Companhia Energética de Minas Gerais - CEMIG Profile
Companhia Energetica de Minas Gerais - CEMIG engages in the generation, transmission, distribution, and sale of energy and gas distribution business. The company provides energy solutions.
Segments
The company operates through 5 segments: Generation, Transmission, Trading, Distribution, and Investees.
Generation
This segment produces energy from hydroelectric and wind facilities.
Transmission
This segment constructs, operates, and maintains transmission lines and substations.
Trading
This segment commercializes energy and provides related services.
Distribution
This segment provides energy distribution services, including operation and maintenance of the related infrastructure and services.
Investees
This segment manages the equity interests in which the company does not have shareholding control, in line with its business strategies. The results of the subsidiaries Gasmig and CEMIG Sim are also included in this segment, since their management is also linked to the CEMIGPar management unit.
Business
The company engages in transactions to buy and sell energy through its subsidiaries. The total volume of energy resourced in 2022 was 98,551 GWh. The amount of energy produced by the company in 2022 was 7,388 GWh. The amount of energy purchased by the company in 2022 was 91,164 GWh. These figures include 5,596 GWh purchased from Itaipu in 2022. Through the Energy Trading Chamber (Câmara de Comercialização de Energia Eletrica, or CCEE) and from other companies, the company purchased 85,567 in 2022.
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, 2022, the company was one of the largest energy generation groups in Brazil, by total installed capacity. As of December 31, 2022, the company was generating energy at 69 hydroelectric plants (small hydroelectric power plants (‘PCH’) and hydroelectric power plants (‘UHE’)), wind plants and solar plants, with total installed capacity of over 5,519 megawatts (MW), with plants present in eight states of Brazil. The vast majority of the company’s capacity is generated at hydroelectric plants (97.3% of installed capacity), with the remaining being generated by wind plants and two solar plants.
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. 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. As of December 31, 2022, CEMIG GT and other CEMIG transmission networks had 4,580 miles of lines.
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. As of December 31, 2022, CEMIG D’s energy system comprised 351,163 miles of distribution lines, through which it supplied 23,778 GWh to 9,032,513 regulated customers and transported 22,796 GWh to 2,570 free customers that use the company’s distribution networks. The total volume of energy distributed was 46,574 GWh, of which 47.7% was distributed to regulated and free industrial customers, 13.5% to regulated and free commercial customers, 24.1% to regulated residential customers, and 14.7% to other regulated and free customers.
Other Businesses: While the company’s main business consists of the generation, transmission and distribution of energy, it also engages in the following businesses: distributed generation, account services, cogeneration, energy efficiency (with Energy Efficiency Program resources – Programa de Eficiência Energetica , or ‘PEE’ ), supply and storage management, through its subsidiary CEMIG Soluções Inteligentes em Energia-CEMIG SIM; sale and trading of energy, through structuring and intermediation of purchase and sale transactions, trading energy in the Free Market, through its wholly-owned subsidiaries CEMIG Trading S.A. and Empresa de Serviços de Comercialização de Energia Eletrica S.A.; and acquisition, transport, and distribution of gas and its sub products and derivatives through Companhia de Gás de Minas Gerais (‘Gasmig’).
Power Generation and Trading: The company’s top five power plants accounted for over 69% of its installed energy generation capacity as of December 31, 2022. The company’s market consists of sales of energy to: Regulated customers in the company’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 2022 was 95,551 GWh.
Generation Assets
As of December 31, 2022, the subsidiaries, jointly controlled entities and affiliates of the company operated 60 hydro plants, totaling 5,368.38 MW. The company has incorporated subsidiaries in the State of Minas Gerais and other states in Brazil to operate certain of its 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.; CEMIG GT incorporated these companies in 2016 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; 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 Aimores 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 four wind plants, which compose the Complexo Eólico Santo Inácio in northeastern Brazil. The company has installed capacity of 1,257 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;
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;
Baguari Energia S.A. (69.39%) – The company operates the Baguari Hydroelectric Plant through the Baguari Hydro Plant Consortium, together with Furnas Centrais Eletricas S.A. (30.61%). Baguari Energia S.A. owns 49% of the plant in partnership with Neoenergia, which owns the remaining 51%, through Baguari I Geração de Energia Eletrica;
Retiro Baixo Energetica S.A. (49.9%) – Holds the concession for the operation of the hydroelectric power plant Retiro Baixo, located in the lower course of the Paraopeba River in the State of Minas Gerais, which has installed capacity of 82 MW and assured energy of 34.08 MW;
Hidreletrica 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 Energetica;
Hidreletrica 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 Asteri Energia S.A.;
Paracambi Energetica 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 Jacare 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 Jacare – 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; and
Queimado Hydroelectric Power Plant – CEMIG GT holds an 82.5% interest in this entity and the company’s partner in this project is CEB Participações S.A. (‘CEBPar’), a subsidiary of Companhia Energetica de Brasília (‘CEB’), which owns 17.5% equity interest in the plant.
Wind Farms
The company 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; and 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 September 2023.
Expansion of Generation Capacity
Poço Fundo; In February 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: In December 2021, the operation of photovoltaic plant Três Marias Geração Distribuída was initiated. This is the second solar plant designed and built by CEMIG GT. This enterprise generates 2.5 MWp and is located near the Hydro Plant UHE 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 September 2023: PV Boa Esperança (100 MWp) and PV Jusante (87 MWp).
CEMIG GT continues to develop projects of hydro, windfarm, and solar projects.
In August 2022, the company signed Full EPC (Engineering, Procurement and Construction) contracts for construction of the Boa Esperança and Jusante photovoltaic solar generation plants.
The Boa Esperança 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 Abaete, 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.
CEMIG SIM: CEMIG SIM, a wholly owned subsidiary of the company that operates in distributed generation and energy solutions.
CEMIG SIM plans to invest R$1.2 billion from 2023 through 2025 in Distributed Generation segment, in order to accomplish its strategic plans.
Transmission
The transmission business consists of the transfer of 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.
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. The company began commercial operation in March 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 Eletrica S.A. – Taesa is a private company jointly controlled by the company, 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. Taesa has led the company’s growth vector in the transmission segment, dedicated to the construction, operation and maintenance of transmission lines in all regions of the country. It represents the main interest that the company has in one Transmission Company in the Brazilian electric sector.
In December 2021, the company 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. 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
The company’s distribution operation consists of transfers of energy from distribution substations to final customers. The company’s distribution network comprises a widespread network of overhead and underground lines and substations with voltages lower than 230 kV. The company supplies 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.
Expansion of Distribution Capacity
The company’s five-year distribution expansion plan, comprising 2023 to 2027, is based on market growth projections. To accommodate this growth, the company plans to add distribution lines, up to 41,850 miles of medium and low voltage and 3,500 miles of high voltage; 127 descending substations, adding 2,800 MVA to its distribution network.
Purchase of Electric Power
During the year ended December 31, 2022, the company purchased 5,596 GWh of energy from Itaipu, which represented 11% of the energy it sold to final users, and 578 GWh (1.2%) of energy from PROINFA. The company also purchased 1,045 GWh under Nuclear Energy Quota Contracts - Contratos de Cotas de Energia Nuclear, or ‘CCENs’. (2.1%) and 7,606 GWh of energy under Assured Energy Quota Contracts - Contratos de Cota de Garantia Física, or ‘CCGFs’ (15%). In addition to this compulsory purchase, the company has two other types of supply arrangements: purchases through public auctions, which accounted for 19% of the energy purchased for resale during the year ended December 31, 2022; and long-term agreements existing prior to the New Industry Model Law, which represented 1% of the energy purchased in 2022.
Itaipu — Itaipu is one of the largest operational hydroelectric plants in the world, with an installed capacity of 14,000 MW. Centrais Eletricas 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%.
The company is 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.
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: The company has 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.
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. The company holds 99.57% of the shares of Gasmig and the Municipality of Belo Horizonte owns the remaining shares.
From January to December 2022, Gasmig supplied 1,105 million cubic meters of natural gas per day to 82,582 customers in forty cities, such as 102 large and medium-sized industrial plants; 1,201 small industrial plants and commercial customers; 62 retail distribution stations that supply natural gas to vehicles; 2 retail distribution stations supplying compressed natural gas (‘CNG’) to vehicles; 7 co-generation projects; 5 distributors of CNG to industrial customers; 81,201 homes; and 2 thermoelectric plants.
Consulting and Other Services
CEMIG SIM was created 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 2022, CEMIG SIM sold the total of 8.199 megawatt-hours (MWh)/month in supply, generated by eleven 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 clients.
In energy solutions, in 2023, CEMIG SIM will work on the implementation of photovoltaic plants.
Sale and Trading of Energy
The company provides 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 its wholly-owned subsidiary companies CEMIG Trading S.A. and Empresa de Serviços de Comercialização de Energia Eletrica S.A. (‘ESCEE’).
Customers and Billing
Customer Base: The company sells energy through the companies CEMIG D, CEMIG GT, CEMIG 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. In 2022, the company sold a total of 59,542 GWh, while the total of power it transported for free customers was 2.8% higher, at 22,796 GWh. Sales of energy to final customers plus the company’s own consumption in 2022 totaled 44,895 GWh. Sales to distributors, traders, other generating companies, and independent power producers in 2022 totaled 14,647 GWh.
As of December 31, 2022, the company invoiced 9,036,990 customers. Of these, 9,036,435 are final customers, including its own consumption; and 555 are other agents in the Brazilian energy sector.
Sales to Final Customers
Residential
The residential customer category accounted for 18.8 % of CEMIG’s energy sales in 2022, totaling 11,217 GWh.
Industrial
Energy billed to regulated and free industrial customers in the State of Minas Gerais and other states was 30.6% of the total volume of energy traded by the company in 2022, at 18,204 GWh.
Commercial and Services
Energy sold to regulated and free customers in this category in Minas Gerais and other states was 10.5 % of the total volume of energy traded by the company in 2022, at 8,957 GWh.
Rural Customers
Energy consumed by the rural customer category in 2022, at 3,093 GWh.
Other Customer Categories
Supply to other categories – government, public lighting, public services, and the company’s own consumption – totaled 3,425 GWh in 2022.
Sales in the Free Market, and ‘Bilateral Contracts’
In 2022, total sales of energy were 12,561 GWh.
Sales in the Regulated Market
Sales in the Regulated Market in 2022 totaled 2,086 GWh.
The ten largest industrial customers served by the company, located in Minas Gerais and other states of Brazil, in terms of revenue, are MOSAIC FERTILIZANTES; WHITE MARTINS; USIMINAS; SYLVAMO DO BRASIL; HOLCIM; COMPANHIA BRASILEIRA DE METALURGIA E MINERACAO; SAMARCO; NOVELIS; CARBETO DE SILICIO SIKA BRASIL; and APERAM SOUTH AMERICA.
Strategy
The strategy adopted by the company in the Free Market is to negotiate and enter into long-term contracts, thus establishing and maintaining a long-term relationship with customers. 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 the company’s results.
Seasonality
The company’s sales of energy are affected by seasonality. Historically, consumption by industrial and commercial customers increases in the fourth quarter (year ended December 31, 2022) 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.
Research and Development
For the year ended December 31, 2022, the company’s research and development expenses were R$24 million.
Maintenance and Repair Systems
The 11,616 miles of high voltage distribution lines in CEMIG D’s network, operating at from 34.5 kV to 230 kV, are supported by 55,276 structures, mainly made of metal.
The network of CEMIG GT has 3,117 miles of high voltage transmission lines, operating at from 230 kV to 500 kV, supported by 11,528 structures.
The majority of the service interruptions to the company’s distribution and transmission lines are the result of lightning, farm surface fires, vandalism, wind, and corrosion.
History
Companhia Energetica de Minas Gerais - CEMIG was founded in 1952. The company, a state-controlled mixed capital company, was incorporated in 1952.
