences Settlement Price (Preço de Liquidação de Diferenças, or ‘PLD’). In years of poor rainfall, the reduction factor, which applies to the assured energy levels, can reduce the levels of the hydroelectric plants by 20% or more. Low liquidity or volatility in future prices, due to market conditions and/or perceptions, could negatively affect our results of operations. Further, if we are unable to sell all the power that we have available (our own generation capacity plus contracts under which we have bought supply of power) in the regulated public auctions or in the Free Market, the unsold capacity will be sold in the CCEE at the PLD, which tends to be very volatile. If this occurs in periods of low spot prices, our revenues and results of operations could be adversely affected. The PLD’s value is calculated through the results of the optimization models of the operation of the national grid used by the ONS and by the CCEE. The PLD is currently published weekly by the CCEE for three load levels (light, medium and heavy). The models depend on entry data revised by the ONS at each period of four months, monthly, and weekly. In this system, there is the possibility that errors occur during the input of data into the model, which can lead to an unexpected change in the PLD. Alteration of these models, and errors in data input, constitute risks for the trading business, because they cause uncertainty in the market, reducing liquidity, and financial losses due to the unexpected change of price. To mitigate the risk of change of the models during the current year, the National Energy Policy Council (‘CNPE’) published a note in 2016 which established that changes in the mathematical models used in the sector will need to be approved by the CPAMP (‘Comissão Permanente para Análise de Metodologias’, or Standing Committee for Methodologies Analysis and Energy Industry Computer Programs) by July 31 of each year in order to be in force in the subsequent year.

In 2020, the frequency of changes in the PLD were increased to hourly. Having an hourly PLD improves the PLD’s adherence to the real operation of the system, which will then better capture the hourly changes in the intermittent sources (solar and wind). This better alignment of price with operation tends to reduce the System and Service Charges (‘ESS’), and to remunerate the thermoelectric generation plants more efficiently when they are activated. On the other hand, the quality of the entry data when input on an hourly basis, especially for solar and wind sources, introduces one more element of uncertainty to the pricing of the market.

We are subject to anti-corruption, anti-bribery, anti-money laundering, and antitrust laws and regulations in Brazil.

We are subject to anti-corruption, anti-bribery, anti-money laundering, antitrust and other international laws and regulations and are required to comply with the applicable laws and regulations of Brazil. There can be no assurance that our internal policies and procedures will be sufficient to prevent or detect all inappropriate practices, fraud, or violations of law by our affiliates, employees, directors, officers, partners, agents, and service providers or that any such persons will not take actions in violation of our policies and procedures. Any violations by us of anti-bribery and anti-corruption laws or sanctions regulations could have a material adverse effect on our business, reputation, results of operations and financial condition.

Our businesses, including our relationships with third parties, are guided by ethical principles and rules of conduct that we have established. We have a range of internal rules that aim to orient our managers, employees and contractors, and to reinforce our ethical principles and rules of professional conduct. Due to the wide distribution and outsourcing of the production chains of our suppliers, we are unable to control all possible irregularities of these third parties. This means that we cannot guarantee that the financial, technical, commercial and legal evaluations that we use in our selection processes will be sufficient prevent our suppliers from having problems related to employment law, or sustainability, or in the outsourcing of the production chain with inadequate safety conditions. We also cannot


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guarantee that these suppliers, or third parties related to them, will not involve themselves in irregular practices. If a significant number of our suppliers involve themselves in irregular practices, we might be adversely affected. Furthermore, we are subject to the risks that our employees, contractors or any person who may do business with us might become involved in activities of fraud, corruption or bribery, circumventing our internal controls and procedures, misappropriating or using our assets for private benefit to the detriment of the Company’s interests. This risk is exacerbated by the fact that there are some affiliates, such as special-purpose companies and joint ventures, in which we do not have control.

Our internal controls systems to identify, monitor and mitigate risks may not be effective in all circumstances, especially in relation to companies that are not under our control. In the case of companies, we have acquired, our internal controls systems might be incapable of identifying fraud, corruption or bribery that took place prior to the acquisition. Any failing in our capacity to prevent or detect non-compliance with the applicable rules of governance or of regulatory obligation could cause harm to our reputation, limit our capacity to obtain financing, or otherwise cause material adverse effects on our, business, results of operations, financial condition and reputation.

A member of our board of directors is party to judicial proceedings.

A member of our board of directors is a defendant administrative action, and three criminal actions for tax evasion, in two of which he has been acquitted by the Higher Appeal Courts. There is more information in "item 6 – Significant Civil and Criminal Proceedings Involving a Key Member of Management". We cannot give any assurance that court and/or administrative proceedings, or commencement of any other court and/or administrative proceedings, against any members of our management or board of directors, will not impose limitations or restraints on the performance of the members of our management or board of directors that are a party to these proceedings. Further, we cannot give any assurance that any such limitations will not adversely affect us or our reputation.

At present, considering projects and companies that are jointly controlled, CEMIG has 57 hydroelectric power plants, with 5,010 MW and representing 96.6% of our installed capacity. Water is the main raw material for CEMIG’s production of energy and is a resource that is sensitive to climate change and vulnerable to the consequences of exploration of other natural resources, significantly impacted by human actions and subject to a regulatory environment. CEMIG’s operation of reservoirs for generation of hydroelectric power essentially requires consideration of the multiple uses of water by other users in a river basin; and this in turn, leads to the need to take into account a range of constraints — environmental, safety, irrigation, human consumption, waterways and bridges, among others. In periods of severe drought, like those of 2013 until 2021, monitoring and forecasting the levels of reservoirs and the constant dialogue with the public authorities, civil society and users were essential for ensuring the generation of energy, and the other uses of this resource. Finally, CEMIG uses a Risk Management System to analyze scenarios and determine the degree of financial exposure to risks, considering the probability of occurrence and its effect. In the scenarios relating to potential conflicts with other users, CEMIG evaluates both the effects arising from prolonged droughts, which can lead to an increase of competition between the energy sector and other users, and the effects of flood events occurring due to excessive rain. While CEMIG engages with other essential users and takes steps to analyze community input and studies on issues relating to the impact of water use, competing interests relating to water use could, subject to certain minimum limits previously established by law, affect its availability to us for use in the operations of certain of our projects, which could adversely affect our business results of operations and financial condition.


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We are controlled by the government of the State of Minas Gerais, which might have interests that are different from the interests of our other investors, or even of the Company.

As our controlling shareholder, the government of the State of Minas Gerais exercises substantial influence on the strategic orientation of our business. Currently it holds 51% of the common shares of CEMIG and as majority shareholder has full powers to decide on business relating to the Company’s objects as stated in the by-laws, and to adopt whatever decisions it deems to be necessary for the defense of its interests and development. The government of the State of Minas Gerais can elect the majority of our senior management and has the authority to approve, among other subjects, matters that require a qualified quorum of shareholders. The latter include transactions with related parties, shareholding reorganizations and the date and payment of dividends. The government of the State of Minas Gerais, as our controlling shareholder, has the capacity to direct us to engage in activities and to make investments that promote the controlling shareholder’s economic or social objectives, and these might not be strictly aligned with the Company’s strategy or the strategies of our other shareholders, adversely affecting the direction of our business.

The government of the State of Minas Gerais has discussed selling a portion of its shareholding in CEMIG with a view to reducing its public debt, and has considered a sale to private shareholders (privatization) or to the Federal Government (federalization). We cannot assure you regarding the timing or likelihood of any such sale and any sale of its shareholding in CEMIG by the State of Minas Gerais could have a material adverse effect on our business, results of operations and financial condition or the market price of our shares.

Our Company is subject to various different regulatory structures, of which the following are examples: (a) laws and regulations of the Brazilian energy sector, such as Law 10,848/04 (on trading in energy) and regulations by ANEEL; (b) the laws and regulations that apply to listed companies with securities traded in the Brazilian capital markets, such as Law 6,404/76 (the ‘Corporate Law’) and regulations of the CVM; (c) laws and regulations that apply to Brazilian companies with majority state-owned shareholdings, such as Law 13,303/2016 (the ‘State Companies Law’); (d) laws and regulations that apply to Brazilian companies that have securities registered with the SEC, such as the Sarbanes-Oxley Act of 2002, the Foreign Corrupt Practices Act (FCPA) and regulations of the SEC; and (e) laws and regulations regarding privacy and data protection, such as Law 13,709/2018 (the ‘General Data Protection Law, LGPD’), among others.

Furthermore, Brazil has rigorous legislation relating to maintaining competition, combat of improbity and preventing corrupt practices. For instance, Law 12,846/13 (the ‘Anticorruption Law’) established objective liabilities for Brazilian companies that commit acts against Brazilian or foreign public administration, including acts relating to public bidding processes and administrative contracts, and established tough penalties for those companies that are punished. The Company has a high number of administrative contracts with high values and a large number of suppliers and customers, which increases its exposure to risks of fraud and administrative impropriety.

Our Company has structures and policies for the prevention and combat of fraud and corruption, audit and internal controls, and has adopted the recommendations for Best Corporate Governance Practices recommended by the Brazilian Corporate Governance Institute (Instituto Brasileiro de Governança Corporativa, or ‘IBGC’) and the framework of the Committee of Sponsoring Organizations of the Treadway Commission (‘COSO’). Furthermore, due to the majority interest held by the State Government in our shareholding structure, we are required to contract the greater part of our works, services, advertising, purchases, disposals and rentals, through competitive bidding processes and administrative contracts, which are ruled by the Tenders Law, State Companies Law and other complementary legislation.

However, despite the Company having processes of governance, risk management and compliance, we might be unable to avoid future violations of the laws and regulations to which we are subject (regarding labor, tax, environment, energy, among others), or violations of our internal control mechanisms, our Code of Ethics and Code


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of Professional Conduct, or the occurrence of fraudulent or dishonest behavior by employees, or individuals or legal entities that are contracted, or other agents that may represent the company in dealings with third parties, especially with the Public Authorities.

Potential shortages of skilled personnel in operational areas could adversely affect our business and results of operations.

It is possible that we will experience shortages of qualified key personnel. In recent years, we have been carrying out voluntary severance incentive programs open to all our employees. Such programs may reduce our employees’ headcount by more than our ability to hire new ones to fill key positions. Our success depends on our ability to continue to successfully train our personnel so they can assume key positions in the organization. We cannot assure you that we will be able to properly train, qualify or retain key staff, or do so without costs or delays. Nor can we assure you that we will be able to hire new qualified personnel, in particular in operational areas, should the need arise. Any such failure could adversely affect our results of operations and our business.

Our ability to distribute dividends is subject to limitations.

Whether or not an investor receives dividends depends on whether our financial condition permits us to distribute dividends under Brazilian law, restrictive covenant clauses in contracts related to our loans and financings and whether our shareholders, on the recommendation of our Board of Directors, acting in its discretion, determine suspension, due to our financial circumstances, of the distribution of dividends in excess of the amount of mandatory distribution required under our by-laws in the case of the preferred shares. As we are a holding company with no revenue-producing operations other than those of our operating subsidiaries, we can only distribute dividends to shareholders if the Company receives dividends or other cash distributions from our operating subsidiaries.

The dividends that our subsidiaries can distribute depend on our subsidiaries generating sufficient profits in any given fiscal year and on restrictive covenant clauses in contracts for loans and financings of these subsidiaries as well as on any restriction imposed by the grantor, all of which place limits upon our subsidiaries’ payments of dividends to the Company. Similarly, we have a limitation on the payment of dividends which cannot exceed the mandatory minimum of 50% of the net income for the business year, as contained in our by-laws, due to restrictive covenant clauses in the contracts for loans and financings of the subsidiaries in which we are guarantors. Dividends are calculated and paid in accordance with applicable Brazilian corporate law and the provisions of the by-laws of each of our regulated subsidiaries.

Concession agreements and Brazilian law have established a mechanism that permits three types of rate adjustment: (a) the Annual Adjustment; (b) the Periodic Review; and (c) the Extraordinary Review. The purpose of the Annual Adjustment (‘Reajuste Anual’) is to compensate for changes in costs that are beyond a company’s control, such as the cost of energy for supply to customers, the sector charges that are set by the Federal Government, and charges for use of the transmission and distribution facilities of other companies.

Manageable costs, on the other hand, are adjusted by the IPCA inflation index, less a productivity and efficiency factor, known as the X Factor, which considers aspects such as distribution productivity and service quality standards. Every five years, there is a Periodic Tariff Review (Revisão Periódica Tarifária, or ‘RTP’), the purpose of which is to: identify the variations in costs referred to above; provide an adequate return on the assets that the Company has constructed during the period, establish a factor based on economies of scale, which will be taken into account in the subsequent annual tariff adjustments and define the efficient operational costs. An Extraordinary Tariff Review takes place whenever there is any unforeseen development that significantly alters the economic/financial equilibrium of the concession.


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Thus, although CEMIG D’s concession contracts specify preservation of their economic and financial balance, we cannot guarantee that ANEEL will set tariffs that do remunerate us adequately in relation to the investments made or the operating costs incurred due to the concession, and this might have a material adverse effect on our business, financial condition and operating results.

ANEEL defines the RAP that we receive through our transmission companies, on behalf of the Federal Government. The concession contracts provide for two mechanisms for the adjustment of revenues: (a) the annual tariff adjustments; and (b) the Periodic Tariff Review (Revisão Tarifária Periódica, or ‘RTP’). The annual tariff adjustment of our transmission revenues takes place annually in June and is effective in July of the same year. The annual tariff adjustments take into account the permitted revenues of the projects that have come into operation, and the revenue from the previous period is adjusted by the inflation index (IPCA for Contract 006/1997 and IGP-M for Contract 079/2000). The periodic tariff review takes place every five years. During the periodic tariff review, the investments made by a concession holder in the period and the operating costs of the concession are analyzed by ANEEL. The grantor takes into account only investments that it deems to be prudent, and operating costs that it assesses as having been efficient, using a benchmarking methodology. Thus, the tariff review mechanism is subject to some extent to the discretionary power of ANEEL, since it may omit investments that have been made, and could recognize revenues for operating costs lower than those actually incurred. This could result in a material adverse effect on our business, results of operations and financial condition.

An Extraordinary Tariff Review takes place whenever there is any unforeseen development that significantly alters the economic/ financial equilibrium of the concession. Thus, although our concession agreements specify that the economic and financial balance of the contract shall be preserved, we cannot guarantee that ANEEL will set tariffs that adequately compensate us in relation to the investments made or in relation to the operating costs incurred because of the concession. This may have a material adverse effect on our business, financial condition and results of operations.

We have strict liability for any damages caused to third parties resulting from inadequate provision of energy services.

Under Brazilian law, we are strictly liable for direct and indirect damages resulting from the inefficient rendering of energy generation, transmission, distribution and related services. In addition, when damages are caused to final customers as a result of outages or disturbances in the generation, transmission and distribution system, whenever these outages or disturbances are not attributed to an identifiable member of the ONS or to the ONS itself, the liability for such damages is shared among generation, distribution and transmission companies. Until a party with final responsibility has been identified, the liability for such damages will be shared in the proportion of 35.7% to the distribution agents, 28.6% to the transmission agents and 35.7% to the generation agents. The number of votes establishes these proportions that each of these types of energy concession holders receives in the general meetings of the ONS, and as such, are subject to change in the future. Consequently, our business, results of operations and financial condition might be adversely affected in the event we are held liable for any such damages.

We may incur losses and reputational damage in connection with pending litigation.

We are party to several legal and administrative proceedings relating to civil, administrative, environmental, tax, regulatory, labor and other claims. These claims involve a wide range of issues and seek indemnities and restitution in money and by specific performance. Several individual disputes account for a significant part of the total amount of claims against the Company. See “Item 8. Financial Information – Legal and Administrative Proceedings”. Our consolidated financial statements include provisions for risks in a total amount of R$2,199 million, as of December 31, 2023, for actions in which the probability of loss have been assessed as ‘probable’. One or more unfavorable decisions


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against us in any legal or administrative proceeding may have a material adverse effect on us. In addition to making provisions and the costs associated with legal fees, we may be required by the court to provide collateral for the proceedings, which may adversely affect our financial condition. In the event that our provisions for legal actions are insufficient, payments for actions in excess of the amounts provisioned could adversely affect our results of operations and financial condition. In addition, a member of our board of directors is involved as a defendant in criminal proceedings that are currently pending, which may distract our management and negatively affect us and our reputation. See “Item 6. Significant Civil and Criminal Proceedings Involving Key Management Members”.

Environmental regulations require us to perform environmental impact studies on future projects and obtain regulatory permits.

For reasons of obligations imposed by Brazilian environmental law, we must conduct environmental impact studies and obtain regulatory and environmental permits and licenses for our current and future projects. We cannot assure that these environmental impact studies will be approved by environmental agencies, that environmental licenses will be issued, that public opposition will not result in delays or modifications to any proposed project, or that laws or regulations will not change or be interpreted in a manner that could materially adversely affect our operations or plans for the projects in which we have an investment.

We believe that concern for environmental protection is also an increasing trend in our industry. Although we consider environmental protection when developing our business strategy, changes in environmental regulations, or changes in the policy of enforcement of existing environmental regulations could have a material adverse effect on our results of operations and financial condition. In addition, the implementation of investments in the transmission sector has suffered delays due to the difficulty in obtaining the necessary regulatory and environmental permits and approvals.

This could have a material adverse effect on our results of operations and our financial condition by delaying the implementation of energy projects and increasing the costs of expansion.

We operate without insurance policies against catastrophes and third-party liability.

Except for use of aircraft, fire and certain operational risks, we do not have third-party liability that covers accidents and we do not seek proposals for this type of insurance. CEMIG has not sought a proposal for, and has not contracted, insurance coverage against disasters, such as earthquakes or floods, that might affect our facilities. Any events of this type could generate unexpected additional costs, resulting in adverse effects on our business, results of operations and financial condition.

The insurance contracted by us might be insufficient to reimburse costs of damage.

Our business is normally subject to a range of risks, including industrial accidents, labor disputes, unexpected geological conditions, changes in the regulatory environment, environmental and climatic risks, and other natural phenomena. In addition, we and our subsidiaries might be found responsible for losses and damages caused to third parties as a result of failures to provide generation, transmission and/or distribution service. We only maintain insurance for fire, risks involving our aircraft, and operational risks, as well as those types of insurance coverage that are required by law, such as transport insurance of goods belonging to legal entities. We cannot guarantee that the insurance contracted by us will be sufficient to cover in full or at all any liabilities that may arise in the course of our business nor that these insurance policies will continue to be available in the future. The occurrence of claims in excess of the amount insured, or which are not covered by our insurance policies, might generate significant and unexpected additional costs, which could have an adverse effect on our business, results of operations and/or financial condition. Further, we cannot guarantee that we will be able to maintain our insurance coverage at favorable or acceptable commercial prices in the future.


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Strikes, work stoppages or labor unrest by our employees or by the employees of our suppliers or contractors could adversely affect our results of operations and our business.

All of our employees are represented by labor unions. Disagreements on issues involving divestments or changes in our business strategy, reductions in our personnel, as well as potential employee contributions, could lead to labor unrest. We cannot ensure that strikes affecting our production levels will not occur in the future. Strikes, work stoppages or other forms of labor unrest at any of our major suppliers, contractors or their facilities could impair our ability to operate our business, complete major projects and adversely affect our ability to achieve our long-term objectives.

A substantial portion of the Company’s assets is tied to the provision of public services and would not be available for attachment as collateral for the enforcement of any court decision.

A substantial portion of the Company’s assets is tied to the provision of public services. These assets cannot be attached as collateral for the enforcement of any court decision because the assets revert to the concession-granting authority to ensure continuity in the provision of public services, according to applicable legislation and our concession agreements. Although the Brazilian Federal Government would be obligated to compensate us for early termination of our concessions, we cannot assure you that the amount ultimately paid by the Brazilian Federal Government would be equal to the market value of the reverted assets. These restrictions on liquidation may lower significantly the amounts available to holders of the notes in the event of our liquidation and may adversely affect our ability to obtain adequate financing.

Climate change can have significant impacts on our distribution, generation and transmission activities.

The effects of climate change, the increase in the frequency and intensity of extreme climate events and regulatory changes can directly affect our distribution, generation and transmission activities, which can lead to financial impacts, loss of competitiveness, risk of disinvestment and reputational damage. Given that virtually all of Cemig’s generation site is composed of hydroelectric power plants, changes in rainfall totals and rainfall dispersion impact certain business activities. Extreme events can also impact distribution and transmission activities, mainly related to asset availability.

On the other hand, high water flow is also a potential risk, since the Company is required to open floodgates to ensure dam safety, thus flooding the downstream area. Moreover, with increased severity and frequency of extreme climate events, such as cyclones and floods, heavy rainfall may occur in a short period accompanied by windstorms and lightning. These events may damage power transportation and distribution facilities, making the resource unavailable to customers.

Furthermore, Cemig may be required to adjust to possible regulatory changes defined by the government to achieve the goals to which it has committed through the National Policy on Climate Change, which defines commitments to reduce emissions by 2030, and through emerging regulations that include carbon pricing mechanisms. The actions include a regulation applicable to the consumption of fossil fuels. The carbon price applied in the fuel sector would imply an increase in fossil fuel prices or fossil source-based thermal plants. Cemig’s business may also be impacted by new technologies in the medium and long term if it does not build strategic partnerships or is unable to implement technological changes to its services. If we fail to adapt or experience delays in adapting to this new global scenario, our operations and financial results may be adversely affected.

Failure to comply with ESG guidelines could adversely affect our business, reputation and results of operations.

Cemig has policies, guidelines, procedures and strategy aligned with ESG commitments. With a 100% renewable matrix and investments in the diversification of renewable sources in the short and medium term, the Company demonstrates its alignment with the energy transition driven by a low-carbon economy. Its operations are guided by its ESG commitments, in line with the sustainable development objectives (SDGs), aiming to contribute to generating value in society with electricity generation, transmission and supply services.

The focus of the Company's governance has been the balance between the economic, financial, environmental and social aspects of Cemig, with the aim of continuous contribution to sustainable development, and aiming to improve


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its relationship with shareholders, customers, employees, society and others interested parts. With this action, the Company allows its decision-making process to be aligned with the ESG strategy, ensuring the supervision and monitoring of initiatives and allocation of the necessary resources to improve practices aimed at improving the Company's ESG performance.

We consider that the most critical topics are related to socio-environmental issues, including supply chain management, as due to a high number of contracts, there is a possibility of failure in the monitoring process that ensures compliance with labor and environmental legislation, respect for human rights and other legal requirements on the part of these suppliers, negatively exposing the Company. In the environmental sphere, although the Company has guidelines and procedures aimed at fulfilling its legal obligations, there is a risk of non-compliance with environmental legislation or inefficiency in actions to mitigate environmental impacts, which may result in loss of biodiversity, environmental pollution, death of fish , among other impacts that may affect the communities surrounding the project.

Despite our level of maturity in ESG and having a strategic plan aligned with sustainability principles, failures in ESG practices and risk mitigation actions may occur, which could result in the loss of social licenses to operate our business and could have an adverse impact on our business, reputation and results of operations.

The outbreak of disease and health epidemics, such as the Covid-19 pandemic, could adversely affect our business, operational results and financial condition.

For the years ended December 31, 2022 and 2023, the COVID-19 pandemic did not have a significant negative impact on our business nor results of operations. However, any further outbreaks of Covid-19 or any other health epidemics could have an adverse effect on our business and results of operations.

In accordance with World Health Organization (WHO), on May 5, 2023, more than three years into the pandemic, the WHO Emergency Committee on COVID-19 recommended to the Director-General, who accepted the recommendation, that given the disease was by now well-established and ongoing, it no longer fit the definition of a Public Health Emergency of International Concern (PHEIC).

Impacts from the military conflict between Russia and Ukraine and the Israel - Hamas conflict, or any widening of these conflicts, may have a material adverse effect on the global economy, certain material and commodity prices and potentially on our business.

Global markets continue to operate in a period of economic uncertainty, volatility and disruption as the military conflict between Russia and Ukraine continues. Such military conflict and the effect of the resulting economic sanctions imposed on Russia and certain Russian citizens and enterprises, as well as the potential Russian response to such sanctions or any further sanctions, could have a negative effect on the global economy and are highly uncertain and difficult to predict. As a result, many entities outside the region may be adversely affected by rising prices of commodities such as oil, gas and wheat, or by a potential slowdown in the global economy. The occurrence of large-scale business disruptions potentially gives rise to liquidity issues for certain entities and there may also be consequential impacts on the credit quality of some suppliers.

In addition, on October 7, 2023, Hamas, a terrorist group in control of Gaza, carried out a surprise attack on Israeli cities and towns near the Gaza strip. Following this terrorist attack, Israel declared war on Hamas and other terrorist organizations in Gaza. The military conflict is ongoing, and its length and outcome are highly unpredictable.

As of the date of this annual report, while we are not directly involved in these regions and, therefore, our exposure to these conflicts is limited, considering the uncertainties surrounding the impact of the conflicts on global economy, we are unable to estimate the extent of any potential effects of these conflicts or any escalation of such conflicts on our business, results of operation or financial condition.


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Risks Relating to Brazil

Political and economic instability in Brazil could have effects on the economy and affect us.

Historically, the Brazilian political environment has influenced, and continues to influence, the performance of the country’s economy. Political crises has affected and continue to affect investor confidence and that of the general public, which resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies. The President of Brazil has power to determine the governmental policies and actions related to the Brazilian economy and, consequently, to affect the operations and financial performance of companies, including ours. The policies eventually implemented by both the Federal Government and State governments, could have a material impact on our business. Furthermore, Brazilian markets have experienced a high level of volatility due to the uncertainties arising from ongoing anticorruption and other investigations being carried out by the Brazilian Federal Prosecutors, and their impact on the economy and on the Brazilian political environment. Such events could cause the trading value of our shares, preferred and common, of our preferred and common ADSs, and our other securities to be reduced, and could negatively affect our access to the international financial markets. Furthermore, any political instability resulting from such events, including upcoming political elections at the federal and state levels, if it affects the Brazilian economy, could cause us to re-evaluate our strategy.

The Brazilian Federal Government frequently intervenes in the country’s economy and occasionally makes significant changes in monetary, fiscal and regulatory policy. Our business, results of operations and financial condition may be adversely affected by changes in government policies, as well as other factors including, without limitation:

•

Fluctuations in the exchange rate;

•

Regulatory policy for the energy sector;

•

Inflation;

•

Changes in interest rates;

•

Fiscal policy;

•

Other political, diplomatic, social and economic developments which may affect Brazil or the international markets;

•

Liquidity of the domestic markets for capital and loans;

•

Development of the energy sector;

•

Controls on foreign exchange and restrictions on remittances out of the country; and/or

•

Limits on international trade.

Uncertainty on whether the Brazilian Federal Government will make changes in policy or regulation that affect these or other factors in the future might contribute to the economic uncertainty in Brazil and to greater volatility of the Brazilian securities-markets and the markets for securities issued outside Brazil by companies. Measures by the Brazilian Federal Government to maintain economic stability, and speculation on any future acts of the Brazilian Federal Government, might generate uncertainties in the Brazilian economy, and increase the volatility of the domestic capital markets, adversely affecting our business, results of operations and financial condition. If the political and economic conditions deteriorate, we may also face increased costs. These uncertainties may adversely affect our business, results of operations and financial condition.


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The stability of the Brazilian Real is affected by its relationship with the U.S. dollar, inflation and Brazilian Federal Government policy regarding exchange rates. Our business could be adversely affected by any recurrence of volatility affecting our foreign currency-linked receivables and obligations as well as increases in prevailing market interest rates.

The Brazilian currency has experienced high degrees of volatility in the past. The Brazilian Federal Government has implemented several economic plans and has used a wide range of foreign currency control mechanisms, including sudden devaluation, small periodic devaluation during which the occurrence of the changes varied from daily to monthly, floating exchange market systems, exchange controls and parallel exchange market. From time to time, there was a significant degree of fluctuation between the U.S. dollar and the Brazilian Real and other currencies.

On December 29, 2023, the exchange rate between the Real and the US dollar was R$4.8521 for US$1.00. There is no guarantee that the Real will not depreciate, or appreciate, in relation to the US dollar, in the future. The instability of the Brazilian Real/U.S. Dollar exchange rate could have a material adverse effect on us. Depreciation of the Real against the United States dollar and other principal foreign countries could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy, and consequently, our growth. Depreciation of the Real could cause an increase in financial and operating costs, since we have payment obligations under financing contracts and import contracts indexed to exchange rate variations. In addition, depreciation of the Real could cause inflationary pressure that might result in abrupt increases in the inflation rate, which would increase our operating costs and expenses, which might adversely affect our business, results of operations, or outlook.

We generally do not enter into derivative contracts or similar financial instruments or make other arrangements with third parties to hedge against the risk of an increase in interest rates. To the extent that such floating rates rise, we may incur additional expenses. Changes that affect the composition of our debt and cause rises in short or long-term interest rates may increase our debt service payments, which could have an adverse effect on our results of operations and financial condition.

Brazil has historically experienced extremely high rates of inflation. Inflation, and some of the Federal Government’s measures taken in an attempt to curb inflation, have had significant negative effects on the Brazilian economy. Since the introduction of the Real in 1994, Brazil’s inflation rate has been substantially lower than in previous periods. Brazilian annual inflation as measured by the IPCA index in the years 2021, 2022 and 2023 was, respectively, 10.06%, 5.79% and 4.62%.

In 2021, the inflation rate was impacted partially due to global supply chain residuals from the 2020 pandemic effects. No assurance can be given that inflation will remain at these levels. Future measures taken by the Federal Government, including increases in interest rates, intervention in the foreign exchange market or actions intended to adjust the value of the Real, might cause an increase in the rate of inflation, and consequently, have an adverse economic impact on our business, results of operations and financial condition. If Brazil experiences high inflation rates in the future, we might be unable to adjust the rates we charge our customers to offset the effects of inflation on our cost structure. A significant increase in interest rates or inflation would have an adverse effect on our finance expenses and financial results as a whole. At the same time, a significant reduction in the CDI rate (interest rate for interbank deposit), or in inflation, could negatively affect the revenue generated by our financial investments, but also have the positive effect of revaluing adjustments to the balances of our concession financial assets.

Substantially, all our cash operating expenses are denominated in Reais and tend to increase with Brazilian inflation. Inflationary pressures might also hinder our ability to access foreign financial markets or might lead to further government intervention in the economy, including the introduction of government policies that could harm our business, results of operations and financial condition or adversely affect the market value of our shares and as a result, of our preferred ADSs, common ADSs and other securities.


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Risks relating to the Preferred and Common Shares, and the Preferred and Common ADSs

Instability of the exchange rate could adversely affect the value of remittances of dividends outside Brazil, and the market price of the ADSs.

Many Brazilian and global macroeconomic factors have an influence on the exchange rate. In this context, the Brazilian Federal Government, through the Central Bank, has in the past occasionally intervened for the purpose of controlling unstable variations in exchange rates. We cannot predict whether the Central Bank or the Federal Government will continue to allow the Real to float freely or whether it will intervene through a system involving an exchange rate band, or the use of other measures. This being so, the Real might fluctuate substantially in relation to the United States dollar, and other currencies, in the future. That instability could adversely affect the equivalent in US dollars of the market price of our shares, and as a result the prices of our ADSs, common and preferred, and also outward dividends remittances from Brazil.

The market value of the securities of Brazilian companies is affected to varying degrees by economic and market conditions in other countries, including other Latin American countries and emerging market countries. Although the economic conditions of such countries may differ significantly from the economic conditions of Brazil, the reactions of investors to events in those countries may have an adverse effect on the market value of the securities of Brazilian issuers. Crisis in other emerging market countries might reduce investors’ interest in the securities of Brazilian issuers, including our Company.

In the future, this could make it more difficult for us to access the capital markets and finance our operations on acceptable terms or at all. Due to the characteristics of the Brazilian power industry (which requires significant investments in operating assets) and due to our financing needs, if access to the capital and credit markets is limited, we could face difficulties in completing our investment plans and the refinancing our obligations, and this could adversely affect our business, results of operations and financial condition.

The relative volatility and illiquidity of the Brazilian securities market may adversely affect our shareholders.

Investing in Latin American securities, such as the preferred shares, common shares, preferred ADSs or common ADSs, involves a higher degree of risk than investing in securities of issuers from countries with more stable political and economic environments and such investments are generally considered speculative in nature. These investments are subject to certain economic and political risks, including, as examples, the following:

•

Changes to the regulatory, tax, economic and political environment that may affect the ability of investors to receive payment, in whole or in part, related to their investments; and

•

Restrictions on foreign investment and on repatriation of capital invested.

The Brazilian securities market is substantially smaller, less liquid, more concentrated and more volatile than the major securities markets in the United States. This might substantially limit an investor’s ability to sell the shares underlying his preferred or common ADSs for the desired price and within the desired period.

In 2023, the São Paulo Stock Exchange (Brasil, Bolsa, Balcão S.A, or ‘B3’), the only stock exchange in Brazil on which our shares are traded, had an annual market capitalization of R$5.1 trillion, and average daily trading volume of R$20.6 billion.


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Holders of the preferred and common ADSs, and holders of our shares, may have different shareholders’ rights than holders of shares in U.S. companies.

Our corporate governance, disclosure requirements and accounting practices are governed by our by-laws, by the Level 1 Differentiated Corporate Governance Practices Regulations (‘Regulamento de Práticas Diferenciadas de Governança Corporativa Nível 1’) of the B3 (the only Brazilian stock exchange) by the Brazilian Corporate Law (Federal Law 6,404/76) and by the rules issued by the CVM. These regulations may differ from the legal principles that would apply if our Company were incorporated in a jurisdiction in the United States, such as Delaware or New York, or in other jurisdictions outside Brazil. In addition, the rights of an ADS holder, which are derived from the rights of holders of our common or preferred shares to have his interests protected in relation to decisions by our board of directors or our controlling shareholder, may be different under the Brazilian Corporate Law from the rules of other jurisdictions. Rules against insider trading and self-dealing and other rules for the preservation of shareholder interests may also be different in Brazil if compared to the United States rules, potentially establishing a disadvantage for holders of the preferred shares, common shares, or preferred or common ADSs.

Exchange controls and restrictions on remittances from Brazil might adversely affect holders of preferred and common ADSs.

Investors in our preferred and common ADSs may be adversely affected by the imposition of restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and the conversion from Reais (R$) into foreign currencies. Restrictions of this type would hinder or prevent the conversion of dividends, distributions or the proceeds from any sale of preferred shares or common shares from Reais (R$) into U.S. Dollars (US$). We cannot guarantee that the Federal Government will not take restrictive measures in the future.

Foreign shareholders may be unable to enforce judgments given in non-Brazilian courts against the Company, or against members of its Board of Directors or Executive Board.

All our directors and officers reside in Brazil. Our assets, as well as the assets of these individuals, are located mostly in Brazil. As a result, it may not be possible for foreign shareholders to effect service of process on them within the United States or other jurisdictions outside Brazil, or to attach their assets, or to enforce against them, or against the Company in United States courts, or in the courts of other jurisdictions outside Brazil, judgments that are predicated upon the civil liability provisions of the securities laws of the United States or the respective laws of such other jurisdictions. In order to have a judgment rendered outside of Brazil enforced in Brazil, the party seeking enforcement would need to be recognized in the courts of Brazil (to the extent that Brazilian courts may have jurisdiction) and such courts would enforce such judgment without any retrial or reexamination of the merits of the original action only if such judgment had been previously ratified by the Superior Court of Justice (Superior Tribunal de Justiça, or ‘STJ’), in accordance with Articles 216-A to 216- X of the Internal Regulations of the STJ (RISTJ), introduced by Regulatory Amendments No. 18/2014 and No. 24/2016. Notwithstanding the foregoing, no assurance can be given that ratification will be obtained.

Exchange of preferred ADSs or common ADSs for underlying shares may have adverse consequences.

The Brazilian custodian for the preferred shares and common shares must obtain an electronic certificate of foreign capital registration from the Central Bank to remit U.S. dollars from Brazil to other countries for payments of dividends, or any other cash distributions, or to remit the proceeds of a sale of shares.

If the investor decides to exchange his preferred ADSs or common ADSs for the underlying shares, the investor will be able to continue to rely, for five business days from the date of the exchange, on the depositary bank’s electronic certificate of registration in order to receive any proceeds distributed in connection with the shares. After that period, the investor may not be able to obtain and remit U.S. dollars abroad upon sale of our common/preferred shares, or distributions relating to our common/preferred shares, unless he or she obtains his or her own certificate of registration or registers the investment under CMN Resolution 4,373/2014, dated September 29, 2014, which entitles registered foreign investors (‘Resolution 4,373/2014’) to buy and sell on a Brazilian stock exchange.


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If the investor does not obtain a certificate of registration or register under Resolution 4,373/2014, the investor will generally be subject to less favorable tax treatment on gains with respect to our common shares. If the ADR investors attempt to obtain their own certificate of registration, they may incur expenses or suffer delays in the application process, which could delay their ability to receive dividends or distributions relating to our common shares or the return of their capital in a timely manner. The custodian’s certificate of registration or any foreign capital registration obtained by an investor may be affected by future legislative changes, and additional restrictions applicable to the investor, the disposition of the underlying common/preferred shares or the repatriation of the proceeds of disposition may be imposed in the future. If the investors decide to exchange their preferred or common shares back into preferred ADSs or common ADSs, respectively, once they have registered their investment in preferred shares or common shares, they may deposit their preferred or common shares with the custodian and rely on the depositary bank’s registration certificate, subject to certain conditions.

We cannot guarantee that the depositary bank’s certificate of registry or any certificate of foreign capital registration obtained by an investor may not be affected by future legislative or other regulatory changes, nor that additional Brazilian restrictions applicable to the investor, or to the sale of the underlying preferred shares, or to repatriation of the proceeds from the sale, will not be imposed in the future.

An investor of our common shares or preferred shares and common or preferred ADSs might be unable to exercise preemptive rights and tag-along rights with respect to our shares.

U.S. investors of common shares or preferred shares and common or preferred ADSs may not be able to exercise the preemptive rights and tag-along rights relating to our shares unless a registration statement under the U.S. Securities Act of 1933, as amended, or the Securities Act, is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to our shares relating to these rights, and we cannot assure that we will file any such registration statement. Unless we file a registration statement or an exemption from registration is available, an ADR investor may receive only the net proceeds from the sale of their preemptive rights and tag-along rights or, if these rights cannot be sold, they will lapse and the ADR investor will receive only the net proceeds from the sale of their preemptive rights and tag-along rights or, if these rights cannot be sold, they will lapse and the ADR holder will receive no value for them.

Judgments of Brazilian courts with respect to our shares will be payable only in Reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our shares, we will not be required to discharge any such obligations in a currency other than Reais. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than Reais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and any such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors full compensation for any claim arising out of, or related to, our obligations under our shares.

Sales of a substantial number of shares, or the perception that such sales might take place, could adversely affect the prevailing market price of our shares, or of the preferred or common ADSs.

As a consequence of the issuance of new shares, sales of shares by existing share investors, or the perception that such a sale might occur, the market price of our shares and, by extension, of the preferred and/or common ADSs, may decrease significantly.


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The preferred shares and preferred ADSs generally do not have voting rights, and the common ADSs can only be voted by proxy by providing voting instructions to the depositary.

Under the Brazilian Corporate Law and our by-laws, holders of our preferred shares, and, consequently, holders of our ADSs representing preferred shares, are not entitled to vote at our shareholders’ meetings, except in very specific circumstances. Holders of our preferred ADSs may also encounter difficulties in the exercise of certain rights, including the limited voting rights. Holders of the ADSs for our common shares do not have automatic entitlement to vote in our General Meetings of Shareholders, other than by power of attorney, by sending a voting instruction to the depositary. Where there is not enough time to send the form with voting instructions to the depository, or in the event of omission to send the voting instruction, the holders of ADSs for CEMIG’s preferred and common shares may be unable to vote by means of instructions to the depository.

Future equity issuances may dilute the holdings of current holders of our shares or ADSs and could materially affect the market price for those securities.

We may in the future decide to offer additional equity to raise capital or for other purposes. Any such future equity offering could reduce the proportionate ownership and voting interests of holders of our shares and ADSs, as well as our earnings and net equity value per share or ADS. Any offering of shares and ADSs by us or our main shareholders, or a perception that any such offering is imminent, could have an adverse effect on the market price of these securities.

The Brazilian Government may assert that the ADS taxation for Non- Resident Holders shall be payable in Brazil.

Pursuant to Section 26 of Law 10,833, published on December 29, 2003, the sale of property located in Brazil involving non-resident investors is subject to Brazilian income tax as of February 1, 2004. Currently, the Company understands that ADSs do not qualify as property located in Brazil and, thus, should not be subject to the Brazilian withholding tax; nevertheless, the Brazilian Tax Authorities may try to assert Brazilian tax jurisdiction in such condition, incurring on the payment of tax income in Brazil for the Non-Resident Holders.


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Item 4. Information on the Company

History and Development of the Company

Companhia Energética de Minas Gerais – CEMIG is a state-controlled mixed capital company (‘sociedade por ações de economia mista’). CEMIG has its registered office located at Avenida Barbacena, 1200, Belo Horizonte, Minas Gerais, Brazil. The U.S. Securities and Exchange Commission (the “SEC”) maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants, such as us, that file electronically with the SEC. Our internet address is https://www.cemig.com.br. The information posted on our website or that could be accessed through our website is not part of, or attached to or incorporated by reference into, this Form 20-F.

CEMIG built its first three hydroelectric power plants in the 1950s and commenced its energy transmission and distribution operations in 1960. CEMIG was incorporated on May 22, 1952 and is organized and existing under the laws of Brazil and the State of Minas Gerais. In the 1970s, CEMIG took over the distribution of energy in the region of the city of Belo Horizonte, commissioned the São Simão hydroelectric power plant and advanced the transmission of energy with the construction of 6,000 km (3,728 miles) of power lines.

In the 1980s, a partnership between CEMIG, Centrais Elétricas Brasileiras S.A. (‘Eletrobras’) and the Brazilian Federal Government launched the Minas-Luz Program, to expand service to low-income populations in rural areas and outer urban suburbs, including the shantytowns. The Emborcação hydroelectric power plant, at the Paranaíba River, started operating in 1982. At that time, together with the São Simão plant, the Emborcação plant tripled the Company’s generation capacity. In 1983, CEMIG created its Ecological Program Coordination Management Unit, which is responsible for planning and developing the Company’s environmental policies. This new unit fostered the research of alternative energy sources, such as wind power and solar generation, biomass and natural gas. Since then, the Company has focused its research projects on such alternative energy sources.

In 1986, CEMIG’s subsidiary Companhia de Gas de Minas Gerais – Gasmig, a natural gas distribution company, was incorporated. By the end of the 1980s, CEMIG’s energy distribution business had a market share in the State of Minas Gerais of 96%.

In 2000, CEMIG was listed in the Dow Jones Sustainability Index for the first time and continues to be listed since then. We believe this to confirm our dedication to the balance between the economic, environmental and social pillars of corporate sustainability. In 2001, CEMIG’s ADRs representing its preferred shares were upgraded to Level 2 on the New York Stock Exchange. In 2004, due to new legal and regulatory requirements, CEMIG transferred its operations to two wholly owned subsidiaries: the energy generation and transmission company CEMIG Geração e Transmissão S.A. (‘CEMIG GT’) and the energy distribution company CEMIG Distribuição S.A. (‘CEMIG D’).

In 2006, CEMIG began to operate in other states, with the acquisition of a significant interest in Light S.A. (‘Light’), which concession is in the state of Rio de Janeiro, and Transmissoras Brasileiras de Energia – TBE, which owned transmission lines in Northern, Midwest and Southern Brazil. In 2008, CEMIG initiated its participation in the UHE Santo Antônio generation project at the Madeira River. In April 2009, CEMIG GT acquired Terna Participações S.A., now called Transmissora Aliança de Energia Elétrica S.A. (‘Taesa’). In May 2013, it increased its holdings in the energy transmission sector with the acquisition of equity interests in five other transmission companies. This increased CEMIG’s market share in Brazilian energy transmission from 5.4% to 12.6% at that time. In 2011, CEMIG GT expanded its participation in relevant generation and transmission assets, including the acquisition, by Amazônia Energia S.A. (in which CEMIG and Light have, respectively, 74.5% and 25.5% of the total capital) of a 9.77% stake in Norte Energia S.A. (‘NESA’), the owner of the concession for the construction and operation of Belo Monte Hydroelectric Power Plant, in Xingu River, State of Pará. The transaction added 818 MW of generation capacity to our total activities and increased Light’s total generation capacity by 280 MW. Also, in 2011, CEMIG acquired a controlling stake in Renova Energia S.A. (‘Renova’), which has been working with Small Hydroelectric Power Plants (SHPs) and wind farms for over a decade. In 2015, the association between Vale S.A. (‘Vale’) and CEMIG GT to form Aliança Geração de Energia (‘Aliança’) was concluded. The two companies subscribed shares issued by Aliança which were paid in by means of the equity interests they held in the following energy generation assets: Porto Estrela, Igarapava, Funil, Capim Branco I, Capim Branco II, Aimorés and Candonga; plus, a 100% interest in the following wind generation Special-Purpose Entities (‘SPEs’): Central


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Eólica Garrote Ltda., Central Eólica Santo Inácio III Ltda., Central Eólica Santo Inácio IV Ltda. And Central Eólica São Raimundo Ltda. CEMIG GT won the concession for Lot D in ANEEL’s Auction 012/2015, for placement of concessions for hydroelectric plants under a regime of allocation of generating capacity and physical offtake guarantees. Lot D is comprised of 13 plants that were previously owned by CEMIG, and an additional five plants which were owned by Furnas Centrais Elétricas S.A. (‘Furnas’). The aggregate installed generation capacity of these 18 plants is 699.57 MW.

On July 17, 2019, in connection with the public offering of shares by Light, the Company sold 33,333,333 shares that it held in that investee, at the price per share of R$18.75, in the total amount of R$625 million.

On January 22, 2021, the Company sold 68,621,264 shares that it held in that investee, at the price per share of R$20.00, in the total amount of R$1,372 million. The transaction is part of the execution of CEMIG’s divestment program. With the completion of this transaction, CEMIG is no longer a stockholder of Light.

On November 11, 2021, CEMIG entered into a Share Purchase Agreement (‘the Agreement’) with AP Energias Renováveis Fundo de Investimento em Participações Multiestratégia, including the following terms (‘the Transaction’): (i) sale of all of CEMIG equity interest in Renova Energia S.A. – In Judicial Recovery, (ii) assignment, for consideration, of all credits owed to CEMIG by Renova Comercializadora de Energia S.A. – In Judicial Recovery – for a total consideration of R$60 million, and (iii) a CEMIG earn-out right subject to certain future events.

On May 5, 2022, Cemig concluded the sale of its entire CEMIG equity interest held in Renova Energia S.A. – In-court supervised reorganization – as well as the assignment, for consideration, of all credits owed to CEMIG by Renova Comercializadora de Energia S.A. – In court supervised reorganization – for a total consideration of R$60 million, with a right to receive an earn out subject to certain future events, as provided in Share Purchase Agreement (‘the Agreement’) entered with AP Energias Renováveis Fundo de Investimento em Participações Multiestratégia on November 11, 2021.

On March 20, 2023 CEMIG concluded the sale of all the equity interest – equivalent to 7.53% of the Share Capital – it held directly and indirectly in Madeira Energia S.A. (‘MESA’), the parent company of Santo Antônio Energia S.A. (‘SAE’), to Furnas Centrais Elétricas S.A. (‘Furnas’), for R$55.4 million.

On October 6, 2023 the Company concluded sale to Furnas of its entire holding, of 69.39%, in the share capital of Baguari Energia, which represents an indirect interest of 34% in the Baguari Consortium, which operates the Baguari Hydroelectric Power Plant, located in Minas Gerais, which has an installed capacity of 140 MW and 81.9 MW of physical guarantee. The transaction totaled R$393.0 million, adjusted for 100% of the CDI from December 31, 2022 to the payment made on October 06, 2023. Dividends of R$11.6 million received on October 03, 2023, were deducted from this amount, resulting in the receipt of the closing amount of R$421.2 million.

On November 22, 2023 CEMIG GT, a wholly-owned subsidiary of CEMIG, concluded the sale of its direct equity interest of 49.9% in the share capital of Retiro Baixo Energética S.A. (‘Retiro Baixo’) to Furnas Centrais Elétricas S.A. (‘Furnas’). The transaction totaled R$223.4 million, adjusted for 100% of the CDI from December 31, 2022. Dividends of R$5.9 million received on June 28, 2023 were deducted from this amount, resulting in the net receipt of the closing amount of R$217.5 million.


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The following describe certain activities relating to CEMIG subsidiaries, jointly controlled entities and associates during 2023, 2022 and 2021 (aggregated by business):

RENOVA GROUP

Disposal of Equity Interest

On May 5, 2022, the Cemig GT concluded the sale of its entire equity interest held in Renova, as well as the assignment, for consideration, of all credits owed to the Cemig GT by Renova for a total consideration of R$60 million, as provided for in the Agreement.

Divestment of Ativas Data Center S.A.

On December 28, 2022, Cemig completed the sale of its entire equity interest in Ativas Data Center S.A. (‘Ativas’) to Sonda Procwork Informática Ltda. (‘Sonda”). The sale price was R$ 60.02 million, which was paid by Sonda by offsetting of: (i) a loan agreement between Cemig and Sonda in the amount of R$ 57.58 million; and (ii) a debtor balance of indemnity owed by Cemig to Sonda, of R$ 2.44 million. With the completion of this transaction Cemig has no shares in Ativas, and Sonda is owner of 100% of Ativas.

Divestment of Axxiom

On December 22, 2022, Cemig signed a share purchase agreement for disposal of its 49% equity interest in Axxiom Soluções Tecnológicas S.A. (‘Axxiom’) to Light S.A., owner of the remaining 51%. The agreement is subject to certain conditions precedent, which are expected to be satisfied in the coming months, after which the transaction will be completed. The agreement has a symbolic payment by Light of R$ 1.00 (one Real), with settlement of the assets and liabilities of Axxiom. The transaction was concluded on April 17, 2023.

This transaction is in line with the Company's strategic planning, which involves the divestment of assets that do not adhere to the Cemig Group's core activities.

Divestment of Madeira Energia S.A.

On March 20, 2023, Cemig GT concluded the sale of all the equity interest – equivalent to 7.53% of the share capital – it held directly and indirectly in Madeira Energia S.A, the parent company of Santo Antônio Energia S.A., to Furnas Centrais Elétricas S.A., for R$55.4 million. The purpose of Santo Antônio Energia S.A. is to operate and maintain the Santo Antônio HPP, located in the state of Rondônia.

This sale was made within the context of executing CEMIG’s Divestment Program, so that the Company can redirect its management and capital allocation efforts to the state of Minas Gerais.

Divestment of Baguari Energia

On April 14, 2023, Cemig GT signed a share purchase agreement with Furnas Centrais Elétricas S.A. for disposal of its 34% indirect equity interest in the Consórcio UHE Baguari, which operates Baguari HPP in Minas Gerais, representing 69.39% of the share capital of Baguari Energia. With the conclusion of transaction, Cemig GT no longer holds any equity in Baguari Energia and thus has no participation in the Consórcio UHE Baguari. The transaction was concluded on October 6, 2023, resulting in a proceed of R$432.8 million.


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The sale is in line with the Company’s Strategic Planning, which provides for the divestment of minority interests of Cemig’s Group.

Divestment of Retiro Baixo Energia Energética S.A.

On April 14, 2023, Cemig GT signed a share purchase agreement with Furnas Centrais Elétrica S.A. for disposal of its 49.9% equity interest in the Retiro Baixo Energética S.A., which operates Retiro Baixo HPP in Minas Gerais. The transaction was concluded on November 22, 2023, resulting in a proceed of R$223.4 million.

The sale is in line with the Company’s Strategic Planning, which provides for the divestment of minority interests of Cemig’s Group.

TAESA

Taesa wins four lots of transmission projects

On December 17, 2021, Taesa won the bid regarding lot 1, related to the Transmission Auction 02/2021, promoted on this date by ANEEL. The project is expected to generate an additional R$129.9 million of RAP for the company, the result of a discount offered of 47.76%. Furthermore, lot 1 is composed by 363 km of transmission lines, located in the states of São Paulo and Paraná and has an investment forecast of R$1.75 billion, according to ANEEL, which estimates a construction period of 60 months.

On June 30, 2022, Taesa won the bid regarding lot 10, related to the Transmission Auction 01/2022, promoted on this date by ANEEL. It is expected to add R$18.8 million of RAP for the company, the result of a discount offered of 47.86%. Lot 10 is composed by 93 km of transmission lines, in the state of Santa Catarina at Auction 01/2022 and has an investment forecast of R$243 million, according to ANEEL, which estimates a construction period of 54 months.

On December 16, 2022, Taesa won the bids regarding two lots related to the Transmission Auction 02/2022.

Lot 3 is expected to generate an additional R$91.4 million of RAP for the company, the result of a discount offered of 47.94%, and is composed by 279 km of transmission lines and 4 substations, in the states of Maranhão and Pará. It also has an investment forecast of R$1.12 billion, according to ANEEL, which estimates a construction period of 60 months.

Lot 5 is expected to generate an additional R$152.2 million of RAP for the company, the result of a discount offered of 34.21%, and its object is the continuation of service provision in existing facilities in the states of Rio Grande do Sul and Santa Catarina. It also has an investment forecast of R$1.18 billion, according to ANEEL, which estimates a construction period of 60 months. Part of that investment refers to an indemnity to the former concessionaire and will generate revenue immediately.

The awarded lots have important synergies, as they are expected to take advantage of Taesa’s existing Operating and Maintenance structure, in addition to expected CAPEX efficiencies and anticipated project delivery, as usually performed by Taesa.

CEMIG Soluções Inteligentes em Energia – CEMIG SIM

On October 08, 2019, CEMIG Soluções Inteligentes em Energia – CEMIG SIM was launched. It comprises the activities developed by Efficientia S.A ('Efficientia') and CEMIG Geração Distribuída – CEMIG GD. Efficientia's by laws were modified to adapt to the new object of CEMIG SIM and change of corporate name. On October 19, 2020, a CEMIG’s Extraordinary General Meeting of Shareholders approved the merger of Geração Distribuída – CEMIG GD (wholly-owned subsidiary), at book value, and as a result the investee ceased to exist and the Company took over of all its rights and liabilities. The proposal is for CEMIG SIM to act, in this first moment, but not limited, in the following segments: distributed generation, account services, cogeneration, energy efficiency (with Energy Efficiency Program resources – Programa de Eficiência Energética, or ‘PEE’), and supply and storage management.


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On November 25, 2020, the Company’s wholly owned subsidiary CEMIG Sim acquired 49% of interest in seven special-purpose companies operating in photovoltaic solar generation for the distributed generation market (‘geração distribuída’), with total installed capacity of 29.45MWp, for R$55 million. On August 19, 2020 and on September 30, 2020, this wholly owned subsidiary also acquired 49% of interest in two others SPCs operating in the same market segment for R$8 million and R$10 million, respectively, with total installed capacity of 11.62 MWp.

In 2022, CEMIG SIM invested R$82 million in the acquisition of photovoltaic plants. As of December 31, 2022, CEMIG SIM had 5,600 customers.

In 2023, CEMIG SIM invested R$212 million in the acquisition and development of photovoltaic plants. As of December 31, 2023, CEMIG SIM had 14,400 customers.

CEMIG SIM plans to invest R$800 million from 2024 through 2025 in Distributed Generation segment, according to its strategic plans.

Transmission Auction No. 02/2022

On December 16, 2022, Cemig GT won the bid regarding lot 1, related to the Transmission Auction 02/2022, promoted on this date by ANEEL. The project is expected to generate an additional R$17 million of RAP for the company, the result of a discount offered of 48.05%. Furthermore, lot 1 is composed by 165 km of transmission lines, located in the states of Minas Gerais and Espírito Santo and has an investment forecast of R$199 million, according to ANEEL, which estimates a construction period of 60 months.

The awarded lot has important synergies and is expected to take advantage of Cemig’s existing Operating and Maintenance structure.

Multiannual Strategic Plan

The strategic planning of Cemig, comprised of the Multiannual Business Plan (2023-2027), was reviewed and approved by the Board of Directors in December 2023, with total investments expected of R$35.6 billion and total EBITDA ('Earnings before interest, taxes, depreciation and amortization') of R$12.2 billion expected through 2028. The planning defined that our ambition is:

“Become a leader in customer satisfaction, safety and achieving efficiency levels above to the regulatory, through a modern, sustainable management, with value generation and promotion of a results culture, investing with a focus on Minas Gerais."

This plan aims to accelerate Cemig's transformation and has the following fundamentals: customer satisfaction, 100% digital (digital transformation), seek maximum efficiency, value creation and agile management with security. The principal guidelines and directives include the following:

•

IT: Digitize CEMIG enabling efficiency gain and increased analytical power in business;

•

HR and Corporate Services: Ensure the achievement of results prioritizing the well-being of collaborators;

•

Purchasing and Logistics: Enable the execution of the strategy with modern model of hiring;

•

Legal: Transform management of legal, labor and tax expenses liabilities;

•

Regulatory: Act proactively with government agencies to capture value arising from regulatory issues;

•

Communication: Enhance image and relationship with stakeholders and municipalities of MG;

•

Financial: Enable the execution of investments, making use of a healthy leverage;

•

Control and Integrity: Manage corporate risks and ensure institutional compliance with laws and ethics;

•

Innovation: Explore new avenues of growth from the transformation of the sector and development of technologies;


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•

ESG: Keep the Company socially conscious, sustainable and properly managed;

•

Culture: Consolidate a bold organizational culture, creating a safe, meritocratic, diverse and inclusive environment that allows us to achieve sustainable business results and ensure the satisfaction of our customers in a competitive market.

Capital Expenditures

Capital expenditures for the years ended December 31, 2023, 2022 and 2021 in millions of Reais, were as follows:


Year ended December 31,	2023		2022		2021
Distribution network		3,175		2,777		1,553
Power Generation		752		19		157
Transmission network		168		299		242
Others (1)		338		404		118

Total capital expenditures (2)		4,433		3,499		2,070

(1)

Includes investments in infrastructure, subsidiaries and others.

(2)

The capital expenditures are presented in our Consolidated Statement of Cash Flow mainly on account lines related to Contractual assets, acquisition of equity investees, capital contributions in investees, PP&E, acquisition of subsidiaries and intangible assets.

For 2024, we plan to make capital investments in the amount of R$5,345 million (R$4,433 million in 2023), corresponding to our basic and expansion program. We expect to allocate these expenditures primarily to the expansion of our distribution, power generation and transmission system. The amounts planned for 2024 do not include investments in acquisitions, capital injections and other projects, that are not remunerated by the concession-granting power – which are not recognized in the calculations of tariffs made by ANEEL. We expect to fund our capital expenditures in 2024 mainly from the cash flow from operations and, to a lesser extent, through financing.

Business Overview

General

Our business involves the generation, transmission, distribution and sale of energy, gas distribution and the providing of energy solutions.

CEMIG

We are engaged in transactions to buy and sell energy through our subsidiaries. The total volume of energy resourced in 2023 was 97,936 GWh or 0.6% less than 98,551 GWh in 2022, and 15.6% more than 84,716 GWh in 2021. The amount of energy produced by us in 2023 was 6,387 GWh or 13.5% less than the 7,388 GWh produced in 2022, and 23.6% more than the 5,169 GWh produced in 2021. The amount of energy purchased by us in 2023 was 91,550 GWh or 0.4% more than 91,163 GWh purchased in 2022, and 15.1% more than the 79,547 GWh purchased in 2021. These figures include 5,550 GWh purchased from Itaipu in 2023, 5,596 GWh in 2022, and 5,580 GWh in 2021. Through the Energy Trading Chamber (Câmara de Comercialização de Energia Elétrica, or ‘CCEE’) and from other companies, we purchased 86,000 in 2023, 85,567 GWh in 2022 and 73,967 GWh in 2021.

Forty six percent (46%) of the energy traded in 2023 (which comprise 44,570 GWh), was traded to final customers, both captive and free. Total losses of energy in the core and distribution networks in 2023 totaled 6,475 GWh, which corresponds to 7% of total resources and is 48.4% less than the 12,538 GWh loss in 2022. The table below presents the breakdown of resources and power requirements by CEMIG traded in the last three years:


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Cemig’s Electric Energy Balance


(GWh)	2023		2022		2021
RESOURCES		97,936		98,551		84,716
Energy generated by CEMIG (1)		4,979		5,547		3,633
Energy generated by Sá Carvalho		314		284		326
Energy generated by Horizontes		45		20		51
Energy generated by CEMIG PCH		42		70		74
Energy generated by Rosal Energia		296		348		338
Energy generated by SPE		554		1,050		731
Energy generated by Poço Fundo		156		69		16
Energy purchased from Itaipu		5,550		5,596		5,580
Energy purchased from CCEE and other companies		86,000		85,567		73,967


REQUIREMENTS	97,936	98,551	84,716
Energy delivered to final customers (2)	44,570	49,498	46,120
Energy delivered by CEMIG H	15,607	-	-
Energy delivered by Sá Carvalho	472	472	472
Energy delivered by Horizontes	81	88	87
Energy delivered by CEMIG PCH	121	121	120
Energy delivered by Rosal Energia	219	244	214
Energy delivered by SPEs	519	830	1,111
Energy delivered by Poço Fundo	149	75	11
Energy delivered to the CCEE and other companies	29,723	34,685	29,864
Losses	6,475	12,538	6,717

(1)

Discounting the losses attributed to generation (420 GWh in 2023) and the internal consumption of the generating plants.

(2)

Includes energy delivered to consumers outside the concession area (Wholesaler and Retailer).

Generation

The electric power generation business consists of the generation of energy using renewable energy sources (water, wind, sun and biomass).

As of December 31, 2023, we were one of the largest energy generation groups in Brazil, by total installed capacity. As of that date, we were generating energy at 68 hydroelectric plants (small hydroelectric power plants (‘PCH’) and hydroelectric power plants (‘UHE’)), wind plants and solar plants, with total installed capacity of over 5,190 MW (5,519 MW in 2022), with plants present in nine states of Brazil. The vast majority of our capacity is generated at hydroelectric plants (96.52% of installed capacity), with the remaining being generated by wind plants (3.43%) and solar plants (0.05%).


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Our top five power plants, which accounted for over 73.4% of our installed energy generation capacity in 2023, are:


Rank (Installed Capacity)	Generation Power Plant	CEMIG Group Company Holding Stake	Restricted / Unrestricted Group	Installed Capacity (MW) *		Start of Comm. Operations	Expiration of Concession or Authorization	Type of Power Plant	CEMIG´s Stake
1st	Belo Monte	Norte Energia	Unrestricted		1,313.0	2016	07/11/2046	UHE		11.69	%
2nd	Teodomiro C. Santiago	CEMIG GT	Restricted		1,192.0	1982	05/26/2027	UHE		100.00	%
3rd	Nova Ponte	CEMIG GT	Restricted		510.0	1994	08/12/2027	UHE		100.00	%
4th	Irapé	CEMIG GT	Restricted		399.0	2006	09/19/2037	UHE		100.00	%
5th	Três Marias	CEMIG GT	Restricted		396.0	1962	01/03/2053	UHE		100.00	%
Sub-Total (Top 5)					3,810.0
Total (All Plants)					5,190.0

(*) The installed capacity presented refers to CEMIG’s stake.

Transmission

The transmission business consists of transporting energy power from the facilities where it is generated to points of consumption, distribution networks and free customers. Its revenue depends directly on the availability of its assets. The transmission network comprises energy transmission lines and substations with voltage of 230 kV or more and is part of the Brazilian Grid regulated by ANEEL and operated by the ONS. See ‘The Brazilian Power Industry’.

On December 31, 2023, CEMIG GT and other CEMIG transmission networks had 4,653 miles of lines, as follows:


CEMIG GT and other CEMIG transmission networks lines in miles
Classification	CEMIG GT		Other CEMIG Group Companies (1)
> 525 kV Lines		-		104
500 kV Lines		1,356		851
440 kV Lines		-		68
345 kV Lines		1,294		21
230 kV Lines		494		465
220 kV Lines		-		-

Total		3,144		1,509

(1)

Proportional to CEMIG’s stake in the relevant concession.

Distribution

Within the CEMIG Group, energy distribution activities are conducted by a wholly owned subsidiary, CEMIG Distribution (‘CEMIG D’).

CEMIG D has five public service energy distribution concession contracts in the State of Minas Gerais, granting rights to the commercial operation of services related to the supply of energy to customers in the regulated ACR market in municipalities in its concession area, including customers that may be eligible, under the legislation, to become customers in the free market (Ambiente de Contratação Livre-ACL, the ‘Free Market’).

CEMIG D’s concession area covers 219,104 square miles, or 96.7% of the territory of the State of Minas Gerais. On December 31, 2023, CEMIG D’s energy system comprised 344,006 miles of distribution lines, through which it supplied 23,870 GWh to 9,211,723 regulated customers and transported 23,742 GWh to 2,988 free customers that use our distribution networks. The total volume of energy distributed was 47,612 GWh, of which 46.8% was distributed to regulated and free industrial customers, 13.4% to regulated and free commercial customers, 25.4% to regulated residential customers, and 14.4% to other regulated and free customers.


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Other Businesses

While our main business consists of the generation, transmission and distribution of energy, we also engage in the following businesses: (i) distributed generation, account services, cogeneration, energy efficiency (with Energy Efficiency Program resources – Programa de Eficiência Energética, or ‘PEE’), supply and storage management, through our subsidiary CEMIG Soluções Inteligentes em Energia-CEMIG SIM; (ii) sale and trading of energy, through structuring and intermediation of purchase and sale transactions, trading energy in the Free Market, through our wholly-owned subsidiaries CEMIG Trading S.A. and Empresa de Serviços de Comercialização de Energia Elétrica S.A.; and (iii) acquisition, transport and distribution of gas and its sub products and derivatives through Companhia de Gás de Minas Gerais (‘Gasmig’).

Revenue Sources

The following table illustrates the revenues attributable to each of our principal revenue sources, in millions of Reais, for the periods indicated:


Year ended December 31,	2023			2022			2021
Revenue from supply of energy		31,671			30,158			29,619
Revenue from use of the energy distribution systems – TUSD		4,417			3,685			3,448
CVA (compensation for changes in ‘Parcel A’ items) and Other financial components		(213	)		(1,147	)		2,146
Financial component arising from PIS/Pasep and Cofins taxes refunded to customers– realization		1,909			2,360			1,317
Transmission revenue
Transmission operation and maintenance revenue		373			413			355
Transmission construction revenue		242			407			252
Interest revenue arising from the financing component in the transmission contract asset		524			575			660
Generation indemnity revenue		93			47			-
Construction revenues		3,899			3,246			1,852
Adjustment to expectation of cash flow from the indemnifiable financial asset of the distribution concession		149			39			54
Revenue from financial adjusting of the Concession Grant Fee		412			467			523
Transactions with energy on the CCEE		146			183			1,157
Mechanism for the sale of surplus		(4	)		453			453
Supply of gas		4,139			4,529			3,470
Fine for violation of service continuity indicator		(139	)		(94	)		(70	)
Recovery of PIS/Pasep and Cofins taxes credits over ICMS	-				-			154
PIS/Pasep and Cofins credits to be refunded to consumers	-				(830	)		-
Other operating revenues		2,316			2,658			1,935
Deductions on revenue		(13,084	)		(12,686	)		(13,679	)
Total net revenues		36,850			34,463			33,646

Power Generation and Trading

Overview

CEMIG’s top five power plants accounted for over 73.4% of its installed energy generation capacity as of December 31, 2023 (69% in 2022).

CEMIG’s market consists of sales of energy to:


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•

Regulated customers in CEMIG’s concession area in the State of Minas Gerais;

•

Free customers both in the State of Minas Gerais and other States of Brazil, through the Free Market;

•

Other agents of the energy sector – traders, generators and independent power producers, also in the Free Market;

•

Distributors in the Regulated Market; and

•

CCEE (eliminating transactions between companies of the CEMIG Group).

The total volume of transactions in energy in 2023 was 97,936 GWh, an increase of 2.5% in comparison to the 95,551 GWh in 2022.

Generation Assets

As of the date of this annual report, the subsidiaries, jointly controlled entities and affiliates of CEMIG operated 57 hydro plants (5,010.4 MW), 9 wind farms (175.7 MW) and 2 photovoltaic power stations (3.9 MW), totaling 5,190.0 MW.

We have incorporated subsidiaries in the State of Minas Gerais and other states in Brazil to operate certain of our generation facilities and to hold the related concessions.

The following are companies in which CEMIG GT owns 100% of the equity:

•

CEMIG Geração Camargos S.A., CEMIG Geração Itutinga S.A., CEMIG Geração Leste S.A., CEMIG Geração Oeste S.A., CEMIG Geração Salto Grande S.A., CEMIG Geração Sul S.A. and CEMIG Geração Três Marias S.A. In 2016, CEMIG GT transferred these companies to 7 Special Purpose Entities ('SPEs') to hold the concession contracts for 18 hydroelectric plants won in the auction the year before. The total installed generation capacity secured to CEMIG GT’s portfolio was 699.6 MW. On May 31, 2023, Cemig Geração Salto Grande S.A. and Cemig Geração Três Marias S.A. were merged into Cemig GT;

•

CEMIG PCH S.A. – Independent power producer, operating the Pai Joaquim small hydroelectric power plant;

•

Horizontes Energia S.A. – An independent power producer, operating the Machado Mineiro SHP in Minas Gerais; and the Salto do Voltão and Salto do Passo Velho hydroelectric plants, in the State of Santa Catarina;

•

Rosal Energia S.A. – Concession holder operating the Rosal hydro plant, on the border between the States of Rio de Janeiro and Espírito Santo;

•

Sá Carvalho S.A. – Production and sale of energy as a public energy service concession holder, through the Sá Carvalho hydroelectric power plant;

•

Cemig Geração Poço Fundo S.A. – Independent power producer, operating the Poço Fundo small hydro power plant, in Minas Gerais state, which assets were transferred from Cemig GT.

The generation companies in which CEMIG GT has joint control are:

•

Aliança Geração de Energia S.A. (45%) – Platform of growth and consolidation of generation assets held by CEMIG GT and Vale (55%). The assets involved in the formation of the Aliança include the Aimorés and Funil hydroelectric plants and the following generation consortia: Porto Estrela, Igarapava, Capim Branco I, Capim Branco II and Candonga. In addition to the hydroelectric plants in operation, there are two wind farms operational in northeastern Brazil, Santo Inácio and Gravier. The company has installed capacity of 1,328 MW in operation, and will be responsible for investments in future projects of energy generation;

•

Aliança Norte Energia Participações S.A. (49%) – together with Vale (51%), the Company holds participation of 9% of Norte Energia S.A., holder of the concession to operate the Belo Monte hydroelectric plant, corresponding to an indirect equity interest of 4.41% and representing an installed capacity of 495 MW;


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•

Amazônia Energia Participações S.A. (49% of voting share, 74.5% of total capital) – Owned jointly with Light (25.5%), holds 9.77% of Norte Energia S.A., representing an installed capacity of 818 MW indirectly held by CEMIG GT;

•

Hidrelétrica Cachoeirão S.A. (49%) – An independent power producer operating the Cachoeirão SHP, located at Pocrane, in the State of Minas Gerais. The other 51% is held by Santa Maria Energética;

•

Hidrelétrica Pipoca S.A. (49%) – An independent power producer that built and operates the Pipoca SHP, on the Manhuaçu River, in the municipalities of Caratinga and Ipanema, in the State of Minas Gerais. The other 51% is held by Serena Energia S.A.;

•

Paracambi Energética S.A. (was denominated Lightger S.A up to October 2022) (49%) – Independent power producer, formed to build and operate the Paracambi SHP (or PCH), on the Ribeirão das Lages river in the county of Paracambi, in the state of Rio de Janeiro. The remaining 51% shareholding is owned by Light;

•

Guanhães Energia S.A. (49%) – Guanhães Energia S.A. is jointly-controlled entity, which has four wholly-owned subsidiaries – PCH Dores de Guanhães S.A., PCH Senhora do Porto S.A., PCH Jacaré S.A. and PCH Fortuna II S.A.. Guanhães Energia S.A. is engaged in commercial operation of these four SHPs. Three of them – Dores de Guanhães, Senhora do Porto and Jacaré – are in the municipality of Dores de Guanhães; and one, Fortuna II, is in the municipalities of Virginópolis and Guanhães, all in the State of Minas Gerais. In July 2021, the project reached its 44 MW aggregate installed capacity;

•

Queimado Hydroelectric Power Plant – CEMIG GT holds an 82.5% interest in this entity and our partner in this project is CEB Participações S.A. (‘CEBPar’), a subsidiary of Companhia Energética de Brasília (‘CEB’), which owns 17.5% equity interest in the plant.

Wind Farms

Wind farms have become one of the most promising power generation sources in Brazil. In addition to their low environmental impact, this source of energy is completely renewable and widely available in Brazil, according to numerous studies of potential wind power. Its rapid technical development over recent decades has successfully reduced costs per MWh in comparison to other power generation sources. CEMIG has monitored and observed the rapid evolution of wind energy and its inclusion in the range of Brazilian energy supply sources.

CEMIG GT owns 100% of the equity in the following companies with wind farms investments:

Central Eólica Praias de Parajuru S.A and Central Eólica Volta do Rio – Wind farms located in the State of Ceará with a total installed capacity of 70.8 MW.

CEMIG GT has joint participation in the following companies with wind farms investments:

Aliança Geração de Energia S.A. (45%) – Four wind farms, compose the Santo Inácio Wind Project (Garrote, São Raimundo, Santo Inácio III and Santo Inácio IV wind farms). The project located at Icapuí, in the State of Ceará, started its commercial operation in December of 2017 and has an installed capacity of 98.7 MW.

The Gravier Wind Project located at Icapuí, also in the State of Ceará, began implementation of the project in January 2021 and full commercial operation started in December 2022. The project has 17 wind turbines, with a total installed capacity of 71.4 MW.

There is also one project under construction, Acauã Wind Project (composed of Acauã I, Acauã II and Acauã III wind farms), it is in the State of Rio Grande do Norte and has a total installed capacity of 109.2 MW. Its commercial operation is estimated to start in second half of 2024.


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Expansion of Generation Capacity

Poço Fundo

On February 5, 2019, Brazilian electricity regulatory agency ANEEL approved an expansion of installed capacity of Poço Fundo, a Small Hydroelectric Power Plant located on the Machado River, in the state of Minas Gerais, from 9.16 MW to 30 MW. Additionally, the concession was extended until May 27, 2052. The plant consists of two generating units of 15 MW each.

Expansion works had been underway since January 2020. The first generation unit began its commercial operation on September 30, 2022 and the second on October 1, 2022.

Três Marias GD

On December 20, 2021, the operation of photovoltaic plant Três Marias Geração Distribuída was initiated. This is the second solar plant designed and built by CEMIG GT. The investment amount in 2023 was R$14.5 million (R$140 million in 2022). The plant has a capacity of 2.5 MWp and it is located near the Hydro Plant Três Marias.

Other Greenfield Projects

The Company has been developing other greenfield projects aligned with its strategic planning. The following projects are under construction with the perspective of beginning operations in May 2024:

•

PV Advogado Eduardo Soares (100 MWp)

•

PV Jusante (87 MWp)

CEMIG GT continues to develop projects of hydro, windfarm and solar projects. The objective is to expand by 1.9 GW (avg) in generation power, with investments of R$26.6 billion in CAPEX, until 2032, in order to accomplish the strategic plans.

On August 23, 2022, the Company signed Full EPC (Engineering, Procurement and Construction) contracts for construction of Advogado Eduardo Soares and Jusante photovoltaic solar generation plants, for which the planned CAPEX is R$824 million – R$447 million for Advogado Eduardo Soares and R$377 million for Jusante.

Advogado Eduardo Soares plant, on a site owned by the Company at Montes Claros, Minas Gerais, will have inverter installed capacity of 85MW (100.4 MWp). The Jusante plant, on a site owned by the Company in São Gonçalo do Abaeté, Minas Gerais, will have 7 generating plants, each with inverter installed capacity of 10MW (87 MWp).

The implementation of these plants is in accordance with the Cemig group’s strategic planning, strengthening its generation from renewable sources, with profitability compatible with the Company’s cost of capital for this type of project.

CEMIG GT also has been developing Floating PV Projects, making the most of its existing hydroelectric power plants towards the establishment of the largest plants of this type in Latin and North America. The company aims to finish the bidding process for the construction of these plants by the end of 2025.

CEMIG SIM

CEMIG SIM, a wholly owned subsidiary of CEMIG that operates in distributed generation and energy solutions, invested R$212 million in 2023 in the acquisition of photovoltaic plants. Currently CEMIG SIM has reached 14,000 customers.

CEMIG SIM plans to invest R$800 million from 2024 through 2025 in Distributed Generation segment, in order to accomplish its strategic plans.


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Transmission

Overview

The transmission business consists of transferring energy from generation power plants to customers directly connected to the basic transmission grid, free customers and distributors. The transmission system comprises transmission lines and step-down substations with voltages ranging from 230kV to 500kV.

All the basic transmission grid users, including generators, distributors, free customers, and others, execute contracts for the use of the transmission system – CUST with the ONS, and make payments to the transmission companies for making available the use of their basic transmission grid equipment. See ‘The Brazilian Power Industry’ and “Item 5. Operating and Financial Review and Prospects”.

The following tables give operating information on our transmission capacity for the dates indicated:


	Circuit Length of Transmission Lines in Miles as of December 31
Voltage of Transmission Lines	2023		2022		2021
500 kV		1,356		1,356		1,355
345 kV		1,294		1,267		1,230
230 kV		494		494		483

Total		3,144		3,117		3,068


	Transformation Capacity (1) of Transmission Substations as of December 31,
Substations	2023		2022		2021
Number of transmission substations (2)		41		40		39
MVA		20,101.75		19,078.15		18,613.15

(1)

Transformation capacity refers to the ability of a transformer to receive energy at a certain voltage and release it at a reduced voltage for further distribution.

(2)

Shared substations are not included.

The tables below present operational information on the transmission capacity of the joint venture proportional to the equity interest held by the CEMIG Group in each case, on the dates indicated:


	Transmission Network Extension in Miles as of December 31,
Voltage of Transmission Lines	2023		2022		2021
>525 kV		104		168		70
500 kV		851		1,370		799
440 kV		68		109		68
345 kV		21		33		67
230 kV		465		675		377

Total		1,509		1,463		1,381

Transmission assets

Furnas–Pimenta Transmission Line (Companhia de Transmissão Centroeste de Minas – ‘Centroeste’) – In September 2004, a consortium formed by Furnas and CEMIG, holding 49% and 51%, respectively, won the bid for the concession of the Furnas–Pimenta transmission line. As required by the tender rules, the partners formed a company, Companhia de Transmissão Centroeste de Minas S.A., which is responsible for the construction and operation of the transmission line. This 345-kV transmission line extending for 39 miles connects the substation of the Furnas hydroelectric plant to a substation at Pimenta, a city in the Center-West region of Minas Gerais. It began commercial operation in March


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2010 and the concession expires in March 2035. On January 13, 2020, the Company concluded the acquisition of 49% of the share capital held by Eletrobras in Centroeste, becoming the sole owner of the investee since then.

Transmissora Aliança de Energia Elétrica S.A. – Taesa is a private company jointly controlled by CEMIG, which holds 36.97% of the voting capital and 21.68% of the total capital of Taesa, and by ISA Investimentos e Participações do Brasil S.A. which holds 14.88% of the total capital.

On December 23, 2021, Cemig completed acquisition of the totality of the equity interests held by Cobra Brasil Serviços, Comunicações e Energia S.A. and Cobra Instalaciones y Servicios S.A. in Sete Lagoas Transmissora de Energia S.A. (‘SLTE’), becoming the holder of a 100% of the shares in that company. The amount disbursed by Cemig was R$ 48 million. SLTE acquired the concession for Lot H in ANEEL Auction 008/2010, for construction and operation of the Sete Lagoas 4 substation. The concession period of Sete Lagoas 4 substation started from in June 2014 until June 2041.

Distribution and Purchase of Electric Power

Overview

Our distribution operation consists of transfers of energy from distribution substations to final customers. Our distribution network comprises a widespread network of overhead and underground lines and substations with voltages lower than 230 kV. We supply energy to small industrial customers, at the higher end of the voltage range, and to residential and commercial customers at the lower end of the range.

In 2023, we invested R$3,175 million (R$2,747 million in 2022) in the construction and acquisition of the property, plant and equipment needed to supply energy to our customers, expand and increase the capacity of our distribution system.

The following tables provide certain operating information pertaining to our distribution system, on the dates indicated:


Circuit length of distribution lines in miles – High voltage (from distribution substations to final customers) as of December 31,
Voltage of distribution lines	2023		2022		2021
161 kV		30.36		33.21		30.64
138 kV		9,065.41		8,850.28		8,076.86
69 kV		2,233.01		2,164.76		2,257.52
34.5 kV + 230 kV		567.55		567.82		636.95

Total		11,896.33		11,616.07		11,001.97


Circuit length of distribution lines in miles – Medium and low voltage (from distribution substations to final customers)
	As of December 31,

Voltage of distribution network	2023		2022		2021
Overhead urban distribution lines		77,559.27		74,955.17		74,961.63
Underground urban distribution lines		1,752.90		1,565.14		1,577.20
Overhead rural distribution lines		264,694.37		262,916.67		263,181.41

Total		344,006.54		339,436.98		339,720.23


Step-down transformation capacity (1) of distribution substations as of December 31,
	2023		2022		2021
Number of substations		463		449		417
MVA		12,183.4		11,809.7		11,021.6

(1)

Step-down transformation capacity refers to the ability of a transformer to receive energy at a certain voltage and release it at a reduced voltage for further distribution.


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Expansion of Distribution Capacity

Our five-year distribution expansion plan, comprising 2023 to 2027, is based on market growth projections. To accommodate this growth, we plan to add distribution lines, up to 41,850 miles of medium and low voltage and 2,175 miles of high voltage; 127 descending substations, adding 2,800 MVA to our distribution network.

Purchase of Electric Power

During the year ended December 31, 2023, we purchased 5,550 GWh of energy from Itaipu, which represented 12.5% of the energy we sold to final users, and 547 GWh (1.2%) of energy from PROINFA. We also purchased 1,073 GWh under Nuclear Energy Quota Contracts - Contratos de Cotas de Energia Nuclear, or ‘CCENs’. (2.4%) and 5,938 GWh of energy under Assured Energy Quota Contracts - Contratos de Cota de Garantia Física, or ‘CCGFs’ (13.3%). In addition to this compulsory purchase, we have two other types of supply arrangements: (i) purchases of 19,218 GWh through public auctions, which accounted for 21% of the energy purchased for resale; and (ii) purchases of 1,363 GWh through long-term agreements existing prior to the New Industry Model Law, which represented 1.5% of the energy purchased in 2023.

Itaipu — Itaipu is one of the largest operational hydroelectric plants in the world, with an installed capacity of 14,000 MW. Centrais Elétricas Brasileiras S.A. (‘Eletrobras’), a holding company controlled by the Federal Government, owns a 50% interest in Itaipu, while the government of Paraguay owns the remaining 50%. Brazil, pursuant to its 1973 treaty with Paraguay, has the option to purchase all of the energy generated by Itaipu that is not consumed by Paraguay.

We are one of the electricity power distributors operating in the south, southeast and west-central regions of Brazil that are jointly required to purchase all of Brazil’s portion of the energy generated by Itaipu, in accordance with the Law 5,899/1973. The Federal Government allocates Brazil’s portion of Itaipu’s power among these energy companies in amounts proportionate to their respective historical market share of total energy sales. For 2020, Resolution 2,642/2019 set it at 10.32% and for 2021 it was set at 10.20% (Resolution 2,804/2020). For 2022, the Resolution 3,146/2021 set it at 10.44%. These rates are fixed to defray Itaipu’s operating expenses and payments of principal and interest on Itaipu’s dollar-denominated borrowings and the cost in Reais of transmitting such power to the Brazilian grid. These rates are above the national average for bulk supply of power and are calculated in U.S. dollars. Therefore, fluctuations in the U.S. dollar/Real exchange rate affect the cost, in Real terms, of energy we are required to purchase from Itaipu. Historically, we have been able to recover the cost of such energy by charging supply rates to customers. According to our concession contract, increases in the supply rates may be transferred to the final customer upon approval by ANEEL.

Since 2007, ANEEL publishes at the end of each year the amount of energy to be purchased from Itaipu by each of the electric power distributors for the following year, as guidance for the five subsequent years. Based on this, the distributors can estimate their remaining energy needs in advance of the next public auctions.

CCENs: These are contracts that formalize the purchase of energy and power as established in Law 12,111/09 and ANEEL Resolution 530/12 between distributors and Electronuclear for the energy produced by the Angra I and Angra II plants.

CCGFs: Decree 7,805/12 regulated Provisional Act 579/12 and created contractual arrangements governing contracting of energy and power from the plants whose concessions were extended under Law 12,783/13.

Auction Contracts: We have purchased energy in public auctions on the CCEE. These contracts are formalized between CEMIG and the various vendors in accordance with the terms and conditions in the invitation to bid.

‘Bilateral Contracts’ — CEMIG D entered into ‘bilateral contracts’ with various suppliers prior to the enactment of the New Industry Model Law in 2004. Such agreements are valid under their original terms but cannot be renewed. During the year ended December 31, 2022 CEMIG D didn’t enter new bilateral contracts.


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Other Businesses

Natural Gas Distribution

Gasmig was established in Minas Gerais, Brazil, in 1986, for the purpose of developing and implementing the distribution of natural gas in the State of Minas Gerais. CEMIG holds 99.57% of the shares of Gasmig and the Municipality of Belo Horizonte owns the remaining shares.

In July 1995, the State Government granted Gasmig an exclusive 30-year concession (as from January 1993) for distribution of piped gas covering the entire State of Minas Gerais and customers located within it. On December 26, 2014, the Second Amendment to the Concession Contract was signed. This document extended Gasmig’s concession for commercial operation of piped gas services for industrial, commercial, institutional and residential use in the State of Minas Gerais for 30 years. As a result, the expiration of this concession was extended from January 10, 2023, to January 10, 2053.

Gasmig’s marketing efforts focus on its ability to provide a more economically efficient and environmentally friendly alternative to oil products, like diesel and liquefied petroleum gas (‘LPG’), wood, wood products and charcoal. From January to December 2023, Gasmig supplied 2,831 million cubic meters of natural gas per day to 95,887 customers in 47 cities: 101 large and medium-sized industrial plants, 1,339 small industrial plants and commercial customers, 63 retail distribution stations that supply natural gas to vehicles, 3 retail distribution stations supplying compressed natural gas (‘CNG’) to vehicles, 7 co-generation projects, 5 distributors of CNG to industrial customers, 94,367 homes, and 2 thermoelectric plants.

The number of customers has increased 16% (mainly residential).

Many energy-intensive industries, such as cement, steel, iron-alloys and metallurgical plants, operate at significant volume in Minas Gerais. Gasmig’s principal strategy is expansion of its distribution network to cover the part of demand that has not yet been met. Gasmig dedicates efforts to development of new projects for expansion of its natural gas distribution system, to supply customers in other areas of Minas Gerais, especially those densely industrialized.

From January to December 2023, capital expenditures totaled R$302 million and 43.2 miles were added to our natural gas network. Gasmig spent R$237 million on the mid-west project, completing environmental licensing, contracting work on the main lines and receiving the materials necessary for construction such as pipes, valves and connections.

In the city of Belo Horizonte, the main projects developed were those aimed at serving the Urban Market. High Density Polyethylene (‘HDPE’) densification networks were implemented in the Ouro Preto, Santa Efigênia, Castelo, Centro, Serra, Buritis, Barro Preto e Belvedere neighborhoods. There were also investments in the cities of Nova Lima, Poços de Caldas and Juiz de Fora.

Gas distribution concessions

The concessions for distribution of natural gas are granted by each Brazilian state. In the state of Minas Gerais (‘Grantor’), the State’s Economic Development Secretariat (‘SEDE’), sets the tariffs for natural gas by market segment. The tariffs are comprised of a portion for the cost of gas and a portion for the distribution of gas. Each quarter the tariffs are adjusted to pass through the cost of gas, and once a year they are adjusted to update the portion allocated to cover the costs relating to the provision of the distribution service – remuneration of invested capital and to cover all the operating, commercial and administrative expenses of the concession holder.

In addition to these adjustments, there are periodic reviews of tariffs. These reviews may occur every five years from the end of the first cycle, to evaluate the changes in the costs of Gasmig, and to update the tariffs. The concession contract also specifies the possibility of an extraordinary review of tariffs if any event occurs that puts the economic-financial balance of the concession at risk.

On September 19, 2019, the Gasmig signed, with the Grantor, the Third Amendment to the Concession Agreement for Industrial, Institutional and Residential Exploration of Piped Gas Services in the State of Minas Gerais. This guarantees maintenance of the period of Gasmig’s concession up to 2053.


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Consulting and Other Services

CEMIG SIM was created in October 2019, as a merger of the companies Efficientia and CEMIG GD, to operate in the markets of distributed generation, energy efficiency and energy solutions. As well as the branding and marketing strategy focused on the retail sector, and on digital transformation of the electricity sector, the organizational culture of SIM, which has a strong character of innovation and technology, is being constructed so that clients are always at the center of decisions.

In 2021, CEMIG SIM sold the total of 7,753 MWh/month in supply, generated by 11 photovoltaic plants (the Janaúba, Corinto, Manga, Bonfinópolis II, Lagoa Grande, Lontra, Mato Verde, Mirabela, Porteirinha I, Porteirinha II and Brasilândia plants) and CEMIG SIM had 4,752 customers.

In 2022, CEMIG SIM sold the total of 8,199 MWh/month in supply, generated by 11 photovoltaic plants (the Janaúba, Corinto, Manga, Bonfinópolis II, Lagoa Grande, Lontra, Mato Verde, Mirabela, Porteirinha I, Porteirinha II, and Brasilândia plants). On December 31, 2022, CEMIG SIM had 5,600 customers.

In 2023, CEMIG SIM sold the total of 13,718MWh/month in supply, generated by 14 photovoltaic plants (the Janaúba, Corinto, Manga, Bonfinópolis II, Lagoa Grande, Lontra, Mato Verde, Mirabela, Porteirinha I, Porteirinha II, Brasilândia, Jequitbá , Montes Carlos and Prudente de Morais plants). On December 31, 2023, CEMIG SIM had 11,806 customers.

Regarding energy solutions, in 2024, CEMIG SIM will work on the implementation of photovoltaic plants.

Sale and Trading of Energy

We provide services related to the sale and trading of energy in the Brazilian energy sector, such as evaluation of scenarios, representation of customers in the CCEE, structuring and intermediating of energy purchase and sale transactions, and consultancy and advisory services, besides services related to the purchase and sale of energy in the Free Market through our wholly-owned subsidiary companies CEMIG Trading S.A. and Empresa de Serviços de Comercialização de Energia Elétrica S.A. (‘ESCEE’).

Energy Losses

CEMIG

The energy losses of a distribution company are comprised of two types of losses: technical losses and non-technical (commercial) losses. Technical losses are inherent to the process of transporting and the transformation of electric power and occur in the cables and equipment of the energy system. Non-technical losses comprise energy that is supplied and not invoiced, which may be the result of illegal connections (theft), fraud, metering errors or failures in internal processes.

CEMIG’s Total Losses Index as of December 31, 2023, using a 12-month window, was 10.71%. This percentage is related to the total energy injected into the distribution system (the total volume of losses was 6,239 GWh). Of that percentage, 8.31% comprised technical losses, and 2.40% comprised non-technical losses. This result was 0.40 percentage points lower than the result for 2022 (11.11%), and below the regulatory target set by ANEEL for 2023 (10.84%).

The total recorded by CEMIG as energy losses has two components: (i) an allocated portion of the losses arising in the National Grid; and (ii) the total of technical and non-technical losses (commercial losses) in the local distribution network of CEMIG D.


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The total energy losses recorded by CEMIG in the year 2023 was 6,659 GWh, a 0.045% increase in comparison to 2022 (6,656 GWh). The CCEE apportioned losses in the national grid totaling 420 GWh to CEMIG D, which decreased 13.22% in comparison to 2022 (484 GWh).

Technical losses were 77.62% of the total losses related to CEMIG D for the year ended December 31, 2023. Losses in distribution are inevitable because of energy transport and its transformation into different levels of voltage. We seek to minimize it by rigorous and regular assessments of the operational conditions of the distribution facilities, and investment to expand distribution capacity, for maintaining quality and reliable levels, thus reducing technical losses; we also operate the system in accordance with certain specific voltage levels, to reduce the level of losses. Technical losses are not strictly comparable: longer distribution distances (for example, in rural areas), naturally have higher technical loss levels.

Non-technical losses were 22.38% of CEMIG D’s total energy losses in 2023. To minimize non-technical losses, preventive actions are taken regularly: customers’ meters and connections are inspected; meter readers are trained; metering systems are modernized; smart meters were installed; procedures for installation and inspection of meters are standardized; meters with quality control guarantees are installed; the database of customers is updated, and irregular or clandestine connections are removed.

Quality indicators – DEC and FEC (SAIDI and SAIFI)

At the end of 2023, the indicators that measure the quality of supply by CEMIG D – (i) System Average Interruption Duration Index (‘SAIDI’), expressed as a figure per customer, in hours per year; and (ii) System Average Interruption Frequency Index (‘SAIFI’), also expressed as a customer-experienced average, were 9.71 and 4.86, respectively. In 2022, the figures for SAIDI and SAIFI were 9.48 and 4.58, respectively. The indicator calculation process is certified according to ISO Quality Standard 9001.

In December 2015, CEMIG D signed the contractual amendment that unified its concession contracts for the provision of public electricity distribution services, which extended the concessions from January 1, 2016, until December 31, 2045. The contract defined limits for the internal portion of the continuity indicators, Internal System Average Interruption Duration Index (‘SAIDI-i’) and Internal System Average Interruption Frequency Index (‘SAIFI-i’), The table below shows the performance of the Company since 2019.


	SAIDI-i (hours)										SAIFI-i (Interruption)
Year	2019		2020		2021		2022		2023		2019		2020		2021		2022		2023
Limit		10.73		10.44		10.08		9.98		9.59		7.03		6.67		6.56		6.43		6.00
Performed		10.56		9.58		9.46		9.48		9.71		4.85		4.86		4.60		4.58		4.86

In 2023, the Company did not exceed the limit for the SAIFI-i, but exceeded the limit for the SAIDI-i set by the Regulatory Agency (‘ANEEL’).

The concession contracts have limitation of in the distribution of dividends and/or payment of Interest on Equity to the minimum established by law, in the event of non-compliance with the annual indicators for outages (SAIDI and SAIFI) for two consecutive years, or three times in a period of five years, until the regulatory parameters are restored. In the past five years, CEMIG D has been complying with these contractual requirements.

Customers and Billing

Customer base

The CEMIG Group sells energy through the companies CEMIG D, CEMIG GT, CEMIG Holding and other wholly-owned subsidiaries – Horizontes Energia, Sá Carvalho, CEMIG PCH, Rosal Energia, CEMIG Geração Camargos, CEMIG Geração Itutinga, CEMIG Geração Salto Grande, CEMIG Geração Três Marias, CEMIG Geração Leste, CEMIG Geração Oeste, CEMIG Geração Sul, CE Praias de Parajuru and CE Volta do Rio.


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This market comprises sales of energy to:

•

Regulated customers in CEMIG’s concession area in the State of Minas Gerais;

•

Free customers both in the State of Minas Gerais and other states of Brazil, through the Free Market;

•

Other participants of the energy sector – traders, generators, and independent power producers, also in the Free Market; and

•

Distributors, in the Regulated Market.

In 2023, we sold a total of 63,134 GWh, or 2.4% more than in 2022, while the total of power we transported for free customers was 4.2% higher, at 23,742 GWh. Sales of energy to final customers plus our own consumption in 2023 totaled 45,806 GWh, or 2.0% higher than in 2022. Sales to distributors, traders, other generating companies, and independent power producers in 2023 totaled 17,328 GWh or 3.3% higher than in 2022.

As of December 31, 2023, CEMIG Group invoiced 9,217,039 customers – a growth of 2.4% in the customer base compared to December 31, 2022. Of these, 9,216,506 are final customers, including CEMIG’s own consumption; and 533 are other agents in the Brazilian energy sector.

Sales to Final Customers

Residential

The residential customer category accounted for 19.1% of CEMIG’s energy sales in 2023, totaling 12,087 GWh or 7.8% more than in 2022. The average monthly consumption per customer in 2023 was 130.4 kWh/month, or 4.6% higher than in 2022 (124.6 kWh/month).

This higher consumption of the residential customer category is with the result of growth of 3.0% in the number of customers, higher temperatures and improvement in the economic scenario. According to the IBGE, through the third quarter, the GDP grew 3.2% compared to the previous year.

Industrial

Energy billed to regulated and free industrial customers in the State of Minas Gerais and other states was 28.7% of the total volume of energy traded by us in 2023, at 18,093 GWh, or 0.6% lower than in 2022.

There was a considerable reduction of 15.1% in the captive market, and the increase of 0.7% in the free market. The reduction in the captive market is due to the migration of consumers to the free market and to the distributed microgeneration and minigeneration. The industrial sector in Minas Gerais presents stability. According to IBGE, the industrial production in Minas Gerais increased 0.2% in 2023, compared to 2022. The variation in energy sold to free industrial customers is related to new sales contracts starting in January 2023.

Commercial and Services

Energy sold to regulated and free customers in this category in Minas Gerais and other states was 15.0% of the total volume of energy traded by us in 2023, at 9,469 GWh, 5.7% higher than in 2022. This reflects a reduction of 3.5% in the volume billed to regulated customers of CEMIG D, and an increase of 15.2% in the volume billed by CEMIG GT and its wholly owned subsidiaries to free customers in Minas Gerais and other Brazilian states.

The reduction in the captive market is due to the migration of consumers to the free market and to the distributed microgeneration and minigeneration. In the free market, the number of customers increased 23.6%.

According to the IBGE, the retail sales volume in Minas Gerais increased 1.7% in 2023, compared to 2022, and the volume of services increased 2.3%.


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Rural Customers

Energy consumed by the rural customer category in 2023, at 3,071 GWh, was 0.7% less than in 2022, and represents 4.9% of the total in 2023. This result is due to a reduction of 8.5% in the numbers of captive customers, in compliance with the cadastral review defined by the Resolution of ANEEL No. 901/2020.

Other customer categories

Supply to other categories – government, public lighting, public services, and our own consumption – totaled 3,086 GWh in 2023 or 9.9% lower than 2022.

Sales in the Free Market

In 2023, total sales of energy were 13,095 GWh, or 4.2% higher than 2022, due to new sales contracts starting in January 2023.

Sales in the Regulated Market

Sales in the Regulated Market in 2023 totaled 4,234 GWh or 0.4% higher than in 2022.

The table below presents CEMIG Group’s market in more detail, itemizing transactions in 2023 compared to 2022:


		2023				2022				Variation YoY
		Customers		Energy		Customers		Energy		Customers			Energy
Type of Sale	Class	Amount		Amount		Amount		Amount		Variation			Variation
		(un)		(GWh)		(un)		(GWh)		(%)			(%)
Traded Energy			9,217,039		63,134		9,036,990		61,671		1.99			2.37
Sales to final customers			9,216,506		45,806		9,036,435		44,895		1.99			2.03
Captive	Residential		7,725,836		12,087		7,501,704		11,217		2.99			7.76
Captive	Industrial		28,437		1,300		29,201		1,533		(2.62	)		(15.14	)
Captive	Commercial		943,831		4,384		948,615		4,542		(0.50	)		(3.46	)
Captive	Rural		422,829		3,012		462,142		3,062		(8.51	)		(1.64	)
Captive	Public Power		69,670		956		69,302		856		0.53			11.67
Captive	Street Lighting		6,659		1,056		7,194		1,138		(7.44	)		(7.25	)
Captive	Public Service		13,703		1,046		13,586		1,400		0.86			(25.32	)
Captive	Own Consumption		758		30		769		31		(1.43	)		(4.13	)
Free	Industrial		1,987		16,792		1,676		16,671		18.56			0.73
Free	Commercial		2,762		5,085		2,234		4,415		23.63			15.17
Free	Rural		34		59		12		31		183.33			91.08
Wholesale sales			533		17,328		555		16,777		(3.96	)		3.29
- Free Contracts	Supply		55		13,095		52		12,561		5.77			4.25
- Contracts in Regulated Market	Supply		478		4,234		503		4,215		(4.97	)		0.43


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This table presents the CEMIG Group’s sales to the Industrial user category in 2023, by sector of activity:


Sector of activity	Volume invoiced (GWh)		(%)
Metallurgy		2,824		15.6
Mining		2,533		14.0
Foods		2,269		12.5
Nonmetallic minerals		2,051		11.3
Chemicals		1,469		8.1
Automotive		1,459		8.1
Plastic Products		1,125		6.2
Cellulose and Paper		755		4.2
Textile		705		3.9
Other sectors		2,904		16.0

Total, industrial customers		18,093		100.0

The ten largest industrial customers served by the CEMIG Group, located in Minas Gerais and other states of Brazil, in terms of revenue, are:


Customer	Activity
MOSAIC FERTILIZANTES	Chemicals
USIMINAS	Metallurgy and Mining
HOLCIM	Non-metallic mineral product manufacturing
SAMARCO	Metallic Mining
COMPANHIA BRASILEIRA DE METALURGIA E MINERACAO	Metallurgy and Mining
CARBETO DE SILICIO SIKA BRASIL	Chemicals
FIAT AUTOMÓVEIS	Automotive
NOVELIS	Metallurgy
APERAM SOUTH AMERICA	Metallurgy
ANGLOGOLD ASHANTI	Metallic Mining

Billing

Normative Resolution 1,000/2021, published by the ANEEL, regulates billing of customers who have active supply contracts with CEMIG D, among other instruments.

According to the Resolution, consumption of energy, and other items charged, are billed monthly, based on the voltage level delivered to the customer unit and the installed load at that unit. ‘Installed load’ means the sum of the nominal potentials of the electrical equipment installed in the customer unit that is in a condition to operate, expressed in kilowatts (‘kW’). ‘Customer unit’ means the group of items comprising installations, facilities, branch connection, electrical equipment, cables and accessories (including the substation, in cases of supply at primary voltage), with receipt of energy at only one point of delivery, and individualized metering corresponding to a single customer located in one single property or in contiguous properties.

CEMIG D’s customers are divided into Low, Medium and High Voltage.

Invoices of High voltage customers, which are connected directly to the transmission network, are payable five working days after reading of the meter. These customers receive the payment document – the energy invoice – by e-mail.


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Medium Voltage customers are those that receive supply at a voltage of 2.3 kV or more, which amount to about 13,735 customers, which are billed within two business days after the meter reading. They receive invoices both in printed form and by email, payable five business days from the date of delivery at the customer’s address. Due to modernization and automation of the meter reading of these customer units, by using remote metering, CEMIG D now has 97.94% of its billing automated. This enables the customer unit to be metered in real time – so that CEMIG D records and updates consumption of energy at regular intervals.

Low Voltage customers are billed in cycles, which vary between 27 and 33 days. The bill is delivered simultaneously with the meter reading. A total of 8,422 million customer units are billed using this technology, which is known as ‘On Site Billing’. These bills are payable five business days from the date of their delivery (or 10 business days for the establishments of public entities and bodies). The great majority of the amounts billed to this category of customers are for energy actually consumed. Only 1.54% of these customers are billed based on estimated consumption (i.e., on the arithmetic mean of the amounts recorded for the 12 months prior to the consumption that is not measured).

In addition to the implementation of ‘On Site Billing’, CEMIG D has invested to increase the number of bills sent by email, which grew by 34% in 2023, with 1,349 million customers now receiving their billing online. CEMIG intensify campaigns to incentivize customers to choose this way of receiving their monthly bills. The reduction in the volume of printed-paper used for billing helps reduce its global cost to the Company and contributes to environmental sustainability for the planet.

In 2023, CEMIG D saved R$3.021 million (R$2.690 million in 2022) with the electronic invoices sent monthly. Modernization of the billing system and the distribution network has significantly contributed to customers’ satisfaction and the quality of CEMIG’s energy supply. CEMIG intends to continue with improvement in this and related fields.

Seasonality

CEMIG’s sales of energy are affected by seasonality. Historically, consumption by industrial and commercial customers increases in the fourth quarter due to their increase in activity. The seasonality of rural consumption is usually associated with rainfall periods. During the dry season between the months of May and November, more energy is used to irrigate crops. The table below presents quarterly figures for energy billed by the CEMIG Group to final users, regulated customers and free customers from 2021 to 2023, in GWh:


Year	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
2023		10,923		11,540		11,370		11,943
2022		10,641		11,408		11,358		11,456
2021		10,507		10,627		10,931		11,165

Competition

Contracts with Free Customers

On December 31, 2023, CEMIG GT and CEMIG had a portfolio of contracts with 6,869 customers, including free customers and suppliers (energy traders, energy distributors and power generators). Of this total, 5,136 are free customers amounting to 52% of the total volume of energy sold by CEMIG GT and CEMIG in 2023.

The strategy adopted by CEMIG in the Free Market is to negotiate and enter into long-term contracts, thus establishing and maintaining a long-term relationship with customers. We seek to differentiate ourselves in the Free Market from our market competitors by the type of relationship we have with our customers and the quality of our services, which have added value for CEMIG GT. This strategy, together with a sales strategy that seeks to minimize exposure to short-term prices and contracts with a minimum demand on a take-or-pay basis, translates into lower risk and greater predictability of our results.


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Environmental Matters

Overview

Our generation, transmission and distribution of energy and our distribution of natural gas are subject to federal and state legislation relating to preservation of the environment. The Brazilian Constitution gives the Federal Government, states and municipalities powers to enact laws designed to protect the environment and issue enabling regulations under these laws. As a general rule, while the Federal Government has the power to promulgate general environmental regulations, state governments have the power to enact specific and even more stringent environmental regulation, and municipalities also have the power to enact laws in their local interest. We have complied with the relevant environmental laws and regulations in all material aspects.

In accordance with our environmental policy, we have established various programs to prevent and minimize damage, aiming to limit our risks related to environmental issues.

Environmental Licensing and Facilities Operating

The purpose of environmental licensing is to establish conditions, restrictions and environmental control measures that should be complied with by entities and individuals to install, expand and operate entities or activities that use environmental resources or have the potential to cause damage to the environment.

Brazilian law requires obtaining licenses for various activities, including construction, installation, expansion and operation of any facility that uses environmental resources, causes significant environmental or polluting degradation or has the potential to cause environmental degradation or pollution or even impacts heritage archaeological, historical and cultural of the community.

Each license is valid for a specific period, and a renewal filing must be made before its expiration. Under Complementary Law 140 of December 8, 2011, the renewal filing of an environmental license must be made at least 120 days before the license expires and remains valid until the environmental authority states an opinion and/or issues a new license. If the renewal filing is not made within this period, and the license is not renewed, and the company continues its activities, the company will be subject to administrative and criminal sanctions.

Failure to obtain and comply with the requirements of an environmental license to construct, implement, operate, expand or enlarge an entity that causes environmental impact, such as the energy plants operated and in implementation by Cemig, is subject to administrative sanctions, such as fines or suspension of operations, as well as criminal sanctions, such as fines and imprisonment for individuals and restriction of rights for legal entities. We have projects licensed at both the federal and state levels.

Federal Law 9,605 of February 12, 1998, stipulates penalties for facilities that operate without environmental licenses. In 1998, the Federal Government issued Provisional Act 1,710 (currently Provisional Act 2,163-41/01), which allows project operators to enter into agreements with the relevant environmental regulators in order to comply with Federal Law 9,605/98. Accordingly, we have been negotiating with (i) Ibama; and (ii) the Regional Environmental Regularization Units (‘URAs’), which comprise the environmental authorities of the State of Minas Gerais, to obtain the environmental operating licenses for all our plants and transmission lines that began operating prior to February 1986.

For the generation facilities located in the State of Minas Gerais, which are subject to state-level environmental licensing, we have agreed with URA and Ibama to bring our facilities into compliance on a gradual basis. For those facilities of Cemig GT that started operations before February 1986, we have prepared the required environmental assessments, filed applications with the appropriate environmental bodies, and submitted them for analysis. Under the applicable law, the Company is allowed to operate while awaiting consideration of its application. We assess the degree of compliance with the conditions by reference to the Conditions Compliance Index (‘ICC’).

In 2023, 45 projects were regularized via Authorizations for Environmental Intervention via application for a DAIA (Documento Autorizativo para Intervenção Ambiental) by Cemig D, and two by Cemig GT. For Cemig D, were obtained a DAIA for environmental intervention, for example, for the construction of the distribution line Carmópolis de Minas - Claúdio 2, 96kV. Native vegetation was suppressed for opening a lane under the line and thus enable the construction and safe operation.


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For Cemig GT, we obtained a DAIA for environmental intervention, for the Piau Small Hydro Plant (‘SHP’), for maintenance work in the plant. Native vegetation was suppressed for opening of some access points and expansion of others.Generation and transmission facilities of the Company in operation account for 50 Environmental Licenses across the different modalities. There are an estimated total of 352 environmental conditions or control mechanisms included in these licenses – they include monitoring programs, reforestation activities, water quality control and other provisions. As examples, we can cite provisions referring to the following: seven programs monitoring terrestrial and river animals, their distribution and occurrence including mammals, reptiles, amphibians and birds, and assessing how the structure of the landscape interacts with animals’ survival; nine fish monitoring programs to assess distribution and local occurrence of fish species and larvae/eggs at spawning sites; 14 fish monitoring programs to assess risk of fish deaths in hydroelectric power plants; eight programs carried out every year focusing on erosion of reservoir margins and application of control and recovery measures; 26 programs to recover degraded areas with reforestation of permanent preservation areas, acting to replenish vegetation on lands affected by facilities or where damage compensation applies; 16 programs to monitoring erosion focus on the banks of the reservoirs, in some of them control and recovery measures are implemented; 51 programs involving the community, such as Environmental Education Programs and the Management Participative Program, which organize a variety of activities over each year, including students, farmers, Cemig employees, and local community members; and 43 programs monitoring water quality and the aquatic community, including macrophytes (plants whose excessive proliferation can cause damage to hydroelectric plants).

Of the generation and transmission projects, 137 have an Operating License (among initial issuances, renewals, corrective licenses and others). Since December 2022, the Cajuru and Gafanhoto Small Hydroelectric Plants (‘SHPs’) have been operating under Conduct Adjustment Undertakings (Termos de Ajustamento de Conduta, or ‘TACs’). The same situation can be observed to Paciência Small Hydroelectric Plants (‘SHPs’) since April 2023. The Rio de Pedras SHP, that also had a TAC in 2022, started the licensing process in 2023 linked to Itabirito city hall. The Poço Fundo PCH has two license modalities: an Operating License and a joint environmental license (Prior License - ‘LP’ + Installation License - ‘LI’ + Operating License -‘LO’) due to its currently undergoing adaptation works.

All the processes referred to above were regularized: (a) in the regional units of the Minas Gerais State Forests Institute (Instituto Estadual de Florestas, or ‘IEF’), in the case of submission of DAIAs; or (b) in the Regional Environmental Regularization Units (Unidades Regionais de Regularização Ambiental, or ‘URAs’) via (i) TACs and (ii) various types of licenses, in both cases through their offices distributed throughout the State of Minas Gerais.

Environmental controls also apply to the distribution of natural gas by Gasmig by pipelines throughout Minas Gerais State. In most cases the environmental authority of the State of Minas Gerais, the State Secretariat for Environment and Sustainable Development (Secretaria de Meio Ambiente e Desenvolvimento Sustentável or Semad), has issued all licenses necessary for regular operation of Gasmig’s activities.

Gasmig’s planning includes the construction of our Natural Gas Distribution System (Sistema de Distribuição de Gás Natural, or ‘SDGN’), to serve the Central West region, a gas pipeline that will initially allow the interconnection of the municipalities of Betim, Sarzedo, Juatuba, Mateus Leme, Igarapé, Itaúna and Divinópolis.

A crucial highlight for the environmental viability of this project was obtaining the Preliminary Environmental and Installation License, in December 2023. This achievement reinforces Gasmig's commitment to sustainable practices and strict compliance with environmental regulations. By ensuring compliance with environmental requirements, Gasmig reaffirms its social and environmental responsibility, ensuring that the development of SDGN Centro Oeste proceeds in a balanced way, respecting local ecosystems and contributing to a more sustainable future.

And following the continued expansion of SDGN, Gasmig started the Extrema-Pouso Alegre Project, marking the beginning of a promising chapter. This new project involves the interconnection of the municipalities of Pouso Alegre, São Sebastião da Bela Vista, Camanducaia, Cambuí, Estiva, Itapeva and Extrema, further expanding the natural gas distribution network in the southern region of Minas Gerais.

This project was born with the aim of implementing this future SDGN, in line with the best design practices and respecting protected areas and with the lowest possible environmental impact.


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All the environmental studies have been completed – including the Environmental Impact Study (Estudo de Impactos Ambientais, or ‘EIA’) and the related Environmental Impact Statement (Relatório de Impacto Ambiental, or ‘RIMA’). These studies will support consideration of the application for the environmental license, which is the responsibility of Regional Environmental Regularization Units (Unidades Regionais de Regularização Ambiental, or ‘URAs’), of the State Environment and Sustainable Development Department (‘Semad’).

Management of Biodiversity

Vegetation in the Energy System

The interaction of trees with electricity distribution cables can cause serious risks to the population as well as outages in supply of electricity to consumers. As a result, Cemig carries out regular annual preventive maintenance programs in both urban and rural regions.

In urban areas, maintenance mainly takes the form of pruning of trees that present a real or potential risk of touching electricity cables. The pruning is supervised by professionals legally qualified for this work and carried out by trained teams to preserve the electricity system and the health and safety of the trees.

In rural areas, the path below electricity cables is cleaned – this consists of removal of vegetation, which may be herbal species, bushes or trees that are in the path of electricity power networks and distribution lines. This activity is also supervised by trained and qualified professionals and can be carried out on a localized one-off basis, to achieve maximum preservation of the environmental conditions at the location.

Fish Populations

Construction of hydroelectric plants may create a risk for fish due to various changes in the aquatic environment caused by operation of plants. One of the main activities of Cemig’s Environmental Management Department is to prevent and mitigate environmental accidents involving the native fish population at its hydroelectric power plants. Further, Cemig has developed a methodology for evaluating the risk of fish mortality at the plants to mitigate the impacts caused by the operation of its plants. The Company also carries out research projects in partnership with universities and research centers to develop scientific knowledge to serve as a basis for more effective fish population conservation programs to be implemented by Cemig.

In June 2007, we created the Peixe Vivo Program, as a result of members of senior management believing that it was necessary to take more effective measures to preserve fish populations of the rivers where the Company has operations. The program’s main activities are summed up in its mission, which is: “To minimize the impact on fish species, seeking handling solutions and technologies that will integrate energy generation by Cemig with conservation of native fish species, promoting involvement of the community”. Since its creation, the program has been operating on two fronts – one seeking preservation of fish populations in the State of Minas Gerais, and the other focusing on forming protection strategies to avoid and prevent fish deaths at Cemig’s hydroelectric plants. The principles guiding the work of the Peixe Vivo team can be summarized as: adoption of scientific criteria for decision-making; establishment of partnerships with other institutions; and modification of practices as a result of the information generated.

Since 2018, the members of Peixe Vivo Program have been developing its Fish Death Risk Assessment Program (Programa de Avaliação do Risco de Morte de Peixes, or ‘PARMP’) aiming to mitigate potential risks related to maintenance and operation of hydroelectric plants. Its main operations are monitoring of fish fauna, periodically and prior to any operational procedures of plants. Biologists evaluate fish density and environmental conditions based on monitoring data. The PARMP has been developed and validated in two consecutive research projects and is now implemented as one of the Company’s continuous optimizing programs. So far, a 78% reduction of mean monthly fish biomass impacted by operation of plants has been observed since the PARMP began.

In 2023, Cemig spent just over R$4 million in activities and research projects in relation to the Peixe Vivo program. Furthermore, two scientific projects were developed in partnership with research institutions which have resulted in 12 documents published.


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These partnerships, which have been operating since 2007, and results obtained have been referenced nationally and internationally for the practices of fish conservation and dialog with the community, presenting Cemig’s work in several countries, and various states of Brazil. These academic results, jointly with the involvement of the community, have been used to create more efficient and practical conservation programs that make it possible for fish to coexist with generation plants in Brazilian rivers.

Environmental Legal Reserves

Under Article 12 of Federal Law 12,651 of May 25, 2012 (the ‘New Brazilian Forest Code’), a Legal Reserve is an area inside a rural property or holding that is necessary for the sustainable use of natural resources, conservation or rehabilitation of ecological processes, conservation of biodiversity or for shelter or protection of native fauna and flora. Generally, all owners of rural properties must preserve an area as a Legal Reserve. However, Article 12, §7º of the New Brazilian Forest Code establishes that a Legal Reserve will not be required for areas acquired or expropriated by the holder of a concession, permission or authorization to exploit hydroelectric power potential in which projects for electric power generation, or energy substations or transmission or distribution lines are operating.

In Minas Gerais, State Law 20,922, enacted on October 16, 2013, made provisions for the state’s Forest Policy and Biodiversity Protection Policy, adapting the environmental legislation to the provisions of the Forest Code. This had the effect of revoking the requirement for a Legal Reserve in the case of hydroelectric generation projects, enabling the processes of Corrective Environmental Licensing that had been held up in the previous year for this reason to be resumed. In the federal sphere, the technical licensing team of Ibama, in relation to the corrective licensing of Cemig’s plants, expressed an opinion, in correspondence sent to us on July 29, 2008, stating that in Cemig’s case there was no need for the constitution of Legal Reserves.

The approval of the New Brazilian Forest Code and the exclusion of the hydropower projects from the need to register a Legal Reserve settled this issue, allowing for the continuation of the process of the environmental licensing of the several projects of the company, with the acquisition of the pending operating licenses and the maintenance of its legal compliance.

Permanent Preservation Areas and restricted use zones

The areas of vegetation surrounding a reservoir are statutorily classified as Permanent Preservation Areas, or APPs. The width of an APP varies depending on whether the reservoir is in a rural or urban area. In rural areas, at least 30 meters are to be preserved, and in urban areas at least 15 meters. Preservation of APPs is mandatory, with intervention allowed in specific conditions. Under State Law 20,922 of 2013, for reservoirs that were registered or whose concession or authorization contracts were made before August 24, 2001, the APP range is the distance between the minimum and maximum normal operating water levels.

Lack of preservation of vegetation in APPs or unauthorized suppression of vegetation in APPs may lead to administrative sanctions, such as fines ranging from R$ 5,000 to R$ 50,000 per hectare, limited to R$ 50 million, and criminal liability.

Law 12,651, of 2012, subjects APPs of artificial reservoirs to a specific program created to regulate the use of, and conservation measures for, the area surrounding it. This program, called the Environmental Plan for Use and Conservation of the Area Surrounding a Reservoir (Plano Ambiental de Conservação e Uso do Entorno do Reservatório, or ‘PACUERA’) must be prepared, for each reservoir, according to the minimum requirements determined by the competent environmental authority in the environmental licensing process.

This requirement was incorporated into state legislation by the New Forest Policy Law of Minas Gerais State, which made preparation and approval of the PACUERA a condition for the grant of operating licenses.


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We have now incorporated preparation of PACUERAs into the processes for obtaining operating licenses of the projects subject to environmental licensing at the state level. As required by law, Cemig GT has prepared and filed applications with the environmental bodies relating to all the required environmental assessments, including PACUERA, in respect of all facilities using artificial reservoirs.

Uses are limited also in the paths of transmission and distribution lines. We have easements for our transmission and distribution networks over land subject to restrictions. A significant portion of these land areas, however, has been occupied by unauthorized construction, mostly residential constructions. This type of activity causes risks of electric shock and accidents involving residents and constitutes an obstacle to the maintenance and operation of our energy system. We are currently seeking solutions for these problems, which will involve either resettlement of these occupants, or improvements that would make it possible to maintain our energy system safely and efficiently.

To mitigate these risks, we have been monitoring and recording invasions, and taking action to prevent invasions on the paths of transmission and sub-transmission lines. Several measures have been taken to preserve the security of these lines, including contracting of a company for systematic inspection, with implementation of security measures and works to minimize the risks of accidents, and removal of occupation of transmission line pathways through agreements with local residents and through partnerships with the municipalities in our concession area.

We also adopt security measures for power generation assets to protect them against invasions. Invaders found inside the facility are identified by a surveillance team and arrangements made for them to withdraw from the site, without resistance or violence.

The plants are marked with fences and warning signs, indicating that the property is private, and that hunting, fishing and swimming are prohibited on the site. To optimize security at the plants, we are planning to implement electronic security systems. In the risk areas of hydroelectric generation facilities, there are signs indicating ownership, and the prohibition on fishing and swimming, due to the possibility of a sudden rise in the water level causing fatal accidents. Also, nautical signaling buoys close to large dams indicate the limits of safe areas for vessels and prohibit entry beyond them.

The Company maintains a team to carry out periodic inspections in its areas, advising the community on the prohibition of construction and removal of irregular occupants before the Company takes legal action for repossession.

Considering the vast area and the number of reservoirs, the Company has included the use of satellite images in its inspection method for identifying irregular occupations, and this has helped to identify invasions and any environmental damage with greater efficiency.

In the operations of Gasmig, the natural gas distribution networks are underground and run through both rural and urban areas. Pipes are usually installed on public roads near pluvial drainage, sanitation, energy and telecommunications, among other utilities. Installation of the networks in the urban subsoil presents risks of damage to the pipelines from third party maintenance workers. However, all our gas networks are flagged according to national standards, and internal procedures. In addition to security signaling, the presence of the Gasmig network in roads, streets and other areas is shown on the Company’s website, where the network map is made available in a complete and up-to-date manner. Gasmig provides free on-site guidance services for excavations by any outside parties through its Dig Safely (‘Escave com Segurança’) program.

Gasmig also has network inspection plans, to check the security conditions of the system and prevent any illegal intrusions, constructions or erosion near pipelines. Gasmig’s distribution networks have clear signage, with geo-referencing recorded on a central register. This register is available for prior consultation and orientation when the public or other organizations are preparing or proposing projects. Orientation is given for carrying out works that might interfere with gas pipelines. Losses of natural gas are low due to the low pressure used in damaged pipes, and because of the rapid response time for containment of leaks. Safety blockade zones have been created to shorten incident response time and make responses more effective. Gasmig has also implemented its Metallic Gas Pipeline Safety Management Plan, which employs specific appropriate techniques to assess and detect any threats from external or internal corrosion of pipelines.


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Research and Development projects

In recent years Cemig has invested in innovation projects, associated with the Research and Development (‘P&D – Pesquisa e Desenvolvimento’) program of Brazil’s electricity grantor, ANEEL (Agência Nacional de Energia Elétrica). The innovations developed by Cemig’s R&D projects benefit the public directly. Innovative projects include an electric car project, a project for an unmanned aerial vehicle, and expansion of the use of solar energy.

A specific range of studies, by the Company’s Vegetation Handling Unit, has developed innovative methods and techniques for improvement of Cemig’s environmental performance in this area for example R&D Project 601 - Breaking Tree Branches: a Model for Risk of Tree Branches Falling, for Preventive Maintenance and Reduction of Impact on the Distribution Network. This is a project in partnership with the São Paulo Technological Research Institute (Instituto de Pesquisas Tecnológicas de São Paulo, or ‘IPT’), to build an easy-to-use mathematical model to be able to predict the risk of falling branches located above electricity networks, based on their physical and morphological characteristics. This enables preventive measures to be taken to avoid accidents and electricity outages.

Further, Cemig is always in the vanguard of projects that enhance techniques for mitigation of impacts and restoration of habitats. In 2023, we had two projects in progress:

•

R&D Project 607 – Smart Monitoring of Water Quality in Hydroelectric Reservoirs through Development of a Photogrammetry Algorithm (Monitoramento Inteligente da Qualidade da Água em Reservatórios Hidrelétricos através do Desenvolvimento de um Algoritmo Fotogramétrico): This project aims to develop methods for remote analysis and monitoring of water quality in the Cemig Group’s reservoirs, using drones and satellite images to complement traditional monitoring and provide data on a more practical and rapid basis.

•

R&D Project 611 – Decommissioning of the Pandeiros PCH: an Unprecedented Experience in South America (Descomissionamento da PCH Pandeiros: Uma Experiência Inédita na América do Sul): A project to assess the possible impacts of removal of the dam of the Pandeiros Small Hydro Plant, analyzing physical, biological and ecological aspects of the environment both upstream and downstream in the event of opening of the dam gates – at all times involving the local community.

Compensation Measures

Federal Law 9,985, of July 18, 2000, and Decree 4,340 of August 22, 2002, require companies whose activities result in major environmental impacts to invest in and maintain Conservation Units, to mitigate those impacts. Conservation Units are areas subject to special protection and include ecological stations, biological reserves, national parks and areas of significant ecological interest. The environmental authority that is competent to license the project stipulates the environmental compensation for each company, depending on the specific degree of pollution or damage to the environment.

Federal Decree 6,848 of May 14, 2009, and Minas Gerais State Decree 45,175 of September 17, 2009, regulate the methodology for deciding these compensation measures, requiring that up to 0.5% of the total amount invested in the implementation of a project that causes significant environmental impact must be applied in compensation measures.

Compliance with the Regional Central Transmission System was obtained under Corrective Operational License (Licença de Operação Corretiva, or ‘LOC’) 083/2010, issued on May 3, 2010, by the Supram of the Central Metropolitan region, currently named Environmental Regularization Units (‘URA’) Central. Condition 3 defined the following procedure for the mandatory Environmental Compensation: “File a request with the Environmental Compensation Management Unit of the Minas Gerais State Forestry Institute (Instituto Estadual de Florestas / Gerência de Gestão da Compensação Ambiental, or ‘IEF/GECAM’) for environmental compensation compliance (Law 9,985/2000 of the National Conservation Units System, or ‘SNUC’), under Decree 45,175/2009. For the purpose of the subsequent license issuance, compliance with the environmental compensation will be considered fulfilled only after signing the Environmental Compensation Commitment Term and publication of its extract, in accordance with Article 13 of the


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Decree. The deadline is 60 days after a positive statement from the State Attorney General's Office (Advocacia Geral do Estado) in reference of the retroactivity of the environmental compensation of the SNUC law.”

In July 2023, the Environmental Compensation Commitment Term (TCCA) 52839868/2022 was signed with the State Forestry Institute (IEF), with the objective of establishing the attending form of the environmental compensation measure provided in article 36 of the Federal Law regulated by Federal Decree 4,340/2002 and State Decree 45,175/2009, amended by State Decree 45,629/2011, in light of the licensing of Cemig Geração e Transmissão S.A./Sistema de Transmissão Regional Centro, specifically with regard to investing in creation, implementation and maintenance of conservation units. As determined by Condition 3, the TCCA extract was published in the Official Gazette of the State of Minas Gerais, on 07/14/2023. The total value defined for compensation was R$1.6 million, duly corrected at the time of payments. The resources covered by this TCCA were distributed in the Conservation Units.

The payments were made as defined in the TCCA and the evidence was forwarded to the environmental agency, through External Letter DEA/GA 01175/2023. To make the payment to the Paraopeba National Forest, the Environmental Compensation Commitment Term – TCCA 38/2023 GABUN/ICMBio was signed with the Chico Mendes Institute for Biodiversity Conservation – ICMBio. The payment was made, as defined in TCCA 38/2023 GABUN/ICMBio. The issuance of the TCCA Certificate of Compliance by ICMBio is awaited. The Institute will send to Cemig and to the responsible agency a copy of this Certificate, indicating the discharge of the commitments assumed before the IEF. At this point, TCCA 52839868/2022, signed with the IEF, may be considered fully complied.

In Cemig GT (generation), compensation through protected areas resulted in creation of three Private Natural Heritage Reserves (Reservas Particulares do Patrimônio Natural, or ‘RPPNs’): The Galheiro RPPN is linked to the Nova Ponte Hydroelectric Plant; the Coronel Domiciano RPPN is linked to the Coronel Domiciano Small Hydro Plant; and the Fartura RPPN is connected to the Irapé Hydroelectric Plant. We also have an ecology station – the Itutinga Environmental Station (Estação Ambiental Itutinga) – linked to the Itutinga Hydroelectric Plant. The first three of these plants manage these areas under Area Handling Plans (Planos de Manejo), which are documents required by Federal Law 9,985/2000. As well as functioning as a refuge for native flora and fauna, RPPNs play an important role in environmental education. At the Itutinga Environmental Station, saplings of native species of the Cerrado and Atlantic Forest biomes are produced and used in reforestation or donated to communities in locations close to Cemig projects.

In addition to the environmental compensation referred to above, forest compensations for cleaning of power line pathways and accesses in which vegetation has been suppressed are routine.

For Cemig’s distribution company (Cemig D) there are several alternative methods of environmental compensation – for example, planting of saplings of vegetation species that are native to the biome affected in the degraded area: in 2023 these comprised a total of 204.97 hectares. There was also compensation through transactions in land and its preservation. In this modality, Cemig donates areas within the limits of Conservation Units to the public authorities, to ensure restrictions on activities that could prejudice the environment by management and conservation of those areas. The proposals for regularization submitted to the competent environmental bodies and approved in 2023 totaled 242.86 hectares.

Other environmental requirements can become applicable due to the impacts of various projects. These may include structuring and operation of programs to monitor fauna and flora of regions surrounding facilities of the energy system, environmental education programs; and programs for recovery of degraded areas (Programas de Recuperação de Áreas Degradadas, or ‘PRADs’).

During 2023, small interventions were carried out by Gasmig for the adequate development of the Flora Reconstruction Technical Project implemented in 2022, in the municipality of Bugre. This Project refers to forest compensation for interventions in Permanent Preservation Areas of the works of our SDGN Polo Vale do Aço 3rd and 4th Stages. The results achieved are satisfactory, as the area under recovery presents constant improvements, with considerable development of the planted seedlings, as well as the existing vegetation resulting from natural regeneration.


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Another significant achievement in 2023 by Gasmig, in relation to some environmental licensing conditions obligations, was the acquisition of 24.12 hectares of area, in the city of Ouro Branco, in land regularization of the Ouro Branco State Park. Therefore, the process for full compliance with the condition of forest compensation for intervention in the Atlantic Forest for the works of the RDGN Polo Vale do Aço 3rd and 4th Stages is in the final stage, with the future donation of the area to the State Forestry Institute (IEF ).

In the Serra do Rola Moça State Park, another area being restored by Gasmig also underwent several monitoring actions throughout the year. According to the final report, the success of the seedlings was evident, as the majority had new leaves, sprouts appeared on the stems and in the root pulling tests to verify rooting, strong and well-distributed roots were observed, with thicker stems and firm, as well as healthy and shiny leaves. It was also observed that the seedlings are free from aggressive pests that could compromise their establishment.

The Carbon Market

The Cemig Group participates in Clean Development Mechanism (‘CDM’) projects registered with the United Nations Framework Convention on Climate Change (‘UNFCCC’), including six Small Hydro Plants (SHPs), with aggregate capacity of 96 MW.

In Guanhães Energia the potential for generation of credits is 44,488, of which 49% belong to Cemig; at the Cachoeirão SHP the total is 34,059 credits (of which 49% belong to Cemig); and at the Paracambi Hydroelectric Plant the total of credits is 38,161, of which 49% belong to Cemig. In 2023, these projects were monitored, corresponding to 57,186.92 credits for Cemig.


Project	Registry number	Status	Estimated annual reduction, tCO2eq		Period of credit	Credits issued
Guanhães SPC (4 SHPs,44 MW)	3088	Registered		44,488	Jan 2013 – Jan 2020 (Renewable) Jan 31, 2020 – Jan 30, 2027 (Has been renewed)	-
Cachoeirão SHP (27 MW)	4788	Registered		34,059	Feb 3, 2019 – Feb 2, 2026 (Renewable)	47,680 (Jan 2013 – Dec 2020) 15,004 (Jan 2021 – Apr 30, 2021)
Paracambi SHP (25 MW)	9893	Registered		38,161	Jul 9, 2021 – Jul 8, 2028	-

Management of equipment and waste contaminated with Polychlorinated Biphenyls (‘PCB’)

Brazil has signed and ratified the Stockholm Convention (‘SC’) that includes goals related to the management of PCBs within electrical equipment. Brazil has prohibited the production, import and sale of PCBs since 1981 and it has been making efforts towards the SC goals. At Cemig, almost all of the large equipment contaminated with PCB has been removed from the electrical system and incinerated. The few large items of equipment contaminated with PCB still in operation will be properly disposed of within the deadlines of the SC. Cemig is identifying small equipment contaminated with PCB, according to the statistical criteria of the Brazilian legislation and aiming to attend the SC goals and deadlines.


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Operational Technologies – CEMIG

CEMIG invests in automated monitoring and control equipment, in connection with the strategy of increasing efficiency and further modernizing the generation, distribution and transmission grids. CEMIG keeps developing and implementing new systems, with the purpose of optimizing its internal activities and increasing the availability of its infrastructure and applications that support CEMIG’s business.

System Operation Center of generation and transmission assets CEMIG’s System Operation Center (Centro de Operação do Sistema, or ‘COS’), located at the head office in Belo Horizonte, is the nerve center of the transmission and generation operations. With a modern control room, it coordinates the operations of the entire energy system, in real time, providing operational integration of the generation and transmission of power. It also operates the interconnections with other generation, transmission, and distribution companies. The supervision and control executed by the COS now extends to 48 extra high voltage substations, 17 major generating power plants, 19 minor generating power plants, four wind farms and two solar power plants.

Through its activities, the COS permanently guarantees the security, continuity, and quality of the energy supply to its clients and to the system. The activities of the COS are supported by up-to-date telecommunications, automation, and information technology resources, and executed by highly qualified personnel. The COS has a Quality Management System, with ISO 9001:2015 certification.

Distribution Operation Center

Our distribution network is managed by a Distribution Operation Center (Centro de Operações de Distribuição, or ‘COD’), located in Belo Horizonte. The COD monitors and coordinates our distribution network operations in real time. They are responsible for the supervision and control of 460 distribution substations, 342,510 miles of medium and low voltage distribution lines, and 11,323 miles of sub-transmission lines and 9.087 million customers and operates in 774 municipalities of Minas Gerais.

We provided an average of 24,686 operating services in the field a day in 2023. There are various systems in use to automate and support the COD’s processes, including trouble call, field crew management, distribution substation supervision and control, restoration of power, emergency switching, network disconnection, and inspection. Technologies, including a Geographic Information System and Satellite Data Communication Helpline, to reduce customer service restoration time and provide better customer service. These are devices, installed along our distribution network, that sense and interrupt fault currents, and automatically restore service after momentary outages, improving operational performance and reducing restoration time and costs.

Geoscience Information System

The Electric Office Cemig system (‘EOC’), known as “Atlantis” in the project phase, has modernized and unified CEMIG’s system of geoprocessing of distribution lines and networks. The system enables management of resources with geospatial vision, allows better planning of expansions, records analysis of electrical networks, and assists in compliance with ANEEL’s normative resolutions.

The Geographic Information System (‘GIS’) enable us to give support to the processes of registry and design, as well as supporting the following corporate processes: network expansion and maintenance, protection of revenues, planning and supplies, property services and management of assets through full integration with the Enterprise Resource Planning (‘ERP’) system, besides supporting the operations. Additionally, it provides support to engineering through integration with the electrical and mechanical calculations system that offers network analysis and suitable network sizing. The EOC system is used by CEMIG's high, medium, and low voltage asset registration teams.

In 2020 the Project Machine module was activated, which manages the process of elaborating electrical projects in an integrated way with the SAP/ECC system, so that the generation of the BOM (material list) is created in an automated way from the technical drawing elaborated in Atlantis with synchronization of all the steps of the process between the EOC System and the PM module of SAP/ECC. The process includes the customer's request in SAP/CRM, execution authorization, drawing preparation, sending of the BOM, budget preparation, authorization for execution of the work,


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construction, project modifications (as built), inspection, measurement of construction, payment, closing and capitalization of the assets deployed.

In 2022 we started an important project to upgrade the version of “GE Smallworld Electric Office”, which is the basis software to our GIS solution. The major aim of the project was migrate from version 4.3 of components, products, integrations and customizations to version 5.2 or superior. The deployment of the new version occurred successfully in September 2023.

We have an engineering system with geoprocessing functions (acronymous GDIS - Gestão da Distribuição) which is responsible for coordinating field service operations (maintenance, restoration and customer services in low and medium electric tensions), attending 27 thousand customer services per day, performed by 2 thousand teams daily connected to this system by GPRS exchange message or satellite connection, sending about 700 thousand messages monthly. Since 2022 there were no significant implementations, although the efforts were to maintain the system’s stability and availability which are critical in these specific processes of energy distribution. This is due to the replacement of GDIS by a new IT solution in the next years.

In 2022 we started a project to customize and adopt a platform of ADMS - Advanced Distribution Management System based on Schneider technological products. ADMS is a software platform to perform the tasks of distribution management and optimization. This solution includes functions that automate outage restoration, self-healing and improve the performance of the distribution circuits. As it is a significant project, with several phases and deliverables, the forecast for conclusion is 2025.

CEMIG has another IT solutions based in GIS technologies, such as, geographic panels with data available in tabular and map views, automation panels for distribution's operations, system to management, inspection and security of dams and integrations to permit access to simple map views.

Internal Telecommunications Network

CEMIG's telecommunications network comprise 1,206 Communication Stations. 450 of these have high-performance microwave links and an optical system of 3,482 miles of optic fiber providing a mix of telecommunications network. Our robust data network also contains communication facilities that share the infrastructure of substations, generation plants and high voltage transmission and distribution lines.

The solution provides a range of services from corporate and operational telephonic networks to the critical telecommunications network, which is dedicated to monitoring, protection and control of generation plants, substations, transmission and distribution lines, the dispatching of field teams to carry out technical and commercial services, as well as the forecast of lightning and storms and hydro meteorological systems to operate reservoirs.

To support the control and supervision of the medium voltage distribution network's system, there is a private radio communication system, installed in 1,350 automated protection or switching equipment. Another 2,022 automated devices are monitored by a satellite solution, and a third party, with 10,200 equipment (cellular and modems) are served by a public mobile network.

Commercial and technical services dispatch are supported by 1,640 mobile vehicle terminals connected by a hybrid satellite and cellular solution and 275 handhelds equipped with the cellular solution. 338,000 energy meters make up an Advanced Metering Infrastructure ('AMI') and are equipped with the cellular or satellite communication solution and dedicated to revenue protection. There are currently 322,681 points settled in low voltage customers in the metropolitan region of Belo Horizonte.

The Telecommunication architecture is aligned with market standards, using latest version equipment, which is monitored, operated and managed using the latest technological solutions.

The Telecommunication Network Operation monitors and operates the infrastructure 24 hours a day, 7 days a week to ensure the continuity and reliability, in accordance with Brazilian´s regulatory requirements and in compliance with ANEEL regulations, operating procedures of the National Grid Operator ('ONS') and others specific regulations.


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Corporate Network

Our company has 9,500 Telecommunications and a Data Networks Assets installed in 300 cities of Minas Gerais linked to a mix of private and public telecommunication infrastructure which includes microwave links, optical fibers and metallic cables networks.

The physical and logical network topologies employ security resources such as firewalls, intrusion prevention system (‘IPS’), access control, Endpoint Detection and Response and antispam systems, which are continuously updated to protect against unauthorized access, in accordance with ISO 27002. A security information and event management system (‘SIEM’) provided by a specialized third-party security company, makes it possible to investigate adverse events, while also providing a historical record base to meet legal requirements.

A external third-party Security Operations Center and an in-house Network Operation Center (‘SOC’ and ‘NOC’), monitor, operate and manage the whole network and security infrastructure in Real time (24 hours per day, 7 days a week), maintaining confidentiality, integrity and availability of the data throughout the whole network. Additionally, we contracted a threat intelligence service, linked to the SOC, with the aim of anticipating possible attacks and increasing the company's level of protection.

A solution based on Cisco App Dynamics was implemented to monitor Customer Services Applications and meter users experience. This monitoring improves proactivity in handling incidents.

Since 2022, 100% of users’ computers have been updated, mostly by replacing desktops with notebooks. Operating Systems have been updated ensuring data protection and vulnerability containment policies.

Collaboration and productivity solutions based on Cloud Solutions using Microsoft Office 365 were implemented, bringing greater results in the users’ experience.

A solution using Azure Virtual Desktop (‘AVD’) has been implemented since 2022 replacing legacy Virtual Desktop Infrastructure (‘VDI’) and reducing VPN connections directly to Corporate Network and also enabling Remote Desktop Connection (‘RDP’) blocking, which were points of vulnerability in the environment.

Multifactor Authentication (‘MFA’) was implemented in all external access as well as a unified endpoint management (‘UEM’) to ensure effective access control to the company network.

In 2023, 85% of Datacenter Server Workload was migrated to Microsoft Azure Cloud, providing high availability, high scalability and cost-effective solution.

Information Security Management

Information security, a permanent concern of ours, is ensured by a management system based on the Brazilian Standard (‘ABNT’) NBR ISO/IEC 27001:2013, which is aligned with best market practices. Our information security management system includes processes for policy, risk, communication, information classification and information security management and control. In addition, recurring actions for improvement in processes, communication, awareness and training strengthen our information security practices.

Since 2022 CEMIG strengthened its cybersecurity program by adopting new technologies and tools to prevent cyber-attacks and data privacy breaches. That includes an Endpoint Detection and Response platform’s expansion for the Operational technology (‘OT’) environment, a security platform that provides industrial cyber security solution, with IoT and OT visibility, for continuous monitoring and real-time risk insights to protect from evolving threats. The entire OT network has been isolated from the IT network by jump server and firewalls so that access to this network is done through a controlled infrastructure dependent on MFA. Update and patch application control was implemented and the creation of an external site for disaster recovery increased the resilience of this environment.

In the Information Technology (‘IT’) environment, Cemig has implemented mobile device management, mobile application management, multifactor authentication (‘MFA’) for network access and reduced VPN connections directly to Corporate Network enabling Remote Desktop Connection (‘RDP’) blocking, which were points of vulnerability in the environment. To help protect our sensitive data, a data loss prevention and an electronic data classification and labeling tool was implemented to apply cryptography protection to sensitive documents. We contracted an external


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third-party Security Operations Center (SOC) and a threat intelligence service with the aim of anticipating possible attacks and increasing the company's level of protection.

A cybersecurity maturity assessment model (C2M2) has been used with the aim of promoting safe practices and directing improvement actions.

CEMIG maintains an ongoing safety awareness program for its employees through annual campaigns.

IT Governance Program

Our Information & Technology Governance program seeks alignment with the business, adding value through the application of the appropriate management of resources and risks, constantly monitoring performance and compliance, ensuring adherence to legal, regulatory and compliance requirements that are continuously audited. In order to execute corporate strategy and objectives, the company aligns interests and goals with control objectives and with governance and management processes, translating business opportunities and needs into results with compliance and within the appropriate levels of risk. To support this governance program and ensure that the strategy is implemented, the processes employed by the IT department are directly related to the control objectives (based on COBIT framework, whenever possible), providing high-level requirements to be provided by management for effectiveness of each IT process and are based on IT service management (‘ITIL’) best practices.

IT Service Manager System

In order to serve CEMIG’s business areas and meet regulatory and compliance requirements, CEMIG has an IT service management system (‘ITSMS’) that applies a set of management practices capable of capturing strategic business needs and expectations and which, through engagement with the company's business areas, performs the acquisition/construction of solutions, design, transition, deliver and support of products and services.

In order to enable and increase the effectiveness of this system, Information & Technology Department has established a standardized mechanism for modeling the relationship between infrastructure assets and configuration of systems and applications with the Company's business processes, better representing the enterprise architecture and identification of applications and systems critical to CEMIG’s business. This mechanism includes the discovery and automated mapping of infrastructure elements for further modeling of these elements with applications and business processes. This end-to-end service modeling allows the simulation of conditions with business impact analysis and cause analysis, provides data for all practices and processes of the value chain, enhancing decision making, risk assessment, information security and quality in the construction of new solutions.

During 2023 some initiatives to streamline the request for change process took place, delivering more value to customers meanwhile following the IT governance and IT controls.

Commercial Management System

We have established and consolidated an efficient customer service system, based on SAP CCS (‘Customer Care Solution’)/ CRM (‘Customer Relationship Management’) platform, fully integrated with the Business Intelligence (‘BI’) database, which supports our customer service processes.

The employees use CCS/CRM to manage and serve more than 9 million customers who receive high, medium and low voltage energy supply. Both corporate tools offer security, quality and productivity to our processes of energy distribution with efficiency in accordance with the regulatory and Market requirements.

In 2023 we installed a solution for electronic invoice for electricity based on SAP technology, named “NF3e” in Brazil. This national model of electronic tax document replaced the system for issuing the current Invoice/Electric Energy Bill, with legal validity guaranteed by the issuer's digital signature, simplifying the ancillary obligations of taxpayers and allowing, at the same time, the monitoring of the issuance in real time by the Tax Authorities.


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Several customizations were reviewed or developed in SAP/CCS to provide integrations with clients, which is the implementation of the Omnichannel strategy, with the integration of new virtual agency, mobile app, WhatsApp application, call center, SMS messages and other channels of customer relationship.

Due to Normative Resolution No. 1,059 from ANEEL agency, in 2023 we implemented several adjustments on both Customer Relationship Management systems, SAP CRM 7.0 and Salesforce, in a sequence of obligations initiated by No. 1,000 resolution, this last announced since 2022. Adjustments were required to be made on the SAP IS-U/CCS as well.

In addition, another deliverable during 2023 was the customization of SAP IS-U/CCS system to offer conditions to negotiate debt inside the governmental program named “Desenrola”, which focused in the reduction of levels of non-payments by the customers, improving the Company’s revenue.

According to the National Electric Energy Agency (ANEEL) new regulation, taking effect by January 1, 2024, nearly 170,000 high and medium voltage consumer units will be allowed to migrate to free energy market. To be able to address this future demand, Cemig has started in March 2023 a project called “Projeto Varejista” to adjust our CRM Sales Force, who has debuted the first e-commerce, from lead to contract and then invoice, to increase market share and improve customer services. As a result of this project, by the end of 2023 we had 1,000 new customer contracts signed. It was also required to adjust the billing module of SAP IS-U/CCS with the new rules to invoice these new clients.

Management Tools

From 2019 to 2022, we executed a project to install new IT products to improve engineering processes, based on the Cyme Platform (‘CYME’), provided by Cooper Power Systems, including installation and configuration of Gateway and Server modules.

The CYME platform is an expert system that includes complex electrical calculations for the planning and study of distribution networks. In the case of CEMIG, which has an extensive and integrated distribution network and a significant level of complexity, the activities for implementing the technology solution are even more challenging and demanding, requiring considerable effort to complete the steps.

In 2022, the CYME project was finished in that phase, by the deployment of all acquired modules.

In 2023 we initiated a new roadmap for the 2023 to 2026 phase including the acquisition of several new licenses or modules to be used by engineers or technicians, by offering these tools to engineering process automation and modernization.

We also implemented a new mobile solution for collection of readings and simultaneous printing of invoices in the field. Since August 2020, we have readers using the new application "SGL Collector" (SGL is a reading management system) on smartphones. The new solution provides benefits of an application with a more intuitive graphical interface that makes it easy for the reader to learn and perform activities, associated with handling smaller, lighter equipment and with lower costs compared to the PDAs previously used.

The installation and updating of versions of the application on the readers' smartphones is done remotely and centrally, through a UEM (‘Unified Endpoint Management’) platform that guarantees all the security and integrity of the equipment and applications used by the field teams in the execution of the activities throughout CEMIG's concession area.

In 2022 we deployed a new web version of the SGL system, integrating in one single server all operations to deliver the sets of readings covering the whole concession area of Cemig and direct connection to transfer data to the server.

In 2023 we implemented a new feature in SGL to make available an option for our customers to pay the monthly invoice directly to Cemig using PIX, an instant payment method in Brazil.


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Customer Relationship Channels

We have three major channels (Call Center, Face-to-face service and Digitals channels) of service for our customers in Minas Gerais. Customer service contact, whether of an emergency nature or to deal with service requests, can be made:

•

by our call center, which can handle an average of 43,000 telephone contacts a day, operating with an efficient electronic service through Interactive Voice Response (‘IVR’);

•

face-to-face service, at our Service Branches in the 774 cities of our concession area; or at our standalone self-service counters (‘totems’), offering 18 services;

•

using the Digital Channels, online, through three ways,

by Cemig Atende Web – our Online Service Branch, on our website – offering 76 types of service or via ChatBot on our home page;

by WhatsApp and Telegram, offering 18 types of service each one;

by our Cemig Atende smartphone app, for Android or iOS, which offers 20 services.

Maintenance and Repair Systems

The 11,896.33 miles of high voltage distribution lines in CEMIG D’s network, operating at from 34.5 kV to 230 kV, are supported by 54,082 structures, mainly made of metal.

The network of CEMIG GT has 3,144 miles of high voltage transmission lines, operating at from 230 kV to 500 kV, supported by 11,913 structures.

The majority of the service interruptions to our distribution and transmission lines are the result of lightning, farm surface fires, vandalism, and wind. Distribution also suffers from corrosion to structures.

The entire high voltage transmission line system of CEMIG D is inspected once a year by helicopter, using a ‘Gimbal’ gyro-stabilized system with conventional and infrared cameras, allowing for simultaneous visual and thermographic (infrared) inspections. Land-based inspections are also made at intervals of between one and three years, depending on the characteristics of the line, such as time in operation, number of outages, type of structure, and the line’s importance to the energy system as a whole.

All the extra high voltage transmission lines of CEMIG GT are inspected twice a year by helicopter. Land-based inspections are made every two years to inspect the supporting structures. Line pathways are inspected annually, aiming to keep the areas free of vegetation that could lead to surface fires.

We use modern modular aluminum structures to minimize the impact of emergencies involving fallen structures. Most of our maintenance work on transmission lines is done using live-wire methods. We have a well-trained staff and special vehicles and tools to support live- and dead-wire work.

Our set of spare equipment (transformers, breakers, arresters, etc.) and mobile substations are of great importance in prompt reestablishment of power to our customers in the event of emergencies involving failed substations.

Insurance

We have insurance policies covering fire damages to owned or rented buildings, including their contents. Since January 8, 2023, the insurance for the building where our head office is located only covers its contents, as the insurance for the building was assumed by the owner of the building. Our operational risk insurance policy covers damages to the turbines, generators and transformers of our principal generating plants and substations caused by lightning, fire and explosion or risks such as equipment failure. We also have insurance policies covering damage to or caused by aircraft used in our operations. We do not have general third-party liability insurance to cover accidents, and we do not seek proposals for this type of insurance. There is, however, a possibility that we may contract this type of insurance in the future.


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In addition, we do not seek proposals for, nor do we have insurance cover against major natural disasters that might affect our facilities, such as earthquakes and floods or failures of the operational system.

We do not have insurance coverage for the risk of interruption of business, which means that damages suffered by our company, and consequent damages suffered by our customers because of interruption in the supply of energy are in general not covered by our insurance and we may be subject to significant losses. See the Section “Item 3, Key Information-Risk Factors-Risks relating to CEMIG – We operate without insurance policies against natural disasters and third-party liability”.

We believe that, since we contract insurance against fire and operational risk, our insurance cover is at a level that is usual in Brazil for the type of business that we conduct.

Organizational Structure

The companies incorporated in Brazil described below are our major subsidiaries, jointly controlled and affiliates entities: (*)

* As of March 31, 2024

CEMIG’s main subsidiaries and jointly controlled entities and affiliates include the following:

CEMIG Geração e Transmissão S.A. (‘CEMIG GT’) – 100% owned: operates in energy generation and transmission;

CEMIG Distribuição S.A. (‘CEMIG D’) – 100% owned: operates in energy distribution;


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Companhia de Gás de Minas Gerais (‘Gasmig’) – 99.57% owned: acquires, transports, distributes and sells natural gas;

SPEs of Lot D – 100% owned: Geração Camargos S.A., CEMIG Geração Itutinga S.A., CEMIG Geração Leste S.A., CEMIG Geração Oeste S.A., CEMIG Geração Salto Grande S.A., CEMIG Geração Sul S.A. and CEMIG Geração Três Marias S.A.; Lot D is comprised of 13 plants, previously owned by CEMIG, and an additional 5 plants, which belonged to other companies. On May 31, 2023, Cemig Geração Salto Grande S.A. and Cemig Geração Três Marias S.A. were merged into Cemig GT. The aggregate installed generation capacity of these 18 plants is 699.57 MW;

SPEs – Wind Energy - 100% owned: Central Eólica Praias de Parajuru S.A. and Central Eólica Volta do Rio S.A., wind farms with 47 wind turbines with 70.8 MW;

CEMIG SIM - 100% owned: distributed generation, account services, cogeneration, energy efficiency, and supply and storage management;

Centroeste – 100% owned: operates in construction, operation and maintenance of the transmission facilities of the Furnas-Pimenta transmission line – part of the national grid;

Transmissora Aliança de Energia Elétrica S.A. (‘Taesa’) – jointly-controlled entity, with ownership of 36.97% of the voting stock and 21.68% of the total stock: construction, operation and maintenance of energy transmission facilities in 18 states of Brazil and in the Federal District;

Aliança Geração de Energia S.A. (‘Aliança’) – jointly controlled entity, with direct ownership of 45% of the voting and total share. Aliança is privately owned and operates as a platform for consolidation of generation assets and investments in future generation projects; and

Amazônia Energia and Aliança Norte are shareholders of Norte Energia S.A. (‘NESA’), which holds the concession to operate the Belo Monte Hydroelectric Plant. Through the jointly controlled entities referred to above, CEMIG GT owns an indirect equity interest in NESA of 11.69%.

Property, Plants, and Equipment

Our main assets are our power generation plants, transmission and distribution infrastructure. Our net book value of total property, plant and equipment and intangible assets, including our investment in certain consortium that operate energy generation projects, including projects under construction, was R$18,505 million on December 31, 2023 (R$17,031 million in 2022).

Generation and Transmission segment represented 21.05% of this net book value, Distribution segments represented 65.38% and Gas distribution system represented 9.17%.

Apart from our distribution and generation network, no single one of our assets produced more than 10% of our total revenues in 2023. Our infrastructure is adequate for our present needs and suitable for their intended purposes. We have rights of way for our distribution lines, which are our assets and do not revert to the landowner upon expiration of our concessions.

The Brazilian Energy Industry

General

In the Brazilian energy sector, generation, transmission, and distribution activities were traditionally conducted by a small number of companies that had always been owned by either the Federal Government or the governments of individual states. Since the 1990s, several state-controlled companies were privatized, in an effort to increase efficiency and competition. The Fernando Henrique Cardoso administration (1995 – 2002) aimed to privatize the state-controlled part of the energy sector, but the Luis Inácio Lula da Silva administration (2003 – 2010) ended this process and implemented a ‘New Industry Model’ for the Brazilian energy sector, expressed in Law 10,848, enacted on March 15, 2004, referred to as the ‘New Industry Model Law’.


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Significant changes were implemented during Dilma Rousseff’s administration (2011 – 2016), by means of Provisional Act 579/12, converted into Law 12,783/13, establishing new rules for renewal of concessions, including rebidding for hydroelectric power generation concessions.

Subsequently, under the administration of Michel Temer (2016–2018), other changes were introduced in the sector by Provisional Act 735/16, enacted as Law 13,360/16, including a change of the bidding rules for energy generation, transmission and distribution concessions, and related services as well as addressing the renegotiation of hydrological risk. In addition, in 2017, a series of public consultations, which discussed proposals for modernization, and expansion of the Free Market in electric power supply with the industry (Public Consultation 33) began.

Under the administration of Jair Bolsonaro (2019 – 2022), the government proceeded with the studies proposed by public consultation 33, holding several workshops and meetings with agents to study the following topics: separation of energy contracts into capacity and energy contracts, pricing, definition of price limits and reduction of the spot price time base.

Subsequently under the Administration of Luís Inácio Lula da Silva (2023-present) the studies continued with public consultation MME 146/2022.

Main Regulatory Authorities

National Energy Policy Council – CNPE

In August 1997, the CNPE was created to advise the Brazilian president regarding the development and creation of the national energy policy. CNPE is presided over by the MME, and the majority of its members are officials of the Federal Government. CNPE was created to optimize the use of Brazil’s energy resources and to assure the supply of energy to the country.

Ministry of Mines and Energy – MME

The MME is the Brazilian Federal Government’s primary grantor of the power industry. Following the adoption of the New Industry Model Law, the Brazilian Federal Government, acting primarily through the MME, undertook certain duties that were previously under the responsibility of ANEEL, including the drafting of guidelines governing the granting of concessions and the issuance of directives governing the bidding process for concessions related to public services and public assets.

National Electric Energy Agency – ANEEL

The Brazilian power industry is regulated by ANEEL, an independent federal regulatory agency. After enactment of the New Industry Model Law, ANEEL’s primary responsibility is to regulate and supervise the power industry in line with the policy issued by MME and to respond to matters which are delegated to it by the Brazilian Federal Government.

National System Operator – ONS

The ONS was created in 1998 as a non-profit private entity comprising free customers, energy utilities engaged in the generation, transmission and distribution of energy, and other private participants such as importers and exporters. The New Industry Model Law granted the Brazilian Federal Government the power to appoint three directors of the ONS, including the Director-general. The primary role of the ONS is to coordinate and control the generation and transmission operations in the interconnected power system, subject to ANEEL’s regulation and supervision.

Brazilian Electric Power Trading Chamber– CCEE

One of the main roles of the CCEE is to run public auctions in the regulated market, including the auction of existing energy and new energy. Additionally, the CCEE is responsible, among other things, for: (1) registering all the power


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purchase agreements within the Regulated Market (‘CCEARs’), and the agreements within the Free Market, and (2) accounting for and settling short-term transactions.

Under the New Industry Model Law, the price of energy in the spot market, known as the Differences Settlement Price (Preço de Liquidação de Diferenças, or ‘PLD’), considers factors similar to the ones used to determine the Wholesale Energy Market spot prices prior to the New Industry Model Law. Among these factors, the variation of the PLD will mainly vary according to the balance between the market supply and demand for energy, as well as the impact that any variation on this balance may have on the optimal use of the energy generation resources by the ONS.

The members of the CCEE are generators, distributors, trading agents and free customers, and its board of directors comprises four members appointed by these agents and one appointed by the MME, who is the chairperson of the board of directors.

Energy Research Company – EPE

The Brazilian Federal Government created EPE by a decree enacted on August 16, 2004. It is a state-owned company, responsible for carrying out strategic research on the energy industry – including energy, oil, gas, coal and renewable energy sources. EPE is responsible for: (i) studying projections for the Brazilian energy matrix; (ii) preparing and publishing the national energy balance; (iii) identifying and quantifying energy resources; and (iv) obtaining the required environmental licenses for new generation concessionaires. EPE’s research supports the MME in its policymaking role in the domestic energy industry. EPE is also responsible for approving the technical qualification of new energy projects to be included in the related auctions.

Energy Sector Monitoring Committee – CMSE

Decree 5,175 enacted on August 9, 2004, established the Energy Sector Monitoring Committee, or CMSE, which acts under the direction of the MME. The CMSE is responsible for monitoring and permanently evaluating the continuity and security of energy supply conditions and for indicating necessary steps to correct identified problems.

Permanent Commission for Analysis of Methodologies and Computation Programs of the Electric Sector – CPAMP

Ordinance 47, enacted on February 19, 2008, created the Permanent Committee for Analysis of Methodologies and Computation Programs of the Electric Sector (‘CPAMP’), with the purpose of guaranteeing coherence and integration of the methodologies and computational programs used by MME, EPE, ONS and CCEE.

Ownership Limitations

On November 10, 2009, ANEEL issued Resolution 378, requiring it to notify the Economic Law Secretariat of the Ministry of Justice (‘SDE’) if it identifies any act that may cause unfair competition or may result in significant market control (under Article 54 of Law 8,884 enacted on June 11, 1994). After the notification, SDE must inform CADE. On November 30, 2011, Law 8,884 was revoked and replaced by Law 12,529, which terminated the SDE and replaced it with the Competition General Management Unit (‘Superintendência Geral’). Such unit, if necessary, will require ANEEL to analyze any such events, upon which CADE will decide if there should be any sanctions applied. Under Articles 37 and 45 of Law 12,529, these may vary from pecuniary penalties to dissolution or other disposition of the offending company.

The New Industry Model

The primary objective of the New Industry Model was to guarantee security of supply and reasonableness of rates. In terms of ensuring security of supply, the New Industry Model Law (a) requires distributors to contract their entire energy production, and to be responsible for making realistic projections of demand requirements; and (b) aims to arrange for the construction of new hydroelectric and thermal plants to be decided in ways that best balance security of supply and reasonableness of rates. To achieve reasonable rates, the New Industry Model Law requires that all purchases of energy by distributors to be by auction, based on lowest price criteria, and that contracting be carried out through the Regulated Market. Auctions are categorized into two types: (i) auctions for supply from new plants,


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aimed at expansion of the system; and (ii) auctions for power generated by existing plants, aiming to meet existing demand.

The New Industry Model created two environments for the purchase and sale of energy: (i) the Regulated Market, in which distributors purchase through public auctions all of the power they need to supply their customers; and (ii) the Free Market, to include all purchases of energy by non-regulated entities, such as free customers and trading companies. Distributors are allowed to operate only in the Regulated Market, whereas generators may operate in both, maintaining their competitive characteristics.

Requirements for expansion of the sector are evaluated by the Federal Government through the MME. Two entities were created to provide structure for the sector: (i) the Energy Research Company (Empresa de Pesquisa Energética or ‘EPE’), a state-controlled company responsible for planning expansion of generation and transmission; and (ii) CCEE, a private entity responsible for the accounting and settlement of short-term (spot) energy transactions. CCEE is also responsible, through delegation by ANEEL, for organizing and conducting Regulated Market public power auctions, in which the distributors purchase energy.

The New Industry Model eliminated self-dealing, forcing distributors to purchase energy at the lowest available price rather than from related parties. The New Industry Model exempted contracts executed prior to the enactment of the law, in order to provide regulatory stability to transactions carried out before it was enacted.

Several categories of power supply are not subject to the requirement for public auction via the Regulated Market: (1) certain low-capacity generation projects located near consumption points (such as certain co-generation plants and SHPs); (2) plants qualified under the PROINFA program; (3) power from Itaipu and, as from January 1, 2013, from Angra I and II; (4) power purchase agreements entered into before the New Industry Model Law; and (5) concessions extended by Law 12,783. The rates at which the energy generated by Itaipu is traded are denominated in U.S. dollars and established by ANEEL pursuant to a treaty between Brazil and Paraguay, and there are compulsory procurement volumes. Consequently, the price of energy from Itaipu rises or falls according to the U.S. Dollar/Real exchange rate. Changes in the price of Itaipu-generated energy are, however, neutralized by the Brazilian Federal Government, which buys all the energy credits from Eletrobrás.

The New Industry Model Law is currently being challenged on constitutional grounds before the Brazilian Federal Supreme Court. The Brazilian Federal Government moved to dismiss the actions, arguing that the constitutional challenges were moot because they relate to a provisional act that had already been converted into law. To date, the Brazilian Supreme Court has not reached a final decision upon the merits of this action and we do not know when such a decision may be reached. Thus, the New Industry Model Law is currently in force. Regardless of the Supreme Court’s final decision, certain portions of the New Industry Model Law related to restrictions on distributors performing activities unrelated to the distribution of energy, including sale of energy by distributors to free customers and the elimination of agreements between related parties, are expected to remain in full force and effect.

Coexistence of Two Energy Trading Environments

Under the New Industry Model Law, energy purchase and sale transactions are carried out in two different market segments: (1) the Regulated Market, in which distributors buy all their power supply needs through public bids; and (2) the Free Market, for all purchases of energy by non-regulated entities such as free customers, energy traders and energy importers.

The Regulated Market

In the Regulated Market, distributors purchase energy for their regulated customers through public auctions regulated by ANEEL and conducted by the CCEE.

Energy purchases take place through two types of bilateral contracts: (i) Energy Agreements (Contrato de Quantidade de Energia) and (ii) Capacity Agreements (Contratos de Disponibilidade de Energia). Under an Energy Agreement, a generator commits to supply a certain amount of energy and assumes the risk that energy supply could be adversely affected by hydrological conditions and low reservoir levels, among other conditions, that could interrupt the supply


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of energy, in which case the generator will be required to purchase the energy from third parties to meet its supply commitments. Under a Capacity Agreement, a generator commits to make a certain amount of capacity available to the Regulated Market. In this case, the revenue of the generator is guaranteed under the contractual conditions and the distributor assumes the hydrological risk. However, if there are additional costs to the distributors, these are passed on to customers. Together, these agreements comprise the power purchase agreements (Contratos de Comercialização de Energia no Ambiente Regulado, or ‘CCEARs’) in the Regulated Market.

The regulations under the New Industry Model Law establish that distributors that contract less than 100% of their total demand, accounted in the CCEE, will be subject to penalties. There are mechanisms to reduce the possibility of penalties, such as participation in the MCSD mechanism (‘Mechanism of compensation of surpluses and deficits’), which allows for the managing of surpluses and deficits among distributors, or purchase of supply in auctions during the year. Any remaining shortfall from 100% of total demand may be purchased at the spot market. If a company contracts more than 105% of its total demand, it would be subject to price risk if it sells that supply in the spot market in the future. To reduce this price risk, a company may reduce its purchase contracts made at ‘existing source’ auctions by up to 4% each year, by bilateral negotiation through Regulation 711, through MCSD ‘New Energy contracts’, and through loss of customers that have opted to become free customers (and are thus supplied by generators directly).

With the renewal of the hydroelectric power plant concessions, Contracts for the Physical Accounts Security (‘CCGF’) were created. These contracts take into account 90% of the energy generated by the plants whose concessions were renewed in order to mitigate the hydrological risk. The execution of CCGF is mandatory and each distributor received an amount according to the assessment made by ANEEL.

The Free Market

In the Free Market, energy is traded by power generators. The Free Market also includes certain grandfathered existing bilateral contracts between generators and distributors until the expiration of their current terms. Upon expiration, new contracts would have to be executed under the New Industry Model Law.

Potentially free customers are those whose energy demand exceeds 3 (three) MW at a voltage equal to or higher than 69kV or at any voltage level if their supply began after July 1995. Since January 2019, customers whose supply began before 1995 were also able to migrate to the Free Market pursuant to Law 13,360/16. In July 2019, the restriction to be a free customer will be reduced to 2.5 MW and in January 2020 to 2 MW (Ministerial Order 514/2018). On December 12, 2019, Ministerial Order 465/2019 reduced the restriction to be free consumer to 1.5 MW in January 2021, to 1.0 MW in January 2022 and to 0.5 MW in January 2023. This order also gave ANEEL and CCEE a deadline (January 2022) to finish and present regulatory measures necessary to allow the free market to be opened for consumers (A Group consumer) with a load below 0.5 MW, including the regulated energy trader and proposed opening schedule beginning January 1, 2024.

Until the total opening, customers with contracted demand of 500 kW or more may be serviced by suppliers other than their local distribution company if they purchase from certain alternative energy sources, such as SHPs, wind, or biomass of a certain size.

Once a customer has opted for the Free Market, it may only return to the regulated system after giving its regional distributor five years’ notice. The distributor may reduce this term at its discretion. The aim of the extended notice period is to ensure that, if necessary, the distributor is able to purchase additional energy to supply the re-entry of free customers into the Regulated Market. Moreover, distributors may also reduce the amount of energy purchased according to the volume of energy that they will no longer distribute to free customers. State-owned generators may also sell energy to free customers, but unlike private-sector generators, they are obliged to do so through an auction process.

Restricted Activities for Distribution companies

Distribution companies in the Brazilian Interconnected Grid (Sistema Interligado Nacional, or ‘SIN’) are not permitted to: (1) operate in the business of the generation or transmission of energy; (2) sell energy to free customers, except


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for those in their concession area and under the same conditions and rates as regulated customers in the Regulated Market; (3) directly or indirectly hold any interest in any other company, except entities incorporated for raising, investment and management of funds necessary for the distributor (or its parent company or related companies or partnerships); or (4) engage in activities that are unrelated to their respective concessions, except for those permitted by law or in the concession agreement.

Contracts Executed Prior to the New Industry Model Law

Under the New Industry Model Law, contracts executed by distributors and approved by ANEEL before the enactment of that law will not be amended to reflect any extension of their terms or change in prices or volumes of energy already contracted.

Limitations on Pass-Through

The New Industry Model also limits the pass-through of costs of energy to final customers. The Annual Reference Value corresponds to the weighted average of the energy prices in ‘A - 5’ and ‘A - 3’ auctions, calculated for all distributors, and creates an incentive for distributors to contract for their expected energy demands in the A - 5 auctions, where prices are expected to be lower than in A - 3 auctions. The Annual Reference Value is applied in the first three years of power purchase agreements from new power generation projects. After the fourth year, the energy acquisition costs from these projects will be allowed to be passed through in full. Decree 5,163/04 establishes the following limitations on the ability of distributors to pass through costs to customers:

•

No pass-through of costs for energy purchases that exceed 105% of regulatory demand;

•

Limited pass-through of costs for energy purchases made in an A–3 auction, if the volume of the acquired energy exceeds 2.0% of the demand found in A–5 auctions;

•

Limited pass-through of energy acquisition costs from new energy generation projects if the volume re-contracted through CCEARs of existing generation facilities is below a ‘Contracting Limit’ defined by Decree 5,163;

•

Energy purchases from existing facilities in the ‘A - 1’ auctions are limited to 0.5% of distributors’ demand, frustrated purchases in previous A - 1 auctions, involuntary exposure to regulated customer demand, plus the ‘replacement’, defined as the amount of energy needed to replace the power from power purchase agreements that expire in the current year (A - 1), according to ANEEL Resolution 450/2011. If the acquired energy in the A - 1 auction exceeds the limit, the pass-through to final customers of costs of the excess portion is limited to 70.0% of the average value of such acquisition costs of energy generated by existing generation facilities. MME will establish the maximum acquisition price for energy generated by existing projects;

•

Energy purchases in ‘market adjustment’ auctions are limited to 5.0% of a distribution concession holder’s total demand (the previous limit, modified by Decree 8,379/14, was 1.0%, except for 2008 and 2009) and pass-through of costs is limited to Annual Reference Value;

•

If distributors fail to comply with the obligation to fully contract their demand, the pass-through of the costs from energy acquired in the short-term market will be the equivalent to the lower of the Differences Settlement Price (Preço de Liquidação de Diferenças, or ‘PLD’) or the Annual Reference Value.

Rationing under the New Industry Model Law

The New Industry Model Law establishes that, in a condition in which the Federal Government decrees a compulsory reduction in the consumption of energy in a certain region, all energy quantity agreements in the regulated market, registered within the CCEE in which the buyer is located, shall have their volumes adjusted in the same proportion to the required reduction of consumption.


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Rates

Electric energy rates in Brazil are set by ANEEL, which has the authority to adjust and review rates in accordance with applicable concession contracts and regulations. Each distribution company’s concession contract provides for an annual rate. In general, ‘Parcel A costs’ are fully passed through to customers. ‘Parcel A costs’ are the portion of the rate calculation formula which provides for the recovery of certain costs that are not within the control of the distribution company. ‘Parcel B costs’, which are costs that are under the control of the distributors, are adjusted for inflation in accordance with IPCA index. The average annual rate adjustment includes components such as the inter-year variation of Parcel A costs (‘CVA’) and other financial adjustments, which compensate for changes in the company’s costs, upward or downward, that could not be previously taken into account in the rate charged in the previous period.

Distribution concessionaires are also entitled to periodic reviews. Our concession agreements establish a five-year period between periodic reviews. These reviews mainly aim: (i) to ensure necessary revenues to cover efficient operating costs, determined by the grantor, and adequate return for investments deemed essential for the services within the scope of each company’s concession; and (ii) to determine the ‘X factor’, which is calculated based on the average productivity gains from increases in scale. The X factor is a result of three components: a productivity factor representing those productivity gains (Xpd); the quality factor XQ, which punishes or rewards the distribution company depending on the quality of the service provided, and the factor Xt, which has the objective of reducing or increasing the regulatory operating costs during the five-year period between the rates reviews, to reach the level defined for the efficient operating cost determined by the grantor.

In 2011, ANEEL concluded the Public Hearing 040/2010, in which it dealt with the methodology for the third periodic review. To calculate the rate of return, ANEEL used the methodology of Weighted Average Cost of Capital (‘WACC’), which resulted in a yearly rate of 7.50% after tax, compared to the rate of 11.25% applied in the previous cycle. This rate of return was applicable to the investments made by CEMIG D until the next tariff cycle, which was conducted in 2018. After that, the new rate of return calculated by the grantor is 8.09% after tax.

ANEEL also changed the methodology used to calculate the X Factor: from a method based on discounted cash flow to the Total Factor Productivity (‘TFP’) method, which consists of defining potential productivity gains for each company based on average productivity gains in the later years. It also included the other two components, as mentioned above: XQ and Xt. The components of the X factor, determined in the 2018 review, for the period 2018/2023, were: Xt = -1.33%, which is applicable on each annual readjustment, Xpd and XQ which are defined ex-post and added to the previous value based, respectively, on the productivity gains from the last year and from changes in the quality of services provided.

ANEEL has also issued regulations governing access to the distribution and transmission facilities and establishing TUSD and the TUST. The rates to be paid by distribution companies, generators, and free customers for use of the interconnected power system are reviewed annually. The review of the TUST takes into account the RAP of transmission concessionaires under their concession contracts. For more detailed information on the rate-setting structure, see ‘Rates for the Use of the Distribution and Transmission Systems.’

In 2015, ANEEL created an additional fee that would be passed on to customers through their energy bills. This system is known as ‘tariff flags.’ The system provides customers with a system disclosing the Real costs of energy generation. The system is a simple one: the colors of flags (green, yellow or red) indicate whether, based on the conditions of energy generation, the cost of energy to customers will increase or decrease. When the system provides a green flag, the hydrological conditions for power generation are favorable and there should be no additional fee included in the customers’ rate. If the conditions are somewhat less favorable, the system will indicate a yellow flag and there will be additional charges proportional to consumption. If conditions are even less favorable, the system will indicate a red flag, which has two levels.

In 2019, the additional charges remain the same as 2018 until July when the additional charges corresponding to each flag were adjusted as follows: the yellow flag was set to R$ 1.50 per 100 kWh, the red flag level 1 was set to R$ 4.00 per 100 kWh and the red flag level 2 was set to R$ 6.00 per 100 kWh. Those additional charges were adjusted again on November 1st when the additional charges corresponding to each flag were adjusted as follows: the yellow flag was


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set to R$1,343 per 100 kWh, the red flag level 1 was set to R$4,169 per 100 kWh and the red flag level 2 was set to R$6,243 per 100 kWh. During 2020, due to the Covid 19 pandemic, the tariff flags were suspended from June/2020 until November/2020 (ANEEL’s dispatch nº 1,511/2020). ANEEL’s Dispatch nº 3,364/2020 restored the tariff flags in December/2020 there was a red flag level 2 in December, a yellow flag in January and a green flag in all other months.

In June 2021, those additional charges were adjusted in accordance with each flag as follows: the yellow flag was set to R$ 1,874 per 100 kWh, the red flag level 1 was set to R$ 3,971 per 100 kWh and the red flag level 2 was set to R$ 9,492 per 100 kWh. In August 2021, the Câmara de Regras Excepcionais para Gestão Hidroenergética (“CREG”) created the water scarcity flag, set to R$ 14.20 per 100 kWh.

In July 2022, those additional charges were adjusted in accordance with each flag as follows: the yellow flag was set to R$2.989 per 100 kWh, the red flag level 1 was set to R$6.50 per 100 kWh and the red flag level 2 was set to R$9.795.

The green flag was in force throughout 2023.

Acquisition of land

The concessions granted to CEMIG by the Federal Government assign to the concessionaire the acquisition of the lands in which the plants and substations will be implanted. Energy companies in Brazil must negotiate with each property owner to obtain the land needed for the implementation of the entity. However, if a concessionaire is unable to obtain the necessary land amicably, these lands may be acquired for use by the concessionaire through specific legislation. In cases of acquisition, through legal proceedings, the concessionaires may have to participate in negotiations regarding the value of compensation to owners and the resettlement of communities in legal proceedings. The Company makes every effort to negotiate with the owners and affected communities before taking legal action.


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The Brazilian Electric Power System – Operational Overview

Brazil’s energy production and transmission is a large-scale hydroelectric and thermal system made up predominantly of hydroelectric power stations, with many separate owners. The Brazilian Interconnected Grid connects companies in the Southern, Southeastern, Center-West, and Northeastern Regions and part of the Northern Region of Brazil. 1% of the country’s energy production capacity is not connected to the Brazilian Grid, in small isolated systems located mainly in the Amazon region. Brazil’s abundant hydrological resources are managed through storage reservoirs. It is estimated that Brazil has hydroelectric power generation potential of close to 246,241 MW, of which only 44% has been developed or is under construction, according to Eletrobrás studies compiled in December 2018.

Source: Banco de Informações de Geração (SIGA ANEEL – 04/19/2024)

By February 2023, Brazil had an installed capacity in the interconnected power system of 203.66 GW, 53.94% of which is hydroelectric, according to the ‘Matriz de Energia Elétrica’ (Electric Power Matrix) available at the Sistemas de Informação de Geração – ‘SIGA’, published by ANEEL. This installed capacity includes half of the installed capacity of Itaipu – a total of 14,000 MW owned equally by Brazil and Paraguay.

Eletrobrás, a company formerly owned by the Federal Government, operates 29% of Brazil’s installed generating capacity and 49% of Brazil’s high voltage transmission lines. Eletrobrás has historically been responsible for implementing energy policy, and conservation and environmental management programs. State-controlled or local electric power companies own the remaining high-voltage transmission lines. Distribution is conducted by 60 state or local utilities, a majority of which has been privatized by the Federal Government or state governments.

Historical Background

The Brazilian Constitution provides that the development, use and sale of energy may be undertaken directly by the Brazilian Federal Government or indirectly through the granting of concessions, permissions, or authorizations. Since 1995, the Brazilian Federal Government has taken a number of measures to restructure the power industry. In general, these have aimed to increase the role of private investment and eliminate restrictions on foreign investment, thus increasing overall competition in the power industry.


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In particular, the Brazilian Federal Government has taken the following measures:

•

The Brazilian Constitution was amended in 1995 to authorize foreign investment in power generation. Prior to this amendment, all generation concessions were held either by a Brazilian individual, or by an entity controlled by Brazilian individuals, or by the Brazilian Federal Government or a state government;

•

The Federal Government enacted Law 8,987 on February 13, 1995, or the Concessions Law, and Law 9,074 on July 7, 1995, or the Power Concessions Law, that together:

required that all concessions for the provision of energy-related services be granted through public bidding processes;

gradually allowed certain energy customers with significant demand (generally greater than 3 MW), referred to as free customers, to purchase energy directly from suppliers holding a concession, permission or authorization;

provided for the creation of generation entities, or Independent Power Producers, which, by means of a concession, permission or authorization, may generate and sell all or part of their energy to free customers, distribution concessionaires and trading agents, among others;

granted free customers and energy suppliers open access to the distribution and transmission grids;

eliminated the need for a concession to construct and operate power projects with capacity from 1 MW to 30 MW, or Small Hydroelectric plants, (SHPs), which was amended on May 28, 2009 by Law 11,943 and further by Law 13,360/16, raising the limit from 30 MW to 50 MW, regardless of being characterized as an SHP or not;

The current grantor, ANEEL, and the Conselho Nacional de Política Energética (National Energy Policy Council, or ‘CNPE’), were created in 1997.

In 1998, the Federal Government enacted Law 9,648 (‘Power Industry Law’), to overhaul the basic structure of the energy industry, providing as follows:

•

Establishment of a self-regulated body responsible for operation of the short-term energy market, or Wholesale Energy Market, replacing the prior system of regulated generation prices and supply contracts;

•

Creation of the ONS a non-profit, private entity responsible for the operational management of the generation and transmission activities of the interconnected power system;

•

Establishment of public bidding processes for concessions for construction and operation of power plants and transmission facilities, in addition to the bidding process requirements under the Concessions Law and the Power Concessions Law, On March 15, 2004, the Brazilian Federal Government enacted Law 10,848, (or the ‘New Industry Model Law’), in an effort to further restructure the power industry, with the ultimate goal of providing customers with security of supply combined with fair rates. On July 30, 2004, the Brazilian Federal Government published Decree 5,163, governing trading rules under the New Industry Model Law, as well as the granting of authorizations and concessions for energy generation projects. These include rules relating to auction procedures, the form of power purchase agreements and the method of passing costs through to final customers.

On September 12, 2013, the Brazilian Federal Government issued Provisional Act 579, enacted as Law 12,783, related to the extension of the concessions granted prior to Law 9,074, aiming to decrease the sector’s charges and achieving tariffs that are more reasonable. This legislation changed the rules applicable to certain concessions, and implemented new bidding process rules utilities, and adjustments to tariffs.

On August 18, 2015, the Brazilian Federal Government published Provisional Act 688, which was converted into Law 13,203, on December 8, 2015, which created the mechanism of voluntary re-negotiation of hydrological risks affecting the hydroelectric generation companies. In the same law, the government changed the bidding process rules concessions too.


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On June 22, 2016, the Brazilian Federal Government issued Provisional Act 735, which was converted into Law 13,360, enacted on November 17, 2016, which, among other measures, altered Chapter III of Law 12,783, governing competitive bids for energy generation, transmission and distribution concessions, and related services.

On July 2017, the MME organized two public consultation proceedings with the purpose of gathering contributions from sectorial agents to improve the national electric energy sector and update its regulatory framework.

On February 9, 2018, the MME submitted for analysis by the Brazilian President a draft bill including several proposed changes to the industry regulation. Among other issues addressed by the MME in the draft of the bill, we highlight:

•

Divestment of hydro power plants. In case of divestment of hydro power plants, the new concession would be granted by means of payment of compensation to the government and it would not be subject to the quota regime established by Law 12,783/2013 (for generation concessions renewed in accordance with Law 12,783/2013, the energy produced by the power plant must be sold to all distributors in Brazil according to a quota system);

•

Expansion of the free market. The consumption requirement for the characterization of free customers would be reduced. Currently, free customers must have an energy load of 3MW. Between 2020 and 2024, the load criteria qualifying the free customer would vary from 2 MW to 300kW. By 2026, there would not be a minimum energy load required, as long as the free customer is connected to tension equal or higher than 2,3kV;

•

Incentives for renewable energy. MME’s proposal tends to reduce incentives granted to renewable energies through discount over connection tariffs. Such discount may be subject to certain conditions;

•

Hydrological risk. The hydrological risk of differences in power production due to a hydrological scenario would exclude: (i) generation in disregard of the merit order which means dispatching energy to the grid in disregard of the ascending price raking for energy generation, (ii) anticipation of delivery of firm energy to the system of relevant power plants, and (iii) restriction to the supply of energy to the grid due to delay in the transmission system; and

•

Separation between energy consumption and firm energy. A timeline for implementation of the legislative model that separates the charges for firm energy added to the grid and energy consumption.

Furthermore, it is under analysis in Congress the Bill of Law 622/2015, which establishes a deadline, defined in 2017, for the application of discounts not lower than 50% in tariffs for use of the transmission and distribution systems (TUST and TUSD) for projects using alternative energy sources such as solar, wind, biomass, and qualified cogeneration, as stated in Article 26 and paragraphs of Law 9,427/1996. In its status, the bill states that such discounts will stay valid for current grants, even if extended, and for future grants up to December 31, 2027. The bill also imposes on the Federal Government the obligation to create a market mechanism to encourage investments in low-carbon energy sources, to be implemented on January 1, 2027.Currently, Bill of Law 622/2015 is in the Infrastructural Services Commission, awaiting appointment of a rapporteur.

The publication of Law 14,052/2020 and Resolution 895/2020, proposed the reimbursement of agents holding the concession of hydraulic plants in the MRE of the effects: (i) generation in disregard of the merit order which means dispatching energy to the grid in disregard of the ascending price ranking for energy generation, (ii) anticipation of delivery of firm energy to the system of relevant power plants, and (iii) restriction to the supply of energy to the grid due to delay in the transmission system. These effects will be calculated retroactively from 2012 to 2020, updated and remunerated at the ANEEL rate of 9.63%. The amount will then be paid through extension of the plants’ concession. With this new agreement, injunctions are expected to be withdrawn and market deficits to be settled. In this way, the liquidity of the market in the short term and the default in the CCEE should return to their historical values.


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Rationing and Extraordinary Rate Increases

Conflicts of interest between CEMIG and other users of water

The operation of reservoirs for generation of energy by CEMIG requires it to assess the multiple uses of water by other users of the relevant river basin, and this in turn requires it to consider the applicability of a number of factors, including environmental factors, irrigation, waterways and bridges. In periods of severe drought, such as the one beginning in 2013, CEMIG was actively involved in monitoring and forecasting the levels of reservoirs and in maintaining a dialogue with public authorities, civil society and users. While CEMIG engages other essential users and takes into account societal interests with respect to its water use, competing interests with respect to the use of water could, subject to certain minimum limits established by law, affect the use of water in our operations, which in turn could affect our operating results or financial condition. Potential conflicts between CEMIG and other users are monitored through CEMIG’s active participation in River Basin Committees, and also in the related Technical Boards and Working Groups, where users of water, organized civil society and public authorities are represented. CEMIG participates in 5 River Basin Committees of rivers under federal control, and 20 River Basin Committees of rivers under local State control. CEMIG also monitors news published in various media outlets, receives comments and complaints during the periods of floods or drought, and acts to resolve any conflicts with communities living in the river basins where it has hydroelectric plants.

For new projects, CEMIG prepares a socio-environmental impact study, and carries out public hearings with all interested parties, where suggestions in assessing any potential conflicts are analyzed. When the project is operational, a Plan for Environmental Conservation and Use of the Artificial Reservoir Surroundings (‘Plano Ambiental de Conservação e Uso do Entorno de Reservatório Artificial’) is prepared with the participation of stakeholders. This plan is intended to govern conservation, recovery, use and environmental protection of the reservoir and its surrounding area in a balanced way, complying with the applicable legislation, the needs of the project and the demands of society.

CEMIG also conducts a program called Proximidade (‘Proximity’), which coordinates activities aimed at improving the relationship with affected communities. Through this program, CEMIG hosts public meetings that cover topics such as the operational and security procedures in its hydroelectric plants; climate conditions; and environmental aspects. CEMIG also provides opportunities for the public to take guided tours of plant facilities. By means of the Proximidade program, CEMIG also receives comments and complaints from the affected population and establishes partnerships with local community leaders, public entities, the local media and other actors responsible for safety and flood, including Civil Defense associations, the Fire Brigade and the Military Police.

Finally, CEMIG uses a risk management system to analyze scenarios and estimate the degree of financial exposure to risks, considering the probability of each event, and its impact. In the scenarios related to potential conflicts with other users, CEMIG also evaluates the effects arising from prolonged droughts, which may lead to an increase in competition for water between the energy sector and other users, and the risks arising from consequences of floods due to excessive rain.

Concessions

We conduct most of our activities in generation, transmission and distribution of energy through concession contracts executed with the Brazilian Federal Government. The Brazilian Constitution requires that all concessions for public services must be subject to competitive tenders. In 1995, in an effort to implement these provisions of the Constitution, the Federal Government instituted certain laws and regulations, collectively known as the Concessions Law, which govern bidding procedures in the energy sector.

Transmission:

On December 4, 2012, CEMIG signed the second amendment to transmission contract 006/97, which extended the concessions under such contract for 30 years, in accordance with PA 579, beginning on January 1, 2013. This resulted in an adjustment to the RAP from these concessions, reducing the revenue from those concessions. The Brazilian Federal Government has compensated us for the reduction of the RAP in part and, through Ministerial Order No.


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120/2016, the Mining and Energy Ministry defined that the amounts referring to assets in commercial operation prior to 2000 that had not yet been compensated, would become part of the Regulatory Remuneration Base - BRR of electric energy transmission concessionaires and a revenue related to their remuneration would be calculated. From July 2017, the transmission companies began to receive revenue from these assets until these assets are effectively amortized.

Generation contracts:

In the years 2014 and 2015, Brazil experienced a severe drought culminating in further alterations to the regulatory framework, established by Provisional Act 688/15 and later converted into Law 13,203/15. This law, among other measures, significantly altered Law 12,783/13, creating a mechanism of voluntary renegotiation of hydrological risks, since they affect the hydroelectric generation companies, and changing the rules for bidding for certain hydroelectric generation concessions. Subsequently, in 2016, other changes were introduced to the sector by Provisional Act 735/16, enacted as Law 13,360/16, which, among other measures, changed Chapter III of Law 12,783/13, which relates to bidding for energy generation, transmission, and distribution concessions.

Following publication of the tender documents for Generation Auction No. 12/15 on October 7, 2015, which included the new regulatory provisions for renewal of concessions of existing plants stipulated by Law 13,203/15, CEMIG’s Board of Directors authorized our participation in Generation Auction No. 12/2015, and CEMIG GT was successful at this auction, held at the B3 on November 25, 2015. CEMIG won concessions for Lot ’D’ – which comprises the concessions for 18 hydroelectric plants: Três Marias, Salto Grande, Itutinga, Camargos, Cajuru, Gafanhoto, Martins, Marmelos, Joasal, Paciência, Piau, Coronel Domiciano, Tronqueiras, Peti, Dona Rita, Sinceridade, Neblina and Ervália. The total installed capacity of these plants is 699.5 MW, and their guaranteed basic offtake is 420.2 MW average.

These concession contracts have a period of 30 years beginning in January 2016 and expiring in January 2046 and, during the first half of 2016, were assigned by CEMIG GT to 7 wholly owned subsidiaries created for commercial operation of these concessions (CEMIG Geração Camargos, CEMIG Geração Itutinga, CEMIG Geração Três Marias, CEMIG Geração Volta Grande, CEMIG Geração Leste, CEMIG Geração Oeste and CEMIG Geração Sul).

On September 9, 2020, the Law 14,052 was issued, changing the Law 13,203/2015, and establishing new conditions for renegotiation of hydrological risk in relation to the portion of costs incurred due to the GSF, borne by the holders of hydroelectric plants participating in the MRE between 2012 and 2017, when there was a crisis in water sources.

The aim of this new law is to compensate the holders of hydroelectric plants participating in the MRE for non-hydrological risks caused by:

Generation ventures classified as structural, related to bringing forward of physical guarantee of the plants;

II.

The restrictions on start of operation of the transmission facilities necessary for outflow of the generation output of structural projects; and

III.

Generation outside the merit order system, and importation.

This compensation will take the form, of extension of the grant of concession or authorization to operate, limited to 7 years, calculated based on the parameters applied by ANEEL.

On December 1, 2020, ANEEL issued its Normative Resolution 895, which established the methodology for calculation of the compensation, and the procedures for renegotiation of hydrological risk. To be eligible for the compensations under Law 14,052, the holders of hydroelectric plants participating in the MRE are required to:

Cease any legal actions which claimed exemption from, or mitigation of hydrological risks related to the MRE;

II.

Relinquish any claims and/or further legal actions in relation to exemptions from or mitigation of hydrological risks related to the MRE; and

III.

Not to have renegotiated hydrological risk under Law 13,203/2015.


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On March 2, 2021, the CCEE sent to ANEEL the calculations for the concessions’ extensions in the Free Market (‘ACL’) that have opted to accept the conditions proposed by ANEEL Normative Resolution 895/2020 and Law 14,052/2020. The Company’s management is awaiting ratification and publication by ANEEL of its extensions of the concession grants, for subsequent submission to the Company’s governance bodies for approval. Thus, no impact arising from this subject has been recorded in the financial statements on December 31, 2020.

Based on Resolutions 2,919/2021 and 2,932/2021, released by ANEEL, the Company's plants had the following concession terms extended:


Power plant	Capacity (MW)	Concession extension (days)	New Term of Concession
Emborcação	1,192	672	05/26/2027
Nova Ponte	510	750	08/12/2027
Irapé	399	934	09/19/2037
Três Marias	396	2,555	01/03/2053
Salto Grande	102	2,555	01/03/2053
Sá Carvalho	78	635	08/28/2026
Rosal	55	1,314	12/13/2035
Others (1)	353	-	-

(1)

With the approval of Law 14,120/2021, the Resolution No. 2,919/2021 also assured the right of reimbursement for the generation plants of Lot D. Their concession extension reached the maximum allowed (seven years/ 2,555 days).

Distribution contracts:

In relation to the extension of the distribution concession contracts, CEMIG D, in accordance with Law 12,783/2013, Decree 7,805/2012 and Decree 8,461/2015, indicated acceptance of the extension of its concession contracts, and signed the Fifth Amendment to its Concession Contract in December 2015. This amendment guarantees extension of the foregoing concessions for an additional 30 years, from January 1, 2016, until January 2, 2046. The new amendment also requires CEMIG’s compliance with more stringent rules regarding service quality and with respect to CEMIG’s economic and financial sustainability, which must be met during the full 30 years of the concession.

Such compliance will be annually assessed by ANEEL, and if there is non-compliance, the concessionaire may be obliged to arrange for capital contributions by its controlling shareholders. Non-compliance for two consecutive years, or for five non-consecutive years, will result in forfeiture of the concession.

Regulatory Charges

Global Reversion Fund and Public Use Fund – RGR and UBP

In certain circumstances, power companies are compensated for assets used in connection with a concession if this concession is eventually revoked or is not renewed. In 1971, the Brazilian Congress created a Global Reversion Fund (Reserva Global de Reversão, or ‘RGR’), designed to provide funds for such compensation. In February 1999, ANEEL revised the assessment of a fee requiring all distributors, transmission companies and certain generators operating under public service regimes to make monthly contributions to the RGR at an annual rate equal to 2.5% of the company’s fixed assets in service, but not to exceed 3.0% of total operating revenues in any year. In recent years, the RGR has been used mainly to finance generation and distribution projects.

The Brazilian Federal Government has imposed a fee on IPPs reliant on hydrological resources, except for SHPs and generators under the public services regime, similar to the fee levied on public-industry companies in connection with the RGR. IPPs are required to contribute to the Public Use Fund (Fundo de Uso de Bem Público, or ‘UBP’), according to the rules of the corresponding public bidding process for the granting of concessions. Until December 31, 2002, Eletrobrás received the UBP payments. Since then, they have been paid directly to the Brazilian Federal Government.


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Since January 2013, the Global Reversion Fund has not been charged to: (i) any distributors; (ii) any transmission or generation utilities whose concessions have been extended under Law 12,783; or (iii) any transmission utilities that started their bidding procedure on or after September 12, 2012.

Fuel Consumption Account – CCC

The Fuel Consumption Account (Conta de Consumo de Combustível, or ‘CCC’), was created in 1973 to generate financial reserves to cover the high costs associated with the use of thermoelectric energy plants, especially in the Northern Region of Brazil, due to the higher operating costs of thermoelectric plants compared to hydroelectric plants. All energy companies were required to contribute annually to the CCC. Annual contributions were calculated based on estimates of the cost of fuel needed by the thermoelectric energy plants in the following year. The CCC was then used to reimburse generators operating thermoelectric plants for a substantial portion of their fuel costs. Starting in 2013, CCC's expenditures are included in the annual budget of the CDE. Eletrobrás managed the CCC and, as of May 2017, it has been managed by CCEE pursuant to Law 13,360/2016.

Charge for the Use of Water Resources

With the exception of Small Hydroelectric Plants, all hydroelectric utilities in Brazil must pay fees to Brazilian states and municipalities for the use of hydrological resources. The amounts are based on the amount of energy generated by each utility and are paid to the states and municipalities where the plant or the plant’s reservoir is located.

Energy Development Account – CDE

In 2002, the Brazilian Federal Government created the CDE to be in effect for 25 years, funded by: (i) annual payments made by concessionaires for the use of public assets; (ii) penalties and fines imposed by ANEEL; and (iii) since 2003, the annual fees to be paid by agents offering energy to final customers, by means of a charge to be added to the rates for the use of the transmission and distribution system. The amounts are adjusted annually. The CDE was created to support: (1) development of energy production throughout the country; (2) production of energy from alternative sources; and (3) universalization of energy services throughout Brazil. With the enactment of Law 12,783/2013, these fees were used to contribute to reduction of energy rates. The CDE is managed by CCEE.

Under the New Industry Model Law, failure to pay the contribution to the RGR, the PROINFA Program, the CDE or any payments for purchases of energy in the regulated market prevents the defaulting party from receiving a rate readjustment (except for an extraordinary review) or receiving resources arising from the RGR or CDE.

ANEEL Inspection Charge – TFSEE

The Energy Services Inspection Charge is an annual tax charged by ANEEL for its administrative and operating costs. It is calculated according to the Tariff Regulation Procedure (Procedimento de Regulação Tarifária, or ‘Proret’) – (Subsection 5.5: Energy Services Inspection Charge) based on the type of service provided (including independent production), and is proportional to the size of the concession, permission or authorization. It is limited to 0.4% of the annual economic benefit, considering the installed capacity, earned by the concessionaire, permit holder or authorized party, and must be paid directly to ANEEL in 12 monthly installments.

Energy Reallocation Mechanism

The Energy Reallocation Mechanism (Mecanismo de Realocação de Energia, or ‘MRE’), attempts to mitigate the risks involved in the generation of hydroelectric power by mandating that all hydroelectric power generators share the hydrological risks within the Brazilian grid. Under Brazilian law, the revenue from sales by generators does not depend on the amount of energy they in fact generate, but on the ‘Guaranteed Energy’ or ‘Assured Energy’ of each plant, indicated in each concession agreement.


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Any imbalances between the power generated and the Assured Energy is covered by the MRE. In other words, the MRE reallocates the energy, transferring a surplus from those who generated more than their Assured Energy to those who generated less than their Assured Energy. The volume of energy generated by the plant, either more or less than the Assured Energy, is priced pursuant to an ‘Energy Optimization Rate,’ which covers the operation and maintenance costs of the plant. This additional revenue or expense is accounted monthly by each generator.

The MRE is efficient in mitigating the risks of individual plants that have adverse hydrological conditions in a river basin, but it fails in mitigating this risk when low hydrological levels affect the whole grid, or large regions of it. In extreme conditions, even with the MRE, the aggregate generation of the whole system will not attain the levels of the total Assured Energy, and hydrological generators may be exposed to the spot market. In these conditions, the shortage in hydro resources will be compensated by greater use of thermal generation, and spot prices will be higher.

In 2014, Brazil was subject to very adverse hydrological conditions, which resulted in a lower level of hydroelectric generation, and on the full utilization of thermoelectric plants of the system, as noted above. This led the plants of the MRE to generate at levels below their physical guarantee levels, causing an exposure for the generation companies to the short-term market. The proportion of the exposure is calculated by the ratio between the energy generated by all the plants of the MRE and the total of all the physical guarantees. This ratio is called the Generation Scaling Factor (‘GSF’) (Fator de ajuste da energia). In 2014, the GSF was 0.91, which indicates that the generation companies had their physical guarantee reduced by 9% in that year. In 2015, this exposure continued to occur, despite of a slightly better hydrology, but with the continued thermal dispatch and lower energy consumption the GSF closed the year at 0.84.

During 2015, the low values of GSFs along with high spot prices again left producers of hydroelectric generation with high financial exposure. Thus, starting in March 2015, generators began to obtain court injunctions to prevent such exposure. Such injunctions claimed that the GSF’s calculation methodology was incorrect and that it caused undue exposure to producers. From March to September, there was an exponential increase in the number of injunctions issued, which led to a paralysis of the market. In order to address this condition, the Brazilian Federal Government proposed (by means of Provisional Act 688) the renegotiation of the hydrological risk, enabling generators with Free Market contracts to transfer the exposure to customers in exchange for a risk’s premium payment to be deposited in the so-called tariff band deposit account (the tariff band surcharges are deposited in such account and transferred to the distribution concessionaires) and would be indemnified for the losses suffered in 2015 by means of, among other measures, an extension of their power generation grants (concessions or authorizations, as the case may be) for up to 15 years. In other words, hydroelectric power plants would recover the costs incurred with GSF deficits retroactively to January 2015, and such recovery would form a ‘regulatory asset,’ which would be amortized over the term of the concession/authorization. If the remaining concession/authorization period is insufficient (i.e. not long enough to amortize the regulatory asset), generating companies would have a concession/authorization extension (limited to 15 years). To be able to use the mechanism the companies must waive all claims filed and all injunctions obtained, as well as waive any further rights they would have in connection with any such legal action. This mechanism enabled plants with contracts signed in the regulated market and the free market to renegotiate them. However, the system and mechanism for renegotiating are different in the two markets. In both, this mechanism functions as a hedge, in which the generators bear the high cost of reserve of energy, and they receive the amount stipulated by the spot market price for their generation.

In the Free Market, the system did not have the same acceptance levels that were present in the regulated market, since the value of the risk premium was too high and, to hedge their GSF exposure, the generation companies would have to acquire reserve energy contracts. For these reasons and considering that there are other alternatives available in the free market to mitigate the hydrological risks, generation companies deemed the voluntary negotiation inefficient. Consequently, acceptance of the mechanism by the regulated market was 90%. However, it was not accepted by the free market.


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In 2023, the average GSF stood at 0.90 still impacted by a hydrological condition below the historical average and lower reservoir levels. The chart below presents the average price and GSF for the periods shown:

PLD – Spot Price (Preço de Liquidação de Diferenças, or ‘PLD’))

Charges for Use of the Distribution and Transmission Systems

ANEEL oversees rate regulations that govern access to the distribution and transmission systems and establish rates: (i) TUSD and (ii) TUST. Additionally, distributors of the South, Southeast and Midwest parts of the grid pay specific charges for transmission of energy generated at Itaipu Hydro Plant. All these rates and charges are set by ANEEL. The following is a summary of each rate or charge:

TUSD

The TUSD is paid to a distribution company by generation companies, other distributors, and customers, for the use of the distribution system to which they are connected. It is adjusted annually according to an inflation index, the variation in transmission costs, and regulatory charges. This adjustment is passed to customers of the distribution network in the Annual Rate Adjustment or Reviews.

Law 9,427/96 defines the application of discounts not lower than 50% in tariffs for use of the distribution and transmission systems (TUSD and TUST) for projects using alternative energy sources such as solar, wind, biomass and qualified cogeneration, as stated in his article 26 and paragraphs.

TUST

The TUST is paid by generators, distributors, and free customers, for the use of the basic transmission grid to which they are connected. It is adjusted annually according to an inflation index and taking into account any adjustment to the annual revenue of the transmission companies. According to criteria established by ANEEL, owners of the different parts of the transmission grid were required to transfer the coordination of their facilities to the ONS in return for receiving regulated payments from the transmission system users. Generation and distributors, and free customers, also pay a fee for exclusive transmission connections to some transmission companies. The grantor sets the fee for a 12-month period and it is paid monthly through the issuance of invoices.


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As mentioned above, this tariff may suffer changes regarding the application of discounts for generators using the low-carbon energy sources defined in Article 26 and paragraphs of Law 9,427/1996.

Distribution rates

Distribution rates are subject to review by ANEEL, which has the authority to adjust and review rates in response to changes in energy purchase costs, charges payments or transmissions payments, or other factors related to market conditions. ANEEL divides the costs of all distributors into: (1) costs that are beyond the control of the distributor, or ‘Parcel A’ costs; and (2) costs that are under the control of the distributor, or ‘Parcel B’ costs. The rate adjustment is based on a formula that takes into account the division of costs between the two categories.

Parcel A costs include, among others, the following:

•

Regulatory Charges (CDE, TFSEE and PROINFA);

•

Costs of energy purchased for resale (CCEARs, power from Itaipu, and bilateral agreements); and

•

Transmission charges (National grid, the Transmission Frontier grid, transport of energy from Itaipu, use of network for connection to other transmission companies, use of networks of other distributors, and the ONS).

Parcel B costs are those that are within the utility’s control, and include:

•

Return on investment;

•

Taxes;

•

Regulatory default;

•

Depreciation costs; and

•

Costs of operation of the distribution system.

In general, Parcel A costs are fully passed through to customers. Parcel B costs; however, are adjusted for inflation in accordance with the IPCA inflation index adjusted by the X Factor. Energy distributors, according to their concession contracts, are also entitled to periodic reviews. These reviews mainly aim: (i) to ensure necessary revenues to cover efficient Parcel B operating costs and adequate compensation for investments deemed essential for the services within the scope of each company’s concession; and (ii) to determine the X factor.

The X factor is used to adjust the proportion of the change in the IPCA index that is used in the annual adjustments and to share the company’s productivity gains with final customers.

In addition, distribution concessionaires are entitled to an extraordinary review of rates, on a case-by-case basis, in the event of unusual circumstances, to ensure their financial balance and compensate them for unpredictable costs, including taxes that significantly change their cost structure.

Item 4A. Unresolved Staff Comments

Not Applicable.


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Item 5. Operating and Financial Review and Prospects

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s consolidated financial statements and the related notes as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021, contained elsewhere in this annual report. See Item 18, “Financial Statements.” This discussion intends to provide the reader with information that will assist in understanding the Company’s financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. It also discusses certain performance metrics that management uses to assess the Company's performance. Additionally, the discussion in this section provides information about the financial results of each of the Company's business segments in order to provide a better understanding of how each of those segments and its results of operations affect the financial position and results of operations of the Company as a whole. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information” or in other parts of this annual report.

The financial information discussed below has been derived from the consolidated financial statements which have been prepared and presented in accordance with IFRS as issued by the IASB.

Basis of Preparation

Statement of compliance

On April 30, 2024, the Company’s Audit Committee authorized the issuance of the consolidated financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021.

Operating Segments

The operating segments of the Company reflects their management and their organizational structure, used to monitoring the Company’s results. The Company also operates in the gas market, through its subsidiary Gasmig, and in other businesses with less impact on the results of its operations.

The segment information is disclosed separately into the following 6 reportable segments:

Generation: Comprises the production of energy from hydroelectric and wind facilities.

Transmission: Comprises the construction, operation and maintenance of transmission lines and substations.

Trading: Comprises the commercialization of energy and provision of related services. In the third quarter of 2021 the Company began the process of segregation of the commercialization business, with partial transfer from Cemig GT to the Company. There was no change in the Company’s corporate strategy of serving the market with the purpose of energy delivery to its clients.

Distribution: Comprises the provision of energy distribution services, including operation and maintenance of the related infrastructure and services.

Gas: Comprises the industrial, institutional and residential exploitation of piped gas distribution and commercialization services in the State of Minas Gerais.

Investees: Comprises the management of the equity interests in which the company does not have shareholding control, in line with the Company’s business strategies. The results of the subsidiaries Gasmig and Cemig Sim are also included in this segment, since their management, too, is linked to the CemigPar management unit.

Transfer of energy from the generation activity to the trading activity comprises a transaction between segments, since it consists of obtaining of revenue from the sale of energy generated, and costs for purchase of energy to be traded - these are measured at sale prices estimated in accordance with criteria based on the Company’s model for management of these businesses, using market prices as a reference.


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Operating Results

Principal Factors Affecting our Financial Performance

Analysis of Energy Sales

Energy rates in Brazil, related to energy distributors’ sales to regulated customers, are set by ANEEL, which has the authority to readjust and review rates in accordance with the applicable provisions of the concession contracts. See “Item 4: The Brazilian Power Industry—Tariffs”.

We charge regulated customers for their actual energy consumption during each 30-day billing period at specified rates. Certain large industrial customers are charged according to the energy capacity contractually made available to them by us, with adjustments to those rates according to consumption during peak demand time, as well as capacity requirements that exceed the contracted amount.

In general, rates on energy that we purchase are determined by reference to the capacity contracted for as well as the volumes actually used.

The following table sets forth the average rate (in Reais per MWh) and volume (by GWh) components of energy sales for the periods indicated. The term ‘average rate’ refers to revenues for the relevant class of customers divided by the MWh used by such class and does not necessarily reflect actual rates and usage by a specific class of end-users during any particular period.


Year ended December 31,	2023		2022		2021
Energy sales:
Average rate to final customers (R$/ MWh)
Residential rate		892.66		903.10		994.43
Industrial rate		326.35		329.10		322.41
Commercial rate		666.81		687.17		662.38
Rural rate		730.66		662.79		645.45
Public services rate and other		663.40		613.96		646.24

Total sales to final customers (GWh)
Residential customers		12,092		11,217		11,186
Industrial customers		18,088		18,204		16,361
Commercial customers		9,469		8,957		8,334
Rural customers		3,063		3,093		3,975
Public services and other customers		3,057		3,394		3,373
Average rate (R$/ MWh)		595.97		587.65		616.83
Total revenues (R$ million)		27,277		26,365		26,665

Sales to concession holders:
Volume (GWh)		17,328		16,777		10,825
Average rate (R$/ MWh)		241.40		232.10		279.35
Total revenues (R$ million)		4,183		3,894		3,023

Distribution Rates

CEMIG D's periodic tariff review takes place every five years and has the objective of re-evaluating the company's manageable costs, which primarily include the operating costs and the costs of fixed assets that comprise the remuneration and depreciation of these assets. In the tariff review, the grantor applies the methodology for defining efficient operating costs and evaluates the incremental investments made in the asset base since the last review, as well as the write-offs and depreciation of the existing assets, composing a new remuneration base.


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On May 23, 2023, ANEEL approved the tariff review with the insertion of the reversal of R$1,267 million, for consumers in CEMIG’s concession area, regarding the financial component of reimbursement of Pasep/ Cofins, reducing the average effect of CEMIG D’s 2023 tariff adjustment to 13.27%. Such rate was effective starting May 28, 2023 and it will remain the same until May 27, 2024. Such updating had the following components: (i) an increase of 10.10% because of withdrawal of financial components of the previous process; (ii) a decrease of 2.58% due to the effect of the financial components of the current process; and (iii) an increase of 5.75% related to the tariff adjustment index.

The average annual tariff adjustments of CEMIG D in 2023, 2022 and 2021, and the revisions of their respective components were as follows:


	2023			2022			2021
Average Effect to Be Perceived by Consumers		13.27	%		8.80	%		1.28	%
Components
Effect of Withdrawal of Financial Components of the Previous Process		10.10	%		9.45	%		(1.41	)%
Effect of the Financial Components of the Current Process		(2.58	)%		(9.32	)%		(8.80	)%
Tariff Adjustment Index		5.75	%		8.67	%		11.48	%

Transmission Rates

In January 2013, our transmission concession was renewed for another 30 years in accordance with the rules defined in Law 12,783/2013. At that time, there was an Extraordinary Review and transmission revenue was strictly reduced to the amount necessary to cover operation and maintenance costs, being part of the non-reversible assets indemnified.

In 2017, the capital cost of the reversible assets not yet amortized at the time of renewal of the transmission became part of the RAP of transmission concessionaires covered by Law 12,783/2013, according to rules defined in MME Administrative Rule 120/2016. This revenue consists of two components. One refers to the financial component, which corresponds to the cost of capital of the non-indemnified assets for the period from January 2013 to June 2017. During this period, the transmission company remained without any revenue for the assets made available that had not yet been indemnified. The second component, called the economic component, refers to the cost of capital to be paid to the end of the asset lifespan.

According to Technical Note 183/2017, appended to Resolution 2,258/2017, which ratified the RAP calculation for the 2017-2018 cycle, the total value of the cost of capital of assets not indemnified for this cycle was R$370.8 million.

Concerning the readjustment processes, the transmission concession agreement provides for a review every five years. The first review after the concession renewal was to occur in July 2018. However, this review occurred only in 2020 with a retroactive effect from July 2018. The methodology for this review was approved by Normative Resolution 816/2018, which covers a new criterion for valuation of the asset base and captures other revenues for tariff moderation.

In 2023, the second review should have taken place, however this process was postponed by ANEEL to 2024, according to Order 402/2023. The methodology for this review is being proposed by ANEEL through Public Consultation 31/2023, which is still ongoing.

Thus, for 2023, the ordinary process of Annual Readjustment of the RAP took place. The total of the RAPs of CEMIG GT for the 2023–2024 cycle – for Concession Contracts 06/1997, 079/2000, 04/2005 and 06/2011 – was R$1,167 million. Further to the amounts of the RAPs, Adjustment Components (Parcelas de Ajuste, or ‘Pas’) in the amount of -R$24 million were ratified for these concessions. In the previous cycle, the RAPs of these concession contracts totaled R$912 million, and the PA was equivalent to R$14 million. The upper figure for RAP in 2023–2024 reflects the reprofiling of the Financial Component of the Annual Cost of the Assets Within the National Grid of Concession Contract 06/1997.


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In the 2023–2024 cycle, the permitted annual revenue for Concession Contract 06/1997 was equivalent to R$1,085 million, compared to R$826 million related to the previous cycle, an increase of R$259 million. The reprofiling of the Financial Component resulted in an increase in the revenue of R$189 million. The Financial Component for the 2022–2023 cycle was R$157 million and was increased to R$346 million in the 2023–2024 cycle. The IPCA inflation index applied in the adjustment of RAP was equivalent to 3.94%. There was an increase in the RAP for the National Grid, due to new works entering the total during 2022-2023 an increase of R$51 million. The amount of the Adjustment Component ratified for this contract in the 2023–2024 cycle was negative and equivalent to R$39 million.

The RAP of CEMIG GT Itajubá (Concession Contract 079/2000) was R$43 million, a decrease of 4.47% in the 2023–2024 cycle from the previous period, reflecting the IGPM inflation index of the period.

The Adjustment Component for CEMIG GT Itajubá (PA) also has a significant positive value, reflecting the effect of the backdated adjustment of the RAPs for the National Grid, when they underwent Periodic Tariff Review. In this cycle, the Adjustment Component was equivalent to R$16.2 million, of which R$17 million was the effect of the backdated revision of the RAPs for the National Grid. The positive effect of the backdated adjustment lasted until the 2023–2024 cycle since it was divided into three portions to be paid over the remaining years of the revision cycle for this concession contract.

As well as Concession Contracts 06/1997 and 079/2000, CEMIG also holds the concession of Centroeste, with Concession Contract 04/2005, for which the RAP in the 2023–2024 cycle was equivalent to R$30 million. Its value is adjusted in accordance with the IGPM inflation index. The amount of the Adjustment Component ratified for this contract in the 2023–2024 cycle was negative and equivalent to R$0.9 million.

In December 2021, CEMIG GT also acquired the concession holder Sete Lagoas Transmissora de Energia (‘SLTE’), which holds the Concession Contract 006/2011 SLTE, of which the RAP for the 2023–2024 cycle was equivalent to an additional amount of R$9.2 million. This is updated in accordance with the IPCA inflation index. The Adjustment Component of this contract was negative and equivalent to -R$0.1 million.

In December 2023, the ANEEL judged the reconsideration requests to Resolution 3,216/2023, resulting in the publication of new RAP and Adjustment Components for the 2023-2024 cycle, through Order 4,675/2023. According to the aforementioned Order, the RAPs of CEMIG GT's transmission assets in operation now amount to R$ 1,179 million. The main adjustment occurred in the RAP of contract 006/1997, which increased by R$12 million. The Adjustment Components were also rectified, becoming R$10.4 million, resulting in a gain of R$14 million in relation to that approved by Resolution 3,216/2023. The main adjustment of this component was the rectification of retroactive revenues associated with large-scale improvement. The financial effects of the increase in the RAP and adjustments Components will only be realized throughout 2024, when these revenues are effectively received.

Exchange Rates

Substantially all of our revenues and operating expenses are denominated in Reais. However, we have some foreign currency-denominated debt. As a result, in reporting periods when the Real declines against the U.S. dollar or other foreign currencies in which our debt is denominated, our operating results and financial position can be adversely affected even with such foreign currency-denominated debt being hedged. Foreign exchange gain or loss and monetary variation gain or loss may affect our results of operations in periods in which there are wide swings in the value of the Real relative to the U.S. dollar or high inflation. We have several financial and other contracts under which we owe, or are entitled to, amounts in respect of monetary variation as measured by an index of price inflation in Brazil.


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Year Ended December 31, 2023 compared to the Year Ended December 31, 2022

Consolidated

Net revenue

Net revenue increased by 6.93% to R$36,850 million in 2023 from R$34,463 million in 2022, as follows.


(in millions of R$)	2023			2022			Var R$			Var %
Revenue from supply of energy		31,671			30,158			1,513			5.02
Revenue from use of the electricity distribution systems – TUSD		4,417			3,685			732			19.86
CVA (compensation for changes in ‘Parcel A’ items) and Other financial components		(213	)		(1,147	)		934			(81.43	)
Financial component arising from PIS/Pasep and Cofins taxes refunded to customers– realization		1,909			2,360			(451	)		(19.11	)
Transmission revenue
Transmission operation and Maintenance revenue		373			413			(40	)		(9.69	)
Transmission construction revenue		242			407			(165	)		(40.54	)
Interest revenue arising from the financing component in the transmission contract asset		524			575			(51	)		(8.87	)
Generation indemnity revenue		93			47			46			97.87
Distribution Construction revenues		3,899			3,246			653			20.12
Adj expectation of cash flow from indemnifiable financial asset of the distribution concession		149			39			110			282.05
Revenue on financial updating of the Concession Grant Fee		412			467			(55	)		(11.78	)
Energy transactions on the CCEE		146			183			(37	)		(20.22	)
Mechanism for the sale of surplus		(4	)		453			(457	)		(100.88	)
Supply of gas		4,139			4,529			(390	)		(8.61	)
Fine for violation of service continuity indicator		(139	)		(94	)		(45	)		47.87
PIS/Pasep and Cofins credits to be refunded to consumers		—			(830	)		830			(100.00	)
Other revenue		2,316			2,658			(342	)		(12.87	)
Deductions on revenue		(13,084	)		(12,686	)		(398	)		3.14
Net revenues		36,850			34,463			2,387			6.93

Revenue from supply of energy

Total revenue from energy sold to final customers in 2023 was R$31,671 million, or 5.02% higher than the figure for 2022 of R$30,158 million. The main items that affected total revenue from energy sold to final customers were an increase of 2.01% GWh (or R$912 million) of energy sold to final customers year-on-year with an increase of 3.46% (or R$241 per MWh) in the Average rate to final customers.

On June 22, 2022, after an extension of the previous tariffs for 25 days while a decision at the federal level on measures for tariff mitigation were expected, ANEEL ratified the result of Cemig D’s Annual Tariff Adjustment, to be in effect until May 27, 2023, with average effect on customers of 8.80% - its components included average increases of 14.31% for high-voltage customers, and of 6.23% for customers connected at low voltage. For residential customers served at low voltage, the average increase was 5.22%.

This result arises from: (i) variation of 0.66% in the Portion B costs (manageable costs), due to the IPCA inflation index over the 12 prior months, and (ii) direct pass-throughs within the tariff, which had an increase of 12.61%, but which had no economic effect for Cemig D, not affecting its profitability, The capital return increased by 15.5% in relation to the values currently in the tariffs. This increase is mainly due to the increase in the Net Remuneration Base, in view of the investments made by Cemig D since its last tariff review.


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Market Evolution

Sales in CEMIG’s consolidated energy market comprises sales to: (i) Captive customers in CEMIG’s concession area in the State of Minas Gerais; (ii) Free Customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ‘ACL’); (iii) other agents of the energy sector – traders, generators and independent power producers, also in the Free Market; (iv) Distributors, in the ACR Market; and (v) the Wholesale Trading Exchange (Câmara de Comercialização de Energia Elétrica, or ‘CCEE’).

As illustrated in the table below, the total volume of energy sold by CEMIG in 2023 increased by 2.36% as compared to 2022:


GWh (1)	2023		2022		Var %
Residential		12,092		11,217		7.80
Industrial		18,088		18,204		(0.64	)
Commercial, Services and Others		9,469		8,957		5.72
Rural		3,063		3,093		(0.97	)
Public Authorities		956		856		11.68
Public Lighting		1,056		1,138		(7.21	)
Public Service		1,045		1,400		(25.36	)
Subtotal		45,769		44,865		2.01
Own Consumption		30		31		(3.23	)
		—
		45,799		44,896		2.01
Wholesale supply to other concession holders (1)		17,328		16,777		3.28
		—
Total		63,127		61,673		2.36

(1)

Includes Regulated Market Energy Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.

Residential: Increase of 7.80% in 2023 compared to 2022, mainly, due to: (i) an increase of 3.00% in the number of consumers; (ii) increase of 4.60% in average monthly consumption per consumer (130.4 kwh/month in 2023 compared 124.6 kWh/month in 2022).

Industrial: Decrease of 0.64% in the amount of energy billed to industrial consumers, due to the migration of customers from the captive market to the free market and the retraction of the industrial sector in the state of Minas Gerais in relation to the previous year.

Wholesale supply to other concession holders: The energy sale to other concessionaires increased 3.28% in 2023 compared to 2022, mainly, due to a higher volume of energy sold in this segment.

Public lighting: Consumption was 7.21% lower in 2023, mainly due to the substitution of common light bulbs for LED bulbs, which occurred in some city halls.

Public Authorities: Increase of 11.68% of energy billed for the public power class, due to the slow recovery of activities after the pandemic and the reclassification of customers from the Rural and Public Service classes to the Public Power class, in compliance with REN ANEEL 901/2020, which meant that the previous year still registered a low level of consumption.

Revenue from Use of Distribution Systems (the TUSD charge): This is revenue from charging Free Customers the Tariff for Use of the Distribution System (TUSD) on the volume of energy distributed. In 2023, this revenue was R$4,417 million, compared to R$3,685 million in 2022, an increase of 19.86% year-on-year, mainly reflecting the following:

Increase of 1.62% in the average tariff on free customers in fiscal year 2023, compared to the same period in 2022, partially offset by the reduction in the ICMS rate; and


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The volume of energy transported from January to December 2023 was 4.62% higher than the same period of 2022, due to the increase in consumption by industrial and commercial customers, offset by decrease for irrigation by rural customers.

CVA (compensation for changes in ‘Parcel A’ items) and Other financial components: CEMIG recognizes the difference between actual non-controllable costs (in which the CDE, and energy purchase for resale, are significant components) and the costs that were used as the basis of decision of the rates charged to customers. The amount of this difference is passed through to customers in CEMIG D’s next tariff adjustment. In 2023, this represented an expense of R$213 million, compared to the revenue of R$1,147 million in 2022. This decrease is due, mainly, to an increase in costs with the purchase of electricity for resale and charges for use of the Basic Grid, combined with the reduction in revenue obtained from the Surplus Sales Mechanism (MVE).

Financial component arising from PIS/Pasep and Cofins taxes refunded to customers– realization: The Company recorded revenue from the refund of PIS/Pasep and Cofins credits to consumers in the amount of R$1,909 million in 2023 compared to R$2,360 million in the previous year. This revenue recomposition results from Cemig D's tariff, effective from June 2022 to May 2023, being discounted from the amounts that are being returned to the consumers related to PIS/Pasep and Cofins credits. See Note 13 to the consolidated financial statements.

Transmission operation and Maintenance revenue: The main variations in transmission concession revenue are as follows: (i) infrastructure operation and maintenance revenues were R$373 million in 2023, compared to R$413 million in 2022, a decrease of 9.69%, mainly associated with a decrease of 8.87% in the financial remuneration revenue from the transmission contract assets, which were R$524 million and R$575 million in 2023 and 2022, respectively. This variation is associated mainly with the IPCA variation, which was 4.62% in fiscal year 2023 compared to 5.78% in fiscal year 2022, the basis for the contract remuneration.

Construction revenues (Distribution and Transmission): Construction distribution revenues increased by 20.12% to R$3,899 million compared to R$3,246 in 2022, related to the infrastructure of the electric energy distribution concession. This increase is mainly due to the greater execution of Cemig D's investment plan in relation to the previous year, highlighting the increase in market services.

This revenue is fully offset by construction costs, in the same amount, and corresponds to Cemig D's investment in the year in concession assets.

Revenue from supply of gas: Revenue from supply of gas decreased by 8.61% to R$4,139 million in 2023 compared to R$4,529 million in 2022, due, mainly, to the cost of gas purchased for resale due to lower demand for the purchase of gas for resale and the lower cost of gas purchased during the year.

Revenue from transactions in energy on the CCEE: Revenue from transactions in energy on the CCEE was R$146 million in 2023, compared to R$183 million in 2022, a decrease of 20.22% year-on-year. This lower amount is due, mainly, to the reduction in energy surpluses during this period, which are settled at the CCEE.

Other: Other revenues totaled R$2,316 million in 2023, compared to R$2,658 million in 2022, 12.87% lower year-on-year. The main change relates to subsidies received from the Electricity Offsetting System ('Sistema de Compensação de Energia Elétrica – SCEE'), governing offsetting for distributed generation, released by ANEEL in the 2023 Tariff Review.. The breakdown of the other revenues is presented on Note 27 to the consolidated financial statements.

Deductions from Revenue: Taxes and charges applied to revenue in 2023 were R$13,084 million, or 3.14% higher than in 2022 (R$12,686 million). This increase is substantially due to an increase in revenue compared to the prior year.

Operating costs and expenses

Operating costs and expenses in 2023 were R$30,061 million, comprised of R$28,466 million of costs and R$1,595 million of expenses, which represents an increase of 1.47% as compared to 2022 (R$29,625 million, of which R$27,651 million of costs and R$1,974 million of expenses).

The following table illustrates the components of operating costs and expenses in 2023 and 2022 expressed as a percentage of net revenues:


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in millions of R$	2023			Net revenues (%)		2022			Net revenues (%)		Var. (%)
Energy purchase for resale		(14,648	)		39.75		(14,614	)		42.40		0.23
Charges for use of the national grid		(2,937	)		7.97		(2,671	)		7.75		9.96
Depreciation and amortization		(1,274	)		3.46		(1,182	)		3.43		7.78
Personnel		(1,308	)		3.55		(1,352	)		3.92		(3.25	)
Gas bought for resale		(2,237	)		6.07		(2,735	)		7.94		(18.21	)
Outsourced services		(1,902	)		5.16		(1,706	)		4.95		11.49
Post-employment benefits		(591	)		1.60		(626	)		1.82		(5.59	)
Materials		(140	)		0.38		(148	)		0.43		(5.41	)
Operating provisions		(434	)		1.18		(401	)		1.16		8.23
Expected credit losses (ECL)		(175	)		0.47		(109	)		0.32		60.55
Employees’ and managers’ profit sharing		(157	)		0.43		(83	)		0.24		89.16
Infrastructure construction costs		(4,072	)		11.05		(3,536	)		10.26		15.16
Reversal of provision for doubtful with related party – Renova		(1	)		0.00		54			0.16		(101.85	)
Write-off of financial asset		—			—		(172	)		0.50		(100.00	)
Other operating expenses		(185	)		0.50		(344	)		1.00		(46.22	)
Total operating costs and expenses		(30,061	)		81.58		(29,625	)		85.96		1.47

The following are the main variations in operating costs and expenses between 2023 and 2022:

Energy purchased for resale

Expenses due to energy purchased for resale in 2023 were R$14,648 million, compared to R$14,614 million in 2022, representing an increase of 0.23%. The main factor contributing to such increase was:

Expenses on energy acquired in regulated market auctions increased by 18.18%, totaling R$3,940 million in 2023, as compared to R$3,334 million in 2022, due to (i) a reflection of the annual contractual readjustments, indexed by the IPCA, and the new contracts; and (ii) The expenses on distributed generation (‘geração distribuída’) acquired were R$2,331 million in 2023, compared to R$1,977 million in 2022, 17.91% higher. This reflects the higher number of generation units installed (249,241 in December 2023, compared to 191,153 in December 2022); and the higher volume of energy injected into the grid (4,720 GWh in 2023, compared to 3.041 GWh in 2022);

This increase was offset by the following factors:

Costs on energy acquired in the Free Market were 6.51% lower, amounting to R$5,612 million in 2023, compared to R$6,003 million in 2022, mainly associated with reduction in the cost of energy purchased related to new purchase contracts made to mitigate the exposure risk.

Decrease in the cost of energy from Itaipu Binacional, which amounted to R$1,207 million in 2023, compared to R$1,644 million in 2022. This variation is mainly due to the 35% reduction in the price of Itaipu's demand, in dollars, from US$24.73KW in 2022 to US$16.19KW (April 2023) and a new regulatory change to US$20.23 in May 2023, defined by resolution.

This is a non-controllable cost for CEMIG Distribution: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment. For further details see Note 28 to the consolidated financial statements.

Charges for use of the national grid

Charges for use of the national grid in 2023 were R$2,937 million, compared to R$2,671 million in 2022, representing an increase of 9.96%. This cost refers to the charges due by the agents of distribution and generation, due to the use


ANNUAL REPORT AND FORM 20-F \| 2023	102

of the facilities and components of the basic network, as well as the electric system, and the amounts to be paid and/or received by the Company are defined by means of a resolution by ANEEL, mainly, due to the increased need for thermal dispatches in 2023 due to high temperatures, as well as the operation of reserve energy contracts resulting from the Simplified Competitive Procedure of 2021 (PCS), with a consequent increase in reserve energy charges in 2023. This is an non-manageable costs, and the difference between the amount considers as a reference for tariff definition and the costs actually incurred is offset in the subsequent tariff adjustment. For more information, please refer to explanatory note No. 13b to the consolidated financial statements.

Gas bought for resale

In 2023 the Company reported expense of R$2,237 million on acquisition of gas, 18.21% less than in 2022 of R$2,735 million. This is primarily due to a reduction in the cost of gas acquired for resale due to lower consumption impacting the demand of gas for resale and the lower cost of gas during the year.

Outsourced services

The expense for outsourced services was R$1,902 million in 2023, compared to R$1,706 million in 2022, representing an increase of 11.49%. The main variations that explain this increase are: (i) increase of 20.20% in expenses with maintenance and conservation of electrical facilities and equipment, being R$708 million in 2023, compared to R$589 million in 2022; and (ii) increase of 19.18% in information technology expenses, being R$174 million in 2023, compared to R$146 million in 2022.

Post-employment benefits

The impact of the Company's post-employment benefits on 2023 operating income was an expense of R$591 million compared to an expense of R$626 million in 2022. This decrease is mainly due to the voluntary election of active employees to the new health plan, called Premium Plan, offered by the Company.

Operating provisions

Operating provisions in 2023 totaled R$434 million, compared to R$401 million in 2022, an increase of 8.23%. This variation is due to an increase in the provisions for labor contingencies, which were R$120 million in fiscal year 2023, compared to R$98 million in fiscal year 2022.

Expected credit losses (‘ECL’)

Expected credit losses increased 60.55% to R$175 million in 2023 compared to R$109 million in 2022, due to deterioration of credit risk among residential consumers related to economic factors which drove down the credit rating for some residential consumers.

Employees´ and managers´ profit sharing

The expense on employees and managers profit sharing was R$157 million in 2023, compared to R$83 million in 2022. The increase of 89.16% was due mainly to the unions' total adherence to the 2023 collective agreement compared to 2022, the year in which some unions did not adhere to the agreement.

Infrastructure construction costs

Infrastructure construction costs in 2023 totaled R$4,072 million, or 15.16% more than in 2022 (R$3,536 million). The difference mainly arises from the higher volume of investments in distribution in 2023, compared to 2022, especially in sub-transmission, in expansion, reinforcement and improvement of high-voltage infrastructure.


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This line records the Company’s investment in assets of the concession in the period, and is fully offset by the line Construction revenue, in the same amount.

Share of profit (loss), net, of associates and joint ventures

In 2023, CEMIG reported a gain by the equity method of R$432 million, compared to R$843 million reported in 2022. This decrease is mainly associated with the following factors that occurred in 2022 and consequently did not occur in 2023: (i) recognition of receivable in the amount of R$161 million, in 2022, related to the payment made by AGPar to FIP Melbourne associated with the Agreement arising from Arbitral Award CCBC-86/2016; and (ii) reversal of provision related to Cemig GT's contractual obligations assumed with the investee Madeira Energia and other shareholders in the amount of R$162 million. Such provision was constituted in 2021, negatively affecting the equity income for that period.

Net finance income (expense)

Net finance expense totaled R$379 million in 2023, compared to net finance expenses of R$1,566 million in 2022. This decrease is mainly associated with the following factors:

(i)

depreciation of the dollar against the Real in 2023, of 7.21%, compared to an depreciation of 6.5% in 2022, generating revenues of R$277 million in 2023 and R$338 million in 2022;

(ii)

the fair value of the financial instrument contracted to protect the risks related to the Eurobonds recorded an expense in 2023, in the amount of R$177 million, compared to the expense in the amount of R$438 million in 2022. The variation is mainly due to the increase in the interest curve in relation to the expected growth in the dollar rate against the Brazilian Real;

(iii)

a decrease in 2023 in net financial expenses with the tax credits monetary update related to PIS/Pasep and Cofins resulting from the exclusion of ICMS from its calculation base, amounting to R$41 million in 2023, compared to R$1,294 million in the previous year. This decrease is due to the monetary updating in the second quarter of 2022 of liabilities relating to the part of tax credits corresponding to the last 10 years, in compliance with the legal requirement for distributors to fully allocate the amounts subject to the repetition of debt to the benefit of consumers.

Income Tax and the Social Contribution

Income tax was an expense of R$1,084 million in 2023, compared to an expense of R$26 million in 2022 and income before income tax and social contribution in 2023 of R$6,851 compared to R$4,120 in 2022, thus the variation identified between the periods is due to calculation of income tax and social contribution for the year, reflecting the main changes explained above.

By segment

Distribution

In 2023 the Distribution segment represented net income of R$1,611 million, compared to R$444 million in 2022, representing an increase of 262.8%. The main variations are presented below:

Net revenue: In 2023 our distribution net revenue was R$23,348 million compared to R$20,919 million in 2022, representing an increase of 11.61%, mainly due to:

•

gross electricity supply revenue was R$21,551 million in 2023 compared to R$20,209 million in 2022, representing an increase of 6.64%. The main impacts on revenue are due to the increase of 4.62% in the volume of energy sold in 2023 compared to 2022;


ANNUAL REPORT AND FORM 20-F \| 2023	104

•

revenue from the use of the network - free consumers increase of 19.73% to R$4,448 million, compared to R$3,715 million in 2022 referring to the tariff for the use of the distribution system (TUSD), arising from the charges collected from free consumers on the energy distributed; and

•

taxes and charges on revenue were R$10,053 million in 2023 compared to R$9,442 million in 2022, representing an increase of 6.47%. Complementary Law 194/2022 excluded transmission and distribution charges from the ICMS tax base, however in February 2023, Decree 45,572/2023 added these charges back to the tax base. This led to an increase in the ICMS calculation base and consequently an increase in the taxes and charges levied on revenue. The increase in taxes and charges on revenue is also related to the increase in revenue in the Distribution segment.

The effects of increase in revenue is compensate by CVA and other financial components – recognized in 2023 an expense in the amount of R$213 million, compared to revenue in the amount of R$1,147 million in 2022.

Cost of energy: In 2023, the cost of energy increased by 6.01% to R$12,656 million compared to R$11,938 million in 2022, mainly due to: (i) a 10.83% increase in the electric system usage charges, in the amount of R$3,067 million in 2023, compared to R$2,767 million in 2022; and (ii) an increase of 4.56% in the cost of electricity purchased for resale, in the amount of R$9,589 million in 2023 compared to R$9,171 million in 2022.

Cost of operation: In 2023, the cost of operation was R$8,422 million, compared to R$7,488 million in 2022, representing an increase of 12.49% (or R$935 million), mainly due to: (i) construction costs for assets related to the infrastructure of the electricity distribution concession were R$3,600 million in 2023, compared to R$3,193 million in 2022, representing an increase of 12.75%, mainly due to the greater execution of Cemig D's investment plan in relation to the previous year; and (ii) the operational provisions were R$455 million in 2023 compared to R$398 million in 2022, representing an increase of 14.32%. The main variations that explain this increase are: (i) variation in the provisions for tax contingencies, which were R$97 million in 2023 compared to a net reversal of R$68 million in 2022; and (ii) increase in the net provisions for civil contingencies, which were R$80 million in 2023 compared to R$48 million in 2022.

Transmission

In 2023 the Transmission segment represented a net income of R$465 million, compared to R$350 million in 2022, representing an increase of 32.69%. The net increase in the Transmission segment is mainly driven by a reduction in construction cost, as presented below:

Transmission operation and Maintenance revenue: (i) revenues from construction, reinforcement and improvement of infrastructure were R$241 million in 2023, compared to R$407 million in 2022, a decrease of 40.79%, due, mainly, reflecting the forecast for projects that are in the final stages of execution, resulting in a decrease in the amounts invested in 2023 compared to 2022. In addition, the new projects are in the initial phase, with disbursements associated with the design and definition stages, which have lower costs; and, (ii) decrease of 8.71% in the financial remuneration revenue from the transmission contract assets, which were R$524 million and R$574 million in 2023 and 2022, respectively. This reduction is associated mainly with the IPCA fluctuation, which was 4.62% in fiscal year 2023 compared to 5.78% in 2022, the basis for the contract remuneration.

Construction cost: construction costs were R$172 million in 2023, compared to R$291 million in 2022, a decrease of 40.89%. The reduction reflects the forecast for projects that are in the final stages of execution, resulting in a decrease in the amounts invested in 2023 compared to 2022. In addition, the new projects are in the initial phase, with disbursements associated with the design and definition stages, which have lower costs.

Generation

In 2023 the Generation segment represented net income of R$1,387 million, compared to R$888 million in 2022, representing an increase of 56.19%. This increase is due to (i) the adjustment to the fair value of the financial asset


ANNUAL REPORT AND FORM 20-F \| 2023	105

relating to the indemnity to be received from the assets not yet amortized from various Cemig GT plants; and (ii) a decrease of R$182 million (or 81.5%) in the cost of operation, due to a reduction of R$172 million in materials, outsourced services and other expenses.

Trading

In 2023 the Trading segment represented net income of R$959 million, compared to R$684 million in 2022, representing an increase of 40.20%, mainly due to:

Cost with electricity purchased for resale: The cost of electricity purchased for resale was R$6,318 million in 2023, compared to R$6,880 million in 2022, representing a decrease of 8.17%. This variation is primarily attributed to the decrease in contracted capacity in 2023 compared to 2022. Several significant contracts expired in 2022, prompting the procurement of short-term contracts to compensate for the energy short-term market in 2022. However, foreseeing lower prices in 2023, the procurement portfolio was not replenished at the same level as the previous year's contracts.

This was offset by the following factor:

Revenue from energy transactions in CCEE: The net revenue of the commercialization segment was R$7,686 million in 2023, compared to R$7,918 million in 2022, a decrease of 2.93%. This variation results, mainly, from the reduction in the volume of energy purchased and the variation in the portfolio, with the start of the supply of new contracts, impacting on the average sales price.

Gas

In 2023 the Gas segment represented net income of R$596 million, compared to R$481 million in 2022, representing an increase of 23.9%, mainly due to higher gross margin and the increase in operating income, as well as the increase in cash generation, impacted by the gas purchase costs passed on in the tariffs and by the tariff review.

Investees

The results of the associates and jointly controlled subsidiaries and the Holding Company are evaluated as a single segment in line with the Company's business strategies. The Investees segment presented, in 2023, a net income of R$749 million, compared to a loss of R$1,251 million in 2022.

Year Ended December 31, 2022 compared to the Year Ended December 31, 2021

For this discussion, see our annual report on Form 20-F/A for the fiscal year ended December 31, 2022 filed with the SEC on July 27, 2023.

Liquidity and Capital Resources

Net cash from operating activities

Our net cash from operating activities was R$6,646 million in the year ended December 31, 2023, compared to R$6,544 million in the year ended December 31, 2022 (an increase of R$102 million or 1.6%). The increase primarily reflects:

An increase of R$2,203 million in net income, adjusted for the reconciliation of net cash;

A net decrease of R$2,798 million in operating assets, primarily driven by recoverable taxes (R$2,315 million) and in Receivables from customers, traders and concession holders (R$399 million)), partially offset by concession contractual assets and concession financial assets (R$285 million);

A net increase of R$679 million in operating liabilities, primarily due to taxes payable (R$370 million) and regulatory charges (R$242 million);


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A decrease in Income tax and social contribution tax paid (R$103 million) and interest received (R$37 million), partially offset by (i)an increase in cash inflows from settlement of derivatives instruments (R$105 million), and (ii) an increase in the amount of interest paid on loans and debentures (R$16 million).

Net cash used in investing activities

Our net cash used in investing activities was R$3,969 million in the year ended December 31, 2023, compared to R$3,136 million in the year ended December 31, 2022, due, mainly, to (i) generated from R$3,679 million in investments in contract assets – distribution of gas and energy infrastructure; (ii) generated from R$1,076 million in acquisition of property, plant end equipment; and (iii) investments and redemptions in marketable securities of R$11,238 million and R$12,360 million, respectively.

Net cash used in financing activities

Our net cash used in financing activities was R$2,581 million in the year ended December 31, 2023, compared to R$2,792 million in the year ended December 31, 2022, which is mainly related to R$1,988 million in proceeds from loans and debentures in 2023 (R$1,981 million in 2022), consumption of R$1,823 million in interest on capital and dividends paid in 2023 (R$2,094 in 2022) and payment of loans and debentures in R$2,679 million in 2023 (R$2,613 in 2022).

Capital Management

The Company has the policy of maintaining a solid capital base to maintain the confidence of investors, creditors and the market and to enable the implementation of its investment program and the maintenance of its credit quality, with access to capital markets, seeking to invest in projects that offer minimum real internal rates of return equal to or greater than those provided for in the Long Term Strategy, with the cost of capital for its various businesses as a reference.

The Company monitors capital using a leverage ratio represented by Net Debt divided by Adjusted Earnings before interest, taxes, depreciation and amortization (EBITDA). Net Debt is calculated as the total of loans and debentures, less cash and cash equivalents and marketable securities. Adjusted EBITDA is calculated by non-cash effects. The Company aims to keep its consolidated net indebtedness at or below 2.5 times Adjusted EBITDA.

Indebtedness

The Company’s indebtedness from loans and debentures (current and non-current) as of December 31, 2023 was R$9,831 million, which was comprised of R$2,630 million of current debt and R$7,201 million of non-current debt. R$1,854 million was U.S. dollar-denominated and R$7,977 million was denominated in Reais.

The Company’s indebtedness from loans and debentures (current and non-current) as of December 31, 2022 was R$10,579 million, which was comprised of R$955 million of current debt and R$9,624 million of non-current debt. R$3,960 million was U.S. dollar-denominated and R$6,619 million was denominated in Reais.


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CEMIG’s indebtedness as of December 31, 2023 and 2022, is shown in the following table (in millions of Reais):


	Principal	Annual financial		2023									2022
Financing source	maturity	cost (%)	Currency	Current			Non-current			Total			Total
FOREIGN CURRENCY
Eurobonds (1)	2024	9.25%	US$		1,857			-			1,857			3,975
(-) Transaction costs					(1	)		-			(1	)		(6	)
(±) Interest paid in advance (2)					(2	)		-			(2	)		(9	)

Debt in foreign currency					1,854			-			1,854			3,960
BRAZILIAN CURRENCY
Eletrobrás	2023	UFIR + 6.00% at 8.00%	R$		-			-			-			2
Debt in Brazilian currency					-			-			-			2

Total of loans and financings					1,854			-			1,854			3,962

CEMIG D
Debentures – 3rd Issuance – 3rd Series	2025	IPCA + 5.10%	R$		331			304			635			912
Debentures – 7th Issuance – 1st Series	2024	CDI + 0.45%	R$		271			-			271			815
Debentures – 7th Issuance – 2nd Series	2026	IPCA + 4.10%	R$		3			1,945			1,948			1,865
Debentures – 8th Issuance – 1st Series	2027	CDI + 1.35%	R$		2			500			502			503
Debentures – 8th Issuance – 2nd Series	2029	IPCA + 6.10%	R$		1			529			530			507
Debentures – 9th Issuance – Single Series	2026	CDI + 2.05%	R$		32			2,000			2,032			-
CEMIG GT
Debentures – 9th Issuance – 1st Series	2027	CDI + 1.33%	R$		3			700			703			703
Debentures – 9th Issuance – 2nd Series	2029	IPCA + 7.63%	R$		1			315			316			302
GASMIG
Debentures – 7th Issuance – Single series	2023	CDI + 1.50%	R$		-			-			-			20
Debentures – 8th Issuance – Single series	2031	IPCA + 5.27%	R$		134			958			1,093			1,044
(-) Discount on the issuance of debentures					-			(9	)		(9	)		(12	)
(-) Transaction costs					(3	)		(42	)		(45	)		(42	)

Total, debentures					776			7,201			7,977			6,617

Total					2,630			7,201			9,831			10,579

(1)

In December 2023, Cemig GT concluded a partial redemption of its Eurobonds, in the principal amount of US$ 375 million (US$ 244 million repurchased in December 2022 and US$ 500 million repurchased in August 2021). See Note 22 to our consolidated financial statements.

(2)

Accrued interest to reach the rate of return until maturity (Yield to Maturity) agreed in the Eurobonds contract.

In June 2023, Cemig D concluded its 9th debentures issuance, not convertible into shares, in the amount of R$2.0 billion, in a single series. This issuance has a 3-year term with amortizations in the second and third years and pays CDI plus 2.05% per year interest, based on 252 working days. The total net funds raised were related to cash flow reinforcement, including investments reimbursement.

Cemig GT’s repurchases and redemption of Eurobonds

Cemig GT has engaged in two tender offers and a redemption to reduce the outstanding balance of its Eurobonds. In August 2021, Cemig GT did a tender offer to repurchase US$500 million and in December 2022 Cemig GT did a tender offer to repurchase US$244 million of its Eurobonds. In December 2023, Cemig GT redeemed US$375 million of its Eurobonds, totaling US$1,119 million repurchased. This reduced the principal amount of Eurobonds outstanding to US$381 million, which mature in 2024.


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CEMIG Financing Guarantees

CEMIG has provided total financing guarantees for R$9,831 million on loans and debentures, as of December 31, 2023 and R$10,581 million as of December, 31, 2022 as follows (in millions of Brazilian Reais):


	2023		2022
Promissory notes and Sureties		2,489		4,871
Guarantees and Receivables		2,208		2,663
Corporate Guarantees		4,059		1,998
Receivables		-		2
Unsecured		1,075		1,047

TOTAL		9,831		10,581

Restricted Covenant Clauses

The Company has contracts with covenants related to financial ratios, as follows:


Title - Security	Covenant	Ratio required - Issuer	Ratio required Cemig (guarantor)	Compliance required
Eurobonds CEMIG GT (1)	Net debt / Adjusted Ebitda for the Covenant (3)	2.5 or less	3.0 or less	Semi-annual and annual
3rd, 7th, 8th and 9th Debentures Issuance CEMIG D	Net debt / Adjusted Ebitda	3.5 or less	3.0 or less	Semi-annual and annual
	General indebtedness (Total liabilities/Total assets)	Less than 0.6	-	Annual
Gasmig Debentures (2)	Ebitda / Debt servicing	1.3 or more	-	Annual
	Ebitda / Net finance results	2.5 or more	-	Annual
	Net debt / Ebitda	2.5 or less	-	Annual
8th Debentures Issuance Gasmig	Ebitda/Debt servicing	1.3 or more	-	Annual
9th Debenture Issue CEMIG GT (3)	Net debt / Adjusted Ebitda	3.5 or less	3.0 from Dec. 31, 2022 to June 30, 2026 and 3.5 from Dec. 31, 2026 onwards	Semi-annual and annual

(1)

Adjusted Ebitda corresponds to earnings before interest, income taxes and social contribution on net income, depreciation and amortization, calculated in accordance with CVM Resolution 156, dated June 23, 2022, from which non-operating income, any credits and non-cash gains that increase net income are subtracted, to the extent that they are non-recurring, and any cash payments made on a consolidated basis during such period in respect of non-cash charges that were added back in the determination of Ebitda in any prior period, and increased by non-cash expenses and non-cash charges, to the extent that they are non-recurring.

(2)

Non-compliance with financial covenants implies non-automatic early maturity. If early maturity is declared by the debenture holders, Gasmig must make the payment upon receipt of the notification.

(3)

Non-compliance with financial covenants implies early maturity resulting in the immediate enforceability of payment by CEMIG GT of the Unit Nominal Value or Updated Unit Nominal Value of the Debentures, as the case may be, plus remuneration, in addition to the other charges due, regardless of judicial or extrajudicial notice, notification or interpellation.

The Company is compliant with all covenants as of December 31, 2023.

Research and Development, Patents and Licenses, etc.

We dedicate ourselves to projects that use technological advances not only in energy systems, but also in all fields related to energy, such as development of environmental control, storage energy systems, performance of energy systems and safety optimization. CEMIG invested R$33 million in research projects and Development (‘R&D’) in 2023. This included 16 R&D projects, in several different areas., Some highlights include:

•

Developing of synergic networks applied to distribution network;

•

Development of a methodology for evaluating urban trees of falling risk, using ground penetrating radar (GPR);


ANNUAL REPORT AND FORM 20-F \| 2023	109

•

A future Dispatch Center - Hyper-vision platform of integrated space time conditional awareness, based on artificial intelligence to operate the distribution system;

•

Adaptation of CEMIG’s virtual reality system to integrate with resources of inspection through real time images and group training of field and dispatch teams;

•

Device for individual notification to address emergency case with dams;

•

Tool for defining future prices with optimal portfolio allocation for buying and selling electricity;

•

Ecological Processes: development of new eco-technologies of diagnose and environmental processes (PROECOS Project).

Trend information

As a public service utility, we are subject to regulations issued by the Brazilian Federal Government as described in “Item 4: Information on the Company – The Brazilian Power Industry”. Therefore, any change in the regulatory framework may affect us significantly either with respect to our revenue, if the change relates to prices or with respect to our operating expenses if the change relates to costs incurred to provide service to customers.

As to the question of reliability of supply of energy, the structural capacity of the system is adequate to meet the market’s needs for consumption of energy, and the expansion of generation and transmission capacity currently in development will be able to meet the expected demand for consumption from the market. Rates of growth of energy consumption in Brazil in recent years have been 4.0% (2020-2021) (in part due to recovery from the COVID-19 pandemic); 0.8% (2021-2022) (due to low average temperatures throughout the year and the increase in distributed generation) and 5.28% (2022-2023) (due to a higher average temperatures and a greater economic growth). The Brazilian Federal Government has been successful with the ‘new supply’ auctions starting in 2005 which have made possible the construction of new projects such as the Santo Antônio hydroelectric plant (3,150 MW) and the Jirau hydroelectric plant (3,750 MW), on the Madeira River; the Belo Monte plant (11,233 MW) on the Xingu River; and the Teles Pires plant (1,820 MW) on the Teles Pires River, in accordance with the needs of the distributors for acquisition of energy.

Regarding capital expenditures, for 2024 we plan to make capital investments in relation to our fixed assets in the amount of R$5,345 million, corresponding to our basic program. We expect to allocate these expenditures primarily to the expansion of our distribution system. For more details see item 4 ‘Capital Expenditures’.

Commitments

Option contracts were signed between Cemig GT and the private pension entities that participate in the investment structure of SAAG (comprising FIP Melbourne, Parma Participações S.A. and FIP Malbec, jointly, ‘the Investment Structure’), giving those entities the right to sell units in the Funds that comprise the Investment Structure, at the option of the Funds, in the 84th (eighty-fourth) month from June 2014. The provision of the exercise price of the Put Options will correspond to the amount invested by each private pension plan in the Investment Structure, updated pro rata temporis by the Expanded National Customer Price (IPCA) index published by the IBGE, plus interest at 7% per year, less such dividends and Interest on Equity as shall have been paid by SAAG to the pension plan entities. This option was considered to be a derivative instrument until the early exercise of the option, of accounted at fair value through profit and loss, measured using the Black-Scholes-Merton ('BSM') model. For more details, see Notes 31 and 34 to our consolidated financial statements.

CEMIG and its subsidiaries have commitments that include acquisition of energy from Itaipu, acquisition of energy at auctions, physical quota guarantees and other commitments, as follows as of December 31, 2023: (in millions of Reais):


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	2024		2025		2026		2027		2028		2029 onwards		Total
Purchase of energy from Itaipu		1,096		1,096		1,096		1,096		1,096		20,827		26,307
Purchase of energy – auctions		4,661		4,099		4,218		4,342		4,575		61,220		83,115
Purchase of energy – ‘bilateral contracts’		491		319		99		20		—		—		929
Quotas of Angra 1 and Angra 2		384		383		383		385		386		7,225		9,146
Transport of energy from Itaipu		248		258		266		274		251		4,555		5,852
Other energy purchase contracts		5,431		5,009		4,285		4,071		2,814		25,999		47,609
Physical quota guarantees		834		738		659		581		581		10,699		14,092

Total		13,145		11,902		11,006		10,769		9,703		130,525		187,050

CEMIG and its subsidiaries have loans and debentures, by currency and index, with the respective amortization, as follows: (in millions of Reais):


	2024			2025			2026			2027			2028			2029 onwards			Total
Currency
US dollar		1,857			—			—			—			—			—			1,857

Total, currency denominated		1,857			—			—			—			—			—			1,857
Index
IPCA (1)		470			1,397			1,099			132			403			1,021			4,522
CDI (3)		308			1,233			1,233			733			—			—			3,507
Total by index		778			2,630			2,332			865			403			1,021			8,029
(-) Transaction costs		(4	)		(9	)		(9	)		(4	)		(7	)		(13	)		(46	)
(±) Interest paid in advance		(2	)		—			—			—			—			—			(2	)
(-) Discount		—			(4	)		(4	)		—			—			—			(8	)

Overall total		2,629			2,617			2,319			861			396			1,008			9,830

(1)

Expanded National Customer Price (IPCA) Index,

(2)

Fiscal Reference Unit (Ufir / RGR)

(3)

CDI: Interbank Rate for Certificates of Deposit,

CEMIG and its subsidiaries have contracts containing a lease that are, in their majority, indexed to the IPCA inflation index on an annual basis. Below is an analysis of maturity of lease contracts:


Years	(R$ million)	Consolidated (nominal)
2024			80
2025			90
2026			79
2027			67
2028			34
2029 to 2048			538

Undiscounted values			888

Embedded interest			(455	)

Lease liabilities			433

Critical Accounting Estimates

For this discussion, see our audited consolidated financial statements included elsewhere in this annual report.


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Item 6. Directors, Senior Managers and Employees

Directors and Senior Management

The Company is managed by the Board of Directors and the Executive Board. The Board of Directors of the Company comprises eleven members, of which one shall be the Chair and another the Deputy Chair. The Executive Board has seven Executive Officers, who may be shareholders, resident in Brazil, elected by the Board of Directors for a period of two years, subject to the requirements of the applicable law and regulations. Re-election for a maximum of three further consecutive periods of office is permitted. The structure and composition of the Board of Directors and the Executive Board shall be identical in the wholly owned subsidiaries CEMIG Distribuição S.A and CEMIG Geração e Transmissão S.A., with occasional exceptions if approved by the Board of Directors.

Board of Directors

The Board of Directors meets, ordinarily, at least once a month and, extraordinarily, whenever called by its Chair, Deputy Chair, or by one third of its members, or by the Executive Board. Its responsibilities include setting the corporate strategy, general orientation of CEMIG’s businesses, approval of significant transactions, and election, dismissal, and monitoring of the Chief Officers (members of the Executive Board).

All the members of the Board of Directors are elected by the General Meeting of Shareholders. With exception of the member of the Board of Directors representing the Employees, no other member of the Board of Directors has an employment contract with CEMIG or with any subsidiary that provides any benefit in the event of its rescission.

The following rules apply to the composition of the Board of Directors:

The following two groups of shareholders each have the right to elect one member, in a separate vote, in accordance with the applicable legislation: (i) the minority holders of common shares, and (ii) the holders of preferred shares;

At least 25% (twenty-five per cent) of the members must be independent, or, under Article 141 of Law 6,404/1976, at least one of them if there is a decision for the minority shareholders to exercise their option to use the multiple vote mechanism;

The employees have the right to elect one member, subject to the terms of Federal Law 12,353 of December 28, 2010, as applicable;

In any event, the majority of members shall be elected by the controlling shareholder of the Company.

Composition of the Board of Directors:


Board of Directors
Nomination	Position	Date of first appointment
Márcio Luiz Simões Utsch (1)	Chair	March 25, 2019
Vacant	Member	n/a
Marcus Leonardo Silberman (1)	Member	Feb 25, 2022
José Reinaldo Magalhães (1)	Member	March 25, 2019
Afonso Henriques Moreira Santos (1)	Member	July 31, 2020
Ricardo Menin Gaertner (1)	Member	April 29, 2022
Aloísio Macário Ferreira de Souza (3)	Member	September 29, 2022
Roger Daniel Versieux (2)	Member	April 29, 2022
José João Abdalla Filho (2)	Member	April 02, 2019
Vacant	Member	n/a
Anderson Rodrigues (4)	Member	April 29, 2022

(1)

Elected by State of Minas Gerais and other shareholders.

(2)

Elected by minority shareholders.

(3)

Appointed by the holders of the preferred shares.

(4)

Elected by a representative of the employees.


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Below are brief biographical information about each member of the Board of Directors:

Márcio Luiz Simões Utsch was born in 1959, has a law degree. Principal executive positions: Mesbla S.A. (department store): General Manager, Purchasing and Operations; Gradiente Entertainment (electronics, games): Chief Officer for Sales and Distribution Logistics. Alpargatas S.A.: Joined 1997. CEO from 2003 until retirement, age 60, in 2019.

Marcus Leonardo Silberman was born in 1962, current is the Chief Financial Officer of Itiquira Acquisition Corp (NASDAQ: ITQRU), a Special Purpose Acquisition Company listed on February 3rd, 2021, and focused on Brazilian target growth companies. He is also a Director at CH Global Capital, an Asset Management and Investment Advisory company since April 2019. Head of Latin America M&A at Bank of America Securities, from September 2014 to March 2019. Head of Emerging Markets M&A and a member of the Global Advisory Investment Banking Committee of Credit Suisse, from January 1998 to June 2014. Marcus has more than 25 years of M&A experience and closed more than 50 transactions totaling more than $140 billion. Holds a PhD in Finance from the Marshall School of Business at the University of Southern California, an MSc in Industrial Engineering from Pontifícia Universidade Católica do Rio de Janeiro and a BS in Industrial Engineering from Universidad Federal do Rio de Janeiro.

José Reinaldo Magalhães was born in 1956, was manager of private equity FIP funds at BR-Investimentos and Bozano Investimentos Gestoras de Recursos from 2009 to 2015 – the team member responsible for the Funds’ investment and disinvestment decisions. At PREVI (Banco do Brasil pension fund), he was Director of Investments, Institutional Investor Department, from – 2006–2018. At Banco do Brasil, he was New York Branch Assistant Manager in 2004–2005, Deputy Manager of the Chicago Representative Office (2002-4), and Executive Manager in the Director’s Department for Planning and Risk Management, from 1998 to2002. At PREVI, he was Division Manager, International Financial Institutions Management, from 1995 to 1998. From 1994–1998, he was a Trainee in the Overseas Manager Training Program, in São Paulo, Austin, Texas and London, and from 1990 to 1994, an analyst in the Technical Department (‘DETEC’) of BB-B1 Banco de Investimentos. He joined DETEC in October 1975, and from 1983–1989 was Technical Adviser to the Minas Gerais State Supervision Office.

Afonso Henriques Moreira Santos was born in 1957, has a degree in electric engineering. From April 2019 to December of the same year he was member of the Board of Directors of Light S.A. Board member at IX Estudos e Projetos LTDA from October 2006 to April 2019. He served as full time professor at the Federal University of Itajubá from January 1980 to March 2016.

Ricardo Menin Gaertner was born in 1975, has a law degree. Since 2019, he became a partner of Barbosa e Gaertner Advogados Associados. He specializes and has extensive experience in complex M&A deals, initial public offerings, private placements, and real estate deals. Among others, he has provided legal and regulatory services to Iguá Saneamento S.A., which controls 18 public water and sewage service concessionaires. Before becoming a partner at his current law firm, he served as a consultant at FIPECAFI – Fundação Instituto de Pesquisas Contábeis, Atuariais e Financeiras. From 2014 to 2018 he served as Legal Director of J&F Investimentos S.A, where he was appointed as chairman of its board of directors from 2017 to 2018.

Aloísio Macário Ferreira de Souza was born in 1960, has a degree in Accounting Sciences, with an MBA in Business and Investment Banking Management from the Corporate University of Citibank – USA, MBA in Business Valuation by LLM Inteligência Empresarial (RJ) and an MBA in Pension and Retirement Plans for Complementary Social Security – Coppe/UFRJ. Mr. Souza is certified by IBGC – Brazilian Institute of Corporate Governance to serve as member at Boards of Directors and Supervisory Boards. He was Vice President of Human Resources and Information Technology at Usiminas, Coordinator of the IBGC – Rio de Janeiro Chapter, Manager of Corporate Governance and Minority Holdings of Previ, Manager of BB-DTVM Asset Analysis and Valuation Division, Advisor in the International Area of Banco do Brasil, Board of Directors Member at Usiminas and CPFL Energia, Member of the Supervisory Board at Eternit, Eletrobras, Celesc and Ambev. Currently he is a Member of the Supervisory Board at Usiminas and a Member of the Statutory Audit Committee of Celesc.

Roger Daniel Versieux was born in 1975. Lawyer over 21 years specialized in litigation and consulting in corporate and public matters, in connection with administrative, environmental, tax, economic criminal law, particularly, in sectors of mining, infrastructure and labor unions. Legal advisor of Empresa de Assistência Técnica e extensão Rural de Minas Gerais - EMATER-MG from 2005 to 2008, specialized in Public Law, with emphasis on public bidding, management in


ANNUAL REPORT AND FORM 20-F \| 2023	113

the administrative framework, public contracts, and legal support to the board of the state-owned company. Senior lawyer in Vale S/A (2013). Since 2010, appointed legal counsel for economically disadvantaged people with the Federal Regional Court of the 3rd Region. Professor at the Federal University of Mato Grosso do Sul. (2009 to 2013), having taught in Criminal and Civil Procedure, Contracts, Private International Law and Ethics. Responsible Professor at the Legal Practice Center at UFMS. (2010 to 2011). Professor of the Post-graduate Course at the Center for International Law – Cedin, Belo Horizonte. (2016 and 2020).

José João Abdalla Filho was born in 1945, is CEO and controlling shareholder of Banco Clássico S.A.; Substitute Member of the Board of Directors of CEG (Companhia Distribuidora de Gás do Rio de Janeiro); Substitute Member of the Board of Directors of Tractebel Energia S.A.; CEO of Dinâmica Energia S.A.; and CEO of Social S.A. Mineração e Intercâmbio Comercial e Industrial.

Anderson Rodrigues was born in 1972, holds a degree in Electric Engineering with Emphasis on Power Systems from Pontifícia Universidade Católica de Minas Gerais - PUC/MG as well as a post-gradaute degree in Work Security Engineering from Universidade FUMEC. He also holds a master’s degree in management - innovation and organizational dynamic, from Centro Universitário - UMA and a doctorate in Information Systems and Knowledge Management from Universidade FUMEC (in progress).

Significant criminal proceedings involving member of the Board of Directors

Mr. José João Abdalla Filho, a member of the Company’s Board of Directors, is defendant in a criminal action before the 2nd Federal Criminal Court of Rio de Janeiro, accused of the crime of tax evasion, for alleged omission of information in his 2010 income tax return. On August 3, 2020, the Court gave judgment “ruling the criminal action to be extinct, without decision on the merit, due to recognition of absence of process, namely, absence of correct, and consequently valid, constitution of the tax claim”. The Federal Public Attorneys then filed an appeal, and the decision of the regional Federal Appeal Court of the 2nd Region was recently confirmed.

In another criminal action, before the first Federal Court of Araçatuba (Judiciary of São Paulo State), Mr. Abdalla Filho is accused of the crime of tax evasion, for alleged false declaration of the totality of his revenues, and omission of revenues in a company in which he was CEO, majority shareholder and manager during the years 2006–2008, 2010 and 2011. In preliminary defense, Mr. Abdalla stated the view that the accusation should be rejected, due to the case being null in its entirety, and that on the merit, the accusation is without grounds, and a ruling of complete acquittal should be given. The procedural questions have been resolved, submissions have been made, and hearings for pre-trial and judgment have been scheduled for June 2024. A third criminal action, also related to tax evasion, was presented in the first Federal Court of Americana – (Judiciary of São Paulo State). The Federal Public Attorneys allege omission of information, false declaration to the tax authorities, and attempt to defraud tax inspection. The case involves more than one company chaired and managed by Mr. Abdalla. Following preliminary defense, Mr. Abdalla is of the view that the accusation should be rejected, that the case is null in its entirety, and that on the merit the accusation is invalid, and a ruling of complete acquittal should be given. The procedural questions having been dealt with, a decision for acquittal was given in the court of first instance. On appeal, a court of second instance handed down a conviction, but this has recently been suspended by the Higher Common Justice Appeal Court (Superior Tribunal de Justiça – STJ).

In addition, the Federal Public Attorneys recently filed an Action for Misconduct in Public Office with the 9th Civil Federal Court of the 3rd Region (Judiciary of São Paulo State), alleging that Mr. José João Abdalla Filho, controlling stockholder of Agro Imobiliária Avanhandava S.A., caused or collaborated in the commission of acts of administrative improbity, or benefited from such acts. According to information supplied by Mr. Abdalla’s lawyer, on April 23, 2024, the Federal Public Attorneys requested his conviction with an order to pay R$280,000 (two hundred and eighty thousand Reais), which has been deposited in escrow with the court. The case is still in the initial phase.

Executive Board

The Executive Board comprises seven Executive Officers, who may be shareholders, resident in Brazil, elected by the Board of Directors for a period of two years, subject to the requirements of the applicable legislation and regulations.


ANNUAL REPORT AND FORM 20-F \| 2023	114

Re-election for a maximum of three consecutive periods of office is permitted. The periods of office of the present members of the Board of Directors expire at the Annual General Meeting of Shareholders to be held in April 2024. The Executive Board meets ordinarily at least twice per month, and extraordinarily whenever called by the Chief Executive Officer or by two Executive Officers.

The Executive Officers exercise their positions as full-time occupations in service of the Company. They may at the same time exercise non-remunerated positions in the management of the Company’s wholly-owned or other subsidiaries, or affiliated companies, at the option of the Board of Directors. They obligatorily hold and exercise, however, the corresponding positions in the wholly owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A.

The Executive Board is responsible for current management of the Company’s business, subject to compliance with the Long-term Strategy, the Multi-year Business Plan, and the Annual Budget, which must be prepared and approved in accordance with the by-laws. The Annual Budget shall reflect the Company’s Multi-year Business Plan and, consequently, the Long-Term Strategy, and must give details of operational revenue and expenses, costs and capital expenditure, cash flow, the amount to be allocated to payment of dividends, investments of cash from the Company’s own funds or from funds of third parties, and any other data that the Executive Board considers to be necessary.

Subject to the provisions in the preceding Clauses and good corporate governance practices, it is the duty of each member of the Executive Board to comply with these by-laws, the decisions of the General Meeting of Shareholders, and of the Board of Directors, the Internal Regulations, and decisions of the Executive Board, these being duties of the related Chief Officers’ Offices.

The following are the names, positions and dates of first appointment of the Members of the Executive Board:


Executive Board
Chief Officer	Nomination	Date of initial appointment
Chief Executive Officer – CEO	Reynaldo Passanezi Filho	January 13, 2020
Vice President of Trading	Dimas Costa	September 1, 2016
Vice President of Distribution	Marney Tadeu Antunes	January 5, 2021
Vice President of Generation and Transmission	Thadeu Carneiro da Silva	July 16, 2021
Vice President of Equity Holdings	Marco da Camino Ancona Lopez Soligo	May 2, 2022
Chief Officer for Finance and Investor Relations	Leonardo George de Magalhães	March 20, 2020
Vice President of Legal Affairs	Cristiana Maria Fortini Pinto e Silva	March 08, 2023

Reynaldo Passanezi Filho, born in 1965, and is a graduate of the Senior Executive Program, the principal course in the Stanford University Graduate School of Business (July-August 2018). He attended the CEO course of the Getúlio Vargas Foundation in Entrepreneurial Management from March 2015 to July 2017; has a doctorate in economics from São Paulo University, 1995-2000; a master’s degree in economics from the University of Campinas, 1987-92, with distinction, for his dissertation in Industrial Organization on the subject ‘Financial Solutions and Privatization for Brazilian Steel’; a degree in economics from São Paulo University, 1983-86 (sixth-placed in the University Entrance examination); and a degree in Law from the Pontifícia Universidade Católica of São Paulo, 1983-89. He is a member of the Brazilian Bar Association (OAB). He has wide experience in positions of senior leadership in the private sector, the financial sector, and the public sector; excellence in strategy and management, with a track record of success in privatizations, restructurings and growth; and solid qualification in finance and mergers and acquisitions, with profound knowledge of Latin America and infrastructure, especially electricity.

Dimas Costa, born in 1954, earned a degree in electrical engineering from PUC Minas in 1978. From 1978 to 1980, he was an Engineer in the Water & Energy Department of Minas Gerais, where he was Division Head from 1980 to 1985. From 1978 to 1980 he worked as an engineer in the Minas Gerais Water & Energy Department. At Cemig, in 1985-1987 he was an engineer in the Distribution Unit; from 1987 to 1995 he was assistant in the Senior Power Planning & Development Management Unit; from 1995 to 1998 he was manager of the Energy Development Department; from 1998 to 2007, manager for sales to corporate clients; from 2007 to 2010, general manager for sales to clients; and in


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2011 to 2013, general manager for sales to the company’s clients with incentive benefits. He was formerly Director and managing partner of Ponta Energia Consultores Associados Ltda, from 2013 to 2016.

Marney Tadeu Antunes, born in 1962, has a degree in electrical engineering from the College of Engineering of Sorocaba, with specialization and postgraduate degrees and studies in subjects including Management, Strategy, Project Management, Marginal Costs and Electricity Tariffs. He has 34 years’ experience in the Brazilian electricity sector. Most recently, he was Chief Distribution Officer of the electricity distributor EDP in São Paulo (from 2015 to 2020) and Sales Director of the distribution companies of the CPFL Energia Group (2011–2015).

Thadeu Carneiro da Silva, born in 1982 and holds a degree in Mechanic Engineering and a post-graduate degree in Commissioning Engineering. He also holds a certification PMP, a master´s degree in Energy and a doctorate in Energy (in progress). He has over 17 years of experience in the energy sector and currently holds a position as chief executive officer of various energy companies such as Costa Oeste Transmissora de Energia S.A, Cutia Empreendimentos Eolicos S.A and Marumbi Transmissora de Energia S.A.

Marco da Camino Ancona Lopez Soligo, born in 1968 and holds a degree in economics from USP (‘Universidade de São Paulo’), MBA in Administration and Management, with emphasis in Marketing, from Université Catholique de Louvain, and Specialization in Social Law. He has over 25 years of experience in Brazilian energy companies, including 3 years as a CEO, and 16 years in corporate, financial and governance departments; and 9 years in credit, corporate, equity research and financial modeling in national and international investment banks (in Brazil, the United States and Europe). He has served as CEO and CFO of companies with shares listed on the São Paulo stock exchange (‘B3’). He has: (i) significant experience in privatizations, M&A, controllership and financial planning, debt restructuring, corporate governance, risk and internal controls, and equity investment; and (ii) a solid additional academic background, with published books and literary reviews, and proficiency in five languages (Portuguese, English, French, Spanish and Italian).

Leonardo George de Magalhães has a degree in accounting and has been an employee of CEMIG for more than 30 years. Since 2008, he has worked in the Controller’s Department, with numerous executive responsibilities in the Finance Department including accounting, tax planning, financial planning, budget, valuation of investments, cash management and forecasting of results.

Cristiana Maria Fortini Pinto e Silva holds a degree in Law from the Federal University of Minas Gerais (1995) and a Ph.D. in Law from the Federal University of Minas Gerais (2003). Professor in the Masters, Doctorate, and Undergraduate Programs of the Law School of UFMG. Professor at Faculdade Milton Campos. Visiting Scholar at the George Washington University. Visiting Professor at the University of Pisa. President of the Brazilian Institute of Administrative Law (IBDA). She is currently a representative of MG at the Brazilian Institute of Sanctioning Law (IDASAN) and a Director of the Brazilian Institute of Infrastructure Studies (IBEJI) in Minas Gerais. Member of the panel of arbitrators/mediators - Panel of Mediators and Arbitrators of the Brazilian Center for Economic Disputes. Editor-in-chief of Rbep, Brazilian Journal of Political Studies at the Federal University of Minas Gerais. Columnist for Conjur. She was President of the Public-Private Partnerships Committee of OAB/MG (Bar Association of MG). She was President of the Administrative Law Committee of OAB/MG. She was President of the Minas Gerais Institute of Administrative Law (IMDA) and a Director of the Brazilian Institute of Administrative Law (IBDA). She was a Deputy Attorney General of Belo Horizonte. She was Controller General of Belo Horizonte.

Compensation

Compensation of Members of the Board of Directors and Executive Board

The total costs of key personnel, comprising the Executive Board, the Fiscal Council, the Audit Committee and the Board of Directors in 2023, 2022 and 2021, are within the limits approved at a General Shareholders’ Meeting, and the effects on the income statements of the years ended, are as follows:


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(in millions of Reais)	2023	2022	2021
Remuneration	29	29	28
Profit sharing (reversal)	7	6	4
Assistance benefits	2	2	2

Total	38	37	34

There is no contract between CEMIG or its wholly-owned subsidiaries and affiliates and any director or officer of CEMIG that grants any kind of retirement benefits, other than the retirement plan of Forluz and the healthcare plan CEMIG Saúde, which is applicable to the Executive Officers (If qualified under the rules and regulations of Forluz) on the same terms as for other employees.

Board Practices

The Fiscal Council

Under Cemig’s by-laws, its Fiscal Council is established permanently. It holds ordinary meetings monthly and extraordinary meetings whenever necessary. It comprises five members, and their respective alternate members, elected by the shareholders at the General Meeting, for a term of two years. A member may be re-elected a total of two times. The holders of the preferred shares, as a group, are entitled to elect one member of the Fiscal Council and a corresponding alternate member. A single minority holder of common shares, or a group of minority holders of common shares, with a joint interest of at least 10% of the total shares, has the right to elect one member of the Fiscal Council and a corresponding alternate. The majority of the members shall be elected by the controlling shareholder, and at least one member shall be a public employee. The primary responsibility of the Fiscal Council, which is independent from management and from the independent external auditors appointed by the Board of Directors, is to review the consolidated financial statements and report on them to the shareholders. The Fiscal Council is also responsible for providing opinions on any proposals by management to be submitted to the General Meeting of Shareholders related to: (i) changes in the share capital; (ii) issue of debentures or warrants; (iii) capital expenditure plans and budgets; (iv) distribution of dividends; (v) changes in the corporate structure; or (vi) any corporate reorganization, such as mergers, consolidations, and spin-offs. It also examines the activities of management and reports on them to the shareholders.

The current members of the Fiscal Council and their alternate members, whose terms expire at the Annual General Meeting of Shareholders to be held in 2024, are as follows:


Name	Position	Date of initial appointment
Carlos Roberto de Albuquerque Sá (1)	Chair	April 29, 2024
Carlos Alberto Arruda de Oliveira (1)	Alternate member	April 29, 2024
Pedro Bruno Barros de Souza (1)	Member	December 11, 2023
Rodrigo Rodrigues Tavares (1)	Alternate member	December 15, 2023
Lucas Vasconcelos Gonzalez (1)	Member	December 11, 2023
Luiz Fernando Medeiros Moreira (1)	Alternate member	December 11, 2023
Michele da Silva Gonsales Torres (2)	Member	July 31, 2020
Paulo Roberto Bellentani Brandão (2)	Alternate member	April 29, 2024
João Vicente Silva Machado (3)	Member	April 29, 2022
Ricardo José Martins Gimenez (3)	Alternate member	April 29, 2022

(1)

Appointed by State of Minas Gerais (as the controlling shareholder).

(2)

Appointed by the holders of the preferred shares.

(3)

Appointed by the minority of the holders of voting shares.

Below is a brief biography of each member of our Fiscal Council:

Carlos Roberto de Albuquerque Sá, born in Rio de Janeiro, member of the Fiscal Council of the Itaú/Unibanco Holding (April/2016, until March/2019); Fiscal Advisor at Banco do Brasil (2014 and 2015); Board Member and President of


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CoAud at Caixa Econômica Federal (June/2020 to January/2023); Member of the Fiscal Council of Marfrig Global Foods (April/2016 to March/2019); Coordinator of the Audit Committee of M.Dias Branco S.A. (2018 until November/2021); Coordinator of the Audit Committee of Lojas Marisa (April/2011 to April/2021); Member of the Audit Committee of Mobly S.A. (2021 until April/2023); Substitute Fiscal Councilor at CEMIG (April/2018 until April/2022); Tax Advisor at Hapvida (April/2022 to April/2023); Coordinator of the Audit Committee of Camil Alimentos S.A. (April/2018 to present); Advisory Advisor at Agrofoods/Polifrigor. (2021 to present); Caixa Seguridade Audit Committee (SX6) (September/2022 to December/2023); Board Member and Coordinator of the Audit Committee at São Paulo Metro (April/2023 to present).

Carlos Alberto Arruda de Oliveira. Previous experience: FAPEMIG – Minas Gerais Support Foundation, Brazil. Industry of activity: Promotion of science, technology and innovation. 2023 President; CFEG – Cambridge Family Enterprise Group, Brazil. Industry of activity: governance consultancy, succession of family businesses. 2021 - 2023 Associate Consultant; Dom Cabral Foundation, Brazil. Industry of activity: executive education. 2022 Associate Professor of Innovation and Competitiveness; 2001 - 2021 Professor of Innovation and Competitiveness; 2004 - 2021 Executive Director of the Innovation and Entrepreneurship Center; 2018 - 2023 Director of PGA FDC & INSEAD; 2012 - 2015 Deputy Director of Partnerships; 2009 - 2013 Executive Director of the International Council; 2001 - 2008 Director of Research and Development and international relations; 1996 - 1998 Director of the MBA Program; 1994 - 1998 Professor of Internationalization and Competitiveness International Trade Center UNCTAD & WTO, Switzerland. Industry: International agency dedicated to the development of international trade in less developed countries 1998 - 2001 Senior Training Officer; Australia Graduate School of Management UNSW, Australia. Industry of activity: higher education 1993 - 1993 Visiting Professor; ENGECOL Ltda, Brazil. Industry of activity: accounting and financial consultancy for small and medium-sized companies 1983 - 1988 Founding partner and executive director; Paulo Abib Engenharia / VALE, Brazil. Industry of activity: engineering projects for the mining sector 1980 - 1983 Project Engineer.

Pedro Bruno Barros de Souza, National Bank for Economic and Social Development - BNDES (Public Administration - Financial Sector) - Superintendent of Partnerships in Social Infrastructure and Environmental Services (Apr/2022 to Feb/2023); Superintendent of Government and Institutional Relations (Aug/2019 to Apr/2022); and, Presidency of the Republic (Public Administration) - Investment Partnership Program - PPI - Secretary for Coordination of Energy, Mining and Airports, Secretary for Public Policy Articulation, Program Director (2016- 2019).

Rodrigo Rodrigues Tavares, born in 1985, is General Director of the Department of Roads and Highways of Minas Gerais - DER/MG (08/2022 - current); Advisor to the Director of the Department of Roads and Highways of Minas Gerais - DER/MG (04/2022 to 08/2022); Advisor to the Presidency of the Mineral Resources Company - CPRM - Brazilian Geological Service (11/2017 to 06/2019); CPRM Development Manager - Brazilian Geological Service (04/2016 to 05/2017).

Lucas de Vasconcelos Gonzales, Advisory Advisor at Grupo Transpes, Betim (February 2020 - Present); Federal Deputy at the National Congress, Brasília (February 2019 - January 2023); Chief Operating Officer - COO at Grupo Transpes, Betim (August 2013 - March 2018); Operational Supervisor at Transpes Group, Betim (February 2011 - July 2013).

Luiz Fernando Medeiros Moreira, Fiscal Councilor of the Minas Gerais Gas Company – GASMIG (June-Current); Deputy Director of Compliance, Corporate Risks and Internal Controls at Companhia Energética de Minas Gerais – CEMIG (October 2019 to June 2023); General Director (CEO) of STOLA do Brasil LTDA. (December 2018 – September 2019); Financial Administrative Director of STOLA do Brasil LTDA. (April 2016 – November 2018).

Michele da Silva Gonsales Torres, born in 1983, has a law degree with specialization in Corporate Law from Mackenzie University. She worked as a Compliance Specialist at LEC-Legal, Ethics & Compliance, and since 2015 has been a member of the Compliance Committee of IASP/SP, responsible for contracts and compliance in office management at the law firm ALFM Advogados. She has worked for many years as Legal Manager of a medium-sized construction and engineering company, working with company risk management, preparing Codes of Conduct and implementing the Compliance Program. She is also a specialist in analysis, preparation and management of the full range of contracts, preparation of corporate transactions and strategic legal planning for business deals. She was a member of the Fiscal


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Council of Cemig from 2018-2019 and was re-elected in 2020 and 2022. In 2020-2021 she was a member of the Audit Board of Light S.A.

Paulo Roberto Bellentani Brandão. Previous experience: Mesquita Pereira Advogados – Law Firm (November 2001 to May 2018); Member of the Capital Market Committee of IBGC – Brazilian Institute of Corporate Governance. Currently Corporate Lawyer – Partner at Alves Ferreira & Mesquita Sociedade de Advogados – law firm recognized for its work in the Capital Markets and various corporate operations. Extensive knowledge of CVM – Securities Commission rules. Work on Fiscal Councils of large companies. Graduated in Law from Universidade Paulista – UNIP, postgraduate from Fundação Getúlio Vargas - GV Law in Business Structures and Operations, class of 2018. GV Law Capital Markets Course, class of 2012. Member of the Communication and Capital Markets Committee from IBGC – Brazilian Institute of Corporate Governance. Full Member of the Fiscal Council – AES BRASIL (2019 – 2020); Substitute Member of the Fiscal Council – CSN (2021 – 2022); Full Member of the Fiscal Council - Usiminas (2022 – 2023); Alternate Member of the Fiscal Council - Forjas Taurus (2023 – 2024); Substitute Member of the Fiscal Council - Eletrobrás (2023 – 2024); Alternate Member of the Fiscal Council – Brasken (2023 – 2024).

João Vicente Silva Machado, born in 1983, is a lawyer. He worked as a Cabinet Officer, a management position, in the Office of a Judge of the Third Chamber of Commercial Law of the TJSC, from November 2015 to February 2017, then as legal advisor in the office of a member of the Fourth Chamber of Public Law of the TJSC, until July 2020. Since that date he has held management positions in private companies and practiced law with a focus on corporate governance. He has been a member of the Fiscal Council of Eternit S.A. since 2020 and was an alternate member of the Fiscal Council of Tecnisa S.A. from 2019 to 2020.

Ricardo José Martins Gimenez, born in 1967, is an equity partner at the law firm ALFM – Alves Ferreira & Mesquita Sociedade de Advogados, since July 2015, acting as lawyer, administrator and financial advisor in HR subjects including management, timecard control, dismissal and admission.

The Audit Committee

The Audit Committee is an independent, consultative body, permanently established, with its own budget allocation. Its objective is to provide advice and assistance to the Board of Directors, to which it reports. It also has the responsibility for such other activities as are attributed to it by legislation.

The main activities conducted by the Audit Committee are related to: (i) supervision of independent auditors’ activities, (ii) supervision of the activities carried out in the areas of internal control, internal audit, and preparation of the consolidated financial statements of the Company, and (iii) monitor the quality and integrity of the internal control mechanisms, the consolidated financial statements, information, and measurements disclosed by the Company.

The Audit Committee has four members, all of which are independent, nominated and elected by the Board of Directors in the first meeting after the Annual General Meeting for periods of office of three years, not to run concurrently. One re-election is permitted.

The Audit Committee has operational autonomy to conduct or order consultations, evaluations, and investigations within the scope of its activities, including contracting and use of independent external specialists.

The Audit Committee must have means for receiving accusations, including those of a confidential nature, internal and external to the Company, on subjects related to its area of duties.


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The Audit Committee may exercise its duties and responsibilities in relation to such wholly owned and other subsidiaries of the Company as adopt the structure of joint sharing of an Audit Committee.


Name	Position
Roberto Tommasetti	Member/Financial specialist
Roberto Cesar Guindalini	Member
Pedro Carlos de Mello	Coordinator

The following is a brief biography of each member of our Audit Committee:

Roberto Tommasetti, born in Italy in 1973, has Brazilian citizenship, and is a Certified Public Accountant in both countries. He has a degree in Economics from the University of Naples (Italy), a Master’s degree in Accounting and Actuarial Sciences from the Pontifical Catholic University of São Paulo, a Doctorate in Accounting from the Federal University of Rio de Janeiro (UFRJ) and a Post-Doctorate in Accounting & Control from the State University of Rio de Janeiro. Professor of graduate and postgraduate accounting courses at UFRJ, he is author and reviewer of accounting journals and congresses. Certified as a Board of Director, Audit Committee and Fiscal Council member by the Corporate Governance Brazilian Institute (IBGC), he has experience as a member of these boards at various companies. He served as CFO, Chief Controller, and Independent Auditor.

Roberto Cesar Guindalini, born in 1964, has a degree in Accounting Sciences. Chief Financial Officer of Kallan Calçados Ltda, in Sao Paulo-SP - October / 2021 – currently. Responsible for the areas of Treasury, Corporate Accounting and management, Tax, Loss Prevention, Expansion and Facilities; Alpargatas S/A - General Audit Manager - Sao Paulo-SP (01/2010 - 04/2020), responsible for managing the internal audit area in operations of the Company (Brazil, Argentina, USA and Europe).

Pedro Carlos de Mello, born in 1952, has a degree in accounting from the Federal District Unified Teaching Association (AEUDF), a degree in Economics from the Political Sciences and Economics College of Cruz Alta, and MBA degree in controllership from Fipecafi (The Accounting, Actuarial and Financial Research Institute Foundation of São Paulo University – ‘USP’), MBA in training of executives from Coppead (the Postgraduate Management Research Institute of Rio de Janeiro Federal University – ‘UFRJ’), and postgraduate degree in accounting, costs, and auditing from the Getúlio Vargas Foundation (‘FGV’). For the Accounting Management Unit of Banco do Brasil S.A. in Brasília (DF), he was Chief Accountant from April 2007 to March 2009; Executive Manager for Supervision of Brazilian Subsidiaries and Foreign Offices (‘Gesex’) from April 1999 to April 2007; and acting General Manager for Accounting in absences of the principal office holder (in Brasília), from 1998 to April 2007. He was General Coordinator of Management Information for the Technical Analysis Director (‘DITEC’) of the National Pension Plan Authority (‘Previc’) in 2014, and a substitute member of the Fiscal Council of Usiminas in 2016 and 2017. Since 2016 he has been a member of the Audit Committee of the Minas Gerais Development Bank (‘BDMG’).

Employees

On December 31, 2023, we had 4,917 employees at CEMIG, CEMIG D and CEMIG GT, of which 201 were management level. On December 31, 2022, we had 4,969 employees at CEMIG, CEMIG D and CEMIG GT, of which 192 were management level and 10 were contracted to provide temporary outsourced services. As of December 31, 2021, we had 5,025 employees at CEMIG, CEMIG D and CEMIG GT, of which 190 were management level and 52 were contracted to provide temporary outsourced services.

This table presents the breakdown of our employees by type on those dates:


Number of Employees as of December 31	2023 (1)		2022 (2)		2021 (3)
Managers		201		192		190
Professional staff		1,063		1,139		1,113
Operational technical staff and office employees		3,653		3,638		3,722

Total		4,917		4,969		5,025

(1)

In 2023, 228 employees were hired and 278 left CEMIG.


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(2)

In 2022, 377 employees were hired and 429 left CEMIG.

(3)

In 2021, 235 employees were hired and 467 left CEMIG.

Unions

Meetings are held throughout the year for collective negotiation with the unions that represent the employees. The Collective Work Agreements (Acordos Coletivos de Trabalho, or ‘ACTs’) that result from these meetings cover salary adjustments, benefits, rights and duties of the employment relationship, and come into effect starting on November 1st of each year until the end of the validity of each respective Collective Work Agreement.

Negotiations between the Company and the Unions for the 2023/2025 Collective Work Agreements were concluded with effective from November 1, 2023 to May 31, 2025.

In the 2023/2025 collective work agreement, the company and the unions agreed on a readjustment of the economic benefits to ensure the replacement of losses resulting from inflation in the period, with an adjustment of 4.14%, which corresponds to the full inflationary index accumulated in the last 12 months before the base date, in addition to ensuring the correction of salaries and benefits.

The agreement reaffirmed benefits as: setting of a ceiling for grant of financial help for training in technical or graduation courses; advance of the first installment of the annual 13th salary payment; assistance benefits; release of union leaders and provisional job stability; and funds for grant of salary alterations in accordance with the Position, Careers and Remuneration Plan (Plano de Cargos, Carreiras e Remuneração, or ‘PCCR’).

There was the introduction of a new benefit: hybrid work regime for employees who perform administrative activities, which consists of the combination of face-to-face and remote modalities, for people with disabilities, with serious illnesses, pregnant and breastfeeding women.

Flexibility in the meal/rest break is also a new benefit included in this collective agreement, which allows the fulfillment of at least 30 minutes of break, under the terms of current labor legislation.

In health and safety in the workplace, the employees have the following benefits guaranteed: regulated Internal Accident Prevention Committees (Comissões Internas de Prevenção de Acidentes, or ‘CIPAs’), with participation by the unions; medical health inventory; inspection of contractors as to their work safety; and notification of serious or fatal accidents.During the 2023/2025 ACT’s negotiations, a 10-day stoppage occurred with the participation of about 0.33% of employees. In the event of strikes, CEMIG has an Operational Emergency Committee, created with the basic objective of establishing a Contingency Plan to maintain our essential services; CEMIG has an Operational Contingency Committee aimed at setting forth a Contingency Plan for continuation of its essential services.

Compensation

CEMIG compensates its employees in a competitive way, in line with best market practices.

CEMIG’s compensation strategy reflects a compatible and competitive positioning with the market, with benefits and programs for the welfare of its employees. Thus, CEMIG has a Careers and Remuneration Plan in which the positions are described based on their nature and complexity, as well as the knowledge requirements necessary for the performance of their functions. The fees are set considering the reviews of positions, made according to specific methodology. The plan is designed to attract, develop, retain, and enhance the best talented Company professionals needed to conduct CEMIG’s business while preserving our culture, the alignment to its business objectives, competitiveness and longevity in the market where it operates without losing sight of the particularities of its segment and the commitment of the employees with the result of their work. In addition, the Careers and Remuneration Plan establishes criteria for granting horizontal and vertical progressions that include, among other things, employee performance.

The current Careers and Remuneration Plan was put in place in June 2022 aiming to provide the company with the instruments of compensation considered to be necessary to maintain an equitable and competitive payment structure and establish criteria for personnel movement between areas of the company and promotions.


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The following table presents the monthly average base salary and monthly average total compensation, by job category of CEMIG, as of December 31, 2023:


December 31, 2023 (R$)	Average monthly base salary		Average monthly compensation
Managers		24,529.21		38,029.55
Professional staff		13,637.73		16,072.64
Operational technical staff and office employees		6,357.17		9,615.26

Program for Sharing in Profit, Results, and Productivity

CEMIG has a program for sharing profits and results with employees in accordance with applicable Brazilian employment legislation. Profits are distributed only if, in aggregate, at least 70% of the corporate targets and 70% of the net income forecast in the budget are achieved, after relative weighting for each of the corporate and operational indicators.

In 2023 the collective agreement for distribution of profits or results established a maximum payment by multiple salaries, covering in the program all its employees, including managerial positions. To qualify to receive this portion, Cemig monitors and calculates a basket of corporate indicators and specific indicators for each area, linked to the challenges of the business and the economic and financial sustainability of the company.

The calculation of the profit-sharing distribution will be based on the Result of Indicators, and the payment will be made 100% in proportion to the individual remuneration of each employee among all the employees represented by the signatory entities of the referred agreement.

The basket of indicators for 2023 contains 6 corporate indicators and 3 to 4 specific indicators, according to the specificities of each area.

Benefits

CEMIG provides its employees a range of benefits, such as reimbursement of disability-related expenses of employees and/or their dependents, funeral assistance in the event of death of an employee or of his or her direct dependents, and payment of part of the employee’s contribution to the complementary pension plan. In 2023, a total of R$176 million was paid in employee benefits, comprising R$82 million in contributions to the pension plan and R$94 million in assistance benefits.

Voluntary Dismissal Programs

In December 2022 , the Company approved the Voluntary Dismissal Program for 2023 (‘2023 PDVP’). All the employees were eligible to join the program.

The program has provided the payment of severance funds: amounts proportional to the balance of salaries, vacation, vacation gratuity, special gratification and 13th salary. In order to make the program more attractive, the company awarded an additional award as shown in the table below:


Years at Cemig	Multiple each year
0 to 15	20% of remuneration for each year of work
16 to 24	30% of remuneration for each year of work
Greater than or equal to 25	Fixed amount of 12 remunerations

In this Program, the employment contract was terminated by dismissal "On Request", pursuant to Articles 477 and 487 of the Consolidation of Labor Laws. That is, there was no payment of the Employee’s Severance Guarantee Fund of Brazil (Fundo de Garantia por Tempo de Serviço, or ‘FGTS’) severance fine and the indemnified prior notice.

The Program has reached 154 employees and the Company expects to save R$ 37.2 million per year.


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Health and Safety

As a result of the various initiatives and programs from CEMIG, focused on health and safety at work, accident indicators have shown a significant reduction over the last years.

The corporate indicator Frequency Rate of Work-Related Injuries with Absence (‘TFA’) of the workforce, reached 1.13 accidents per million hours worked in December 2023, one of the best results achieved by the Company in the last eight years. It represents a decrease of 23.6% towards the rate achieved in 2022 (1.48) and 3.4% comparing to the result in 2021 (1.17). The TFA in 2023 was 1.8% above the limit of 1.11 set by the Company.

In 2023 the Company had its workforce (working simultaneously) increase 10.0% compared to 2022 due to the end of the DDP cycle - Distribution Development Plan. The peak of employees working simultaneously in 2023 was 31,270 persons compared to 28,435 in 2022.

Share Ownership

None of our directors or executive officers owns, on an individual basis, 1% or more of our common shares or preferred shares (including ADSs representing common shares or preferred shares) or of our total equity share capital.

Disclosure of a registrant’s action to recover erroneously awarded compensation.

Not applicable.


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Item 7. Major shareholders and related party transactions

Major Shareholders

On March 31, 2024, the government of the State of Minas Gerais was the holder, directly and indirectly of 375,031,302 common shares, or 50.97% of CEMIG’s shares carrying the right to vote. As of the same date, FIA Dinâmica Energia, our second largest shareholder, held 236,373,892 common shares, or 32.12% of that class of shares, and 115,106,154 preferred shares, or 7.75% of that class of shares.

The table below provides information about ownership of the common and preferred shares in CEMIG as of March 31, 2024:


Shareholder	Common Shares		% of the Class			Preferred Shares		% of the Class
Minas Gerais State Government (1)		375,031,302		50.97	%		35,566,346		2.43	%
FIA Dinâmica Energia Fund		236,373,892		32.12	%		115,106,154		7.85	%
BNDES Participações S/A – BNDESPar		82,007,784		11.14	%		—		0.00	%
BlackRock		—					217,550,174		14.84	%
Total of all members of Board of Directors, Executive Board and Fiscal Council		14,947		0.00	%		144,574		0.01	%
Others		42,419,597		5.76	%		1,096,309,754		74.81	%
Total shares		735,847,522		100.00	%		1,464,677,002		99.94	%
Shares in treasury		102		0.00	%		846,062		0.06	%
Total shares issued		735,847,624		100.00	%		1,465,523,064		100.00	%

(1)

The shares attributed in this line to the State of Minas Gerais include shares held by Minas Gerais Participações S.A., a Brazilian stock company (‘sociedade por ações’), and other agencies of the State government and companies controlled by the State of Minas Gerais.

Since CEMIG was formed, its operations have been influenced by the fact that it is controlled by the government of the Brazilian State of Minas Gerais. Its operations have had and will continue to have an important impact in the development of trade and industry of Minas Gerais and on the social conditions in the State. Occasionally in the past the Minas Gerais state government has oriented the company to dedicate itself to certain activities and make certain expenditures specifically designed to promote the social, political, or economic objectives of the government of the State of Minas Gerais, and not necessarily destined to generate profit for CEMIG, and there is the possibility that the state government may orient us in this direction in the future. See “Item 3. Material Information – Risk factors – Risks Relating to CEMIG – We are controlled by the government of the Brazilian State of Minas Gerais, which might have interests that are different from the interests of the other investors, or even of the Company”.

As of March 31, 2024, CEMIG had 1 registered holder of common shares represented by ADRs who were registered in the United States, holding a total of 907,073 common shares; and 12 registered holders of preferred shares represented by ADRs who were registered in the United States, holding a total of 192,886,535 preferred shares.

Although the by-laws do not make any restriction on a change in control of CEMIG, under the legislation of the State of Minas Gerais such a change would require a state law authorizing the change of control. Since CEMIG is controlled by the State, any sale that results in the state government not holding more than 50% of the voting shares of CEMIG (or any other transaction that could transfer the control of CEMIG, in whole or in part), requires approval by legislation specifically authorizing this change, made by the legislative power of Minas Gerais, approved by a minimum of 60% of the members of the State Assembly; and this authorization must then also be approved by the local citizens in a referendum.

On June 30, 2022 the FIA Dinâmica Energia Fund notified us that it had increased its holding of common shares of CEMIG to 221,306,092, equivalent at that time to 30.07% of the voting stock of Cemig and increased its holding of preferred shares of CEMIG to 122,302,254, equivalent at that time to 8.34% of the preferred shares.

On April 10, 2023, BlackRock, Inc. (“BlackRock”) notified us that on April 4, 2023, it increased its holding of shares of CEMIG to 10.015% of the Company's total capital. On August 16, 2023, BlackRock notified us it has decreased its holding of shares of CEMIG to 9.88% of the Company's total capital, of which 198,345,419 preferred shares and 19,204,755 American Depositary Receipts (‘ADRs’), representing 19,204,755 preferred shares, totaling 217,550,174


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preferred shares, representing 14.84% of the total preferred shares issued by the Company, and 12,662,091 derivative financial instruments referenced to preferred shares with a financial settlement, accounting for approximately 0.86% of the total preferred shares issued by the Company.

We are not aware of any other significant alterations in percentages of shares held by holders of 5% or more of our voting shares in circulation during the last three years.

Related Party Transactions

During the regular course of our business, we engage in transactions with related parties, some of which are of a recurring nature. The following summarizes the material transactions we engage in with our principal shareholders and their affiliates.

CEMIG is party to the following transactions with related parties (refer to Note 30 to the consolidated financial statements for more details):

Sale of energy supply to the Minas Gerais State government. The price of the supply is set by the grantor (ANEEL) through a Resolution relating to the annual tariff adjustment of Cemig D. In 2017 the government of Minas Gerais State signed a debt recognition agreement with Cemig D for payment of debts relating to the supply of power due and unpaid, in the amount of R$113 million, up to November 2019. These receivables have guarantees in the form of CEMIG’s right to retain dividends and Interest on Equity otherwise payable to the State (in proportion to the State’s equity interest in the Company), for as long as any payments are overdue or in default. On March 31, 2021, Cemig D obtained authorization from the Minas Gerais State Finance Secretary to offset part of the ICMS tax payable to the state against the debt owed by the State government to the Company, under State Law 23,705/2020. The monthly amount to be offset was R$10.5 million, in 21 equal installments. As of December 31, 2022, all installments were paid;

Inflation advances against Future Capital Increase (‘AFAC’), which were returned to the State of Minas Gerais. These receivables have a guarantee in the form of CEMIG´s right to retain dividends and Interest on Equity otherwise payable to the State (in proportion to the State’s equity interest in the Company), for as long as any payments are overdue or in default. The balance receivable on December 31, 2023 and 2022 was R$13 million;

Transactions in energy between generators and distributors were made in auctions organized by the Federal Government; transactions for transport of energy, made by transmission companies, arise from the centralized operation of the National Grid carried out by the National System Operator (‘ONS’);

Contract to provide plant operation and maintenance services related to transmission services;

Legal actions realized and legal actions provisioned arising from the agreement made between Aliança Geração (jointly controlled entity), Vale S.A. (company which we have joint ventures in common) and CEMIG. The action is provisioned in the amount of R$166 million (R$156 million on December 31, 2022), of which Cemig’s portion is R$58 million (R$55 million on December 31, 2022);

The contracts of Forluz are updated by the Expanded Customer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or ‘IPCA’) calculated by the Brazilian Geography and Statistics Institute (‘IBGE’) plus interest of 6% p.y. and will be amortized up to the business year of 2031 (see Note 24 to the consolidated financial statements);

The Company’s contributions to the pension fund for the employees participating in the Mixed Plan, and calculated on the monthly remuneration, in accordance with the regulations of the Fund;

Funds for annual current administrative costs of the Pension Fund in accordance with the specific legislation of the sector. The amounts are estimated as a percentage of the Company’s payroll;

Rental of the Company’s administrative head offices from Forluz (the employee pension fund), in effect up to August 2024 (able to be extended every five years, up to 2034), with annual inflation adjustment by the IPCA index and price reviewed every 60 months. On September 19, 2023, the lease contract was adjusted upward by 4.61%, corresponding to accumulated IPCA inflation over the prior 12 months;

Post-employment obligations relating to the employees’ health and dental plan (CEMIG Saúde). (See Note 24 to the consolidated financial statements);


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The relationship between CEMIG and its investees are described in Note 16 – Investments to the consolidated financial statements.

Interests of Experts and Counsel

Not applicable

Item 8. Financial Information

Consolidated Statements and Other Financial Information

Find our consolidated financial statements, which begin on page F-1 of this document.

Legal and Administrative Proceedings

The Company, in particular CEMIG GT and CEMIG D, are involved in certain legal and administrative proceedings regarding tax, regulatory, customer, administrative, environmental, employment-law and other issues, in relation to its business. In accordance with IFRS, we record and disclose the amounts of the proceedings that we have determined a loss to be ‘probable’ and disclose the amounts of the proceedings in which we have determined a loss to be ‘possible’; to the extent, these amounts can be reasonably estimated. For more information regarding such contingencies, see Note 25 to the consolidated financial statements.

Regulatory Matters

CEMIG and CEMIG D are parties in lawsuits arising from clauses of energy supply contracts for public lighting, signed with various municipalities in the concession area. These actions request restitution of a portion of amounts charged in the last 20 years, in the event that the courts recognize that these amounts were unduly charged. The proceedings are based on an alleged mistake by CEMIG in the estimate of time used for the calculation of the consumption of energy by public lighting paid for by the Public Lighting Contribution (Contribuição de Iluminação Pública, or ‘CIP‘). On December 31, 2023, the amount involved in these actions was R$1.6 billion, and the probability of loss were assessed as ‘possible’, since, although the case law is amply in favor of CEMIG, it has not been definitively consolidated.

CEMIG GT filed an application to be included a joint defendant in a lawsuit brought by AES Sul against ANEEL, seeking annulment of ANEEL Dispatch No. 288/2002, which set the guidelines for interpretation of ANEEL Resolution No. 290/2000, and thus changed the condition of AES Sul Distribuidora, from creditor to debtor of the Wholesale Energy Market (Mercado Atacadista de Energia, or ‘MAE’), predecessor of the present CCEE. CEMIG GT obtained an interim decision to suspend the deposit that had been ordered in favor of AES, determined in the process of financial settlement, for the historic amount. The application to be joined as a party was granted and CEMIG GT is a co-litigant with Centrais Elétricas de Santa Catarina S.A. (‘CELESC’) in the principal case (‘Ordinary Action’), resulting in CEMIG D being able to present petitions and appeals in that action if necessary. A Special Appeal was filed against the decision allowing for CEMIG D’s joinder before the Superior Court of Justice (Superior Tribunal de Justiça, or ‘STJ’), which awaits judgment. This appeal does not prevent CEMIG GT from acting in the case to which it was admitted. Judgment at first instance was given against said Ordinary Action, and AES filed an appeal, which was granted. The Appeal Court Judgment on the appeal was the subject of a Motion for Clarification by CEMIG GT, on which judgment was given (cognizance taken, and appeal granted in part as to confirmation that only ANEEL should bear the costs of loser’s fees). As to the merits of the question, an appeal was lodged (against non-unanimous decision by an appellate court, which awaits judgment. On December 31, 2023, the amount involved in the action was R$594 million, and the probability of loss were assessed as ‘possible’ since there is still the possibility of the second instance decision being modified in the appeals that are currently awaiting judgment.

Company and its subsidiaries are involved in numerous administrative and judicial proceedings, challenging, principally: (i) tariff charges in invoices for use of the distribution system by a self-producer; (ii) alleged violation of targets for continuity indicators in retail supply of energy; and (iii) the tariff increase made during the federal government’s economic stabilization plan referred to as the ‘Cruzado Plan’, in 1986. On December 31, 2023, the


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aggregate amount of the contingency is R$652 million, of which R$52 million has been recorded as provision – the amount estimated as probably necessary for settlement of these disputes.

Tax and Similar Charges

CEMIG, CEMIG GT and CEMIG D are parties in various legal actions disputing the applicability of the Urban Land Tax (Imposto Territorial Urbano, or ‘IPTU’), on Real estate properties designed for public service concessions. This is a matter on which case law has not been established by the higher courts. As of December 31, 2023, the amount involved in these actions for which probability of loss were assessed as ‘probable’ totaled R$2 million and the proceedings in which the probability of loss were assessed ‘possible’ totaled R$184 million.

In 2006, CEMIG, CEMIG GT and CEMIG D advanced funds to some of their employees in exchange for their rights to future payments, referred to as the ‘Anuênio.’ No income tax or social security contributions were collected in connection with those payments, since it is our opinion that they are not applicable The Brazilian Federal Revenue Service, however, initiated an administrative proceeding seeking to levy taxes on such payments. In order to avoid the risk of imposition of penalties, we filed two writs for mandamus, which were decided unfavorably to us in the lower court. We have appealed and are awaiting the ruling of the Court of Appeals on whether the income tax is applicable. Regarding the social security contributions, the Federal Regional Court (Tribunal Regional Federal, or ‘TRF’) ruled against us. We appealed to the Superior Courts, which have not yet rendered a decision. On December 31, 2023, the amount involved in these actions was R$319 million, in which we have assessed the chance of loss as ‘probable’ in the amount of R$142 million, in view of the indemnity nature of the advance payments made to the employees and the absence of specific case law in Superior Court of Justice (Superior Tribunal de Justiça, or ‘STJ’) and the TRF of the First Region (‘TRF1’). We emphasize that, in relation to Income Tax, both the STJ and the TRF of the First Region adopt the position that there is no tax levied on payments arising from the suppression of employees’ collective bargaining rights when agreed through a collective agreement, since such amounts are considered as being of an indemnity nature.

INSS initiated an administrative proceeding against CEMIG in 2006 alleging non-payment of the social security contribution on the amounts paid to our employees and directors as profit-sharing in the period 1998 to 2004. In 2007, we filed a writ of mandamus seeking declaration that such profit-sharing payments were not subject to social security contributions. We received a partial favorable decision in 2008, which declared non-applicability of the contribution of social security on the profit-sharing amounts paid for employees, and its applicability on the profit-sharing amounts paid to directors. We have appealed the decision and, on August 23, 2019, the TRF of the 1st Region issued a ruling giving partial approval to declare the decay of tax credits related to taxable events that occurred up to August 2001 but denying the other requests. As a result of this decision, we started a new judicial discussion with the objective of producing evidence. On December 31, 2023, the amount involved in this action was assessed as R$227 million, and we have assessed the chance of loss as ‘probable’.

The Brazilian Federal Tax Authority (‘Secretaria da Receita Federal’) has brought, in addition to the process mentioned above, other administrative proceedings against CEMIG, CEMIG GT, CEMIG D and Rosal Energia S.A., in relation to Social Security contributions under various headings: employee profit sharing, the Workers’ Food Program (Programa de Alimentação do Trabalhador, or ‘PAT’), the education support contribution (‘auxílio-educação’), time-of-service bonuses, Special Additional Retirement payments, taxes under suspended enforcement, overtime payments, hazardous occupation payments, matters related to Sest/Senat (transport workers’ support programs), donations, sponsorships, and fines for non-compliance with accessory obligations. We have presented defenses and wait for judgment. As of December 31, 2023, the amount involved in these actions was R$1.7 billion. As a result of the decision by the TRF of the 1st Region mentioned above, the amounts for which probability of loss were assessed as ‘probable’ totaled R$1.2 billion and the proceedings in which the probability of loss were assessed ‘possible’ totaled R$501 million.

CEMIG, CEMIG GT, CEMIG D and Sá Carvalho S.A. are parties in administrative proceedings in relation to Corporate Income Tax (‘IRPJ’) and the Social Contribution on Net income (‘CSLL’). As of December 31, 2023, the amount involved in these actions were assessed as R$587 million, and the probability of loss assessed as ‘possible’. The infringement notices for the Social Contribution (CSLL) tax are due in particular to the companies having excluded from their


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declared basis of calculation for this tax, amounts relating to: (i) cultural and artistic donations and sponsorship; (ii) payments of punitive fines; (iii) taxes with liability suspended; and (iv) expenses on amortization of goodwill, since there is no provision in law that supports taxation of amounts reported under this heading. The infringement notices for corporate income tax are due to the fact that when calculating the real profit, the companies considered as expenses the amounts spent on technological innovation, under Law 11,196/05. The Trade and Industry Ministry (‘MCTI’), which initially, due to lack of information, had not recognized this legal categorization of these amounts, is reviewing its legal opinions now that it is in possession of the information sent by the companies.

The Federal Tax Authority issued an infringement notice on Parati – Participações em Ativos de Energia Elétrica (‘Parati’), a CEMIG affiliated company, and as a jointly responsible party, on CEMIG, in relation to the Withholding Income Tax (Imposto de Renda Retido na Fonte, or ‘IRRF’) allegedly applicable to capital gains arising from the disposal of assets or rights in Brazil by a non-resident, on the basis of allegedly being the legal entity responsible for the withholding and payment of the tax. The transaction in question was in regard to the purchase by Parati, and sale by Enlighted, on July 7, 2011, of a 100% interest in Lepsa LLC (a company headquartered in Delaware, USA). Lepsa LLC was also the owner of 75% of the quotas of Luce Brasil Fundo de Investimento em Participações (‘FIP Luce’), which in turn was the indirect holder, through Luce Empreendimentos e Participações S.A., of 13.03% of the total and voting share of Light (Light, which has only issued common shares). After certain transactions, Parati became the direct holder of 100% of the shares of Luce Empreendimentos e Participações S.A. (LEPSA), which in turn was the holder of 13.03% of the voting share and total share capital of Light. After successive corporate transactions, Parati was merged into CEMIG and, consequently, succeed its position in this process. On May 2, 2016, the Delegated Judgment office of the Federal Tax Authority decided on the challenge presented by Parati and CEMIG: it maintained the posting of the tax credit against Parati, and in relation to CEMIG, it upheld the principle of joint liability. The companies then appealed, and the Voluntary Appeal is pending judgment by CARF. As of December 31, 2023, the amount claimed in this case totaled R$274 million and the chance of loss was assessed as ‘possible’, mainly due to the matters of fact: (i) on the question of simulation, the condition in this specific case is more favorable than that in the precedents that are found in the case law. If the allegation of simulation is overturned, we believe that there will be no legal case for the demand for payment; (ii) on the merit, because this is a very specific transaction, there are no similar precedents; and (iii) with regards to the fine, the same arguments hold as to the singular nature of this specific case.

CEMIG and its wholly owned subsidiaries, especially CEMIG GT and CEMIG D, are parties in various court and administrative proceedings dealing with offsetting of credits arising from tax losses in corporate income tax returns, and payments made in excess, identified by Federal Revenue Payment or Credit Receipts, involving corporate income tax, the Social Contribution on net income and the PIS and Cofins taxes. The companies are contesting the non-ratification by the authorities of these offsetting and attempts by the federal tax authorities to recover the amounts of these taxes to be compensated. On December 31, 2023, the amount involved in these for which the probability of loss was assessed as ‘probable’ totaled R$1.3 million and the proceedings in which the probability of loss were assessed ‘possible’ totaled R$146 million.

CEMIG and its subsidiaries are involved in numerous administrative and judicial claims actions relating to taxes, including, among other matters, subjects relating to the Rural Property Tax (‘ITR’); the Tax on Donations and Legacies (‘ITCD’); the Social Integration Program (Programa de Integração Social, or ‘PIS’); the Contribution to Finance Social Security (Contribuição para o Financiamento da Seguridade Social, or ‘Cofins’); Corporate Income tax (‘Imposto de Renda Pessoa Jurídica’, or ‘IRPJ’); the Social Contribution (‘Contribuição Social sobre o Lucro Líquido’, or ‘CSLL’); and motions to tax enforcement. As of December 31, 2023, the amount involved in these actions for which probability of loss were assessed as ‘probable’ totaled R$23 million and the proceedings in which the probability of loss were assessed ‘possible’ totaled R$530 million.

ICMS (local state value added tax)

From December 2019 to November 2021 the Tax Authority of Minas Gerais State issued infraction notices against the subsidiary Gasmig, in the total amount of R$357 million, relating to reduction of the calculation base of ICMS tax in the sale of natural gas to its customers over the period from December 2014 to September 2021, alleging a divergence


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between the form of calculation used by Gasmig and the opinion of that tax authority. The claims comprise: principal of R$124 million, penalty payments of R$201 million and interest of R$32 million.

Considering that the State of Minas Gerais, over a period of more than 25 years, has never made any allegations against the methodology of calculation by the Company, the managers, together with their legal advisers, believe that there is a defense under Article 100, III of the National Tax Code, which removes claims for penalties and interest; and that the contingency for loss related to these amounts is ‘remote’. In relation to the argument on the difference between the amount of ICMS tax calculated by Gasmig and the new interpretation by the state tax authority, the probability of loss was considered ‘possible’. In July 2021, Gasmig filed a lawsuit against the State of Minas Gerais. The infraction notices are suspended until the merits of the action are determined. On December 31, 2023, the amount of the contingency for the period relating to the rules on expiry by limitation of time is R$223 million.

Contracts

CEMIG D is a party in court disputes involving claims for rebalancing of contracts to implement part of the rural electrification program known as Luz Para Todos (‘Light for All’). As of December 31, 2023, the amount involved in these actions was R$515 million and the probability of loss was assessed as ‘possible’.

Employment Law Obligations

CEMIG, CEMIG GT and CEMIG D are parties in various labor claims filed by their employees and by employees of companies that provide them with services. Most of these claims relate to overtime and additional pay, severance payments, various benefits, salary adjustments and the effects of such matters on a supplementary retirement plan, and the use of outsourced labor. Under Brazilian employment laws, claimants must file claims for any unpaid amounts to which they are entitled within two years from the relevant termination of the employment contract, and such rights are limited to a period of five years prior to the filing of the claim. On December 31, 2023, the value of the claims for which the probability of loss had been assessed as ‘probable’ was R$432 million; for those with probability of loss assessed as ‘possible’ the amount was R$1.36 billion.

Environmental Issues

CEMIG, CEMIG GT and CEMIG D are party to several other administrative and judicial proceedings and claims involving environmental matters, regarding certain protected areas, environmental licenses and remediation of environmental damages, among others. On December 31, 2023, the amount for which probability of loss were assessed as ‘probable’ was R$664 thousand and the proceedings in which the probability of loss were assessed ‘possible’ totaled R$275.6 million.

Property and Liability

CEMIG, CEMIG GT and CEMIG D are party in several legal proceedings, mainly as defendant, relating to Real property and to indemnity arising from accidents taking place in the ordinary course of the business. On December 31, 2023 the amount for which probability of loss were assessed as ‘probable’ was R$40 million and the total of proceedings in which probability of losses were assessed as ‘possible’ was R$613 million.

Specifically in civil lawsuits, involving land lawsuits, on December 31, 2023, the amount for which probability of loss is classified as ‘probable’ is R$1.7 million, and the total of lawsuits for which probability of loss is classified as ‘possible’ is of R$427.6 million.

Other proceedings

Company and its subsidiaries are involved as plaintiff or defendant, in other less significant claims, related to the normal course of their operations including: provision of cleaning service in power line pathways and firebreaks, indemnities for rescission of contracts, on a lesser scale, and disputes alleging losses suffered because of supposed


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breaches of contract at the time of provision of services of cleaning of power line pathways and firebreaks. As of December 31, 2023, the amount involved in these actions for which probability of loss were assessed as ‘possible’ totaled R$494 million and the proceedings in which the probability of loss were assessed ‘probable’ totaled R$10.7 million.

Customer’s claims

Company and its subsidiaries are involved in various civil actions relating to indemnity for moral injury and for material damages, arising, principally, from allegations of irregularity in measurement of consumption, and claims of undue charging, in the normal course of business. As of December 31, 2023, the amount involved in these actions for which probability of loss were assessed as ‘possible’ totaled R$346 million and the proceedings in which the probability of loss were assessed ‘probable’ totaled R$45 million.

Renova: Application to override corporate identity

A Receivables Investment Fund (Fundo de Investimento em Direitos Creditórios – FIDC) filed an application for Override of Legal Identity (Incidente de Desconsideração da Personalidade Jurídica – IDPJ) in relation to certain companies of the Renova group, aiming to include some shareholders of Renova, including the Company and its subsidiary CEMIG GT, as defendants jointly and severally liable. The amount involved in this dispute is estimated at R$127 million on December 31, 2023. The probability of loss has been assessed as ‘possible’.

Dividend Policy and Payments

Mandatory Dividend—Priority and Amount of Dividends

Under our by-laws, we are required to pay to our shareholders, as mandatory dividends, 50% of the net income of each fiscal year ending December 31, determined in accordance with Law 6,404, enacted on December 15, 1976, or ‘Brazilian Corporate Law’. Our preferred shares have priority in the allocation of the minimum mandatory dividend for the period in question. The order of priority of the dividend distribution is as follows:

The annual minimum dividend for the preferred shares: these have preference in the event of repurchase of shares, and have an annual minimum dividend equal to the greater of the following:

•

10% of their par value; or

•

3% of the shareholders’ equity associated with it;

•

The dividends on the common shares, up to the minimum percentage for the preferred shares.

Without prejudice to the mandatory dividend, every two years, or shorter period if the Company’s cash position permits, we distribute extraordinary dividends, up to the limit of the cash available, as determined by the Board of Directors, under the Company’s Strategic Guidelines Plan and the dividend policy specified in that plan.

The annual dividends declared shall be paid in two equal installments, the first by June 30 and the second by December 30 of each year. Extraordinary dividends shall be paid as decided by the Board of Directors, according to the same deadline.

Under Brazilian Corporate Law, the Board of Directors may declare interim dividends, in the form of interest on capital, to be paid from retained earnings, accumulated reserves or profit reported in semi-annual or quarterly financial statements. Any interim dividend paid may be set off against the amount of the mandatory dividend payable for the fiscal year in which the interim dividend was paid.

In the fiscal years in which we do not have sufficient profit to pay dividends to our preferred and common shareholders, the State of Minas Gerais guarantees a minimum dividend of 6% of the par value of the preferred or common shares, respectively, per year to all shares of the Company issued until August 5, 2004 and held by individuals.


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Unrealized profit reserve: Article 197 of the Brazilian corporate law 6,404/76 allows the Company to pay the mandatory dividend, calculated as required by the Bylaws, up to the amounts of the realized portion of the net income for the year (received in cash). The excess between such mandatory dividend amount and the dividends that will be actually paid was recorded in the ‘Unrealized profit reserve’.

On March 23, 2022, the Company declared payment of Interest on Capital in the amount of R$245 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on March 28, 2022. This amount was paid on December 29, 2022. On June 15, 2022, the Company declared payment of Interest on Capital in the amount of R$353 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on June 24, 2022. On September 20, 2022, the Company declared payment of Interest on Capital in the amount of R$471 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on September 23, 2022. On December 14, 2022, the Company declared payment of Interest on Capital in the amount of R$398 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on December 21, 2022. On December 22, 2022, the Company declared payment of Interest on Capital in the amount of R$515 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on December 27, 2022. The amounts were paid in two installments, the first on June 30, 2023 and the second on December 30, 2023.

At the Annual General Meeting (AGM), held on April 27, 2023, we declared payment of dividends for the 2022 fiscal year in the amount of R$249 million, to holders whose names were on the Company´s Nominal Share Registry on the date of the AGM. The dividends were paid in two installments, the first on June 30, 2023 and the second on December 28, 2023.

At the Annual General Meeting (AGM), held on April 29, 2024, we declared payment of dividends for the 2023 fiscal year in the amount of R$3,124million, to holders whose names were on the Company's Nominal Shares Registry on the date of the AGM. The dividends will be paid in two installments, the first by June 30, 2024 and the second by December 30, 2024.

Amounts Available for Distribution

The amount available for distribution is calculated based on the financial statements prepared in accordance with generally accepted accounting practices adopted in Brazil and the procedures described below.

The mandatory dividend is calculated based on adjusted net income, defined as net income after taking onto account: (a) amounts allocated to the legal reserve, (b) amounts allocated to record contingency reserves and reversal of these reserves accumulated in prior fiscal years, and (c) any unrealized profit transferred to the unrealized profit reserve account, and any amounts previously posted to this reserve account which have been realized in the fiscal year and used to offset losses.

We are obligated to maintain a legal reserve of 5% of the net income of each fiscal year until it reaches 20% of the Company’s social capital according to Article 193 of Brazilian Corporate Law. However, we are not obligated to make any allocation to the legal reserve in relation to any fiscal year in which the sum of the legal reserve and the other established capital reserves exceeds 30% of the Company’s total paid-in capital. Any loss for the year may be charged against the legal reserve.

Under Brazilian Corporate Law, profits of subsidiaries or affiliates are accounted by the equity method and income from term sales, realizable after the end of the next fiscal year, are accounted for as unrealized profit.

The total of income reserves (except for the reserve for contingencies relating to expected losses, tax benefits and the unrealized profit reserve), the legal reserve, the special reserves, the reserve for investment projects, and retained earnings may not be greater than the Company’s registered capital. The amount in excess of our registered capital must be used to increase our registered capital or be distributed as cash dividends.


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Under Brazilian Corporate Law and the by-laws of the Company, dividends not claimed within three years of the date on which they are distributed revert to the Company.

Interest on Equity

Brazilian corporations are permitted to distribute dividends in the form of a tax-deductible notional interest expense on shareholders’ equity in accordance with Law 9,249/1995 of December 26, 1995, as amended. The amount of tax-deductible interest that may be paid is calculated by applying the daily pro rata variation of the TJLP on the shareholders’ equity during the relevant period and cannot exceed the greater of:

•

50.0% of net income (before taking into account such distribution and any deductions for income taxes and after taking into account any deductions for social contributions on net income) for the period in respect of which the payment is made; or

•

50.0% of earnings reserves and retained earnings.

Non-resident’s shareholders must register with the Central Bank so that the foreign currency proceeds of their dividend, Interest on Capital payments, or of sale or other amounts relating to their shares, may be remitted to them outside Brazil. The preferred shares underlying our Preferred ADSs and the common shares underlying our Common ADSs are held in Brazil by the custodian bank, as agent for the depositary bank, which is the registered owner of the shares.

Dividends and interest on shareholders’ equity over the minimum established in a Company’s by-laws are recognized when approved by the shareholders in the general meeting.

Currency Exchange

Payments of cash dividends and distributions, if any, will be made in Reais to the custodian on behalf of the depositary bank, which will then convert such proceeds into U.S. dollars and transfer such U.S. dollars to the depositary bank for distribution to holders of ADRs. If the custodian is unable to immediately convert the Reais received as dividends into U.S. dollars, the amount of U.S. dollars payable to the holders of ADRs may be adversely affected by devaluations of the Real that occur before such dividends are converted and remitted. See “Item 3, Key Information—Risk Factors—Risks Relating to Brazil— The Federal Government exercises significant influence on the Brazilian economy, Political and economic conditions can have a direct impact on our business”.

Dividends in respect of the preferred shares and common shares paid to non-resident holders, including holders of Preferred ADSs and Common ADSs, are generally not subject to Brazilian withholding tax, although in general payments of interest on capital are subject to withholding tax. See “Item 10, Additional Information - Taxation - Brazilian Tax Considerations - Taxation of Dividends’ and ‘- U.S. Tax Considerations - Taxation of Distributions.” There is no specific record date upon which the depositary bank will determine the exchange rate to be used in connection with converting cash dividends or other cash distributions. Pursuant to the Deposit Agreements, the depositary bank will arrange for the funds to be converted into U.S. dollars upon receipt of notice of cash dividends or other cash distributions.

History of Dividend Payments

The table below gives the track record of recent declarations of dividends and Interest on Capital to holders of our common and preferred shares. In each case, the payment takes place in the year following the year for the results of which the dividend was declared.


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Declaration History of Dividends and Interest on Capital (1)


Dividend Year	Common Shares				Preferred Shares
	(in millions of R$) (2)		(in millions of US$) (3)		(in millions of R$) (2)		(in millions of US$) (3)
2021 (4)		658		133		1,309		265
2022 (5)		747		141		1,486		281
2023 (6)		867		179		1,725		356

(1)

Under Brazilian accounting practices, dividends and Interest on Capital are accounted in the business year in which the income from which the dividends are declared, provided that they are previously approved.

(2)

Amounts expressed in Reais are expressed in nominal Reais.

(3)

The amounts in USD displayed above are for illustrative purposes only and were calculated by dividing the amount of dividends and interest on capital paid, expressed in nominal Reais, by the exchange rate obtained from the Federal Reserve Board’s website on respective ‘record dates’; for 2023 - as of December 29 2023.

(4)

On December 07, 2021, the Company declared payment of Interest on Capital in the amount of R$ 955 million, on account of the amount of the minimum mandatory dividend for 2021, and payable to shareholders whose names were on the Company’s Nominal Share Registry on December 21, 2021. This amount was paid in two installments, the first on June 30, 2022 and the second on December 30, 2022. The Board of Directors proposed to the Annual General Meeting (‘AGM’) held on July 29, 2022 the payment of dividends for the year 2021 of R$1.011 million, to holders whose names are in the Company´s Nominal Share Registry on the date of the AGM. The payment of dividends was paid in two installments, the first on June 30, 2022 and the second on December 30, 2022.

(5)

On March 23, 2022, the Company declared payment of Interest on Capital in the amount of R$245 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on March 28, 2022. This amount was paid on December 29, 2022. On June 15, 2022, the Company declared payment of Interest on Capital in the amount of R$ 353 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on June 24, 2022. This amount was paid in two installments, the first on June 30, 2023 and the second on December 28, 2023. On September 20, 2022, the Company declared payment of Interest on Capital in the amount of R$471 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on September 23, 2022. This amount was paid in two installments, the first on June 30, 2023 and the second on December 28, 2023. On December 14, 2022, the Company declared payment of Interest on Capital in the amount of R$398 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on December 21, 2022. This amount was paid in two installments, the first on June 30, 2023 and the second on December 28, 2023. On December 22, 2022, the Company declared payment of Interest on Capital in the amount of R$515 million, on account of the amount of the minimum mandatory dividend for 2022, and payable to shareholders whose names were on the Company’s Nominal Share Registry on December 27, 2022. This amount was paid in two installments, the first on June 30, 2023 and the second on December 28, 2023.

(6)

On March 22, 2023, the Company declared payment of Interest on Capital in the amount of R$424 million, on account of the amount of the minimum mandatory dividend for 2023, and payable to shareholders whose names were on the Company’s Nominal Share Registry on March 27, 2023. This amount will be paid in two installments, the first by June 30, 2024 and the second by December 30, 2024. On June 20, 2023, the Company declared payment of Interest on Capital in the amount of R$427 million, on account of the amount of the minimum mandatory dividend for 2023, and payable to shareholders whose names were on the Company’s Nominal Share Registry on June 23, 2023. This amount will be paid in two installments, the first by June 30, 2024 and the second by December 30, 2024. On September 20, 2023, the Company declared payment of Interest on Capital in the amount of R$418 million, on account of the amount of the minimum mandatory dividend for 2023, and payable to shareholders whose names were on the Company’s Nominal Share Registry on September 25, 2023. This amount will be paid in two installments, the first by June 30, 2024 and the second by December 30, 2024. On December 14, 2023, the Company declared payment of Interest on Capital in the amount of R$1,323 million, on account of the amount of the minimum mandatory dividend for 2023, and payable to shareholders whose names were on the Company’s Nominal Share Registry on December 21, 2023. This amount will be paid in two installments, the first by June 30, 2024 and the second by December 30, 2024.

Significant Changes

Except as otherwise disclosed in our audited consolidated financial statements and in this annual report, there have been no significant changes in our business, financial condition or results of operations since December 31, 2023.

Item 9. The Offer and Listing

Offer and Listing Details

For a description of our trading markets, see Item C. Markets, below.

Plan of Distribution

Not applicable.

Markets

The principal trading market for our preferred shares is the Brazilian Stock Exchange (B3). Our Preferred ADSs, each representing one preferred share as of December 31, 2023 have been traded on the NYSE under the symbol ‘CIG’ since


ANNUAL REPORT AND FORM 20-F \| 2023	133

September 18, 2001. Prior to that date, our Preferred ADSs were traded in the over the counter, or ‘OTC’, market in the United States. The Preferred ADSs are evidenced by Preferred ADRs issued by Citibank, N.A., as depositary, pursuant to a Second Amended and Restated Deposit Agreement, dated August 10, 2001, as amended on June 11, 2007 and on September 11, 2012 and on April 15, 2022 by and among the Company, the depositary and the holders and beneficial owners of Preferred ADSs evidenced by Preferred ADRs issued thereunder. As of March 31, 2024, there were 192,886,535 Preferred ADSs outstanding (each representing one preferred share), representing 13.16% of our 1,465,523,064 preferred shares.

The principal trading market for our common shares is the B3. Our Common ADSs, each representing one common share as of December 31, 2023 have been traded on the NYSE under the symbol ‘CIG.C’ since June 12, 2007, when we established an American Depositary Shares program for our common shares. The Common ADSs are evidenced by Common ADRs issued by Citibank, N.A., as depositary, pursuant to a Deposit Agreement, dated June 12, 2007, as amended on April 15, 2022, by and among Company, the depositary and the holders and beneficial owners of Common ADSs evidenced by Common ADRs issued thereunder. As of March 31, 2024, there were 907,073 Common ADSs outstanding (each representing one common share), representing 0.12% of our 735,847,624 common shares. The following prices are net of earnings, including dividends:

As of December 31, 2023, the closing price per preferred share on the B3 was R$ 11.32 and the closing price per Preferred ADS on the NYSE was US$2.29.

As of December 31, 2023, the closing price per common share on the B3 was R$ 14.95 and the closing price per Common ADS on the NYSE was US$3.15.

The following table sets forth the reported high and low dividend-adjusted closing sale prices for our preferred and common stock on the B3 as well as our preferred and common ADSs on the NYSE for the periods indicated.


	Common Shares				Common ADSs				Preferred Shares				Preferred ADS
	Price in Nominal R$				Price in US$				Price in Nominal R$				Price in US$
Year	High		Low		High		Low		High		Low		High		Low
2019		18.71		13.73		4.83		3.21		15.09		12.24		3.95		2.86
2020		16.33		7.10		4.06		1.37		14.61		7.25		3.40		1.24
2021		18.40		11.19		3.59		2.24		14.53		9.03		2.63		1.50
2022		18.92		11.29		4.00		2.22		12.11		8.12		2.43		1.50
2023		19.12		13.44		4.26		2.89		12.54		9.07		2.54		1.68


	Common Shares			Common ADSs			Preferred Shares			Preferred ADS
Quarter	Price in Nominal R$			Price in US$			Price in Nominal R$			Price in US$
2022
1 Q		14.27	11.29		3.36	2.21		10.26	8.12		2.23	1.50
2 Q		15.28	12.13		3.50	2.48		11.00	9.31		2.35	1.76
3 Q		18.92	14.37		4.00	2.89		12.11	9.38		2.43	1.80
4 Q		17.94	15.13		3.72	2.94		11.26	9.68		2.25	1.80
2023
1 Q		15.84	13.44		3.49	2.89		10.35	9.07		1.99	1.68
2 Q		19.12	15.90		4.20	3.32		11.84	10.41		2.42	2.01
3 Q		18.80	16.45		4.26	3.66		12.11	11.01		2.46	2.16
4 Q		18.33	14.18		3.90	2.97		12.54	9.87		2.54	1.98


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	Common Shares				Common ADSs				Preferred Shares				Preferred ADS
	Price in Nominal R$				Price in US$				Price in Nominal R$				Price in US$
Month	High		Low		High		Low		High		Low		High		Low
October 2023		18.33		14.18		3.90		3.00		11.70		10.91		2.27		2.12
November 2023		16.57		14.47		3.66		3.21		12.54		9.87		2.54		1.98
December 2023		14.95		14.24		3.27		2.97		11.32		10.13		2.29		2.02
January 2024		15.41		14.79		3.17		2.97		11.98		11.18		2.43		2.21
February 2024		15.27		14.80		3.06		2.94		11.84		11.07		2.36		2.17
March 2024		14.97		13.07		3.02		2.61		12.60		10.94		2.47		2.18

* Source: Economatica – net earnings prices, including dividends.

The table below represents the dividends paid on the common and preferred shares and their respective Common and Preferred ADSs, resulting in an adjustment to the price per share and ADS:


Record of dividends paid on common and preferred shares and Common and Preferred ADSs
Year	Declaration	Record date Brazil	Payment date Brazil	Record date NYSE	Payment date NYSE
2021	4/30/2021	4/30/2021	6/30/2021	5/4/2021	7/12/2021
			12/29/2021		1/6/2022
2022	4/29/2022	4/29/2022	12/29/2022	5/3/2022	7/8/2022
					1/5/2023
	12/10/2021	12/21/2021	6/30/2022	12/23/2021	7/8/2022
			12/29/2022		1/5/2023
	3/23/2022	3/28/2022	12/29/2022	4/4/2022	1/5/2023
	4/29/2022	4/29/2022	6/30/2022	5/3/2022	7/8/2022
			12/29/2022		1/5/2023
2023	6/15/2022	6/24/2022	6/30/2023	6/28/2022	7/10/2023
			12/30/2023		1/8/2024
	9/20/2022	9/23/2022	6/30/2023	10/3/2022	7/10/2023
			12/30/2023		1/8/2024
	12/14/2022	12/27/2022	6/30/2023	12/27/2022	7/10/2023
			12/30/2023		1/8/2024
	12/22/2022	12/27/2022	6/30/2023	1/3/2023	7/10/2023
			12/30/2023		1/8/2024
	4/27/2023	4/27/2023	6/30/2023	1/5/2023	7/10/2023
			12/30/2023		1/8/2024

Since July 12, 2002, our shares have been traded on the LATIBEX, under the ticker symbol ‘XCMIG,’ The LATIBEX is an electronic trading market created in 1999 by the Madrid Stock Exchange to facilitate the trading market of Latin American Securities in Euros.

Trading on the B3 S.A. - BRASIL, BOLSA, BALCÃO (‘B3’)

The preferred shares and common shares are traded on the B3, the only Brazilian stock exchange that trades shares. Trading on the B3 is limited to brokerage firms and a limited number of authorized entities. The CVM and B3 have discretionary authority to suspend trading in shares of a particular issuer under certain circumstances.

Trading on the B3 is conducted between 10:00 a.m. and 5:00 p.m. or from 11:00 a.m. to 6:00 p.m. (during daylight savings time in Brazil). The B3 also permits trading from 5:30 p.m. to 6:00 p.m. during a different trading period called the ‘aftermarket’, except during daylight time. Trading during aftermarket is subject to regulatory limits on price volatility and on the volume of shares transacted through internet brokers.

Preferred or common shares traded on the B3 are settled within three business days after the trading date. Delivery of and payment for shares is made through the facilities of a separate clearinghouse, which maintains accounts for


ANNUAL REPORT AND FORM 20-F \| 2023	135

brokerage firms. The seller is ordinarily required to deliver the shares to the exchange on the second business day following the date of the trade. The clearing house for the B3 is the Câmara de Ações (previously organized as Companhia Brasileira de Liquidação e Custódia, or ‘CBLC’).

In order to better control volatility, the B3 has adopted a ‘circuit breaker’ system pursuant to which trading sessions may be suspended (i) for a period of 30 minutes whenever the index of this stock exchange falls more than 10% from the index registered for the previous day; (ii) for one hour if the index of this stock exchange falls 15% or more from the index registered for the previous day, after the reopening of trading; and (iii) for a certain period of time to be defined by the B3, if the index of this stock exchange falls 20% or more from the index registered for the previous day, after the reopening of trading. The minimum and maximum price is based on a reference price for each asset, which will be the previous session’s closing quote, when considering the asset at the beginning of the day before the first trade, or the price of the day’s first trade. The asset’s reference price will be altered during the session if there is an auction sparked by the intraday limit being breached. In this case, the reference price will become whatever results from the auction.

B3 settles the sale of shares three business days after they have taken place, without monetary adjustment of the purchase price. The shares are paid for and delivered through a settlement agent affiliated with the B3. The B3 performs multilateral compensation for both the financial obligations and the delivery of shares. According to the B3’s regulations, financial settlement is carried out by the Central Bank’s reserve transfer system. The securities are transferred by the B3’s custody system. Both delivery and payment are final and irrevocable.

Trading on the B3 is significantly less liquid than trading on the NYSE or other major exchanges in the world. Although any of the outstanding shares of a listed company may trade on the B3, in most cases fewer than half of the listed shares are available for trading by the public, the remainder being held by a controlling group or by government entities.

Trading on the B3 by a holder not deemed to be domiciled in Brazil for Brazilian tax and regulatory purposes, or a ‘non-Brazilian holder,’ is subject to certain limitations under Brazilian foreign investment regulations. With limited exceptions, non-Brazilian holders may trade on Brazilian stock exchanges in accordance with the requirements of CMN Resolution 4,373/2014, which requires that securities held by non-Brazilian holders be maintained in the custody of financial institutions authorized by the Central Bank and by the CVM or in deposit accounts with financial institutions. In addition, Resolution 4,373/2014 requires non-Brazilian holders to restrict their securities trading to transactions on the B3 or qualified over the counter markets. With limited exceptions, non-Brazilian holders may not transfer the ownership of investments made under Resolution 4,373/2014 to other non-Brazilian holders through a private transaction.

We have been a member of Special Corporate Governance Level 1 of the B3 since October 2001. The rules regarding such corporate governance segment are comprised by the Special Corporate Governance Level 1 Regulations (‘Regulamento de Listagem do Nível 1 de Governança Corporativa’), which were amended on March 21, 2011 by B3 and approved by the CVM. Such revised set of rules became effective on May 10, 2011. Among the obligations that are contemplated by such regulations, we are required to:

•

Present our consolidated statement of financial position, Standardized Financial Statements – DFP, consolidated statement of income, quarterly financial statements – ITR, and the Reference Form (‘Formulário de Referência’);

•

Include, in the notes to our quarterly financial statements, a note regarding related party transactions, containing the disclosure provided in the applicable accounting rules to annual financial statements;

•

Disclose any direct or indirect ownership interest per type and class exceeding 5% of each type and class of the Company’s capital share, to the level of individual shareholders, once the Company has been provided with such information;

•

Disclose the amount of free float shares and their respective percentage in relation to total shares outstanding, which shall be of at least 25% of shares representing our capital share;


ANNUAL REPORT AND FORM 20-F \| 2023	136

•

Disclose, by December 10th of each year, an annual timetable of corporate events, containing, at a minimum, the date of (a) acts and corporate events, (b) public meetings with analysts and other applicable parties, and (c) disclosure of financial information scheduled for the next fiscal year, any changes in scheduled events must be notified to the B3 and to the public at least 5 days in advance;

•

Hold at least one annual meeting with market analysts and any other interested parties to disclose information about their economic and financial condition, projects and perspectives;

•

Prepare, disclose and submit to the B3, a securities trading policy and a code of conduct establishing the values and principles that guide the Company, the controlling shareholder, the members of the board of directors and of the Fiscal Council, when installed, and members of any bodies with technical or advisory functions created the by-laws;

•

Establish that the term of office of our board of directors shall not exceed two years, with reelection being permitted;

•

Have different persons occupying the positions of chairman of the board of directors and chief executive officer or main executive officer of our company;

•

Adopt mechanisms that provide for capital dispersion in any public share offerings through the adoption of special procedures, such as guaranteeing access to all interested investors or distributing to non-institutional individuals or investors of at least 10% of the total to be distributed; and

•

Include in our by-laws the mandatory provisions required by B3.

Disclosure of Trading by Insiders

Brazilian securities regulations require our controlling shareholders, management, members of our Fiscal Council and any other technical or advisory body to disclose to us, the CVM and the B3 the number and types of securities issued by us, our subsidiaries and our controlling companies that are held by them or by persons closely related to them and any changes in their respective ownership positions during the preceding 12 months. The information regarding the trading of such securities (amount, price, and date of acquisition) must be provided to the CVM and the B3 by the Company within 10 days of the end of the month in which they occurred or of the month in which the managers of the Company were empowered.

Disclosure of Material Developments

Under the Brazilian securities legislation, we are required to publicly disclose any material act or fact related to our business, to CVM and to B3. We are also required to publish an announcement of such material acts or facts (in newspapers or on news websites). An act or fact is considered material if it has a material impact on: the price of our securities; the decision of investors to buy, sell or hold our securities; or the decision of investors to exercise any rights as holder of any of our securities. Under extraordinary circumstances, material acts or facts may in practice not be disclosed if the controlling shareholders or the management believes that revealing them would put the Company’s legitimate interests at risk, provided that such controlling shareholders or managers must immediately publicize the material act or fact if they lose control over the information or in case of atypical alterations on share prices or on the amount of shares traded.

Trading on Brazilian stock exchanges by non-residents in Brazil is subject to limitations under the Brazilian law on foreign investment. See the section “Item 10. Additional information – Foreign exchange controls”.

Regulation of Brazilian Securities Markets

The Brazilian securities markets are principally governed by Law 6,385, enacted on December 7, 1976, and the Brazilian Corporate Law, each as amended and supplemented, and by regulations issued by the CVM, the National Monetary Council (CMN), and the Central Bank, which has, among other powers, licensing authority over brokerage firms, and


ANNUAL REPORT AND FORM 20-F \| 2023	137

which regulates foreign investments and foreign exchange transactions. These laws and regulations, among others, provide for disclosure requirements applicable to issuers of traded securities, protection of minority shareholders and criminal penalties for insider trading and price manipulation. They also provide for licensing and oversight of brokerage firms and governance of the Brazilian stock exchanges.

Under Brazilian Corporate Law, a corporation is either public (‘companhia aberta’), such as we are, or a closed company (‘companhia fechada’). All public companies, including us, are registered with the CVM and are subject to reporting requirements. A company registered with the CVM may have its securities traded on the Brazilian stock exchanges or in the Brazilian over‑the‑counter market. Our common shares are listed and traded on the B3 and may be traded privately subject to some limitations between individuals in which a financial institution registered with the CVM serves as intermediary.

We have the option to request that trading in our securities on the B3 be suspended in anticipation of a material announcement. Trading may also be suspended on the initiative of the B3, or the CVM based on or due to, among other reasons, a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to inquiries by the CVM or the stock exchange.

The Brazilian over the counter market consists of direct trades between individuals in which a financial institution registered with the CVM serves as intermediary. No special application, other than registration with the CVM, is necessary for securities of a public company to be traded in this market. The CVM requires that it be given notice of all trades carried out in the Brazilian over the counter market by the respective intermediaries.

Trading on the B3 by non-residents of Brazil is subject to limitations under Brazilian foreign investment and tax legislation. The Brazilian custodian for the preferred shares or the common shares must register with the Central Bank of Brazil (‘BCB’) to be eligible for the remittance of funds in U.S. dollars abroad for payments of dividends, any other cash disbursements, or upon the disposition of the shares and sales proceeds thereof. In the event of a holder of Preferred ADSs exchanges it is Preferred ADSs for preferred shares or a holder of Common ADSs exchanges it is Common ADSs for common shares, the investor will need to apply for registration, as required by BCB Resolution 4,373, enacted on September 29, 2014, which regulates investments in Brazilian financial and securities markets by foreigners. See “Item 10. Additional Information—Exchange Controls”.

Disclosure Requirements

The CVM Resolution 44 of August 23, 2021, establishes some requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information on the trading and acquisition of securities issued by publicly held companies. Among others, these requirements include provisions that:

•

Establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by the controlling shareholders, resolutions of the general meeting of shareholders and of management of the company, or any other facts related to the company’s business (whether occurring within the company or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade those securities or to exercise any of those securities’ underlying rights;

•

Specify examples of facts that are considered to be material, which include, among others, the execution of shareholders’ agreements providing for the transfer of control, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the company, and any corporate restructuring undertaken among related companies;

•

Oblige the investor relations officer, controlling shareholders, other officers, directors, members of the audit committee and other advisory boards to disclose material facts;

•

Require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;


ANNUAL REPORT AND FORM 20-F \| 2023	138

•

Require the acquirer of a controlling stake in a corporation to publish material facts, including its intentions as to whether or not to de-list the corporation’s shares, within one year;

•

Establish rules regarding disclosure requirements in the acquisition and disposal of a material shareholding stake; and

•

Restrict the use of insider information.

Selling Shareholders

Not applicable.

Dilution

Not applicable.

Expenses of the Issue

Not applicable.

Item 10. Additional Information

Share Capital

Not applicable.

Memorandum and Articles of Association

By-laws

We are a state-controlled company registered under the laws of Brazil. The registration number (‘NIRE’) given to us by the Board of Trade of Minas Gerais (Junta Comercial do Estado de Minas Gerais, or ‘Jucemg’) is 31300040127. Set forth below is a summary of certain significant provisions of (i) our by-laws, as amended by our Extraordinary General shareholders’ meeting on December 11, 2023 and (ii) Brazilian Corporate Law. The description of our by-laws contained herein does not purport to be complete and is qualified by reference to our by-laws, which have been filed as an exhibit to this annual report.

Objects and purpose

As described in Clause 1 of its by-laws, CEMIG was incorporated with four main objects:

To build, operate and make commercial use of systems for generation, transmission, distribution and sale of electricity, and related services;

II.

To operate in the various fields of energy, from whatever source, with a view to economic and commercial operation.

III.

To provide consultancy services within its field of operation to companies in and outside Brazil; and

IV.

To carry out activities directly or indirectly related to its objects, including the development and commercial operation of telecommunication and information systems, technological research and development, and innovation.


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Preferred Shares

Holders of preferred shares have the right to receive annual minimum dividends in an amount equal to the greater of 10% of the par value of each preferred share or 3% of the net worth value associated with each preferred share. Holders of our preferred shares also have priority over any other class of shares if we decide to redeem shares. A preferred share does not entitle its owner to vote at the General Shareholders’ Meetings.

Share Subscription

Shares purchased by the State Government, which must constitute at all times the majority of our voting shares, are paid for in accordance with Brazilian Corporate Law. Shares purchased by other shareholders (whether natural persons or legal entities) shall be paid for in accordance with the decision resulting from the general meeting of shareholders that addresses the matter.

Article 172 of the Brazilian Corporate Law provides that each shareholder has a general preemptive right to subscribe for new shares or convertible securities issued in any capital increase, in proportion to that shareholder’s shareholding, except in the event of the exercise of any option to acquire shares of our capital share. Shareholders must exercise their preemptive rights within 30 days of the publication of the notice of capital increase.

In the event of a capital increase, holders of Preferred ADSs, which represent preferred shares, and holders of Common ADSs, which represent common shares, have preemptive rights to subscribe only for newly issued preferred shares or common shares, respectively, in proportion to their shareholdings but may be unable to exercise those rights due to U.S. securities law restrictions. See “Item 3, Risk Factors—Risks Relating to the Preferred and Common Shares and the Preferred and Common ADSs. An investor of our common or preferred shares and common or preferred ADS might be unable to exercise preemptive rights and tag-along rights with respect to our shares”.

Minority Shareholders

Our by-laws provide that the preferred and minority common shareholders are entitled to elect one member to the Board of Directors, respectively, in a separate vote in accordance with the applicable legislation, as more fully described in ‘—Rights of Shareholders—Rights of Minority Shareholders.’

Dividends

For a discussion of our dividend policy, see “Item 8, Financial Information—Dividend Policy and Payments.”

General Meetings of Shareholders

The general meetings of shareholders are held for the purposes provided for by law, specifically in the Brazilian Corporate Law. They take place within the first four months following the end of the business year and are called by prior notice of at least 15 days. The Corporate Law also specifies that the following decisions can be made only by the General Meeting of Shareholders:

•

To changes the by-laws;

•

To elect or dismiss, at any time, the members of the company’s management or Fiscal Council or committee, subject to sub-item II of Article 142 of the Corporate Law;

•

Annually, to receive the accounts of management, and to decide on the financial statements presented by them;

•

To authorize issuance of debentures;

•

To suspend exercise of shareholders’ rights;

•

To decide on valuation of goods or assets that a shareholder provides for formation of the share capital;


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•

To authorize issuance of ‘founder’s shares’;

•

To decide on transformation, merger, absorption or split of or by the company, its dissolution or liquidation; To elect or dismiss liquidators, and take decisions on their accounts; and

•

To authorize the managers to admit bankruptcy or seek concordats.

As a rule, a vote in favor by shareholders representing at least the majority of the common shares in circulation, present in person or represented by holders of power of attorney, at a General Meeting of Shareholders, is required for approving or ratifying any measure proposed. Abstentions are not counted. However, an affirmative vote by shareholders representing a majority of the share capital in circulation is required for decisions which:

•

Create preferred shares or increase an existing class of preferred shares in a manner not proportional in relation to the other classes of shares, unless the measure is specified or authorized by the by-laws;

•

Change any preference, prerogative or condition of redemption or amortization conferred upon one or more classes of preference shares; or create a class with greater prerogatives than those of the existing classes of preferred shares;

•

Reduce the percentage of the obligatory dividends;

•

Make any change to the company’s corporate Objects;

•

Carry out any transaction of absorption or merger of the company with any other company;

•

Carry out a split of part of the company’s assets or liabilities;

•

Approve our participation in a group of companies;

•

Apply for cancellation of the state of liquidation;

•

Approve dissolution of the company;

•

Approve the creation of ‘founder’s shares’; and/or

•

Approve incorporation of all our shares into those of another company in such a way as to make us a wholly owned subsidiary of that other company.

Shareholders may be represented at a General Meeting of Shareholders by a person holding a power of attorney given not more than one year prior to the date of the meeting. To be qualified to represent a shareholder at a General Meeting of Shareholders, the holder of the power of attorney must be a shareholder, or one of the Company’s directors, or a member of the Board of Directors, or a lawyer. For a listed company, such as CEMIG, the holder of the power of attorney may also be a financial institution.

Subject to provisions of the Corporate Law and our by-laws, our Board of Directors may routinely call our General Meetings of Shareholders. General Meetings of Shareholders may also be called:

•

By the Fiscal Council, if the Board of Directors omits to call the General Meeting within one month from the date on which this has been requested of it, in accordance with the applicable law, or a General Meeting at any moment in the event that serious and urgent matters affect our Company;

•

By any shareholder, whenever the Board of Directors omits to call the General Meeting of Shareholders within 60 days from the date on which this has been requested of it in accordance with the Brazilian Corporate Law or our by-laws;

•

By shareholders holding at least 5% of the share capital, in the event that the Board of Directors omits to call the General Meeting within 8 calendar days from receipt of a request from these shareholders to call a General Meeting, with indication of the matters to be discussed; or,

•

By any holders of at least 5% of our voting stock or 5% of the shareholders without the right to vote if our Board of Directors omits to call the General Meeting of Shareholders within 8 calendar days from receipt of a request from said shareholders to install the Fiscal Council.


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Remote voting procedure

Pursuant to CVM Instruction 561, it is mandatory that remote voting – an absentee ballot system – should be available for Ordinary (Annual) General Meetings and Extraordinary General Meetings of Shareholders held to elect members of the Board of Directors or the Fiscal Council.

Shareholders may exercise the vote in General Meetings by filling in the Remote Voting Statement (Boletim de Voto à Distância, or ‘BVD’), which must contain all the subjects to be decided. The BVD may be delivered through the custody agent, through the administrator for book-entry shares, or directly at the Company.

The objective of remote voting is to increase shareholders’ participation in general meetings, by facilitating the process of voting/representation. It also enables reduction of the costs of attending meetings and representation in them. In accordance with the provisions of the legislation, CEMIG is adopting remote voting as from the start of the current year.

The Board of Directors

Our by-laws require our Board of Directors to have nine members. One must be appointed Chair of the Board, and one Deputy Chair.

Key functions specific to the Board of Directors include the following:

•

To set the general orientation of the Company’s business;

•

To elect, dismiss and evaluate the Executive Officers of the Company, in accordance with the applicable legislation, subject to the by-laws;

•

To approve the policy on transactions with the related parties;

•

To decide, upon proposal by the Executive Board, on disposal of, or placement of a charge upon, any of the Company’s property, plant or equipment, and on the Company giving any guarantee to any third party of which the individual value is equal to 1% or more of the Company’s Shareholders’ equity;

•

To decide, upon proposal by the Executive Board, on the Company’s investment projects, signing of contracts and other legal transactions, contracting of loans or financing, or the constitution of any obligations in the name of the Company which, individually or jointly, have value equal to 1% or more of the Company’s Shareholders’ equity, including injections of capital into wholly owned or other subsidiaries or affiliates or the consortia in which the Company participates;

•

To call the General Meeting of Shareholders;

•

To monitor and inspect the management by the Executive Board: The Board of Directors may, at any time, examine the books and papers of the Company, and request information on contracts entered into or in the process of being entered into, and on any other administrative facts or acts which it deems to be of interest to it;

•

To give a prior opinion on the Executive Board’s report of management and accounts of the Company;

•

To choose and to dismiss the Company’s auditors, from among companies with international reputation that are authorized by the Securities Commission (CVM) to audit listed companies, subject to statement of position by the Fiscal Council;

•

To authorize, upon proposal by the Executive Board, opening of administrative tender proceedings, or proceedings for dispensation or non-requirement of tender, or of non-applicability of the duty to tender, and the corresponding contracting, when the amount is more than 1% or more of the Company’s Shareholders’ equity, or more than R$100,000,000.00, as adjusted annually by the IPCA Inflation Index, if positive;

•

Upon proposal by the Executive Board, to authorize filing of legal actions, or administrative proceedings, or entering into court or out-of-court settlements, for amounts equal to 1% or more of the Company’s Shareholders’ equity;


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•

To authorize the issuance of securities in the Brazilian or external market, for raising of funding in the form of non-convertible debentures, promissory notes, commercial papers and other instruments;

•

To approve the Long-term Strategy, the Multi-year Business Plan and the Annual Budget, and alterations and revisions to them;

•

Annually, to set the directives and establish the limits, including financial limits, for spending on personnel, including concession of benefits and collective employment agreements, subject to the competency of the General Meeting of Shareholders and subject to the Annual Budget;

•

To authorize the exercise of the right of preference and rights under shareholders’ agreements or voting agreements in wholly owned or other subsidiaries or affiliates and the consortia in which the Company participates, except in the cases of the wholly owned subsidiaries CEMIG Distribuição S.A. and CEMIG Geração e Transmissão S.A., for which the General Meeting of Shareholders has the competency for decision on these matters;

•

To approve participation in the share capital of, and constitution or extinction of, any company, undertaking or consortium;

•

To approve, in accordance with its Internal Regulations, the institution of committees supporting the Board of Directors – the opinions or decisions of which are not a necessary condition for decision on the matters by the Board of Directors;

•

To accompany the activities of internal auditing;

•

To discuss, approve and monitor decisions that involve corporate governance practices, relationship with interested parties, people management policy and code of conduct;

•

To ensure implementation of, and to supervise, the systems for management of risks and internal controls established for the prevention and mitigation of the principal risks to which the Company is exposed, including the risks related to safety and security of accounting and financial information and the occurrence of corruption or fraud;

•

To establish an information disclosure policy to mitigate the risk of contradiction between the various areas and the managers of the Company;

•

To make statements on any increase in number of the Company’s own staff, concession of benefits or advantages, or revision of a salaries and careers plan, including alteration in the amount paid for commissioned posts or free appointments, and compensation of Chief Officers;

•

To appoint, and to dismiss, in both cases with grounds, the head of the Internal Audit Unit, from among the Company’ career employees;

•

To elect the members of the Audit Committee, at the first meeting held after the Annual General Meeting, and to dismiss them, at any time, upon vote given with grounds by absolute majority of the members of the Board of Directors;

•

To arrange for analysis, every year, of the success in meeting targets and results in execution of the Multi-year Business Plan and the Long-term Strategy, and to publish its conclusions and state them to the Legislative Assembly of Minas Gerais State and to the Minas Gerais State Audit Court; and

•

To approve the complementary policies, including the policy on holdings, in accordance with the terms of these by-laws.

The financial limits relating to decisions by the Board of Directors that are identified by a percentage of the Company’s Shareholders’ equity shall be automatically adopted when the financial statements of each year are approved.


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Under Brazilian Corporate Law, members of the Board of Directors of a company usually have certain duties equivalent to those imposed by the laws of the majority of the States of the USA, including duty of loyalty to the company, duty not to trade in their own personal interest, and the duty diligently attend to the management of the company’s business. The Members of our Board of Directors and our Executive Board may be held liable for failure in these duties to us and to our shareholders and may be subject to legal action in proceedings brought by government bodies or by our shareholders.

There are no provisions in our bylaws relating to: (i) power for a board member to vote on proposals or contracts in which he or she has a material interest; (ii) powers that may be exercised by our board members to take on loans; (iii) retirement age for members of the Board of Directors; or (iv) the number of shares necessary for qualification of board members.

The Chair and Vice-Chair of the Board of Directors must be chosen by their peers, at the first meeting of the Board of Directors that takes place after the election of its members, and the Vice-Chair shall take the place of the Chair when the Chair is absent or prevented from exercising his/her functions. The shareholders have the power to set the compensation of the members of boards at the General Meeting of Shareholders at which the board members are elected.

Rights of Shareholders

We extend to our shareholders all of the rights that are provided under Brazilian law. Our by-laws are in compliance with the Brazilian Corporate Law.

Essential Rights

Article 109 of Brazilian Corporate Law provides that a corporation may not deny certain rights to its shareholders under any circumstances. These shareholders’ rights include:

The right to have a share of the corporation’s earnings;

The right to have a share of the corporation’s assets, in the event of a liquidation of the Company;

The right to supervise our management according to Brazilian Corporate Law;

Preemptive rights to subscribe new shares or securities convertible into shares, except for exceptions provided by Brazilian Corporate Law and our by-laws; and

The right to withdraw from the company under certain circumstances provided in Brazilian Corporate Law.

Voting Rights

As a general rule, only our common shares are entitled to vote, and each common share corresponds to one vote. Holders of preferred shares acquire voting rights if, during three consecutive fiscal years, we fail to pay a fixed or minimum dividend to which the preferred shares are entitled. If a holder of preferred shares acquires voting rights in this manner, such rights will be identical to the voting rights of a holder of common shares and will continue until the dividend is paid. No restrictions exist on the right of a holder of common shares or preferred shares to exercise voting rights with respect to such shares by virtue of such holder being a non-resident of Brazil or a citizen of a country other than Brazil. However, holders of Preferred ADSs may only vote the underlying preferred shares through the depositary according to the terms of the Second Amended and Restated Deposit Agreement, and holders of Common ADSs may only vote the underlying common shares through the depositary according to the terms of the Common ADS Deposit Agreement. In any circumstance in which holders of preferred shares are entitled to vote, each preferred share will entitle its holder to one vote.


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Redemption Rights

Brazilian Corporate Law provides that, under limited circumstances, a shareholder has the right to withdraw his or her equity interest from the company and to receive payment for the portion of shareholder’s equity attributable to his or her equity interest. Our common shares and preferred shares are not redeemable, with the exception that a dissenting shareholder is entitled under Brazilian Corporate Law to obtain redemption in the event of any of the following decisions being made at a shareholders’ meeting by shareholders representing at least 50% of the voting shares:

(1)

Creating preferred shares or increasing an existing class of preferred shares without maintaining the existing ratio with the remaining class of preferred shares, unless when already set forth in or authorized by the bylaws;

(2)

To modify a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or to create a new class with greater privileges than the existing classes of preferred shares;

(3)

To reduce the mandatory distribution of dividends;

(4)

To change the Company’s purpose;

(5)

To merge into another company or to consolidate with another company, subject to the conditions set forth in Brazilian Corporate Law;

(6)

To transfer all of our shares to another company in order to make us a wholly owned subsidiary of that company, known as ‘incorporação de ações’;

(7)

To approve acquisition of the control of another company at a price that exceeds certain limits set out in Brazilian Corporate Law;

(8)

To split up, subject to the conditions set forth in Brazilian Corporate Law;

(9)

To transform the Company into another type of company;

(10)

To participate in a centralized group of companies, as defined under Brazilian Corporate Law and subject to the conditions set forth therein;

Only holders of shares adversely affected by the changes mentioned in items (1) and (2) above may require the Company to redeem their shares. The right of redemption mentioned in items (5), (6), (7) and (10) above may only be exercised if our shares do not satisfy certain liquidity ratios or dispersion at the time of the decision by the shareholders. The shareholders’ right to withdraw referred to in item (8) may be exercised only if the split results in: (a) a change in the corporate objects, except when the equity value of the assets and liabilities split off is passed to a company whose preponderant activity coincides with that arising from the corporate objects of the company from which it is split; (b) reduction of the mandatory dividend; or (c) participation in a group of companies. Also note that in the case of item (10), the right to withdraw applies to all the Company’s shareholders, and not only to those who have been dissident at the related General Meeting of shareholders. The right to redeem shares will expire 30 calendar days from publication of the minutes of the related shareholders’ meeting, except: (a) in the case of items (1) and (2) above, if the decision is subject to confirmation by the holders of the preferred shares (which must be given in an Extraordinary General Meeting to be held within one year), in which case the period of 30 days shall be counted from publication of the minutes of the Extraordinary General Meeting; or (b) in the case of item (5), (6) and (7) above, in which case the period of 30 days shall be counted from the end of a period of 120 days, given for the company resulting from the amalgamation, merger or unbundling to obtain a listed company registration and have its shares listed on the secondary market.

Our Company has the right to reconsider any act that gives rise to rights of redemption within 10 calendar days of expiry of such rights if the redemption of shares of dissident shareholders places the Company’s financial stability at risk. Law 9,457 enacted on May 5, 1997, which altered Brazilian Corporate Law, contains provisions which, among other matters, restrict the rights of redemption in certain cases and allow companies to redeem their shares for their economic value, subject to certain requirements. Our by-laws at present do not specify that our share capital may be redeemed at its economic value and, consequently, any redemption in accordance with Brazilian Corporate Law would


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be made at a minimum of the book value per share, determined on the basis of the last Statement of financial position approved by the shareholders, it being stipulated that, if the General Meeting which gives rise to the rights of redemption has taken place more than 60 calendar days of the date of the last approved Statement of financial position approved, the shareholder shall have the right to require that its shares be valued based on a new Statement of financial position on a date that falls within a period of 60 calendar days of the General Meeting of Shareholders.

Rights of Minority Shareholders – Brazilian Corporate Law provides that shareholders owning at least 5% of the capital share of a corporation are afforded the following rights, among others:

The right to require that the books of the corporation be made available for review, whenever there is any indication of an act violating the Brazilian legislation or the Company’s by-laws, or whenever these have been violated, or if there are grounds for suspicion that serious irregularities have been committed by the company’s management; the right to require the Company’s managers to reveal:

•

The number of securities issued by the company or by subsidiaries, or companies of the same group, that They have acquired or sold, directly or through other people, in the prior business year;

•

Share purchase options that management have contracted or exercised in the prior business year;

•

All benefits or advantages, whether indirect or complementary, that they have received or which they are receiving from the company, or from affiliated or subsidiary companies or companies of the same group;

•

The terms of such employment contracts as have been signed by the company with directors or high-level employees;

•

Any other material acts or facts in relation to the activities of the company.

•

The right to require that the members of the Fiscal Council supply information about matters within their sphere of competence;

•

The right to call General Meetings of Shareholders, in certain circumstances, whenever the members of the Board of Directors or of the Executive Board omit to do so; and

The right to file legal actions for indemnity against members of the Board of Directors or the Executive Board for losses and/or damages caused to the company’s property, whenever it is decided in the General Meeting of Shareholders that such an application for indemnity will not be presented.

Minority shareholders that own, individually or in aggregate, our outstanding common shares (since at least 10% of our outstanding common shares are held by minority shareholders), and holders of our preferred shares, have the right to appoint one member of the Fiscal Council and an alternate. All shareholders have the right to attend general meetings of shareholders.

Brazilian Corporate Law also provides that minority shareholders that hold either (i) preferred shares representing at least 10% of the total share capital of a company or (ii) common shares representing at least 15% of the voting capital of a company, have the right to appoint one member to the Board of Directors. If no common or preferred shareholder meets these thresholds, shareholders holding preferred shares or common shares representing at least 10% of the total share capital of the company are entitled to combine their holdings to appoint one member to the Board of Directors.

Changes in rights of shareholders – A General Meeting of Shareholders must be held whenever the Company intends to change the rights of holders of our common shares or preferred shares. Under Brazilian Corporate Law the proposed changes must be approved by a majority of the class of shareholders that would be affected. Certain changes related to the rights of preferred shares, such as changes in preferences, advantages or conditions of redemption or amortization, may result in the exercise of rights to withdraw by the holders of the shares affected.


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Going Private Transactions and Delisting from the B3 – Our delisting, as a public company, must be preceded by a tender offer by our controlling shareholders or the Company for the acquisition of all the then outstanding shares, subject to the conditions below:

•

The price offered for the shares under the public offering must be the fair value of those shares, as established in Brazilian Corporate Law; and

•

Shareholders holding more than two thirds of our float shares shall have expressly agreed to the decision to become a private company or accepted the offer.

Under Brazilian Corporate Law, the fair price shall be at least equal to our valuation as determined by one or more of the following valuation methods: Shareholders’ equity as expressed by book value, Shareholders’ equity valued at market prices, discounted cash flow, comparison of multiples, the quoted price of our shares on the securities market; or based on some other method of valuation accepted by the CVM. The price of the offer may be revised if it is challenged within 15 calendar days of its publication by holders of at least 10% of our outstanding shares, by means of a request sent to our management for an extraordinary General Meeting of Shareholders to be called to decide on whether to request new valuations, using the same, or another, valuation method. If the new valuation is lower than the valuation challenged, the shareholders that requested a new valuation, and those that approved the request, shall reimburse us for the costs incurred. However, if the second valuation is higher, the offering party will have the option to continue the offer, with the new price, or withdraw the offer.

Arbitration

Under the Brazilian Corporate Law and its related regulations, litigation between shareholders is subject to the arbitration specified in the by-laws. Under Clause 44 of CEMIG’s by-laws, the Company, its shareholders, managers and members of the Fiscal Council undertake to resolve through arbitration, preceded by mediation, before the Market Arbitration Chamber (‘CAM’) of the B3 or the FGV Mediation and Arbitration Chamber, all and any dispute or controversy that may arise between them related to or arising from, in particular, the application, validity, efficacy, interpretation or violation of the provisions contained in the applicable legislation and regulations, the by-laws, any shareholders’ agreements filed at the head office, the rules issued by the Brazilian Securities Commission (‘CVM’), or the other rules applicable to the functioning of the capital markets in general, as well as those contained in the Level 1 Regulations of the B3. Without prejudice to the validity of this arbitration clause, application for urgency measures, before the arbitration tribunal has been constituted, should be remitted to the Judiciary, through the courts of the fore of the district of Belo Horizonte, Minas Gerais.

CEMIG’s Compliance and Corporate Governance System

CEMIG seeks to keep its compliance and corporate governance system aligned to best market practices. Over recent years, the Company has been enhancing its system of governance. This includes all the requirements specified in Federal Law 13,303/16 (‘the State Companies Law’). Under this law, all companies that are controlled or partly owned by the state, and their subsidiaries, have the obligation to comply with rules on corporate governance, contracting of outsourced entities or individuals, and public competitions.

CEMIG includes the following practices of good governance and compliance demanded by this legislation:

The Board of Directors is responsible for ensuring implementation and supervision of our systems of risk management and internal controls.

At least 25% of the Board of Directors must be independent.

We have an Audit Committee.

The CEO has the responsibility of directing compliance and corporate risk management.

The members of the Board of Directors, the Executive Board and the members of committees formed under the by-laws must be submitted to individual and collective performance evaluation annually.


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The head of the Internal Audit Unit may be appointed, and dismissed, only by the Board of Directors, in both cases only with due justification, and must be chosen from among the Company’s career employees.

Adaptation of the Company to the General Data Protection Law (‘LGPD’), with a structure dedicated to the subject, and designation of an Official Responsible for Data Protection.

As well as adopting good corporate governance and compliance practices, CEMIG has a group of policies that establish directives for related subjects. These include:

CEMIG´s Compliance and Anti-Bribery Policy; the Related Party Transactions Policy; the Nominations and Eligibility Policy; the Governance and Management Policy for Non-controlled Investees; the Conflict of Interests Policy; the Data Privacy Policy for Clients and the Public; the Data Privacy Policy for Employees, Suppliers and Service Providers; and the Corporate Risks Management Policy.

CEMIG’s Compliance and Anti-Bribery Policy comprises consolidation of the directives that aim to assure the Company’s commitment to adoption of a high standard of integrity and compliance with rules and the law, in the conduct of its business. CEMIG’s commitment to the concept and principle of Integrity is one of its Values, approved by the Board of Directors. The following are objectives of CEMIG’s Compliance Policy:

To create and maintain an organizational culture that encourages ethical conduct and commitment to best compliance practices, and obedience to internal and external rules (a ‘compliance culture’);

To prevent, detect and respond to any failings in compliance with CEMIG’s internal and external rules, and any deviations of conduct; and

To concentrate on mitigation of compliance risks prioritized by the Company.

The Compliance Policy establishes the directives for achieving these objectives, including among other matters: the role of Senior Management and the Company’s leadership; maintenance of documented rules and procedures; training and teaching in communication; implementation of internal controls; and availability of channels for consultations and reports of adverse behavior.

In 2024, CEMIG’s Compliance Policy was updated, incorporating anti-bribery guidelines, making it more accessible and adherent to the legal provisions, seeking simplification, rationalization and optimization of standards that establish the company’s governance. Therefore, the document is now called CEMIG’s Compliance and Anti-Bribery Policy.

In terms of anti-corruption action, the Company’s most significant risks relating to fraud and corruption have been mapped, documented, and approved by Senior Management. In this mapping process, probabilities of materialization of risks are estimated, in accordance with their causes and the severity of the consequences if they occur, and the internal controls and measures related to mitigation of each risk are mapped.

Three areas – Compliance; Risk Management and Internal Controls; and Privacy and Data Protection – are responsible for coordinating the related processes in the company and supporting the individuals responsible for each area of risk and controls. The Internal Audit unit is responsible for periodically checking the compliance and effectiveness of functioning of the Company’s systems of internal controls, compliance, and risk management, including the risks and controls related to prevention of and combating corruption.

On its corporate intranet, CEMIG makes a group of rules and procedures permanently available to employees, which orient appropriate conduct by employees in management of processes and execution of all their activities.

The Company also has an Anonymous Reporting Channel, an Ombudsman, and an Ethics Committee, which are accessible for interactions with their internal and external public and able to record and deal with any ethical irregularities or dilemmas affecting operations.


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Matters related to compliance are continually dealt with through the Company’s internal channels and mechanisms for communication and training. For this, we use several internal channels, including email, the intranet, CEMIG Online (newsletter), the Leadership Channel, banners, and Teams. We covered a range of subjects through articles, texts, webinars, and videos, aiming to take highly important contents on the culture of integrity and compliance to everyone in the Company. Internal Policies and Procedures were also widely disseminated through these channels.

In the last four years CEMIG carried out, its Compliance Maturity Survey. The aim of this survey is to assess the levels of knowledge on what compliance is, on CEMIG’s Compliance Policy, on adherence to our values (culture), and on employees’ perception in terms of CEMIG’s procedures for prevention, detection and response that are currently in place. Together, these dimensions express the maturity of compliance in the Company. The data resulting from the survey show us that there is attention and commitment on the part of employees in relation to compliance culture and behavior, recognition of its importance, and growing interest in the subject.

Finally, we highlight that CEMIG is a signatory to the UN Global Compact, of which principle number 10 is: ‘Work against corruption in all its forms, including extortion and bribery’.

Material Contracts

For information concerning our material contracts, see “Item 4, Information on the Company” and “Item 5, Operating and Financial Review and Prospects”.

Exchange Controls

There are no restrictions on the ownership of preferred shares or common shares of non-financial institutions by legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of preferred shares or common shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation, which generally requires, among other things, that the relevant investment be registered with the Central Bank and the CVM. Such restrictions on the remittance of foreign capital abroad may hinder or prevent the custodian for our common shares represented by our ADSs or the holders of our common shares from converting dividends, distributions, or the proceeds from any sale of these shares into U.S. dollars and remitting the U.S. dollars abroad. Holders of our ADSs could be adversely affected by delays in, or refusal to grant any, required government approval to convert Brazilian currency payments on the common shares underlying our ADS and to remit the proceeds abroad.

Since March 30, 2015, CMN Resolution 4,373/2014, of September 29, 2014, has been in full effect, providing for the issuance of depositary receipts in foreign markets in respect to shares of Brazilian issuers. CMN Resolution 4,373/2014, among other acts, revoked CMN Resolution 1,927/1992, enacted on May 18, 1992, CMN Resolution 1,289/1987, of March 20, 1987, and CMN Resolution 2,689/2000, enacted on January 26, 2000. Under Brazilian law relating to foreign investment in the Brazilian capital markets, foreign investors registered with the CVM and acting through authorized custodial accounts managed by local agents may buy and sell shares on Brazilian stock exchanges without obtaining separate certificates of registration for each transaction. Foreign investors may register their investment under Law 4,131/1962, enacted on September 3, 1962, as amended, or under CMN Resolution 4,373, enacted on September 20, 2014.

The Law 4,131/1962 is the main legislation concerning investment of direct foreign capital and foreign direct equity in companies based in Brazil. It is applicable to any amount of capital that enters Brazil in the form of foreign currency, goods, or services. Foreign investment portfolios are regulated by CMN Resolution 4,373/2014, and CVM Instruction 560/2015, enacted on March 27, 2015, which regulates the filing of transactions and disclosure of information by foreign investors, all reflecting the provisions of CMN Resolution 4,373/2014.

As of January 1, 2016, foreign investors that intend to be registered with the CVM shall fulfill the requirements under CVM Instruction 560/2015. In accordance with CMN Resolution 4,373/2014, the definition of a foreign investor includes individuals, legal entities, mutual funds, and other collective investment entities, domiciled, or headquartered abroad. In order to become a 4,373 Holder, a foreign investor must:


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•

Appoint at least one representative in Brazil, with powers to perform actions relating to its investment;

•

Appoint an authorized custodian in Brazil for its investments, which must be a financial institution or entity duly authorized by the Central Bank or CVM;

•

Appoint a tax representative in Brazil;

•

Through its representative in Brazil, register itself as a foreign investor with the CVM;

•

Through its representative in Brazil, register its foreign investment with the Central Bank; and

•

Be registered with the Federal Tax Authority (‘Secretaria da Receita Federal’), or the ‘RFB’, pursuant to RFB Normative Instruction 1,634/2016, enacted on May 06, 2016, and RFB Normative Instruction 1,548/2015, enacted on February 13, 2015.

Investments in the preferred shares through the holding of Preferred ADSs, or in the common shares through the holding of Common ADSs, must be made pursuant to Annex II to CMN Resolution 4,373 enacted on September 29, 2014. Direct investments in the preferred shares upon the cancellation of the Preferred ADSs, or in the common shares upon the cancellation of the Common ADSs, may be held by foreign investors under Law 4,131 of September 3, 1962 or CMN Resolution 4,373 enacted on September 29, 2014, both of which effectively allow registered foreign investors to invest substantially in any capital market instrument in Brazil and extend a favorable tax treatment to all foreign investors registered and qualified under CMN Resolution 4,373, who are not resident in a tax haven, as defined by Brazilian tax laws.

The Annex II Regulations provide for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. The Preferred ADSs have been approved under the Resolution 1,289, which was repealed by Resolution 4,373, by the Central Bank and the CVM, and the Common ADSs have been approved by the CVM (since authorization from the Central Bank is no longer necessary).

Electronic certificates of registration have been issued in the name of Citibank, N.A., the depositary bank, with respect to the Preferred ADSs and the Common ADSs and are maintained by Citibank Distribuidora de Títulos e Valores Mobiliários S.A., the Brazilian custodian for the preferred shares and the common shares, on behalf of the depositary bank. These electronic certificates of registration are registered through the Central Bank Information System. Pursuant to the certificates of registration, the custodian and the depositary bank are able to convert dividends and other distributions or sales proceeds with respect to the preferred shares represented by Preferred ADSs and the common shares represented by the Common ADSs into foreign currency and remit the proceeds outside Brazil.

In the event that a holder of Preferred ADSs exchanges such Preferred ADSs for preferred shares, or a holder of Common ADSs exchanges such Common ADSs for common shares, such investment will need to be registered with the Central Bank, according to Resolution 4,373. Thereafter, the holder may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, the preferred shares or the common shares, unless the holder is a duly qualified investor under Resolution 4,373 by registering with the CVM and the Central Bank and appointing a representative in Brazil. If not so registered, the holder will be subject to less favorable Brazilian tax treatment than a holder of Preferred ADSs or Common ADSs. Regardless of qualification under Resolution 4,373, residents in tax havens are subject to less favorable tax treatment than other foreign investors. See ‘—Taxation—Brazilian Tax Considerations.’

Under current Brazilian legislation, the Brazilian Federal Government may impose temporary restrictions of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For nine months in 1989 and early 1990, the Brazilian Federal Government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors, in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with Brazilian Federal Government directives. We cannot assure you that the Brazilin Federal Government will not impose similar restrictions on foreign reparations in the future.


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Taxation

The following summary contains a description of certain Brazilian and U.S. federal income tax consequences of the purchase, ownership and disposition of preferred shares, common shares, and Preferred ADSs or Common ADSs by a United States person, as defined in section 7701(a)(30) of the Internal Revenue Code of 1986, or the Code, as amended (which includes, among other things, an individual citizen or resident of the U.S., a corporation (or other entity that is treated as a corporation for U.S. federal income tax purposes) created or organized in the U.S. or any political subdivision thereof (including the District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its source, and certain trusts), or a holder that otherwise will be subject to U.S. federal income tax on a net income basis in respect of preferred shares, common shares, Preferred ADSs or Common ADSs, which we refer to as a U.S. holder, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase preferred shares, common shares, Preferred ADSs or Common ADSs. In particular, this summary deals only with U.S. holders that will hold preferred shares, common shares, Preferred ADSs or Common ADSs as capital assets and does not address the tax treatment of U.S. holders that own or are treated as owning 10% or more of the total combined voting power of all classes of stock entitled to vote of the Company or 10% or more of the total value of shares of all classes of stock of the Company or that may be subject to special tax rules, such as banks or other financial institutions, insurance companies, retirement plans, regulated investment companies, real estate investment trusts, dealers in securities or currencies, brokers, traders in securities that elect to mark to market, tax-exempt organizations, persons liable for alternative minimum tax, ‘pass-through entities’ such as partnerships, persons that will hold preferred shares, common shares, Preferred ADSs or Common ADSs as part of a hedging transaction, constructive sale transaction, position in a ‘straddle’ or a ‘conversion transaction’ for tax purposes, controlled foreign corporations or passive foreign invest companies, U.S. expatriates or former long-term residents of the U.S., persons who are required to accelerate the recognition of any item of gross income with respect to the preferred shares, common shares, Preferred ADSs or Common ADSs as a result of such income being recognized on an applicable financial statement, persons who acquired their preferred shares, common shares, Preferred ADSs or Common ADSs pursuant to the exercise of employee share options or otherwise as compensation, and persons that have a ‘functional currency’ other than the U.S. dollar. If an entity treated as a partnership for U.S. federal income tax purposes invests in our preferred shares, common shares, Preferred ADSs or Common ADSs, the U.S. federal income tax considerations relating to such investment will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners relating to the purchase, ownership, and disposition of such shares or ADSs. This summary, as relates to U.S. tax considerations, does not describe any implications under U.S. state or local tax law, non-U.S. tax law, or the federal alternative minimum tax, estate tax or gift tax. U.S. holders should consult their own tax advisors regarding such matters.

The Company has not requested, and will not request, a ruling from the U.S. Internal Revenue Service (the 'IRS') regarding the U.S. federal income tax consequences of the acquisition, ownership and disposition of preferred shares, common shares, Preferred ADSs or Common ADSs. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions described in this summary.

This summary is based upon the tax laws of Brazil and the United States (including the Code, final, temporary, and proposed Treasury regulations, rulings, judicial decisions and administrative pronouncements) as in effect on the date hereof which are subject to change, possibly with retroactive effect, and to different interpretations, which could result in Brazilian and U.S. federal income tax consequences different from those discussed below. Prospective purchasers of preferred shares, common shares, Preferred ADSs or Common ADSs are encouraged to consult their own tax advisors as to the Brazilian, U.S. or other tax consequences of the purchase, ownership and disposition of preferred shares, common shares, Preferred ADSs or Common ADSs, including, in particular, the effect of any foreign, state or local tax laws.

There is currently no income tax treaty in force between Brazil and the United States, though it is possible that a treaty could be introduced in the future. No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. holders of preferred shares, common shares, Preferred ADSs or Common ADSs.


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Brazilian Tax Considerations

General — The following discussion summarizes the main Brazilian material tax consequences of the acquisition, ownership and disposal of preferred shares, common shares, Preferred ADSs or Common ADSs, as the case may be, by a holder that is not domiciled in Brazil, which we refer to as a non-Brazilian holder for purposes of Brazilian taxation. In the case of a holder of preferred shares or common shares, we assume the investment is registered with the Central Bank. The following discussion does not address all the Brazilian tax considerations applicable to any particular non-Brazilian holder. Therefore, each non-Brazilian holder should consult his or her own tax adviser concerning the Brazilian tax consequences of an investment in our preferred shares, common shares, Preferred ADSs or Common ADSs.

Taxation of Dividends — Dividends paid by the Company, including share dividends and other dividends paid in property to the depositary in respect of the preferred shares or common shares, or to a non-Brazilian holder in respect of the preferred shares or common shares, are currently exempted from withholding tax in Brazil to the extent that the dividends are paid out of profits generated as of January 1, 1996.

Payments of ‘Interest on capital’– Law 9,249, enacted on December 26, 1995, as amended, enables Brazilian corporations to make distributions to shareholders, in Brazilian currency, of a payment referred to as Interest on capital (‘Juros sobre Capital Próprio’). The payment is calculated based on multiplying the value of the company’s Shareholders’ equity by the Federal Government’s ‘TJLP’, as set forth by the Central Bank, and payments up to such an amount may be deducted by the company as an expense when calculating its profit that will be taxable by income tax and the Social Contribution Tax, subject to the deduction not exceeding the greater of:

50% of the net income (after deduction of the Social Contribution tax on Net Income, and before the provision for corporate income tax and the amounts attributed to shareholders as Interest on capital) for the period in which the payment will be made; or

50% of the sum of retained earnings and appropriation to profit reserves as of the date of the beginning of the period in respect of which the payment is made.

Any payment of interest on capital to shareholders (including holders of Preferred ADSs in respect of preferred shares and Common ADSs in respect of common shares) is subject to a withholding tax at a rate of 15%, or 25% if the non-Brazilian holder is domiciled in a Nil or Low Taxation Jurisdiction. These payments may be included, at their net value, as part of any mandatory dividend.

Law 9,430, enacted on December 27, 1996, was amended by Law 11,727 enacted on June 24, 2008, and later by Law 11,941 enacted on May 27, 2009, establishing the concept of a ‘privileged tax regime’, to govern transactions involving transfer pricing, and to strict rules for capitalization. This concept has a wider reach than the concept of a Nil or Low Taxation Jurisdiction. Under the new laws, a ‘privileged tax regime’ is defined as one which has one or more of the following characteristics: (i) it does not tax income or it taxes it at a maximum rate lower than 20%; (ii) it grants tax advantages to non-resident entities or individuals (a) without requiring substantial economic activity in the country or territory or (b) conditional upon non-exercise of substantive business activity in the country or territory; (iii) it does not generate tax income outside its territory, or taxes such income with a maximum rate lower than 20% (or 17% if the jurisdiction follows international standards of tax transparency, as defined by Brazilian Internal Revenue Office, especially in what regards to the disclosure of information in respect to corporate structure, ultimate beneficial owner, ownership of assets and business activities carried on in their territory) or (iv) it does not allow access to information on shareholdings, ownership of assets or rights, or to the business transactions carried out.

Although interpretation of the current Brazilian tax legislation might lead to the conclusion that the concept of ‘privileged tax regime’ should apply only for the purposes of rules to govern transfer pricing in Brazil, it is unclear whether such concept would also apply to other types of transaction, such as investments carried out in the Brazilian financial and capital markets for the purposes of this law. In the event that the ‘privileged tax regime’ concept is interpreted to be applicable to transactions carried out in the Brazilian financial and capital markets, this tax law would accordingly result in the imposition of taxes on a Non-Brazilian-Resident Holder that meets the privileged tax regime requirements in the same way as is applicable to a Nil or Low Taxation Jurisdiction. Current and prospective investors should consult with their own tax advisors regarding the consequences of the implementation of Law 9,430 enacted


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on December 27, 1996, as amended, and of any related Brazilian tax law or regulation concerning the concepts of ‘Nil or Low Taxation Jurisdiction’ or ‘privileged tax regimes’.

To the extent that payments of interest on capital are included as part of a mandatory dividend, we are required to distribute an additional amount to ensure that the net amount received by shareholders, after payment of the applicable withholding tax is at least equal to the mandatory dividend.

Distributions of interest on net equity to foreign holders may be converted into U.S. dollars and remitted outside Brazil, subject to applicable exchange controls, to the extent that the investment is registered with the Central Bank.

We cannot assure you that our Board of Directors will not determine that future distributions should be made by means of dividends or interest on net equity.

Taxation of Gains — According to Law 10,833/03, the gains recognized on a disposal of assets located in Brazil, such as CEMIG shares, by a non-Brazilian holder, are subject to withholding income tax in Brazil. This rule is applicable regardless of whether the disposal is conducted in Brazil or abroad whether the disposal is made to an individual or entity resident or domiciled in Brazil.

Generally, capital gains realized as a result of a disposal transaction are the positive difference between the amount realized on the disposal of the asset and the respective acquisition cost.

Capital gains realized by non-Brazilian holders on the disposal of shares sold on the Brazilian stock exchange (which includes the transactions carried out on the official over-the-counter market) are subject to:

•

Withholding income tax at a zero percent rate, when realized by a non-Brazilian holder that (i) has registered its investment in Brazil whit the Central Bank under the rules of the Brazilian Monetary Council, (‘CMN’) (‘Resolution 4,373 enacted on September 29, 2014’), or a Registered Holder, and (ii) is not a Nil or Low Taxation Jurisdiction Holder;

•

In all other cases, including gains realized by a Non-Resident Holder that is not a Registered Holder and/or is a resident of or domiciled in a Nil or Low Taxation Jurisdiction, subject to income tax at a 15.0% rate. In this case, a withholding income tax of 0.005% shall be applicable and can be offset against any income tax due on the capital gain.

Any other gains assessed on the disposition of the common shares that are not carried out on the Brazilian stock exchange are subject to income tax at a rate of 15%, except for Nil or Low Taxation Jurisdiction, which, in this case, would be subject to income tax at a rate of 25%. Law 13,259 of March 17, 2016, increased the income tax rates applicable to gains derived by Brazilian individuals up to 22.5% and, such increase, applicable as of January 2017, may affect Non-Resident Holders. Non-Resident Holders should consult with their own tax advisors regarding the consequences of Law 13,259/2016. In the cases above, if the gains are related to transactions conducted on the Brazilian unofficial over-the-counter market with intermediation, the withholding income tax of 0.005% shall also be applicable and can be offset against any income tax due on the capital gain.

Any exercise of preemptive rights relating to shares will not be subject to Brazilian income tax. Gains realized by a non-Brazilian holder on the disposal of preemptive rights will be subject to Brazilian income tax according to the same rules applicable to the disposal of shares. There can be no assurance that the current favorable tax treatment of Registered Holders will continue in the future.

Sale of Preferred ADSs and Common ADSs by U.S. Holders to Other Non-Residents in Brazil—Pursuant to Section 26 of Law 10,833, published on December 29, 2003, the sale of property located in Brazil involving non-resident investors is subject to Brazilian income tax as of February 1, 2004. Our understanding is that ADSs do not qualify as property located in Brazil and, thus, should not be subject to the Brazilian withholding tax; nevertheless, there is a risk that the Tax Authorities will try to assert Brazilian tax jurisdiction in such condition, reason why Non-Resident Holders should consult with their own tax advisors the chances of success in that respect Insofar as the regulatory norm referred to is generic and has not been tested through the administrative or judicial courts, we are unable to assure the final outcome of such condition.


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If such argument does not prevail, it is important to mention that with respect to the cost of acquisition to be adopted for calculating such gains, Brazilian law has conflicting provisions regarding the currency in which such amount must be determined, CEMIG’s Brazilian counsel’s view is that the capital gains should be based on the positive difference between the cost of acquisition of the preferred shares or common shares registered with the Central Bank in foreign currency and the value of disposal of those preferred shares or common shares in the same foreign currency. A precedent issued by the Brazilian administrative court has supported this view. However, considering that the tax authorities are not bound by such precedent, assessments have been issued adopting the cost of acquisition in Brazilian currency.

Gains on the Exchange of Preferred ADSs for Preferred Shares or the Exchange of Common ADSs for Common Shares—Although there is no clear regulatory guidance, the exchange of ADSs for shares should not be subject to Brazilian tax to the extent that, as described above, ADSs do not qualify as property located in Brazil for the purposes of Law 10,833. Non-Brazilian holders may exchange Preferred ADSs for the underlying preferred shares or Common ADSs for the underlying common shares, sell the preferred shares or common shares on a Brazilian stock exchange and remit abroad the proceeds of the sale within five business days of the date of exchange (according to the depositary’s electronic registration), with no tax consequences. Although there is no clear regulatory guidance, the exchange of ADSs for shares should not be subject to Brazilian withholding income tax. Nevertheless, it is important to mention that there is no precedent regarding this matter in administrative or judicial courts.

Upon receipt of the underlying preferred shares in exchange for Preferred ADSs or the underlying common shares in exchange for Common ADSs, non-Brazilian holders may also elect to register with the Central Bank the U.S. dollar value of such preferred shares or common shares as a foreign portfolio investment under CMN Resolution 4,373/2014, which will entitle them to the tax treatment referred to above in connection with ‘U.S. market investors’.

Alternatively, the non-Brazilian holder is entitled to register with the Central Bank the U.S. dollar value of such preferred shares or common shares as a foreign direct investment under Law 4,131/62, in which case the respective sale would be subject to the tax treatment referred in the section ‘Taxation of Gains’.

Gains on the Exchange of Preferred Shares for Preferred ADSs or Common Shares for Common ADSs— With reference to the deposit of preferred shares in exchange for the Preferred ADSs or common shares in exchange for the Common ADSs, the difference between the acquisition cost of the preferred shares or common shares and the market price of the preferred shares or common shares is considered to be a capital gain subject to income tax at a rate from 15% or 25% for Nil or Low Taxation Jurisdiction Holders. Although there is no clear regulatory guidance, such taxation should not apply in case of Non-Resident Holders registered under CMN Resolution 4,373/2014, except for Nil or Low Taxation Jurisdiction Residents. Law 13,259 of March 17, 2016, increased the income tax rates applicable to gains derived by Brazilian individuals up to 22.5% and, such increase, applicable as of January 2017, may affect Non-Resident Holders. Non-Resident Holders should consult with their own tax advisors regarding the consequences of Law 13,259/2016.

Taxation of foreign exchange transactions—Brazilian law imposes Financial Transactions Tax ("Imposto sobre Operações Financeiras, or ‘IOF’) on foreign exchange transactions (known as the IOF/Câmbio, or ‘FX IOF’), on conversion of Reais into foreign currency or vice-versa. The currently applicable rate of this tax for almost all foreign exchange transactions is 0.38%. However, exchange transactions carried out for the inflow of funds in Brazil for investments in the Brazilian financial and capital market made by a foreign investor (including a Non-Resident Holder, as applicable) are subject to IOF/Exchange at a 0%. The IOF/Exchange rate will also be 0% for the outflow of funds from Brazil related to these types of investments, including payments of dividends and interest on shareholders’ equity and the repatriation of funds invested in the Brazilian market.

Notwithstanding the said rates of the FX IOF tax in effect on the date of publication hereof, the Finance Ministry is authorized by law to increase the rate of this tax up to a maximum of 25% of the value of the transaction, but only for future transactions.

Taxation on transactions relating to securities—Brazilian legislation imposes a tax on financial transactions relating to securities (referred to as the IOF tax on Securities, or ‘IOF/Títulos’), including transactions made on Brazilian stock exchanges.


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The IOF Tax on Securities may also apply to transactions involving ADSs of preferred shares, or ADSs of common shares, if they are considered by the Brazilian tax authorities to be assets located in Brazil.

The rate of the IOF Tax on Securities applicable to transactions involving shares (preferred shares, ADSs for preferred shares, common shares and ADSs for common shares) is currently zero. Moreover, by Decree 8,165 enacted on December 24, 2013, the rate of the IOF Tax on Securities applicable on assignment of shares traded on a Brazilian stock exchange for the specific purpose of the underlying issuance of DRs outside Brazil was reduced to zero.

The Finance Ministry has the power to increase the rates of IOF Tax on Securities to as high as 1.5% per day, but this is applicable only to future transactions.

Other Brazilian Taxes — Some Brazilian states impose gift and inheritance tax on gifts or bequests made by individuals or entities not domiciled or residing in Brazil to individuals or entities domiciled or residing within such states. There are no Brazilian stamp, issues, registrations, or similar taxes or duties payable by holders of preferred shares, common shares, Preferred ADSs or Common ADSs.

U.S. Tax Considerations – In general, and taking into account the earlier assumptions, for U.S. federal income tax purposes, a U.S. holder of ADSs is typically treated as the owner of the underlying shares represented by those ADSs. Consequently, exchanges of ADSs into shares, and shares into ADSs, as a general rule, will not be subject to U.S. federal income tax.

The description below is not intended to constitute a complete analysis of all tax consequences relating to ownership and disposition of shares or ADSs. U.S. holders and prospective purchasers should consult their own tax advisors concerning the tax consequences of their particular situations.

Taxation of Distributions—Subject to the discussion below under ‘Passive Foreign Investment Company Rules’, distributions with respect to the shares or the ADSs (other than distributions in redemption of the shares subject to Section 302(b) of the Code or in a liquidation of the Company) will, to the extent made from current or accumulated earnings and profits of the Company as determined under U.S. federal income tax principles, constitute dividends. A distribution also includes distributions characterized as interest attributable to shareholders’ capital for Brazilian law purposes and the amount of any Brazilian taxes withheld on any such distribution, if any, even though a U.S. holder will not receive such amount as part of their distribution. Whether current or accumulated earnings and profits will be sufficient for all such distributions on the shares or ADSs to qualify as dividends depends on the future profitability of the Company and other factors, many of which are beyond the control of the Company. To the extent that such a distribution exceeds the amount of the Company’s earnings and profits, it will be treated as a non-taxable return of capital to the extent of the U.S. holder’s basis in the shares or ADSs, and thereafter as capital gains. As used below, the term ‘dividend’ means a distribution that constitutes a dividend for U.S. federal income tax purposes. The Company does not currently intend to calculate its earnings and profits under U.S. federal income tax principles. Accordingly, U.S. holders should expect that all distributions made with respect to the shares or ADSs will generally be treated as dividends. Cash dividends (including distributions characterized as interest attributable to shareholders’ capital for Brazilian law purposes and amounts withheld in respect of Brazilian taxes) paid with respect to:

•

The shares generally will be included in the gross income of a U.S. holder as ordinary income on the day on which the dividends are actually or constructively received by the U.S. holder; or

•

The shares represented by ADSs generally will be included in the gross income of a U.S. holder as ordinary income on the day on which the dividends are received by the depositary bank, and in either case, will not be eligible for the dividends received deduction allowed to corporations. Dividends paid in Reais will be included in the income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day they are received by the U.S. holder, in the case of shares, or the depositary bank, in the case of shares represented by ADSs.

If dividends paid in Reais are converted into U.S. dollars on the day they are received by the U.S. holder or the depositary bank, as the case may be, U.S. holders generally should not be required to recognize a foreign currency gain or loss in respect of the dividend income. If the depositary bank, in the case of ADSs, does not convert such Reais into U.S. dollars on the date of receipt, it is possible that the U.S. Holder will recognize foreign currency gain or loss,


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which would be U.S. source ordinary gain or loss, when the Reais are converted into U.S. Dollars.U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any Reais received by the U.S. holder or the depositary bank are not converted into U.S. dollars on the date of receipt, as well as the tax consequences of the receipt of any additional Reais from the custodian due to Brazilian inflation.

Dividends will generally constitute foreign source income and will generally constitute ‘passive category income’ or, in the case of certain U.S. holders, ‘general category income,’ for foreign tax credit purposes. In the event Brazilian withholding taxes are imposed on such dividends, such taxes may be treated as a foreign income tax eligible, subject to generally applicable limitations and conditions under U.S. federal income tax law, for a credit against a U.S. holder’s U.S. federal income tax liability (or at a U.S. holder’s election, may be deducted in computing taxable income). These generally applicable limitations and conditions include new requirements adopted by the Treasury in 2021, and any Brazilian tax will need to satisfy these requirements in order to be a creditable tax for a U.S. holder. In the case of a U.S. holder that consistently elects to apply a modified version of these rules under recently issued temporary guidance and complies with specific requirements set forth in such guidance (for tax years ending before such temporary guidance is modified or withdrawn), the Brazilian tax on dividends generally will be treated as meeting the new requirements, and therefore as a creditable tax. The calculation and availability of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes in computing its taxable income (which, if such election is made, applies to all taxes paid or accrued in the taxable year to foreign countries and possessions of the United States), the availability of deductions, involves the application of rules that depend on a U.S. holder’s particular circumstances. U.S. holders should consult their own tax advisors regarding the availability of foreign tax credits with respect to Brazilian withholding taxes.

Distributions to U.S. holders of additional common shares or preemptive rights relating to such common shares with respect to their common shares or Common ADSs that are made as part of a pro rata distribution to all shareholders of the Company generally will not be treated as dividend income for U.S. federal income tax purposes but could result in additional U.S.-source taxable gain upon the sale of such additional shares or preemptive rights. Non-pro rata distributions of such shares or rights generally would be included in the U.S. holder’s gross income to the same extent and in the same manner as distributions payable in cash. In that event, the amount of such distribution (and the basis of the new shares or preemptive rights so received) generally will equal the fair market value of the shares or preemptive rights on the date of distribution. It is not entirely clear whether the preferred shares will be treated as preferred shares or common shares for this purpose. If the preferred shares are treated as common shares for these purposes the treatment above would apply to distributions of shares or preemptive rights with respect to preferred shares or Preferred ADSs. On the other hand, if the preferred shares are treated as preferred shares, a distribution of additional shares or preemptive rights would be included in gross income to the same extent as a cash distribution whether or not such distribution is considered a pro rata distribution.

Qualified Dividend Income – Notwithstanding the foregoing, certain dividends received by individual or other non-corporate U.S. holders that constitute ‘qualified dividend income’ may be subject to a reduced maximum marginal U.S. federal income tax rate. Qualified dividend income generally includes, among other dividends, dividends received during the taxable year from ‘qualified foreign corporations’. In general, a foreign corporation is treated as a qualified foreign corporation with respect to any dividend paid by the corporation with respect to shares of the corporation that are readily tradable on an established securities market in the United States. For this purpose, a share is treated as readily tradable on an established securities market in the United States if an ADS backed by such share is so traded. Our Preferred ADSs and our Common ADSs are listed on the NYSE so we anticipate that our ADSs should qualify as readily tradable on an established securities market in the United States so long as they are listed, although there can be no assurances in this regard (as there is no clear guidance on whether dividends with respect to ADSs will be treated as qualified dividends, because the underlying shares themselves are not listed on an established securities market in the United State).

Notwithstanding this previous rule, dividends received from a foreign corporation that is a passive foreign investment company (as defined below under ‘Passive Foreign Investment Company Rules’) in either the taxable year of the corporation in which the dividend was paid or the preceding taxable year will not constitute qualified dividend income. In addition, the term ‘qualified dividend income’ will not include, among other dividends, any (i) dividends on any


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share or ADS which is held by a taxpayer for 60 days or less during the 121-day period beginning on the date which is 60 days before the date on which such share or the shares backing the ADS become ex-dividend with respect to such dividends (as measured under section 246(c) of the Code) or (ii) dividends to the extent that the taxpayer is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Moreover, special rules apply in determining a taxpayer’s foreign tax credit limitation under section 904 of the Code in the case of qualified dividend income.

Individual U.S. holders should consult their own tax advisors to determine whether or not amounts received as dividends from us will constitute qualified dividend income subject to a reduced maximum marginal U.S. federal income tax rate and, in such a case, the effect, if any, on the individual U.S. holder’s foreign tax credit.

Taxation of Sales, Redemptions and Other Taxable Dispositions — Deposits and withdrawals of shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.

Subject to the discussion below under – ‘Passive Foreign Investment Company Rules’, gains or losses realized by a U.S. holder on the sale, redemption or other taxable disposition of shares or ADSs will be subject to U.S. federal income taxation as capital gains or losses in an amount equal to the difference between such U.S. holder’s adjusted tax basis in the shares or the ADSs and the amount realized on the disposition as determined in U.S. dollars. Gains or losses recognized by a U.S. holder on such a sale, redemption or other taxable disposition generally will be long-term capital gains or losses if, at the time of the sale or other taxable disposition, the shares or ADSs, as applicable, have been held for more than one year. Certain non-corporate U.S. holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deduction of a capital loss is subject to limitations for U.S. federal income tax purposes.

A gain realized by a U.S. holder on a sale, redemption or other taxable disposition of shares or ADSs, including a gain that arises because the U.S. holder’s adjusted tax basis in the shares or ADSs has been reduced because a distribution is treated as a return of capital rather than as a dividend, generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Accordingly, if Brazilian withholding tax or income tax is imposed on the sale, redemption or other disposition of shares or ADSs as described in — ‘Taxation—Brazilian Tax Considerations’, such tax generally will not be available as a credit for the U.S. holder against U.S. federal income tax unless the U.S. holder has other income treated as derived from foreign sources, in the appropriate category, for purposes of the foreign tax credit rules.

If a Brazilian withholding tax or income tax is imposed on the sale, redemption or other taxable disposition of shares or ADSs, the amount realized by a U.S. holder will include the gross amount of the proceeds of such sale, redemption or other taxable disposition before deduction of the Brazilian withholding tax or income tax if applicable. The availability of U.S. foreign tax credits for these Brazilian taxes is subject to certain limitations and involves the application of rules that depend on a U.S. holder’s particular circumstances. If a Brazilian tax is withheld on a sale or disposition of shares or ADSs, the amount realized by a U.S. holder will include the gross proceeds of the sale or other disposition (i.e., before deduction of the Brazilian tax). In the case of a gain from the disposition of shares or ADSs that is subject to Brazilian tax, the U.S. holder may not be able to claim as a foreign tax credit any Brazilian tax paid, against such U.S. holder's U.S. federal income tax liability, except in the case of a U.S. holder that consistently elects to apply a modified version of the U.S. foreign tax credit rules that is permitted under recently issued temporary guidance and complies with specific requirements set forth in such guidance (for tax years ending before such temporary guidance is modified or withdrawn). As noted above, instead of claiming a credit, a U.S. holder may elect to deduct foreign taxes (including any Brazilian taxes) in computing its taxable income, subject to generally applicable limitations. An election to deduct foreign taxes (instead of claiming foreign tax credits) applies to all taxes paid or accrued in the taxable year to foreign countries and possessions of the United States. In the event the Brazilian withholding tax does not qualify as a creditable tax, the amount of such tax would generally reduce the amount realized on the sale, redemption, or other taxable disposition of shares or ADSs. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, shares or ADSs.

Passive Foreign Investment Company Rules – Certain adverse U.S. federal income tax rules as a general rule, apply to a U.S. person that owns or disposes of stock in a non-U.S. corporation that is classified as a passive foreign investment company (a ‘PFIC’). In general, a non-U.S. corporation will be classified as a PFIC for any taxable year during which,


ANNUAL REPORT AND FORM 20-F \| 2023	157

after applying relevant look-through rules with respect to the income and assets of subsidiaries, either (i) 75% or more of the non-U.S. corporation’s gross income is ‘passive income’ or (ii) 50% or more of the gross value (determined on the basis of an average of the quarterly value of the assets during such year) of the non-U.S. corporation’s assets (including cash) produce passive income or are held for the production of passive income. For these purposes, passive income generally includes, among other things, dividends, interest, rents, royalties, gains from the disposition of passive assets and gains from commodities and securities transactions (other than certain active business gains from the sale of commodities). In determining whether a non-U.S. corporation is a PFIC, a pro rata portion of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account.

The Company does not believe that it was a PFIC, for United States federal income tax purposes, for its preceding taxable year and does not expect to be a PFIC in its current taxable year or in the foreseeable future. However, because PFIC status depends upon the composition of a company’s income and assets, the market value of assets from time to time, and the application of rules that are not always clear, there can be no assurance that the Company will not be classified as a PFIC for any taxable year.

If the Company was to be classified a PFIC, a U.S. holder could be subject to material adverse tax consequences including being subject to greater amounts of tax on gains and certain distributions on the shares or ADSs as well as increased reporting requirements. U.S. holders should consult their tax advisors about the possibility that the Company might be classified as a PFIC and the consequences if the Company was classified as a PFIC.

Tax on Net Investment Income – A U.S. holder that is an individual, an estate or a trust (other than a trust that falls into a special class of trusts that is exempt from such tax) will be subject to a 3.8% tax on the lesser of (i) the U.S. holder’s ‘net investment income’ (in the case of individuals) or ‘undistributed net investment income’ (in the case of estates and trusts) for the relevant taxable year and (ii) the excess of the U.S. holder’s ‘modified adjusted gross income’ (in the case of individuals) or ‘adjusted gross income’ in the case of estates and trusts) for the taxable year over a certain threshold (which, in the case of individuals, will be between $125,000 and $250,000 depending upon the individual’s circumstances). A U.S. holder’s net investment income will generally include its dividend income on the shares or ADSs, and its net gains from the disposition of the shares or ADSs. U.S. holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax to their income and gains in respect of the shares or ADSs.

Information Reporting and Backup Withholding — Information reporting requirements will generally apply to U.S. holders (other than certain U.S. holders that are ‘exempt recipients’ (who demonstrate this fact when required), such as a corporations) of ADSs and such U.S. holders will be required to comply with applicable certification procedures to establish that they are not subject to backup withholding. These requirements generally apply to payments of dividends on, and to proceeds from the sale or redemption of our shares or ADSs made within the U.S. Investors who are individuals and fail to report the required information could be subject to substantial penalties. Investors should consult their own tax advisors regarding these requirements. The backup withholding tax rate is 24%. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is furnished to the U.S. Internal Revenue Service on a timely basis. A holder that is not a "United Sates person" (as such term is defined in the Code) will generally be exempt from these information reporting requirements and backup withholding tax, but may be required to comply with certain certification and identification procedures in order to establish its eligibility for such exemption.

Disclosure Requirements for Specified Foreign Financial Assets – Certain U.S. holders that own certain ‘specified foreign financial assets’ with an aggregate value in excess of US$50,000 on the last day of the tax year or US$75,000 at any time during the tax year are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. ‘Specified foreign financial assets’ generally include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include our shares and ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. U.S. holders who fail to report on their specified foreign financial assets could be subject to substantial tax penalties. U.S. holders should consult their own


ANNUAL REPORT AND FORM 20-F \| 2023	158

tax advisors regarding the application of these information reporting rules to the ADSs or shares, including the application of these rules to their own particular circumstances.

Dividends and Paying Agents

Not applicable.

Statements by Experts.

Not applicable.

Documents on Display

We are subject to the information requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act. In accordance with these requirements, we file reports and other information with the SEC. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington D.C. 20549. Copies of the materials may be obtained from the SEC’s Public Reference Room at prescribed rates. The public may obtain information on the operation of the SEC’s Public Reference Room by calling the SEC in the United States at 1-800-SEC-0330. In addition, copies of the exhibits that accompany this annual report may be inspected at our principal executive offices located at Avenida Barbacena, 1,200, 30190-131 Belo Horizonte, Minas Gerais, Brazil.

Subsidiary Information

Not applicable.

Annual Report to Security Holders

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk resulting from foreign currency exchange rates and interest rates fluctuations.

Foreign exchange risk results from certain of our loans and financing being denominated in currencies (primarily the U.S. dollar) other than the currency in which we earn revenues (the Brazilian Real).

Exchange Rate Risk

On December 31, 2023, R$1,857 million, representing 18.89% of our outstanding indebtedness, were denominated in foreign currencies, of which 100%, was denominated in U.S. dollars. We do not have substantial any revenues denominated in any foreign currencies and, due to regulations that require us to keep excess cash on deposit in Real-denominated accounts at Brazilian banks; we do not have monetary assets denominated in foreign currencies.

The foreign exchange variations of the acquisition of energy from Itaipu Binacional are balanced by the CVA and Other financial components in tariff adjustment. This amount is passed through to customers in the next tariff adjustment. Thus, this exposure affects the cash flow of the year, but does not affect the result of the year.

The Company has prepared a sensitivity analysis over the exposed liabilities with respect to the depreciation of the Real against the U.S. dollar, based on a ‘probable’ and an ‘adverse’ scenario.

Based on December 31, 2023, CEMIG may find relief of R$60 million in a ‘probable’ scenario, and, in an ‘adverse’ scenario, an increase of R$501 million of their exposed liabilities for next year.


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The table below provides summarized information regarding our exposure to exchange rate risk as of December 31, 2023:


Risk: foreign exchange rate exposure	Base scenario			Probable' scenario US$1 = R$4.98			Adverse scenario US$1 = R$6.00
US dollar
Loans and financings		(1,857	)		(1,910	)		(2,301	)
Suppliers (Itaipu Binacional)		(240	)		(247	)		(297	)

		(2,097	)		(2,157	)		(2,598	)

Net liabilities exposed		(2,097	)		(2,157	)		(2,598	)
Net effect of exchange rate fluctuation		—			(60	)		(501	)

Swap transactions

Considering that part of the Loans and financing of the Company’s subsidiaries is denominated in foreign currency, the companies use derivative financial instruments (swaps and currency options) to protect the servicing associated with these debts (principal plus interest).

The derivative financial instruments contracted have the purpose of protecting the operations against the risks arising from foreign exchange variation and are not used for speculative purposes.

The notional amount of derivative transactions are not presented in the Company´s statement of financial position, since they refer to transactions that do not require cash as only the gains or losses actually incurred are recorded.


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The table below presents the derivative instruments contracted by the Company as of December 31, 2023:


Assets (1)	Liability	Maturity period	Trade market	Notional amount (2)	Carrying amount 2023		Fair value 2023
US$ exchange variation + Rate (9.25% p.y.)	Local currency R$ + 152.01% of CDI	Interest: Semi-annual Principal: Dec. 2024	Over the counter	US$250		191		161
US$ exchange variation + Rate (9.25% p.y.)	Local currency R$ + 125.52% of CDI	Interest: Semi-annual Principal: Dec. 2024	Over the counter	US$500		254		207

						445		368

Non-current asset								368
Current liabilities								—

(1)

For the US$1 billion Eurobond issued on December 2017: (i) for the principal, a call spread was contracted, with floor at R$3.25/US$ and ceiling at R$5.00/US$; and (ii) a swap was contracted for the total interest, for a coupon of 9.25% p.a. at an average rate equivalent to 150.49% of the CDI. For the additional US$500 issuance of the same Eurobond issued on July 2018 a call spread was contracted for the principal, with floor at R$3.85/US$ and ceiling at R$5.00/US$, and a swap was contracted for the interest, resulting in a coupon of 9.25% p.a., with an average rate equivalent to 125.52% of the CDI rate. The upper limit for the exchange rate in the hedge instrument contracted by the Company for the principal of the Eurobonds is R$5.00/US$. The instrument matures in December 2024. If the USD/BRL exchange rate is still over R$5.00 in December 2024, the company will disburse, on that date, the difference between the upper limit of the protection range and the spot dollar on that date. The Company is monitoring the possible risks and impacts associated with the dollar being valued above R$5.00 and assessing various strategies for mitigating the foreign exchange risk up to the maturity date of the transaction. The hedge instrument fully protects the payment of six-monthly interest, independently of the USD/BRL exchange rate.

(2)

In millions of US$.

In accordance with market practice, the Company uses a mark-to-market method to measure its derivative financial instruments for its Eurobonds. The principal indicators for measuring the fair value of the swap are the B3 future market curves for the DI rate and the dollar. The Black & Scholes model is used to price the call spread, and one of the parameters of which is the volatility of the dollar, measured on the basis of its historic record over 2 years.

Interest Rate Risk

This exposure occurs as a result of net assets indexed to variation in interest rates, as follows:


	2023
	(in millions of R$)
Assets
Cash equivalents - Cash investments - CDI		1,342
Marketable securities - CDI / SELIC		774
Generation indemnity revenue		784
Restricted cash - CDI		31
CVA and in tariffs - SELIC		806
		3,737
Liabilities
Loans and debentures - CDI		(3,508	)
Loans and debentures - TJLP		—
Sector financial liabilities		—
		(3,508	)
Net assets exposed		229


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In relation to the most significant interest rate risk, the Company and its subsidiaries estimate that in a probable scenario the Selic rate will be 9.25% and the TJLP rate will be 6.27% on December 31, 2023. The Company and its subsidiaries made a sensitivity analysis of the effects on results considering an adverse scenario in relation to the probable scenario, as shown in the table below. The CDI rate follows the Selic rate.


	2023			2024
				Probable' scenario			Adverse scenario
Risk: Increase in Brazilian interest rates	Book value			Selic 9.25%			Selic 13.25%
				TJLP 6.27%			TJLP 7.27%
Assets
Cash equivalents		1,342			1,466			1,520
Marketable securities		774			846			877
Restricted cash		31			33			35
CVA and Other financial components - SELIC		806			880			912

		2,953			3,225			3,344

Liabilities
Loans and financing (Note 22) - CDI		(3,508	)		(3,833	)		(3,973	)

		(3,508	)		(3,833	)		(3,973	)



Net assets exposed		(555	)		(608	)		(629	)

Net effect of fluctuation in interest rates					(53	)		(74	)

Increase in inflation risk

The Company is exposed to the risk of increase in inflation index on December 31, 2023. A portion of the loans, financings and debentures as well as the pension fund liabilities are adjusted using the IPCA (Expanded National Customer Price). The revenues are also adjusted using the IPCA and IGP-M index, mitigating part of the Company risk exposure.

This table presents the Company’s net exposure to inflation index:


Exposure to increase in inflation	2023			2022
Assets
Concession financial assets related to Distribution infrastructure - IPCA (1)		1,920			1,407
Concession Grant Fee - IPCA (Note 14)		3,031			2,950

		4,951			4,357

Liabilities
Loans and debentures - IPCA and IGP-DI		(4,522	)		(4,630	)
Debt with pension fund (Forluz) - IPCA		(90	)		(251	)
Deficit of pension plan (Forluz) - IPCA		(521	)		(545	)

		(5,133	)		(5,426	)


Net assets exposed		(182	)		(1,069	)

(1)

Portion of the concession financial assets relating to the Regulatory Remuneration Base of Assets ratified by the grantor (ANEEL) after the 4th tariff review cycle.

Liquidity risk

CEMIG has sufficient cash flow to cover the cash needs related to its operating activities.

The Company manages liquidity risk with a group of methods, procedures and instruments that are coherent with the complexity of the business, and applied in permanent control of the financial processes, to guarantee appropriate risk management.

CEMIG manages liquidity risk by permanently monitoring its cash flow in a budget-oriented manner. Balances are projected monthly, for each one of the companies, over a period of 12 months, and daily liquidity is projected over 180 days.


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Short-term investments must comply with investing principles established in the Company’s Cash Investment Policy. These include applying its resources in private credit investment funds, without market risk, and investment of the remainder directly in bank CDs or repo contracts which earn interest at the CDI rate.

In managing cash investments, the Company seeks to obtain profitability through a rigid analysis of financial institutions’ credit risk, applying operational limits for each bank, based on assessments that take into account their ratings, exposures and balance sheet. It also seeks greater returns on investments by strategically investing in securities with longer investment maturities, while bearing in mind the Company’s minimum liquidity control requirements.

Any reduction in the Company’s ratings could result in a reduction of its ability to obtain new financing and could also make refinancing of debts not yet due more difficult or more costly. In this condition, any financing or refinancing of the Company’s debt could have higher interest rates or might require compliance with more onerous covenants, which could additionally cause restrictions to the operations of the business.

The flow of payments of the Company’s obligation to suppliers, debts with the pension fund, Loans and debentures, at floating and fixed rates, including future interest up to contractual maturity dates, is as follows:


	Up to 1 month		1 to 3 months		3 months to 1 year		1 to 5 years		Over 5 years		Total
Financial instruments at interest rates:
- Floating rates
Loans and debentures		47		460		2,920		7,405		1,236		12,068
Onerous concessions		—		1		3		13		16		33
Debt with pension plan (Forluz)		15		31		46		—		—		92
Deficit of the pension plan (FORLUZ)		7		14		63		363		316		763

		69		506		3,032		7,781		1,568		12,956

- Fixed rate
Suppliers		2,854		163		—		—		—		3,017

Total		2,923		669		3,032		7,781		1,568		15,973

Item 12. Description of Securities Other than Equity Securities

Debt Securities

Not applicable.

Warrants and Rights

Not applicable.

Other Securities

Not applicable.

American Depositary Shares

Citibank, N.A, serves as the depositary (the ‘Depositary’) for both our Common ADSs and Preferred ADSs. Holders of ADSs, any person or entity having a beneficial interest deriving from the ownership of the ADSs, and persons depositing shares or surrendering ADSs for cancellation and withdrawal of Deposited Securities (as defined in the Deposit Agreements) are required to pay to the Depositary certain fees and related charges as identified below.


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The fees associated with our ADSs are as follows:


Service	Rate	By Whom Paid
(1) Issuance of ADSs (e.g., an issuance upon a deposit of Shares, upon a change in the ADS(s)-to-Share(s) ratio, or for any other reason), excluding issuances as a result of distributions described in paragraph (4) below.	Up to $5.00 per 100 ADSs (or fraction thereof) issued.	Persons depositing shares or persons receiving ADSs.
(2) Cancellation of ADSs (e.g., a cancellation of ADSs for Delivery of deposited Shares, upon a change in the ADS(s)-to Share(s) ratio, or for any other reason).	Up to $5.00 per 100 ADSs (or fraction thereof) surrendered.	Person for whom ADSs are being cancelled
(3) Distribution of cash dividends or other cash distributions (e.g., upon a sale of rights and other entitlements).	Up to $5.00 per 100 ADSs (or fraction thereof) held.	Persons to whom the distribution is made.
(4) Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) an exercise of rights to purchase additional ADSs.	Up to $5.00 per 100 ADSs (or fraction thereof) held.	Persons to whom the distribution is made.
(5) Distribution of securities other than ADSs or rights to purchase additional ADSs (e.g., spin-off shares).	Up to $5.00 per 100 ADSs (or fraction thereof) issued.	Persons to whom the distribution is made.
(6) ADS Services	Up to U.S. $5.00 per 100 ADSs (or fraction thereof) held on the applicable record date(s) established by the Depositary.	Person holding ADSs on the applicable record date(s) established by the Depositary.
(7) Registration of ADS Transfers (e.g., upon a registration of the transfer of registered ownership of ADSs, upon a transfer of ADSs into DTC and vice versa, or for any other reason).	U.S. $1.50 per certificate presented for transfer.	Person for whom or to whom ADSs are transferred.
(8) Conversion of ADSs of one series for ADSs of another series (e.g., upon conversion of Partial Entitlement ADSs for Full Entitlement ADSs).	Up to $5.00 per 100 ADSs (or fraction thereof) converted.	Person for whom ADSs are converted or to whom the converted ADSs are delivered.

Direct and indirect depositary payments.

We have an agreement with the Depositary to reimburse the Company, up to a limited amount, for certain expenses in connection with our ADR programs, including listing fees, legal and accounting expenses, proxy distribution costs and investor relation related expenses. These reimbursements for the year ended December 31, 2023 totaled a net amount of US$5.340 million, after deduction of applicable U.S. taxes, in the amount of US$2.288 million.


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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

Not applicable.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15. Controls and procedures

(a)

Assessment of Controls and Procedures for Disclosure

Our Executive Board, including our Chief Executive Officer (‘CEO’) and Chief Financial and Investor Relations Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2023, and have concluded that these controls and procedures were effective.

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time period specified in the SEC rules and forms. These disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit is accumulated and communicated to management of the Company, including the principal executive officer and financial officer, as appropriate to allow timely decisions regarding required disclosure. Accordingly, our management, including our principal executive and financial officer, have concluded that the consolidated financial statements included in this Form 20-F present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with IFRS as issued by the IASB.

(b)

Management’s Annual Report on Internal Controls over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.

Our internal control system was designed to provide a reasonable assurance as to the integrity and reliability of the published financial statements. Our internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

II.

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and Chief Officers of the Company; and

III.

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance that the objectives of the control system are met.

Management evaluated internal control over financial reporting under the supervision of our CEO and Chief Financial and Investor Relations Officer, as of December 31, 2023, based on the criteria set forth in the Integrated Internal Control Framework issued by the Committee on Sponsoring Organizations of the Commission Treadway, or COSO


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(2013). Based on these criteria, our management concluded that, for the year ended December 31, 2023, the internal control system was effective. Our CEO and CFO have certified that, to the best of their knowledge, the financial statements and other financial information included in this Form 20-F fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of and for the periods shown on this Form 20-F.

(c)

Attestation Report of Independent Registered Public Accounting Firm

Our independent auditors audited the effectiveness of our internal control over financial reporting on December 31, 2023, as stated in its opinion, included in this annual report.

(d)

Changes in Internal Control over Financial Reporting

There were no significant changes in our internal control over financial reporting during the year ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 16. [Reserved]

Item 16A. Audit Committee Financial Expert

We established an Audit Committee on June 11, 2018 in compliance with the Brazilian State Companies Law, which operates as an audit committee for the purpose of the Sarbanes-Oxley Law of 2002. Under Section 10A–3 (c) (3) of the SEC rules on audit committees of companies listed on the New York Stock Exchange, non-US issuers can opt not to have a separate audit committee made up of independent members provided that they have an established audit board or committee that has been chosen in accordance with the legal rules of its origin country, which expressly require or permit this committee or board should comply with certain obligations. The Financial Expert of our Audit Committee is Roberto Tommasetti and he also satisfies the independence requirements of Rule 10A-3.

Item 16B. Code of Ethics

We have adopted a code of ethics as defined in Item 16B of Form 20-F under the Exchange Act. Our code of ethics applies to our Chief Executive Officer, Chief Finance, and Investor Relations Officer, and to persons performing similar functions, members of the Board of Directors, other officers, and employees. In 2022, the document was completely revised, having undergone a change in its name, format, and content, with the purpose of giving greater clarity to all involved about the ethical principles and rules of conduct of the Company. Also, all employees must mandatorily receive the training on CEMIG’s Code of Conduct, every year.

Our code of ethics is filed with the SEC as an exhibit to this Form 20-F and is available on our website www.cemig.com.br. If we change the provisions of our code of ethics that apply to our Chief Executive Officer, Chief Finance, and Investor Relations Officer, and/or persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such change on our website at the same address.

Item 16C. Principal Accountant Fees and Services

KPMG Auditores Independentes Ltda (PCAOB ID 1124 - São Paulo, SP, Brazil) acted as our independent registered public accounting firm for the fiscal year ended December 31, 2023 and 2022. The total fees for professional services provided by our independent accountants in 2023 and 2022, is R$7,096 thousand and R$5,670 thousand, respectively. The total fees billed for professional services, including out-of-pocket expenses, and a breakdown of these amounts by category of service, as follows:


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	(Thousands of Reais)
Year ended December 31	2023		2022

Audit Fees		6,291		4,322
Audit-related Fees	161			101
Tax Fees	644			374
Total		7,096		4,797

Audit fees include the audit of our annual consolidated financial statements and internal control over financial reporting, the quarterly reviews of our consolidated interim financial statements, statutory audits of our subsidiaries and certain regulatory audits. Audit-related fees include mainly the agreed upon procedures required by the grantor (ANEEL). Tax fees refers to certain tax compliance services.

Audit Committee Pre-Approval Policies and Procedures

Our Audit Committee currently serves as our audit board or committee for purposes of the Sarbanes-Oxley Act of 2002. However, as required by Brazilian legislation, we have adopted pre-approval policies and procedures whereby all audit and non-audit services provided by external auditors must be approved by the Board of Directors. Any service proposals submitted by external auditors need to be discussed and approved by the Board of Directors during its meetings. Once the proposed service is approved, we formalize the engagement of the relevant services. The approval of any audit and non-audit services to be provided by our external auditors is specified in the minutes of the meetings of the Board of Directors. All services mentioned above were pre-approved by the Board of Directors and Audit Committee.

Item 16D. Exemptions from the Listing Standards for Audit Committees

We rely on the general exemption from the listing standards relating to audit committees contained in Rule 10A-3(c) (3) under the Exchange Act. Our Audit Committee carries out the functions of an audit committee of the United States to the extent permitted under Brazilian law. Brazilian law requires our Audit Committee to be separate from our board of directors, and members of our Audit Committee are not elected by the Company’s management. Brazilian law provides standards for the independence of our Audit Committee from our management. Our Audit Committee is composed of four members, one of which is member of our board of directors.

We do not believe that our reliance on this general exemption will materially affect the ability of our Audit Committee to act independently and to satisfy the other requirements of the listing standards relating to audit committees contained in Rule 10A-3 under the Exchange Act.

We also have a Fiscal Council constituted according to the Brazilian law requirements. See more information on Item 6. Directors, Senior Managers and Employees.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

Corporate Governance Differences from NYSE Practices

On November 4, 2003, the NYSE established new corporate governance rules. Under the rules, foreign private issuers are subject to a more limited set of corporate governance requirements than U.S. domestic issuers. Under the NYSE


ANNUAL REPORT AND FORM 20-F \| 2023	167

rules, we are required only to: (i) have an audit committee or Fiscal Council, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, (ii) provide prompt certification by our CEO of any material noncompliance with any corporate governance rules, and (iii) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

For more information on our corporate governance practices, see Item 9. The Offer and Listing Trading Market—Trading on the B3.


Section	NYSE Corporate Governance Rule for U.S. Domestic Issuers	Our Approach
303A.01	A listed company must have a majority of independent directors; ‘Controlled companies’ are not required to comply with this requirement.	Under Section 303A of the rules of the NYSE, ‘controlled company’ is taken to include a company in which more than 50% of the voting power is held by one individual, a group or another company. Since 50.97% of the voting share of CEMIG is held by the State of Minas Gerais, it is considered to be a controlled company. Therefore, this requirement currently does not apply to CEMIG.
303A.03	The non-management directors of a listed company must meet at regularly scheduled executive sessions without management.	The non-management directors of CEMIG do not meet at regularly scheduled executive sessions without management.
303A.04	A listed company must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. ‘Controlled companies’ are not required to comply with this requirement.	As a controlled company, CEMIG is not required to have a nominating/governance committee. Nonetheless, CEMIG has a Corporate Governance Committee, composed of dependent and independent directors, and its responsibilities are clearly defined in the internal regulations of the Board of Directors.
303A.05	A listed company must have a compensation committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties; ‘Controlled companies’ are not required to comply with this requirement.	As a controlled company, CEMIG would not be required to comply with the compensation committee requirements as if it were a U.S. domestic issuer. CEMIG does not have a compensation committee.
303A.06 and 303A.07	A listed company must have an audit committee with a minimum of three independent directors that satisfy the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended, with a written charter that covers certain minimum specified duties.	CEMIG exercised its prerogative under SEC Rule 10A-3 and the Sarbanes Oxley Act of 2002, which allow non-U.S. issuers not to have an Audit Committee. Our Audit Committee carries out the functions of an Audit Committee of the United States up to the limit permitted by Brazilian law.
303A.06 and 303A.07		CEMIG’s Audit Committee is a permanent body, responsible, principally, for inspection and supervision of the activities of the management and for verifying the managers’ compliance with their duties under the law and under the by-laws.
303A.08	Shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exemptions set forth in the NYSE rules.	Under Brazilian Corporate Law, shareholder preapproval is required for the adoption of equity compensation plans.
303A.09	A listed company must adopt and disclose corporate governance guidelines that cover certain minimum specified subjects.	CEMIG’s listing on B3 is at Corporate Governance Level 1, and CEMIG is thus obliged to comply with the rules contained in those related regulations. In addition, CEMIG’s Manual for Disclosure and Use of Information, its Securities Trading Policy, the Internal Regulations of its Board of Directors, and its Code of Ethics outline important rules of corporate governance, which orient its management.
303A.12	Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards.	CEMIG’s CEO will promptly notify the NYSE in writing after any executive officer of CEMIG becomes aware of any material non-compliance with any applicable provisions of the NYSE corporate governance rules.

Item 16H. Mine Safety Disclosure

Not applicable.


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Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Item 16J. Insider trading policies

Not applicable.

Item 16K. Cybersecurity

Cybersecurity risks

We maintain a robust cybersecurity infrastructure to safeguard our operations, networks and data through comprehensive security measures including our technology tools, internal management and external service providers. Our processes for assessing, identifying and managing material risks from cybersecurity threats are integrated into our risk management system. We use a variety of tools and processes to collect relevant data and identify, monitor, assess and manage material cybersecurity risks.

The company has a corporate risk management process formally defined in the Corporate Risk Management and Internal Controls Policy (NO – 02.19), which maps process risks, identifies top risks and reviews the risk matrix annually. The identified risks are classified and treated through action plans.

The board of directors is responsible for evaluation and approval of the Top Risks Matrix, as well as the general guidelines for establishing of the Company's acceptable limits of exposure to risks.

Cybersecurity risk is mapped as one of the company's top risks and to mitigate it, Cemig puts into practice processes, policies and tools, including, among others:

•

Information Security Policy: Cemig has an Information Security Policy (ISP), which defines its security principles and ensure that employees, suppliers and other users follow the security rules;

•

Vulnerability and threat management process: This process monitors the environment to identify existing vulnerabilities and apply necessary fixes. The external environment is also monitored through the “Threat intelligence” service, which seeks to identify possible leaks of credentials or information on the deep web, abuse of the Cemig brand and other frauds;

•

Network Security: Cemig is protected by network security solutions, which include web content filter, intrusion prevent system, anti-spam software and next generation firewalls;

•

Training and Awareness Program: The company has a workforce awareness process that consists of training through its own distance learning platform, UniverCemig, to raise information security awareness, promote behavioral change and realize the importance of information security for the company's workforce. Through the company's intranet, communication campaigns guide employees on safe use of the internet, prevention of fraud, phishing and scams, in addition to the responsible use of company assets;

•

DLP (Data Loss Prevention) and electronic information classification tool that monitors and prevents the leakage of personal and confidential data and applies encryption protection to critical documents;

•

Use of multiple factor authentication (MFA) for all VPN connections and access to corporate and operational networks. Additionally, we implemented a virtualized access solution (VDI) for outsourced labor;

•

Phishing attack simulation: Phishing simulation campaigns are carried out with the aim of training employees in identifying threats received by email and reporting suspicious behavior to the cybersecurity area;


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•

Endpoint Protection: Cemig implements antivirus (AV) and Endpoint Detection & Response (EDR) solutions on desktops and servers. Cemig also has next-generation firewalls and intrusion prevention system (IPS);

•

Central Logging Management: Cemig utilizes a Security Information and Events Management (SIEM) solution that collect, manage and analyze events from many sources and also is connected to other security solutions, which allow security analysts to quickly respond when any suspicious activity is detected;

•

SOC – Security Operation Center: The SOC team performs continuous monitoring of the IT environment through various tools for detecting, identifying, containing and eradicating any threat;

•

Third Parties: In 2023, we created a policy to apply security Information requirements to all suppliers that can rights to access, creation, processing, maintenance, transfer and storage of data outside the company’s IT environment.

Governance

Our board of directors oversees management’s approach to managing cybersecurity risks as part of its risk management oversight. Our board of directors holds periodic discussions with management regarding our guidelines and policies with respect to cybersecurity risks and receives regular reports from our Deputy Director of IT – DTI regarding such risks and the steps management has taken to monitor and control any exposure resulting from such risks.

Cemig has a Privacy, Data Protection and Cybersecurity Committee under the coordination of the Deputy Directorate of Compliance, Corporate Risks and Internal Controls, which is responsible for strategic choices related to privacy, data protection and cybersecurity and has as one of its responsibilities to support the Board of Directors in defining investments in technological resources, acquisition of knowledge, trends and indicators for preventive and effective management. The coordination of this committee is carried out by the Deputy Directorate of Compliance, Corporate Risks and Internal Controls and secretariat by the Privacy and Data Protection Management - DCI/PR, in matters of privacy and data protection, and by the Systems Architecture and Engineering Management of Software - DTI/AE, in matters of information security and cyber security and involves the IT, Compliance, Legal, Business and People Management Directorates, as defined in Circular DCI 03/2022.

The Board of Directors is also advised by the Audit Committee, which is an independent support body of an advisory and permanent nature. This committee aims to evaluate the effectiveness of the internal control system, risk management and recommend correction and improvement of policies, practices and procedures.

Cemig has an IT security control system, based on Cobit 5 and the effectiveness of internal controls, governance and risk management is monitored through regular reports from internal and external audits, on the results of its activities, including responses of the Board of Directors to the recommendations made on controls and non-conformities, following up the notes and recommendations.

The administration of information security, cybersecurity and the execution of internal IT controls are under the responsibility of Mr. Luiz Claudio Correa Vilanni, Deputy Director of IT – DTI at CEMIG, who is responsible for assessing, identifying, and managing the risks from cybersecurity threats. Mr. Villani has more than 20 years of experience as CIO in several companies in the IT, services and automotive industry. He has specialized knowledge in ITIL, IT service management, IT strategy and Datacenter.

During 2023 and as of the date of this annual report, we have not identified any cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, the company or our business strategy, results of operations or financial condition.


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PART III

Item 17. Financial Statements

See “Item 18. Financial Statements”.

Item 18. Financial Statements

Reference is made to pages F-1 through F-145 hereof.

The following consolidated financial statements are filed as part of this annual report on Form 20-F:

•

Report of Independent Registered Public Accounting Firm as of December 31, 2023 and 2022 of Consolidated Financial Statements of Companhia Energética de Minas Gerais – Cemig (PCAOB ID: 1124);

•

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements of Companhia Energética de Minas Gerais – Cemig (PCAOB ID: 1448);

•

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting of Companhia Energética de Minas Gerais – Cemig;

•

Audited Consolidated Statement of Financial Position as of December 31, 2023 and 2022;

•

Audited Consolidated Statement of Income for the years ended December 31, 2023, 2022 and 2021;

•

Audited Consolidated Statement of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021;

•

Audited Consolidated Statement of Changes in Equity for the years ended December 31, 2023, 2022 and 2021;

•

Audited Consolidated Statement of Cash Flow for the years ended December 31, 2023, 2022 and 2021;

•

Notes to the Consolidated Financial Statements;


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Item 19. Exhibits

The following documents are included as exhibits to this annual report:


No.	Description
1	Corporate by-laws of CEMIG, as amended and in effect since December 11, 2023.
2.1	Second Amended and Restated Deposit Agreement, dated as of August 10, 2001, by and among us, Citibank, N.A., as depositary, and the holders and beneficial owners of ADSs evidenced by ADRs issued thereunder (incorporated by reference to the Registration Statement on Form F-6 relating to the ADSs filed on August 20, 2001 (File No. 333-13826)). (P)
2.2	Shareholders’ Agreement dated June 18, 1997, between the State Government and Southern, relating to the rights and obligations of owners of our shares (incorporated by reference to Exhibit 2.1 to our Registration Statement on Form 20-F filed on August 13, 2001 (File No. 1-15224)). (P)
2.3	Amendment No. 1 to the Second Amended and Restated Deposit Agreement, dated August 10, 2001, by and among us, Citibank, N.A., as depositary, and the holders and beneficial owners of ADSs evidenced by ADRs issued thereunder (incorporated by reference to the Registration Statement on Form F-6 relating to the ADSs filed on June 11, 2007 (File No. 333-143636)).
2.4	Amendment No. 2 to Second Amended and Restated Deposit Agreement, dated as of April 15, 2022, by and among Companhia Energética de Minas Gerais – CEMIG (the “Company”), Citibank, N.A., as depositary (the “Depositary”), and all Holders and Beneficial Owners of American Depositary Shares (“ADSs”) issued under the terms of the Second Amended and Restated Deposit Agreement (incorporated by reference to the Registration Statement on Form F-6 relating to the common share ADSs filed on March 14, 2022 (File No. 333-263528))
2.5	Deposit Agreement, dated as of June 12, 2007, by and among us, Citibank, N.A., as depositary, and the holders and beneficial owners of ADSs evidenced by ADRs issued thereunder (incorporated by reference to the Registration Statement on Form F-6 relating to the common share ADSs filed on May 7, 2007 (File No. 333-142654)).
2.6	Amendment No. 1 to Deposit Agreement, dated as of April 15, 2022, by and among Companhia Energética de Minas Gerais – CEMIG (the “Company”), Citibank, N.A., as depositary (the “Depositary”), and all Holders and Beneficial Owners of American Depositary Shares issued under the terms of the Deposit Agreement (incorporated by reference to the Registration Statement on Form F-6 relating to the common share ADRs filed on March 14, 2022 (File No. 333-142654))
2.7	The total amount of long-term debt securities of CEMIG and its subsidiaries under any one instrument does not exceed 10.0% of our total assets on a consolidated basis. We agree to furnish copies of instruments defining the rights of certain holders of long-term debt to the Securities and Exchange Commission upon request.
2.8	Indenture, dated as of December 5, 2017, among CEMIG Geração e Transmissão S.A., as issuer, Companhia Energética de Minas Gerais – CEMIG, as notes guarantor, and the Bank of New York Mellon as trustee, paying agent, transfer agent and registrar and the Bank of New York Mellon SA/NV, Luxembourg Branch, as Luxembourg Paying Agent, Luxembourg Transfer Agent and Luxembourg Listing Agent (incorporated by reference to Exhibit 8 to our Annual Report on Form 20-F filed on May 25, 2005 (File No. 1-15224)).
4.1	Contract of Concession for Generating Electric Energy, dated July 10, 1997, between the Federal Government and us, relating to the provision of electric energy generation services to the public (incorporated by reference to Exhibit 4.1 to our Registration Statement on Form 20-F filed on August 13, 2001 (File No. 1-15224)). (P)
4.2	Contract of Concession of Electric Energy Transmission Services, dated July 10, 1997, between the Federal Government and us, relating to the transmission of electric energy to the public (incorporated by reference to Exhibit 4.2 to our Registration Statement on Form 20-F filed on August 13, 2001 (File No. 1-15224)). (P)
4.3	Second Amendment to the Energy Transmission Concession Contract, dated September 16, 2005 (incorporated by reference to Exhibit 4.3 to our Registration Statement on Form 20-F filed on June 30, 2006 (File No. 1-15224))
4.4	Third Amendment to the Energy Transmission Concession Contract, for the Northern, Southern, Eastern, and Western geographic areas, dated April 13, 2010 (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form 20-F filed on June 30, 2010 (File No. 1-15224)).
4.5	Contracts of Concession of Public Service for Distribution of Electric Energy, dated July 10, 1997, between the Federal Government and us, relating to the provision of electric energy distribution services to the public (incorporated by reference to Exhibit 4.3 to our Registration Statement on Form 20-F filed on August 13, 2001 (File No. 1-15224)). (P)
4.6	First Amendment to the Energy Distribution Concession Contract, dated March 31, 2005 (incorporated by reference to Exhibit 4.5 to our Registration Statement on Form 20-F filed on June 30, 2006 (File No. 1-15224)).
4.7	Second Amendment to the Energy Distribution Concession Contract, dated September 16, 2005 (incorporated by reference to Exhibit 4.6 to our Registration Statement on Form 20-F filed on June 30, 2006 (File No. 1-15224)).
4.8	Contract for the Assignment of CRC Account, dated May 31, 1995, between the State Government and us, relating to amounts due to us from the State Government (incorporated by reference to Exhibit 4.4 to our Registration Statement on Form 20-F filed on August 13, 2001 (File No. 1-15224)). (P)


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4.9	First Amendment to the Contract for the Assignment of CRC Account, dated February 24, 2001, between the State Government and us, relating to amounts due to us from the State Government (incorporated by reference to Exhibit 4.5 to our Annual Report on Form 20-F filed on March 26, 2003 (File No. 1-15224)).
4.10	Second Amendment to the Contract for the Assignment of CRC Account, dated October 14, 2002, between the State Government and us, relating to amounts due to us from the State Government (incorporated by reference to Exhibit 4.6 to our Annual Report on Form 20-F filed on March 26, 2003 (File No. 1-15224)).
4.11	Third Amendment to the Contract for the Assignment of CRC Account, dated October 24, 2002, between the State Government and us, relating to amounts due to us from the State Government (incorporated by reference to Exhibit 4.7 to our Annual Report on Form 20-F filed on March 26, 2003 (File No. 1-15224)).
4.12	Fourth Amendment to the Contract for the Assignment of CRC Account, dated January 23, 2006, between the State Government and us, relating to amounts due to us from the State Government (incorporated by reference to Exhibit 4.14 to our Registration Statement on Form 20-F filed on June 30, 2006 (File No. 1-15224)).
4.13	Announcement of Start of Public Distribution of Senior Units under CRC Account Securitization Fund, dated as of January 26, 2006 (incorporated by reference to Exhibit 4.15 to our Registration Statement on Form 20-F filed on June 30, 2006 (File No. 1-15224)).
4.14	Summary of Indenture Covering Public Distribution of Non-Convertible Unsecured Debentures, dated August 24, 2006, between CEMIG D and Unibanco—União dos Bancos Brasileiros S.A. (incorporated by reference to Exhibit 4.18 to our Registration Statement on Form 20-F filed on July 23, 2007 (File No. 1-15224)).
4.15	Summary of Indenture Covering Public Distribution of Non-Convertible Unsecured Debentures, dated April 17, 2007, between CEMIG GT and Unibanco—União dos Bancos Brasileiros S.A. (incorporated by reference to Exhibit 4.19 to our Registration Statement on Form 20-F filed on July 23, 2007 (File No. 1-15224)).
4.16	Summary of Indenture Covering the Second Issuance of Debentures, dated December 19, 2007, between CEMIG D and BB Banco de Investimento S.A. (incorporated by reference to Exhibit 4.20 to our Annual Report on Form 20-F filed on June 30, 2008 (File No. 1-15224)).
4.17	Share Purchase Agreement, dated April 23, 2009, between CEMIG GT, Terna—Rete Elettrica Nazionale S.p.A., and CEMIG (incorporated by reference to Exhibit 4.22 to our Registration Statement on Form 20-F filed on June 19, 2009 (File No. 1-15224)).
4.18	English Summary of Share Purchase Agreement between CEMIG and Andrade Gutierrez Concessões S.A., dated December 30, 2009 (incorporated by reference to Exhibit 4.18 to our Registration Statement on Form 20-F filed on June 30, 2010 (File No. 1-15224)).
4.19	English Summary of Share Purchase Agreement between CEMIG and Fundo de Investimento em Participações PCP, dated December 31, 2009 (incorporated by reference to Exhibit 4.19 to our Registration Statement on Form 20-F filed on June 30, 2010 (File No. 1-15224)).
4.20	English Summary of Put Option Agreement between CEMIG and Enlighted Partners Venture Capital LLC, dated March 24, 2010 (incorporated by reference to Exhibit 4.20 to our Registration Statement on Form 20-F filed on June 30, 2010 (File No. 1-15224)).
4.21	English Summary of Share Purchase Agreement among, Taesa, Abengoa Concessões Brasil Holding S.A. and Abengoa Participações Holding S.A., dated June 2, 2011 (incorporated by reference to the Form 20-F filed on April 27, 2012 (File No. 1-15224)).
4.22	English Summary of Share Purchase Agreement among, Taesa, Abengoa Concessões Brasil Holding S.A., Abengoa Construção Brasil Ltda., NTE—Nordeste Transmissora de Energia S.A. and Abengoa Participações Holding S.A., dated June 2, 2011 (incorporated by reference to the Form 20-F filed on April 27, 2012 (File No. 1-15224)).
4.23	Summary of Indenture Covering Public Distribution of Non-Convertible Unsecured Debentures, dated March 3, 2010, between CEMIG GT and BB – Banco de Investimento S.A. (incorporated by reference to Exhibit 4.23 to our Annual Report on Form 20-F filed on June 30, 2011 (File No. 1-15224)).
4.24	English Summary of Share Purchase Agreement between Taesa and Abengoa Concessões Brasil Holding S.A. dated March 16, 2012 (incorporated by reference to the Form 20-F filed on April 27, 2012 (File No. 1-15224)).
4.25	English Summary of Investment Agreement among RR Participações S.A., Light and Renova dated July 8, 2011 (incorporated by reference to the Form 20-F filed on April 27, 2012 (File No. 1-15224)).
4.26	English Summary of Put Option Agreement between Parati S.A. and Fundação de Seguridade Social Braslight dated July 15, 2011 (incorporated by reference to the Form 20-F filed on April 27, 2012 (File No. 1-15224)).
4.27	English Summary of Share Purchase and Sale Agreement entered into between Amazônia Energia Participações S.A. and Construtora Queiroz Galvão S.A., Construtora OAS Ltda., Contern Construções e Comércio Ltda., Cetenco Engenharia S.A., Galvão Engenharia S.A. and J. Malucelli Construtora de Obras S.A., for shares in Norte Energia S.A. dated October 25, 2011 (incorporated by reference to the Form 20-F filed on April 27, 2012 (File No. 1-15224)).
4.28	English Summary of Share Acquisition Agreement between CEMIG and the State of Minas Gerais dated December 27, 2011 (incorporated by reference to the Form 20-F filed on April 27, 2012 (File No. 1-15224)).


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4.29	Summary of Indenture Covering the Public Distribution of Non-Convertible Unsecured Debentures, dated March 13, 2012, between CEMIG Geração e Transmissão S.A., HSBC Corretora de Títulos e Valores Mobiliários S.A., Banco BTG Pactual S.A. and Banco do Nordeste do Brasil S.A. (incorporated by reference to the Form 20-F filed on April 27, 2012 (File No. 1-15224)).
4.30	Initial Announcement of Public Distribution, under the Regime of Firm Guarantee of Placement, of Unsecured Debentures Not Convertible into Shares, with Additional Guarantee, in Three Series, of the Third Issue by CEMIG D, dated March 19, 2012 (incorporated by reference to the Form 20-F filed on April 30, 2013 (File No. 1-15224)).
4.31	Initial Announcement of Public Distribution, under the Regime of Best Efforts for Placement, of Unsecured Debentures Not Convertible into Shares, with Additional Guarantee, in up to Three Series, of the Third Issue by CEMIG GT, dated March 12, 2012 (incorporated by reference to the Form 20-F filed on April 30, 2013 (File No. 1-15224)).
4.32	Summary of Private Contract for Investment in Transmission Assets, among CEMIG, CEMIG GT and Taesa dated May 17, 2012 (incorporated by reference to the Form 20-F filed on April 30, 2013 (File No. 1-15224)).
4.33	Summary of the Share Purchase Agreement between CEMIG Capim Branco Energia S.A., Suzano Papel e Celulose S.A., and Suzano Holding S.A., intervening by Comercial Agrícola Paineiras LTDA. (‘Paineiras’) e Epícares Empreendimentos e Participações LTDA. (‘Epícares’), dated March 12, 2013 (incorporated by reference to the Form 20-F filed on April 30, 2013 (File No. 1-15224)).
4.34	Summary of the Commitment Undertaking for Settlement, signed between the State of Minas Gerais and CEMIG, dated November 22, 2012 (incorporated by reference to the Form 20-F filed on April 30, 2013 (File No. 1-15224)).
4.35	Fifth Amendment to Concession Contracts No. S 002/1997–DNAEE, 003/1997–DNAEE, 004/1997–DNAEE and 005/1997–DNAEE, dated December 21, 2015, between the Federal Republic of Brazil and us, related to energy distribution service (incorporated by reference to the Form 20-F filed on November 14, 2016 (File No. 1-15224)).
4.36	Excerpts from concession contracts for energy generation Nos. 8, 9, 10, 11, 12, 13, 14, 15 and 16 between the Mining and Energy Ministry and CEMIG GT.
8	List of Subsidiaries (incorporated by reference to Exhibit 8 to our Annual Report on Form 20-F filed on May 25, 2005 (File No. 1-15224)).
11	Statement of Ethical Principles and Code of Professional Conduct (incorporated by reference to Exhibit 11 to our Form 20-F filed on May 17, 2022 (File No. 1-15224)).
12.1	Chief Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 30, 2024.
12.2	Chief Officer for Finance and Investor Relations Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 30, 2024.
13.1	Chief Executive Officer Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 30, 2024.
13.2	Chief Officer for Finance and Investor Relations Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 30, 2024.
97.1	Policy for the Recovery of Erroneously Awarded Compensation.
101.INS	Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)


ANNUAL REPORT AND FORM 20-F \| 2023	174

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

Date: April 30, 2024.


By:	/s/ Reynaldo Passanezi Filho


Name: Reynaldo Passanezi Filho
Title: Chief Executive Officer


By:	/s/ Leonardo George de Magalhães


Name: Leonardo George de Magalhães
Title: Chief Officer for Finance and Investor Relations


ANNUAL REPORT AND FORM 20-F \| 2023	175

    Index to Consolidated Financial Statements

   


Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements		F-2
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting		F-6
CONSOLIDATED STATEMENT OF FINANCIAL POSITION		F-8
CONSOLIDATED STATEMENT OF INCOME		F-10
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME		F-11
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY		F-12
CONSOLIDATED STATEMENT OF CASH FLOWS		F-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS		F-15
1.	OPERATING CONTEXT	F-15
2.	CONCESSIONS AND AUTHORIZATIONS	F-17
3.	BASIS OF PREPARATION	F-24
4.	PRINCIPLES OF CONSOLIDATION	F-26
5.	OPERATING SEGMENTS	F-27
6.	CASH AND CASH EQUIVALENTS	F-30
7.	MARKETABLE SECURITIES	F-31
8.	RECEIVABLES FROM CUSTOMERS	F-31
9.	RECOVERABLE TAXES	F-33
10.	INCOME AND SOCIAL CONTRIBUTION TAXES	F-35
11.	ESCROW DEPOSITS	F-40
12.	REIMBURSEMENT OF TARIFF SUBSIDIES	F-40
13.	CONCESSION FINANCIAL AND SECTOR ASSETS AND LIABILITIES	F-41
14.	CONCESSION CONTRACT ASSETS	F-47
15.	INVESTMENTS	F-51
16.	PROPERTY, PLANT AND EQUIPMENT	F-73
17.	INTANGIBLE ASSETS	F-76
18.	LEASING	F-79
19.	SUPPLIERS	F-82
20.	TAXES PAYABLE AND AMOUNTS TO BE REFUNDED TO CUSTOMERS	F-83
21.	LOANS AND DEBENTURES	F-84
22.	REGULATORY CHARGES	F-89
23.	ACCOUNTS PAYABLE RELATED TO ENERGY GENERATED BY CONSUMERS	F-90
24.	POST-EMPLOYMENT OBLIGATIONS	F-90
25.	PROVISIONS	F-98
26.	EQUITY AND REMUNERATION TO SHAREHOLDERS	F-106
27.	REVENUE	F-113
28.	OPERATING COSTS AND EXPENSES	F-119
29.	FINANCE INCOME AND EXPENSES	F-122
30.	RELATED PARTY TRANSACTIONS	F-123
31.	FINANCIAL INSTRUMENTS AND RISK MANAGEMENT	F-129
32.	ASSETS CLASSIFIED AS HELD FOR SALE	F-141
33.	COMMITMENTS	F-143
34.	PARLIAMENTARY COMMITTEE OF INQUIRY (‘CPI’)	F-143
35.	SUBSEQUENT EVENTS	F-143


ANNUAL REPORT AND FORM 20-F \| 2023	4

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Companhia Energética de Minas Gerais - CEMIG;

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statements of financial position of Companhia Energética de Minas Gerais – CEMIG and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the two‑year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two‑year period ended December 31, 2023, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 30, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Investments in the infrastructure of the energy distribution concession

As discussed in notes 13, 14 and 17 of the consolidated financial statements, the Company has R$ 1,881 million, R$ 3,431 million and R$ 12,099 million of concession financial assets, contract assets and intangible assets, respectively, as of December 31, 2023. These assets relate to investments in energy distribution infrastructure made as part of the Company’s energy distribution concession contracts. The Company recognizes expenditures on energy distribution infrastructure as a contract asset during the construction period when the Company believes that the grantor will subsequently accept those expenditures as eligible investments in the expansion of, or for improvements to, the


ANNUAL REPORT AND FORM 20-F \| 2023	F-2

infrastructure. When the infrastructure is brought in to use, the Company derecognizes the related contract asset and recognizes either an intangible asset or both an intangible asset and a financial asset. An intangible asset is recognized for the portion of the investment in infrastructure that is expected to be recovered through the tariffs paid by energy consumers. A financial asset, measured at fair value through profit or loss, is recognized for infrastructure that has an expected useful life (as defined by the grantor) greater than the remaining term of the concession contract and the Company estimates its fair value based on the amount expected to be received from the grantor in relation to that infrastructure at the end of the concession term. Periodically, the grantor assesses the expenditures on infrastructure made by the Company, formalizes its acceptance of those expenditures as investments for expansion / improvement of the infrastructure and determines its value for purposes of the tariff process. Subsequent to initial measurement, the Company estimates the fair value of the concession financial assets by making subjective adjustments to historic information related to the infrastructure – either the historic cost or the value for purposes of the tariff process determined by the grantor.

We identified the recognition of contract assets and the subsequent fair value measurement of concession financial assets relating to investments in the expansion of, and improvements to, the energy distribution infrastructure as a critical audit matter. During the construction phase, industry knowledge and auditor judgment was required to evaluate the Company’s assessment of the eligibility of certain expenditures to be recognized as investments in expansion / improvement of the energy distribution infrastructure due to the need to interpret regulatory requirements and decisions. Furthermore, subjective auditor judgment was required to assess the estimate of the fair value of the concession financial assets at the reporting date, specifically, in relation to the adjustments made by management to the historic information when determining the expected amount to be received from the grantor at the end of the concession term.

The following are the primary procedures we performed to address this critical audit matter.

- We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s energy distribution concession investments accounting process. This included controls related to the assessment of the eligibility of the expenditures as investments in expansion / improvement of the energy distribution infrastructure and to the estimate of the fair value of the concession financial assets.

- For a sample of additions to the contract asset that occurred during the year, we evaluated the reasonableness of management’s assessment of their eligibility by considering the regulatory requirements as well as expenditures previously accepted by the grantor as investments in expansion / improvement of the energy distribution infrastructure.

- We evaluated the Company’s ability to accurately estimate the expected amounts to be received from the grantor at the end of the concession terms by comparing the amounts determined by the grantor in the most recent periodic review with the Company’s estimates prior to that review.

- We assessed the reasonableness of the adjustments made by management to the historic information when determining the fair value of the concession financial assets at the reporting date by comparing them to industry practices and publicly available information.

-We checked the accuracy of the Company’s estimate of the fair value of the concession financial assets related to the energy concession infrastructure using information provided by management, including the historic information related to the infrastructure investments and the adjustments made to these.The following are the primary procedures we performed to address this critical audit matter.


ANNUAL REPORT AND FORM 20-F \| 2023	F-3

Measurement of the obligation for defined benefit pension plans and health plan

As discussed in Note 24 to the consolidated financial statements, the Company has post-employment obligations related to its defined benefit pension plans and post-employment health plan of R$ 2,357 million and R$ 3,007 million, respectively, as of December 31, 2023. The measurement of the obligation for the defined benefit pension plans and post-employment health plan is dependent, in part, on the selection of certain actuarial assumptions that require judgment, including: the discount rates; the life expectancy of participants (derived from morality tables); the estimated future salary increases; and the projected real growth of contributions. The Company hired external actuaries to assist with the process of determining the actuarial assumptions and calculating these post-employment obligations.

We identified the measurement of the post-employment obligations related to the Company’s defined benefit pension plans and post-employment health plan as a critical audit matter. Specialized skills and knowledge were required to evaluate the actuarial assumptions, specifically the discount rates, the life expectancy of participants, the estimated future salary increases and the projected real growth of contributions. Additionally, minor changes in the discount rates and the life expectancy of participants could have a significant impact on the measurement of the post-employment obligations.

The following are the primary procedures we performed to address this critical audit matter:

- We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s post-employment obligation measurement process, including controls related to the development of the actuarial assumptions, including the discount rates, the life expectancy of participants, the estimated future salary increases and the projected real growth of contributions.

- We assessed the scope of work, independence, competence, professional qualifications and experiences and objectivity of the external actuaries hired to assist with the measurement of the post-employment obligations.

- We involved actuarial specialists with specialized skills and knowledge, who assisted in evaluating the discount rates, the life expectancy of participants, the estimated future salary increases and the projected real growth of contributions by comparing them to data obtained from external sources.

/s/ KPMG Auditores Independentes Ltda.

We have served as the Company’s auditor since 2022.

Belo Horizonte, Minas Gerais, Brazil
April 30, 2024


ANNUAL REPORT AND FORM 20-F \| 2023	F-4

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of

Companhia Energética de Minas Gerais – CEMIG

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of income, comprehensive income, changes in equity and cash flows of Companhia Energética de Minas Gerais – CEMIG (the Company) for the year ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2021, in conformity with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

/s/ Ernst & Young Auditores Independentes S/S Ltda.

We have served as the Company‘s auditor from 2017 to 2021.

Belo Horizonte, Brazil

May 16, 2022


ANNUAL REPORT AND FORM 20-F \| 2023	F-5

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Companhia Energética de Minas Gerais – CEMIG;

Opinion on Internal Control Over Financial Reporting

We have audited Companhia Energética de Minas Gerais – CEMIG and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes collectively, the consolidated financial statements, and our report dated April 30, 2024, expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


ANNUAL REPORT AND FORM 20-F \| 2023	F-6

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG Auditores Independentes Ltda.

Belo Horizonte - Minas Gerais, Brazil
April 30, 2024


ANNUAL REPORT AND FORM 20-F \| 2023	F-7

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As of December 31, 2023 and 2022

Assets


(in millions of reais)	Note	2023		2022
CURRENT
Cash and cash equivalents	6		1,537		1,441
Marketable securities	7		774		1,745
Receivables from customers	8		5,434		4,769
Concession financial assets	13		814		1,055
Concession contract assets	14		850		728
Recoverable taxes	9		635		1,917
Income tax and social contribution tax credits	10a		411		775
Derivative financial instruments - Swap	31b		368		-
Dividends receivables	30		50		146
Public lighting contribution			261		207
Other assets			677		682

			11,811		13,465

Assets classified as held for sale			58		-

TOTAL CURRENT			11,869		13,465

NON-CURRENT

Marketable securities	7		-		134
Receivables from customers	8		43		43
Recoverable taxes	9		1,319		1,358
Income tax and social contribution tax recoverable	10a		445		173
Deferred income tax and social contribution tax	10c		3,045		3,120
Escrow deposits	11		1,243		1,207
Derivative financial instruments – Swap	31b		-		703
Accounts receivable from the State of Minas Gerais	30		13		13
Concession financial assets	13		5,726		4,938
Concession contract assets	14		7,676		5,976
Investments – Equity method	15		4,632		5,107
Property, plant and equipment	16		3,256		2,410
Intangible assets	17		15,249		14,621
Leasing – right-of-use assets	18a		398		329
Other assets			86		74

TOTAL NON-CURRENT			43,131		40,206

TOTAL ASSETS			55,000		53,671

The Notes are an integral part of these Consolidated Financial Statements.


ANNUAL REPORT AND FORM 20-F \| 2023	F-8

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As of December 31, 2023 and 2022

Liabilities- and Equity


(in millions of reais)	Note	2023			2022
CURRENT
Suppliers	19		3,017			2,832
Regulatory charges	22		487			510
Profit sharing			165			105
Taxes payable	20		644			544
Income tax and social contribution tax	10b		111			240
Interest on equity and dividends payable	26f		2,924			1,863
Loans and debentures	21		2,630			955
Payroll and related charges			239			260
Public lighting contribution			425			312
Accounts payable related to energy generated by residential consumers			705			455
Post-employment obligations	24		329			388
PIS/Pasep and Cofins taxes to be refunded to customers	20		854			1,496
Derivative financial instruments – Swaps	31b		-			91
Derivative financial instruments - Put options SAAG	31b		-			672
Lease liabilities	18b		79			57
Other liabilities			484			423

TOTAL CURRENT			13,093			11,203

NON-CURRENT
Regulatory charges	22		90			65
Loans and debentures	21		7,201			9,626
Taxes payable	20		362			370
Deferred income tax and social contribution tax	10c		1,112			932
Provisions	25		2,200			2,029
Post-employment obligations	24		5,088			5,304
PIS/Pasep and Cofins taxes to be refunded to customers	20		664			1,808
Lease liabilities	18b		354			297
Other liabilities			180			253

TOTAL NON-CURRENT			17,251			20,684

TOTAL LIABILITIES			30,344			31,887

EQUITY	26
Share capital			11,007			11,007
Capital reserves			2,250			2,250
Profit reserves			13,041			10,395
Other comprehensive Income			(1,648	)		(1,874	)

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT			24,650			21,778

NON-CONTROLLING INTERESTS			6			6

TOTAL EQUITY			24,656			21,784

TOTAL LIABILITIES AND EQUITY			55,000			53,671

The Notes are an integral part of these Consolidated Financial Statements.


ANNUAL REPORT AND FORM 20-F \| 2023	F-9

CONSOLIDATED STATEMENT OF INCOME

For the years ended December 31, 2023, 2022 and 2021


(in millions of reais, except earnings per share)	Note	2023			2022			2021
REVENUE	27		36,850			34,463			33,646

COSTS
Cost of energy and gas	28a		(19,822	)		(20,020	)		(21,449	)
Infrastructure construction cost	28b		(4,072	)		(3,536	)		(2,036	)
Costs of operation	28c		(4,572	)		(4,095	)		(3,438	)

			(28,466	)		(27,651	)		(26,923	)


GROSS PROFIT			8,384			6,812			6,723


EXPENSES	28c
Expected credit losses			(175	)		(109	)		(144	)
General and administrative expenses			(707	)		(789	)		(572	)
Other expenses, net			(713	)		(1,076	)		(489	)

			(1,595	)		(1,974	)		(1,205	)

Periodic tariff review, net			-			-			215
Renegotiation of hydrological risk (Law 14,052/20), net			-			-			1,032
Bargain purchase	15		-			5			4
Fair value adjustments of investments	15		9			-			-
Share of profit, net, of affiliates, subsidiaries and joint ventures	16		432			843			182

Income before financial revenue (expenses) and taxes			7,230			5,686			6,951

Finance income	29		1,272			1,500			844
Finance expenses	29		(1,651	)		(3,066	)		(3,096	)

			(379	)		(1,566	)		(2,252	)


Income before income tax and social contribution tax			6,851			4,120			4,699

Current income tax and social contribution tax	10d		(943	)		(950	)		(1,156	)
Deferred income tax and social contribution tax	10d		(141	)		924			210

			(1,084	)		(26	)		(946	)

NET INCOME FOR THE YEAR			5,767			4,094			3,753
Total of net income for the year attributed to:
Equity holders of the parent			5,764			4,092			3,751
Non-controlling interests			3			2			2

			5,767			4,094			3,753

Basic and diluted earnings per preferred share – R$	26		2.62			1.86			1.70
Basic and diluted earnings per common share – R$	26		2.62			1.86			1.70

The Notes are an integral part of these Consolidated Financial Statements.


ANNUAL REPORT AND FORM 20-F \| 2023	F-10

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the years ended December 31, 2023, 2022 and 2021


(in millions of reais)	2023			2022			2021
NET INCOME FOR THE YEAR		5,767			4,094			3,753

OTHER COMPREHENSIVE INCOME
Items not to be reclassified to profit or loss in subsequent periods
Post retirement liabilities – remeasurement of obligations of the defined benefit plans		351			697			301
Income tax and social contribution tax on remeasurement of defined benefit plans		(119	)		(237	)		(102	)
Other		-			1			-

		232			461			199


COMPREHENSIVE INCOME FOR THE YEAR		5,999			4,555			3,952


Total of comprehensive income for the year attributed to:
Equity holders of the parent		5,996			4,553			3,950
Non-controlling interests		3			2			2

		5,999			4,555			3,952

The Notes are an integral part of these Consolidated Financial Statements.


ANNUAL REPORT AND FORM 20-F \| 2023	F-11

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the years ended December 31, 2023, 2022 and 2021


(in millions of reais, except where otherwise indicated)	Share capital		Capital reserves		Profit reserves			Equity valuation adjustments			Retained earnings			Equity attributable to equity holders of the parent			Non-controlling interests			Total Equity
AS OF DECEMBER 31, 2022		11,007		2,250		10,395			(1,874	)		—			21,778			6			21,784

Net income for the year		-		-		-			-			5,764			5,764			3			5,767
Adjustment of actuarial liabilities – restatement of obligations of the defined benefit plans, net of taxes		-		-		-			232			-			232			-			232
Other comprehensive income
Realization of PP&E deemed cost		-		-		-			(6	)		6			-			-			-
Tax incentives reserve (Note 26)		-		-		63			-			(63	)		-			-			-
Legal reserve (Note 26)		-		-		288			-			(288	)		-			-			-
Retained earnings reserve (Note 26)		-		-		2,295			-			(2,295	)		-			-			-
Reversal of unrealized Earnings Reserve		-		-		(835	)		-			-			(835	)		-			(835	)
Constitution of unrealized Earnings Reserve		-		-		835			-			-			835			-			835
Proposed dividends		-		-		-			-			(3,124	)		(3,124	)		-			(3,124	)
Non-controlling Interests		-		-		-			-			-			-			(3	)		(3	)

AS OF DECEMBER 31, 2023		11,007		2,250		13,041			(1,648	)		-			24,650			6			24,656


	Share capital		Capital reserves		Profit reserves			Equity valuation adjustments			Retained earnings			Equity attributable to equity holders of the parent			Non-controlling interests			Total Equity
AS OF DECEMBER 31, 2021		8,467		2,250		10,948			(2,208	)		-			19,457			5			19,462

Subscription of capital		2,540		-		(2,540	)		-			-			-			-			-
Net income for the year		-		-		-			-			4,092			4,092			2			4,094
Other comprehensive income		-		-		-			461			-			461			(1	)		460
Realization of PP&E deemed cost		-		-		-			(127	)		127			-			-			-
Tax incentives reserve		-		-		26			-			(26	)		-			-			-
Legal reserve (Note 26)		-		-		205			-			(205	)		-			-			-
Retained earnings reserve (Note 26)		-		-		1,756			-			(1,756	)		-			-			-
Proposed dividends		-		-		-			-			(2,232	)		(2,232	)		-			(2,232	)

AS OF DECEMBER 31, 2022		11,007		2,250		10,395			(1,874	)		-			21,778			6			21,784


	Share capital		Capital reserves		Profit reserves			Equity valuation adjustments			Retained earnings			Equity attributable to equity holders of the parent			Non-controlling interests			Total Equity
AS OF DECEMBER 31, 2020		7,594		2,250		10,061			(2,431	)		-			17,474			4			17,478

Subscription of capital		873		-		(873	)		-			-			-			-			-
Net income for the year		-		-		-			-			3,751			3,751			2			3,753
Other comprehensive income		-		-		-			199			-			199			-			199
Actuarial losses reclassified (Note 26c)		-		-		-			39			(39	)		-			-			-
Realization of PP&E deemed cost		-		-		-			(15	)		15			-			-			-
Tax incentives reserve		-		-		21			-			(21	)		-			-			-
Legal reserve (Note 26)		-		-		187			-			(187	)		-			-			-
Retained earnings reserve (Note 26)		-		-		1,552			-			(1,552	)		-			-			-
Proposed dividends		-		-		-			-			(1,967	)		(1,967	)		-			(1,967	)
Non-controlling Interests		-		-		-			-			-			-			(1	)		(1	)

AS OF DECEMBER 31, 2021		8,467		2,250		10,948			(2,208	)		-			19,457			5			19,462

The Notes are an integral part of these Consolidated Financial Statements.


ANNUAL REPORT AND FORM 20-F \| 2023	F-12

CONSOLIDATED STATEMENT OF CASH FLOWS

For the years ended December 31, 2023, 2022 and 2021


(in millions of reais)	Note	2023			2022			2021
CASH FLOW FROM OPERATIONS
Net income for the year			5,767			4,094			3,753
Adjustments to reconcile net income to net cash flows:
Deferred income tax and social contribution tax	10		1,084			26			(210	)
Depreciation and amortization	28		1,274			1,182			1,049
Loss on write-off of net residual value of unrecoverable concession financial assets, concessional contract asset, PP&E and Intangible assets			97			74			47
Fair value adjustment of financial assets			-			172			-
Renegotiation of hydrological risk costs (Law 14,052/20), net	18		-			-			(1,032	)
Write off related to contractual securities	14		(8	)		1			11
Bargain purchase			-			(5	)		(4	)
Discount and premium on repurchase of debt securities			-			47			491
Share of loss (gain), net, of subsidiaries and joint ventures	15		(432	)		(843	)		(182	)
Remeasuring of concession financial and concession contract assets			(1,246	)		(1,245	)		(1,306	)
Periodic Tariff Review adjustments			-			-			(237	)
Interest and monetary variation	29		676			493			1,381
Exchange variation on loans, financing and debentures	29		(277	)		(338	)		353
Reimbursement of PIS/Pasep and Cofins over ICMS credits to customers – Realization			(1,909	)		(2,360	)		(1,317	)
Gain on sale of non-current asset held for sale			(319	)		(52	)		(109	)
Transaction costs	22		14			7			20
Expected credit losses	28		175			109			-
Provision for contingencies	25		360			342			375
Other provisions			59			(18	)		-
Net gain on derivative instruments at fair value through profit or loss	31		177			438			538
CVA (Parcel A items Compensation) Account and Other financial components in tariff adjustments	14		213			1,147			(2,146	)
Post-employment obligations	24		611			666			86
Other			(46	)		130			(24	)

			6,270			4,067			1,537
Increase (decrease) in assets
Receivables from customers	8		(839	)		(440	)		(90	)
CVA and Other financial components in tariff adjustments	14		-			191			15
Recoverable taxes	9		175			2,490			1,668
Income tax and social contribution tax credits	10		6			149			(555	)
Escrow deposits	12		45			31			(70	)
Dividends received from investees			592			708			499
Contractual assets and concession financial assets	14		905			620			713
Other			154			87			(267	)

			1,038			3,836			1,913


ANNUAL REPORT AND FORM 20-F \| 2023	F-13


Increase (decrease) in liabilities
Suppliers	20	185		149		325
Taxes payable	21	778		408		5
Income tax and social contribution tax payable	10	-		50		1,206
Payroll and related charges		(21	)	35		12
Regulatory charges	22	2		(240	)	78
Post-employment obligations	24	(535	)	(482	)	(422	)
PIS/Pasep and Cofins over ICMS credits to customers		249		219		-
Other		(40	)	(200	)	101

		618		(61	)	1,305

Cash generated by operating activities		7,926		7,842		4,755

Interest received		328		291		-
Interest paid on loans, financing and debentures	19	(1,026	)	(1,010	)	(1,589	)
Interest paid on lease contracts		(5	)	(4	)	(3	)
Income tax and social contribution tax paid	31	(601	)	(704	)	(500	)
Cash inflows from settlement of derivatives instruments		24		129		1,022

NET CASH FLOWS FROM OPERATING ACTIVITIES		6,646		6,544		3,685


INVESTING ACTIVITIES
Investments in marketable securities		(11,238	)	(14,152	)	-
Redemptions in marketable securities		12,360		14,420		2,047
Restricted cash		-		-		43
Acquisition of equity investees		(37	)	(52	)	(56	)
Arising from the sale of equity interest, net of costs of sales		669		52		1,367
Settlement of put option		(780	)	-		-
Acquisition of property, plant and equipment	17	(1,076	)	(173	)	(182	)
Acquisition of intangible assets	18	(188	)	(119	)	(51	)
Contract assets – distribution of gas and energy infrastructure	15	(3,679	)	(3,112	)	(1,798	)

NET CASH PROVIDE BY/ USED IN INVESTING ACTIVITIES		(3,969	)	(3,136	)	1,370

FINANCING ACTIVITIES
Proceeds from loans and debentures	22	1,988		1,981		13
Interest on capital and dividends paid		(1,823	)	(2,094	)	(1,416	)
Payment of loans and debentures	22	(2,679	)	(2,613	)	(4,437	)
Leasing liabilities paid	19	(67	)	(66	)	(70	)

NET CASH FLOWS USED IN FINANCING ACTIVITIES		(2,581	)	(2,792	)	(5,910	)


NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS FOR THE YEAR		96		616		(855	)

Cash and cash equivalents at the beginning of the year	6	1,441		825		1,680
Cash and cash equivalents at the end of the year	6	1,537		1,441		825

The Notes are an integral part of these Consolidated Financial Statements.


ANNUAL REPORT AND FORM 20-F \| 2023	F-14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2023 and 2022 and for the years ended on December 31, 2023, 2022 and 2021

(in millions of reais - R$ MN - except where otherwise indicated)

OPERATING CONTEXT

The Company

Companhia Energética de Minas Gerais (‘CEMIG’, 'Group', or ‘Company’) is a listed corporation registered in the Brazilian Registry of Corporate Taxpayers (‘CNPJ’) under No. 17.155.730/0001-64, with shares traded on the São Paulo Stock Exchange (‘B3’) at Corporate Governance Level 1; on the New York Stock Exchange (‘NYSE’); and on the stock exchange of Madrid (‘Latibex’).

The Company is an entity domiciled in Brazil, with head office in Belo Horizonte/MG. Constituted to operate in the commercialization of electric power and as holding company, with interests in subsidiaries or jointly controlled entities, whose objects are: construction and operation of systems for generation, transformation, transmission, distribution and sale of energy, and also activities in the various fields of energy sector, including gas distribution, provision of distributed generation services and energy efficiency solutions, for the purpose of commercial operation.

The Company's financial statements comprise the Company and its subsidiaries.

On December 31, 2023 the Company had negative consolidated working capital (as defined as consolidated current assets less consolidated current liabilities) of R$1,249. Management monitors the Company’s cash flow, and for this purpose assesses measures to be taken the Company's management monitors its cash flow and, in this regard, assesses measures aimed at aligning its current financial position with levels deemed appropriate to meet its needs.

The Company estimates that the cash balances, and cash flow from operations and financing activities, are sufficient to meet the needs for working capital, investments, debt servicing, and other cash needs in the next 12 months. The Company also has existing credit lines at the financial institutions with which it operates.

Management has assessed the capacity of the Company to continue as a going concern and believes that its operations will generate sufficient future cash flows to enable continuity of its businesses. In addition, Management is not aware of any material uncertainties that could generate significant doubts about its ability to continue as a going concern. Therefore, these financial statements have been prepared on a going concern basis.

Shareholding interests

CEMIG holds equity interests in the following subsidiaries, jointly controlled entities and affiliates, all of which principal activities are construction and operation of systems of generation, distribution and sale of energy and gas:


Investments	% share	Description
Subsidiaries
Cemig Geração e Transmissão S.A. (“Cemig GT” ou “Cemig Geração e Transmissão”)	100.00	Subsidiary engaged in the energy generation and transmission services. Its shares are listed in Brazil, but are not actively traded. CEMIG GT has interests in 68 power plants (60 of which are hydroelectric, 7 are wind power and 1 is solar) and associated transmission lines, most of which are part of the Brazilian national generation and transmission grid system, with total installed generation capacity of 5,517 MW.
Cemig Baguari Energia S.A. (“Cemig Baguari“)	100.00	Production and commercialization of electricity under an independent production regime and participation in other companies or consortia whose purpose is the production and commercialization of electricity in future projects.
Cemig Geração Itutinga S.A (“Cemig Geração Itutinga”)	100.00	A public limited company, a wholly-owned subsidiary of the Company, its purpose is to produce and sell electricity, as a public service concessionaire, through the operation of the Itutinga Power Station, as well as to sell electricity on the free trading market.
Cemig Geração Camargos S.A (“Cemig Geração Camargos”)	100.00	A public limited company, a wholly-owned subsidiary of the Company, its purpose is to produce and sell electricity, as a public service concessionaire, through the operation of the Camargos Power Station, as well as to sell electricity on the free trading market.


ANNUAL REPORT AND FORM 20-F \| 2023	F-15


Investments	% share	Description
Cemig Geração Sul S.A (“Cemig Geração Sul”)	100.00	A public limited company, a wholly-owned subsidiary of the Company, its purpose is to produce and sell electricity, as a public service concessionaire, through the operation of the Coronel Domiciano, Marmelos, Joasal, Paciência and Piau SHPs, as well as to sell electricity on the free trading market.
Cemig Geração Leste S.A (“Cemig Geração Leste”)	100.00	A corporation, a wholly-owned subsidiary of the Company, its purpose is to produce and sell electricity, as a public service concessionaire, through the operation of the Dona Rita, Sinceridade, Neblina, Ervália, Tronqueiras and Peti SHPs, as well as to sell electricity on the free trading market.
Cemig Geração Oeste S.A (“Cemig Geração Oeste”)	100.00	A public limited company, a wholly-owned subsidiary of the Company, its purpose is to produce and sell electricity, as a public service concessionaire, through the operation of the Gafanhoto, Cajuru and Martins SHPs, as well as to sell electricity on the free trading market.
Rosal Energia S.A. (“Rosal”)	100.00	Production and sale of electricity, as a public electricity service concessionaire, through the Rosal Hydroelectric Power Plant, located on the border between the states of Rio de Janeiro and Espírito Santo.
Sá Carvalho S.A. (“Sá Carvalho”)	100.00	Production and sale of electricity, as a public electricity service concessionaire, through the Sá Carvalho Hydroelectric Power Plant, located on the Piracicaba River, in the municipality of Antônio Dias, in the state of Minas Gerais.
Horizontes Energia S.A. (“Horizontes”)	100.00	Generation and sale of electricity, under an independent production regime, through the Machado Mineiro and Salto do Paraopeba Hydroelectric Power Plants, located in the state of Minas Gerais, and Salto Voltão and Salto do Passo Velho, located in the state of Santa Catarina, in addition to the sale of electricity at the Electricity Trading Chamber ("CCEE").
Cemig PCH S.A. (“Cemig PCH”)	100.00	Production and sale of electricity under an independent production regime, through the Pai Joaquim Hydroelectric Power Plant, located on the Araguari River, in the municipalities of Sacramento and Santa Juliana, in the state of Minas Gerais.
Cemig Trading S.A. (“Cemig Trading”)	100.00	Marketing and intermediation of energy-related business.
Empresa de Serviços e Comercialização de Energia Elétrica S.A. (“ESCEE”)	100.00	Marketing and intermediation of energy-related business.
Cemig Geração Poço Fundo S.A. (“Poço Fundo”)	100.00	Production and sale of electricity, under an independent production regime, through the Poço Fundo hydroelectric plant, located on the Machado River, in the municipality of Poço Fundo, in the state of Minas Gerais.
Central Eólica Praias de Parajuru S.A. (“Central Eólica Praias de Parajuru”)	100.00	Generation and sale of electricity through a wind farm located in the municipality of Beberibe, in the state of Ceará. It has 19 wind turbines, with towers 85 m high. All its energy is sold through Proinfa.
Central Eólica Volta do Rio S.A. (“Central Eólica Volta do Rio”)	100.00	Generation and sale of electricity through the wind farm located in the municipality of Acaraú, in the state of Ceará. It has 28 wind turbines with 65-meter-high towers. All its energy is sold through Proinfa.
Cemig Distribuição S.A. (“Cemig D” ou “Cemig Distribuição”)	100.00	Operation of electricity distribution through networks and distribution lines in practically the entire state of Minas Gerais.
Companhia de Gás de Minas Gerais (“Gasmig”)	100.00	Acquisition, transportation and distribution of fuel gas or by-products and derivatives, through a gas distribution concession in the state of Minas Gerais.
Cemig Sim	100.00	A wholly owned subsidiary of CEMIG that operates in distributed generation and energy solutions, with investments in the acquisition of photovoltaic plants. Currently CEMIG SIM has reached 14,000 customers, providing energy efficiency, optimization and solution services, through studies and project execution, as well as operation and maintenance services for energy supply facilities.
Companhia de Transmissão Centroeste de Minas (“Centroeste”)	100.00	Construction, implementation, operation and maintenance of electricity transmission facilities in the National Interconnected System.
Sete Lagoas Transmissora de Energia S.A. (“Sete Lagoas”)	100.00	Operation of public electricity transmission service concessions, provided through the construction, operation and maintenance of electricity transmission facilities at the Sete Lagoas 4 Substation, in the municipality of Sete Lagoas, Minas Gerais.
Photovoltaic power plants (1)	100.00	Photovoltaic solar power generation for the distributed generation market.
Jointly Controlled Entities
Guanhães Energia S.A. (“Guanhães Energia”)	49.00	Production and sale of electricity through the implementation and operation of the Dores de Guanhães; Senhora do Porto; and Jacaré Small Hydroelectric Power Plants, located in the municipality of Dores de Guanhães; and Fortuna II, located in the municipality of Virginópolis. All in the state of Minas Gerais.
Paracambi Energética S.A. ("Paracambi")	49.00	Independent production of electricity, through the implementation and exploitation of the hydraulic potential called PCH Paracambi, located on the Ribeirão das Lages river in the municipality of Paracambi/RJ.
Usina Hidrelétrica Itaocara S.A. (“Itaocara”)	49.00	The UHE Itaocara Consortium, formed by Cemig GT and Itaocara Energia (Light Group), is responsible for building the Itaocara I Hydroelectric Power Plant (UHE Itaocara I).
Hidrelétrica Cachoeirão S.A. (“Cachoeirão”)	49.00	Production and sale of electricity, under an independent production regime, through the Cachoeirão Hydroelectric Power Plant, located in Pocrane/MG.


ANNUAL REPORT AND FORM 20-F \| 2023	F-16


Investments	% share	Description
Hidrelétrica Pipoca S.A. (“Pipoca”)	49.00	Independent production of electricity, through the implementation and exploitation of the hydraulic potential called PCH Pipoca, located on the Manhuaçu River, in the municipalities of Caratinga and Ipanema/MG.
Amazônia Energia Participações S.A (“Amazônia Energia”)	74.50	Special-purpose company (SPE), created by the Company, which holds a 74.50% stake, and Light, which holds the remaining 25.50%, for the purpose of acquiring a 9.77% stake in Norte Energia S.A. ("NESA"), the company that holds the concession for the Belo Monte Hydroelectric Power Plant ("Belo Monte HPP"), on the Xingu River, located in the state of Pará.
Aliança Norte Energia Participações S.A. (“Aliança Norte”)	49.00	Special-purpose company (SPE), set up by the Company, which holds a 49.00% stake, and Vale S.A., which holds the remaining 51.00%, for the purpose of acquiring a 9.00% stake in Norte Energia S.A. ("NESA"), the company that holds the concession for the Belo Monte Hydroelectric Power Plant ("Belo Monte HPP"), on the Xingu River, located in the state of Pará.
Aliança Geração de Energia S.A. (“Aliança”)	45.00	Private limited company created by the Company and Vale S.A. to become a platform for consolidating generation assets held by the parties in generation consortia and investments in future electricity generation projects. Vale S.A. and the Company hold 55.00% and 45.00% of the total capital, respectively.
Transmissora Aliança de Energia Elétrica S.A. (“Taesa”)	21.68	Construction, implementation, operation and maintenance of electricity transmission facilities in all regions of the country, directly and through participation in investees.
FV Janaúba Geração de Energia Elétrica Distribuída SA UFV Corinto Geração de Energia Elétrica Distribuída SA UFV Manga Geração de Energia Elétrica Distribuída SA UFV Bonfinópolis II Geração de Energia Elétrica Distribuída SA UFV Lagoa Grande Geração de Energia Elétrica Distribuída SA, UFV Lontra Geração de Energia Elétrica Distribuída SA, UFV Mato Verde Geração de Energia Elétrica Distribuída SA, UFV Mirabela Geração de Energia Elétrica Distribuída SA, UFV Porteirinha Geração de Energia Elétrica Distribuída SA, UFV Porteirinha II Geração de Energia Elétrica Distribuída SA e UFV Brasilândia Geração de Energia Elétrica Distribuída S.A. Apolo I Empreendimentos e Energia S.A. G2 Campo Lindo I Energia S.A. G2 Campo Lindo II Energia S.A. G2 Olaria I Energia S.A. UFV Fazenda Prudente SPE LTDA	49.00	Photovoltaic solar power generation for the distributed generation market.

CONCESSIONS AND AUTHORIZATIONS

CEMIG, through its subsidiaries, holds the following public service concessions and authorizations:


	Company holding concession or authorization	Concession or authorization contract	Expiration date
POWER GENERATION

Hydroelectric plants
Theodomiro Carneiro Santiago (1) (5) (7)	Cemig GT	07/1997	05/2027
Nova Ponte (1) (7)	Cemig GT	07/1997	08/2027
Santa Luzia (1)	Cemig GT	07/1997	02/2026
Sá Carvalho (1) (8)	Sá Carvalho	01/2004	08/2026
Rosal (1)	Rosal Energia	01/1997	12/2035


ANNUAL REPORT AND FORM 20-F \| 2023	F-17


	Company holding concession or authorization	Concession or authorization contract	Expiration date
Machado Mineiro (1) (10) Salto Voltão (1) (6) Salto Paraopeba (1) (6) Salto do Passo Velho (1) (6)	Horizontes Energia	Resolution 331/2002	05/2027 06/2033 10/2030 03/2031
PCH Pai Joaquim (1)	Cemig PCH S.A. (“Cemig PCH”)	Authorizing Resolution 377/2005	04/2032
Irapé (1)	Cemig GT	14/2000	09/2037
Queimado (Consortium) (1)	Cemig GT	06/1997	06/2034
Rio de Pedras (1) (6)	Cemig GT	02/2013	12/2025
Poço Fundo (1)	Cemig Geração Poço Fundo S.A. (“Cemig Geração Poço Fundo”)	01/2021	05/2052
São Bernardo (1) (6)	Cemig GT	02/2013	06/2027
Três Marias (2) (9)	Cemig Geração Três Marias S.A. (“Cemig Geração Três Marias”)	08/2016	01/2053
Salto Grande (2) (9)	Cemig Geração Salto Grande S.A. (“Cemig Geração Salto Grande”)	09/2016	01/2053
Itutinga (2)	Cemig Geração Itutinga S.A. (“Cemig Geração Itutinga”)	10/2016	01/2053
Camargos (2)	Cemig Geração Camargos S.A. (“Cemig Geração Camargos”)	11/2016	01/2053
Coronel Domiciano (2) Joasal, Marmelos, Paciência and Piau (2)	Cemig Geração Sul S.A. (“Cemig Geração Sul”)	12/2016 and 13/2016	04/2047 01/2053
Dona Rita (2) Ervália (2) Neblina (2) Peti (2) Sinceridade (2) Tronqueiras (2)	Cemig Geração Leste S.A. (“Cemig Geração Leste”)	14/2016 and 15/2016	07/2050 04/2047 01/2053 03/2047 12/2046
Cajurú, Gafanhoto and Martins (2)	Cemig Geração Oeste S.A. (“Cemig Geração Oeste”)	16/2016	01/2053

Wind power plants
Central Geradora Eólica Praias de Parajuru (3)	Central Eólica Praias de Parajuru (“Parajuru”)	Resolution 526/2002	09/2032
Central Geradora Eólica Volta do Rio (3)	Central Eólica Volta do Rio (“Volta do Rio”)	Resolution 660/2001	01/2031

Photovoltaic power plants
UFV Mineirão	Cemig GT	-	-


POWER TRANSMISSION
National grid (4)	Cemig GT	006/1997	01/2043
Itajubá Substation (4)	Cemig GT	79/2000	10/2030
Furnas - Pimenta - Transmission line (4)	Companhia de Transmissão Centroeste de Minas S.A. (“Centroeste”)	004/2005	03/2035
Subestação Sete Lagoas 4 (4)	Sete Lagoas	006/2011	06/2041

ENERGY DISTRIBUTION	Cemig D	002/1997 003/1997 004/1997 005/1997	12/2045

GAS DISTRIBUTION	Gasmig	State Law 11,021/1993	01/2053


ANNUAL REPORT AND FORM 20-F \| 2023	F-18

(1)

Refer to power generation concession agreements that are not in the scope of IFRIC 12, whose infrastructure assets are recorded as property, plant and equipment since the grantor does not control to whom the services should be provided and their price, and their energy is mainly sold in the Free Contracting Environment (‘ACL’).

(2)

Refers to energy generation concession contracts whose concession bonus revenue is classified as financial assets of the concession.

(3)

Refer to concessions, by means of authorization, of wind power generation in the independent production modality, commercialized in the scope of Proinfa. The assets linked to the exploration right are registered in fixed assets. The exploration authorization rights, which are considered in the parent company's financial statements as investments, are classified in the consolidated balance sheet as intangible assets.

(4)

These refer to power transmission concession agreements which, in accordance with IFRS 15, are classified as contract assets as they are subject to the satisfaction of performance obligations in the provision of the electric energy transmission service.

(5)

On March 17, 2023, ANEEL Order 738 was published, registering the change of name of the Emborcação HPP to Theodomiro Carneiro Santiago HPP.

(6)

On August 10, 2023, the Company held a public auction for the sale in a single lot of 15 SHPPs/CGHs, 12 of which are Cemig GT assets and 3 of which are owned by the wholly owned subsidiary Horizontes. On January 10, 2024, ANEEL transferred the ownership of the authorization grants for the exploration of the Salto Voltão, Salto do Passo Velho and Salto do Paraopeba SHPs, from Horizontes to Mang, through Order 62. On February 6, 2024, ANEEL authorized the transfer of the concessions of the Rio de Pedras and São Bernardo SHPs from Cemig GT to Mang Participações, through REA 15,094. On 29 February 2024, the divestment was completed, after all conditions precedent of the VCA had been fulfilled. Further details can be found in note 32: Assets classified as held for sale.

(7)

In July 2023, the Company reaffirmed its interest in extending the concessions for the Theodomiro Carneiro Santiago and Nova Ponte HPPs under the Physical Guarantee Quota regime, and in November 2023, it filed its expression of interest in extending these concessions by transferring control of the plants.

(8)

In February 2023, in order to guarantee its right to apply for a new concession, the Company filed its expression of interest in extending the concession of the Sá Carvalho HPP, through the transfer of shareholder control of its wholly-owned subsidiary Sá Carvalho, and, in July 2023, through the Physical Guarantee Quota regime.

(9)

On January 24, 2023, ANEEL decided to approve the transfer of the concessions for the Três Marias and Salto Grande hydroelectric plants to Cemig GT. On May 31, 2023, the merger was approved at the Company's Extraordinary General Meeting - AGE, at book value, with the consequent extinction of the investees as of May 31, 2023.

(10)

On February 20, 2024, ANEEL transferred the authorization of the Machado Mineiro SHP from Horizontes Energia S.A. (Horizontes Energia) to Cemig GT, through Order 504/2024.


ANNUAL REPORT AND FORM 20-F \| 2023	F-19

Generation concessions

In the Generation business, the Company earns revenue from the sale of energy from its plants in the regulated market (ACR) and in the free market (ACL). While in the regulated environment the transactions occur by means of centralized and public auctions, in the free environment the negotiations are bilateral and reserved to the interested parties.

There is also revenue from the spot market, which remunerates agents for de-contracted energy, which is settled at the Spot Price (PLD).

Statement of interest in extension of concession

To guarantee its right to request a new grant of concessions for plants whose current concessions terminate in 2026 and 2027, Cemig GT filed Statements of Interest in relation to extension of the concession of the Sá Carvalho hydroelectric plant: (a) through transfer of stockholding control of its wholly-owned subsidiary Sá Carvalho, as per Decree 9271/2018, in February 2023; and (b) in July 2023, under the regime of Physical Guarantee Quotas as per Law 12783/2013.

Cemig GT reiterates that the sole objective of these statements of interest is to ensure its right to a potential extension of Concession Contract 01/2004, for up to 30 years, at the option of the concession-granting power, in accordance with the legislation – which still contains some matters of condition yet to be decided by the Mining and Energy Ministry.

Additionally, in the correspondence sent to the Mining and Energy Ministry and to ANEEL in July 2023, the Cemig GT reaffirmed its interest in extension, under the Physical Guarantee Quotas regime, of the concessions of the Emborcação and Nova Ponte hydroelectric plants (Concession Contract 07/1997).

Cemig GT emphasizes that this statement of interest is of a non-binding nature, its objective being to ensure that it has the right to any extension of Concession Contract 01/2004, and to reaffirm the same interest in Concession Contract 07/1997. Any decision on the subject will only take place after publication by the Brazilian Mining and Energy Ministry and by the Brazilian electricity regulator, ANEEL, of all the conditions for extension of the concessions, which will be submitted to decision by Cemig’s governance bodies.

Cemig GT further clarifies that this statement of interest will not suspend analysis of any legal alternatives which may be in progress for the extension of the concessions in question.

Transmission concessions

Under the transmission concession contracts, the Company, through its subsidiaries, is authorized to charge a Tariff for use of the Transmission System (Tarifa de Uso do Sistema de Transmissão, or ‘TUST’). Tariffs are adjusted annually on the same date the Permitted Annual Revenue (Receitas Anuais Permitidas, or RAP) of transmission concessions contracts is adjusted. This tariff is in effect from July 1 of each year, upon its publication, until June 30 of the subsequent year.

The payment for use of transmission service also applies to generation provided by the Itaipu Binacional. However, due to the legal characteristics of that plant, the corresponding charges are assumed by the holders of distribution concessions that hold quotas of its output.

Transmission Auction 02/2022

The Cemig GT won the auction for Lot 1 of ANEEL Transmission Auction 2/2022, held on December 16, 2022: the contract for the new 165-kilometer 230kV Governador Valadares 6 - Verona high voltage transmission line. The Company’s bid was for RAP of approximately R$17 million. The deadline for start of operation is March 30, 2028, and the concession is for 30 years.


ANNUAL REPORT AND FORM 20-F \| 2023	F-20

On April 13, 2023 the Board of Directors approved transfer of funds totaling R$222 by the Cemig GT into the investee Centroeste over the period from March 2023 to June 2026, depending on the needs and cash generation of Centroeste. The objective is construction of the 230 kV Governador Valadares 6 – Verona transmission line, which will be operated by Centroeste. The expected start date for construction is January, 2025.

Electricity power distribution concessions

The CEMIG D (wholly owned subsidiary) operates the concession for the distribution of energy in the greater part of the State of Minas Gerais, which expires in December 2045.

According to the concession contract, all assets and facilities that are used in the provision of the distribution service and which have been constructed by the concession holder are considered revertible and part of the assets of the related concession. These assets are automatically reverted to the Grantor at the end of the contract and are then valued to determine the amount of the indemnity payable to CEMIG D, subject to the amounts and the dates on which they were incorporated into the energy system.

CEMIG D does not have obligations to make compensatory payments for commercial operation of the distribution concessions but has to comply with requirements related to quality, and investments made, in accordance with the concession contract.

The concession contracts and the Brazilian legislation establish a mechanism of maximum prices that allows for three types of adjustments to tariffs: (i) an annual tariff adjustment; (ii) periodic review of tariffs; and (iii) extraordinary reviews.

Each year the CEMIG D has the right to request for the annual adjustment, the purpose of which is to be compensated the effects of inflation on the tariffs, and to allow for certain changes in costs that are outside the CEMIG D’s control to be passed through to customers - for example the cost of energy purchased for resale and sector charges including charges for the use of the transmission and distribution facilities.

Also, the grantor performs a periodic review of tariffs every five years, which aims to adjust due to changes in the CEMIG D’s costs, and to establish a factor based on scale gains, which will be applied in the annual tariff adjustments, for the purpose of sharing such gains with the CEMIG D’s customers.

The CEMIG D also has the right to request an extraordinary review of tariffs in the event that any unforeseen development significantly affects the economic-financial equilibrium of the concession. The Periodic Review and the Extraordinary Review are subject, to a certain degree, to the discretion of the grantor, although there are pre-established provisions for each revision cycle.

Under the distribution concession contracts, the CEMIG D is authorized to charge customers a tariff consisting of two components: (i) A component related to costs of energy purchased for resale, charges for use of the transmission grid and charges for use of the distribution system that are not under its control (‘Parcel A costs’); and (ii) a portion relating to operating costs (‘Parcel B costs’).

Fifth Amendment to concession contract

On December 21, 2015, the Company signed, with the Mining and Energy Ministry, the Fifth Amendment to its concession contracts, extending its energy distribution concessions for an additional 30 years, starting January 1, 2016.

The principal characteristics and terms of the Amendment are as follows:

•

The annual tariff adjustment will occur on May 28 of each year, according the rules set for in Clause 6 of the Amendment will be applied.

•

Limitation of in the distribution of dividends and/or payment of Interest on Equity to the minimum established by law, in the event of non-compliance with the annual indicators for outages (DECi and FECi) for two consecutive years, or three times in a period of five years, until the regulatory parameters are restored.


ANNUAL REPORT AND FORM 20-F \| 2023	F-21

•

There is a requirement for injections of capital from the controlling shareholder in an amount sufficient to meet the minimum conditions for economic and financial sustainability.

•

The requirement of compliance with efficiency criteria related to the continuity of supply and economic and financial management to maintain the concession, respecting the right to full defense and the adversary in case of non-compliance, being that any non-compliance for three consecutive years for the criteria of efficiency in the continuity of supply and two consecutive years for the criteria of efficiency in economic and financial management will result in the opening of a process of forfeiture of the concession.

Periodic Tariff Review

On May 23, 2023, ANEEL approved the result of Cemig D's Periodic Tariff Review, according to Resolution No. 3,202/2023. The approved result represented an average tariff adjustment of 13.27% for consumers, 8.94% on average for Group A (high and medium voltage) and 15.55% on average for Group B (low voltage).


Voltage level		Average effect on consumers
High and medium voltage - Group A		8.94%
Low voltage - Group B		15.55%
Average adjustment		13.27%

The readjustment percentage corresponding to costs manageable by the Company (Parcel B) was 0.66%, and the remaining percentage of 12.61% has zero economic effect for the Company, not impacting its profitability, as they represent direct transfers within the tariff and refer to the following items: (i) a 5.09% increase in non-manageable costs (Parcel A), related to the purchase of energy, transmission, sector charges and irrecoverable revenues, and; (ii) 7.52% relating to the financial items that make up the tariff. This adjustment will take effect from May 28, 2023 until May 27, 2024.

Due to the approval of the result of Cemig D's 5th Periodic Tariff Review (RTP) cycle, the update of the financial asset had an increase of R$39,516, considering the base date of November 30, 2022. The increase stems from the difference between the asset update estimate used by the company and the New Replacement Value (NRV) of these assets approved in the PTR process.

Gas distribution concessions

Gasmig obtained the concession for commercial operation of industrial, institutional and residential piped gas services in the State of Minas Gerais for a period of 30 years, extendable under provision of its contract, as from the publication of State Law 11,021 of January 11, 1993. On December 26, 2014, the second amendment to the concession contract was signed, and the concession period was extended until January 10, 2053.

The concessions for distribution of natural gas are granted by each Brazilian state. In the state of Minas Gerais, the tariffs for natural gas are set by the regulator, the State’s Economic Development Secretariat, by market segment. The tariffs is comprised of a portion for the cost of gas and a portion for the distribution of gas.

Each quarter the tariffs are adjusted to pass through the cost of gas, and once a year they are adjusted to update the portion allocated to cover the costs relating to the provision of the distribution service - remuneration of invested capital and to cover all the operating, commercial and administrative expenses of Gasmig.

In addition to these adjustments, there are periodic reviews of tariffs. These reviews may occur every five years from the end of the first cycle, to evaluate the changes in the costs of the Gasmig and update the tariffs. The concession contract also specifies the possibility of an extraordinary review of tariffs if any event occurs that puts the economic-financial balance of the concession at risk.


ANNUAL REPORT AND FORM 20-F \| 2023	F-22

Fourth amendment to the concession contract

In November 2022, the fourth addendum to the concession contract was signed with the aim of: (i) changing the deadline for meeting the expansion targets for the 2022-26 tariff cycle; and (ii) changing the inflation index for adjusting the natural gas distribution margins, the asset base and the non-depreciated portion of assets at the end of the concession from IGP-M to IPCA as of February 2022, with IGP-M remaining as the adjustment index before February 2022.

Gas distribution tariff readjustments

On January 25, 2023, it was published the SEDE resolution No. 4, effective as of February 1, 2023, containing the tariff adjustments that represent a reduction of the average values between 9.19% and 10.71%, according to consumption ranges and tariff categories. The largest reduction was in the GNV category, as a result of Gasmig's efforts to make average margins more flexible to ensure the competitiveness of natural gas with substitute energy sources.

Onerous concessions

When obtaining the concessions for construction of certain generation projects, the Company is required to make payments to the grantor over the period of the contract or for up to 5 years upon signature of the concession contract for plants with installed capacity between 1 and 50 MW (information of MW not audited), as compensation for the right to operate them.

The information on the grants, with the amounts to be paid, is as follows:


Project	Nominal value in 2023	Present value in 2023	Period of the concession (1)	Updating indexer
Irapé	45	22	03/2006 - 09/2037	IGPM
Queimado (Consortium)	12	6	01/2004 - 06/2034	IGPM

(1)

The term presented includes the extension of the concession grant for these plants under the terms of ReH 2,932, of September 14, 2021. During the period of the extension of the concession term, the generator will freely dispose of the energy from the undertaking, under the terms of Law 13,203/2015, with the other clauses unchanged for both contracts.

CEMIG generates energy from nine hydroelectric plants that have the capacity of 5MW or less, including those mentioned in the previous paragraph - having a total installed capacity of 11.53MW, and thus under Law 9,074/95, these are dispensed from concession, permission or authorization, and do not have a final concession date (information of MW not audited).

The concessions fees are paid monthly to the grantor for an amount that changes over time. These payments are recorded as an intangible asset, representing a right to operate the concession and to charge users through the concession period, they are recorded as from the date of signature of the contracts at the present value of the future payment obligations.

The amounts paid to the grantor in 2022, the nominal value and the present value of the amounts to be paid in the next 12 months, are as follows:


	Interest, %		Amounts paid in 2023	Nominal value of amounts to be paid in the next 12 months	Present value of amounts to be paid in the next 12 months
Irapé		100.00	3	3	3
Queimado (Consortium)		82.50	1	1	1

The rate used by the Company to discount the above liabilities to its present value, was 12.50%, and represents the average cost of funding under usual conditions on the date of registration of each concession.


ANNUAL REPORT AND FORM 20-F \| 2023	F-23

BASIS OF PREPARATION

Statement of compliance

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements provide comparative information in respect of the previous period.

On April 23, 2024, the Company’s Board of Directors authorized the issuance of the consolidated financial statements as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021.

Basis of measurement

The consolidated financial statements were prepared on a historical cost basis, except in the case of certain financial instruments and assets as held for sale which are measured at fair value and fair value less costs to sell, in accordance with the standards applicable, as detailed in Note 31 and 32, respectively.

Functional currency and presentation currency

The consolidated financial statements are presented in Reais - R$, which is the functional currency of the Company and its subsidiaries, joint ventures and affiliates The information is expressed in millions of Reais (R$ ’000’000), except when otherwise indicated.

Transactions in foreign currency, corresponding to those not carried out in the functional currency, were converted to Reais at the exchange rate as of the transaction date. Balances of monetary assets and liabilities denominated in foreign currency are translated to Reais at the exchange rates at the reporting date. Foreign exchange gains and losses resulting from updating assets and liabilities are recognized as finance income and cost in the statements of income.

Use of estimates and judgments

Preparation of the parent company and consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues and expenses. Future reported results may differ from these estimates.

Estimates and assumptions are periodically reviewed, using as a reference both historical experience and any significant change in scenarios that could affect the Company’s financial position or results of operations. Revisions in relation to accounting estimates are recognized in the period in which the estimates are reviewed, and in any future periods affected.

The main estimates and judgments that have a significant effect in the amounts recognized in the financial statements are as follows:

•

Note 8 - Consumers, traders and energy transmission concessionaires (expected credit losses)

•

Note 10 - Income tax and social contribution (recognition of deferred tax, availability of future taxable profit and uncertain tax treatments)

•

Note 13 - Financial assets and liabilities of the concession (fair value measurement)

•

Note 14 - Concession contract assets (construction margin and remeasurement of contract assets)

•

Note 15 - Investments (evaluation of recoverable value)

•

Note 16 - Property, plant and equipment (useful life)

•

Note 17 - Intangible assets (useful life)


ANNUAL REPORT AND FORM 20-F \| 2023	F-24

•

Note 18 - Leasing (measurement of right of use and lease liabilities)

•

Note 24 - Post-employment obligations (main assumptions in the measurement)

•

Note 25 - Provisions (reliable estimate of the value of obligations)

•

Note 27 - Net revenue (unbilled supply and construction margin)

•

Note 31 - Financial instruments and risk management (fair value measurement)

•

Note 32 - Assets classified as held for sale (fair value measurement)

Material accounting practices

The accounting practices described in detail in the explanatory notes to the financial statements have been applied consistently for all the business years presented in these financial statements, except as described in Explanatory Note 3(h), in accordance with the rules and regulations described in Note 3(a) – Compliance statement.

Impairment

Annually, management reviews the carrying amount of non-financial assets to assess whether there are indications, such as events or changes in economic, operational, or technological conditions, that may suggest impairment. If any indications are found and the carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognized. This involves adjusting the carrying amount of the asset or cash generating unit to its recoverable amount.

New or revised accounting standards applied for the first time in 2023

The changes presented below became effective on January 1, 2023 and had no material impact on the Company's consolidated financial statements.


Rule	Main changes
IFRS 17 – Insurance contracts	IFRS 17 establishes the principles for recognition, measurement, presentation and disclosure of insurance contracts, and replaces IFRS 4 – Insurance contracts. This rule has the overall objective of supplying an accounting model for insurance contracts, issued by any entity, that is more useful and consistent for insurance issuers. The Company does not have any contracts that meet the definition of an insurance contract under IFRS 17.
IAS 08 – Accounting policies, changes in accounting estimates and errors – Definition of accounting estimates	The Company adopted the amendments to IAS 08 for the first time in the current year. The changes replace the definition of “change in accounting estimates” with a definition of “accounting estimates”. According to the new definition, accounting estimates are “monetary amounts in financial statements subject to uncertainty in measurement.” The definition of change in accounting estimates was excluded.
IAS 1 – Presentation of Financial Statements, and IFRS Practice Statement 2 – Making materiality judgments	The Company adopted the amendments to IAS 1 for the first time in the current year. Although the changes did not themselves result in any change in the accounting policies, they affected the information on accounting policies disclosed in financial statements. The changes require disclosure of “material”, instead of “significant”, accounting policies. The changes also provide guidance on the application of materiality to the disclosure of accounting policies, helping entities to provide useful information on entity-specific accounting policies that users need, to understand other information in the financial statements. The Company revised the presentation of its accounting policies and maintained the presentation, in the financial statements, only of those that were judged to be material.
IAS 12 – Deferred income tax related to assets and liabilities arising from the same transaction	The Company adopted the amendments to IAS 12 for the first time in the current year. The changes restrict the range of application of exemption from initial recognition, so that it is not applied to transactions which give rise to temporary differences that are both taxable and deductible, resulting in recognition of a deferred tax asset and a deferred tax liability for temporary differences resulting from the initial recognition of leasing agreements and provisions for dismantling. There was no impact on carried forward profit and losses in January 2023, nor any impact on the Company’s result: the effect of this adoption relates only to the presentation of recognized deferred tax assets and liabilities.


ANNUAL REPORT AND FORM 20-F \| 2023	F-25

Standards issued but not yet effective


Rule	Main changes	Start of term
IAS 1 – Presentation of financial statements – Revision of classification of liabilities as current or non-current	Clarifies that the classification of liabilities as current or non-current is based on the rights existing on the reporting date, and specifies that the classification is not affected by expectations as to whether an entity will exercise its right to postpone the settlement of the liability. They explain that the rights exist if the restrictive clauses are complied with on the reporting date, and introduce the definition of ‘settlement’ to clarify that settlement refers to the transfer to a counterparty of cash, equity instruments, other assets or services.	Jan. 1, 2024
IAS 1 – Presentation of financial statements, IAS 7 – Statement of cash flows and IFRS 7 – Financial instruments: Disclosure – Supplier finance arrangements (“Debtor risk”)	The changes introduce new disclosures related to supplier financing agreements (‘debtor risk’) that help users of the financial statements assess the effects of these agreements on an entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk. To meet the purposes of disclosure, the entity must disclose, in full, for its supplier financing agreements: the terms and conditions of the agreements; the accounting amount; the corresponding lines in its balance sheet; the liabilities that are part of the agreements, and their accounting amounts, and corresponding lines for which suppliers have already received payment from those providing the financing; the ranges of payment due dates for financial liabilities that are part of a supplier financing agreement and accounts payable which are not part of a supplier financing agreement; and information on liquidity risk.	Jan. 1, 2024
IFRS 10 – Consolidated financial statements and IAS 28 – Investments in associates and joint ventures – Sale or contribution of assets between an investor and its associate or joint venture	This deals with situations involving the sale or contribution of assets between an investor and an affiliated company or joint venture. Specifically, the gains and losses resulting from the loss of control of a subsidiary that does not contain a business in a transaction with an affiliate or joint venture that is accounted by the equity method are recognized in the parent company’s income statement only in proportion to the holdings of the non-related investor in that affiliate or joint venture. Likewise, the gains and losses resulting from remeasurement of investments retained in some former controlled company (which has become an affiliate or joint venture accounted by the equity method) at fair value are recognized in the income statement of the former parent in proportion to the holdings of the non-related investor shares in the new associate or joint venture.	Not yet defined
IFRS 16 – Leases – Lease liability in a sale and leaseback	This adds requirements for subsequent measurement for sale and leaseback transactions, which meet the requirements of IFRS 15, for the purposes of accounting as a sale. The changes require the seller-lessee to determine ‘lease payments’ or ‘revised lease payments’ so that the seller-lessee does not recognize a gain or loss related to the right of use retained by the seller-lessee after the start date. The changes do not affect the gain or loss recognized by the seller-lessee related to the total or partial termination of a lease. Without these new requirements, a seller-lessee may have recognized a gain on the right of use which it retains solely due to the remeasurement of the lease liability (for example, after a modification or change of the lease within the lease term) that applies the general requirements in IFRS 16. In particular this may have been the case in a retro-lease that includes variable lease payments that do not depend on an index or rate.	Jan. 1, 2024

In relation to the standards under discussion at the IASB or with an effective date set for a future year, the Company is following the discussions and, so far, has not identified significant impacts.

Reclassification of items in the Statements of Cash Flows (SoCF)

The Company and its subsidiaries have made adjustments to the classification of items in the SoCF in order to improve the quality of the disclosure of accounting information.

At December, 2023, the Company and its subsidiaries have segregated this movement, presenting the interest received as part of the cash flow from operating activities and the investments and redemptions separately in the cash flow from investing activities. In addition, the Company and its subsidiaries began to adjust profit with the total amount of income tax recognized in profit or loss.

In order to maintain comparability, the information for the period ended December 31,2022 is being presented using the same criteria. The Company considers these adjustments not to be material.

PRINCIPLES OF CONSOLIDATION

The reporting dates of financial statements of the subsidiaries used for the purposes of calculation of consolidation and jointly controlled entities and affiliates used for calculation of this equity method contribution are prepared as of the same reporting date of the Company.


ANNUAL REPORT AND FORM 20-F \| 2023	F-26

The direct equity investments of CEMIG, included in the consolidation, are the following:


	2023 and 2022
Subsidiary		Form of valuation	Direct interest (%)
Cemig Geração e Transmissão S.A.		Consolidation		100.00
Cemig Distribuição S.A.		Consolidation		100.00
Companhia de Gás de Minas Gerais (‘Gasmig’)		Consolidation		99.57
Cemig Soluções Inteligentes em Energia S.A. (‘CEMIG Sim’)		Consolidation		100.00
Sete Lagoas Transmissora de Energia S.A. (‘Sete Lagoas’)		Consolidation		100.00

Refer to the Note 1 for all direct and indirect consolidated subsidiaries.

Accounting policy

Subsidiaries, jointly controlled and affiliated entities

The financial statements of subsidiaries are included in the consolidated financial statements as from the date on which control is obtained, until the date on which the control ceases. The accounting policies of the subsidiaries and jointly controlled entities are aligned with the policies adopted by the Company.

The Company controls an investee when its existing rights give it the current ability to direct the relevant activities of the investee. Control is achieved when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

When the Company loses control of an investee, it derecognizes the assets and liabilities of the former subsidiary from the statements of financial position, at the date when control is lost.

Any investment retained in the former subsidiary is recognized at its fair value and any resulting difference is recognized as gain or loss in the statement of income.

Jointly controlled and affiliated entities are accounted for under the equity method.

Consortium

The Company recognizes the proportional interest in assets, liabilities, and income (loss) of consortium operations since these investments are considered to be ‘joint operations’ as defined in accounting standards.

Transactions eliminated in consolidation

Intra-group balances and transactions, and any unrealized gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with investee companies accounted for under the equity method are eliminated against the investment in proportion to the Company’s equity interests in the investee. Unrealized losses are eliminated in the same way as unrealized gains are eliminated, but only up to the point at which there is no evidence of impairment.

Equity interest of non-controlling stockholders

The equity interest of non-controlling stockholders is recognized as the proportional share of the non-controlling stockholders in the net assets of the investor, when applicable. It is presented in equity, separately from the net equity attributable to the controlling stockholders.

OPERATING SEGMENTS

The operating segments of the Company and its subsidiaries reflect their management and their organizational structure, used to monitoring its results.


ANNUAL REPORT AND FORM 20-F \| 2023	F-27

In 2023, due to a change in the way in which the Company’s chief operating decision maker (CODM) evaluates the operating segments performance, the Company changed its operational segments and began to publish information on the Gas business segment separately. To maintain comparability, the information for 2022 is now restated using the same criterion.

The segment information is disclosed separately into the following 6 reportable segments:

•

Generation: comprise production of energy from hydroelectric, wind and solar facilities.

•

Transmission: comprise construction, operation and maintenance of transmission lines and substations.

•

Trading: comprises the sale of electricity to free customers and the provision of related services.

•

Distribution: comprises the distribution and sale of electricity to captive customers, and the operation and maintenance of infrastructure and related services.

•

Gas: this business segment includes commercial operation of industrial, institutional and residential distribution and sale of piped gas in the State of Minas Gerais.

•

Investees: Comprise management of the equity interests in which the company does not have shareholding control, in line with the Company’s business strategies. The results of the subsidiary Cemig Sim are also included in this segment.


INFORMATION BY SEGMENT AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2023
Description	Energy												Gas			Investees			Total			Inter segment transactions (1)			Reconciliation (2) (3)			Total
	Generation			Transmission			Trading			Distribution
NET REVENUE		2,875			1,091			7,686			23,348			3,618			18			38,636			(1,208	)		(578	)		36,850

COST OF ENERGY, GAS AND CHARGES FOR USE OF THE NATIONAL GRID		(347	)		-			(6,318	)		(12,656	)		(2,237	)		(4	)		(21,562	)		1,208			532			(19,822	)

COSTS AND EXPENSES (3)
Personnel		(148	)		(137	)		(27	)		(875	)		(73	)		(48	)		(1,308	)		-			-			(1,308	)
Employees’ and managers’ profit sharing		(16	)		(16	)		(3	)		(102	)		-			(20	)		(157	)		-			-			(157	)
Post-employment obligations		(59	)		(36	)		(8	)		(400	)		-			(88	)		(591	)		-			-			(591	)
Materials, outsourced services and others expenses (revenues)		(223	)		(88	)		(18	)		(2,157	)		(63	)		275			(2,274	)		-			46			(2,228	)
Depreciation and amortization		(327	)		(1	)		-			(834	)		(94	)		(18	)		(1,274	)		-			-			(1,274	)
Operating provisions and impairment		(29	)		(14	)		(7	)		(455	)		2			(106	)		(609	)		-			-			(609	)
Construction costs		-			(172	)		-			(3,600	)		(300	)		-			(4,072	)		-			-			(4,072	)
Total cost of operation		(802	)		(464	)		(63	)		(8,423	)		(528	)		(5	)		(10,285	)		-			46			(10,239	)

COSTS AND EXPENSES		(1,149	)		(464	)		(6,381	)		(21,079	)		(2,765	)		(9	)		(31,847	)		1,208			578			(30,061	)

Equity in earnings of unconsolidated investees, net		(2	)		-			-			-			-			434			432			-			-			432
Gains arising from the sale of non-current asset held for sale		-			-			-			-			-			9			9			-			-			9
Result of business combination		-			-			-			-			-			-			-			-			-			-

INCOME BEFORE FINANCE INCOME (EXPENSES)		1,724			627			1,305			2,269			853			452			7,230			-			-			7,230
Finance net income (expenses)		(11	)		(48	)		82			(253	)		(9	)		(140	)		(379	)		-			-			(379	)
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX		1,713			579			1,387			2,016			844			312			6,851			-			-			6,851
Income tax and social contribution tax		(326	)		(114	)		(428	)		(405	)		(248	)		437			(1,084	)		-			-			(1,084	)
NET INCOME FOR THE YEAR		1,387			465			959			1,611			596			749			5,767			-			-			5,767
Equity holders of the parent		1,387			465			959			1,611			593			749			5,764			-			-			5,764
Non-controlling interests		-			-			-			-			3			-			3			-			-			3


ANNUAL REPORT AND FORM 20-F \| 2023	F-28


Information by Segment as of and for The Year Ended December 31, 2022 (restated)
Description	Energy												Gas			Investees			Total			Inter segment transactions (1)			Reconciliation (2) (3)			Total
	Generation			Transmission			Trading			Distribution
NET REVENUE	2661			1195			7918			20919			3690			7			36390				(1,423	)		(504	)	34463

COST OF ENERGY, GAS AND CHARGES FOR USE OF THE NATIONAL GRID		(331	)					(6,880	)		(11,938	)		(2,735	)		(1	)		(21,885	)	1423			442				(20,020	)

OPERATING COSTS AND EXPENSES (3)
Personnel		(162	)		(135	)		(12	)		(913	)		(66	)		(64	)		(1,352	)								(1,352	)
‘Employees and managers’ income sharing		(15	)		(11	)		(6	)		(40	)		-			(11	)		(83	)								(83	)
Post-employment obligations		(66	)		(42	)		(10	)		(421	)		-			(87	)		(626	)								(626	)
Materials, outsourced services and others expenses (revenues)		(395	)		(96	)		(14	)		(1,786	)		(57	)		(84	)		(2,432	)				62				(2,370	)
Depreciation and amortization		(328	)								(738	)		(91	)		(25	)		(1,182	)								(1,182	)
Operating provisions and impairment		(18	)		(3	)		(34	)		(398	)					(3	)		(456	)								(456	)
Construction costs					(291	)					(3,193	)		(52	)		-			(3,536	)								(3,536	)
Total operating costs		(984	)		(578	)		(76	)		(7,489	)		(266	)		(274	)		(9,667	)		-		62				(9,605	)
	3
OPERATING COSTS AND EXPENSES		(1,315	)		(578	)		(6,956	)		(19,427	)		(3,001	)		(275	)		(31,552	)	1423			504				(29,625	)

Equity in earnings of unconsolidated investees, net		(2	)	3												842			843									843
Fair value of business combination		-														5			5									5

OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES)	1344			620			962			1492			689			579			5686				-			-		5686
Finance net income (expenses)		(150	)		(96	)	34				(1,115	)		(9	)		(230	)		(1,566	)								(1,566	)
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX	1194			524			996			377			680			349			4120				-			-		4120
Income tax and social contribution tax		(307	)		(174	)		(314	)	67				(199	)	901				(26	)								(26	)
NET INCOME FOR THE YEAR	887			350			682			444			481			1250			4094				-			-		4094
Equity holders of the parent	887			350			682			444			479			1250			4092									4092
Non-controlling interests													2						2									2


	Information by Segment as of and for The Year Ended December 31, 2021 (restated)
Account/description		Energy												Gas			Investees			Total			Inter segment transactions (1)			Reconciliation (2) (3)			Total
		Generation			Transmission			Trading			Distribution
NET REVENUE			2,921			1,094			6,430			22,345			2,852			6			35,648			(1,575	)		(427	)		33,646

COST OF ENERGY, GAS AND CHARGES FOR USE OF THE NATIONAL GRID			(795	)					(5,735	)		(14,853	)		(2,011	)					(23,394	)		1,575			370			(21,449	)

OPERATING COSTS AND EXPENSES (3)
Personnel			(149	)		(115	)		(20	)		(847	)		(56	)		(53	)		(1,240	)								(1,240	)
‘Employees and managers’ income sharing			(14	)		(14	)		(3	)		(94	)					(9	)		(134	)								(134	)
Post-employment obligations			(5	)		3			(1	)		19						(32	)		(16	)								(16	)
Materials, outsourced services and others expenses (revenues)			(209	)		(94	)		(14	)		(1,524	)		(48	)		(117	)		(2,006	)					57			(1,949	)
Depreciation and amortization			(254	)		(3	)		(1	)		(683	)		(90	)		(18	)		(1,049	)								(1,049	)
Operating provisions and impairment			(20	)		(12	)		(14	)		(198	)		(6	)		(114	)		(364	)								(364	)
Construction costs						(184	)	-				(1,802	)		(50	)	-				(2,036	)								(2,036	)
Total operating costs			(651	)		(419	)		(53	)		(5,129	)		(250	)		(343	)		(6,845	)					57			(6,788	)

OPERATING COSTS AND EXPENSES			(1,446	)		(419	)		(5,788	)		(19,982	)		(2,261	)		(343	)		(30,239	)		1,575			427			(28,237	)

Periodic Tariff Revision, net						215															215									215
Renegotiation of hydrological risk (Law 14,052/20), net			1,032																		1,032									1,032
Gains arising from the sale of non-current asset held for sale																		109			109									109
Equity in earnings of unconsolidated investees, net			54															128			182									182
Fair value of business combination						4															4									4

OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES)			2,561			894			642			2,363			591			(100	)		6,951									6,951
Finance net income (expenses)			(758	)		(395	)		15			(7	)		(89	)		(1,018	)		(2,252	)								(2,252	)
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX			1,803			499			657			2,356			502			(1,118	)		4,699									4,699
Income tax and social contribution tax			(409	)		(78	)		(224	)		(655	)		(142	)		562			(946	)								(946	)
NET INCOME FOR THE YEAR			1,394			421			433			1,701			360			(556	)		3,753									3,753
Equity holders of the parent			1,394			421			433			1,701			358			(556	)		3,751									3,751
Non-controlling interests															2						2									2


ANNUAL REPORT AND FORM 20-F \| 2023	F-29

(1)

The only inter-segment transactions are from the generation to the trading segment, as explained above.

(2)

Refers to the reconciliation between our statements of income to our segments information evaluated by CODM, which is necessary to made adjustments (eliminations) related to intercompany transactions..

(3)

The information on operational costs and expenses separated by type is segregated in accordance with the internal business model, which has immaterial differences in relation to the accounting information.

The information for assets and liabilities by segment is not presented, because this is not part of the information made available to the Company’s Chief Operating Decision Maker (‘CODM’).

Accounting policy

The operating results of all operating segments for which discrete financial information is available, are reviewed regularly by the Company’s CODM, to make decisions about resources to be allocated to the segment, and to assess its performance.

Segment results that are reported to the Company’s CODM include items directly attributable to the segment, as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise corporate assets and head office expenses.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of balances in bank current accounts and short-term highly liquid investments subject to an insignificant risk of change in value, held to meet the short-term cash management of the Company and its subsidiaries.


	2023		2022
Bank accounts		195		95
Cash equivalents
Bank certificates of deposit (CDBs)		991		1,049
Overnight		351		294
Others		-		3

		1,342		1,346

		1,537		1,441

Bank Certificates of Deposit (Certificados de Depósito Bancário, or CBDs), accrued interest between 80% to 112%, of the CDI Rate (Interbank Rate for Interbank Certificates of Deposit or Certificados de Depósito Inter-bancário - CDIs) published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip) on December 31, 2023 (80.05% to 112% on December 31, 2022). For these CDBs, the Company and its subsidiaries have repurchase transactions which state, on their trading notes, the bank’s commitment to repurchase the security, on demand, on the maturity date of the transaction, or earlier.

Overnight transactions are available for redemption on the following day. They are usually backed by Treasury Bills, Notes or Bonds and referenced to a pre-fixed rate of 11.42% to 11.65% on December 31, 2023 (13.62% to 13.64% on December 31, 2022). Their purpose is to settle the short-term obligations of the Company and its subsidiaries, or to be used in the acquisition of other assets with better return to replenish the portfolio.

Note 31 disclosures (i) the exposure of the Company and its subsidiaries to interest rate risks (ii) the sensitivity analysis for financial assets and liabilities and (iii) the material accounting policies. Financial investments in a reserved investment fund are show in note 30.


ANNUAL REPORT AND FORM 20-F \| 2023	F-30

MARKETABLE SECURITIES


	2023		2022
Investments
Current
Bank deposit certificates (CDBs)		74		191
Financial Notes (LFs) – Banks		475		1,140
Treasury Financial Notes (LFTs)		214		402
Others		11		12

		774		1,745

Non-current
Bank deposit certificates (CDBs)		-		127
Debentures (4)		-		7

		-		134

		774		1,879

Bank Certificates of Deposit (Certificados de Depósito Bancário, or CBDs), accrued interest between 103% and 104.3% of the CDI Rate (Interbank Rate for Interbank Certificates of Deposit or Certificados de Depósito Inter-bancário - CDIs) published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip) on December 31, 2023 (103% to 104.4% on December 31, 2022).

Bank Financial Notes (Letras Financeiras, or LFs) are fixed-rate fixed-income securities, issued by banks and that accrued interest a percentage of the CDI rate published by Cetip. The LFs had remuneration rates varying between 108.6% and 111.98% of the CDI rate on December 31, 2023 (103.3% and 110.26% on December 31, 2022).

Treasury Financial Notes (LFTs) are fixed-rate securities, their yield follows the daily changes in the Selic rate between the date of purchase and the date of maturity. The LFTs had remuneration rates varying between 11.83% and 11.85% on December 31, 2023 (13.65% and 13.88% on December 31, 2022).

The material accounting policies and classification of these securities are shown in note 31. Investments in marketable securities of related parties are shown in Note 30.

The Company and its subsidiaries consistently classify the income related to these securities as part of the cash flow of the operating activity, because they believe that this is the most appropriate presentation to properly reflect the activities.

RECEIVABLES FROM CUSTOMERS


	Balances not yet due			Up to 90 days past due			More than 91 up to 360 days past due			More than 361 days past due			2023			2022
Billed supply		2,041			428			561			821			3,851			3,240
Unbilled supply		1,373			-			-			-			1,373			1,244
Other concession holders – wholesale supply		26			47			-			-			73			67
Other concession holders – wholesale supply, unbilled		369			-			-			-			369			369
CCEE (Power Trading Chamber)		84			22			6			2			114			162
Concession Holders – power transport		53			62			10			48			173			180
Concession Holders – power transport, unbilled		391			-			-			-			391			370
(–) Provision for expected credit losses		(165	)		(22	)		(80	)		(600	)		(867	)		(820	)

		4,172			537			497			271			5,477			4,812


Current assets														5,434			4,769
Non-current assets														43			43


ANNUAL REPORT AND FORM 20-F \| 2023	F-31

The Company and its subsidiaries’ exposure to credit risk related to customers and traders is provided in Note 30.

Breakdown and changes in the provision for expected credit losses

The expected credit losses are considered to be sufficient to cover any potential losses in the realization of accounts receivable, and the breakdown by type of customers is as follows:


	2023		2022
Residential		322		272
Industrial		173		168
Commercial, services and others		237		203
Rural		40		33
Public authorities		27		28
Public lighting		2		1
Public services		27		33
Charges for use of the network (TUSD)		39		82

		867		820



Balance at December 31, 2020	712

Additions (note 28)	144
Disposals	(23	)

Balance at December 31, 2021	833

Additions (note 28)	239
Changes to estimate assumptions	(130	)
Disposals	(122	)

Balance at December 31, 2022	820

Additions (note 28)	174
Disposals	(127	)

Balance at December 31, 2023	867

Accounting policy

Accounts receivable from customers, traders and power transport concession holders are initially recognized at the sales value of the energy supplied or the value of the gas supplied and are measured at amortized cost. These receivables are stated with the amount of sales tax included, net of the taxes withheld by the payers, which are recognized as recoverable taxes.

The contract asset is transferred to the financial asset (Consumers and resellers and concessionaires - Energy transport), within the scope of IFRS 9, after the issuance of the credit notice, monthly issued by ONS, authorizing RAP billing, which is when the right to consideration is unconditional.

The financial asset is recognized at the transaction price and the assets are subsequently measured at amortized cost, using the effective interest method, adjusted by impairment losses, when applicable, and recognizing the deferred taxes. As required by IFRS 9 - Financial Instruments, the financial asset carrying amount is analyzed and, when applicable, a loss allowance for expected credit losses is recognized.


ANNUAL REPORT AND FORM 20-F \| 2023	F-32

Estimations and judgments

The adjustment for expected credit losses is recorded based on policies approved by Management. The main criteria defined by the Company and its subsidiaries are: (i) for consumers with significant amounts outstanding, the balance receivable is analyzed taking into account the history of the debt, ongoing negotiations and real guarantees; and (ii) for large consumers, an individual analysis is made of debtors and ongoing initiatives to receive the credits.

For captive customers, the Company adopts in its analysis a simplified approach, considering that the balances of its Accounts Receivable do not have significant financing components and estimates the expected loss considering the average history of non-collection over the total amount billed in each month, based on 24 months of billing, segregated by consumer class and projected for the next 12 months considering the age of maturity of the invoices, including those not yet due and unbilled.

The Company has adopted a differentiated rule for the amounts to be received from billing of irregular debits, due to their representing greater difficulty in collection. The analysis is individualized; a level of solvency for the client is calculated internally, and weighted in the measurement of the risk of loss.

The expected losses for overdue accounts of customers that renegotiated their debt is measured based on the maturity date of the original invoice, despite the new terms negotiated. Expected losses are fully recognized for accounts overdue for more than 24 months.

Expected losses for invoices unbilled, not yet due or less than 12 months past due are measured according to the potential default events, or losses of credit expected for the whole life of a financial instrument, if the credit risk has significantly increased since its initial recognition.

RECOVERABLE TAXES


	2023		2022
Current
ICMS (VAT)		476		449
PIS/Pasep (a) (b)		24		258
Cofins (a) (b)		114		1,189
Others		21		21

		635		1,917

Non-current
ICMS (VAT) (b)		726		548
PIS/Pasep (a)		128		166
Cofins (a)		465		644

		1,319		1,358

		1,954		3,275

Pis/Pasep and Cofins taxes credits over ICMS

The Company and its subsidiaries recorded the PIS/Pasep and Cofins credits corresponded to the amount of these taxes over ICMS paid in the period of July 2003 to May 2019.

Thus, final court judgment has also been given, against which there is no further appeal, in favor of the similar actions filed by Cemig’s wholly-owned subsidiaries Sá Carvalho, Cemig Geração Distribuída (former UTE Ipatinga S.A.), Cemig Geração Poço Fundo S.A. (previously denominated UTE Barreiro S.A.) and Horizontes Energia S.A.. The credits of these companies were approved by the Brazilian tax authority (Receita Federal do Brasil) in September 2022, and offsetting against federal taxes due has already begun.

The Company and its subsidiaries have two ways to recover the tax credit: (i) offsetting of the amount receivable against amounts payable of PIS/Pasep and Cofins taxes, monthly, within the five-year period specified by the relevant law of limitation; or (ii) receipt of specific credit instruments ‘precatórios’ from the federal government.


ANNUAL REPORT AND FORM 20-F \| 2023	F-33

In August 2023, the Parent Company formalized a request to the Brazilian Federal Revenue Service to receive the credits by means of writs of payment.

On May 12, 2020, the Brazilian tax authority granted the Company’s request for ratification of the credits of PIS/Pasep and Cofins taxes arising from the legal action on which final judgment, subject to no further appeal, was given in favor of Cemig D and Cemig GT are offsetting since May 2020 the amount receivable against amounts of federal taxes payable on a monthly basis, within the five-year period specified by the relevant law of limitation.

Based on the opinion of legal advisors, Cemig D had constituted a liability related to the portion of tax credits corresponding to the period of the last 10 years, that is, from June 2009 to May 2019, net of PIS/Pasep and Cofins levied on its update revenue.

On June 27, 2022 the Draft Law 1,280/22, which provided for the full allocation of tax credits related to the issue of PIS/Pasep and Cofins on ICMS to customers of electricity distributors, without the limitation of the period of 10 years mentioned above was converted into Law 14,385/22 and the Company made a allowance, posting a additional amount in liabilities, as per Notes 21.

The Company’s management awaits the Law regulation by ANEEL, and is assessing possible future actions related to this matter with its legal advisers.

After the STF’s (Superior Tribunal Federal means Federal Court) decision on the modulation of effects, the subsidiary Gasmig recognized, in the second quarter of 2021, the amounts of PIS/Pasep and Cofins taxes credits on ICMS referring to the periods contemplated in the process that discusses the matter, in the amount of R$220.

As from the final judgment, subject to no further appeal, in the case, Gasmig began the proceedings for release of the amounts held in escrow and for qualification with the national tax authority (Receita Federal) to receive the tax credit. In February and April 2023, the tax authority granted the requests for qualification to receive the credits of PIS and Pasep taxes, and the Cofins tax, respectively. Gasmig used the credits to offset federal taxes.

Like Cemig D, Gasmig constituted a liability for the portion of the tax credits corresponding to the period of the last 10 years, to be returned to consumers, from January 2014 to January 2020, net of the PIS, Pasep and Cofins taxes applicable to the gain from monetary updating.

For more information about the amounts to be refunded by Cemig D and Gasmig to customers, see Note 20.

In 2023, tax credits of PIS, Pasep and Cofins taxes previously charged on amounts of ICMS tax were offset against federal taxes payable, in a total of R$ 1,335 (R$ 1,453 in 2022). Offsetting of tax credits is a transaction that does not involve cash, and thus is not reflected in the Statements of cash flow.

Other recoverable taxes

The ICMS (VAT) credits reported in non-current assets arise mainly from acquisitions of property, plant and equipment, and intangible assets, and can be offset against taxes payable in the next 48 months. The transfer to non-current is made in accordance with management's best estimate of the amounts which will likely be realized in 12 months after these financial statements reporting date.

Credits of PIS/Pasep and Cofins generated by the acquisition of machinery and equipment can be offset immediately.


ANNUAL REPORT AND FORM 20-F \| 2023	F-34

10.

INCOME AND SOCIAL CONTRIBUTION TAXES

Income tax and social contribution tax recoverable

The income tax and social contribution balances refer to credits from previous years' tax returns, withholdings made in the current year and prepayments that will be offset against federal taxes payable to be determined at the end of the fiscal year or in subsequent periods.


	2023		2022
Income tax		594		707
Social contribution tax		262		241

		856		948


Current		411		775
Non-current		445		173

The balances of current tax assets and liabilities relating to income tax and social contribution are presented net when the requirements of IAS 12 are met.

Income tax and social contribution tax payable

The balances of income tax and social contribution tax recorded in current liabilities refer mainly to the taxes owed by the subsidiaries which report by the Real Income method and have opted to make monthly payments based on estimated revenue, and also by the subsidiaries that have opted for the Presumed Income method, in which payments are made quarterly.


	2023		2022
Current
Income tax		71		198
Social contribution tax		40		42

		111		240


ANNUAL REPORT AND FORM 20-F \| 2023	F-35

Deferred income tax and social contribution tax

The Company has deferred taxed assets and liabilities from unused tax loss carryforwards, negative base for the social contribution tax, and deductible temporary differences, at the statutory rates applicable to each legal entity in Brazil of 25% (for Income tax) and 9% (for the social contribution tax), as follows:


	2023			Profit and loss			Comprehensive income			Other		2022			Profit and loss			Comprehensive income			Other			2021
Deferred tax assets
Tax loss carryforwards		1,219			232			-			-		987			180			-			-			807
Provisions for contingencies		723			121			-			-		602			60			-			-			542
Changes to equity method investees temporary differences, net		57			1			-			-		56			(188	)		-			-			244
Fair value of derivative financial instruments (PUT SAAG)		-			(229	)		-			-		229			13			-			-			216
Provision related to the exclusion of ICMS from the calculation basis of PIS/Pasep and Cofins (1)		88			(510	)		-			-		598			598			-			-			-
Provision for income sharing payments		48			18			-			-		30			30			-			-			-
Post-employment obligations		1,812			80			(119	)				1,852			108			(237	)		-			1,981
Estimated provision for doubtful receivables		326			7			-			-		319			4			-			-			315
Onerous concession		12			-			-			-		12			12			-			-			-
Rights of use (2)		126			9			-			-		117			117			-			-			-
Others		13			(10	)		-			6		17			(133	)		-			-			150

Total		4,424			(281	)		(119	)		6		4,819			801			(237	)		-			4,255


Deferred tax liabilities
Deemed cost		(155	)		1			-			-		(156	)		63			-			-			(219	)
Acquisition costs of equity interests		(439	)		17			-			-		(456	)		10			-			-			(466	)
Borrowing costs capitalized		(182	)		(12	)		-			-		(170	)		(5	)		-			-			(165	)
Adjustment to expectation of cash flow – Concession assets		(334	)		(71	)		-			-		(263	)		(18	)		-			-			(245	)
Revenues arising from transmission contract asset		(931	)		9			-			-		(940	)		(45	)		-			-			(895	)
Adjustment to fair value: Swap/Loss		(126	)		84			-			-		(210	)		202			-			-			(412	)
Reimbursement of costs – GSF		(229	)		45			-			-		(274	)		45			-			-			(319	)
Lease liabilities (2)		(127	)		(19	)		-			-		(108	)		(108	)		-			-			-
Others		32			85			-			-		(54	)		(20	)		-			(3	)		(31	)

Total		(2,491	)		139			-			-		(2,631	)		124			-			(3	)		(2,752	)

Total, net		1,933			(142	)		(119	)		6		2,188			925			(237	)		(3	)		1,503


Total assets		3,045											3,120												2,465
Total liabilities		(1,112	)										(932	)											(962	)

(1) In 2022, a provision was recorded as a result of Law 14385/22, which determined the fully destination, for the benefit of consumers, of the amounts subject to repeal of debt by the distributors, related to the exclusion of ICMS from the PIS/Pasep and Cofins calculation basis. The amount refers to the period from the 11th year onwards, counted retroactively from the date of the final and unappealable decision in the lawsuit, net of the portion included in the 2022 and 2023 Annual Tariff Adjustments.

(2) The separate presentation of these deferred tax assets and liabilities results from the change in IAS 12. There was no impact on the Company's results, the effect of the change being related only to disclosure. For comparability purposes, the change was reflected in the 2022 financial year based on the same criteria. For further details, see note 3.8.

The changes in deferred income tax and social contribution tax were as follows:


ANNUAL REPORT AND FORM 20-F \| 2023	F-36



Balance at December 31, 2020	1,413

Effects allocated to net profit	210
Effect allocated to other comprehensive income	(102	)
Deferred taxes received in corporate reorganization	(16	)
Others	(2	)

Balance at December 31, 2021	1,503

Effects allocated to net profit	924
Effect allocated to other comprehensive income	(237	)
Deferred taxes received in corporate reorganization	-
Others	(2	)

Balance at December 31, 2022	2,188

Effects allocated to net profit	(141	)
Effect allocated to other comprehensive income	(119	)
Others	5

Balance at December 31, 2023	1,933

The estimated taxable incomes forecast, on which the realization of deferred tax asset are based, are determined by the annual budget and the long-term budget, both reviewed periodically, and by the historical income. However, the taxable income may be either higher or lower than the evaluation used by the management when the amount of the deferred tax recognized was determined.

Reconciliation of income tax and social contribution tax effective rate

This table reconciles the statutory income tax (rate 25%) and social contribution tax (rate 9%) with the current income tax expense in the statement of income:


	2023			2022
Profit before income tax and social contribution tax		6,851			4,121
Income tax and social contribution tax – nominal expense (34%)		(2,329	)		(1,401	)
Tax effects applicable to:
Gain in subsidiaries by equity method		93			182
Tax incentives		89			62
Effects from subsidiaries taxed based on gross revenues		92			97
Non-deductible penalties		(95	)		(45	)
Interest on Equity		950			722
Estimated losses on doubtful accounts receivable from related parties		-			234
Realization of goodwill (note 32)		-			108
Monetary update on tax credits (1)		101			-
Others		15			15

Income tax and Social Contribution – effective gain (expense)		(1,084	)		(26	)

Current tax		(943	)		(950	)
Deferred tax		(141	)		924

		(1,084	)		(26	)

Effective rate		15.82	%		0.63	%

(1) Refers to the monetary updates on PIS/Pasep and Cofins on ICMS including differences beteween ICMS Invoiced x Collected. In 2022, the balance of this update was taxed, but with the STF's favorable decision, the balance was excluded in the 2023 calculation.

Accounting policy

The income tax and social contribution tax expenses represents the total amount of current and deferred taxes, which are presented separately in the financial statements. The Company is subject to the regular tax regime ‘Lucro Real’. However, its subsidiaries that can benefit from the favorable tax regime, according to tax law, analyze the payable tax projection for the next year, in order to determine the tax regime that reduces its taxes payment.

Deferred and current tax items are recognized in correlation to the underlying transaction either in OCI or directly in equity.


ANNUAL REPORT AND FORM 20-F \| 2023	F-37

Periodically, in accordance with IFRIC 23, the Company and its subsidiaries evaluate positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Current

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date.

Advances, or tax credits, are presented as current or non-current assets, in accordance with the expected date of their realization at the balance sheet date, when the tax amounts are duly calculated and offset against advances made.

Deferred

Deferred tax is recognized for temporary differences between the carrying amount of an asset or liability in the statement of financial position and its tax base at the reporting date.

Government grants

Government grants are recognized when there is reasonable assurance that the grant will be received, and all attached conditions will be complied with, in line with IAS 20.

The subsidiaries Cemig D e GT have ventures in an area incentivized by SUDENE area, which result in the recognition of its right to a 75% reduction in income tax. Such tax incentives, in the form of exemption or reduction of income tax, comply with the concept of government grants and are recognized as income on a systematic basis over the periods that the related income tax expense for which it is intended to compensate, is recorded.

Given the legal restriction on the distribution of net income corresponding to the tax incentive, the Company maintains the amount related to the incentive granted in the tax incentive reserve. For more details, see note no. 6.

Estimations and judgments

Deferred taxes

Deferred tax liabilities are recognized for all the inter-temporal tax differences. Deferred tax assets are recognized for all the temporary differences deductible, to the extent that it is probable that future taxable income will be available for the temporary differences to be offset, except:

•

When the deferred tax asset or liability arises from recognition of goodwill or of an asset or liability in a transaction which is not a business combination and, on the date of the transaction, does not affect the accounting profit or the profit or loss for tax purposes, except when the transaction gives rise to temporary differences that are both taxable and deductible, in which the entity must recognize a deferred tax asset or liability and must recognize the resulting deferred tax expense or revenue in the income statement;

•

In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

•

In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint arrangements, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable income will be available against which the temporary differences can be utilized.


ANNUAL REPORT AND FORM 20-F \| 2023	F-38

These taxes are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred income tax and social contribution tax assets are reviewed at the reporting date, and are reduced to the extent that their realization is no longer probable or recognized to the extent that it becomes probable that future taxable incomes will allow them to be recovered.

The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

Uncertainties on the treatment of taxes on profit

There are certain matters regarding treatment of taxes on profit about which the Company has uncertainties. The uncertainties about the treatment of taxes on profit represent the risks that the tax authority may not accept a given tax treatment applied by the Company. The Company estimates the probability of the tax authority accepting the uncertain tax treatment based on technical assessments of its legal advisors.


ANNUAL REPORT AND FORM 20-F \| 2023	F-39

11.

ESCROW DEPOSITS


	2023		2022
Labor claims		226		259

Tax contingencies
Income tax on Interest on Equity		33		31
PIS/Pasep and Cofins taxes (1)		76		70
Donations and legacy tax (ITCD)		64		60
Urban property tax (IPTU)		106		96
Finsocial tax		46		44
Income and Social Contr. Tax on indemnity for employees’ ‘Anuênio’ benefit (2)		319		305
Income tax withheld at source on inflationary income		9		9
Income tax and contribution tax effective rate (3)		143		106
Other (4)		115		123

		911		844
Other
Regulatory		50		46
Third party		12		9
Customer relations		5		8
Court embargo		27		20
Other		12		21

		106		104

		1,243		1,207

(1)

This refers to escrow deposits in the action challenging the constitutionality of inclusion of ICMS tax within the amount to which PIS/Pasep and Cofins taxes are applied.

(2)

See more details in Note 25 - Provisions under the section relating to the ‘Anuênio indemnity’.

(3)

Court escrow deposit in the proceedings challenging charging of corporate income tax and the Social Contribution tax on payments of Interest on Equity and application of the Social Contribution tax to cultural and artistic donations and sponsorship, expenses on punitive fines, and taxes with enforceability suspended.

(4)

Includes escrow deposits from legal actions related to INSS and PIS/Pasep and Cofins taxes.

12.

REIMBURSEMENT OF TARIFF SUBSIDIES

The Company recognizes as revenue from tariff subsidies the amounts applying to (i) the tariffs paid by users of public electricity distribution service provided from incentive-bearing sources; (ii) rural supply; (iii) nocturnal irrigation; (iv) generation by incentive-bearing sources; and (v) public service. These amounts are reimbursed by transfers of funds from the Energy Development Account (Conta de Desenvolvimento Energético – CDE). Also reimbursed from the CDE are: (i) subsidies for low-income users; (ii) the subsidy related to the Electricity Compensation System (SCEE), which ANEEL released for application in the Tariff Review of 2023 for compensation of distributed generation; and (iii) the allowance for the amounts contributed by Eletrobras or its subsidiaries under CNPE Resolution 15/2021, transferred on to holders of electricity distribution concessionaries and permissionaries.

In 2023, (i) the revenue from subsidies reimbursed via the CDE was R$ 1,565 (R$1,689 in 2022); and (ii) the other subsidies – which include the ‘Flag Tariffs’, and the Program to Incentivize Voluntary Reduction of Electricity Consumption – totaled R$78 (R$284 in 2022). Of this amount, the Company has a receivable of R$196 (R$159 on December 31, 2022), recognized in current assets under "Other assets", of which R$187 from Cemig D and R$9 from Cemig GT.


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13.

CONCESSION FINANCIAL AND SECTOR ASSETS AND LIABILITIES


	2023		2022
Concession financial assets related to the infrastructure
Energy distribution concession (13.a)		1,881		1,370
Gas distribution concession (13.a)		38		37
Indemnifiable receivable – Generation (13.b)		785		692
Concession grant fee – Generation concessions (13.c)		3,031		2,950
		5,735		5,049
Sector financial assets
Amounts receivable from Parcel A (CVA) and Other Financial Components (13.d)		805		944

Total		6,540		5,993

Current assets		814		1,055
Non-current assets		5,726		4,938

The changes in concession financial assets are as follows:


	Energy Distribution			Generation			Gas Distribution		Total
Balances at December 31, 2020		530			3,365			29		3,924
Transfers from contract assets		110		-			-			110
Transfers from (to) intangible assets		(9	)	-			-			(9	)
Monetary updating		54			523			5		582
Disposals		(1	)	-			-			(1	)
Amounts received	-				(280	)	-			(280	)

Balances at December 31, 2021		684			3,608			34		4,326

Transfers from contract assets		670			-			-		670
Transfers from (to) intangible assets		(22	)		-			-		(22	)
Monetary updating		39			514			3		556
Fair Value Adjustments		-			(172	)		-		(172	)
Disposals		(1	)		-			-		(1	)
Amounts received		-			(308	)		-		(308	)

Balances at December 31, 2022		1,370			3,642			37		5,049

Transfers from contract assets		363			-			-		363
Disposals		148			505			1		654
Amounts received		-			(331	)		-		(331	)

Balances at December 31, 2023		1,881			3,816			38		5,735

Distribution - Financial assets

The energy and gas distribution concession contracts are within the scope of IFRIC 12. The financial assets under these contracts refer to the investments made in infrastructure that will be paid by grantor at the end of the concession period. The financial assets are measured at fair value through income or loss, in accordance with regulation of the energy segment and concession contracts executed by CEMIG and its subsidiaries and the granting authorities.

Generation - Indemnity receivable

Various concession contracts for various plants operated under Concession Contract 007/1997 began to expire as from August 2013. Upon expiration of the concession contract, the Company has a right to receive an amount corresponding


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to the residual value of the assets not yet amortized, as specified in the concession contract. The accounting balances corresponding to these assets were recognized in Financial assets, at fair value through profit or loss.

On July 28, 2022 ANEEL revoked Normative Resolution (ReN) 942, by publication of ReN 1,027, establishing the general methodology and criteria for calculation - to be based on New Replacement Value, which is calculated, as first priority, based on the reference database of prices - then as second priority by the concession holder’s own prices database, then, as the last alternative, by the updated inspected accounting cost.

With the conclusion of the appraisal report, the Company made an adjustment to the fair value of the financial asset in the amount of R$172 in June 2022, corresponding to the difference between the amounts originally estimated by the Company.

The movement in the balance is as follows:


		(information of MW not audited)
Generation plant	Concession expiration date	Installed capacity (MW) (information of MW not audited)	Net balance of assets on December 31, 2022		Financial Update		Net balance of assets on December 31, 2023
Lot D							203
UHE Três Marias	July 2015	396.00	179			24
UHE Salto Grande	July 2015	102.00	92			12	104
UHE Itutinga	July 2015	52.00	11			1	12
UHE Camargos	July 2015	46.00	21			3	24
PCH Piau	July 2015	18.01	5			1	6
PCH Gafanhoto	July 2015	14.00	6			1	7
PCH Peti	July 2015	9.40	6			1	7
PCH Dona Rita	Sep. 2013	2.41	2			-	2
PCH Tronqueiras	July 2015	8.50	9			1	10
PCH Joasal	July 2015	8.40	7			1	8
PCH Martins	July 2015	7.70	5			1	6
PCH Cajuru	July 2015	7.20	20			3	23
PCH Paciência	July 2015	4.08	4			1	5
PCH Marmelos	July 2015	4.00	3			-	3
Others
UHE Volta Grande	Feb. 2017	380.00		-		-		-
UHE Miranda	Dec. 2016	408.00	97			13	110
UHE Jaguara	Aug. 2013	424.00	148			20	168
UHE São Simão	Jan. 2015	1,710.00	77			10	87

		3,601.70	692			93	785

The balance of R$784 represents management’s best estimate for the right to receive cash from the grantor related to the generation entities, based on the evaluation criteria set by grantor (ANEEL).

The Valuation Report on the assets is subject to inspection by ANEEL, which may request complementary documentation. As a result there may be adjustments to the amounts resulting from the valuation process - in which case the concession holder has the right of defense and reply.

The due date and form of payment of the investments made after entry into operation of the basic plant plans, which have not yet been amortized or depreciated, will be decided by the Grantor after inspection and ratification of the reimbursements amounts.

Concession grant fee - Generation concessions

The concession grant fee paid by the Company for a 30-year concession contracts No. 08 to 16/2016, related to 18 hydroelectric plants of Auction 12/2015, won by CEMIG GT, was an amount of R$2,216. The amount of the concession fee was recognized as a financial asset measured at amortized cost, as CEMIG GT has an unconditional right to receive


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the amount paid, updated by the IPCA Index and remuneratory interest (the total amount of which is equal to the internal rate of return on the project), during the period of the concession.

The changes in concession financial assets are as follows:


SPE	Plants	2022		Monetary updating		Amounts received			2023
Cemig Geração Três Marias S.A.	Três Marias		1,672		222		(178	)		1,716
Cemig Geração Salto Grande S.A.	Salto Grande		525		70		(56	)		539
Cemig Geração Itutinga S.A.	Itutinga		198		30		(24	)		204
Cemig Geração Camargos S.A.	Camargos		148		22		(18	)		152
Cemig Geração Sul S.A.	Coronel Domiciano, Joasal, Marmelos, Paciência e Piau		195		31		(25	)		201
Cemig Geração Leste S.A.	Dona Rita, Ervália, Neblina, Peti, Sinceridade e Tronqueiras		133		23		(19	)		137
Cemig Geração Oeste S.A.	Cajurú, Gafanhoto e Martins		79		14		(11	)		82

Total			2,950		412		(331	)		3,031


SPC	Plants	2021		Interest		Amounts received			2022
CEMIG Geração Três Marias S.A.	Três Marias		1,584		254		(166	)		1,672
CEMIG Geração Salto Grande S.A.	Salto Grande		497		80		(52	)		525
CEMIG Geração Itutinga S.A.	Itutinga		187		33		(22	)		198
CEMIG Geração Camargos S.A.	Camargos		140		25		(17	)		148
CEMIG Geração Sul S.A.	Coronel Domiciano, Joasal, Marmelos, Paciência and Piau		184		34		(23	)		195
CEMIG Geração Leste S.A.	Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras		125		26		(18	)		133
CEMIG Geração Oeste S.A.	Cajurú, Gafanhoto and Martins		75		15		(11	)		79

Total			2,792		467		(309	)		2,950


SPC	Plants	2020		Interest		Amounts received			2021
CEMIG Geração Três Marias S.A.	Três Marias		1,447		287		(150	)		1,584
CEMIG Geração Salto Grande S.A.	Salto Grande		454		90		(47	)		497
CEMIG Geração Itutinga S.A.	Itutinga		171		37		(21	)		187
CEMIG Geração Camargos S.A.	Camargos		128		27		(15	)		140
CEMIG Geração Sul S.A.	Coronel Domiciano, Joasal, Marmelos, Paciência and Piau		167		38		(21	)		184
CEMIG Geração Leste S.A.	Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras		114		27		(16	)		125
CEMIG Geração Oeste S.A.	Cajurú, Gafanhoto and Martins		69		17		(11	)		75

Total			2,550		523		(281	)		2,792

Account for compensation of variation of parcel A items (CVA) and Other financial components

Sector financial assets and liabilities refer to the differences between: (i) the non-manageable costs expected by ANEEL and recognized in the tariff at the beginning of the tariff period, and (ii) the non-manageable costs actually incurred over the period of validity of the tariff. These differences constitute an asset, when the costs incurred are higher than the expected costs in the tariff calculation; and a liability when the costs incurred are lower than the expected costs. The variations found are inflation-adjusted, based on the Selic rate, and compensated in the subsequent tariff adjustments.


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The amendment to the concession contract guarantee to the Company the right to the indemnity of the assets and/or the liabilities not amortized by the termination of the concession.

The balance of these sector financial assets and liabilities, which are presented at net value at net basis. The values disclosed may exhibit positive or negative amounts, upon their classification as assets or liabilities, respectively. Presentation of items at net value is required, wherein assets and liabilities are disclosed according their nature. The tariff adjustments that have been authorized or are to be ratified, are as follows:


Sectorial financial assets	Dec. 31, 2022			Additions			Amortization			Remuneration			Transfer (2)			Dec. 31, 2023			Amortization			Constitution			Current			Non-current
CVA assets		(345	)		1,597			(2,527	)		260			330			(685	)		(434	)		(251	)		(584	)		(101	)

Energy acquisition (CVA energy)		(1,787	)		1,213			(1,223	)		161			527			(1,109	)		(443	)		(666	)		(837	)		(272	)
Itaipu energy costs		594			(40	)		(455	)		44			(114	)		29			143			(114	)		75			(46	)
Program of Incentives for Alternative Electricity Sources – PROINFA		31			-			(42	)		1			(10	)		(20	)		(19	)		(1	)		(20	)		-
Transport basic charges		215			388			(265	)		40			35			413			114			299			291			122
Transport of Itaipu supply		18			60			(20	)		4			5			67			14			53			45			22
System service charges – ESS		583			(24	)		(380	)		7			(248	)		(62	)		(242	)		180			(136	)		74
CDE		1			-			(142	)		3			135			(3	)		(1	)		(2	)		(2	)		(1	)
Other sectoral financial assets		1,289			1,254			(1,388	)		205			130			1,490			523			967			1,077			413
Quotas from nuclear energy		105			103			(86	)		16			-			138			51			87			102			36
Neutrality of Parcel A		203			168			(51	)		5			61			386			(29	)		415			363			23
Energy over contracting (1)		750			643			(529	)		58			-			922			349			573			688			234
Tariff refunds		(71	)		-			-			-			(17	)		(88	)		(25	)		(63	)		(67	)		(21	)
Other		302			340			(722	)		126			86			132			177			(45	)		(9	)		141

Total sectorial financial assets		944			2,851			(3,915	)		465			460			805			89			716			493			312

Sectorial financial liabilities

CVA liabilities		-			(1,706	)		2,380			(343	)		(331	)		-			-			-			-			-

Energy acquisition (CVA energy)		-			(1,179	)		1,941			(234	)		(528	)		-			-			-			-			-
Itaipu energy costs		-			(109	)		-			(5	)		114			-			-			-			-			-
Program of Incentives for Alternative Electricity Sources – PROINFA		-			(31	)		25			(4	)		10			-			-			-			-			-
Transport basic charges		-			-			35			-			(35	)		-			-			-			-			-
Transport of Itaipu supply		-			-			5			-			(5	)		-			-			-			-			-
System service charges – ESS		-			(506	)		371			(113	)		248			-			-			-			-			-
CDE		-			119			3			13			(135	)		-			-			-			-			-

Other sector financial liabilities		-			(729	)		908			(47	)		(132	)		-			-			-			-			-

Neutrality of Parcel A		-			(58	)		124			(5	)		(61	)		-			-			-			-			-
Tariff refunds		-			(88	)		73			(2	)		17			-			-			-			-			-
Other		-			(583	)		711			(40	)		(88	)		-			-			-			-			-

Total sector financial liabilities		-			(2,435	)		3,288			(390	)		(463	)		-			-			-			-			-


Total sectoral financial assets and liabilities (net)		944			416			(627	)		75			(3	)		805			89			716			493			312

(1)

Reversal of the over contracting amounts passed on to consumers in the 2018 and 2019 tariff adjustments because they were previously recognized by ANEEL as involuntary over contracting, made possible by the publication of the involuntariness orders, recognizing over contracting as voluntary. Regarding the amount constituted in the period, there is a high volume of surplus energy, mainly due to the growing increase in the energy injected by MMGD facilities, settled at a low PLD.


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(2)

In addition to the transfers between sectoral financial assets and liabilities, there was a transfer of R$1,550 to the "Other assets" group.

Changes in balances of sector financial assets and liabilities are as follow:



Balance on December 31, 2020	(98	)

Additions	1,908
Amortization	238
Transfer of other liabilities (1)	(15	)
Updating - Selic rate (Note 29)	64

Balance on December 31, 2021	2,097

Additions	(386	)
Amortization	(761	)
(-) Proceeds from loan - Water scarcity account	(191	)
Updating - Selic rate (Note 29)	185

Balance on December 31, 2022	944

Additions	416
Amortization	(629	)
(-) Proceeds from loan - Water scarcity account	(343	)
Updating - Selic rate (Note 29)	76

Balance on December 31, 2023	464

(11)

Amounts relating to the reversal of the credits that could not be returned to customers in final billing, due to moderation of tariffs, as specified in §6 of Article 88 of REN 414/2010, included by REN 714/2016.

Accounting policy

Energy Distribution and Gas segment

The portion of the infrastructure to be amortized during the concession period is recorded as an intangible asset, as provided for in IFRIC 12 - Concession contracts, and subsequently measured at cost less amortization. The amortization rates reflect the expected pattern of their consumption and are measured based on the asset carrying amount using the straight-line method, using the rates based on the expected useful life of the energy distribution assets, that are used by the Grantor during the tariff process.

The portion of the value of the assets which will not be fully amortized by the end of the concession is reported as a financial asset because it is an unconditional right to receive cash or another financial asset directly from the grantor.

Transmission segment

Only after the satisfaction of the performance obligation to operate and maintain the infrastructure, the contract asset is classified as a financial asset (accounts receivable - concessionaires - energy transport), considering that the receipt of the consideration only depends on the passage of time.

Financial portion of the transmission concession contracts renewed in accordance with Law 12,783/2013

Corresponding to the financial portion of remuneration for the assets related to the Existing Basic System Network (RBSE), that represents the amount payable from the date of the extension of the concessions until it was incorporated into the tariff (January 1, 2013 until June 30, 2017), to be collected over a period of eight years.

The amounts to be received are subject to the applicable regulatory rules in the tariff process, including the mechanisms that monitor and measure efficiency. In this new context, the unconditional right to consideration depends on the satisfaction of the performance obligation to operate and maintain, and is, thus, characterized as a contract asset. It is classified to financial assets only after an authorizing dispatch by ANEEL.

Additional information on the accounting policies relating to assets linked to the transmission activity is described in note 14.


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Generation segment

The concession fee right paid for the concession contracts granted by the Brazilian Grantor (ANEEL) in November 2015, has been classified as a financial asset, at amortized cost, as it represents an unconditional right to receive cash, adjusted by the IPCA index, and remuneratory interest, during the period of the concession.

For the extension of the concession of the hydroelectric plants participating in the MRE, relating to the compensation for non-hydrological risks specified in Law 14,052/2020, an intangible asset was recognized, considering the nature of the right, which enables, by provision of law, the plants to be used for a period longer than the one specified in their original contracts, during the contract extension, the Company is entitled to sell the energy generated without constraint. The asset was measured at fair value in the initial recognition.

The asset is amortized by the straight-line method for the new remaining period of the concession. For more details see Note 17.

Estimations and judgments

The electricity distribution activity

The amortization rates reflect the expected pattern of their consumption and are measured based on the asset carrying amount using the straight-line method, using the rates based on the expected useful life of the energy distribution assets, that are used by the grantor during the tariff process.

The part of the value of the assets that will not be completely amortized by the end of the concession agreement period is reported as a Financial asset, since it is an unconditional right to receive cash or other financial asset directly from the concession-granting power. This component is valued on the basis of New replacement cost, which is equivalent to fair value – having as a reference the amounts approved by ANEEL for the remuneration base of assets in tariff review processes. The amounts added after the Periodic Tariff Review process are estimated, and may be altered, for purposes of decision on compensation payable at the end of the concession period.

The calculations made are in line with the regulations in force. If the concession is terminated, for any reason, the remaining balances of these assets or liabilities that have not been passed through to the tariff are to be included in the basis for compensation at the end of the concession life time.

The gas distribution activity

The amortization reflects the pattern of consumption of the rights acquired. It is calculated on the balance of the assets linked to the concession, by the straight-line method, based on the application of rates which take into account the expected useful life of the gas distribution assets, which are taken into consideration by the grantor during the process of tariff review.

The part of the value of the assets that will not be completely amortized by the end of the concession period is reported as a Financial asset, because it is an unconditional right to receive cash or other financial asset directly from the concession-granting power, or a party appointed by it. This portion is valued based on its fair value corresponding to its cost of acquisition updated by the Expanded National Consumer Price Index (IPCA), as determined by the concession contract.


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14.

CONCESSION CONTRACT ASSETS


	2023		2022
Distribution – Infrastructure assets under construction		3,431		1,850
Gas – Infrastructure assets under construction		338		117
Transmission – National Grid (‘BNES’ - Basic Network of the Existing System) - Law 12,783/13		1,723		1,927
Transmission – Assets remunerated by tariff		3,034		2,810

		8,526		6,704


Current		850		728
Non-current		7,676		5,976

Changes in concession contract assets are as follows:


	Transmission			Distribution			Gas			Total
Balances at December 31, 2020		3,745			1,142			93			4,980

Additions		252			1,757			50			2,059
Inflation adjustment		660		-			-				660
Results of the Periodic Tariff Review		237		-			-				237
Amounts received		(612	)	-			-				(612	)
Disposals		(5	)	-				(3	)		(8	)
Others additions	-			-				6			6
Transfers to financial assets	-				(110	)	-				(110	)
Transfers to intangible assets	-				(851	)		(51	)		(902	)
Contract assets arising from business combination		81		-			-				81
Impairment	-				(11	)	-				(11	)

Balances at December 31, 2021		4,358			1,927			95			6,380

Additions		407			3,098			61			3,566
Inflation adjustment		575			-			-			575
Results of the Periodic Tariff Review		-			-			-			-
Amounts received		(608	)		-			-			(608	)
Disposals		-			-			(3	)		(3	)
Others additions		5			-			-			5
Transfers to financial assets		-			(762	)		-			(762	)
Transfers to intangible assets		-			(2,412	)		(36	)		(2,448	)
Contract assets arising from business combination		-			-			-			-
Impairment		-			(1	)		-			(1	)

Balances at December 31, 2022		4,737			1,850			117			6,704

Additions		242			3,478			270			3,990
Inflation adjustment		524			-			-			524
Amounts received		(746	)		-			-			(746	)
Disposals		-			-			-			-
Others additions		-			-			-			-
Transfers to financial assets		-			(364	)		-			(364	)
Transfers to intangible assets		-			(1,541	)		(49	)		(1,590	)
Impairment		-			8			-			8

Balances at December 31, 2023		4,757			3,431			338			8,526


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The amount of additions in the period ended December 31, 2023 includes R$70 borrowing costs, as presented in note 21. The average rate to determine the amount of borrowing costs was 11.75% (11.36% in 2022). The nature of the additions to contract and intangible assets is shown in note 28b.

The capitalization of financial charges is a non-cash transaction, and therefore is not reflected in the Cash Flow Statements.

The transmission activity

For transmission concessions, the consideration to be paid to the Company arises from the concession contracts, as follows:


	2023		2022
Current
Concession contract - 004/05 (d)		28		29
Concession contract - 079/00 (b)		45		47
Concession contract - 006/11 (c)		9		8
Concession contract - 006/97 (a)
National Grid (‘BNES’ - Basic Network of the Existing System)		466		408
National Grid - new facilities (RBNI)		302		236

		850		728

Non-current
Concession contract - 004/05 (d)		74		81
Concession contract - 079/00 (b)		118		143
Concession contract - 006/11 (c)		100		85
Concession contract - 006/97 (a)
National Grid (‘BNES’ - Basic Network of the Existing System)		1,257		1,519
National Grid - new facilities (RBNI)		2,358		2,182


		3,907		4,010

		4,757		4,738

Concession contract no. 006/1997

The contract regulates the public service operation of the transmission facilities classified as part of the Basic Grid, in accordance with Law 9.074/1995 and pertinent regulations, in effect until December 31, 2042.

The changes implemented in these facilities are treated as Basic Network New Facilities (BNE). Its cash flow refers to the return on investments in reinforcements and improvements to the transmission infrastructure, and is discounted to present value and, where applicable, includes the portion of investments made and not amortised by the end of the concession term.

ANEEL Dispatch 402 of February 14, 2023 postponed the Periodic Tariff Review (Revisão Tarifária Periódica – RTP) of the Permitted Annual Revenue (Receita Anual Permitida – RAP) of the transmission concessions that had been extended under Law 12783/2013. Thus, for 2023 there was the ordinary process of annual readjustment of transmission revenue, established by Ratifying Resolution (Resolução Homologatória) No. 3.216 of 4 July 2023. The financial impact of the new RAPs had no material impact on the calculation of contract assets, since there were no significant changes to the assumptions used.

On December 5, 2023, ANEEL approved Order No. 4,675, recognizing administrative appeals filed against ReN No. 3,216/2023, which led to changes in the RAP result for the 2023-2024 cycle, the effects of which will be reflected in the 2024-2025 cycle. The effects of the claims that were accepted, in full or in part, represent an increase of 1.16% in the RAPs approved in ReH No. 3.216/2023 (from R$1,084,670 to R$1,097,264) and a reduction in the Adjustment


ANNUAL REPORT AND FORM 20-F \| 2023	F-48

Portion (PA) of 35.5% (from R$39,303 to R$25,350). The effects of the changes are being analyzed and no material impacts are expected, considering that there were no significant changes in the assumptions used.

National Grid Assets- ‘BNES’ - the regulatory cost of capital updating

On January 06, 2021, the Brazilian General Attorney's Office issued a legal opinion about the effects of the reversal of the court decision that had suspended the cost of equity remuneration of the transmission agents determined by Ministerial Order 120/2016, concluded that it must be updated by the cost of equity rate until July 1, 2020, which is the date that the payment took place, and must be included to RAP as of July 1, 2020 (2020-2021 cycle) for eight years.

On April 22, 2021, ANEEL published Resolution 2,852, which altered Resolution 2,712/2020, defining, among other provisions, the financial component referred to. Thus, the cost capital associated with the financial components was incorporated into the calculation of the periodic review processes of 2018 deciding the RAP of the transmission concessions that were extended under Law 12,783/2013. This caused 2 effects: (i) A new value for the component to be considered in the RAP of the tariff cycles for 2020-2021 to 2025-2026; and (ii) a residual value for the difference between the amount paid to the transmission companies in the 2017-2018 and 2019-2020 tariff cycles and the amount payable after the injunctions were overturned.

Thus, the debt balance of this component was recalculated, using remuneration at the rate of cost capital, up to the date of actual payment (July 1, 2020), discounted present value of the amount paid.

In addition, ANEEL opted the alternative of ‘reprofiling’ these payments, for payment gradually over a period of 8 years, guaranteeing the net present value of the transaction.

In the proposed profile the minimum payment is made in the 2021-2022 cycle, with zero amortization of the debt portion of the balance; in the 2022-2023 cycle there is amortization at a rate of 3.0%, so as to amortize part of the debt and keep the level of payments stable; and there are then constant payments over the cycles of 2023-2024 to 2027-2028, with amortization rates of 16.11% per year.

ANEEL Order 402, of February 14, 2023, postponed to 2024 the RTP of the RAP of the transmission concessions extended under Law No. 12.783/2013. ReN No. 3,216/2023 established the annual revenues, which were subsequently modified by Order No. 4,675 of December 5, 2023. These regulations had no impact on this financial component.

Concession contract no. 079/00

The contract regulates commercial operation of public transmission service, comprising construction, maintenance and operation of transmission of the following facilities: The Itajubá 3 Substation; the Itajubá 3 - Poços de Caldas Transmission Line; and the Itajubá 3-Cachoeira Paulista Transmission Line, in effect until October 4, 2034.

The indexer used for adjustment of the contract is the General Market Prices Index (Índice Geral de Preços do Mercado - IGPM).

The next Periodic Tariff Revision (RTP) of the enhancements that have been approved will take place in June 2024, with effect from July 1st, 2024.

Concession contract no. 006/2011

The contract regulates commercial operation of public transmission service, comprising construction, maintenance and operation of the Sete Lagoas 4 substation, in effect until June 15, 2041.

The indexer used for adjustment of the contract is the Expanded National Consumer Price (‘Índice de Preços ao Consumidor Amplo’ - IPCA).


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Concession contract no. 004/2005

The contract regulates the concession for the second circuit 345kV transmission facility which runs between the Furnas and Pimenta substations, a distance of approximately 75 km, for a period of 30 years from March 2005. For making the transmission facilities available for commercial operation, Centroeste will receive the Permitted Annual Revenue (RAP), adjusted annually, in the first 15 years of commercial operation. In the 16th year of commercial operation, its RAP will be reduced by 50%, until the end of the concession.

The indexer used for adjustment of the contract is the IGP-M (Índice Geral de Preços do Mercado - General Market Prices Index).

Accounting policy

Energy Distribution activity

Assets linked to concession infrastructure still under construction are initially recorded as contract assets, considering the right of the Company to charge for the services provided to customers or receive an indemnity at the end of the concession period for assets not yet amortized. In accordance with IFRS 15, the counterpart amounts of construction revenues equivalent to the new assets are initially recorded as contract assets, measured at acquisition cost including capitalized borrowing costs.

After the assets start operation, the conclusion of the performance obligation linked to construction is recorded, and the assets are split between financial assets and intangible assets. Assets amortized over the term of the concession are classified as intangible assets. The portion of the assets not amortized within the concession period, which will be subject to compensation at the end of the concession, is classified as a financial asset.

Transmission activity

During the term of the concession, the company receives the Annual Permitted Revenue (RAP), which remunerates the investment made in the transmission lines, as well as the improvement, operation and maintenance services. The transmission revenue is recognized as the corresponding performance obligations are met, namely: (i) availability and construction and (ii) operation and maintenance. The amounts are recognized in the Company's income statement, against the contract asset. Subsequently, when the credit notice is issued by the ONS, the RAP is invoiced and the balances are transferred from Contract Assets to Consumer Receivables.

When construction of transmission infrastructure is concluded the assets related to the transmission infrastructure remains classified as contract assets, considering the dependence on the satisfaction of a performance obligations during the concession period, represented by the availability/construction, operation and maintenance of the transmission lines, thus there is no unconditional right to receive the consideration for the construction services unless the Company operates and maintains the infrastructure.

The costs related to the infrastructure construction are recognized as incurred in the statement of income.

Additional information about the accounting practices related to the assets related to the transmission segment are described in note 14.

Gas distribution activity

New assets are classified initially as contract assets, measured at acquisition cost, including capitalized borrowing costs. When they start operation, they are split into financial assets and intangible assets.

The Company's accounting policy in relation to impairment for the contract assets of all activities can be found in note 3.6.


ANNUAL REPORT AND FORM 20-F \| 2023	F-50

Estimations and judgments

Transmission activity

Construction and improvement revenues are recognized according to the stage of completion of the work, based on the costs actually incurred, plus the construction margin. The margin allocated to the infrastructure construction performance obligation is defined based on management's best estimates and expectations of the profitability of the projects implemented by the Company.

When the tariff changes during the periodic tariff reviews, the contract asset is remeasured, bringing future RAPs to present value at the implicit rate originally identified, comparing the result found with the balance recorded, in order to recognize the gain or loss in profit or loss.

Of the amounts invoiced for transmission concession revenue, represented by the RAP, the portion relating to the fair value of the operation and maintenance of the assets is recognized against the income statement for the year and the portion relating to construction revenue, originally recorded when the assets were formed, is written off against contract assets. Additions due to expansion and reinforcement generate additional cash flow and are therefore incorporated into the balance of the contract asset.

The portion of the assets that is not recorded in financial assets is valued based on the New Replacement Value, equivalent to fair value, having as a reference the amounts homologated for the Remuneration Base of Assets in the processes of tariff review. The book value of assets substituted is written down, with counterpart in the Income and loss account, and taken into consideration by the grantor in the next tariff review cycle.

The discount rate related to the financial component of the concession contract asset represents the Company's best estimate for the financial remuneration of the investments in the transmission infrastructure, which represents the approximate percentage of what would be the cash price to be charged for the infrastructure built or improvement by the concessionaire in a sale transaction. The implicit rate for pricing the financial component of the concession contract asset is established at the beginning of the investments and considers the credit risk of the counterparties.

15.

INVESTMENTS


	Control	2023		2022

Guanhães Energia S.A. ("Guanhães Energia")	Jointly controlled		222		183
Hidrelétrica Cachoeirão S.A. ("Hidrelétrica Cachoeirão")	Jointly controlled		47		47
Hidrelétrica Pipoca S.A. ("Hidrelétrica Pipoca")	Jointly controlled		47		47
Madeira Energia ("MESA") (3)	Affiliated		-		10
Fundo de Investimento em Participações Melbourne Multiestratégia ("FIP Melbourne") (3)	Affiliated		-		8
Retiro Baixo Energética S.A. ("Retiro Baixo") (4)	Jointly controlled		-		185
Aliança Norte Participações S.A. ("Aliança Norte") (2)	Jointly controlled		536		576
Baguari Energia S.A. ("Baguari Energia") (4)	Jointly controlled		-		160
Aliança Geração de Energia S.A. ("Aliança Geração")	Jointly controlled		1,172		1,194
Amazônia Energia Participações S.A. ("Amazônia Energia") (2)	Jointly controlled		819		886
Paracambi Energética S.A. ("Paracambi") (antiga Lightger)	Jointly controlled		112		134
Transmissora Aliança de Energia Elétrica S.A. ("Taesa")	Jointly controlled		1,565		1,549
UFVs (1)	Jointly controlled		112		128

Total of investments			4,632		5,107

Total			4,632		5,107

(1)

Set of photovoltaics business, in which the investee Cemig Sim has a interest.

(2)

Indirect interest in the Belo Monte plant through these investees.

(3)

On March 20, 2023, Cemig GT completed the sale of its direct and indirect ownership interest in the capital stock of Mesa to Furnas Centrais Elétricas S.A. ("Furnas"). More details will follow in the course of this explanatory note.

(4)

Cemig GT concluded the sale of its stake in the share capital of the companies Baguari Energia and Retiro Baixo to Furnas, on October 6 and November 22, 2023, respectively. Further details can be found in this note.


ANNUAL REPORT AND FORM 20-F \| 2023	F-51


Investee	2022		Gain (loss) by equity method (Income statement)			Dividends			Additions / Acquisitions		(Others)			2023
Hidrelétrica Cachoeirão		47		12			(12	)		-		-			47
Guanhães Energia		183		39			-			-		-			222
Hidrelétrica Pipoca		47		15			(15	)		-		-			47
MESA (3)		10		(10	)		-			-		-			-
FIP Melbourne (3)		8		22			-			-		(30	)		-
Paracambi (former Lightger)		134		15			(26	)		-		(11	)		112
Baguari Energia (4)		160		12			(12	)		-		(160	)		-
Amazônia Energia (1)		886		(67	)		-			-		-			819
Aliança Norte (1)		576		(40	)		-			-		-			536
Taesa		1,549		278			(262	)		-		-			1,565
Aliança Geração		1,194		136			(158	)		-		-			1,172
Retiro Baixo (4)		185		5			-			-		(191	)		(1	)
UFV Janaúba Geração de Energia Elétrica Distribuída S.A. ("UFV Janaúba")		3		2			-			-		-			5
UFV Corinto Geração de Energia Elétrica Distribuída S.A. ("UFV Corinto")		8		1			(1	)		-		-			8
UFV Manga Geração de Energia Elétrica Distribuída S.A. ("UFV Manga")		11		2			(1	)		-		-			12
UFV Bonfinópolis II Geração de Energia Elétrica Distribuída S.A. ("UFV Bonfinópolis II")		5		-			-			-		-			5
UFV Lagoa Grande Geração de Energia Elétrica Distribuída S.A. ("UFV Lagoa Grande")		15		2			(2	)		-		-			15
UFV Lontra Geração de Energia Elétrica Distribuída S.A. ("UFV Lontra")		18		2			(2	)		-		-			18
UFV Mato Verde Geração de Energia Elétrica Distribuída S.A. ("UFV Mato Verde")		6		1			(1	)		-		-			6
UFV Mirabela Geração de Energia Elétrica Distribuída S.A. ("UFV Mirabela")		4		1			-			-		-			5
UFV Porteirinha I Geração de Energia Elétrica Distribuída S.A. ("UFV Porteirinha I")		4		1			(1	)		-		-			4
UFV Porteirinha II Geração de Energia Elétrica Distribuída S.A. ("UFV Porteirinha II")		7		1			(1	)		-		-			7
UFV Brasilândia Geração de Energia Elétrica Distribuída S.A. ("UFV Brasilândia")		15		2			(2	)		-		-			15
Apolo I SPE Empreendimentos e Energia S.A. ("UFV Apolo I")		7		-			-			-		(1	)		6
Apolo II SPE Empreendimentos e Energia S.A. ("UFV Apolo I")		-		-			-			6		-			6
G2 Campo Lindo I Energia S.A. ("UFV Campo Lindo I") (2)		8		-			-			10		(18	)		-
G2 Campo Lindo II Energia S.A. ("UFV Campo Lindo II") (2)		9		-			-			10		(18	)		1
G2 Olaria I Energia S.A. ("UFV Olaria I") (2)		8		-			-			10		(18	)		-
Total of investments		5,107		432			(496	)		36		(447	)		4,632

Total		5,107		432			(496	)		36		(447	)		4,632

(1)

Indirect participation in Belo Monte Dam through these investees.

(2)

On July 20, 2023, control of these investees was acquired and they were consolidated by the Company. Therefore, the Company’s interest in these investees is reflected in the Company’s consolidated assets and liabilities.

(3)

(4)

The sale of Baguari Energia was completed on October 6, 2023 and the sale of Retiro Baixo was completed on November 22, 2023. The investments writ-off is presented in the "Other" column depicted above .Further details can be found in this note.

For the fiscal year ended on December 31, 2023, the Company's management evaluated whether there were indications of possible devaluation of assets, as referred to in IAS 36 - Impairments of Assets. The net book value of the investments was found to be recoverable.

Additionally, in relation to the above, the Company’s management has assessed the risk threatening all its investments ability to continue as a going concern, taking substantially into consideration: the economic-financial clauses of Cemig D and Gasmig; the guarantee of revenues of the transmission companies; the protection against force majeure reduction in regulated generation contracts; and all the legal measures that have been applied by the federal government and by Aneel - and has concluded that the Company and its subsidiaries’ will continue to operate as a going concern.


ANNUAL REPORT AND FORM 20-F \| 2023	F-52

Changes in investments in subsidiaries, jointly controlled entities and affiliates:



Investee	2021			Gain (loss) by equity method (Income statement)			Dividends			Additions / Acquisitions		Other			2022

Hidrelétrica Cachoeirão		59			15			(27	)		-		-			47
Guanhães Energia		125			58			-			-		-			183
Hidrelétrica Pipoca		47			16			(16	)		-		-			47
MESA (3)		-			10			-			-		-			10
FIP Melbourne (3) (5)		-			169			-			-		(161	)		8
Paracambi (formely Lightger)		124			17			(7	)		-		-			134
Baguari Energia		168			22			(30	)		-		-			160
Amazônia Energia (4)		933			(47	)		-			-		-			886
Aliança Norte (4)		609			(33	)		-			-		-			576
Ativas		16			(1	)		-			-		(15	)		-
Taesa		1,580			305			(336	)		-		-			1,549
Aliança Geração		1,141			104			(48	)		-		(3	)		1,194
Retiro Baixo		201			22			(38	)		-		-			185
UFV Janaúba Geração de Energia Elétrica Distribuída S.A. (‘UFV Janaúba’)		3			1			(1	)		-		-			3
UFV Corinto Geração de Energia Elétrica Distribuída S.A. (‘UFV Corinto’) (2)		9			2			(2	)		-		(1	)		8
UFV Manga Geração de Energia Elétrica Distribuída S.A. (‘UFV Manga’) (2)		11			3			(2	)		-		(1	)		11
UFV Bonfinópolis II Geração de Energia Elétrica Distribuída S.A. (‘UFV Bonfinópolis II’) (2)		6			1			(1	)		-		(1	)		5
UFV Lagoa Grande Geração de Energia Elétrica Distribuída S.A. (‘UFV Lagoa Grande’) (2)		15			3			(2	)		-		(1	)		15
UFV Lontra Geração de Energia Elétrica Distribuída S.A. (‘UFV Lontra’) (2)		18			4			(3	)		-		(1	)		18
UFV Mato Verde Geração de Energia Elétrica Distribuída S.A. (‘UFV Mato Verde’) (2)		6			1			(1	)		-		-			6
UFV Mirabela Geração de Energia Elétrica Distribuída S.A. (‘UFV Mirabela’) (2)		4			1			(1	)		-		-			4
UFV Porteirinha I Geração de Energia Elétrica Distribuída S.A. (‘UFV Porteirinha I’) (2)		5			1			(1	)		-		(1	)		4
UFV Porteirinha II Geração de Energia Elétrica Distribuída S.A. (‘UFV Porteirinha II’) (2)		7			1			(1	)		-		-			7
UFV Brasilândia Geração de Energia Elétrica Distribuída S.A. (‘UFV Brasilândia’) (2)		15			3			(2	)		-		(1	)		15
Apolo I SPE Empreendimentos e Energia S.A. (‘UFV Apolo I’)		-			1			-			6		-			7
G2 Campo Lindo I Energia S.A. (‘UFV Campo Lindo I’)		-			1			-			7		-			8
G2 Campo Lindo II Energia S.A. (‘UFV Campo Lindo II’)		-			2			-			7		-			9
G2 Olaria I Energia S.A. (‘UFV Olaria I’)		-			1			-			7		-			8
Axxiom		4			(4	)		-			-		-			-
Itaocara		-			(3	)		-			10		(7	)		-

Total investment		5,106			676			(519	)		37		(193	)		5,107

Itaocara - Uncovered liability		(21	)		7			-			14		-			-
MESA (3) - Loss provisions (1)		(162	)		162			-			-		-			-

Total		4,923			845			(519	)		51		(193	)		5,107

(1)

In June 2022, the provision related to the Company's contractual obligations assumed with the investee and the other shareholders was reversed. Further details are disclosed in this note.

(2)

On May 23, 2022, the reduction of capital stock of these UFVs was approved by means of an Extraordinary General Assembly.

(3)

Indirect participation in the Santo Antônio Plant through these investees.

(4)

Indirect participation in Belo Monte Dam through these investees.

(5)

On September 12, 2022, AGPar made the payment associated with the settlement arising from Arbitral Award CCBC-86/2016 to the Melbourne Fund. Thereafter, the Company recognized the receivable against income. Further details are provided throughout this note.


ANNUAL REPORT AND FORM 20-F \| 2023	F-53



Investee	2020			Gain (loss) by equity method (Income statement)			Dividends			Additions / acquisitions		Losses on investments			Other			2021

Hidrelétrica Cachoeirão		53			14			(8	)		-		-			-			59
Guanhães Energia		131			(6	)		-			-		-			-			125
Hidrelétrica Pipoca		36			11			-			-		-			-			47
Madeira Energia (Santo Antônio plant)		209			(209	)		-			-		-			-			-
FIP Melbourne (Santo Antônio plant)		158			(158	)		-			-		-			-			-
Lightger		131			5			(12	)		-		-			-			124
Baguari Energia		159			31			(22	)		-		-			-			168
Amazônia Energia (Belo Monte plant)		965			(32	)		-			-		-			-			933
Aliança Norte (Belo Monte plant)		631			(22	)		-			-		-			-			609
Ativas Data Center		17			(1	)		-			-		-			-			16
Taesa		1,467			481			(368	)		-		-			-			1,580
Aliança Geração		1,167			199			(225	)		-		-			-			1,141
Retiro Baixo		195			13			(7	)		-		-			-			201
UFV Janaúba Geração de Energia Elétrica Distribuída		10			1			(2	)		-		-			(6	)		3
UFV Corinto Geração de Energia Elétrica Distribuída		10			-			(1	)		-		-			-			9
UFV Manga Geração de Energia Elétrica Distribuída		11			2			(2	)		-		-			-			11
UFV Bonfinópolis II Geração de Energia Elétrica Distribuída		6			-			-			-		-			-			6
UFV Lagoa Grande Geração de Energia Elétrica Distribuída		15			2			(2	)		-		-			-			15
UFV Lontra Geração de Energia Elétrica Distribuída		17			1			-			-		-			-			18
UFV Mato Verde Geração de Energia Elétrica Distribuída		6			1			(1	)		-		-			-			6
UFV Mirabela Geração de Energia Elétrica Distribuída		4			1			(1	)		-		-			-			4
UFV Porteirinha I Geração de Energia Elétrica Distribuída		6			-			(1	)		-		-			-			5
UFV Porteirinha II Geração de Energia Elétrica Distribuída		7			1			(1	)		-		-			-			7
UFV Brasilândia Geração de Energia Elétrica Distribuída (1)		-			4			(1	)		12		-			-			15
Axxiom Soluções Tecnológicas		4			(2	)		—			2		-			-			4

Total of investments		5,415			337			(654	)		14		-			(6	)		5,106

Itaocara - equity deficit (2)		(30	)		7			-			42		(40	)		-			(21	)
Madeira Energia (Santo Antônio Plant) - provisions to losses (3)		-			(162	)		-			-		-			-			(162	)

Total		5,385			182			(654	)		56		(40	)		(6	)		4,923

(1)

Includes the amount of R$2 of the acquisition of the jointly controlled subsidiary UFV Brasilândia.

(2)

On December 1, 2021, CEMIG GT injected capital into UHE Itaocara S.A., in the amount of R$40. This amount is proportional to its shareholding interest in the investee and was recognized under Other expenses in the Company’s income statement. Further, R$1 was injected to cover the expenses specified in the 2021 budget of the investee.

(3)

A loss was recognized for extension of the contractual obligations which the Company had assumed to the investee and the other shareholders. On December 31, 2021 this amount was R$162.

Main information on the subsidiaries, jointly controlled entities and affiliates, not adjusted for the percentage represented by the Company’s ownership interest:


ANNUAL REPORT AND FORM 20-F \| 2023	F-54


			2023						2022						2021
Investee	Numbers of shares		Cemig interest (%)		Share capital		Equity		Cemig interest (%)		Share capital		Equity		Cemig interest (%)		Share capital		Equity
Cemig Geração e Transmissão		2,896,785,358		100.00		5,474		10,703		100.00		5,474		8,893		100.00		4,124		7,755
Mesa		24,796,536,323		-		-		-		7.53		12,202		229		15.51		10,620		1,492
Hidrelétrica Cachoeirão		35,000,000		49.00		35		96		49.00		35		96		49.00		35		120
Guanhães Energia		548,626,000		49.00		549		419		49.00		549		373		49.00		549		255
Hidrelétrica Pipoca		41,360,000		49.00		41		97		49.00		41		95		49.00		41		95
Baguari Energia		26,157,300,278		-		-		-		69.39		187		231		69.39		187		243
Parajuru		35,000,000		100.00		35		92		100.00		86		158		100.00		86		128
Volta do Rio		180,000,000		100.00		180		208		100.00		275		248		100.00		275		207
Paracambi (antiga Lightger)		79,078,937		49.00		57		83		49.00		79		123		49.00		79		98
Aliança Norte		41,949,320,044		49.00		1,210		1,007		49.00		1,210		1,084		49.00		1,209		1,148
Amazônia Energia (1)		1,322,897,723		74.50		1,323		1,099		74.50		1,323		1,189		74.50		1,323		1,252
Aliança Geração		1,291,582,500		45.00		1,291		2,046		45.00		1,291		2,039		45.00		1,291		1,858
Retiro Baixo		225,350,000		-		-		-		49.90		225		319		49.90		225		346
Itaocara		156,259,500		49.00		207		15		49.00		207		15		49.00		156		(42	)
Cemig Baguari		406,000		100.00		-		-		100.00		-		-		100.00		-		-
CEMIG Geração Três Marias		1,291,423,369		-		-		-		100.00		1,291		1,728		100.00		1,291		1,652
CEMIG Geração Salto Grande		405,267,607		-		-		-		100.00		405		562		100.00		405		527
Cemig Geração Itutinga		151,309,332		100.00		151		228		100.00		151		231		100.00		151		212
Cemig Geração Camargos		113,499,102		100.00		113		168		100.00		113		183		100.00		113		165
Cemig Geração Sul		148,146,505		100.00		148		255		100.00		148		252		100.00		148		215
Cemig Geração Leste		100,568,929		100.00		101		158		100.00		101		168		100.00		101		148
Cemig Geração Oeste		60,595,484		100.00		61		145		100.00		61		126		100.00		61		106
Rosal Energia		46,944,467		100.00		47		112		100.00		47		123		100.00		47		115
Sá Carvalho		361,200,000		100.00		37		92		100.00		37		138		100.00		37		134
Horizontes Energia		10,000,000		100.00		10		32		100.00		39		61		100.00		39		60
Cemig PCH		6,000,000		100.00		6		51		100.00		46		99		100.00		46		90
Cemig Geração Poço Fundo		139,084,745		100.00		139		168		100.00		139		172		100.00		97		114
Empresa de Serviços de Comercialização de Energia Elétrica S.A.		486,000		100.00		-		29		100.00		-		11		100.00	-			8
Cemig Trading		1,000,000		100.00		1		9		100.00		1		6		100.00		1		2
Centroeste		28,000,000		100.00		28		113		100.00		28		120		100.00		28		-
UFV Três Marias		6,887,499		100.00		7		46		100.00	-		-			-		-		-
Cemig Distribuição		2,359,113,452		100.00		6,284		9,121		100.00		5,372		7,105		100.00		5,372		6,943
Taesa		1,033,496,721		21.68		3,042		6,679		21.68		3,042		6,570		21.68		3,042		6,685
Gasmig		409,255,483		99.57		665		1,386		99.57		665		1,373		99.57		665		1,222
Cemig Sim		306,664,742		100.00		307		419		100.00		175		199		100.00		285		297
Sete Lagoas		36,857,080		100.00		37		80		100.00		37		73		100.00		37		65

(1)

Indirect participation in Belo Monte Plant through this investee.


ANNUAL REPORT AND FORM 20-F \| 2023	F-55

The main balances for the affiliated and jointly controlled entities on December 31, 2023



2023	Taesa			Paracambi (formely Lightger)			Hidrelétrica Cachoeirão			Hidrelétrica Pipoca			Aliança Norte (1)

Assets
Current		2,745			24			11			11			-
Cash and cash equivalents		1,144			17			7			6			-
Non-current		14,833			100			86			95			1,015

Total assets		17,578			124			97			106			1,015

Liabilities
Current		1,617			11			7			8			-
Loans		-			9			-			7			-
Non-current		9,282			30			-			1			8
Loans		368			30			-			1			-
Equity		6,679			83			90			97			1,007

Total liabilities and equity		17,578			124			97			106			1,015

Statement of income
Net sales revenue		1,345			60			38			46			-
Cost of sales		(196	)		(16	)		(15	)		(12	)		-
Depreciation and amortization		(6	)		(12	)		(4	)		(4	)		-

Gross income (loss)		1,149			44			23			34			-

General and administrative expenses		(179	)		(2	)		-			(1	)		(77	)
Finance income		370			7			3			3			-
Finance expenses		(1,623	)		(4	)		-			(1	)		-

Operational income (loss)		(283	)		45			26			35			(77	)
Share of (loss) income, net, of subsidiaries and joint ventures		1,181			—			—			-			-
Income tax and social contribution tax		470			(4	)		(2	)		(3	)		-

Net income (loss) for the year		1,368			41			24			32			(77	)


Comprehensive income (loss) for the year
Net income (loss) for the year		1,368			41			24			32			(77	)

Comprehensive income (loss) for the year		1,368			41			24			32			(77	)

(1) At the year ended December 31, 2023, Company has assessed all relevant aspects related to going concern and no triggers of impairment were found.


ANNUAL REPORT AND FORM 20-F \| 2023	F-56


2023	Guanhães Energia			Amazônia Energia			Aliança Geração			Usina Hidrelétrica Itaocara S.A.
Assets
Current		1,534			-			583			3
Cash and cash equivalents		112			-			348			3
Non-current		4,735			1,108			3,701			12

Total assets		6,269			1,108			4,284			15

Liabilities
Current		143			8			829			-
Loans		69			-			180			-
Non-current		1,151			-			1,767			-
Loans		941			-			993			-
Equity		4,975			1,100			1,688			15

Total liabilities and equity		6,269			1,108			4,284			15

Statement of income
Net sales revenue		60			-			1,149			-
Cost of sales		(39	)		-			(472	)		(1	)
Depreciation and amortization		(21	)		-			(131	)		-

Gross income (loss)		21			-			677			(1	)

General and administrative expenses		-			-			(51	)		-
Finance income		15			-			50			-
Finance expenses		(10	)		-			(171	)		-

Operational income (loss)		26			-			505			(1	)
Share of (loss) income, net, of subsidiaries and joint ventures		-			(83	)		23			-
Income tax and social contribution tax		(7	)					(170	)		-

Net income (loss) for the year		19			(83	)		358			(1	)


Comprehensive income (loss) for the year
Net income (loss) for the year		19			(83	)		358			(1	)

Comprehensive income (loss) for the year		19			(83	)		358			(1	)


ANNUAL REPORT AND FORM 20-F \| 2023	F-57

The main balances for the affiliated and jointly controlled entities on December 31, 2022


2022	Taesa			Paracambi (formely Lightger)			Hidrelétrica Cachoeirão			Hidrelétrica Pipoca			Retiro Baixo
Assets
Current		2,261			63			15			20			63
Cash and cash equivalents		760			60			11			14			49
Non-current		13,198			109			91			98			338

Total assets		15,459			172			106			118			401

Liabilities
Current		817			11			1			8			25
Loans		1,957			9			-			7			14
Non-current		8,045			38			1			7			45
Loans		372			38			-			7			28
Equity		6,597			123			104			103			331

Total liabilities and equity		15,459			172			106			118			401

Statement of income
Net sales revenue		1,621			62			43			45			77
Cost of sales		(176	)		(17	)		(12	)		(10	)		(4	)
Depreciation and amortization		(9	)		(12	)		(3	)		-			(9	)

Gross income (loss)		1,445			45			31			35			73
General and administrative expenses		(197	)		(2	)		-			(1	)		(3	)
Finance income		652			6			4			3			10
Finance expenses		(1,700	)		(4	)		-			(1	)		(5	)

Operational income (loss)		200			45			35			36			75
Share of (loss) income, net, of subsidiaries and joint ventures		925			-			-			-			-
Income tax and social contribution tax		324			(4	)		(3	)		(3	)		(26	)

Net income (loss) for the year		1,449			41			32			33			49


Comprehensive income (loss) for the year
Net income (loss) for the year		1,449			41			32			33			49

Comprehensive income (loss) for the year		1,449			41			32			33			49


ANNUAL REPORT AND FORM 20-F \| 2023	F-58


2022	Aliança Norte			Guanhães Energia			Amazônia Energia			Madeira Energia			Baguari Energia
Assets
Current		-			132			-			1,819			83
Cash and cash equivalents		-			3			-			924			10
Non-current		1,092			376			1,191			20,953			205

Total assets		1,092			508			1,191			22,772			288

Liabilities
Current		-			38			2			2,571			25
Loans		-			12			-			655			-
Non-current		8			97			-			19,972			24
Loans		-			80			-			13,546			-
Equity		1,084			373			1,189			229			239

Total liabilities and equity		1,092			508			1,191			22,772			288

Statement of income
Net sales revenue		-			57			-			4,137			81
Cost of sales		-			(45	)		-			(3,451	)		(31	)
Depreciation and amortization		-			(16	)		-			-			(10	)

Gross income (loss)		-			12			-			686			50

General and administrative expenses		(65	)		-			-			(150	)		-
Finance income		-			90			-			361			10
Finance expenses		-			(11	)		-			(3,521	)		-

Operational income (loss)		(65	)		91			-			(2,624	)		60
Share of (loss) income, net, of subsidiaries and joint ventures		-			-			(63	)		-			-
Income tax and social contribution tax		-			(32	)		-			(222	)		(20	)

Net income (loss) for the year		(65	)		59			(63	)		(2,846	)		40


Comprehensive income (loss) for the year
Net income (loss) for the year		(65	)		59			(63	)		(2,846	)		40

Comprehensive income (loss) for the year		(65	)		59			(63	)		(2,846	)		40


ANNUAL REPORT AND FORM 20-F \| 2023	F-59


2022	Aliança Geração			Usina Hidrelétrica Itaocara S.A.			UFV Janaúba			UFV Corinto			UFV Manga
Assets
Current		724			4			4			2			2
Cash and cash equivalents		449			4			3			1			1
Non-current		3,468			11			17			17			20

Total assets		4,192			15			21			19			22

Liabilities
Current		383			-			2			-			-
Loans		136			-			2			-			-
Non-current		1,489			-			12			1			1
Loans		713			-			11			-			-
Equity		2,320			15			7			18			21

Total liabilities and equity		4,192			15			21			19			22

Statement of income
Net sales revenue		1,109			-			-			6			7
Cost of sales		(608	)		-			5			(1	)		(1	)
Depreciation and amortization		(124	)		-			(1	)		-			-

Gross income (loss)		501			-			5			5			6

General and administrative expenses		(43	)		-			-			-			-
Finance income		61			-			-			-			-
Finance expenses		(109	)		(7	)		(1	)		-			-

Operational income (loss)		410			(7	)		4			5			6
Share of (loss) income, net, of subsidiaries and joint ventures		11			-			-			-			-
Income tax and social contribution tax		(139	)		-			(1	)		(1	)		(1	)

Net income (loss) for the year		282			(7	)		3			4			5


Comprehensive income (loss) for the year
Net income (loss) for the year		282			(7	)		3			4			5

Comprehensive income (loss) for the year		282			(7	)		3			4			5


ANNUAL REPORT AND FORM 20-F \| 2023	F-60


2022	UFV Bonfinópolis II			UFV Lagoa Grande			UFV Lontra			UFV Olaria 1			UFV Mato Verde			UFV Mirabela
Assets
Current		2			3			4			1			1			1
Cash and cash equivalents		1			1			2			1			1			—
Non-current		12			23			27			13			11			9

Total assets		14			26			31			14			12			10

Liabilities
Current		-			-			1			-			-			-
Loans		-			-			-			-			-			-
Non-current		1			1			1			1			-			-
Loans		-			-			-			1			-			-
Equity		13			25			29			13			12			10

Total liabilities and equity		14			26			31			14			12			10

Statement of income
Net sales revenue		-			8			10			2			4			3
Cost of sales		(1	)		(1	)		(1	)		(1	)		(1	)		(1	)
Depreciation and amortization		-			-			-			(1	)		-			-

Gross income (loss)		(1	)		7			9			1			3			2

General and administrative expenses		-			-			-			-			-			-
Finance income		1			-			-			-			-			-
Finance expenses		-			-			-			-			-			-

Operational income (loss)		-			7			9			1			3			2
Share of (loss) income, net, of subsidiaries and joint ventures		-			-			-			-			-			-
Income tax and social contribution tax		3			(1	)		(1	)		-			-			-

Net income (loss) for the year		3			6			8			1			3			2


Comprehensive income (loss) for the year
Net income (loss) for the year		3			6			8			1			3			2

Comprehensive income (loss) for the year		3			6			8			1			3			2


ANNUAL REPORT AND FORM 20-F \| 2023	F-61


2022	UFV Porteirinha I			UFV Porteirinha II			UFV Brasilândia			UFV Apolo 1			UFV Campo Lindo 1			UFV Campo Lindo 2
Assets
Current		1			2			3			1			1			1
Cash and cash equivalents		-			1			2			-			-			1
Non-current		11			11			28			8			13			13

Total assets		12			13			31			9			14			14

Liabilities
Current		-			-			4			-			-			-
Loans		-			-			-			-			-			-
Non-current		1			1			1			-			1			1
Loans		1			-			3			-			1			1
Equity		11			12			26			9			13			13

Total liabilities and equity		12			13			31			9			14			14

Statement of income
Net sales revenue		4			4			8			2			3			2
Cost of sales		(1	)		(1	)		(2	)		(1	)		(1	)		(1	)
Depreciation and amortization		-			-			-			-			(1	)		(1	)

Gross income (loss)		3			3			6			1			2			1

General and administrative expenses		-			-			-			-			-			-
Finance income		-			-			1			-			-			-
Finance expenses		-			-			-			-			-			-
Operational income (loss)		3			3			7			1			2			1

Share of (loss) income, net, of subsidiaries and joint ventures		-			-			-			-			-			-
Income tax and social contribution tax		-			-			(1	)		-			-			-

Net income (loss) for the year		3			3			6			1			2			1


Comprehensive income (loss) for the year
Net income (loss) for the year		3			3			6			1			2			1

Comprehensive income (loss) for the year		3			3			6			1			2			1


ANNUAL REPORT AND FORM 20-F \| 2023	F-62

The main balances for the affiliated and jointly controlled entities on December 31, 2021


2021	Hidrelétrica Itaocara S.A.			Ativas Data Center			Taesa			Axxiom Soluções Tecnológicas			Lightger			Hidrelétrica Cachoeirão
Assets
Current		5			42			2,135			13			35			29
Cash and cash equivalents		5			16			385			4			29			25
Non-current		11			96			13,761			19			120			93

Total assets		16			138			15,896			32			155			122


Liabilities
Current		58			39			1,417			21			11			1
Loans		-			24			16			7			9			-
Non-current		-			19			7,794			2			46			1
Loans		-			14			614			-			46			-
Equity		(42	)		80			6,685			9			98			120

Total liabilities and equity		16			138			15,896			32			155			122


Statement of income
Net sales revenue		-			90			3,472			28			54			37
Cost of sales		(36	)		(85	)		(649	)		(28	)		(26	)		(8	)
Depreciation and amortization		-			(10	)		(9	)		(1	)		(11	)		(3	)

Gross income (loss)		(36	)		5			2,823			-			28			29
General and administrative expenses		-			(7	)		(169	)		(4	)		(1	)		-
Finance income		-			-			34			-			2			2
Finance expenses		(30	)		(3	)		(844	)		(1	)		(11	)		-

Operational income (loss)		(66	)		(5	)		1,844			(5	)		18			31
Share of (loss) income, net, of subsidiaries and joint ventures		-			-			781			-			-			-
Income tax and social contribution tax		-			-			(411	)		-			(3	)		(2	)

Net income (loss) for the year		(66	)		(5	)		2,214			(5	)		15			29


Comprehensive income (loss) for the year
Net income (loss) for the year		(66	)		(5	)		(2.214	)		(5	)		15			29
Equity valuation adjustments		—			—			37			—			—			—

Comprehensive income (loss) for the year		(66	)		(5	)		2,251			(5	)		15			29


ANNUAL REPORT AND FORM 20-F \| 2023	F-63


2021	Hidrelétrica Pipoca			Retiro Baixo			Aliança Norte			Guanhães Energia			Amazônia Energia			Madeira Energia (1)			Baguari Energia
Assets
Current		18			111			-			15			-			928			72
Cash and cash equivalents		12			99			-			5			-			180			3
Non-current		101			322			1,150			392			1,254			23,286			218

Total assets		119			433			1,150			407			1,254			24,214			290


Liabilities
Current		10			38			-			41			2			2,309			21
Loans		7			14			-			12			-			116			-
Non-current		14			49			2			111			-			20,413			26
Loans		13			41			-			93			-			12,828			-
Equity		95			346			1,148			255			1,252			1,492			243

Total liabilities and equity		119			433			1,150			407			1,254			24,214			290


Statement of income
Net sales revenue		39			70			-			52			-			3,758			77
Cost of sales		(11	)		(25	)		-			(55	)		(2	)		(2,292	)		(9	)
Depreciation and amortization		(3	)		(9	)		-			(18	)		-			(870	)		(11	)

Gross income (loss)		28			45			-			(3	)		(2	)		1,466			68
General and administrative expenses		(2	)		(3	)		(2	)		-			-			(80	)		-
Finance income		-			4			-			-			-			265			4
Finance expenses		(2	)		(5	)		-			(8	)		-			(3,476	)		(4	)

Operational income (loss)		24			41			(2	)		(11	)		(2	)		(1,825	)		68
Share of (loss) income, net, of subsidiaries and joint ventures		-			-			(39	)		-			(42	)		-			-
Income tax and social contribution tax		(1	)		(13	)		—			(2	)		-			1,812			(23	)

Net income (loss) for the year		23			28			(41	)		(13	)		(44	)		(13	)		45



Comprehensive income (loss) for the year		23			28			(41	)		(13	)		(44	)		(79	)		45

(1)

The amount of Shareholders’ equity originally disclosed by the investee was adjusted by the Company for the purposes of posting equity income (change in the value of equity in non-consolidated investees), to take into account the modifying subsequent events resulting from the judgments given in the arbitration proceedings to which Saesa is a party. There is more information below in this Note.


ANNUAL REPORT AND FORM 20-F \| 2023	F-64


2021	Aliança Geração			UFV Janaúba			UFV Corinto			UFV Manga			UFV Bonfinópolis II			UFV Lagoa Grande
Assets
Current		728			1			3			3			2			3
Cash and cash equivalents		378			1			2			2			2			3
Non-current		3,364			18			17			20			12			23

Total assets		4,092			19			20			23			14			26


Liabilities
Current		762			2			1			1			1			-
Loans		101			-			-			-			-			-
Non-current		1,472			12			-			-			-			-
Loans		700			-			-			-			-			-
Equity		1,858			5			19			22			13			26

Total liabilities and equity		4,092			19			20			23			14			26


Statement of income
Net sales revenue		1,096			5			4			6			3			6
Cost of sales		(102	)		(2	)		-			-			-			-
Depreciation and amortization		(157	)		(2	)		(1	)		(1	)		-			(1	)

Gross income (loss)		994			3			4			6			3			6
General and administrative expenses		(44	)		-			(1	)		(1	)		(1	)		(1	)
Finance income		41			-			-			-			-			-
Finance expenses		(233	)		(1	)		-			-			-			-

Operational income (loss)		758			2			3			5			2			5
Income tax and social contribution tax		(252	)		(1	)		-			(1	)		(1	)		(1	)

Net income (loss) for the year		506			1			3			4			1			4



Comprehensive income (loss) for the year		506			1			3			4			1			4


ANNUAL REPORT AND FORM 20-F \| 2023	F-65


2021	UFV Lontra			UFV Mato Verde			UFV Mirabela			UFV Porteirinha I		UFV Porteirinha II			UFV Brasilândia
Assets
Current		4			1			1			3		1			3
Cash and cash equivalents		3			1			1			2		-			2
Non-current		26			11			9			11		12			27

Total assets		30			12			10			14		13			30


Liabilities
Current		1			1			1			1		1			3
Equity		29			11			9			13		12			27

Total liabilities and equity		30			12			10			14		13			30


Statement of income
Net sales revenue		5			3			2			2		3			5
Depreciation and amortization		(1	)		-			-			-		-			(1	)
Gross income (loss)		5			3			2			2		3			5
General and administrative expenses		(1	)		(1	)		(1	)		-		(1	)		(1	)
Operational income (loss)		4			2			1			2		2			4
Income tax and social contribution tax		(1	)		-			-			-		-			(1	)

Net income (loss) for the year		3			2			1			2		2			3



Comprehensive income (loss) for the year		3			2			1			2		2			3

Amazônia Energia S.A. and Aliança Norte Energia S.A.

Amazônia Energia and Aliança Norte are shareholders of Norte Energia S.A. (‘NESA’), which holds the concession to operate the Belo Monte Hydroelectric Plant. Through the jointly controlled entities referred to above, Cemig GT owns an indirect equity interest in NESA of 11.69%.

On December 31, 2023, NESA has negative net working capital of R$578 (R$494 on December 31, 2022). According to the estimates and projections, the situation of negative net working capital, and the future demands for investments in the hydroelectric plant, will be supported by revenues from future operations.

On September 21, 2015, NESA was awarded a preliminary injunction ordering ANEEL to abstain from applying penalties or sanctions to NESA in relation to the delay in Belo Monte Hydroelectric Plant to start operations, until the hearing of the application for an injunction made in the original case. NESA management, supported by their legal advisers, have classified the probability of loss as ‘possible’ and estimated the potential loss on December 31, 2023 to R$2,859 (R$2,972 on December 31, 2022). The potential impact for the Company is limited to its investment interest in NESA.

Montes Claros photovoltaic plant

On June 29, 2022, Cemig approved acquisition, through its wholly-owned subsidiary Cemig Sim, of 100% of the interests held by Genesys Participação Societária Ltda. and by an individual, among other, in the special-purpose company (‘SPC’) Duceu Geradores de Energia, Máquinas e Equipamentos SPE Ltda. (‘UFV Montes Claros’), owner of the Montes Claros photovoltaic plant.

On April 28, 2023, Cemig Sim concluded acquisition of 100% of the shares in the Montes Claros photovoltaic generation plant. This was approved by the Brazilian antitrust authority, CADE – its approval is a usual condition precedent in this type of transaction.

Below is a summary of the preliminary measurement of the fair value of the assets and liabilities acquired:


ANNUAL REPORT AND FORM 20-F \| 2023	F-66


	Montes Claros photovoltaic plant
– Net equity of the Montes Claros solar plant		20
– Added value (fair value – book value)		1

– Fair value of net assets		21

Goodwill		1
Consideration paid for 100% interest in the Montes Claros solar plant		20


Assets	Fair value on date of acquisition		Liabilities	Fair value on date of acquisition
Current		-	Current		-

Other current assets		-	Other current liabilities		-

			Non-current		5

Non-current		26	Other non-current liabilities		5

Fixed assets		19
Rights of use – Leasing		5
Intangible assets		2

			Total fair value, net		21

The acquisition will add to the Cemig Group’s participation in the generation sector and total generation output, also contributing to efficient supply to consumers due to the Group’s expertise in this market.

Acquisition of interest in special-purpose companies (SPCs)

On July 20, 2023, Cemig Sim concluded acquisition of the remaining 51% interests in the following SPCs – becoming the holder of 100% of the shares in these companies:

•

G2 Olaria 1 Energia S.A.,

•

G2 Campo Lindo 1 Energia S.A.,

•

G2 Campo Lindo 2 Energia S.A.

On the same date Cemig Sim also concluded acquisition of 100% of the shares in the SPC SPE G2 Olaria 2 Energia S.A. The aggregate value of these acquisitions was R$47.

These four SPCs own four photovoltaic generation plants in full commercial operation, with installed capacity of 13 MWp, operating in the regime of shared distributed mini-generation, in the city of Lavras, Minas Gerais.

This transaction underlines the Company’s strategy of growth in distributed generation, with 100% ownership of generation plants under its management, exclusively in the State of Minas Gerais.

Goodwill, capital gain and gain on fair value adjustment of previous investment


	UFV Campo Lindo 1	UFV Campo Lindo 2	UFV Olaria 1	UFV Olaria 2	Total
Consideration paid	10	10	10	17	47
Equity adjusted to market value	9	9	8	15	41
Capital gain	2	2	1	1	6
Goodwill	1	1	2	2	6


	UFV Campo Lindo 1		UFV Campo Lindo 2		UFV Olaria 1		Total
Previous investment measured at fair value (a)		10		10		9		29
Investment on acquisition date (b)		7		7		7		21
Gain from adjustment to fair value of previous investment (a - b) (1)		3		3		3		9


ANNUAL REPORT AND FORM 20-F \| 2023	F-67

(1)

The gain on the fair value adjustment of the previous holding was recognized under "Fair value adjustment of investments" in the Income Statement.

Fair value of acquired assets and liabilities


Assets	Fair value on acquisition date		Liabilities	Fair value on acquisition date
Current		3	Current		-
Other assets		3	Other liabilities		-

			Non-current		2
Non-current		42	Other liabilities		2
Fixed assets		34
Right of use – leases		1
Intangible asset - Right of commercial operation		7
	Total net assets at fair value				41

Absorption of the wholly-owned subsidiaries Cemig Geração Três Marias S.A. and Cemig Geração Salto Grande S.A.

On January 24, 2023 Aneel approved transfer of the concessions of the Três Marias and Salto Grande hydroelectric plants to Cemig GT. On May 31, 2023, the merger was approved at the Company's Extraordinary General Meeting (EGM), at book value, with the consequent extinction of the investees as of this date and succession by Cemig GT in all its assets, rights and obligations, under the terms of Article 277 of Law 6.404/1976.

Since this was a merger of wholly-owned subsidiaries, there was no capital increase or need to issue new shares in Cemig GT.

The merger will optimize Cemig's corporate structure, resulting in cost reductions and generating administrative and financial efficiency.

Divestments in shareholdings

MESA

On March 20, 2023 the Cemig GT completed sale to Furnas Centrais Elétricas S.A of the whole of its direct and indirect stockholding interests in Mesa, equivalent to 7.53% of the share capital of that investee, which is the controlling stockholder of Santo Antônio Energia S.A. (SAE), for R$55.

With the conclusion of the sale, Furnas undertook to assume the guarantees given by Cemig and Cemig GT to the Brazilian Development Bank (BNDES) and other creditors, under agreements for financing of SAE, and to hold Cemig and Cemig GT harmless from any obligation relating to these guarantees, up to the time when these obligations are effectively assumed by Furnas.

As a result of the sale a capital gain was recognized in March 2023, as follows:


Parent company e Consolidated
Direct participation:	4.1422	%
Indirect participation:	3.3837	%
Selling price:	736
Direct participation (1):	30
Indirect participation (1):	25
	55
Investment cost (2):	-

(1)

The effects of the sale are presented in the results of the Holdings/Holding operating segment in note 5.

(2)

The calculation considered the investment balance as of February 28, 2023, which represents the last financial statement prepared for the investee before the sale, used for equity accounting purposes. The investment balance is zero, hence its derecognition did not result in any impact on the profit or loss for the purpose of determining the gain on disposal.


ANNUAL REPORT AND FORM 20-F \| 2023	F-68

The capital gain relating to the direct stockholding was recognized in the income statement for the period, with counterpart in Cash and cash equivalents. The taxes on this amount were R$10, representing 34% (25% corporate income tax and 9% Social Contribution tax on Net Profit).

The capital gain on the indirect participation was recognized by the equity method, because of its origin in realization of the equity interest held by Fundo Melbourne in SAAG. Due to the sale of the equity interest by the investment fund, which subsists only for operational reasons necessary for its liquidation, the balance receivable from the funds was recognized in the Statement of financial position as a financial instrument in the ‘Other assets’ group, considering the imminence of receipt of the proceeds.

This disposal is part of the execution of Cemig’s disinvestment program, with the aim of redirecting management efforts and allocation of capital to the State of Minas Gerais.

The agreement between FIP Melbourne and AGPar - CCBC Arbitration Judgment 86/2016

The share purchase agreement that governed the transaction for acquisition of the shares of SAAG by the Company specifies payment of indemnity to FIP Melbourne by AGPar in the event of any excess cost in Mesa as a result of any causative factor prior to the signature of that agreement. From the conclusion of the transaction in 2014, up to the year 2016, there were extraordinary expenditures, which had to be borne by FIP Melbourne, and which, in FIP Melbourne’s understanding, were within the scope of the provision of the share purchase agreement. Since agreement was not reached with AGPar on these questions, FIP Melbourne filed arbitration proceedings with the Brazil-Canada Chamber of Commerce.

The final arbitration judgment was given in January 2021, in favor of FIP Melbourne, and in August 2022 an agreement was signed between the parties to terminate litigation, establishing the updated amount of compensation at R$200, which was paid on September 12, 2022.

Considering Cemig GT's participation in FIP Melbourne, the Company has a receivable recorded in the amount of R$256 on September 30, 2023, in the statement of financial position under “Other Assets”. On October 23, 2023, Cemig GT received the updated amount of R$257.

Baguari Energia and Retiro Baixo Energética

Transaction 1

Share purchase agreements were signed on April 14, 2023 for sale to Furnas Centrais Elétricas of the Cemig GT’s entire stockholding interests in the jointly-controlled subsidiaries Retiro Baixo and Baguari Energia, as follows:

(1)

for R$200, the 49.9% equity interest held by the Cemig GT in Retiro Baixo, which operates the Retiro Baixo Hydroelectric Plant, in Minas Gerais, with installed capacity of 81.1 MW, and assured energy (physical offtake guarantee) of 34.8 MW.

(2)

for R$393, the Cemig GT’s indirectly held interest of 34% in the Baguari Consortium, which operates the Baguari hydroelectric plant, in Minas Gerais, with installed generation capacity of 140 MW and assured energy (physical offtake guarantee) of 81.9 MW, representing 69.39% of the share capital of Baguari Energia.

In April 2023 the assets were classified as held for sale, at book value, in accordance with IFRS 15, thus having no effect on net profit.


Assets classified as held for sale	Book value on Apr. 30, 2023 - R$ thousand		Fair value net of selling expenses - R$ thousand
Baguari Energia		160		392
Retiro Baixo		190		200

Total		350		592

It was concluded that the assets classified as held for sale do not qualify within the concept of discontinued operations, since they do not represent a significant separate line of business or geographical area of operations, nor do they constitute a subsidiary acquired exclusively for the purpose of resale.


ANNUAL REPORT AND FORM 20-F \| 2023	F-69

Conclusion of the sale of Baguari Energia

On October 6, 2023, the Company concluded the sale to Furnas Centrais Elétricas of its entire holding, of 69.39%, in the share capital of Baguari Energia, which represents an indirect interest of 34% in the Baguari Consortium.

The value of the transaction was R$433, comprising: the amount of R$393 agreed in the share purchase agreement, plus updating at 100% of the CDI rate since December 31, 2022. Of this total, the amount of R$12 was deducted for the dividend received on October 3, 2023. Thus, the amount received on the closing date of the transaction was R$421.

As a result of conclusion of the transaction, the Company recognized the following accounting effects, in October 2023:



Stake held by Cemig GT	69.39	%
Total sale price	421
Value of asset held for sale on Sep. 30, 2023	(160	)

Corporate capital gain (1) (a)	261


Tax capital gain net of selling expenses (2)	248
IRPJ and CSLL (b)	(84	)

Tax capital gain net of taxes (1)	164


Net impact on the Income Statement (a + b)	177

(1)

The effects of the disposal will be reported in the net profit for the operational segment of Equity holdings, in the note 5.

(2)

Sales expenses totaled R$1 and its refers to accounting, tax and legal due diligence services, and legal advice.

Completion of the disposal of Retiro Baixo Energética

On November 22, 2023, the sale was completed for the amount of R$223, made up of the amount agreed in the CCVA of R$190 plus 100% CDI adjustment since December 31, 2022. From this total, the amount of R$6 was deducted, referring to the dividend received on June 28, 2023. Thus, the amount received on the closing date of the transaction was R$218.

As a result of concluding the transaction, Cemig GT recognized the following accounting effects in November 2023:



Stake held by Cemig GT	49.9	%
Total sale price	218
Value of asset held for sale on Nov. 30, 2023	191

Corporate capital gain (1) (a)	27


Tax capital gain net of selling expenses	6
IRPJ and CSLL (b)	(2	)

Tax capital gain net of taxes (1)	4


Net impact on the Income Statement (a + b)	25

The effects of the disposal will be reported in the net profit for the operational segment of Equity holdings, in the note 5.

Transaction 2

On May 30, 2023, a share purchase agreement was signed for acquisition of 100% of the shares in Baguari I Geração de Energia Elétrica S.A., a company controlled by Neoenergia S.A., for R$ 454, formalizing the right of first refusal exercised by Baguari Energia.

Baguari Energia and Baguari I respectively hold interests of 49% and 51% in Consórcio UHE Baguari (– the Baguari Hydroelectric Plant Consortium).


ANNUAL REPORT AND FORM 20-F \| 2023	F-70

With the conclusion of Transaction 1, Cemig GT will no longer hold any equity in Baguari Energia and thus have no participation in the Consórcio UHE Baguari. Thus, payment for the purchase of Baguari I by Baguari Energia will be entirely an obligation of Furnas. As a result, Transaction 2 will have no effect on Cemig GT.

Axxiom

On December 22, 2022, the Company entered into a share purchase agreement ("SPA") for the sale of 49.0% of its equity interest in Axxiom Soluções Tecnológicas S.A. ("Axxiom") to Light S.A. ("Light"), which held the remaining 51.0% interest.

On April 17, 2023, the Company completed the sale of its entire stake in Axxiom's share capital. The value of the transaction was a symbolic R$1.00 (one real), with the liquidation of Axxiom's assets and liabilities.

This transaction is in line with the Company's Strategic Plan, which provides for the divestment of assets that do not adhere to the Cemig Group's core activities.

Reduction of share capital in the jointly controlled subsidiary Guanhães Energia

An Extraordinary General Meeting of Stockholders held on September 19, 2023 decided to reduce the share capital by R$235, of which R$137 will be destined to absorption of losses and R$98 will be repaid to stockholders, with no reduction in the number of nominal common shares as currently issued. Thus, the share capital of the jointly controlled subsidiary has decreased from R$549 to R$313. The share of Cemig GT corresponds to R$48; in January 2024 Cemig GT received R$46. This transaction will be reflected in the interim financial statements for the first quarter of 2024.

Risks related to compliance with laws and regulations

Investigations

The Public Attorneys’ Office of the State of Minas Gerais is conducting a civil public inquiry with the objective of identifying any irregularities in the investment of Cemig GT in Guanhães Energia. Up to the date of publication of these financial statements there has been no movement in the process.

Accounting policy

Investments

The Company and its subsidiaries hold investments in affiliates and joint ventures. Control is obtained when the Company and/or one of its subsidiaries has the power to control the financial and operational policies of an entity to receive benefits from its activities. These investments are accounted using the equity method in the parent company and consolidated financial statements and are, initially, recognized at acquisition cost, by the consideration transferred, measured at fair value at acquisition date.

The difference between the amount paid and the amount of the shareholders’ equity acquired is recognized in Investments as: (i) added value, when the economic basis is substantially related to the fair value of the net assets of the subsidiary acquired; and (ii)goodwill, when the amount paid is higher than the fair value of the net assets, and this difference represents the expectation of generation of future value. The goodwill arising from the acquisition is tested annually for impairment.

Business combinations

A business combination occurs when the Company or its subsidiaries acquire control of a business, whatever its legal form. The Company determines that it has acquired a business when the group of activities and assets acquired includes, at least, an input - entry of funds, and a substantive process, which together contribute materially to the capacity to generate output - an outflow of funds.

The Company and its subsidiaries accounts business combinations using the acquisition method. Thus, at the moment of acquisition the acquiring company is required to recognize and measure the identifiable assets acquired, the


ANNUAL REPORT AND FORM 20-F \| 2023	F-71

liabilities assumed, and the shareholding interests of non-controlling equity holders at fair value, which will result in recognition of a goodwill due to expectation of future profitability, or in a gain arising from an bargain purchase, the gain being allocated to the Statement of income for the period.

Capital gains and losses on acquisition represent the difference between the fair value of the identifiable assets acquired and the fair value of the liabilities assumed.

Estimations and judgments

Investments in shareholdings

The subsequent measurement of these investments is based on the equity method. Subsequent to this measurement, the company assesses whether there are indications of possible impairment in the recoverable value of its investments. Losses, when incurred, are recognized in the income statement if there is any indication that the recoverable value of the investment is lower than its book value. The equity method ceases to be applied from the moment the investment loses its characteristics as an associate, subsidiary or jointly-controlled subsidiary, for example in the case of classification as a non-current asset held for sale.

The financial statements of jointly-owned subsidiaries are prepared for the same disclosure period as those of the Company and its subsidiaries. When necessary, adjustments are made to bring the accounting policies into line with those applied by the Company and its subsidiaries.

Business combinations

Costs generated by acquisition of assets are allocated directly to the Statement of income as and when incurred.

After the initial recognition, the goodwill is measured at cost, less any accumulated impairments. For the purposes of the impairment test, the goodwill acquired in business combinations is, as from the acquisition date, allocated to each one of the cash generating units that it is expected will be benefited by the synergies of the combination.

It is the Company’s understanding that the amount specifically referred to the right of concession, the right of commercial operation, or similar rights, does not constitute goodwill, including when these rights are acquired in a business combination in which the acquired entity is a concession holder, whose right to the concession has a known and defined period.

When a business combination is carried out in stages (“step-acquisition method”), the interest previously held by the Company in its investee is remeasured at the fair value at the acquisition date and the corresponding gain or loss, if any, is recognized in the statement of income.

In the parent company, the difference between the amount paid and the amount of the shareholders’ equity of the entities acquired is recognized in Investments based to the criteria described above.


ANNUAL REPORT AND FORM 20-F \| 2023	F-72

16.

PROPERTY, PLANT AND EQUIPMENT


	2023							2022
	Historical cost		Accumulated depreciation			Net value		Historical cost		Accumulated depreciation			Net value
In service
Land		247		(33	)		214		247		(30	)		217
Reservoirs, dams and watercourses		3,323		(2,470	)		853		3,303		(2,433	)		870
Buildings, works and improvements		1,095		(868	)		227		1,092		(859	)		233
Machinery and equipment		2,826		(2,078	)		748		2,765		(2,059	)		706
Vehicles		19		(15	)		4		15		(13	)		2
Furniture and utensils		14		(11	)		3		14		(11	)		3

		7,524		(5,475	)		2,049		7,436		(5,405	)		2,031

In progress		1,207		-			1,207		379		-			379

Net property, plant and equipment		8,731		(5,475	)		3,256		7,815		(5,405	)		2,410

Changes in PP&E are as follows:


	2022		Additions (2)		Business Combination		Disposals - Assets classified as held for sale			Reversal of provision			Depreciation			Transfers / Capitalizations			2023
In service
Land (1)		217		-		-		(2	)		-			(3	)		2			214
Reservoirs, dams and watercourses		870		-		-		(22	)		-			(79	)		84			853
Buildings, works and improvements		233		-		-		(5	)		-			(17	)		16			227
Machinery and equipment		706		1		70		(29	)		(1	)		(69	)		70			748
Vehicles		2		-		-		-			-			(2	)		4			4
Furniture and utensils		3		-		-		-			-			-			-			3

		2,031		1		70		(58	)		(1	)		(170	)		176			2,049

In progress		380		1,005		-		-			(2	)		-			(176	)		1,207

Net property, plant and equipment		2,411		1,006		70		(58	)		(3	)		(170	)		-			3,256

(1)

Certain land linked to concession agreements with no indemnity provision is depreciated over the concession period.

(2)

This includes investments in the Boa Esperança and Jusante photovoltaic solar plants – respectively of R$369 and R$339.


ANNUAL REPORT AND FORM 20-F \| 2023	F-73


	2021		Additions		Disposals			Depreciation			Transfers / Capitalizations			2022
In service
Land (1)		220		-		-			(3	)		-			217
Reservoirs, dams and watercourses		944		-		-			(81	)		7			870
Buildings, works and improvements		248		-		-			(17	)		2			233
Machinery and equipment		697		-		(12	)		(70	)		91			706
Vehicles		1		-		-			(1	)		2			2
Furniture and utensils		3		-		-			-			-			3

		2,113		-		(12	)		(172	)		102			2,031
In progress		306		176		-			-			(102	)		380

Net property, plant and equipment		2,419		176		(12	)		(172	)		-			2,411

(1)

Certain land linked to concession agreements with no indemnity provision is amortized over the concession period.


	2020		Additions		Disposals			Depreciation			Write-off (2)		Transfers / capitalizations			Reversion of provision		2021
In service
Land (1)		224		-		(1	)		(3	)		-		-			-		220
Reservoirs, dams and watercourses		1,020		-		-			(81	)		-		5			-		944
Buildings, works and improvements		264		-		-			(17	)		-		1			-		248
Machinery and equipment		717		-		(14	)		(69	)		-		63			43		697
Vehicles		2		-		-			(1	)		-		-			-		1
Furniture and utensils		3		-		-			-			-		-			-		3

		2,230		-		(15	)		(171	)		-		69			43		2,113
In progress		177		182		-			-			16		(69	)		-		306

Net property, plant and equipment		2,407		182		(15	)		(171	)		16		-			43		2,419

(1)

Certain land sites linked to concession contracts and without provision for reimbursement are amortized in accordance with the period of the concession.

(2)

Reversal of a provision previously recognized for impairment of works in progress assets.


ANNUAL REPORT AND FORM 20-F \| 2023	F-74

Depreciation rates, which take into consideration the expected useful life of the assets, are revised annually by Management and are as follows:


Generation	(%)		Administration	(%)
Reservoirs, dams and watercourses		2	Software		20
Buildings - Machine room		2	Vehicles		14.29
Buildings - Other		3.33	IT equipment in general		16.67
Generator		3.33	General equipment		6.25
Water turbine		2.5	Buildings - Other		3.33
Pressure tunnel		3.13
Command station, panel and cubicle		3.57
Floodgate		3.33

The Company has not identified any evidence of impairment of its Property, plant and equipment assets. The generation concession contracts provide that at the end of each concession the grantor must determine the amount to be indemnified to the Company for the exception of the concession contracts related to Lot D of Auction 12/2015. Management believes that the amount ultimately received will be higher than the historical residual value.

The residual value of the assets is the residual balance of the assets at the end of the concession contract which will be transferred to the grantor at the end of the concession contract and for which CEMIG is entitled to receive in cash. For contracts under which CEMIG does not have a right to receive such amounts or there is uncertainty related to collection of the amounts, such as in the case of thermal generation and hydroelectric generation as an independent power producer, no residual value is recognized, and the depreciation rates are adjusted so that all the assets are depreciated within the concession term.

Consortium

The Company is a partner in an energy generation consortium for the Queimado plant, for which no separate company with independent legal existence was formed to manage the object of the concession. The Company’s portion in the consortium is recorded and controlled individually in the respective categories of PP&E and Intangible assets.


	Stake in power output (%)		Average annual depreciation rate (%)		2023			2022
In service
Queimado Power Plant		82.50		3.94		220			220
Accumulated depreciation						(142	)		(135	)

Total operation						78			85


In progress
Queimado Power Plant		82.50		-		2			2

Total construction						2			2

Total						80			87

Accounting policy

Property, plant and equipment are stated at the cost, including deemed cost, decommissioning costs and capitalized borrowing costs, less accumulated depreciation and impairment, if there is.

Gains and losses resulting from the disposal of a property, plant and equipment, are measured as the difference between the net proceeds obtained from the sale and the asset’s book value and are recognized in the Statement of income when the asset is disposed of.


ANNUAL REPORT AND FORM 20-F \| 2023	F-75

Estimations and judgments

The relevant components of certain assets that are replaced over the economic useful life of the main asset are recognized separately and depreciated over the estimated period until their replacement. Periodic maintenance costs are recognized in the income statement as incurred.

Depreciation is calculated on the balance of property, plant and equipment in service and investments in consortia, by the straight-line method, using the rates that reflect the estimated useful life of the assets, for assets related to energy activities, limited in certain circumstances to the periods of the related concession contracts.

17.

INTANGIBLE ASSETS


	2023							2022
	Historical cost		Accumulated amortization			Residual value		Historical cost		Accumulated amortization			Residual value
In service
Useful life defined
Temporary easements		15		(7	)		8		15		(6	)		9
Onerous concession		14		(10	)		4		14		(10	)		4
Assets of concession		25,217		(10,933	)		14,284		23,813		(10,258	)		13,555
Assets of concession - GSF		1,031		(334	)		697		1,032		(200	)		832
Others		139		(79	)		60		92		(77	)		15

		26,416		(11,363	)		15,053		24,966		(10,551	)		14,415
In progress		196		-			196		206		-			206

Net intangible assets		26,612		(11,363	)		15,249		25,172		(10,551	)		14,621

Changes in Intangible assets are as follow:


	2022		Additions		Disposals			Amortization			Transfers (1)			2023
In service
Useful life defined
Temporary easements		9		-		-			(1	)		-			8
Onerous concession		4		-		-			-			-			4
Assets of concession		13,555		3		(81	)		(914	)		1,721			14,284
Assets of concession - GSF		832		-		-			(135	)		-			697
Others		15		26		(10	)		(5	)		34			60

		14,415		29		(91	)		(1,055	)		1,755			15,053
In progress		206		158		(3	)		-			(165	)		196

Net intangible assets		14,621		187		(94	)		(1,055	)		1,590			15,249


	2021		Additions		Disposals			Amortization			Transfers (1)			2022
In service
Useful life defined
Temporary easements		10		-		-			(1	)		-			9
Onerous concession		5		-		-			(1	)		-			4
Assets of concession		11,807		-		(57	)		(817	)		2,622			13,555
Assets of concession - GSF		966		-		-			(134	)		-			832
Other		4		13		-			(3	)		1			15

		12,792		13		(57	)		(956	)		2,623			14,415
In progress		161		106		-			-			(61	)		206

Net intangible assets		12,953		119		(57	)		(956	)		2,562			14,621


ANNUAL REPORT AND FORM 20-F \| 2023	F-76


	2020		Additions		Disposals			Amortization			Transfers (1)			2021
In service
Useful life defined
Temporary easements		9		-		-			(1	)		2			10
Onerous concession		6		-		-			(1	)		-			5
Assets of concession		11,674		-		(23	)		(757	)		913			11,807
Assets of concession - GSF		-		1,032		-			(66	)		-			966
Other		8		-		-			(4	)		-			4

		11,697		1,032		(23	)		(829	)		915			12,792
In progress		113		51		-			-			(3	)		161

Net intangible assets		11,810		1,083		(23	)		(829	)		912			12,953

(1)

The main transfers were made between concession contract assets to Intangible assets: in 2022 of R$2,448 (R$902 in 2021).

Concession assets

The energy and gas distribution infrastructure assets already in service and that will be fully amortized during the concession term are recorded as intangible assets. Assets linked to the infrastructure of the concession that are still under construction are posted initially as contract assets, as detailed in Note 14.

The main amortization rates, which take into account the useful life that management expects for the asset, and reflect the expected pattern of their consumption, are as follows:


Energy	(%)	Administration	(%)
System cable - below 69 KV	6.67	Software	20.00
System cable - below 69 KV	3.57	Vehicles	14.29
Structure - Posts	3.57	General equipment	6.25
Overhead distribution transformer	4.00	Buildings	3.33
Circuit breaker - up to 69 kV	3.03
Capacitor bank - up to 69 kV	6.67
Voltage regulator - up to 69 kV	4.35


Gas	(%)	Administration	(%)
Tubing	3.33	Software	20.00
Buildings, works and improvements	4.00	Vehicles	20.00
Improvements in leased properties	10.00	Data processing equipment	20.00
Machinery and equipment	5.00 to 20.00	Furniture	10.00

The annual average amortization rate is 4.01% and by segment is follows:


Hydroelectric Generation	Wind Power Generation	Gas	Distribution	Administration
7.03%	8.81%	3.33%	3.90%	16.26%

Under the regulations of the energy segment, property, plant and equipment used in the distribution concession are linked to these services, and cannot be withdrawn, disposed of, assigned or provided in guarantee without the prior express authorization of the Grantor.


ANNUAL REPORT AND FORM 20-F \| 2023	F-77

Renegotiation of hydrological risk – Generation Scaling Factor - GSF

ReH 2,919/2021 ratified the amounts of the right to compensation for the São Simão, Jaguara, Miranda and Volta Grande plants, which were owned by the Company during the period indicated in Law 14,052/2020 for compensation, but this Law does not specify how this will be carried out in the event of the absence of debts with the Union related to the concession regime determined in the Law. The amounts calculated are:


Plant re-offered for tender	Amount
São Simão		783
Miranda		146
Jaguara		237
Volta Grande		157

Total		1,323

On December 21, 2023, the Company sent correspondence to the Ministry of Mines and Energy - MME, requesting recognition of the absence of a mechanism for compensation, in the hypothesis mentioned above, as well as the updating of the amounts contained in ReH No. 2,919/2021 and their conversion into an agreement to extend the terms of certain power plants under the Company's concession, under the terms of Law No. 14,052/2020.

Considering that there is no legal provision on how to compensate for non-hydrological risks and the Company's right depends on the occurrence of uncertain future events, which are not entirely under its control, the contingent assets relating to the plants listed in the table above were not recognized.

Operating licenses

In compliance with the legal determinations contained in Copam Normative Decision 217/2017, the company's power plants and its subsidiaries have been going through the process of obtaining and renewing operating licenses.

The following facilities have obtained operating licenses: HPP Irapé, HPP Salto Grande, EOL Volta do Rio and HPP Pai Joaquim. Expenditure on environmental conditions, related to legal and regulatory requirements after the start-up of the projects, was estimated and recognized against intangible assets. The estimated costs of environmental conditions were brought to present value considering the incremental rate, taking into account the term of up to 10 years of the operating licenses, the period in which the asset will be amortized.

The Santa Luzia HPP, Jacutinga HPP, Salto Voltão HPP, Salto do Passo Velho HPP, Xicão HPP and Pissarrão HPP also obtained operating licenses, but no provisions were made for the costs of environmental conditions, since these plants are classified as assets held for sale.

In addition, the Luiz Dias HPP and Salto Moraes HPP also obtained operating licenses. Expenses related to legal and regulatory requirements after the projects come into operation are being calculated and estimated for provisioning against intangible assets in 2024.

Accounting policy

These mainly include assets relating to the service concession contracts described above and software. They are measured at total acquisition cost, less amortization expenses and accumulated impairment losses, when applicable.

Any gain or loss resulting from the derecognition of intangible assets, corresponding to the difference between their book value and the net sale value, is recognized in the income statement.

Energy and gas distribution activity

The portion of the concession assets that will be fully amortized during the concession is classified as an intangible asset and amortized over the term of the concession contract, as provided for in IFRIC 12 - Concession Contracts.


ANNUAL REPORT AND FORM 20-F \| 2023	F-78

Renegotiation of hydrological risk – Generation Scaling Factor - GSF

Under the terms of Law 13.203/2015 and subsequent amendments, the hydrological risk was renegotiated, establishing the right to reimbursement for the costs incurred with the GSF, assumed by the owners of the hydroelectric plants participating in the Energy Reallocation Mechanism (MRE) between 2012 and 2017.

The procedure adopted by ANEEL for this compensation was to extend the grant periods for these plants. The company therefore recognized an intangible asset representing this right to extend the concessions.

On initial recognition, the fair value of the right to extend the concession was estimated individually for each plant, using the revenue approach, which converts future values into a single current value, discounted by the rate of return approved by management for the energy generation activity, reflecting current market expectations in relation to future values.

The useful life of the assets that make up property, plant and equipment and intangible assets has been adjusted to the new remaining term of the concession, i.e. the term of the extension of the right to grant the concession has been added to the originally agreed term. Thus, amortization is carried out using the straight-line method until the end of the new concession term.

Estimations and judgments

The annual amortization rates take into account the expected useful life of the assets and reflect their expected consumption pattern and are reviewed annually by management.

The Company and its subsidiaries have not identified any indications of impairment of their intangible assets.

18.

LEASING

The Company recognized a right of use and a lease liability for the following contracts which contain a lease in accordance with IFRS 16:

•

Leasing of commercial real estate used for serving customers;

•

Leasing of building used as administrative headquarter;

•

Leasing of commercial vehicles used in operations.

The discount rates were obtained based on incremental borrowing rate, as follows:


Incremental borrowing rate	Annual rate (%)		Monthly rate (%)
Contracts entered – 2022 (1)
Up to five years		6.48		0.53
Six to ten years		6.59		0.54
Eleven to fifteen years		6.64		0.54
Sixteen to thirty years		6.65		0.54

Contracts entered – 2023 (1)
Up to seven years		6.82		0.55
Eight to nine years		6.90		0.56
Ten to twelve years		6.99		0.57
Thirteen to twenty-two years		7.19		0.58

(1)

Monthly the Company calculates the addition to the rate to be applied to the new contracts. For the purposes of publication, these are presented at the average rates used.


ANNUAL REPORT AND FORM 20-F \| 2023	F-79

Right of use assets

The right-of-use assets were valued at cost, corresponding to the amount of the initial measurement of the lease liabilities, adjusted by its remeasurements, and amortized on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.

Changes in the right of use asset are as follows:


	Real estate property			Vehicles			Total
Balances at December 31, 2021		192			34			226
Amortization (1)		(14	)		(40	)		(54	)
Right of use acquired in a business combination		5			-			5
Disposals (contracts terminated)		(9	)		(1	)		(10	)
Addition		24			117			141
Remeasurement (2)		16			5			21

Balances at December 31, 2022		214			115			329

Amortization (1)		(12	)		(37	)		(49	)
Business combination adjustment		8			-			8
Disposals (contracts terminated)		(8	)		(5	)		(13	)
Addition		31			24			55
Remeasurement (2)		13			55			68

Balances at December 31, 2023		246			152			398

(1)

Amortization of the Right of Use recognized in the Statement of income is net of use of the credits of PIS/Pasep and Cofins taxes on payments of rentals, a total R$0.719 in 2023 (R$0.641 in 2022).

(2)

The Company have identified events giving rise to revaluation and modifications of their principal contracts. The leasing liabilities are restated with adjustment to the asset of Right of Use.

Leasing liabilities

The liability for leasing agreements is measured at the present value of lease payments to be made over the lease term, discounted at the Company’s incremental borrowing rate. The liability carrying amount is remeasured to reflect leases modifications.

The changes in the lease liabilities are as follows:



Balances at December 31, 2021	244

Addition	141
Lease obligation arising from business combination	5
Accrued interest	29
Payment of principal portion of lease liability	(66	)
Payment of interest	(4	)
Disposals (contracts terminated)	(16	)
Remeasurement (2)	21
Balances at December 31, 2022	354

Addition	55
Lease obligation arising from business combination	3
Accrued interest (1)	38
Payment of principal portion of lease liability	(67	)
Payment of interest	(5	)
Disposals (contracts terminated)	(13	)
Remeasurement (2)	68
Balances at December 31, 2023	433

Current liabilities	79
Non-current liabilities	354

(1)

Financial expenses recognized in the Statement of income are net of incorporation of the credits for PIS/Pasep and Cofins taxes on payments of rentals, in the amounts of R$2 in 2023 (R$2 on December 31, 2022).


ANNUAL REPORT AND FORM 20-F \| 2023	F-80

(2)

The Company identified events that give rise to restatement and modifications of their principal contracts; the leasing liability was remeasured with an adjustment to the asset of Right of Use.

Additions and settled in leases are non-cash transactions, and therefore are not reflected in the Statements of Cash Flows.

The potential right to recovery of PIS/Pasep and Cofins taxes embedded in the leasing consideration, according to the periods specified for payment, is as follows:


Cash flow	Nominal		Adjusted to present value
Consideration for the leasing		888		433
Potential PIS/Pasep and Cofins (9.25%)		59		21

For lease liability and right of use measuring and remeasuring, the Company used the technique of discounted cash flow, without considering projected future inflation in the flows to be discounted, as per the prohibition imposed by IFRS 16.

The cash flows of the leasing contracts are, in their majority, updated by the IPCA inflation index, annually. Below is an analysis of maturity of lease contracts:



2024	80
2025	90
2026	79
2027	67
2028	34
2029 at 2048	538

Undiscounted values	888

Embedded interest	(455	)

Lease liabilities	433

Accounting policy

Right of use assets

Lease liabilities

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs.

Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition exemption to its short-term leases. It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term.


ANNUAL REPORT AND FORM 20-F \| 2023	F-81

Estimations and judgments

Right of use assets

Right-of-use assets are measured at cost, less any accumulated amortization and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of Right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are amortized on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as described in Note 18.

If ownership of the leased asset transfers to the Company at the end of the lease term or the cost reflects the exercise of a purchase option, amortization is calculated using the estimated useful life of the asset.

Lease liabilities

In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

The Company recognize separately the expenses of interest on the leasing liability and the expense of depreciation of the asset of the right to use.

19.

SUPPLIERS


	2023		2022

Energy purchased for resale		1,250		1,162


Energy on spot market – CCEE		135		110


Charges for use of energy network		246		207


Itaipu Binacional		240		274


Gas purchased for resale		204		278


Materials and services		942		801

		3,017		2,832

The exposure of the Company and its subsidiaries to exchange rate and liquidity risks related to suppliers is disclosed in note 31.


ANNUAL REPORT AND FORM 20-F \| 2023	F-82

20.

TAXES PAYABLE AND AMOUNTS TO BE REFUNDED TO CUSTOMERS


	2023		2022
Current
ICMS		113		108
Cofins (1)		225		199
PIS/Pasep (1)		49		43
INSS		54		44
Others (2)		203		150

		644		544

Non-current
Cofins (1)		297		304
PIS/Pasep (1)		65		66

		362		370

		1,006		914

Amounts to be refunded to customers
Current
PIS/Pasep and Cofins		513		1,155
ICMS (3)		341		341
Non-current
PIS/Pasep and Cofins		664		1,808

		1,518		3,304

(1)

PIS/Pasep and Cofins recorded in current liabilities include the deferral on the financial remuneration of the contract asset and on the construction and improvement revenues linked to the transmission contracts. For more information, see Note 15.

(2)

The December 31, 2022, balance includes income tax withholdings on interest on equity declared on December 14, 2022 and December 22, 2022, the collection of which occurred in January 2023, in accordance with tax legislation.

(3)

On June 23, 2022 Complementary Law no. 194 was enacted, with immediate effectiveness, which changed the National Tax Code (CTN) and Complementary Law no. 87/96 (Kandir Law), classifying electric energy, among other goods, as essential, prohibiting the establishment of ICMS rates for transactions with these goods at a higher level than for transactions in general, and applying the non-levy of this tax on transmission and distribution services and sectorial charges related to electric energy transactions. In December 2022, an amount of R$341 was provisioned to be returned to the consumers, referring to the period in which the tax was still charged in the invoices.

The amounts of PIS/Pasep and Cofins to be refunded to consumers regarding the credits to be used by Cemig D and Gasmig due to the exclusion of ICMS from the calculation basis of these contributions represent the amounts of R$1,014 (R$2,787 on December 31, 2022) and R$163 (R$176 on December 31, 2022), respectively. The criteria for refunding Gasmig's PIS/Pasep and Cofins credits to consumers will still be the subject of discussions with the Minas Gerais Development Secretariat.

As a result of the analysis by the Brazilian tax authority (‘Receita Federal’), for the purpose of auditing and confirming the amount of the tax credit to which Cemig D was entitled, the credit was reduced by R$67, of which amount R$23 corresponds to the original credit. This reduction was posted in both Assets and Liabilities, and resulted in the equivalent reduction in the amount to be repaid to consumers.

Movement of amounts to be refunded to consumers


	Consolidated
Balances on December 31, 2021		3,023

ICMS to be refunded		341
Refund to consumers		(2,360	)
Additional tax credits - Law 14.385/2022		1,419
Financial adjustments - Selic		881

Balances on December 31, 2022		3,304

Consumers refunds		(1,909	)
Federal Revenue Inspection		(67	)
Financial adjustments - Selic		190

Balances on December 31, 2023		1,518


ANNUAL REPORT AND FORM 20-F \| 2023	F-83

Cemig D has already refunded R$5,852 by December 31, 2023 (R$3,225 by December 31, 2022).

21.

LOANS AND DEBENTURES


				2023									2022
Financing source	Principal maturity	Annual financial cost	Currency	Current			Non-current			Total			Total
Foreign currency
Eurobonds (1)	2024	9.25%	U$$		1,857			-			1,857			3,975
(-) Transaction costs					(1	)		-			(1	)		(6	)
(±) Interest paid in advance (2)					(2	)		-			(2	)		(9	)

Debt in foreign currency					1,854			-			1,854			3,960

BRAZILIAN CURRENCY
Eletrobrás (3)	2023	UFIR + 6,00% a 8,00%	R$		-			-			-			2
Sonda (4)	2022	110,00% do CDI	R$		-			-			-			-

Debt in Brazilian currency					-			-			-			2

Total of loans and financings					1,854			-			1,854			3,962

Debentures - 3rd Issue - 3rd Series (5)	2025	IPCA + 5,10%	R$		331			304			635			913
Debentures - 7th Issue - 1st Series (3)(7)	2024	CDI + 0,45%	R$		271			-			271			816
Debentures - 7th Issue - 2nd Series (3)(7)	2026	IPCA + 4,10%	R$		3			1,945			1,948			1,864
Debentures - 8th Issue - 1st Series (3)(7)	2027	CDI + 1,35%	R$		2			500			502			503
Debentures - 8th Issue - 2nd Series (3)(7)	2029	IPCA + 6,10%	R$		1			529			530			507
Debentures - 7th Issue - Single series (8)	2026	CDI + 2,05%	R$		32			2,000			2,032			-
Debentures - 7th Issue - Single series (8)	2023	CDI + 1,50%	R$		-			-			-			20
Debentures - 8th Issue - Single series (8)	2031	IPCA + 5,27%	R$		134			958			1,092			1,044
Debentures - 9th Issue - 1st Series (6)	2027	CDI + 1,33%	R$		3			700			703			703
Debentures - 9th Issue - 2nd Series (6)	2029	IPCA + 7,63%	R$		1			315			316			302
(-) Discount on the issuance of debentures (6)					-			(9	)		(9	)		(12	)
(-) Transaction costs					(2	)		(41	)		(43	)		(42	)

Total, debentures					776			7,201			7,977			6,618

Total					2,630			7,201			9,831			10,580

(1)

Cemig Geração e Transmissão;

(2)

Advance of funds to achieve the yield to maturity agreed in the Eurobonds contract;

(3)

Cemig Distribuição;

(4)

Debentures issued by Gasmig.

(5)

Discount on the sale price of the 2nd series of the Seventh issue of Cemig Distribuição.

The debentures issued by the subsidiaries are non-convertible, there are no agreements for renegotiation, nor debentures held in treasury.


ANNUAL REPORT AND FORM 20-F \| 2023	F-84

Issue of debentures - 2023

On June 6, 2023, Cemig D concluded all the procedures related to the financial settlement of the 9th issue of simple debentures, not convertible into shares, of the unsecured type, with an additional fiduciary guarantee, in a single series, for public distribution under the automatic distribution regime, in accordance with CVM regulations.

Two million debentures were issued, totaling R$2,000 (two billion reais), at a remuneration rate of CDI + 2.05% and maturing in 3 years. The balance of the nominal unit value of the debentures will be paid in 2 (two) installments, with the first payment (50% of the balance) on May 15, 2025 and the second, of the remaining balance, on May 15, 2026, the date of the main maturity. The funds raised will be used to replenish Cemig D's cash flow, including, but not limited to, Cemig D's operations and investments.


Company	Entry Date	Due Date Principal	Financial charges	Value
BRAZILIAN CURRENCY
Debentures – 9th Issue Single serie	June 2023	2026	CDI + 2.05%		2,000
(-)Transaction costs					(12	)

Total					1,988

The credit risk rating agency Fitch Ratings has assigned a AA+(bra) rating to the Issue.

Partial repurchase of Eurobonds

On December 20, 2023, the Company concluded the partial early redemption, without premium, by exercise of a call option, of its debt securities in the external market, maturing in December 2024, remunerated at 9.25% a year, in the principal amount of US$375 million.

This reduced the balance of these securities, due in December 2024, to US$381 million.

The table below shows the effects related to the repurchase of bonds:


	%		US$		R$
Principal Amount		100.00		375		1,823
Accrued interests		0.41		2		8
				377		1,831
Income tax on accrued interests		17.65		-		1
				-		1

Total of payments				377		1,832

Partial disposal of hedge				-		(283	)
NDF positive adjustment (*)				-		117

Total				377		1,666

(*) Difference between the PTAX dollar rate on the day of purchase (R$4.9091) in relation to the financial instrument - exchange protection NDF, with the dollar purchase lock in April/23 at R$5.1110 and difference between the PTAX dollar rate on the day of purchase (R$4.8663) in relation to the financial instrument - exchange protection NDF, with the dollar purchase lock in December/23 at R$4.9675.


ANNUAL REPORT AND FORM 20-F \| 2023	F-85

Guarantees

The guarantees of the debt balance on loans and debentures, on December 31, 2022, were as follows:


	2023
Promissory notes and sureties		2,489
Guarantee and receivables		2,208
Sureties		4,059
Receivables		—
Unsecured		1,075

Total		9,831

Composition and consolidated changes on loans and debentures

The company's debt has an average repayment period of 2.8 years. The consolidated breakdown of loans and debentures, by currency and index, considering their maturities, is as follows:


	2024			2025			2026			2027			2028			2029 onwards			Total
Currency
US dollar		1,857			-			-			-			-			-			1,857

Total, currency denominated		1,857			-			-			-			-			-			1,857

Index
IPCA (1)		470			1,397			1,099			132			403			1,021			4,522
UFIR/RGR (2)		-			-			-			-			-			-			-
CDI (3)		308			1,233			1,233			733			-			-			3,507

Total by index		778			2,630			2,332			865			403			1,021			8,029

(-) Transaction costs		(4	)		(9	)		(9	)		(4	)		(7	)		(13	)		(46	)
(±) Interest paid in advance		(2	)		-			-			-			-			-			(2	)
(-) Discount		-			(4	)		(4	)		-			-			-			(8	)

Overall total		2,629			2,617			2,319			861			396			1,008			9,830

(1)

Expanded National Customer Price (IPCA) Index.

(2)

Fiscal Reference Unit (Ufir / RGR).

(3)

CDI: Interbank Rate for Certificates of Deposit.

(4)

Interest rate reference unit (URTJ) / Long-Term Interest Rate (TJLP)

The US dollar and index used for monetary updating of Loans had the following variations:


Currency	Accumulated change on 2023 (%)			Accumulated change on 2022 (%)			Indexer	Accumulated change on 2023 (%)			Accumulated change on 2022 (%)
US dollar		(6.50	)		(6.50	)	IPCA		4.62			5.79
							CDI		13.04			12.39
							TJLP		(9.03	)		35.34


ANNUAL REPORT AND FORM 20-F \| 2023	F-86

The changes in loans and debentures are as follows:



Balance at December 31, 2020	15,020

Liabilities arising from business combination

Initial balance for consolidation purposes	15,020

Liabilities arising from business combination	13
Discount and premium on repurchase of debt securities (Eurobonds)	491
Monetary variation	331
Exchange rate variation	353
Financial charges provisioned	1,162
Amortization of transaction cost	20
Financial charges paid	(1,589	)
Amortization of financing	(4,437	)
Reclassification to “Other obligations”

Subtotal	11,364

FIC Pampulha: Marketable securities of subsidiary companies

Balance at December 31, 2021	11,364

Loans and financing obtained	2,000
Transaction costs	(18	)

Financing obtained, net	1,981

Monetary variation	167
Exchange rate variation	(338	)
Financial charges provisioned	975
Premium on repurchase of debt securities (Eurobonds)	47
Amortization of transaction cost	7
Financial charges paid	(1,010	)
Amortization of financing	(2,613	)

Balance at December 31, 2022	10,580

Loans and financing obtained	2,000
Transaction costs	(12	)
Discount in the issues of securities	-

Financing obtained, net	1,988

Monetary variation	148
Exchange rate variation	(276	)
Financial charges provisioned	1,082
Amortization of transaction cost	14
Financial charges paid	(1,026	)
Amortization of financing	(2,679	)

Balance at December 31, 2023	9,831


ANNUAL REPORT AND FORM 20-F \| 2023	F-87

Borrowing costs, capitalized

Borrowing costs directly related to the acquisition, construction or production of an asset that necessarily requires substantial time to be completed for its intended use or sale are capitalized as part of the cost of the corresponding asset. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs comprise interest and other costs incurred by the Company related to Loans and debentures.

The subsidiaries CEMIG D and Gasmig considered the costs of loans and debentures linked to construction in progress as construction costs of intangible and concession contract assets, as follows:


	2023			2022			2021
Costs of loans and financing		1,083			975			1,162
Financing costs on intangible assets and contract assets		(70	)		(47	)		(15	)

Net effect in Profit or loss		1,013			928			1,147

(1)

The average capitalization rate p.a. on December 31, 2022 was 11.36% (9.44% on December 31, 2021).

The amounts of the capitalized borrowing costs have been excluded from the statement of cash flows, in the additions to cash flow of investment activities, as they do not represent an outflow of cash for acquisition of the related asset.

Restrictive covenants

There are early maturity clauses for cross-default in the event of non-payment by CEMIG GT or by the Company, of any pecuniary obligation with individual or aggregate value greater than R$50 (‘cross default’).

The Company has contracts with financial covenants as follows:


Title - Security	Covenant	Ratio required - Issuer	Ratio required CEMIG (guarantor)	Compliance required
Eurobonds CEMIG GT (1)	Net debt / Adjusted Ebitda for the Covenant (3)	2.5 or less	3.0 or less	Semi-annual and annual
7th and 8th Debentures Issuance CEMIG D	Net debt / Adjusted Ebitda	3.5 or less	3.0 or less	Semi-annual and annual
8th Debentures Issuance Gasmig (2)	Ebitda/Debt servicing Net debt/EBITDA	1.3 or more 3.0 or less	-	Annual
9th Debenture Issue CEMIG GT 1st and 2nd Series (3)	Net debt / Adjusted Ebitda	3.5 or less	3.0 or less from Dec. 31, 2022 onwards 3.5 or less from Dec. 31, 2026 onwards	Semi-annual and annual
9th Debentures Issuance CEMIG D	Net debt / Adjusted Ebitda	3.5 or less from June 30, 2023 onwards	3.5 or less from June 30, 2023 onwards	Semi-annual and annual

(1)

(2)

Non-compliance with financial covenants implies non-automatic early maturity. If early maturity is declared by the debenture holders, Gasmig must make the payment upon receipt of the notification.

(3)

Management monitors these indexes, so that the conditions are satisfied.

The information on the derivative financial instruments (swaps) contracted to hedge the debt servicing of the Eurobonds (principal, in foreign currency, plus interest), and the Company’s exposure to interest rate risks, are disclosed in Note 31.


ANNUAL REPORT AND FORM 20-F \| 2023	F-88

22.

REGULATORY CHARGES


	2023		2022
Liabilities
Global Reversion Reserve (RGR)		28		28
Energy Development Account (CDE)		133		127
Grantor inspection fee – ANEEL		3		3
Energy Efficiency Program		187		221
Research and development (R&D)		150		126
Energy System Expansion Research		5		4
National Scientific and Technological Development Fund		9		8
Proinfa – Alternative Energy Program		9		10
Royalties for use of water resources		11		10
Emergency capacity charge		26		26
CDE on R&D (1)		3		3
CDE on EEP		8		4
Others		5		5

		577		575

Current liabilities		487		510
Non-current liabilities		90		65

(1)

The Energy Efficiency Program (PEE) aims to promote the efficient use of electricity in all sectors of the economy. To this end, concessionaires and permit holders of public electricity distribution services are obliged to invest an annual amount of their net revenue in research and development in the electricity sector.

Research, development and innovation

Every year, electricity distribution, generation and transmission concessionaires and permit holders must allocate 1% of their regulatory net operating revenue to research, development and innovation projects in the electricity sector.

The movement of balances is as follows:


	Consolidated
		2022	Additions		Expenses			Investments			Monetary updating		2023
FNDCT		8		63		(62	)		-			-	9
MME		4		32		(31	)		-			-	5
R&D (1)		126		40		-			(32	)		16	150

Total		138		135		(93	)		(32	)		16	164


ANNUAL REPORT AND FORM 20-F \| 2023	F-89


	Consolidated
		2021	Additions		Expenses			Investments			Monetary updating		2022
FNDCT		9		49		(50	)		-			-	8
MME		4		25		(25	)		-			-	4
R&D (1)		112		34		-			(32	)		12	126

Total		125		108		(75	)		(32	)		12	138

(1)

The changes in R&D are presented net of services in progress, which amounted to R$6 on December 31, 2023 and R$2 on December 31, 2022.

23.

ACCOUNTS PAYABLE RELATED TO ENERGY GENERATED BY CONSUMERS

The Electricity Compensation System (Sistema de Compensação de Energia Elétrica – SCEE) is a system in which the electricity injected by customers which have micro- or mini-distributed generation is assigned, as a loan free of charge, to the local distributor, and subsequently offset against electricity consumption.

The balance of the obligation represents the volume of energy to be offset, measured at the electricity distribution tariff in force at the time.

On December 31, 2023, the amount posted in Current liabilities was R$705 (R$455 on December 31, 2022). This increase is mainly due to the increase in the number of generating facilities (249,241 in December 2023, compared to 191,153 in December 2022) and the increase in the amount of energy injected (4,720 GWh in 2023, compared to 3,041 GWh in 2022).

24.

POST-EMPLOYMENT OBLIGATIONS

Forluz Pension plan (a Supplementary retirement pension plan)

CEMIG and its subsidiaries are sponsors of Forluz - Forluminas Social Security Foundation, a non-profit legal entity whose object is to provide its associates and participants and their dependents with a finance income to complement retirement and pension, in accordance with the pension plan that they are subscribed in.

Forluz provides the following supplementary pension benefit plans available to its participants:

Mixed Benefit Plan (‘Plan B’): This plan operates as a defined-contribution plan in the fund accumulation phase for retirement benefits for normal time of service, and as a defined-benefit plan for disability or death of participants still in active employment, and for receipt of benefits for time of contribution. The Sponsors match the basic monthly contributions of the participants. This is the only plan open for joining by new participants. The actuarial risks related to Plan B occur only as from the option for the lifetime benefit at the moment of the participant’s retirement. In this specific case the responsibility for the risk of insufficiency of reserves for coverage of the benefits (deficits) is in parity between sponsors and participants.

Funded Benefit Plan (‘Plan A’): This plan includes all currently employed and assisted participants who opted to migrate from the Company’s previously sponsored defined benefit plan and are entitled to a benefit proportional to those balances. For participants who are still working, this benefit has been deferred to the retirement date. The benefit balances of Plan A have the characteristic of lifetime payment, and the responsibility for the risk of insufficiency of reserves to cover the benefits (deficits) is exclusively that of the sponsors.

In addition to the Forluz pension plans, Cemig, Cemig GT and Cemig D , contribute to the Integrated Health Plan (PSI) and premium plan, and a dental plan for the active employees, retired employees and dependents, administered by Cemig Saúde.


ANNUAL REPORT AND FORM 20-F \| 2023	F-90

Health Plan and Dental Plan

As from December 2022, Cemig Saúde offered all active employees of Cemig an alternative, new, health plan, called the Premium Plan, in substitution of the Integrated Health Plan (PSI) that was in effect up to that date. The Premium Plan is financed entirely by the Company. In counterpart to the Company bearing the entire cost, those employees who accept the new plan will no longer receive the contribution from Cemig for payment for the health plan in their retirement. The adherence period to the new plan under the proposed conditions was available to employees up to January 31, 2023, and migration of some of the employees to the Premium Plan reduced the number of employees covered by the PSI.

In light of IAS 19 this situation constitutes a curtailment event, requiring the Company to remeasure its post-employment liabilities for the base date March 31, 2023. The effects of the curtailment have been recognized in the statement of income as a cost of past service, in the amounts of R$55 for the health plan and R$1 for the dental plan.

The curtailment event that was recognized for the quarter affected the actuarial assumptions, in that it altered the discount rates applicable to the plans. Since the new discount rate was higher, there was a reduction of the liability, and as a result an actuarial gain of R$60 for the health plan, and R$1 for the dental plan.

Actuarial obligations and recognition in the financial statements

On this Note the Company discloses its obligations and expenses incurred for purposes of the Retirement Plan, Health Plan, Dental Plan and the Life Insurance Plan in accordance with the terms of IAS 19 - Employee Benefits, and the independent actuarial opinion issued as of December 31, 2023.

Agreement to cover the deficit on Forluz Pension Plan ‘A’

Forluz and the sponsors CEMIG, CEMIG GT and CEMIG D have signed a Debt Assumption Instrument to cover the deficit of Plan A for the years of 2015, 2016 and 2017.

The monthly amortizations, calculated by the constant installments system (Price Table), will be paid up to 2031 for the 2015 and 2016 deficits, in the amount of R$344, and up to 2033 for the 2017 deficit, in the amount of R$177. Remuneratory interest applicable to the outstanding balance is 6% p.y., plus the effect of the IPCA. If the plan reaches actuarial surplus before the full period of amortization of the debt, the Company will not be required to pay the remaining installments and the contract will be extinguished.

On December 31, 2023 the total amount payable by Cemig and its subsidiaries as a result of the Plan A deficits was R$521 (R$545 on December 31, 2022 referring to the Plan A deficits of 2015, 2016 and 2017).

Forluz consignment deposits

In accordance with the specific legislation, Forluz sent Cemig a proposal to enter into new Private Debt Assumption Instruments between Forluz and the sponsors Cemig, Cemig GT and Cemig D, according to the settlement plan to cover the deficit of Forluz's Plan A in 2019, 2020 and 2021. In the case of deficit settlements, if the plan reaches actuarial balance before the full amortization period of the contract, the Company would be exempt from paying the remaining installments and the contract would be extinguished.


ANNUAL REPORT AND FORM 20-F \| 2023	F-91

The Company, recognizing its legal obligation with regard to the Plan A deficit, corresponding to 50% of the minimum amount, respecting the rule of contributory parity, makes consignment payments into a judicial deposit account, which are available to Forluz to be redeemed at any time at the official bank. The deposits are constituted monthly by the amount of 50% of the installment of each of the 2019, 2020 and 2021 Deficit Equalizations, as follows:


	Deficit of pension fund 2019		Deficit of pension fund 2020		Deficit of pension fund 2021
Start of consignment		May, 2021		April, 2022		In process
Total amount requested by Forluz		R$160		R$252		R$670
Amount considering contribution parity		R$80		R$126		R$335
Number of parcels		166		158		159
Remuneratory interest		IPCA + 6%		IPCA + 6%		IPCA + 6%
Balance deposited on December 31, 2023		R$ 27		R$ 26		R$ 20

Regarding the resolution of the 2019 deficit, Forluz, due to (i) the non-execution of the Debt Assumption Agreement to cover the minimum proposed amount in the plan for the actuarial deficit of Plan A in 2019, and (ii) the refusal of the Company's consignment payments. Forluz entered with a lawsuit on April 27, 2021, against sponsors Cemig, Cemig GT, and Cemig D. The lawsuit requests approval for enforcing the debt agreement in order to cover the consolidated deficit of R$160, in the same amount.

In 2022 the first instance of the Employment Law Appeal Court of Minas Gerais gave a decision in favor of Forluz, and against the Company’s requests, however, this discussion can be conduced in higher courts. As a result the Company, based on the assessments of its specialists, has opted to maintain its assessment of the chances of loss in the action as ‘possible’.

Debt with the pension fund (Forluz)

On December 31, 2023, the Company recognized an obligation for past actuarial deficits relating to the pension fund in the amount of R$90 on December 31, 2023 (R$251 on December 31, 2022). This amount has been recognized as an obligation payable by CEMIG and its subsidiaries, and will be amortized until June of 2024, through monthly installments calculated by the system of constant installments (known as the ‘Price’ table) and adjusted by the IPCA (Expanded National Customer Price) inflation index (published by the Brazilian Geography and Statistics Institute - IBGE) plus 6% per year. The Company is required to pay this debt even if Forluz has a surplus, thus, the Company maintain recorded the debt in full, and record the effects of monetary updating and interest in finance income (expenses) in the statement of income.

Actuarial information


2023	Pension plans and retirement supplement plans			Health plan		Dental plan		Total
Present value of obligations		12,216			3,007		53		15,276
Fair value of plan assets		(9,882	)		-		-		(9,882	)

Initial net liabilities		2,334			3,007		53		5,394
Adjustment to asset ceiling		23			-		-		23

Net liabilities in the statement of financial position		2,357			3,007		53		5,417


ANNUAL REPORT AND FORM 20-F \| 2023	F-92


2022	Pension plans and retirement supplement plans			Health plan		Dental plan		Total
Present value of obligations		11,404			3,314		60		14,778
Fair value of plan assets		(9,198	)		-		-		(9,198	)

Initial net liabilities		2,206			3,314		60		5,580
Adjustment to asset ceiling		112			-		-		112

Net liabilities in the statement of financial position		2,318			3,314		60		5,692

The asset ceiling is the present value of any economic benefits available in the form of restitutions coming from the plan or reductions in future contributions to the plan.

The present value of the liabilities of the pension plan is adjusted to the asset ceiling, which corresponds to the surplus result of Plan B, which has a specific destination allocation under the regulations of the National Private Pension Plans Council (CNPC).

The changes in the present value of the defined benefit obligation


	Pension plans and retirement supplement plans			Health plan			Dental plan			Life insurance			Total
Defined-benefit obligation at December 31, 2020		13,308			3,319			64			551			17,242

Cost of current service		2			21			1			3			27
Past service cost (1)											(415	)		(415	)
Interest on actuarial obligation		883			232			5			39			1,159
Actuarial losses (gains):
Due to changes in demographic assumptions		378			122			1			(15	)		486
Due to changes in financial assumptions		(2,393	)		(252	)		(5	)		(127	)		(2,777	)
Due to adjustments based on experience		828			200			3			(26	)		1,005

		(1,187	)		70			(1	)		(168	)		(1,286	)
Benefits paid		(980	)		(173	)		(3	)		(10	)		(1,166	)

Defined-benefit obligation at December 31, 2021		12,026			3,469			66			-			15,561

Cost of current service		2			16			-						18
Past service cost (1)		(4	)		-			-						(4	)
Interest on actuarial obligation		1,224			361			7						1,592
Actuarial losses (gains):
Due to changes in demographic assumptions		(7	)		(1	)		-						(8	)
Due to changes in financial assumptions		(857	)		(305	)		(6	)					(1,168	)
Due to adjustments based on experience		106			(20	)		(3	)					83

		(758	)		(326	)		(9	)					(1,093	)
Benefits paid		(1,086	)		(206	)		(4	)					(1,296	)

Defined-benefit obligation at December 31, 2022		11,404			3,314			60						14,778

Cost of current service		-			11			-						11
Past service cost (2)		-			(55	)		(1	)					(56	)
Actuarial losses (gains):		1,276			370			7						1,653
Actuarial losses (gains):
Due to changes in demographic assumptions		-			26			1						27
Due to changes in financial assumptions		754			232			4						990
Due to adjustments based on experience		(125	)		(673	)		(14	)					(812	)

		629			(415	)		(9	)					205
Benefits paid		(1,093	)		(218	)		(4	)					(1,315	)

Defined-benefit obligation at December 31, 2023		12,216			3,007			53			-			15,276

(1)

Due to the alterations made in the Collective Work Agreement for 2021-23, for offer and payment of life insurance for the employees and former employees, the Company understood that the post-retirement benefit in question had been entirely canceled, and as a result wrote down the balance of the obligation, remeasured using the revised actuarial assumptions.


ANNUAL REPORT AND FORM 20-F \| 2023	F-93

(2)

Relating to the changes in the conditions of Plan B for requesting the Enhancement of Retirement for Length of Contribution, Special or Age - MAT (Melhoria de Aposentadoria por Tempo de Contribuição, Especial ou or Idade).

Changes in the fair values of the plan assets


	Pension plans and retirement supplement plans
Fair value of the plan assets at December 31, 2020		10,420

Return on investments		(298	)
Contributions from employer		236
Benefits paid		(980	)

Fair value of the plan assets at December 31, 2021		9,378

Return on investments		633
Contributions from employer		272
Benefits paid		(1,085	)

Fair value of the plan assets at December 31, 2022		9,198

Return on investments		1,464
Contributions from employer		313
Benefits paid		(1,093	)

Fair value of the plan assets at December 31, 2023		9,882

Changes in net liabilities


	Pension plans and retirement supplement plans			Health plan			Dental plan			Life insurance			Total
Net liabilities at December 31, 2020		2,909			3,319			64			551			6,843

Expense recognized in Statement of income		200			253			6			42			501
Past service cost	-			-			-				(415	)		(415	)
Contributions paid		(236	)		(173	)		(3	)		(10	)		(422	)
Actuarial gains (losses)		(203	)		70			(1	)		(168	)		(302	)

Net liabilities at December 31, 2021		2,670			3,469			66			-			6,205

Expense recognized in Statement of income		285			378			7						670
Past service cost		(4	)		-			-						(4	)
Contributions paid		(272	)		(206	)		(4	)					(482	)
Actuarial gains		(361	)		(327	)		(8	)					(696	)

Net liabilities at December 31, 2022		2,318			3,314			61						5,693

Expense recognized in Statement of income		280			381			7						668
Past service cost		-			(55	)		(1	)					(56	)
Contributions paid		(313	)		(218	)		(5	)					(536	)
Actuarial gains (losses)		72			(415	)		(9	)					(352	)

Net liabilities at December 31, 2023		2,357			3,007			53			-			5,417


										2023			2022

Current liabilities											329			388
Non-current liabilities											5,088			5,304

Actuarial losses and gains, net of income tax and social contribution, do not involve cash and are therefore not reflected in the Cash Flow Statements.


ANNUAL REPORT AND FORM 20-F \| 2023	F-94

Amounts recorded as current liabilities refer to contributions to be made by CEMIG and its subsidiaries in the next 12 months for the amortization of the actuarial liabilities.

The amounts reported as ‘Expense recognized in the Statement of income’ refer to the costs of post-employment obligations, that include the past service cost arising from the cancellation of the post-retirement life insurance obligation, totaling R$591 (R$626 on December 31, 2022), plus the finance expenses and monetary updating on the debt with Forluz, in the amounts of R$20 (R$40 on December 31, 2022).

The amounts recognized in 2022, 2021 and 2020 statement of income


2023	Pension plans and retirement supplement plans			Health plan			Dental plan			Total
Current service cost		-			11			-			11
Past service cost		-			(55	)		(1	)		(56	)
Interest on the actuarial obligation		1,276			370			7			1,653
Expected return on the assets of the Plan		(1,004	)		-			-			(1,004	)

Expense in 2023		272			326			6			604


	Pension plans and retirement supplement plans			Health plan		Dental plan		Total
Current service cost		2			16		-		18
Past service cost		(4	)		-		-		(4	)
Interest on the actuarial obligation		1,224			361		7		1,592
Expected return on the assets of the Plan		(941	)		-		-		(941	)

Expense in 2022		281			377		7		665


	Pension plans and retirement supplement plans			Health plan		Dental plan		Life insurance			Total
Current service cost		2			21		1		3			27
Past service cost (1)		-			-		-		(415	)		(415	)
Interest on the actuarial obligation		883			232		5		39			1,159
Expected return on the assets of the Plan		(685	)		-		-		-			(685	)

Expense in 2021		200			253		6		(373	)		86


ANNUAL REPORT AND FORM 20-F \| 2023	F-95

Estimates for the following year and sensitivity analysis

The independent actuary’s estimation for the expense to be recognized for 2024 is as follows:


	Pension plans and retirement supplement plans			Health plan		Dental plan		Total
Current service cost		1			6		-		7
Interest on the actuarial obligation		1,055			262		5		1,322
Expected return on the assets of the Plan		(842	)		-		-		(842	)

Expense in 2024 according to actuarial calculation		214			268		5		487

The expectation for payment of benefits for 2024 is as follows:


	Pension plans and retirement supplement plans		Health plan		Dental plan		Total
Estimated payment of benefits		1,124		219		4		1,347

The Company CEMIG GT and CEMIG D have expectation of making contributions to the pension plan in 2023 of R$186 for amortization of the deficit of Plan A, and R$84 for the Defined Contribution Plan (recorded directly in the Statement of income for the year).

Below is a sensitivity analysis of the liabilities effect of changes in the main actuarial assumptions used to determine the defined-benefit obligation on December 31, 2023:


Effects on the defined-benefit obligation	Pension plans and retirement supplement plans			Health plan			Dental plan			Total
Reduction of one year in the mortality table		341			61			1			403
Increase of one year in the mortality table		(311	)		(62	)		(1	)		(374	)
Reduction of 1% in the discount rate		1,140			342			6			1,488

In the presentation of the sensitivity analysis, the present value of the defined-benefit obligation was calculated using the Projected Unit Credit method, the same method used to calculate the defined-benefit obligation recognized in the Statement of financial position.

The average maturity periods of the obligations of the benefit plans, in years, are as follows:


Pension plans and retirement supplement plans
Plan A	Plan B	Health plan	Dental plan
8.38	10.26	9.92	9.79

The following assets measured at fair value, are related to the Company and are not considered plan assets. According to the requirement of the standards, the amount are presented for informational purposes:


	2023		2022		2021
Non-convertible debentures issued by the Company		96		137		302
Shares issued by the Company		4		3		-
Real estate properties of the Foundation, occupied by the Company		275		270		277

		375		410		579


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Main actuarial assumptions


	2023
	Pension plans and retirement supplement plans	Health plan and Dental plan
Annual discount rate for present value of the actuarial obligation	9.03%	9.07%
Annual expected return on plan assets	9.03%	Not applicable
Long-term annual inflation rate	3.50%	3.50%
Estimated future annual salary increases	3.50%	Not applicable
General mortality table	AT-2000 M S10%	AT-2000 M&F S10% D20%
Disability table	Not applicable	Not applicable
Disabled mortality table	AT-83 IAM Male	MI-85 Female
Real growth of contributions above inflation (1)	-	1%


	2022		2021
	Pension plans and retirement supplement plans	Health plan and Dental plan	Pension plans and retirement supplement plans	Health plan and Dental plan	Life insurance
Annual discount rate for present value of the actuarial obligation	11.73%	11.83%	10.60%	10.75%	10.73%
Annual expected return on plan assets	11.73%	Not applicable	10.60%	Not applicable	Not applicable
Long-term annual inflation rate	5.31%	5.31%	5.03%	5.03%	5,03%
Estimated future annual salary increases	5.31%	Not applicable	5.03%	Not applicable	6,29%
General mortality table	AT-2000 S10% by sex	AT-2000 M&F S10% D20%	AT-2000 S10% by sex	AT-2000 M&F S10% D20%	AT-2000 M&F S10% D20%
Disability table	Not applicable	Álvaro Vindas increase of 30%	Not applicable	Tasa 1927 increase of 100%	Tasa 1927 increase of 100%
Disabled mortality table	AT-83 IAM Male	MI-85 Female	AT-83 IAM Male	MI-85 Female	MI-85 Female
Real growth of contributions above inflation	-	1%	-	1%	-

The Company has not made changes in the methods used to calculate its post-employment obligations for the years ended December 31, 2023 and 2022.

Accounting policy

Expenses related to the debt agreed upon with the pension trust fund were recorded in finance income (expenses), because they represent financial interest and inflation adjustment. Other expenses related to the pension fund were recorded as operating expenses.

Estimations and judgments

In the case of retirement obligations, the liability recognized in the balance sheet with respect to defined benefit pension plans is the greater of the debt agreed with the foundation for amortization of actuarial obligations and the present value of the actuarial obligation, calculated by means of an actuarial report, less the fair value of the plan's assets.

The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using the rate of return on high-quality corporate bonds that have terms similar to the duration of the respective pension plan obligations and are denominated in the currency in which the benefits will be paid.


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In defined contribution plans, the Company makes fixed contributions and has no legal or constructive obligations to make contributions if the fund does not have sufficient assets to pay all employees the related benefits. The Company has no additional payment obligation after the contribution is made. Contributions are recognized as an employee benefits expense when due.

In the case of the health and dental plans, the liabilities are calculated by calculating the present value of the future obligations to be made by the Company, considering the maintenance of the current contribution level, the forecast of a real readjustment of the amounts and the future updating of the contributions by the variation of an index compatible with the Regulations and the history of the costs of the plans.

Actuarial calculations take place at each financial year end and involve the use of assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future increases in retirement and pension benefits. All assumptions are reviewed at each base date.

In the current and previous years, post-employment expenses are recorded as operating expenses, with the exception of expenses related to the debt agreed with the Pension Fund, which are recorded in the financial result, as they represent interest and monetary variation.

Actuarial gains and losses arising from adjustments based on experience and changes in actuarial assumptions are recognized through other comprehensive income and will not be reclassified to profit or loss in the future.

Both the past service cost resulting from a change or reduction in the defined benefit plan and the gain or loss on the settlement of obligations are determined based on the remeasurement of the net present value of the obligation, due to the revision of actuarial assumptions, and are recognized directly in profit or loss for the year in which the change occurs.

25.

PROVISIONS

Company and its subsidiaries are involved in certain legal and administrative proceedings at various courts and government bodies, arising in the normal course of business, regarding employment-law, civil, tax, environmental and regulatory matters, and other issues.

Company and its subsidiaries recorded provisions for contingencies in relation to the legal actions in which, based on the assessment of the Company’s management and its legal advisors, the chances of loss are assessed as ‘probable’ (i.e. an outflow of funds to settle the obligation will be necessary), as follows:


	2022		Additions		Reversals			Settled			2023
Labor		415		146		(26	)		(103	)		432
Civil		-		-		-			-
Costumer relations		42		65		(10	)		(52	)		45
Other civil actions		36		24		(1	)		(19	)		40
		78		89		(11	)		(71	)		85

Tax		1,474		147		(2	)		(1	)		1,618
Regulatory		48		9		-			(4	)		53
Others		14		18		(10	)		(10	)		12
Total		2,029		409		(49	)		(189	)		2,200


ANNUAL REPORT AND FORM 20-F \| 2023	F-98


	2021		Additions		Reversals			Settled			2022
Labor		404		124		(26	)		(87	)		415
Civil		-		-		-			-
Customer relations		33		44		-			(35	)		42
Other civil actions		38		14		(3	)		(13	)		36

		71		58		(3	)		(48	)		78

Tax		1,295		332		(150	)		(3	)		1,474
Regulatory		48		12		(5	)		(7	)		48
Other		71		57		(57	)		(57	)		14

Total		1,889		583		(241	)		(202	)		2,029


	2020		Additions		Reversals			Settled			2021
Labor		427		81		(46	)		(58	)		404
Civil
Customer relations		23		36		-			(26	)		33
Other civil actions		32		19		(1	)		(12	)		38

		55		55		(1	)		(38	)		71
Tax		1,294		91		(89	)		(1	)		1,295
Regulatory		52		7		(8	)		(3	)		48
Other		64		23		(3	)		(13	)		71

Total		1,892		257		(147	)		(113	)		1,889

Additionally, there are lawsuits whose expected loss is considered possible, since the Company's and its subsidiaries' legal advisors assessed them as having a possible chance of success, and no provision was recorded, as follows:


Possible loss
	Consolidated
	2023		2022
Labor		1,363		1,199
Civil
Costumer relations		346		231
Other civil actions		613		537

		959		768

Tax		2,474		2,149
Regulatory		3,145		2,976
Others		1,840		1,361

Total		9,781		8,453

The Company and its subsidiaries’ management, in view of the extended period and the Brazilian judiciary, tax and regulatory systems, believes that it is not practical to provide information that would be useful to the users of this financial statements in relation to the timing of any cash outflows, or any possibility of reimbursements.

The Company and its subsidiaries believe that any disbursements in excess of the amounts provisioned, when the respective claims are completed, will not significantly affect the Company and its subsidiaries’ result of operations or financial position.


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The main provisions and contingent liabilities are provided below, with the best estimation of expected future disbursements for these contingencies.

Tax

Company and its subsidiaries are involved in numerous administrative and judicial claims actions relating to taxes, including, among other matters, subjects relating to the Urban Property Tax (Imposto sobre a Propriedade Territorial Urbana, or IPTU); the Rural Property Tax (ITR); the Tax on Donations and Legacies (ITCD); the Social Integration Program (Programa de Integração Social, or PIS); the Contribution to Finance Social Security (Contribuição para o Financiamento da Seguridade Social, or Cofins); Corporate Income tax (Imposto de Renda Pessoa Jurídica, or IRPJ); the Social Contribution (Contribuição Social sobre o Lucro Líquido, or CSLL); and motions to tax enforcement. The aggregate amount of this contingency is R$368 (R$276 on December 31, 2022), of which R$24 (R$23 on December 31, 2022) has been recorded - the amount estimated as probably necessary for settlement of these disputes.

In addition to the issues above the Company is involved in various proceedings on the applicability of the IPTU Urban Land Tax to real estate properties that are in use for providing public services. The aggregate amount of the contingency is approximately R$186 (R$94 on December 31, 2022). Of this total, R$2 has been recognized (R$4 on December 31, 2022) - this being the amount estimated as probable necessary for settlement of these disputes. The Company has been successful in its efforts to have its IPTU tax liability suspended, winning judgments in favor in some cases.

Social Security contributions on income sharing payments

The Brazilian tax authority (Receita Federal) has filed administrative and court proceedings against the Company, relating to social security contributions on the payment of income sharing to its employees over the period 1999 to 2016, alleging that the Company did not comply with the requirements of Law 10,101/2000 on the argument that it did not previously establish clear and objective rules for the distribution of these amounts. In August 2019, the Regional Federal Court of the First Region published a decision against the Company on this issue. As a result the Company, based on the opinion of its legal advisers, reassessed the probability of loss from ‘possible’ to ‘probable’ for some portions paid as income-sharing amounts, maintaining the classification of the chance of loss as 'possible' for the other portions, since it believes that it has arguments on the merit for defense and/or because it believes that the amounts questioned are already within the period of limitation.

The amount of the contingencies is R$1,789 (R$1,640 on December 31, 2022), of which R$1,449 (R$1,311 on December 31, 2022) has been provisioned, this being the probable estimate of funds to settle these disputes.

Indemnity of employees’ future benefit (the ‘Anuênio’)

In 2006 the Company paid an indemnity to its employees, totaling R$178, in exchange for rights to future payments (referred to as the Anuênio) for time of service, which would otherwise be incorporated, in the future, into salaries. The Company did not pay income tax nor Social Security contributions in relation to these amounts because it believed that amounts paid as indemnity are not taxable. However, given the possibility of dispute and to avoid risk of future penalty payments, The Company filed legal actions for recognition of the right of non-taxation on these Anuênio payments, making separate submissions and argument in relation to (a) income tax and (b) the social security contribution, in the aggregate historic amount of R$122, which is considered sufficient for payment of the lawsuit.

In the action relating to applicability of the social security contribution, a court judgment was given that impedes consideration of an appeal to the Federal Supreme Court - thus consideration by the Higher Appeal Court remains. Additionally, in October 2022, a judgment was published refusing to recognize the Special Appeal filed by the Company, reducing the chances of success in the action. As a result, the assessment of the chances of loss in this action were altered from ‘possible’ to ‘probable’, and a provision made for the amount deposited in escrow. The chances of loss in the action relating to applicability of income tax on the amounts of the anuênios, due to its current phase of


ANNUAL REPORT AND FORM 20-F \| 2023	F-100

procedure, have been maintained as ‘possible’. The amount of the contingency is R$319 (R$305 on December 31, 2022), of which R$142 (R$136 on December 31, 2022) has been provisioned.

Lack of approval to offset tax credit

The federal tax authority did not approve the Company’s offset in corporate income tax returns, of carryforwards and undue or excess payment of federal taxes - IRPJ, CSLL, PIS/Pasep and Cofins - identified by official tax deposit receipts (‘DARFs’ and ‘DCTFs’). The Company is contesting the lack of approval of compensated amounts. The amount of the contingency is R$148 (R$164 on December 31, 2022), of which R$1 (R$1 on December 31, 2022), has been provisioned since the relevant requirements of the National Tax Code (CTN) have been complied with. The probability of loss related to the amount not provisioned has been assessed as ‘possible’.

Social Security contributions

The Brazilian federal tax authority (Secretaria da Receita Federal, or ‘SRF’) has filed administrative proceedings related to various matters: employee income sharing; the Workers’ Food Program (Programa de Alimentação do Trabalhador, or ‘PAT’); education benefit; food benefit; Special Additional Retirement payment; overtime payments; hazardous occupation payments; matters related to Sest/Senat (transport workers’ support programs) and fines for non-compliance with accessory obligations. The Company have presented defenses and await judgment. The amount of the contingency is R$148 (R$125 on December 31, 2022). Management has classified the chance of loss as ‘possible’, also taking into account assessment of the chance of loss in the judicial sphere, (the claims mentioned are in the administrative sphere), based on the evaluation of the claims and the related case law.

Income tax withheld on capital gain in a shareholding transaction

The federal tax authority issued a tax assessment against CEMIG as a jointly responsible party with its jointly controlled entity Parati S.A. Participações em Ativos de Energia Elétrica (Parati), relating to withholding income tax (Imposto de Renda Retido na Fonte, or IRRF) allegedly applicable to returns paid by reason of a capital gain in a shareholding transaction relating to the purchase by Parati, and sale, by Enlighted, at July 7, 2011, of 100.00% of the equity interests in Luce LLC (a company with head office in Delaware, USA), holder of 75.00% of the shares in the Luce Brasil equity investment fund (FIP Luce), which was indirect holder, through Luce Empreendimentos e Participações S.A., of 13.03% of the total and voting shares of Light S.A. (Light). The amount of the contingency is R$274 (R$256 on December 31, 2022), and the loss has been assessed as ‘possible’.

The social contribution tax on net income (CSLL)

The federal tax authority issued a tax assessment against the Company for the years of 2012 and 2013, alleging undue non-addition, or deduction, of amounts relating to the following items in calculating the social contribution tax on net income: (i) taxes with liability suspended; (ii) donations and sponsorship (Law 8,313/91); and (iii) fines for various alleged infringements. The amount of this contingency is R$587 (R$517 on December 31, 2022). The Company has evaluated the tax treatments adopted, which are susceptible to questioning by the tax authorities, and has concluded that it is more likely than not that they will be accepted by the tax authority.

ICMS (local state value added tax)

From December 2019 to March 2022, the Tax Authority of Minas Gerais State issued infraction notices against the subsidiary Gasmig, in the total amount of R$357, relating to reduction of the calculation base of ICMS tax in the sale of natural gas to its customers over the period from December 1, 2014 to September 30, 2021, alleging a divergence between the form of calculation used by Gasmig and the opinion of that tax authority, The claims comprises principal amount of R$124, penalty payments of R$201 and interest of R$32.


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Considering that the State of Minas Gerais, over a period of more than 25 years, has never made any allegations against the methodology of calculation by the Company, Management and Company’s legal advisors, believe that there is a defense under Article 100, III of the National Tax Code, which removes claims for penalties and interest; and that the contingency for loss related to these amounts is ‘remote’, In relation to the argument on the difference between the amount of ICMS tax calculated by Gasmig and the new interpretation by the state tax authority, the probability of loss was considered ‘possible’. On December 31, 2023, the amount of the contingency for the period relating to the rules on expiry by limitation of time is R$223 (R$182 on December 31, 2022). In July 2021, Gasmig filed a lawsuit for annulment of a tax debit, against the State of Minas Gerais, and this proceeding suspended the tax claim referred to above.

Interest on Equity

The Company filed an application for mandamus, with interim relief, requesting the right to deduct, from the basis of calculation of corporate income tax and Social Contribution tax, the expense relating to payment of Interest on Equity in 4Q20 calculated on the basis of prior periods (the first and second quarters of 2020), and for cancellation of the demand for new supposed credits of corporate income tax and the Social Contribution relating to the amount that was not paid as a result of the deduction of the said financial expense, with application of fines. Additionally, a judicial deposit was made in the amount of R$82 (R$68 on December 31, 2022). The amount of the contingencies in this case is R$74 (R$67 on December 31, 2022). The Company has evaluated the tax treatments adopted, which are susceptible to questioning by the tax authorities, and has concluded that it is more likely than not that they will be accepted by the tax authority.

Reversal of credits in calculation of PIS/ Pasep and Cofins taxes

The Brazilian tax authority issued, in August 2021, two infringement notices relating to calculation of the PIS/Pasep and Cofins taxes, from August 2016 to December 2017, alleging insufficiency of payment of these contributions due to supposed undue credits deduction of the expenses on the Proinfa charge, and absence of reversal of the credits related to non-technical losses. The Company is contesting these infringement notices. The amount of the contingency is R$200 (R$180 on December 31, 2022) and the Company has classified the chances of loss as ‘possible’, due to the scarcity of case law on the subject.

Labor claims

Company and its subsidiaries are involved in various legal claims filed by its employees and by employees of service providing companies. Most of these claims relate to overtime and additional pay, severance payments, various benefits, salary adjustments and the effects of such items on a supplementary retirement plan. In addition to these actions, there are other relating, complementary additions to or re-calculation of retirement pension payments by Forluz, and salary adjustments.

The aggregate amount of the contingency is R$1,795 (R$1,613 on December 31, 2022), of which R$432 (R$415 on December 31, 2022) has been recorded - the amount estimated as probably necessary for settlement of these disputes.

Customers claims

The Company is involved in various civil actions relating to indemnity for personal injury and for material damages, arising, principally, from allegations of irregularity in measurement of consumption, and claims of undue charging, in the normal course of business, totaling R$287 (R$272 on December 31, 2022), of which R$45 (R$41 on December 31, 2022) has been recorded - this being the probable estimate for funds needed to settle these disputes.


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Power supply outages

The Attorney General’s Office of Uberlândia filed a Public Civil Action against the Company, as a result of recurring electricity outages in that municipality. The amount of the contingency for collective moral damages is R$103, on December 31, 2023. The chance of loss in this action has been classified as “possible”, since the action is at the initial stage: the Company is still preparing its defense.

Other civil proceedings

The Company is involved in various civil actions claiming indemnity for personal and material damages, among other, arising from incidents occurred in the normal course of business, in the amount of R$653 (R$573 on December 31, 2022), of which R$40 (R$36 on December 31, 2022) has been recorded - the amount estimated as probably necessary for settlement of these disputes.

Regulatory

The Company is involved in numerous administrative and judicial proceedings, challenging, principally: (i) tariff charges in invoices for use of the distribution system by a self-producer; and (ii) alleged violation of targets for continuity indicators in retail supply of energy. The aggregate amount of the contingency is approximately R$589 (R$323 on December 31, 2022), of which R$26 (R$25 on December 31, 2022) has been recorded as provision - the amount estimated as probably necessary for settlement of these disputes.

Tariff increase – The Cruzado Plan

The Company and its subsidiaries are defendants in actions challenging the tariff increase authorized by Ministerial Orders DNAEE (Departamento Nacional de Águas e Energia Elétrica) 38/86 and 45/86, which took place during the Federal Government’s economic stabilization plan called the ‘Cruzado Plan’, in 1986. The plaintiffs demand restitution of excess amounts allegedly paid in the period in question, since the Supreme Court's defining judgment on Theme 319 decided the increase in tariffs was unlawful. Currently, most of the actions on this issue are at the phase of calculation of amounts to be repaid. In view of this, the amount of the contingency is estimated at R$66 (R$53 on December 31, 2022), of which R$26 (R$22 on December 31, 2022) has been provisioned.

Public Lighting Contribution (CIP)

CEMIG and CEMIG D are defendants in several public civil claims (class actions) requesting nullity of the clause in the Electricity Supply Contracts for public illumination signed between the Company and the various municipalities of its concession area, and restitution by the Company of the difference representing the amounts charged in the last 20 years, in the event that the courts recognize that these amounts were unduly charged. The actions are grounded on a supposed error by CEMIG in the estimation of the period of time that was used in calculation of the consumption of energy for public illumination, funded by the Public Lighting Contribution (Contribuição para Iluminação Pública, or ‘CIP’).

The Company believes it has arguments of merit for defense in these claims, including a partial favorable decision. As a result, it has not constituted a provision for this action, the amount of which is estimated at R$1,582 (R$1,433 on December 31, 2022). The Company has assessed the probability of loss in this action as ‘possible’, due to the Customer Defense Code (Código de Defesa do Consumidor, or ‘CDC’) not being applicable, because the matter is governed by the specific regulation of the electricity sector, and because CEMIG complied with ANEEL Resolutions 414 and 456, which deal with the subject.

Accounting of energy sale transactions in the Power Trading Chamber (CCEE)

In a claim dating from August 2002, AES Sul Distribuidora challenged in the court the criteria for accounting of energy sale transactions in the wholesale energy market (Mercado Atacadista de Energia, or ‘MAE’) (predecessor of the


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present Power Exchange Chamber - Câmara de Comercialização de Energia Elétrica, or ‘CCEE’), during the period of rationing. It obtained a favorable interim judgment on February 2006, which ordered the grantor (ANEEL), working with the CCEE, to comply with the claim by AES Sul and recalculate the settlement of the transactions during the rationing period, not considering the grantor (ANEEL) Dispatch 288 of 2002.

This should take effect in the CCEE as from November 2008, resulting in an additional disbursement for CEMIG GT, related to the expense on purchase of energy in the spot market on the CCEE, in the amount of R$594 (R$507 on December 31, 2022). On November 9, 2008 CEMIG GT obtained an interim decision in the Regional Federal Appeal Court (Tribunal Regional Federal, or TRF) suspending the obligatory nature of the requirement to pay into court the amount that would have been owed under the Special Financial Settlement made by the CCEE, CEMIG GT has classified the chance of loss as ‘possible’, since this action deals with the General Agreement for the Electricity Sector, in which the Company has the full documentation to support its arguments.

Energy billing dispute

During 2022, one of the Company's clients filed an arbitration proceeding requesting changes in contractual clauses and questioning the incidence of certain taxes on its electricity bills. In September 2022, the Company was duly notified of the court decision that granted the injunction request, which determined that the Company should start billing the energy supply contract according to the request. After the arbitration procedure was initiated and the parties were heard, in January 2023, the Court revoked the previous decision and determined the reestablishment of the contractual billing system, as well as the payment of the unbilled amounts due to the injunction initially granted in favor of this customer.

The arbitration proceeding is still in progress, in which this client is questioning the points informed above. If the arbitration decision grants the client's request, the Company will have to refund the difference between the contracted amounts and the adjustments demanded, which amounted to R$234 on December 31, 2023. Management, based on the opinion of its legal advisors, classified the probability of loss as possible.

Exclusion of customers classified as low-income

The Federal Public Attorneys’ Office filed a class action against the Company and the grantor (ANEEL), to avoid exclusion of customers from classification in the Low-income residential tariff sub-category, requesting an order for CEMIG D to pay twice the amount paid in excess by customers. A decision was given in favor of the plaintiffs, but the Company and the grantor (ANEEL) have filed an interlocutory appeal and await judgment. In July 2023, after the case had been properly processed, the Federal Public Attorneys’ Office request was dismissed and the decision became final.

Administrative penalty

The Company and its subsidiary filed an action for annulment of the administrative act, with request for injunctive relief, against the National Electric Energy Agency (ANEEL), for cancellation of the punishments, warnings and fines, in the historic amount of R$26, arising from Infringement Notice 076/2013 – SEF/ANEEL. The amount of the contingency is R$132 (R$108 on December 31, 2022). The chance of loss has been assessed as ‘possible’. The case is awaiting judgment by the court.

Environmental claims

Impact arising from construction of power plants

The Public Attorneys’ Office of Minas Gerais State has filed class actions requiring the formation of a Permanent Preservation Area (APP) around the reservoir of the Capim Branco hydroelectric plant, suspension of the effects of the environmental licenses, and recovery of alleged environmental damage. The Company, based on the opinion of its legal advisers in relation to the changes that have been made in the new Forest Code and in the case law on this subject, has classified the chance of loss in this dispute as ‘possible’. The estimated value of the contingency is R$149 (R$137 on December 31, 2022).


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Other legal actions in the normal course of business

Company and its subsidiaries are involved as plaintiff or defendant, in other less significant claims, related to the normal course of their operations including: environmental matters, removal of residents from risk areas; and indemnities for rescission of contracts, on a lesser scale, related to the normal course of its operations, with an estimated total amount of R$511 (R$434 at December 31, 2022), of which R$13 (R$6 at December 31, 2022), the amount estimated as probably necessary for settlement of these disputes.

Breach of contract - Power line pathways and accesses cleaning services contract

The Company and its subsidiaries are involved in disputes alleging losses suffered as a result of supposed breaches of contract at the time of provision of services of cleaning of power line pathways and firebreaks. In October 2022, the judge authorized the opposing party to withdraw the amount deposited of R$38, converting it into payment of the conviction. In February 2023, the payment of R$7 was made, referring to the residual issues of the process, and the discussion was closed.

‘Luz Para Todos’ Program

The Company is a party in disputes alleging losses suffered by third parties as a result of supposed breach of contract at the time of implementation of part of the rural electrification program known as the ‘Luz Para Todos’. The estimated amount of the contingency is approximately R$515 (R$470 on December 31, 2022). Of this total, R$0.154 (R$0.141 on December 31, 2022) has been provisioned the amount estimated as probably necessary for settlement of these disputes.

Contractual imbalance

CEMIG D is party in other disputes arising from alleged non-compliance with contracts in the normal course of business, for an estimated total of R$246 (R$223 on December 31, 2022). CEMIG D has classified the chance of loss as ‘possible’, after analysis of the case law on this subject.

Renova: Application to override corporate identity

A receivables investment fund filed an application for Override of Legal Identity (Incidente de Desconsideração da Personalidade Jurídica - IDPJ) in relation to certain companies of the Renova group, aiming to include some shareholders of Renova, including the Company and its subsidiary CEMIG GT, as defendants jointly and severally liable. The amount involved in this dispute is estimated at R$127 (R$103 on December 31, 2022). The probability of loss has been assessed as ‘possible’.

Clearance of residential occupation under high-voltage lines

The class action brought by the Public Attorneys of Minas Gerais State requests that the Company remove and resettle the inhabitants currently living within the limits of the safety zone of the high-voltage lines in the region. The amount of the contingent liability in dispute has been estimated at R$130 on December 31, 2023 (R$25 on December 31, 2022).

Volta do Rio wind farm

The Company and its subsidiary Volta do Rio are defendants in a claim presented in 2022 by the Federal Heritage Board (Secretaria de Patrimônio da União – SPU) of Ceará state, which considered that landfills, rockfill and towers for installation of the wind generation system of the Volta do Rio wind farm are located on free beach coastline. This resulted in the following penalties being applied to the Volta do Rio wind farm: (i) demolition and/or removal of buildings, and the installed equipment, if they are unable to be regularized; and (ii) a monthly fine for each square meter affected by the facilities. The Company has presented a defense to the accusation, and filed an administrative appeal. The contingency is estimated at R$174 on December 31, 2023. The chances of loss have been assessed as ‘possible’.


ANNUAL REPORT AND FORM 20-F \| 2023	F-105

Accounting policy

A provision shall be recognised when: (a) an entity has a present obligation (legal or constructive) as a result of a past event; (b) it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision shall be recognised.

Estimations and judgments

In relation to the contingent liability, it is a possible obligation that results from past events, the confirmation of which depends on one or more uncertain future events, which are not entirely under the control of the Company. This is an unrecognized obligation, since it is not probable that there will be a requirement to make a payment to settle the obligation, but such items are disclosed in explanatory notes. In the disclosure, a brief description is given of the nature of the contingent liability, with an indication of the uncertainties on the amount of any disbursement, or the amount of any expected reimbursement, where applicable.

26.

EQUITY AND REMUNERATION TO SHAREHOLDERS

(a)

Share capital

On December 31, 2023 and 2022, the Company’s issued and share capital was R$11,007 represented by 735,847,624 common shares and 1,465,523,064 preferred shares, both of them with nominal value of R$5.00, as demonstrated below:


	Number of shares on December 31, 2023
Shareholders	Common		%		Preferred		%		Total		%
State of Minas Gerais		375,031,302		51		17,085		-		375,048,387		17
PZENA				-		73,283,989		5		73,283,989		3
FIA Dinâmica Energia S/A		233,004,992		31		116,951,354		8		349,956,346		16
BNDES Participações		82,007,784		11		-		-		82,007,784		4
BlackRock		-		-		217,550,174		15		217,550,174		10
Others
In Brazil		29,160,676		4		101,717,633		7		130,878,309		6
Foreign shareholders		16,642,870		2		956,002,829		66		972,645,699		44

Total		735,847,624		99		1,465,523,064		101		2,201,370,688		100


	Number of shares on December 31, 2022
Shareholders	Common		%		Preferred		%		Total		%
State of Minas Gerais		375,031,302		51		17,085		-		375,048,387		17
Other entities of Minas Gerais State		30,021		-		21,880,950		1		21,910,971		1
FIA Dinâmica Energia S/A		233,625,046		31		118,771,654		8		352,396,700		16
BNDES Participações		82,007,784		11		-		-		82,007,784		4
BlackRock		-		-		218,212,381		15		218,212,381		10
Other
In Brazil		26,546,632		4		178,219,966		12		204,766,598		9
Foreign shareholders		18,606,839		3		928,421,028		64		947,027,867		43

Total		735,847,624		100		1,465,523,064		100		2,201,370,688		100


ANNUAL REPORT AND FORM 20-F \| 2023	F-106


	Number of shares on December 31, 2021
Shareholders	Common		%		Preferred		%		Total		%
State of Minas Gerais		288,485,632		51		13,143		-		288,498,775		17
Other entities of Minas Gerais State		23,094		-		14,472,345		1		14,495,439		1
FIA Dinâmica Energia S.A.		153,354,328		27		80,004,762		7		233,359,090		14
BNDES Participações		63,082,911		11		22,141,720		2		85,224,631		5
BlackRock		-		-		123,325,741		11		123,325,741		7
Other
In Brazil		43,689,699		8		145,881,261		13		189,570,960		11
Foreign shareholders		17,400,970		3		741,486,462		66		758,887,432		45

Total		566,036,634		100		1,127,325,434		100		1,693,362,068		100

The Company’s Share Capital may be increased by up to a limit of 10% (ten percent) of the share capital set in the by-laws, without need for change in the by-laws and upon decision of the Board of Directors, having previously heard statement of opinion issued by the Fiscal Council.

(b)

Earnings per share

The number of shares included in the calculation of basic and diluted earnings, is described in the table below:


	Number of shares
	2023			2022			2021
Common shares already paid up		735,847,624			735,847,624			735,847,624
Shares in treasury		(102	)		(102	)		(102	)

		735,847,522			735,847,522			735,847,522


Preferred shares already paid up		1,465,523,064			1,465,523,064			1,465,523,064
Shares in treasury		(846,062	)		(846,062	)		(846,062	)

		1,464,677,002			1,464,677,002			1,464,677,002

Total		2,200,524,524			2,200,524,524			2,200,524,524

The calculation of basic and diluted earnings per share is as follows:


	2023		2022		2021
Net income for the year attributed to equity holders of the parent		5,764		4,092		3,751

Minimum mandatory dividend from net income for the year – preferred shares		2,080		1,486		1,309
Net income for the year not distributed – preferred shares		1,757		1,238		1,188

Total earnings - preferred shares (A)		3,837		2,724		2,497


Minimum mandatory dividend from net income for the year - common shares		1,045		747		657
Net income for the year not distributed – common shares		883		622		597

Total earnings - common shares (B)		1,928		1,369		1,254


Basic and diluted earnings per preferred share (A / number of preferred shares)		2.62		1.86		1.70
Basic and diluted earnings per common share (B / number of common shares)		2.62		1.86		1.70


ANNUAL REPORT AND FORM 20-F \| 2023	F-107

Considering that each class of share participates equally in the income reported, the earning per share in the fiscal years ended on December 31, 2023 and 2022 were, respectively, R$2.62 and R$1.86, calculated based on the weighted average number of the Company’s shares.

(c)

Rights and preferences of the common and preferred shares

Every holder of CEMIG common shares has the right to vote in an election for members of our Board of Directors. Under the Brazilian Corporate Law, any shareholder holding at least 5% of CEMIG’s common shares in circulation may request adoption of a multiple vote procedure, which confers upon each share a number of votes equal to the present number of members of the Board of Directors and gives the shareholder the right to accumulate his or her votes in one sole candidate or distribute them among several.

Under the Brazilian Corporate Law, holders of preferred shares representing at least 10% of CEMIG’s share capital and also holders of common shares representing at least 15% of its share capital (other than the controlling shareholder) have the right to appoint a member of the Board of Directors and his or her respective substitute member in a separate election. If none of the holders of common or preferred shares qualifies under the minimum limits specified above, shareholders representing, in the aggregate, a minimum of 10% of the share capital may combine their holdings to elect a member of the Board of Directors, and that member’s substitute member.

Under Article 171 of the Corporate Law, every shareholder has a generic right of first refusal in subscription of new shares, or securities convertible into shares, issued in any capital increase, in proportion to their percentage shareholding, except in the event of exercise of any option to acquire shares in our share capital. Shareholders are required to exercise their right of first refusal within 30 days from publication of the notice of increase of capital. Every holder of CEMIG preferred shares has preference in the event of share redemption.

The dividend rights of the preferred and common shares are described below.

(d)

Dividends

Under the by-laws, if the Company is able to pay dividends higher than the mandatory minimum dividends required for the preferred Shareholders, and the remaining net income is sufficient to offer equal dividends for both the common and preferred shares, then the dividends per share will be the same for the holders of common shares and preferred shares. Dividends declared are paid in two equal installments, the first by June 30 and the second by December 30, of the year following the generation of the income to which they refer. The Executive Board decides the location and processes of payment, subject to these periods.

Under its by-laws, CEMIG is required to pay to its shareholders, as mandatory dividends, 50% of the net income of each year.

The preferred shares have preference in the event of reimbursement of capital and participate in incomes on the same conditions as the common shares have the right, when there is net income, to a minimum mandatory dividend equal to the greater of:

(a)

10% of their par value, and

(b)

3% of the portion of equity that they represent.

Under its by-laws, CEMIG’s shares held by private individuals and issued up to August 5, 2004, have the right to a minimum dividend of 6% per year on their par value in all years when CEMIG does not obtain sufficient incomes to pay dividends to its Shareholders. This guarantee is given by the State of Minas Gerais by Article 9 of State Law 828 of December 14, 1951, and by State Law 15,290 of August 4, 2004.


ANNUAL REPORT AND FORM 20-F \| 2023	F-108

Calculation of the minimum dividends proposed

The calculation of the minimum dividends proposed for distribution to Shareholders, considering the unrealized income assumption as mentioned in the previous paragraph, is as follows:


	2023			2022			2021
Calculation of minimum dividends required by the by-laws for the preferred shares
Nominal value of the preferred shares		7,328			7,328			5,637

		7,328			7,328			5,637

Percentage applied to the nominal value of the preferred shares		10.00	%		10.00	%		10.00	%

Amount of the dividends by the first payment criterion		733			733			564


Equity		24,649			21,777			19,457
Preferred shares as a percentage of Equity (net of shares held in Treasury)		66.56	%		66.56	%		66.56	%

Portion of Equity represented by the preferred shares		16,406			14,495			12,950
Percentage applied to the portion of Equity represented by the preferred shares		3.00	%		3.00	%		3.00	%

Amount of the dividends by the second payment criterion		492			435			389



Minimum Dividends required by the Bylaws for the preferred shares		733			733			564


Calculation of the Minimum Dividend under the by-laws based on the net income for the year

Net income for the year		5,764			4,092			3,751
		50	%		50	%		50	%

Mandatory dividends – 50% of Net income		2,882			2,046			1,876
Unrealized profit reserve		(835	)		(835	)		(835	)
Reversal of the unrealized profit reserve		835			835			835
Withholding income tax on Interest on equity		242			186			91

		3,124			2,232			1,967

Dividends recorded, as specified in the by-laws
Interest on Equity		2,592			1,983			956
Ordinary dividends		532			249			1,011

		3,124			2,232			1,967


Total dividends for the preferred shares		2,079			1,486			1,309
Total dividends for the common shares		1,045			747			658

Unit value of dividends – R$
Minimum dividends required by the by-laws for the preferred shares		0.50			0.50			0.50
Mandatory dividends (including withholding income tax on Interest on Equity)		1.42			1.01			1.16
Dividends proposed: Common (ON) shares		1.42			1.01			1.16
Dividends proposed: Preferred (PN) shares		1.42			1.01			1.16


ANNUAL REPORT AND FORM 20-F \| 2023	F-109

This table provides the changes on dividends and interest on capital payable:



Balances at December 31, 2021	1,910
Proposed dividends	2,232
Proposed dividends - Non-controlling interests	1
Withholding income tax on interest on capital	(186	)
Dividends retained – Minas Gerais state government	-
Dividends paid	(2,094	)
Balances at December 31, 2022	1,863
Proposed dividends	3,124
Proposed dividends - Non-controlling interests	2
Withholding income tax on interest on capital	(242	)
Dividends paid	(1,823	)
Balances at December 31, 2023	2,924

(e)

Remuneration to shareholders

The obligation to pay dividends is recognized when the distribution is authorized or as provided for by law and/or the Company's bylaws. In view of the applicable legislation and the Company's bylaws, which provide for a minimum dividend payment of 50% of net income for the year, this is considered a present obligation on the closing date of the fiscal year, and is recognized as a liability.

The Company’s Executive Board decided to declare Interest on Equity as follows:


Declaration date	Entitled shareholders (1)	Amount		Income tax withheld
March 22, 2023	March 27, 2023		424		(40	)
June 20, 2023	June 23, 2023		427		(40	)
September 20, 2023	September 25, 2023		418		(39	)
December 14, 2023	December 21, 2023		1,323		(123	)

			2,592		(242	)

(1)

Shareholders who have their names entered in the Register of Registered Shares on the dates indicated are entitled.

The amount of income tax withheld at source, due to tax legislation, is not taken into account when attributing JCPs to the mandatory dividend and is calculated at the rate of 15%, in cases where this tax is levied, under the terms of the legislation in force.

(f)

Allocation of net income for 2023 - Management’s proposal

The Board of Directors declared at the Annual General Meeting (AGM), held on April 29, 2024, the following allocation of the net income for 2023, totaling R$5,764, of realization of the deemed cost of PP&E, totaling R$6, realization of the unrealized earnings reserve totaling R$835, as follow:

•

R$288 was held in Stockholders’ equity in the Legal Reserve, as established in Brazilian corporate Law 6,404/1976.

•

R$3,124 as minimum mandatory dividends, to the Company’s shareholders, to be paid in two equal installments, by June 30 and December 30, 2024, as follows:

R$2,591 declared as interest on own equity and imputed to the mandatory dividend, as deliberated by the Executive Board in 2023;


ANNUAL REPORT AND FORM 20-F \| 2023	F-110

R$533 in the form of dividends, to holders whose names are in the Company’s Nominal Share Registry on the date of the AGM.

•

R$2,295 was held in Shareholders’ equity in the Retained Earnings Reserve, to provide funding for the Company’s consolidated investments planned for 2024, as per capital budget.

•

R$63 was held in Shareholders’ equity in the Tax Incentives Reserve, related to tax incentive due to investment in the region of Sudene.

The amount of R$835 remains as Unrealized Earnings Reserve, considering the reversal of the reserve constituted in 2022 and the new constitution in 2023, of the same amount.

Payment of the dividends will be made by December 30, 2024, in accordance with the availability of cash and at the decision of the Executive Board.

(g)

Equity valuation adjustments


	2023			2022			2021
Adjustments to actuarial liabilities – Employee benefits		(2,072	)		(2,303	)		(2,762	)
Deemed cost of PP&E		421			427			554
Others		3			2


Valuation adjustments		(1,648	)		(1,874	)		(2,208	)

The adjustments to post-employment benefit obligations comprise gains or losses resulting from re-measurements of the net defined-benefit obligation, in accordance with the actuarial report, net of tax effects.

The amounts recorded as deemed cost of the generation assets represents its fair value determined using the replacement cost at initial adoption of IFRS on January 1, 2009. The valuation of the generation assets resulted in an increase in their book value, recorded in a specific line in Equity, net of the tax effects. These values are being realized based on the depreciation of the assets.

The curtailment event occurred in 2023 affected the actuarial assumptions, as consequence it altered the discount rates applicable to the plans. Since the new discount rate was higher, there was a reduction of the liability, and as a result an actuarial gain of R$60 for the health plan, and R$1 for the dental plan which impacted the statements of income in 2023.

(h)

Reserves

Capital reserves


	2023			2022			2021
Investment-related donations and subsidies		1,857			1,857			1,857
Goodwill on issuance of shares		394			394			394
Shares in treasury		(1	)		(1	)		(1	)

		2,250			2,250			2,250

The reserve for investment-related donations and subsidies basically refers to the compensation by the Federal Government for the difference between the profitability obtained by CEMIG up to March 1993 and the minimum return guaranteed by the legislation in effect at the time.

The reserve for treasury shares refers to the pass-through by Finor (‘Fundo de Investimentos do Nordeste’) of shares arising from funds applied in CEMIG projects in the area covered by Sudene (the development agency for the Northeast) under tax incentive programs.


ANNUAL REPORT AND FORM 20-F \| 2023	F-111

Income reserves


	2023		2022		2021
Legal reserve		1,674		1,387		1,181
Statutory reserve		57		57		57
Profit retention reserve		8,842		6,546		7,331
Unrealized profit reserve		835		835		835
Incentive tax reserve		213		150		124
Reserve for mandatory dividends not distributed		1,420		1,420		1,420

		13,041		10,395		10,948

Legal reserve

Constitution of the legal reserve is mandatory, up to the limits established by law. The purpose of the reserve is to ensure the security of the share capital, its use being allowed only for offsetting of losses or increase capital. This reserve constitution corresponds to 5% of the net income for the year, less the amount allocated to incentive tax reserve.

Statutory reserve

The reserve under the By-laws is for future payment of extraordinary dividends, in accordance with Article 28 of the by-laws.

Retained earnings reserve

Retained earnings reserves refers to incomes not distributed in prior years, to guarantee execution of the Company’s Investment Program, and amortization of loans and debentures. The retentions are supported by capital budgets approved by the Board of Directors in the respective years.

Unrealized earnings reserve

Article of the Brazilian corporate law no. 6,404/76 allows the Company to pay the mandatory dividend, calculated as required by the Bylaws up to the amounts of the realized portion of the net income for the year.

In 2023, Company presented a positive net share of income of subsidiaries, jointly controlled entities and affiliates of R$4,836, which can be regarded as unrealized portion of net income for the year, in accordance with the Brazilian corporate law.

Additionally, the above does not apply to the payment of the minimum mandatory dividends on preferred shares, which are required to be paid in full for an amount of R$733 as described in further details in (f) below. In addition, since the creation of the Unrealized Earnings Reserve is optional, Management decided to propose the same proportion of dividend payment to shareholders owning common shares, considering Company’s expected financial capacity.

The outstanding balance of the Unrealized Earnings Reserve will remain R$835, considering the reversal of the reserve recorded in 2022 and the creation of a new one in 2023, in the same amount.

The Unrealized Earnings Reserve amounts can only be used to pay mandatory dividends. Hence, when the Company realizes such incomes in cash, it must distribute the corresponding dividend in the subsequent period, after offsetting of any losses in subsequent years.


ANNUAL REPORT AND FORM 20-F \| 2023	F-112

Incentives tax reserve

The Company has a right to 75% reduction in income tax, including the tax paid at the additional rate, calculated on the basis of the operating income in the region of Sudene (the Development Agency for the Northeast), for 10 years starting in 2014. In 2023, this benefit was renewed, valid for another 10 years.

The amount of the incentive recognized in the Statement of income was R$63 in 2023 (R$26 in 2022), and it was subsequently transferred to the incentives tax reserve. This reserve cannot be used for payment of dividends.

Reserve for mandatory dividends not distributed



Dividends withheld, arising from the net income of 2015			623
Dividends withheld, arising from the net income of 2014			797

			1,420

These dividends were retained in Equity, in years 2015 and 2014, in the account Reserve for mandatory dividends not distributed; and as per the proposal approved in the Annual General Meetings of 2016 and 2015, the dividends retained will be paid as soon as the Company’s financial situation permits.

The Company's Management, in view of the estimated cash requirement for the next year, concluded that the financial situation does not yet allow the payment of these retained dividends.

27.

REVENUE



	2023			2022			2021
Revenue from supply of energy (a)		31,671			30,158			29,619
Revenue from use of the electricity distribution systems (TUSD)		4,417			3,685			3,448
CVA and Other financial components (1) (4)		(213	)		(1,147	)		2,146
Reimbursement of PIS/Pasep and Cofins over ICMS credits to customers- realization (2)		1,909			2,360			1,317
Transmission revenue
Transmission operation and maintenance revenue (b)		373			413			355
Transmission construction revenue (b)		242			407			252
Interest revenue arising from the financing component in the transmission contract asset (b) (Note 14)		524			575			660
Generation indemnity revenue (Note 13.b)		93			47			-
Distribution construction revenue		3,899			3,246			1,852
Adjustment to expectation of cash flow from indemnifiable financial assets of distribution concession		149			39			54
Revenue on financial updating of the Concession Grant Fee (13.b)		412			467			523
Transactions in energy on the CCEE		146			183			1,157
Mechanism for the sale of surplus (c) (13.b)		(4	)		453			453
Supply of gas		4,139			4,529			3,470
Fine for violation of service continuity indicator		(139	)		(94	)		(70	)
PIS/Pasep and Cofins credits to be refunded to consumers (3)		-			(830	)
Advances for services provided		-			-			154
Other operating revenues (d)		2,316			2,658			1,935
Deductions on revenue (e)		(13,084	)		(12,686	)		(13,679	)

Net revenue		36,850			34,463			33,646


ANNUAL REPORT AND FORM 20-F \| 2023	F-113

(1)

As per GREG/MME Resolution 3, the effect of the water scarcity tariff ‘Flag’, which was in force until April 2022, resulted in a significant reduction of revenue in 2022. Due to the better hydrological conditions, the tariff flag was ‘green’ as from May 2022, and produced no effect in the whole of 2023.

(2)

More information in note 18.

(3)

This is the result of recognition of the effects of Law 14.385/22, which ordered that the amounts of credits of PIS, Pasep and Cofins wrongly charged on the ICMS tax component of electricity bills should be reimbursed in their entirety to the customers of electricity distributors.

(4)

This income derives from the total additions and amortizations shown in note 13.d.

Revenue from energy supply



	MWh (1)						R$
	2023		2022		2021		2023		2022			2021
Residencial		12,092		11,217		11,186		10,794		10,133			11,124
Industrial		18,088		18,204		16,361		5,903		5,991			5,275
Commercial, services and others		9,469		8,957		8,334		6,314		6,155			5,520
Rural		3,063		3,093		3,975		2,238		2,050			2,566
Public authorities		956		856		729		786		660			583
Public lighting		1,056		1,138		1,226		498		535			718
Public services		1,045		1,400		1,418		744		841			879

Subtotal		45,769		44,865		43,229		27,277		26,365			26,665
Own consumption		30		31		33		-		-			-
Unbilled revenue		-		-		-		166		(189	)		(14	)

		45,799		44,896		43,262		27,443		26,176			26,651

Wholesale supply to other concession holders (1)		17,328		16,777		10,825		4,183		3,894			3,023
Wholesale supply unbilled, net		-		-		-		45		88			(55	)

Total		63,127		61,673		54,087		31,671		30,158			29,619

(1)

Data not audited by external auditors.

(2)

The volume reported does not include the distributed generation market, which corresponded to 3,910,204 MWh in 2023 (2,672,285 MWh in 2022).

(3)

Includes a CCEAR (Regulated Market Sales Contract), ‘bilateral contracts’ with other agents, and the revenues from management of generation assets (GAG) for the 18 hydroelectric plants of Lot D of Auction no 12/2015.

Transmission concession revenue

The margin defined for each performance obligation from the transmission concession contract is as follows:


	2023			2022			2021
Construction and upgrades revenue		242			407			252
Construction and upgrades costs		(172	)		(291	)		(183	)

Margin		70			116			69

Mark-up (%)		40.70	%		39.86	%		37.40	%

Operation and maintenance revenue		373			413			355
Operation and maintenance cost		(292	)		(287	)		(235	)

Margin		81			126			120

Mark-up (%)		27.74	%		43.90	%		50.88	%


ANNUAL REPORT AND FORM 20-F \| 2023	F-114

Mechanism for the sale of energy surplus

The revenue from the surplus sale mechanism (Mecanismo de Venda de Excedentes – ‘MVE’) refers to the sale of power surpluses by distributor agents. This mechanism is an instrument regulated by ANEEL enabling distributors to sell over contracted supply - the energy amount that exceeds the quantity required to supply captive customers.

Other operating revenues



	2023		2022		2021
Charged service		21		19		17
Services rendered		85		66		53
Low-income subsidy		401		321		269
subsidy SCEE (1)		129		-		-
subsidy Eletrobras (2)		51		432		-
Tariff flags subsidy		78		290		-
Others subsidies (3)		1,031		962		1,323
Rental and leasing (2)		412		493		211
Contractual indemnities		6		-		27
Other		102		75		35

Total		2,316		2,658		1,935

(1)

Revenue under the Electricity Offsetting System (Sistema de Compensação de Energia Elétrica – SCEE), governing offsetting for distributed generation, released by ANEEL in the 2023 Tariff Review.

(2)

This refers to the amounts injected by Eletrobras or by its subsidiaries under CNPE Resolution 15/2021, passed through to companies holding electricity distribution concessions or permissions.

(3)

This is revenue arising from subsidies applying to tariffs paid by users of distribution service, it includes tariff subsidies applying to tariffs paid by or relating to: supply from incentive-bearing source load; rural supply; nocturnal irrigation; incentive-bearing generation; public services; as well as revenue recognizing subsidies related to the Program to Encourage Voluntary Reduction of Electricity Consumption.

(4)

The amount shown for from January to December 2022 comprises R$ 187 for the debt recognition agreement signed with a major client in June 2022, for use of infrastructure (distribution poles) in the period January 2019 to May 2022.


ANNUAL REPORT AND FORM 20-F \| 2023	F-115

Deductions on revenue



	2023		2022			2021
Taxes on revenue
ICMS (1)		5,043		4,892			6993
Cofins		3,032		2,948			2842
PIS/Pasep		658		643			618
others		7		5			11

		8,740		8,488			10,464

Charges to the customer
Global Reversion Reserve (RGR)		12		14			15
Energy Efficiency Program (PEE)		74		69			74
Energy Development Account (CDE)		3,949		4,057			2658
Research and Development (R&D)		37		35			34
National Scientific and Technological Development Fund (FNDCT)		53		49			55
Energy System Expansion Research (EPE of MME)		27		25			27
Customer charges - Proinfa alternative sources program		63		77			66
Energy services inspection fee		37		33			35
Royalties for use of water resources		53		54			37
Customer charges - the ‘Flag Tariff’ system		-		(252	)		162
CDE on R&D		16		15			21
CDE on PEE		23		22			31

		4,344		4,198			3,215

Total		13,084		12,686			13,679

(1)

On June 23, 2022, Complementary Law 194 came into force with immediate effect, making changes to the National Tax Code (CTN) and to Complementary Law 87/96 (the ‘Kandir Law’) including: (i) classifying electricity, among other goods, as essential, (ii) prohibiting the setting of rates of ICMS tax for transactions with these goods at a level higher than those of transactions in general, and (iii) removing this tax from electricity transmission and distribution services, and from sector charges linked to electricity operations. In February 2023 judgment was given in Action for Unconstitutionality (Ação Direta de Inconstitucionalidade – ADI) No. 7195, which suspended the effects of Article 3, Sub-item X, of Complementary Law 87/96, as amended by Complementary Law 194/2022, which had excluded transmission and distribution services, and sector charges related to electricity operations, from the calculation base for ICMS tax. Cemig has adjusted its procedures due to this decision.

Accounting policy

Revenue recognition

In general, for the Company and its subsidiaries’ business in the energy sector, gas and other, revenue from contracts with customers is recognized when the performance obligation is satisfied, at an amount that reflects the consideration to which the Company and its subsidiaries expects to be entitled in exchange for the goods or services transferred, which must be allocated to that performance obligation. The revenue is recognized only when it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer, considering the customer’s ability and intention to pay that amount of consideration when it is due. Below are the material accounting policies linked to the Company's revenues.

Revenue from energy supply

Revenues from the sale of energy are measured based on the energy supplied and the tariffs specified in the terms of the contract or in effect in the market. Revenues from supply of energy to final customers are recorded when the delivery has taken place. The billing is carried out monthly.


ANNUAL REPORT AND FORM 20-F \| 2023	F-116

Wind farms are subject to a minimum amount of energy generation to be sold through Proinfa. When the difference between the energy actually generated and the energy contracted is positive, the Company recognizes a receivable that will be settled during the following year. On the other hand, when the difference is negative, the Company makes a provision for non-performance, deducting the revenue for the period.

Revenue from gas

Revenues from the sale of gas are recognized on a monthly basis, when gas is supplied, based on the volume measured and invoiced, measured in accordance with the tariffs specified in the contractual terms. Revenues from gas distribution are calculated on the basis of the volumes contracted and the volumes actually distributed, in accordance with the contractual terms and regulations.

Revenue from Use of Distribution Systems (TUSD)

Revenues from use of the distribution system (TUSD) received by the Company from other concession holders and other customers that use the distribution network are recognized in the period in which the services are provided.

CVA and Other financial components in tariff adjustments

The results from variations in the CVA account (Parcel A Costs Variation Compensation Account), and in Other financial components in calculation of tariffs, refer to the positive and negative differences between the estimated non-manageable costs of the subsidiary Cemig D and the cost actually incurred. The amounts recognized arise from balances recorded in the current period, homologated or to be homologated in tariff adjustment processes. For more information please see Note 13.

Revenue from transmission concession

Revenues from transmission concession services are recognized in the income monthly and include:

•

Construction revenue: corresponds to the performance obligation to build the transmission infrastructure. They are recognized according to the stage of completion of the works (construction phase) and measured based on the cost incurred, including PIS/Pasep and Cofins taxes over the total revenues and the income margin of the project. More information in Note 14.

•

Operation and maintenance revenue: corresponds to the performance obligation of operation and maintenance specified in the transmission concession contract, after termination of the construction phase. They are recognized when the services are rendered and the invoices for the RAPs are issued.

•

Financial revenue related to financing component of transmission: corresponds to the significant financing component in the contract asset and is recognized by the effective interest rate method based on the rate determined at the start of the investments, which is not subsequently changed. The average of the implicit rates is 6.86%. The rates are determined for each authorization and are applied on the amount to be received (future cash flow) over the contract duration. This includes financial updating by the inflation index specified for each transmission contract.

The services provided include charges for connection and other related services; the revenues are recognized when the services are rendered.

The Resolution ANEEL 729/2016 regulates the Variable Portion (‘Parcela Variável’ or ‘PV’), which is the pecuniary penalty applied by the grantor as a result of any unavailability’s or operational restrictions on facilities that are part of the National Grid and the surcharge corresponding to the pecuniary bonuses provided to concessionaries as an incentive to improve the transmissions facilities availability.


ANNUAL REPORT AND FORM 20-F \| 2023	F-117

Revenue on financial updating of the Concession Grant Fee

Represents the inflation adjustment using the IPCA inflation index, plus interest, on the Concession Grant Fee for the concession awarded as Lot D of Auction 12/2015. See Note 13.

Energy transactions on the CCEE (Power Trading Chamber)

The revenue from transactions made through the Power Trading Chamber (Câmara de Comercialização de Energia Elétrica, or CCEE) is the monthly positive net balance of settlements of transactions for purchase and sale of energy in the Spot Market, through the CCEE, for which the consideration corresponds to the product of energy sold at the Spot Price.

Government subsidies

Government grants are recognized when there is reasonable assurance that all conditions established and related to the grant will be met and that it will be received, in accordance with IAS 20.

The subsidiaries Cemig D e GT receive amounts from the Energy Development Account (CDE) as reimbursement for subsidies on tariffs granted to users of the public energy distribution service - TUSD and EUST (charges for use of the transmission system). These amounts are recognized in the Statement of income in a monthly basis as those subsidiaries acquire the right of receive them.

Estimations and judgments

Supply and distribution of electricity and gas

The Company recognizes the revenues corresponding to the supply of energy and unbilled gas for the period between the last billing and the end of each month, estimated based on the contracted supply and the volume of gas consumed and not billed in the period.

The revenues of the gas distribution service are recognized monthly, even if there is no use of the system, namely:

•

Utilization of the contracted capacity in amounts as from 85%: The revenue recognized will correspond to the utilization;

•

Utilization of the contracted capacity in amounts less than 85%: Revenue is capped at a maximum of 85% of the value relative to full utilization.

Unbilled supply of energy, from the period between the last billing and the end of each month, is estimated based on the supply contracted and on the volume of energy delivered but not yet billed.

Any adjustment of expected cash flows from the concession financial asset of the energy distribution concession contract is presented as operating revenue, together with the other revenues related to the energy distribution services.

The construction margin is defined on the basis of the Company's best estimates of profitability at the time the investment projects are initially conceived. Changes in the initial measurement of the transaction price, which may give rise to a change in the profitability determined organically and remeasurement of the contract asset, are dealt with at the time of the periodic tariff review.


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Revenue from transmission concession

The income margin on operation and maintenance of transmission infrastructure is determined based on the individual sale price of the service, based on available information costs incurred for the provision of services of operation and maintenance, on the value of the consideration that the entity expects to have the right, in exchange for the services promised to the client, in cases where the Company’s transmission subsidiaries have the right, separately, to the remuneration for the activity of operation and maintenance, as per IFRS 15 - Revenue from contracts with clients.

The Company assessed the variable parcel effects ('PV'), based on historical data, and concluded that the variable consideration arising from the PV estimated is not material. Therefore, for both situations described, it is recognized as an adjustment to revenue, either as an increase in or a reduction of operation and maintenance revenue, when it occurs.

28.

OPERATING COSTS AND EXPENSES

The operating costs and expenses of the Company is as follows:

a) Cost of energy and gas


	2023			2022			2021
Energy purchased for resale
Supply from Itaipu Binacional		1,207			1,644			1,946
Physical guarantee quota contracts		918			925			832
Quotas for Angra I and II nuclear plants		364			357			244
Spot market		478			530			1,224
Proinfa Program		511			598			401
‘Bilateral’ contracts		510			493			418
Energy acquired in Regulated Market auctions		3,940			3,334			6,242
Energy acquired in the Free Market (1)		5,612			6,003			4,976
Distributed generation (‘Geração distribuída’)		2,331			1,977			1,268
PIS/Pasep and Cofins credits		(1,223	)		(1,247	)		(1,450	)

		14,648			14,614			16,101

Charges for use of the national grid
Transmission charges – Basic network		3,220			2,925			3,663
Distribution charges		54			50			41
PIS/Pasep and Cofins credits		(337	)		(304	)		(367	)

		2,937			2,671			3,337

Gas purchased for resale		2,237			2,735			2,011

Total		19,822			20,020			21,449

(1)

The energy acquired in the free environment by the Parent Company derives from the contracts transferred by Cemig GT, as a result of the process of partial segregation of the Company's energy trading business.

(2)

The price of the gas molecule acquired by Gasmig is corrected for the variation in Brent-type oil and the variation in the exchange rate.

b) Construction and infrastructure costs


	2023		2022		2021
Personnel and managers		155		135		100
Materials		2,007		2,233		1,150
Outsourced services		1,458		1,052		682
Others		452		116		104

Total		4,072		3,536		2,036


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c) Operating costs and expenses


	Operating costs						Expected credit loss						General and administrative expenses						Other operating expenses (revenue)								2023			2022			2021
	2023		2022		2021		2023		2022		2021		2023		2022		2021		2023			2022			2021
Personnel		1,000		976		983		-		-		-		308		376		258		-			-			-		1,308			1,352			1,241
Employees’ and managers’ profit sharing		-		-		-		-		-		-		-		4		2		157			79			132		157			83			134
Post-employment benefits (note 24)		-		-		-		-		-		-		-		-		-		591			626			15		591			626			15
Materials		100		93		76		-		-		-		40		55		18		-			-			-		140			148			94
Outsourced services		1,652		1,433		1,265		-		-		-		250		273		185		-			-			-		1,902			1,706			1,450
Depreciation and amortization		1,247		1,110		947		-		-		-		27		72		102		-			-			-		1,274			1,182			1,049
Operating provisions and adjustments for operating losses		333		278		86		-		-		-		-		-		-		101			123			145		434			401			231
Expected credit losses of accounts receivable		-		-		-		175		109		144		-		-		-		-			-			-		175			109			144
Reversal of provision for doubtful with related party - Renova		-		-		-		-		-		-		-		-		-		1			(54	)		-		1			(54	)		-
Write-off of financial asset (note 14)		-		-		-		-		-		-		-		-		-		-			172			-		-			172			-
Gains arising from the sale of equity interest (2)		-		-		-		-		-		-		-		-		-		(319	)		(52	)		-		(319	)		(52	)		-
Other operation costs and expenses		240		205		81		-		-		-		82		9		7		182			182			306		504			396			394

Total		4,572		4,095		3,438		175		109		144		707		789		572		713			1,076			598		6,167			6,069			4,752

(1)

With the conclusion of the appraisal report, Cemig GT wrote off the financial asset in the amount of R$172 in the second quarter of 2022. This amount is presented in the Income Statements under "Other expenses, net".

(2)

Refers to the gains obtained on the sale of investments in 2023, of which R$261 refers to the sale of Baguari Energia, R$27 refers to the sale of Retiro Baixo and R$31 refers to the sale of the direct stake in MESA. Further details on these operations are disclosed in note 15.

C.1) Outsourced services



	2023		2022		2021
Meter reading and bill delivery		161		146		134
Communication		169		153		148
Maintenance and conservation of electrical facilities and equipment		708		589		485
Building conservation and cleaning		85		73		72
Security services		20		17		17
Consultancy		21		39		43
Information technology		174		146		93
Disconnection and reconnection		87		90		82
Legal services and procedural costs		32		40		32
Environment services		58		49		46
Cleaning of power line pathways		117		91		92
Copying and legal publications		17		18		18
Inspection of customers		45		41		33
Other		208		214		155

Total		1,902		1,706		1,450


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C.2) Other costs and expenses, net



	2023		2022		2021
Leasing and rentals		3		16		6
Advertising		14		9		12
Own consumption		23		24		28
Subsidies and donations		29		26		27
Paid concessions		4		4		4
Insurance		22		24		29
CCEE annual charge		7		6		5
Forluz – Administrative running cost		40		36		32
Collecting agents		72		77		86
Net loss (gain) on deactivation and disposal of assets		210		127		99
Obligations deriving from investment contracts		3		3		11
Taxes (IPTU, IPVA and other)		10		8		16
Other (reversals) (1)		67		36		39
Total		504		396		394

(1)

The following expenses were recognized in 2023, posted in Other operational expenses: a regulatory fine of R$11 resulting from an ANEEL inspection in 2019 to check the procedures and criteria adopted by the Company in application of the conditions required by regulations established for Micro- and Mini-Distributed Generation; and financial compensation totaling R$85 for delay in the commercial services arising from alterations in ANEEL Normative Resolution 1000 of December 7, 2021.


ANNUAL REPORT AND FORM 20-F \| 2023	F-121

29.

FINANCE INCOME AND EXPENSES


	2023			2022			2021
FINANCE INCOME
Income from financial investments		452			468			242
Interest on sale of energy		286			337			460
Foreign exchange variations – Itaipu		7			17			-
Foreign exchange variations - loans and debentures		277			338			-
Monetary variations		163			108			68
Monetary variations – CVA		76			185			64
Monetary updating of escrow deposits		82			82			29
PIS/Pasep and Cofins charged on finance income (1)		(197	)		(117	)		(124	)
Gains on financial instruments – Swap		-			-
Prepayment rents		4			5			-
Borrowing costs paid by related parties		-			-			2
Monetary updating on PIS/Pasep and Cofins taxes credits over ICMS (2)		-			-			20
Others		122			77			83

		1,272			1,500			844

FINANCE EXPENSES
Charges on loans and debentures (Note 21)		(1,013	)		(928	)		(1,147	)
Cost of debt – amortization of transaction cost		(14	)		(7	)		(20	)
Foreign exchange variations - loans and financing		-			-			(353	)
Premium on repurchase of debt securities (Eurobonds)		-			(47	)		(491	)
Foreign exchange variations – Itaipu		-			-			(27	)
Monetary updating – loans and debentures		(148	)		(167	)		(331	)
Charges and monetary updating on post-employment obligations		(20	)		(40	)		(70	)
Loss on financial instruments – Swap		(177	)		(438	)		(538	)
Monetary updating on PIS/Pasep and Cofins taxes credits over ICMS (2)		(41	)		(1,294	)		-
Monetary updating – onerous concessions								(8	)
Monetary updating – Lease liabilities		(35	)		(27	)		(25	)
Financial expenses (R&D and PEE)		(38	)		(38	)
Others		(165	)		(80	)		(86	)

		(1,651	)		(3,066	)		(3,096	)

NET FINANCE INCOME (EXPENSES)		(379	)		(1,566	)		(2,252	)

(1)

PIS/Pasep and Cofins expenses are levied on financial income and interest on own capital.

(2)

The interest of the tax credits related to PIS/Pasep and Cofins, arising from the exclusion of ICMS from its calculation basis, and the liability to be refunded to consumers is presented by net value. With the offsetting of the credits, the liability to be refunded to consumers exceeded the value of the credits to be received, generating a net financial expense.

(3)

This includes inflation correction, in the amount of R$14, on the court escrow deposits received by the Company as ordered in the arbitration proceedings. More details in note 24 – Provision: Dispute on billing of electricity.

Accounting policy

Finance income is mainly comprised of interest income on financial investments and interest of overdue invoices. Interest income is recognized using the effective interest method.

Finance expenses include interest expense on borrowings, and foreign exchange and monetary adjustments on borrowing costs of debt, financings and debentures. They also include the negative change in fair value on other


ANNUAL REPORT AND FORM 20-F \| 2023	F-122

financial assets and liabilities. Interest expense on the Company’s borrowings that is not capitalized is recognized in the Statement of income using the effective interest method.

30.

RELATED PARTY TRANSACTIONS

The relationships between Cemig and its investees are described in the investment note (No. 15). The main consolidated balances and transactions, as well as the main conditions relating to the Company's business with related parties, are shown below:


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023		2022
Transactions with energy
Aliança Geração		3	4		22	19		49	56		(234	)	(222	)
Norte Energia		-	-		31	30		-	-		(278	)	(260	)
Paracambi		-	-		2	2		-	-		(30	)	(33	)
Hidrelétrica Pipoca		-	-		3	3		2	1		(47	)	(46	)
Hidrelétrica Cachoeirão		-	-		-	-		2	2		-		-
Retiro Baixo		-	1		-	1		5	7		(6	)	(6	)
Taesa		-	-		-	-		-	-		-		-

The sale and purchase of electricity between generators and distributors are carried out through auctions in the regulated contracting environment organized by the Federal Government. In the free contracting environment, in turn, they are carried out by means of auctions or direct contracting, according to the applicable legislation. Electricity transport operations, on the other hand, are carried out by the transmitters and result from the centralized operation of the National Interconnected System by the National System Operator (ONS).


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023		2022
Charges
Connection charges
Taesa		-	-		-	-		-	-		(6	)	(4	)
Transmission charges
Aliança		-	-		-	-		1	1		-		-
Norte Energia		3	2		-	-		30	26		-		-
Taesa		-	-		12	12		-	-		(138	)	(135	)

Connection charges are financial amounts set and approved by ANEEL for use of connection facilities and/or connection points in the transmission system, payable by the accessing party to the connected agent.

Transmission charges are monthly amounts payable by users to holders of transmission concessions for the provision of transmission services, calculated according to the tariffs and the contracted amounts of use of the transmission system, in accordance with regulations set by ANEEL.


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023	2022
Customers and traders
Governo do Estado de Minas Gerais		45	37		-	-		194	166		-	-


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The “Consumers and Traders” balance that the Company holds with the controlling entity refers to sale of electricity to the government of Minas Gerais State – the price of the supply is that decided by ANEEL through a Resolution which decides the Company’s annual tariff adjustment.


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023	2022
Provision of services
Aliança Geração		1	1		-	-		7	6		-	-
Taesa		-	-		-	-		2	1		-	-

The balances for services rendered refer to contracts for the provision of operation and maintenance services for power plants, transmission networks and distribution networks.


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023	2022
Accounts Receivable
Governo do Estado de Minas Gerais		13	13		-	-		-	3		-	-

This refers to the recalculation of the monetary correction of amounts related to advance for future capital increase returned to the State of Minas Gerais. These receivables are guaranteed by the retention of dividends or interest on equity distributed to the State, in proportion to its participation, while the delay and/or default persists.


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023	2022
Other credits
FIP Melbourne		-	161		-	-		-	-		-	-

In January 2021, a final arbitration award was issued in favor of FIP Melbourne, and in August 2022 an agreement was reached between the parties to close the dispute, with the establishment of an updated compensation amount of R$200, settled on September 12, 2022 (see note 15).


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023		2022
Provision of legal services
Aliança Geração		-	-		59	55		-	-		(3	)	(3	)

This refers to contractual obligations to the investee Aliança Geração corresponding to contingencies arising from events that occurred before the closing of the transaction that resulted in the contribution of assets by Cemig and Vale S.A. in the capital of this investee. The total value of the shares is R$166 (R$156 at December 31, 2022), of which R$58 (R$55 at December 31, 2022) is attributable to Cemig.


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023	2022
Interest on Equity, and dividends
Retiro Baixo		-	6		-	-		-	-		-	-
Hidrelétrica Pipoca		-	4		-	-		-	-		-	-
Hidrelétrica Cachoeirão		-	4		-	-		-	-		-	-

The table above indicates the asset position of dividends receivable from the investees presented in “Other” in the “Dividends receivable” table.


ANNUAL REPORT AND FORM 20-F \| 2023	F-124


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023	2022
FIC Pampulha
Current
Cash and cash equivalents		351	294		-	-		-	-		-	-
Marketable securities		771	1,743		-	-		26	77		-	-
Non-current
Marketable securities		-	7		-	-		-	-		-	-

Cemig and its subsidiaries and jointly controlled entities invest part of their financial resources in an investment fund which has the characteristics of fixed income and obeys the Company’s cash investment policy. The amounts invested by the fund are reported as cash and cash equivalent or marketable securities line in current and non-current assets.

The funds applied are allocated only in public and private fixed income securities, subject only to credit risk, with various maturity periods, obeying the unit holders’ cash flow needs.


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023		2022
Current
Operating leasing		-	-		27	26		-	-		(33	)	(31	)
Non-current
Operating leasing		185	182		187	179		-	-		-		-


ANNUAL REPORT AND FORM 20-F \| 2023	F-125

This is a contract with Fundação Forluminas de Seguridade Social (Forluz), the closed private pension fund (Entidade Fechada de Previdência Complementar – EFPC) of employees of the Cemig Group, the owner of the building (the Júlio Soares Building), for rental of the Company’s administrative headquarters, valid until August 2024. The rental can be extended every 5 years, up to 2034, is adjusted annually by the IPCA inflation index, and is subject to a price review every 60 months. On September 19, 2023 the rental contract was adjusted upward by 4.61%, corresponding to accumulated IPCA inflation over the prior 12 months.


	ASSETS			LIABILITIES			REVENUES			EXPENSES
COMPANY		2023	2022		2023	2022		2023	2022		2023		2022
Post-employment benefit

FORLUZ
Current
Post-employment obligations (1)		-	-		126	199		-	-		(280	)	(285	)
Supplementary pension contributions - Defined contribution plan (2)		-	-		-	-		-	-		(81	)	(80	)
Administrative running costs (3)		-	-		-	-		-	-		(40	)	(36	)
Non-current
Post-employment obligations (1)		-	-		2,230	2,120		-	-		-		-

Cemig Saúde
Current
Health Plan and Dental Plan (4)		-	-		230	218		-	-		(388	)	(385	)
Non-current
Health Plan and Dental Plan (4)		-	-		2,830	3,156		-	-		-		-

The Company has contractual obligations to a group of retired former employees in which it is responsible for ensuring funds for the cost of a supplementary pension plan, called Forluz, and for the running costs of a health plan, called Cemig Saúde. The main conditions related to the post-employment benefits are as follows:

(1)

Forluz's contracts are adjusted by the Broad National Consumer Price Index - IPCA of the Brazilian Institute of Geography and Statistics - IBGE, plus interest of 6% per year and will be amortized until 2031 (see note 15);

(2)

Company's contributions to the Pension Fund regarding the employees participating in the Mixed Plan and calculated over monthly remunerations in conformity with the Fund's regulation;

(3)

Funds for the annual administrative funding of the Pension Fund in accordance with the specific legislation for the sector. The amounts are estimated as a percentage of the Company's payroll;

(4)

Post-employment obligations related to the employees' health and dental plan (see note 15).

Details of post-employment benefits can be found in note 24.


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Dividends receivable


Dividends receivable	2023	2022
Aliança Geração	-	127
Taesa	50	5
Other (1)	-	14

Total	50	146

(1)

The subsidiaries grouped in ‘Other’ are identified in the table above under ‘Interest on Equity, and Dividends’.

Changes in dividends receivable



Balances at December 31, 2020	188

Dividends proposed by investees	655
Elimination of dividends due to business combination
Adjustment of dividends proposed by investee classified as held for sale
Withholding income tax on Interest on equity	(9	)
Amounts received	(499	)

Balances at December 31, 2021	335

Dividends proposed by investees	519
Amounts received	(708	)
Withholding income tax on Interest on equity	-

Balances at December 31, 2022	146

Dividends proposed by investees	496
Amounts received	(592	)

Balances at December 31, 2023	50

Guarantees on loans and debentures

CEMIG has provided guarantees on Loans and debentures of the following related parties - not consolidated in the financial statements because they relate to jointly controlled entities or affiliated companies:


Related party	Relationship	Type	Objective	2023	Maturity
Norte Energia (NESA) (1)	Affiliated	Surety	Financing	2,574	2042
Norte Energia S.A (NESA)/Light (2)	Affiliated	Counter-guarantee	Financing	684	2042
Norte Energia (NESA)	Affiliated	Surety	Debentures	82	2030

				3,340

(1)

Related to Norte Energia loans.

(2)

Counter-guarantee to Light, related to execution of guarantees of the Norte Energia loans.

On December 31, 2023, Management evaluate that there is no need to recognize any provisions in the Company’s financial statements for the purpose of meeting any obligations arising under these sureties and/or guarantees.

Cash investments in FIC Pampulha - the investment fund of CEMIG and its subsidiaries and affiliates

CEMIG and its subsidiaries and jointly controlled entities invest part of their financial resources in an investment fund which has the characteristics of fixed income and obeys the Company’s cash investment policy. The amounts invested by the fund are reported as cash and cash equivalent or marketable securities line in current and non-current assets.


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The funds applied are allocated only in public and private fixed income securities, subject only to credit risk, with various maturity periods, obeying the unit holders’ cash flow needs.

Loan between related parties

On February 10 and February 15, 2023, Cemig D received the amounts of R$150 and R$200, respectively, related to the loan agreement approved by ANEEL and authorized by the Board of Directors in 2020 from Cemig (lender), in the amount of R$350, with payment term until May 2024. The loan bears interest at a rate equivalent to 110% of the CDI variation, to be paid together with the original installment. As guarantee, Cemig D issued a promissory note in favor of Cemig, comprising the principal and estimated interest for the contract.

In March 2023, the Board of Directors authorized the first amendment to the loan agreement from Cemig (lender), under the same terms cited above, recognized by ANEEL, in the amount of R$750, with no transfer of the funds to date.

Remuneration of key management personnel

The total remuneration of key personnel, comprising the Executive Board, the Fiscal Council, the Audit Committee and the Board of Directors, are within the limits approved at a General Shareholders’ Meeting, and the effects on the Statement of income of the year ended December 31, 2023, 2022 and 2021, are as follows:


	2023		2022
Remuneration		29		29
Income sharing		7		6
Pension plans		2		2

Total		38		37


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31.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial instruments classification and fair value

The financial instruments, classified in accordance with the accounting principles, are as follows:


		2023						2022
	Level	Balance			Fair value			Balance			Fair value
Financial assets
Amortized cost (1)
Marketable securities – Cash investments			11			11			380			380
Accounts receivable from Customers and traders; Concession holders (transmission service)			5,477			5,477			4,812			4,812
Restricted cash			31			31			16			16
Accounts receivable from the State of Minas Gerais (AFAC)			13			13			13			13
Concession financial assets – CVA (Parcel ‘A’ Costs Variation Compensation) Account and Other financial components			806			806			944			944
Low-income subsidy						-			1,207			1,207
Concession grant fee – Generation concessions			3,031			3,031			2,950			2,950
Agreement between FIP Melbourne and AGPar						-			161			161

			9,369			9,369			10,483			10,483
Fair value through profit or loss
Cash equivalents – Cash investments	2		1,342			1,342			1,346			1,346
Marketable securities									-
Bank certificates of deposit (CDBs)	2		74			74			191			191
Financial Notes – Banks	2		475			475			906			906
Treasury Financial Notes (LFTs)	1		214			214			402			402
			2,105			2,105			2,845			2,845
Derivative financial instruments (Swaps)	3		368			368			703			703
Concession financial assets – Distribution infrastructure	3		1,920			1,920			1,407			1,407
Indemnifiable receivable – Generation	3		784			784			691			691

			5,177			5,177			5,646			5,646

			14,546			14,546			16,129			16,129

Financial liabilities
Amortized cost (1)
Loans and debentures			(9,831	)		(9,831	)		(10,581	)		(10,581	)
Debt with pension fund (Forluz)			(90	)		(90	)		(251	)		(251	)
Deficit of pension fund (Forluz)			(521	)		(521	)		(545	)		(545	)
Concessions payable			(28	)		(28	)		(27	)		(27	)
Suppliers			(3,017	)		(3,017	)		(2,832	)		(2,832	)
Leasing			(433	)		(433	)		(354	)		(354	)

			(13,920	)		(13,920	)		(14,590	)		(14,590	)
Fair value through profit or loss
Derivative financial instruments - Swaps	3		-			-			(91	)		(91	)
Derivative financial instruments (PUT options)	3								(672	)		(672	)

			-			-			(763	)		(763	)

			(13,920	)		(13,920	)		(15,353	)		(15,353	)

(1) The book value represents the approximate fair value amount.

At initial recognition the Company measures its financial assets and liabilities at fair value and classifies them according to the accounting standards currently in effect. Fair value is a measurement based on assumptions that market participants would use in pricing an asset or liability, assuming that market participants act in their economic best interest. The information applied in the fair value valuation techniques is classified in three levels of fair value hierarchy, as follows:

•

Level 1 - Active market - Quoted prices: A financial instrument is considered to be quoted in an active market if the prices quoted are promptly and regularly made available by an exchange or organized over-the-counter


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market, by operators, by brokers or by a market association, by entities whose purpose is to publish prices, or by regulatory agencies, and if those prices represent regular arm’s length market transactions made without any preference.

•

Level 2 - No active market - Valuation technique: For an instrument that does not have an active market, fair value should be found by using a method of valuation/pricing. Criteria such as data on the current fair value of another instrument that is substantially similar, or discounted cash flow analysis or option pricing models, may be used. Level 2 is based on information that is observable, either directly or indirectly. The objective of the valuation technique is to establish what would be the transaction price on the measurement date in an arm’s-length transaction motivated by business model.

•

Level 3 - No active market - No observable inputs: Fair value is determined based on generally accepted valuation techniques, such as on discounted cash flow analysis or other valuation techniques, including non-observable data, such as the measurement at new replacement value (NRV). Non-observable data should be used to measure fair value where significant observable data is not available, admitting situations in which there is little or no market activity at the measurement date. Non-observable data are developed using the best possible information available in the circumstances, which may include the entity’s own data.

The fair value hierarchy prioritizes information (inputs) from valuation techniques, and not the valuation techniques used for measurement of fair value. In some cases, information is used from different hierarchy levels in measurement of fair value, and this is classified entirely in the same level of the fair value hierarchy applicable to the significant information of a lower level. For assets and liabilities that are recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization.

Fair value calculation of financial positions

Distribution infrastructure concession financial assets: these are measured at New Replacement Value (NRV), according to criteria established by the Concession-granting power (‘Grantor’), based on fair value of the concession assets in service and which will be revertible at the end of the concession, and on the weighted average cost of capital (WACC) defined by the Grantor, which reflects the concession holder’s return on the operations of the concession. The NRV and the WACC are public information disclosed by the Grantor and by CEMIG respectively. The gas distribution assets are measured at the construction cost adjusted by the General Market Prices Index (Índice Geral de Preços de Mercado - IGPM). Changes in concession financial assets are disclosed in Note 13.

Indemnifiable receivable - generation: measured at NRV, as per criteria set by regulations of the grantor power, based on the fair value of the assets to be indemnify at the end of the concession. For more information, see Note 13.2.

Marketable securities: Fair value of marketable securities is determined taking into consideration the market prices of the investment, or market information that makes such calculation possible, considering future interest rates and exchange of investments to similar securities. The market value of the security is deemed to be its maturity value discounted to present value by the discount rate obtained from the market yield curve.

Swaps: Fair value was calculated based on the market value of the security at its maturity adjusted to present value by the discount rate from the market yield curve.


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Other financial liabilities: Fair value of its Loans and debentures were determined using 123.85% of the CDI rate - based on its most recent funding. For the loans and debentures and debt renegotiated with Forluz, with annual rates between IPCA + 4.10% to 7.62% and CDI + 1.18% to 6.96%, Company believes that their carrying amount is approximated to their fair value.

Derivative financial instruments

Put option - SAAG

Early liquidation of Funds, and early maturity of put option

The judgment of the arbitration tribunal was published on February 10, 2023, ordering Cemig GT to make full payment of the exercise price of the options contained in the contracts.

On May 8, 2023, a Transaction Agreement was signed between Cemig GT and the private pension funds (‘the Funds’) which participated in the investment structure of the Santo Antônio hydroelectric plant through SAAG (a structure comprising FIP Melbourne, Parma Participações S.A. and FIP Malbec – jointly, ‘the Investment Structure”).

The total value of the agreement was R$780, which was settled by Cemig GT on May 12, 2023. An additional effect of R$25, relating to the fair value of the liabilities up to the date of settlement, was posted in the second quarter of 2023.

The changes in the value of the options are as follows:



Balance at December 31, 2020	536

Adjustment to fair value	100

Balance at December 31, 2021	636

Adjustment to fair value	36

Balance at December 31, 2022	672

Adjustment to fair value	58
Related assets (1)	50
Payment	(780	)

Balance at December 31, 2023	-

(1)

With the acquisition of the share units then held by the Funds in the Investment Structure, Cemig GT became the holder of the related assets, which have aggregate value of R$50. This amount is recognized in Other assets in the Statement of financial position.

Swap transactions, currency options and NDF

Considering that part of the Loans of the Company’s subsidiaries is denominated in foreign currency, the companies use derivative financial instruments (swaps and currency options) to protect the servicing associated with these debts (principal plus interest).

The derivative financial instruments contracted have the purpose of protecting the operations against the risks arising from foreign exchange variation and are not used for speculative purposes.

The gains and losses realized in 2023 and 2022 are shown below:


		Maturity	Trade	Notional	Realized gain / loss
Assets	Liability	period	market	amount	2023			2022
US$ exchange variation + Rate (9.25% p.y.)	Local currency R$ + 152.01% of CDI	Interest: Half-yearly Principal: Dec. 2024	Over the counter	US$120		97			185
US$ exchange variation + Rate (9.25% p.y.)	Local currency R$ + 125.52% of CDI	Interest: Half-yearly Principal: Dec. 2024	Over the counter	US$261		87			(54	)
US$ exchange variation higher R$5.0984	US$ exchange variation lower R$5.0954	August 03, 2021 December 16, 2022	Over the counter	2022: US$280		-			32
US$ exchange variation higher than R$5.1110	US$ exchange variation of less than R$5.1110	October 13, 2023 December 05, 2023	Over the counter	US$392		(79	)		-
US$ exchange variation higher than R$4.9675	US$ exchange variation of less than R$4.9675	December 05, 2023 December 19, 2023	Over the counter	US$377		(38	)		-

						67			163


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In 2023, the interest on the swap was settled every six months, with a negative result of R$99 and a cash outflow of the same amount (negative R$95 in 2022 and a cash outflow of the same amount). In June 2023, the hedge was partially disassembled in the amount of US$369, with a positive result of R$283 and a net cash inflow of R$241.

On April 13, 2023 and June 14, 2023, Cemig GT contracted a short-term hedge against dollar fluctuations in the amount of US$392, locking the dollar at R$5.1110, maturing on December 5, 2023. On the same date, a new short-term operation was contracted for a volume of US$376 maturing on December 19, 2023. The instrument contracted was an NDF (Non Deliverable Forward), a forward exchange derivative contract, without physical delivery of the currency, which guaranteed Cemig GT a predetermined rate at the time of maturity. The result of the settlement of the NDFs corresponded to a cash outflow of R$117.

The principal amounts of derivative transactions are not recorded in the balance sheet, since they refer to transactions that do not require the transit of full cash, but only of the gains or losses earned or incurred. The net results of these operations represent a loss with financial instruments, on December 31, 2023, in the amount of R$177 (negative adjustment of R$438 on December 31, 2022), recorded in the financial result.

The Company is the guarantor of these derivative instruments contracted by Cemig GT.

This table presents the derivative instruments as of December 31, 2023, and 2022:


					Unrealized gain / loss				Unrealized gain / loss
Assets (1)	Liability	Maturity period	Trade market	Notional amount (2)	Carrying amount 2023		Fair value 2023		Carrying amount 2022		Fair value 2022
US$ exchange variation + Rate (9.25% p.y.)	Local currency R$ + 152.01% of CDI	Interest: Half-yearly Principal: Dec. 2024	Over the counter	US$250		191		161		428		273
US$ exchange variation + Rate (9.25% p.y.)	Local currency R$ + 125.52% of CDI	Interest: Half-yearly Principal: Dec. 2024	Over the counter	US$500		254		207		568		339

						445		368		996		612

Current asset								368				-
Non-current asset								-				703
Current liabilities								-				(91	)

(1)

(2)

In million of US$.

The Cemig GT uses a mark-to-market method to measure its derivatives financial instruments for its Eurobonds. The principal indicators for measuring the fair value of the swap are the B3 future market curves for the DI rate and the dollar. The Black & Scholes model is used to price the call spread, and one of parameters of which is the volatility of the dollar, measured on the basis of its historic record over 2 years.

The fair value on December 31, 2023 was R$368 (R$612 on December 31, 2022), which would be the reference if CEMIG GT would liquidate the financial instrument on December 31, 2023, but the swap contracts protect the Company’s cash flow up to the maturity of the bonds in 2024 and they have carrying amount of R$445 at December 31, 2023 (R$997 on December 31, 2022).

Market risk and sensitivity analysis

The Company is exposed to market risk due to having contracted this hedge, the principal potential impact being a change in future interest rates and/or the future exchange rates.


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Based on the futures curves for interest rates and dollar, the Company prepare a sensitivity analysis and estimates that in a probable scenario, its results would be positively affected by the swap and call spread, on December 31, 2024, in the amount of R$129. The fair value of the financial instrument was estimated in R$497.

Financial risk management

Corporate risk management is a management tool that is part of the Company’s corporate governance practices, and is aligned with the process of planning, which sets the Company’s strategic business objectives.

The Company monitor the financial risk of transactions that could negatively affect the Company’s liquidity or profitability, recommending hedge protection strategies to minimize its exposure to foreign exchange rate, interest rate and inflation risks, which are effective, in alignment with the Company’s business strategy.

Exchange rate risk

The Company is exposed to the risk of appreciation in exchange rates, with effect on loans, suppliers (energy purchased from Itaipu) and cash flow.

For the debt denominated in foreign currency, the Company contracted a derivative financial instrument that protects the risks associated with the interest and principal, in the form of a swap and a call spread, respectively, in accordance with the hedge policy of the Company. The Company exposure to market risk associated to this instrument is described in the topic ‘Swap transaction’ of this Note.

The risk exposure of group is mitigated by the account for compensation of variation of parcel A items (CVA).

The net exposure to exchange rates is as follows:


Exposure to exchange rates	2023						2022
	Foreign currency			R$			Foreign currency			R$
US dollar
Loans and financing (note 21)		(384	)		(1,857	)		(762	)		(3,975	)
Suppliers (Itaipu Binacional)		(50	)		(240	)		(52	)		(274	)

		(434	)		(2,097	)		(814	)		(4,249	)

Net liabilities exposed					(2,097	)					(4,249	)

Sensitivity analysis

Based on finance information from its financial consultants, the Company estimates that in a probable scenario the variation of the exchange rates of foreign currencies in relation to the Real on December 31, 2024 will be an appreciation of the dollar by 2.86%, to R$4.98.

The Company has prepared a sensitivity analysis of the effects on the Company’s net income arising from depreciation of the Real exchange rate considering an adverse scenario in relation to the probable scenario.


Risk: foreign exchange rate exposure				Probable' scenario			Adverse scenario
	Base scenario			Dollar R$4.98			Dollar R$6.00
US dollar
Loans and financings (note 21)		(1,857	)		(1,910	)		(2,301	)
Suppliers (Itaipu Binacional) (note 19)		(240	)		(247	)		(297	)

		(2,097	)		(2,157	)		(2,598	)


Net liabilities exposed		(2,097	)		(2,157	)		(2,598	)
Net effect of exchange rate fluctuation					(60	)		(501	)


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Company has entered into swap operations to replace the exposure to the US dollar fluctuation with exposure to fluctuation in the CDI rate, as described in more detail in the item ‘Swap Transactions’ in this Note.

Interest rate risk

The Company is exposed to the risk of decrease in Brazilian domestic interest rates on December 31, 2023. This risk arises from the effect of variations in Brazilian interest rates on net financial income comprised by financial revenues from cash investments made by the Company, and also to the financial assets related to the CVA and other financial components, net of the effects on financial expenses associated to loans and debentures in Brazilian currency, and also sectorial financial liabilities.

Part of the Loans in Brazilian currency comprises financings obtained from various financial agents that specify interest rates taking into account basic interest rates, the risk premium compatible with the companies financed, their guarantees, and the sector in which they operate.

The Company does not contract derivative financial instruments for protection from this risk. Variations in interest rates are continually monitored with the aim of assessing the need for contracting of financial instruments that mitigate this risk.

This exposure occurs as a result of net assets indexed to variation in interest rates, as follows:


Risk: Exposure to domestic interest rate changes	2023			2022
Assets
Cash equivalents – Cash investments (Note 6) – CDI		1,342			1,345
Marketable securities (Note 7) – CDI / SELIC		774			1,878
Generation indemnity revenue		784			691
Restricted cash – CDI		31			16
CVA and in tariffs (Note 14) – SELIC		806			944

		3,737			4,874

Liabilities
Loans, financing and debentures (Note 22) – CDI		(3,508	)		(2,041	)
Loans, financing and debentures (Note 22) – TJLP					-
Sector financial liabilities (note 14)					-

		(3,508	)		(2,041	)

Net assets exposed		229			2,833

Sensitivity analysis

In relation to the most significant interest rate risk, the Company estimate that in a probable scenario the Selic rate will be 9.25% and the TJLP rate will be 6.27% on December 31, 2024.


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The Company made a sensitivity analysis of the effects on results considering an adverse scenario in relation to the probable scenario, as shown in the table below. The CDI rate follows the Selic rate.


	2023			2024
				Probable' scenario			Adverse scenario
Risk: Increase in Brazilian interest rates	Book value			Selic 9.25%			Selic 13.25%
				TJLP 6.27%			TJLP 7.27%
Assets
Cash equivalents (Note 6)		1,342			1,466			1,520
Marketable securities (Note 7)		774			846			877
Restricted cash		31			33			35
CVA and Other financial components – SELIC (Note 14)		806			880			912

		2,953			3,225			3,344

Liabilities
Loans and financing (Note 21) – CDI		(3,508	)		(3,833	)		(3,973	)

		(3,508	)		(3,833	)		(3,973	)



Net assets exposed		(555	)		(608	)		(629	)

Net effect of fluctuation in interest rates					(53	)		(74	)

Increase in inflation risk

The Company is exposed to the risk of increase in inflation index on December 31, 2023. A portion of the loans and debentures as well as the pension fund liabilities are adjusted using the IPCA (Expanded National Customer Price). The revenues are also adjusted using the IPCA and IGP-M index, mitigating part of the Company risk exposure.

This table presents the Company’s net exposure to inflation index:


Exposure to increase in inflation	2023			2022
Assets
Concession financial assets related to Distribution infrastructure - IPCA (1)		1,920			1,407
Concession Grant Fee – IPCA (Note 14)		3,031			2,950

		4,951			4,357

Liabilities
Loans, financing and debentures – IPCA and IGP-DI (Note 22)		(4,522	)		(4,630	)
Debt with pension fund (Forluz) – IPCA (Note 24)		(90	)		(251	)
Deficit of pension plan (Forluz) – IPCA (Note 24)		(521	)		(545	)
Leasing liabilities		(433	)		(354	)

		(5,566	)		(5,780	)

Net liabilities exposed		(615	)		(1,423	)

(1)

Portion of the concession financial assets relating to the Regulatory Remuneration Base of Assets ratified by the grantor (ANEEL) after the 4th tariff review cycle.


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Sensitivity analysis

In relation to the most significant risk of reduction in inflation index, reflecting the consideration that the Company has more assets than liabilities indexed to inflation indexes, the Company estimates that, in a probable scenario, at December 31, 2024 the IPCA inflation index will be 4.23% and the IGPM inflation index will be 3.81%. The Company has prepared a sensitivity analysis of the effects on its net income arising from reductions in rates in an adverse scenario.


	2023			2024
				Probable' scenario			Adverse scenario
Risk: increase in inflation index	Book value			IPCA 4.23%			IPCA 6.86%
				IGPM 3.81%			IGPM 5.09%
Assets
Concession financial assets related to Distribution infrastructure – IPCA (1)		1,882			1,961			2,010
Concession financial assets related to gas distribution infrastructure – IGPM		39			40			41
Concession Grant Fee – IPCA (Note 14)		3,031			3,159			3,238

		4,952			5,160			5,289

Liabilities
Loans, financing and debentures – IPCA and IGP-DI (Note 22)		(4,522	)		(4,713	)		(4,831	)
Debt agreed with pension fund (Forluz) – IPCA (Note 24)		(90	)		(94	)		(96	)
Deficit of pension plan (Forluz) (Note 24)		(521	)		(543	)		(557	)
Leasing liabilities		(433	)		(451	)		(463	)

		(5,566	)		(5,801	)		(5,947	)

Net liability exposed		(614	)		(641	)		(658	)

Net effect of fluctuation in IPCA and IGP–M indexes					(27	)		(44	)

(1)

Portion of the Concession financial assets relating to the Regulatory Remuneration Base of Assets ratified by the grantor (ANEEL) after the 4th tariff review cycle.

Liquidity risk

CEMIG has sufficient cash flow to cover the cash needs related to its operating activities.


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the Company’s debt could have higher interest rates or might require compliance with more onerous covenants, which could additionally cause restrictions to the operations of the business.


	Up to 1 month				1 to 3 months				3 months to 1 year				1 to 5 years				Over 5 years				Total
Consolidated	Principal		Interest		Principal		Interest		Principal		Interest		Principal		Interest		Principal		Interest
Financial instruments at interest rates:
- Floating rates
Loans, financing and debentures		45		2		398		62		2,152		768		6,314		1,091		1,140		96		12,068
Onerous concessions		-		-		1		-		3		-		13		-		16		-		33
Debt with pension plan (Forluz) (Note 23)		15		-		30		1		46		-		-		-		-		-		92
Deficit of the pension plan (Forluz) (Note 23)		4		3		9		5		41		22		271		92		287		29		763

		64		5		438		68		2,242		790		6,598		1,183		1,443		125		12,956

- Fixed rate
Suppliers		2,854		-		163		-		-		-		-		-		-		-		3,017

Total		2,918		5		601		68		2,242		790		6,598		1,183		1,443		125		15,973

Risk of debt early maturity

The Company’s subsidiaries have loan contracts with restrictive covenants normally applicable to this type of transaction, related to compliance with a financial index. Non-compliance with these covenants could result in earlier maturity of debts. More details in Note 21.

Credit risk

The distribution concession contract requires levels of service on a very wide basis within the concession area, and disconnection of supply of defaulting customers is permitted. Additionally, the Company uses numerous tools of communication and collection to avoid increase in default. These include: telephone contact, emails, text messages, collection letters, posting of customers with credit protection companies, and collection through the courts.

The risk arising from the possibility of Cemig and its subsidiaries incurring losses as a result of difficulty in receiving amounts billed to its customers is considered to be low. The credit risk is also reduced by the extremely wide customers’ base.

The estimated credit losses recorded on December 31, 2023, considered to be adequate in relation to the credits in arrears receivable by the Company and its subsidiaries was R$910 (R$820 in 2022).

Company and its subsidiaries manage the counterparty risk of financial institutions based on an internal policy, which is constantly updated. This Policy assesses and scales the credit risks of the institutions, the liquidity risk systemic risk related to macroeconomic and regulatory conditions, the market risk of the investment portfolio and the Treasury operational risk.

All investments are made in financial securities that have fixed-income characteristics, always indexed to the CDI rate, and may be of public or private capital as well as financial or non-financial entities. The Company does not carry out any transactions in variable income securities or that would bring volatility risk into its financial statements.

As a management instrument, the Company and its subsidiaries divide the investment of its funds into direct purchases of securities (own portfolio) and investment funds. The investment funds invest the funds exclusively in fixed income


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products, having companies of the Group as the only unit holders. They obey the same policy adopted in the investments for the Company’s directly-held own portfolio.

The minimum requirements for concession of credit to financial institutions are centered on three items:

Minimum Brazilian long-term rating of ‘BBB’ (bra), ‘brBBB’ or ‘Baa2’ by any of the agencies: Fitch Ratings, Moody’s or Standard & Poor’s.

Equity greater than R$800.

Basel ratio one percentage point above the minimum set by the Brazilian Central Bank.

The quality of the financial institutions’ credit portfolio is another indicator that is monitored and may result in reduction of the institution’s limit.

Banks that exceed these thresholds are classified in three groups, in accordance with their equity value, plus a specific segment comprising those whose credit risk is associated only with federal government, and within this classification, limits of concentration by group and by institution are set:


		Limit per bank (% of equity) (1) (2)
Group	Equity	AAA	AA	A	BBB
Federal Risk	-	10%	10%	10%	10%
A1	Equal or over R$10 billion	9%	8%	7%	6%
A2	Between R$5 billion and R$10 billion	8%	7%	6%	5%
A3	Between R$2 billion and R$5 billion	7%	6%	5%	4%
A4	Between R$800 million and R$2 billion	6%	5%	4%	-

The percentage assigned to each bank depends on individual assessment of indicators, e.g. liquidity, and quality of the credit portfolio.

When the institution has different ratings from different risk rating agencies, the rating that is most favorable for the institution is taken into account.

Further to these points, CEMIG also sets two concentration limits:

No bank may have more than 30% of the Group’s portfolio.

The banks in the ‘Federal risk’, ‘A1’ and ‘A2’ groups must concentrate at least 50% of the total of the funds available, comprising investments held in the Investment Funds and in the own portfolio, excluding public securities.

The Company only permits investments in securities of non-financial companies that have a rating equal to or higher than the most recent rating of the Company published by the risk rating agencies Fitch Rating, Moody’s or Standard & Poor’s.

Risk of over-contracting and under-contracting of energy supply

Sale or purchase of energy supply in the spot market to cover a positive or negative exposure of supply contracted, to serve the captive market of CEMIG D, is an inherent risk to the energy distribution business. The regulatory agent limits for 100% pass-through to customers the exposure to the spot market, valued at the difference between the distributor’s average purchase price and the spot price (PLD), is only the margin between 95% and 105% of the distributor’s contracted supply. Any exposure that can be proved to have arisen from factors outside the distributor’s control (‘involuntary exposure’) may also be passed through in full to customers. Company’s management is continually monitories its contracts for purchase of energy supply to mitigate the risk of exposure to the spot market.

Risk of continuity of the concession

The risk to continuity of the distribution concession arises from the new terms included in the extension of CEMIG D’s concession for 30 years from January 1, 2016, as specified by Law 12,783/13. The extension introduced changes to the present contract, conditional upon compliance by the distributor with new criteria for quality, and for economic and financial sustainability.


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Non-compliance with the quality criteria for three consecutive years, or the minimum parameters for economic/financial sustainability for two consecutive years, results in opening of proceedings for termination of the concession.


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The efficiency criteria for continuity of supply and for economic and for financial management, required to maintain the distribution concession, were met in the year ended December 31, 2023.

Hydrological risk

The greater part of the energy sold by the Company’s subsidiaries is generated by hydroelectric plants. A prolonged period of drought can result in lower water volumes in the reservoirs of these plants, which can lead to an increase in the cost of acquisition of energy, due to replacement by thermoelectric generation, or reduction of revenues due to reduction in consumption caused by implementation of wide-ranging programs for saving of energy. Prolongation of the generation of energy using the thermal plants could pressure costs of acquisition of supply for the distributors, causing a greater need for cash, and could result in future increases in tariffs.

The Company continuously monitors the position of its energy balance and the risk position of power purchase contracting, in order to ensure that transactions are consistent with its objectives and corporate strategy.

Capital management

Accounting policy

Financial instruments are classified, at initial recognition, as measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through income or loss, depending on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them.

Fair value through income or loss: this includes the concession financial assets related to energy and gas distribution segment infrastructure. The financial assets related to energy distribution infrastructure are measured at the expected New Replacement Value (NRV), as defined in the concession contract, which represent the fair value of the residual value of the infrastructure as of the balance sheet date. The financial assets related to gas distribution infrastructure are measured based on the fair value of the indemnity established in the concession contract.

The Company recognize a financial asset resulting from a concession contract when it has an unconditional contractual right to receive cash or another financial asset from, or under the direction of the grantor for the services of construction and maintenance of the infrastructure.

This category also includes cash equivalents, marketable securities not classified at amortized cost, derivative financial instruments and indemnities receivable from the generation assets.

Cash and cash equivalents comprise cash at banks and on hand and short-term highly liquid deposits, subject to an insignificant risk of changes in value, maintained to carry out the Company’s short-term cash management.

The disclosures about the main assumptions used in fair value measurement are summarized in the respective notes.

Derivative financial instruments (Swap transactions and call spread): CEMIG GT, maintains derivative instruments to manage its exposure to the risks of changes in foreign currency exchange rates that are recognized initially at their fair value and the related transaction costs are recognized in the statement of income when they are incurred. After the initial recognition, derivatives are measured at fair value and changes in fair value are recorded in the statement of income.

Derivative financial instruments (Put options) - The options to sell to CEMIG GT units of the FIP Melbourne and FIP Malbec funds (‘the SAAG PUT’) were measured at fair value using the Black-Scholes-Merton (BSM) method until the exercising date of the options, that occurred in 2020.


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Amortized cost: This includes accounts receivables from customers, traders and concession holders; restricted cash; escrow deposits in litigation; marketable debt securities with the intention of holding them until maturity and the terms of their contracts originate known cash flows that constitute exclusively payments of principal and interest; concession financial assets related to generation concession grant fee; accounts receivable from related parties; suppliers; loans and debentures; debt agreed with the pension fund (Forluz); concessions payable; the Minas Gerais State PRCT Tax Amnesty Program; assets and liabilities related to the CVA account and Other financial components in tariff adjustments; the low-income subsidy; reimbursement of tariff subsidies; and other credits.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate (EIR). Gains and losses are recognized in income or loss when the asset is derecognized, modified or impaired.

32.

ASSETS CLASSIFIED AS HELD FOR SALE

Process of sale of 15 PCHs/CGHs

On March 17, 2023 the invitation and tender were published for a public auction to sell 15 small hydroelectric generation plants and units (PCHs and CGHs), 12 owned by Cemig GT and 3 by its wholly-owned subsidiary Horizontes.


Generation plant	Ledger	Beginning of the operation	Installed capacity (MW) (1)		Physical guarantee (MWm) (1)	Commercial Operation Status	Site
Cemig GT
CGH Bom Jesus do Galho	Registry	1931	0.36		0.13	Out of operation	Minas Gerais
CGH Xicão	Registry	1942	1.81		0.61	In operation	Minas Gerais
CGH Sumidouro	Registry	1954	2.12		0.53	In operation	Minas Gerais
PCH São Bernardo	Concession	1948	6.82		3.42	In operation	Minas Gerais
CGH Santa Marta	Registry	1944	1.00		0.58	In operation	Minas Gerais
CGH Santa Luzia	Registry	1958	0.70		N/A Generation: 0.28	In operation	Minas Gerais
CGH Salto Morais	Registry	1957	2.39		0.60	In operation	Minas Gerais
PCH Rio de Pedras	Concession	1928	9.28		2.15	In operation	Minas Gerais
CGH Pissarrão	Registry	1925	0.80		0.55	In operation	Minas Gerais
CGH Lages	Registry	1955	0.68		N/A Generation: 0.32	In operation	Minas Gerais
CGH Jacutinga	Registry	1948	0.72		0.57	In operation	Minas Gerais
CGH Anil	Registry	1964	2.06		1.10	In operation	Minas Gerais
Horizontes
CGH Salto do Paraopeba	Authorization	1955	2.46		2.21	Out of operation	Minas Gerais
CGH Salto Passo Velho	Authorization	2001	1.80		1.64	In operation	Santa Catarina
PCH Salto Voltão	Authorization	2001	8.20		7.36	In operation	Santa Catarina

Total				41.20	22.05

(1)

Information not audited by the independent auditors.

Thus, in March 2023 the assets were transferred to Current assets held for sale, in accordance with the terms of IFRS 5. There are no accumulated gains or losses included in other comprehensive income relating to this group held for sale and there are no liabilities associated with the asset held for sale.

It was concluded that that the assets classified as held for sale do not qualify within the concept of discontinued operations, under Item 32 of IFRS 5, since they do not represent a significant separate line of business or geographical area of operations, nor do they constitute a subsidiary acquired exclusively for the purpose of resale.

On August 10, 2023, the Company held a public auction for the sale of these assets as a single lot. The winning bid was R$100, representing a premium of 108.6% to the minimum price of R$48.


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The book value of the plants in the assets held for sale group on December 31, 2023 is as follows:


Plant	Net book value Fixed assets and Intangible assets
Cemig GT		46

CGH Bom Jesus do Galho		-
CGH Xicão		8
CGH Sumidouro		2
PCH São Bernardo		6
CGH Santa Marta		-
CGH Santa Luzia		1
CGH Salto Morais		1
PCH Rio de Pedras		22
CGH Pissarrão		1
CGH Lages		1
CGH Jacutinga		2
CGH Anil		2
Horizontes		12

CGH Salto do Paraopeba		-
CGH Salto Passo Velho		3
PCH Salto Voltão		9

Total		58

Cemig GT and its wholly owned subsidiary Horizontes signed the sale agreement with the winning bidder, Mang Participações e Agropecuaria Ltda. (‘Mang’), on September 13, 2023. The sale was completed on February 29, 2024, after all the conditions precedent of the CCVA had been met. The amount received for the sale was R$100. The accounting effects of this transaction will be reflected in the first quarter of 2024.

This disposal aims to comply with the directives of the Company’s strategic planning, in optimizing its portfolio of assets, seeking to improve operational efficiency and allocation of capital.

Accounting policy

The Company and its subsidiaries classify a non-current asset as held for sale when its carrying amount will be recovered primarily through a sale transaction rather than through continuing use.

Property, plant and equipment and intangible assets are not depreciated or amortized while they are classified as held for sale. Dividends received from joint ventures classified as held for sale are recognized in the income statement, given the interruption of measurement by the equity method.

Estimations and judgments

They are measured at the lower of their book value and fair value net of selling expenses. Selling expenses are represented by the incremental expenses directly attributable to the sale, excluding financial expenses and income taxes. Assets and liabilities classified as held for sale are presented separately as current items in the balance sheet.


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33.

COMMITMENTS

Cemig and its subsidiaries have contractual obligations and commitments not yet incurred, therefore not recognized in these financial statements, which mainly include the purchase of electricity, as shown in the table below:


	2024		2025		2026		2027		2028		2029 onwards		Total
Purchase of energy from Itaipu		1,096		1,096		1,096		1,096		1,096		20,827		26,307
Purchase of energy – auctions		4,661		4,099		4,218		4,342		4,575		61,220		83,115
Purchase of energy – ‘bilateral contracts’		491		319		99		20		-		-		929
Quotas of Angra 1 and Angra 2		384		383		383		385		386		7,225		9,146
Transport of energy from Itaipu		248		258		266		274		251		4,555		5,852
Other energy purchase contracts		5,431		5,009		4,285		4,071		2,814		25,999		47,609
Physical quota guarantees		834		738		659		581		581		10,699		14,092

Total		13,145		11,902		11,006		10,769		9,703		130,525		187,050

The payment flows for leases, loans and suppliers are presented in Explanatory Notes 18 and 31.

34.

PARLIAMENTARY COMMITTEE OF INQUIRY (‘CPI’)

On June 17, 2021, the Legislative Assembly of Minas Gerais has established a Parliamentary Committee of Inquiry (‘CPI’) to investigate management acts of Cemig since January 2019. CPI was entitled to investigate the facts underlying the application for its creation, and requested, through application, several documents and information related, mainly, human resources management and purchasing processes which were fully met by the Company within the stipulated deadlines.

On February 18, 2022 the CPI approved its final report, to be submitted to the Public Attorneys’ Office of Minas Gerais State, and other control bodies, for assessment of what further referrals of it should be made.

In August 2023, the prosecutors of the Public Attorneys’ Office of Minas Gerais decided to set aside the Public Civil Inquiries that were investigating events referred to in the CPI. The decisions stated that all acts of Cemig's management were regular. The only matter pending is conclusion of the investigation by the Minas Gerais Civil Police in relation to the IBM contract.

It should be noted that the Company carries out regular audits of its contracting processes, and no material impacts were identified in the financial statements for the year ending December 31, 2023 or in the financial statements for previous years.

35.

SUBSEQUENT EVENTS

Advance payment CDE

On February 9, 2024, Cemig D signed an agreement, with Banco Safra, for assignment of receivables without co-obligation, for advance payment of three installments of receivables from the CDE becoming due over the period March–May 2024, each in the amount of R$101, totaling R$304. The total received on February 9, 2024 was R$297. The payments to Banco Safra will be made as and when the funds originating from the CCEE are received by Cemig D.


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Debenture issue

On March 13, 2024 the Company published notice to the market of the start of public offering for distribution of its tenth debenture issue, comprising two million unsecured non-convertible debentures without asset guarantee, in up to two series, with nominal unit value of one thousand Reais, comprising total value of two billion Reais, to be carried out in accordance with CVM regulations.

On March 15, 2024, the Company concluded the financial settlement of its 10th debenture issue, in two series, with a surety guarantee from Cemig. Two million debentures were issued, characterized as ‘sustainable ESG debentures’, with total value of two billion Reais, which were subscribed as follows:


Series	Quantity	Amount	Remuneration	Maturity	Amortization
First Series	400,000	R$400,000,000.00	CDI + 0.80%	5 years	48th and 60th months
Second Series	1,600,000	R$1,600,000,000.00	IPCA + 6.1469%	10 years	96th, 108th and 120th months

Cemig D’s net proceeds from the issue will be allocated to replenishment of its cash position, including, but not limited to, operations, and reimbursement of prior expenditure, including on investments, already made in projects involving social and environmental issues.

We note, additionally, that Fitch Ratings allocates a credit risk of AA+(bra) to this Issue.

Social capital increase - Proposal by Management

Considering that on December 31, 2023 the share capital was R$11,007 and the balance of profit reserves, excluding the Tax Incentives Reserve and the Future Earnings Reserve, was R$11,993, exceeding the share capital by R$986, the Board of Directors declared at the Annual General Meeting (AGM), held on April 29, 2024, to increase the share capital, in accordance with Article 199 of the Corporate Law of 1976 (Law 6,404/76).

The approval of capital increase by capitalization of the balance of R$1,857 of the Capital Reserve, and R$1,445 from the Retained Earnings Reserve, by issuance of a stock bonus of 660,411,207 new shares, with par value of R$5.00 (as specified by the by-laws), of which 220,754,287 will be common shares and 439,656,920 will be preferred shares – increasing the share capital from R$11,007 to R$14,309.

Interest on Equity

On March 21, 2024, the Board of Directors approved declaration of Interest on Equity for the 2024 business year, in the amount of R$386, to be paid in two equal installments, by June 30 and by December 30, 2025, to stockholders whose names were on the Company’s Nominal Share Registry on March 26, 2024.

The Executive Board is responsible for determining the locations and processes of payment and posting the amounts of Interest on Equity as on account of the mandatory dividend for the 2024 business year, approved in a General Meeting of Stockholders held on April 29, 2024.

Disposal of the equity interest held in Aliança Energia

On March 27, 2024, a wholly-owned subsidiary of Cemig, approved and executed a contract for the disposal of its direct equity interest of 45% in the share capital of Aliança Energia S.A. ('Aliança') to Vale S.A. ('Vale'). The effectiveness of the contract is subject to the approval of the transaction by the Company's Extraordinary Shareholders Meeting and compliance with conditions precedent ('CP') that are common for this type of transaction, among which approval from the Brazilian Antitrust Authority ('CADE') and the Brazilian Electricity Regulatory Agency ('ANEEL'). The cost of the transaction is R$2,700 million, with a base date of June 30, 2023, restated by the CDI rate from that date up to the date prior to the actual closing of the transaction.

Thus, in March 2024 the assets were transferred to Current assets held for sale, in accordance with the terms of IFRS 5.


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Initiates process for the Onerous Transfer of four SHPs/HPPs

On April 01, 2024, a wholly-owned subsidiary of Cemig and Cemig published a notice for an in-person public auction, to be carried out by B3, aimed at the Onerous Transfer of the Right to Operate the Electric Power Generation Services of four SHPs/HPPs, comprising one SHP from Cemig GT and three HPPs of its wholly-owned subsidiaries Cemig Geração Leste S.A., Cemig Geração Oeste S.A., and Cemig Geração Sul S.A. The minimum value for the single batch of the power plants is R$29, and the auction is expected to occur on July 03, 2024, according to the schedule outlined in the Notice.


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