Companhia Energetica de Minas Gerais SA Sponsored ADR Pfd Stock

Good morning, everyone. I'm Carolina Senna, Cemig's Investor Relations Superintendent. Welcome to Cemig's Second Quarter 2026 Earnings Video Conference Call. Please note that this video conference is being recorded, and it will be available on the company's IR website at ri.cemig.com.br, where you will also find the company's presentation. [Operator Instructions].

We now start Cemig's video conference with Alexandre Ramos Peixoto, CEO; Leonardo George de Magalhães, CFO and IR Officer; Luis Claudio Correa Villani, Chief Information Technology Officer; Demétrio Alexandre Ferreira, Chief Generation and Transmission Officer; Ernando Antunes Braga, Chief Distribution Officer; Sergio Lopes Cabral, Chief Trading Officer; Sérgio Pessoa de Paula Castro, Chief Legal Officer; Iuri Araújo de Mendonça, Cemig SIM CEO; and Ronalde Xavier Moreira Júnior, Gasmig, CFO and IR Officer.

For the initial remarks, I now turn the floor to Alexandre Ramos Peixoto, our CEO, who will start the presentation. Please, Alexandre, the floor is yours.

Thank you, Carolina. Good morning, everyone. It is a real pleasure to be here with you on my first earnings call as a CEO, ahead of our dear Cemig group. I take on this role with great confidence, confidence in the company we've built, also confidence in the quality of our people, the excellence of our professionals and above all and the great potential that lies ahead.

I would like to start with a very clear message. We have a sound company. We delivered consistent results, and we know how to execute and that consistency comes from a well-defined strategy, disciplined management and a real ability to turn plans into tangible outcomes.

And it's important to make it very clear right now, the quality of the service provided to our clients that will always be at the core of our priorities. We want to be recognized not only by our financial results, but also by the excellence of our operation and the quality of the experience we deliver to the millions of clients we serve, over 9.5 million consuming units. And that's why we will continue executing a relevant cycle of investments, especially in distribution.

We have over BRL 22 billion in our tariff review cycle, for May of 2028. And we are investing to turn the networks more robust to modern, resilient and prepared for the new demands of our clients and also for the transformations in the electric sector, highlighting the full opening of the electric power market in Brazil, which should happen in November 25, 2028.

As all of you know, the electric sector is undergoing a deep transformation. And I can tell you that we are very well positioned to be part of this future, we have quality assets, knowledge investment capacity and experienced team and very well prepared one to execute our strategy.

We have an important advantage. We are an integrated company. The combination of our businesses gives us scale, complementarity and also a privileged view of the sector's changes. That integration strengthens our ability to navigate different cycles, seize opportunities and create value in a sustainable fashion.

So the message I would like to convey to all of you in his first earnings call is of confidence and continuity of the implementation and the success strategy and a long-term view, a management with financial discipline, consistent results and responsibility in our business is, therefore, meeting our commitments and generating value to our shareholders.

Today, we have a strong company, and we are working and we'll keep on working hard so that it can be even stronger. And with that long-term vision, customer focus and discipline in execution and commitment with results that I start this new cycle. I will continue working on this new cycle of this management ahead of this company.

Having said that, I thank you very much with the opportunity to be addressing it. And I turn the floor to our dear CFO, Leonardo George de Magalhães to start the presentation of the results of the second quarter. Thank you very much.

Thank you very much Alexandre, for your message. Good morning, everyone. Thank you for being here with us in this video conference call for the second quarter's results. We will start with the highlights of this 2Q.

We have had very consistent sound results and with the operating performance of BRL 2.5 billion in the quarter, a recurring EBITDA that reflects our soundness in terms of results for the company. The company, as Alexandre has mentioned, is integrated to a number of businesses that support our cash generation and as well as our results at every quarter, bringing you consistent results.

Also, we have funding of BRL 4.6 billion also in this quarter. This was very relevant, and this was to support our investment program. In the next slide, we'll talk more about that. This is an investment program that is very relevant, especially you're distributing company that will be generating value for the next years.

For shareholder remuneration, historically, this is a company that has a good remuneration to its shareholders. And we had interest on capital of BRL 631 million. That represents BRL 0.22 per share. Growth strategy. Our CapEx is of BRL 1.8 billion. We are going to go over that figure. And also we had a tariff adjustment for Cemig distribution with 6.5% of average tariff impact to Cemig's consumers.

On this slide, we have the planned investment for the year, which is BRL 6.7 billion. And up to the first 6 months, we were able to invest BRL 3.3 billion, 49% of the total amount. And the message is that we are in line with the investments forecasted for the year.

As also, we had estimated and we are communicating to the market. We have a large investment in our distribution brand, BRL 2.6 billion in these first 6 months. an investment in generation of BRL 275 million and Cemig SIM also a significant highlight of BRL 227 million, Gerais BRL 92 million in investments, especially here in the Midwest project. And with 33.5 kilometers of network built in the quarter.

Now going over the investments of our distribution branch here the company. We see that with these investments, the company is adding a lot of value, not only thinking about the remuneration base that we expected to be included in the next tariff review in 2028, but also in the quality of service that we provide our clients, which surely has -- will be positively affected by all of these investments.

In transmission, also we have relevant investments and these are investments that are bringing in additional revenue just for additional RAP in this quarter, we have BRL 36 million thanks to investments that have been concluded and they are already bringing revenue to the company.

So in summary, the company is frequently being transparent, bringing to the market its investment program, and we are in line with investments that we have forecasted for next years. And in this quarter, it has been no different.

Now we have the consolidated results for the company. These are good results, 9.3% here recurring result for EBITDA compared to the prior year. Net income, 15.6%. Here, it was impacted by financial expenses because of the fundings that the company had to be able to provide support to its investment programs, and this was already in our strategic plan.

And here, we highlight nonrecurring effects here, the voluntary dismissal program has an impact in the beginning. But in the long term, it will bring benefits to the company because it is a process where naturally replacing our employees and employees that are with us for a longer period of time, they get incentives to leave the company a new employees come in to help in our culture and our performance.

Also, we have a free market customer arbitration. There were some questions about some contract clauses and this is being concluded now. And because of the maturity and the current stage of this process, the company considered to be necessary to have a provision of BRL 191 million or the outcome regarding this topic. This is not -- this does not have a cash effect as of now. But right now, we had to have provisions for that.

And in the prior year, we had a few adjustments, nonrecurring as well because of RBSE remeasurement and also the remeasurement of post-employment liabilities. We should highlight as well that the provision for losses for the company because of delinquency and the company adjusted its criteria. According to ANEEL and the marketing the market benchmark. And so that generated expected losses reversal of BRL 232 million with a positive effect in this quarter.

Moving on, we have here consolidated costs and expenses, which had an increase of 15.5% this quarter. This was very relevant, but it's important to highlight that we have seasonal effects. This is because of the investments that we had in this period in improving the quality of the network. And all of this is very important so that we can improve our service to clients and also to tackle possible contingencies. And now we are talking about El Niño that will be seen in the second half of 2026.

In any case, we believe that we did have seasonal effects, and we do not to have a variation or see a reduction in this variation when we complete 12 months, and we compare 2026 to 2025. But in this quarter, we did have a specific impact, that was a onetime off impact and therefore, this variation was 15.5%, but the company's costs are being controlled because we have financial discipline, and we are balancing out the improvement of the network, the investment in the processes that might help the company to serve the clients better and we are keeping costs at a very disciplined level.

Moving on, we have the debt profile. The company still has a high quality of credit. We are AAA in two rating agencies and AA+ at S&P Global. And here, we have our maturity schedule that has a very adequate profile for the upcoming years and leverage reached 2.58x in the second quarter of 2026, and we understand that considering our current investment plan, this leverage is right, and that corresponds to our expectation when we think that we have a tariff review in 2028. Therefore, our leverage has a growth up to 2027, but in 2028, it will come down because of the tariff review in our distribution company, but the company is still accessing the capital market in the frequent fashion, and it has great access to the market and also very competitive costs.

On the next slide, we have our cash generation. We generate -- we have a strong cash generation even with the adjusted EBITDA, you see that the EBITDA is reflected in the cash and the operating cash here in this half of the year, close to BRL 4 billion. So if you double it, we are generating operating cash of almost BRL 8 billion in the year, and that's very strong to provide support to this investment program. And here, we also have the third-party capital that helps the company in the distribution segment. And here, we have this 5-year cycle from 2023 to 2028.

Now we're turning to Cemig D and Cemig GT results. Cemig D has positive results, 21% up in EBITDA when compared to 2Q '25 recurring net income is in line with 8.9% down. But as we mentioned, also there was an impact of issues involving higher financial expenses because of the interest rates, which are high and also the natural debt to provide for our investment programs.

I also talked about the tariff adjustments. We had an average impact of 6.5%. And the 4.9% correction in Portion B in here, there is an increase of 2.7% in residential market. We also talked about the ECL reversal estimated last year. It has to do with current delinquency of our consumers. This is very much controlled by Cemig D.

And here, we have the energy market is down 1.6% when compared to the second quarter of 2026 to 2025, you see that the total power carried has increased a little bit, and we have 3.8% of drop in the captive market because we had large clients living Cemig network -- distribution network this year, and that did have an impact when you compare that to 2Q '25.

And when we compare the different consumption customers, consumers classes, we have residential growing 2.7%. And we also can highlight the rural class with a reduction of 11% because of the rainy season which was greater in the second half of the year. Therefore, there is lower consumption by the rural segment. And Cemig DG has a relevant impact. It now represents 25.8% of captive market of Cemig distribution.

Moving on, the company is very much disciplined in its cost. As I mentioned, our OpEx today is BRL 416 million lower than the regulatory limit in this first quarter of 2026. Operating efficiency. Also, this is very important. And we see great financial results, consistent results for Cemig D. And also, they are in line with operating efficiency, all the investments that the company is making, they have provided improvements in our quality indicators. Our DEC is 8.43 lower than the regulatory limit. So in the downward trend, FEC also 4.86 compared to 5.37 which is the regulatory indicator. That's the limit established by ANEEL. So we have good room here. And that is thanks to the investments that the company has been making in the past few years, which are bringing results in these indicators that prove that we have a good quality of service to our clients.

Regulatory losses are still low and lower than the real losses. And we have already talked about the reversals for expected credit losses in this half of year. So the quality indicators for the company are in an upward trend, a positive trend.

Now talking about Cemig GT. Also, we have great results, 10.6% vis-a-vis the prior year in EBITDA and recurring net income with a reduction of 11.4% because of the increase of financial expenses as highlights, we have increased revenue from sales to end customers, 124 megawatts average and also inflation adjustment on [ RBL ] revenue or plants that received by quota, there was a an adjustment of BRL 29 million because we have the cumulative IPCA inflation here. And all of them are related to these plants.

Now we have a breakdown for Cemig generation and transmission in terms of the business for generation. Here, we have a positive result, both in EBITDA as well as in recurring net income, EBITDA up 13.3% and recurring net income also up but here, 3 to 6%. And average GSF here was better than what we had in 2025 and that has reflected in higher revenue that we have seen in '26 compared to the prior year.

And for transmission, very positive results with added RAP and also the regulatory assets of transmission that allowed that our transmission results were 50% higher when measured by EBITDA compared to 2025 and recurring net income to 50% and BRL 190 million compared to BRL 120 million in the prior year.

Moving on, Cemig trading results or BRL 180 million negative recurring EBITDA compared to the prior year. We talked about this provision of BRL 191 million. This is a onetime off result of this stems from a specific action related to a major industrial client, which has generated an effect of provision in the second quarter. This is not a cash effect right now. Right now, it's only a provision. So this is still being discussed. And this negative effect in this first -- in the second quarter stems from positions that have been settled and higher prices of energy purchased. This was already expected by the company and also the effects that have been related to submarkets, especially regarding the South. We understand that the trading company effects that generated this impact of minus BRL 180 million have been very much concentrated in the first half of the year, and we understand that the trading company results in the second half of the year, we'll have positive results compared to the first half of the year, which we already knew. This was already planned.

We know it would have that type of effect, especially because of the company's position. But for the second half of the year, we understand that we are going to have a more favorable environment, both in hydrology and also because we have already settled positions that were needed for the year of 2026.

On the next slide, we have Gasmig results still sound results. This reduction that we see both in EBITDA as well as in recurring net income for Gasmig, it was already expected because we had migration of clients to the free market. Therefore, we have a lower margin affecting the EBITDA and net income of the company.

Also that had an impact of the reduction of the volume distributed of 17%. All of these factors combined brought this reduction in the results. Gasmig has a tariff review that should happen by the end of the year. We are very optimistic about the project and Gasmig should be bringing sound and consistent results to the group in the next quarters.

Basically, these were the main highlights of our presentation. We understand that these were consistent and sound results and the different Cemig businesses. We understand that especially in the trading company, it was a more difficult half of the year, but we have a positive outlook for the next 6 months. And we will continue executing our investment program that will generate a lot of value to Cemig in the next few years, considering the tariff review that we have ahead. I turn the floor now to Carolina so that we can start our Q&A session.

Thank you very much, Leonardo. So right now, we will start our Q&A session. [Operator Instructions] our first question is from [ Marco Aurelio ] and the question is, "considering that there was an increase in tariffs only in 2028. And with the increase of the indebtedness and the debt cost, what will be the direct impact on the profit or the net income reduction for 2027? And what will be the impact in the shareholders' remuneration?"

It's important to mention that Cemig has always been a great dividend payer in the electric sector. This is company that we can say that it has been one of the best in paying dividends in our bylaws, by our bylaws, we have a minimum mandatory dividends at 50% of net income. So this is a relevant payout.

We understand that right now, in 2026, this is the year where the company's results because of higher financial expenses will be relevant results, very positive ones, both for EBITDA as well as net income. And we believe that we will keep on bringing positive dividend yields, whether now we're in the next few years, we are going to have a tariff review in 2028, we will have a positive impact on results.

But even in the next years, '26 and '27, considering the current payout of the company established by the bylaws of 50% of net income, that is a very attractive remuneration to our shareholders even considering an adverse scenario to all the markets. And we understand that this dividend yield will continue being relevant and positive for our shareholders this year and also in 2027.

Next question is from [ Ricardo Balsara ]. "how is your perspective for El Niño effects in the different areas of businesses? Are you going to have CapEx prepayment in the distribution and transmission companies to avoid possible incidents?"

For this question, we will have our Chief Distribution Officer to answer Ernando.

El Niño, requires a robust planning, which we have for a maintenance plan. We have a contingency plan considering that we have the largest investment plan in history, we are executing our maintenance plan also the largest one in history, our OpEx. We have AMI meters, automation in electric systems. So for the second half of 2026, we are fully prepared for El Niño impacts.

In addition to these investments, we have the penetration of our structure in the state as a whole to face this diversity. So in summary, we will have no impact in our budget because of El Niño.

Thank you, Ernando. Now to talk about generation and transmission. I would like to ask our Chief Generation and Transmission Officer, Demétrio to take that question.

For generation and transmission, starting by generation, we have a permanent routine to manage these assets that is based in risks we need to guarantee the availability of different pieces of equipment during harder demand. So we run periodic tests for all the plants to make sure that when they are demanded, they will be working.

We do not have above the average rainfall with El Niño. So we should have more rainfall for the South, not for the Southeast region. So in our point of view, we do not need contingency plans that are just more elaborated than the ones that we already have to our large plants and reservoirs.

For storms, for the small plants that have smaller reservoirs, we are reviewing our contingency plans to guarantee access to them and also to control flooding. That's what we have for generation. We are fine about it. For transmission, we do have assets of high resilience. This is thanks to the work that we have been developing for preventive maintenance, modernization, management based on risks, this contingency plan that we have transmission is very robust. We maintain vegetation at low levels in the right of ways. We also have weather forecast that will issue alerts in case that is needed so that we can tackle all the contingencies, if needed.

We have devices all over the state. These are previously placed in the state of Minas Gerais in case of contingencies, we can return the lines at a lower period of time. So prevention is the key word here, and we are prepared for any problems that might happen in terms of contingencies, both for generation transition.

We have another question. Now regarding auctions. I will ask our CFO and IR Officer, to answer. And the question is "if we are interested in taking part in transmission auctions and then Sergio Lopes is going to talk about the auctions for batteries." Please Leonardo.

Regarding auctions, yes, the company is considering transmission auctions and the last ones that happened in the country we were following. And it's important to highlight the company's discipline in allocating capital we studied. We considered all these auctions. If we understand that the return is interesting, we take part of them. But if the return is not attractive, the company rather allocates its capital in assets where we understand that we will have more value for shareholders.

So the answer is yes. We are still keeping an eye on them. But we have discipline in capital allocation, and we will just be winners and in the areas where we are sure that we will be generating value to the company, considering that we have several businesses, and this is one of the key areas of the company.

And we can diversify our capital allocation, and right now, as I have already mentioned, we understand that the regulated businesses and investing in reinforcements, even in transmission, they have been bringing more value, and they are very important in the value generation to our shareholders.

About data centers, I will turn the floor to Sergio. He can talk more about it. But we will also be analyzing the battery auctions always taken into consideration the return to our shareholders in value generation. And this is something that is key to us.

I will talk about data centers. And of course, we are talking to some market players to understand the segment and to see how we can turn the profitable the sale of energy or the participation of Cemig in this process. We understand that there is an opportunity in the market, but it has to be analyzed cautiously, and we want to extract the best and the greatest value of this opportunity, understanding the assets and what are the benefits that they bring to the company.

So data centers are assets that we are considering but cautiously and how we can bring profit to Cemig and shareholders in this investment.

Thank you, Sergio. The next question is about the maturity of the concessions, he's asking how the process is going because the next maturity of Sá Carvalho. I'll turn the floor to Leonardo.

So the market knows that we have three concessions that will have the maturity close in 2026. Sá Carvalho and two others in 2027. And so we may say that the process is moving forward. We have already a favorable note from ANEEL. So now this is being discussed in the Ministry of Mines and Energy. And what we can tell you that we are very optimistic about the process. Of course, we have to wait for the granting power approval, but we believe that's going to have a positive result for the company in this concession renewal process.

Our next question is about the trading area, and I'll turn the floor to Sergio Lopes, it's about "the losses that we had that negative impact in the trading company's results. And how is the company prepared to overcome this loss? And what is its future outlook?"

I think we can go back to last year and this year and then talk about the future. The trading company is undergoing moment when it has to positions, there was a change. There was a moment when we had price model change and scenario changes, and we have been working in a very cautious way. Last year, we did have net income maybe in the market, we were the one of the few companies that were able to have this result. And this year, we expected a possible negative EBITDA.

And also, we had situations where we had a detachment of the south submarket. This was an unprecedented case. I think this was the first time that this is happening. We were able to purchase energy, although it is expensive, and we are selling positions, we did that anyhow. So we exchanged positions with generation. And therefore, this remained in the group itself, although we posted negative results in the trading company, it became positive in the generation company. So the positive -- and the final impact was 0. So we were able to end this year. And for 2027, 2028, we have brought down our position.

Of course, we have to have a patience and we have to be cautious to be able to settle these positions in the best time possible. We have been able to do that. And for 2028, we already expect significant results for the trading companies. So we have results of around BRL 1 billion, BRL 1.8 billion. That's what we expect to reach.

We understand that we are prepared to undergo this moment. Right now, we are applying the best practices and the best strategies to serve the market, but the whole market is having a hard time because of a structural issue. And we are having better results than our competitors, thanks to our strategy. So for the future, we believe we will have good results. This is a difficult moment now. Again, this was expected, and we are looking at the best time to close to settle positions, reduce losses and also to have gains as we had last year.

Thank you, Sergio. And for the final remarks, I turn the floor to Leonardo.

Once again, I would like to thank you all very much for being here in this call for the second quarter of 2026, I came back to the company in June. But when I was in the company from 2020 to 2024, we have always been very transparent in our strategies, which is to divest in complex and noncore assets and prioritize investments in the regulated sectors, especially our distributing company always investing in operating efficiency and this strategy is already bringing results to the company, this is a winning strategy. This is delivering value to shareholders, also to our clients, and we have the best quality indicators.

We thank our investors for their trust, and we are very optimistic about the strategy for the continuity of implementation of the strategy and the company, greater operating efficiency and discipline in capital allocation. Thank you very much.

So thank you very much for your participation in this video conference call. And the Investor Relations superintendent is available to take any further questions that you might have. Therefore, we conclude Cemig's Second Quarter 2026 Earnings Conference Call. Have a nice day. Thank you.

Good afternoon, everyone. I am Carolina Senna, Cemig's Investor Relations Superintendent. Welcome to Cemig's First Quarter 2026 Earnings Video Conference Call. Please note that this video conference is being recorded, and it will be available on the company's IR website at ri.cemig.com.br, where you will also find the company's presentation. [Operator Instructions]

Before turning to the results presentation, we would like to inform you that the appointment of Alexandre Ramos Peixoto as the new CEO of Cemig has been approved as of yesterday. Alexandre Ramos Peixoto replaces Reynaldo Passanezi, to whom the company recognizes and expresses its gratitude for the work carried out. Under his management, Cemig conducted a consistent financial recovery process, resumed investment levels and developed a strategic plan worth approximately BRL 70 billion through 2030.

During this period, the company has strengthened its infrastructure, expanded the number of substations, modernized the grid and eliminated historical bottlenecks. [indiscernible] resumed sustainable growth and achieved the highest market value in its history, increasing it from BRL 8 billion to BRL 45 billion. His departure stems from the term limit restriction provided for the state-owned enterprises law on #13,303/2016.

It is precisely to give continuity to this trajectory that Alexandre Ramos Peixoto comes in, a career employee of the company with solid experience in the Brazilian electric sector. He's an engineer by training. He holds a degree in quality engineering and management from PUC University and a degree in management and strategic planning from the University of Minas Gerais in addition to specializations of -- an MBA in related areas related to generation and planning in the sector. Throughout his career, he has worked at ANEEL, MME and EPE, and at Cemig itself, served as Regulatory and Institutional Relations Officer. Since May 2023, he has chaired the Board of Directors of CEE (sic) [ CCEE ].

So now we will start the conference. And with us, we will have: Andrea Marques de Almeida, CFO and IR Officer; Luis Claudio Correa Villani, Chief Information Technology Officer; Marco da Camino Ancona Lopez Soligo, Chief Generation and Transmission Officer; Marney Tadeu Antunes, Chief Distribution Officer; Iuri Araujo de Mendonca, Cemig SIM CEO; and Marcus Vinicius de Castro Lobato, Trading, Planning Superintendent.

For the initial remarks, we would like to bring to the floor, Andrea Marques de Almeida. She is going to be making the presentation.

Good morning, and good afternoon to all of you. It's a pleasure to be here again to bring you the results for Cemig, and we are very proud of that. We always start talking about the quarterly highlights. Cemig has the benefit of being a diversified company which is maintaining its results consistently.

These are the operating results. And this quarter, it is just like the others. Of course, we reached the results of BRL 1.79 billion in EBITDA and BRL 979 million in profit. And I usually say that we have to balance out all the plates here, and we have worked on our investment plan here of BRL 1.48 billion. We also have shareholders' remuneration, another important topic of our strategy, BRL 658 million.

And we had small acquisitions, SPH (sic) [ PCH ] Pipoca and Timoteo and Mesquita that we acquired in the quarter. And also, we talked about this at the end of the year about the post-employment agreement and all the impacts that we reported at the time. But this is an agreement that in fact is going to allow us to have effects over time. And we can already see a reduction in our expenses in the amount of BRL 80 million, and that's an important highlight as well.

Now we have a snapshot of the quarter. The total of BRL 1.48 billion is in the main areas here. And distribution is always carrying the highest representativeness of our investments with BRL 1.28 billion. For distribution, we have more energy, [ Minas 3 ] phase. We are delivering 6 new substations and 1 substation that was modernized in the [ more energy ] program. And also, 765 (sic) [ 765,000 kilometers ] of low and average voltage networks.

In transmission, we usually grow in reinforcements and improvements, and it was just like that. We have investments in the quarter, BRL 103 million, which added in terms of RAP, the annual permitted revenue, and that was [indiscernible] for our cash generation portfolio.

For generation, I think we have a lower amount. Gasmig is still moving on with its project, and the Midwest as the most relevant one, and Cemig SIM. Here, we start seeing that in our chart as a relevant investment with 7 new solar photovoltaic plants and added 19 megawatts capacity to our portfolio.

The quarter results are in line with the results of last year, considering that the highlights of the distributing company, the positive highlight here is that we effectively we had in May, the rebuilding of Parcel B, which was 7.78%. So comparing quarter to quarter, this is the main impact in the distributing company, and we also had an increase in residential consumption, which is positive.

And in terms of challenges also known already by the market, we had effect of price that starting 2025, energy prices are more volatile. And as you know, we have positions that need to be closed over time. And with the higher prices, the positions closing ended up causing negative results in the trading company and the generating company. Also, the main effect was GSF. And if we compare year against year, we had 0.92 in the first quarter of 2026. And the purchase of energy to tackle the hydrological risk allowed us to have impact in the EBITDA of BRL 49 million.

Now we go into the details of what I just mentioned. We have the level of prices. And clearly, we can see the change in the price volatility that started in the beginning of 2025. We started from January to March of '25, the prices were around BRL 59 per megawatt, and then they went up. Last year, we also had a GSF close to 1, which is no longer the reality in 2026, when we have a lower GSF and the price is much higher. So we reached levels of BRL 382 per megawatt, impacting the management of the hydrological risk. That's an impact of BRL 49 million.

Now turning into a zoom to our cost and expenses. The main item has been -- and in the other quarters also, it was the same, so it is a recurrence, it is third-party services. This quarter, maybe we had higher expenses and preventive maintenance as well as corrective maintenance. And obviously, we have the right of way clearing. And all of these services are in order to deliver a better quality of services to our clients.

So they come with all the investments that we are making on the investment branch -- sorry, distribution branches. So this is to provide better services to our clients, and we'll go over that when we discuss our DEC and other expenses. Also with this large investment program, we have decommissionings. And we had a disposal of asset which has been part of our management. We are disposing of assets that in the past had some use for Cemig, but no longer have.

Now talking about the impact already, the post-employment restructuring that we had up to December of last year. We see that if we compare that growth, including the post-employment effect, the growth has been 2.5% quarter-on-quarter. We will also be discussing how this increase can be seen in regards to the network kilometers, substations, which is also important for the distributing company.

Now we talk about our debt profile and all the work that we have been doing to match the profile of the debt with the profile of our investments. We know that we have 5 years of investments in the distributing company up to the tariff review that's going to happen in 2028. That's why we are increasing to extend our debt. And so we reached 6.6 years of average maturity. And also important is that 76%, that is, the bulk of our debt is due after the tariff review rebuilding in 2028. So that profile has been extended so that also, it matches with the recovery time of the tariffs that we'll have in the future.

The last funding that we had in the quarter was a debenture combined with a loan of [ 4,131 ]. And the last issuances, they have been made lower than the sovereign risk, and we were able to include BRL 2.6 billion to the distributing company in this quarter. We reached the leverage of 2.45x net debt over recurring EBITDA, very healthy. And this is the leverage debt, also includes the financing of the investment program, but this leverage is always going to be at very healthy levels for the whole program that, of course, will peak in 2028 when we are going to have that tariff review. And that cost also is very reasonable. It's 89% of the CDI. Of course, interest rates are high for everyone, but this is a cost that's very positive for the company.

Now going over operating cash generation and how it has been used over the quarter. We start on the EBITDA of BRL 1.79 billion, and we discount the noncash effect, we reach the EBITDA of BRL 1.6 billion. We have the effect of the CVA Portion A variation account, which has had a relevant impact because of the higher price. The distributing company has a cash impact that is going to be recovered next year, dividends received, the working capital with a positive effect.

And then you reach the operating cash flow of BRL 1.5 billion and how we have used it over the quarter. Income tax, social contribution, interest, leases and our investments, which is the most representative share here of [ 1.6 ]. So the cash delta was negative, and we showed that and the cash availability that we have from 1 quarter to another.

Now going into the details of these companies. As we said, Cemig D had a representative performance in EBITDA, an increase of 26.6%, reaching BRL 1.010 billion of EBITDA in the quarter, especially because of the effect I already mentioned of that adjustment of 7.78%. And also, we had an increase in the residential market. This is nice. It is representative, significant for us. As we know, residential tariffs are higher, so that has a good impact in our revenue.

Now here, we have our energy market. So we have been saying that in the past quarters, that there is a migration in the case of the transported energy from 2 clients to the basic network. We will no longer see this drop effect. After the second or third quarter, we will no longer be seeing this effect because it will be then have been integrated in the quarter, but we do see that reduction.

And we also talked about the positive effect that we had in the residential area. But we did have a period with a lot of rainfall and milder temperatures, and we see rural with a significant drop especially because of the rainfall period. And we still see the effect of GD (sic) [ DG ], distributed generation impacting [ Minas Gerais ]. And a piece of information is that DG represents 26%, and the captive market is very representative in our region.

Regarding operating efficiency for Cemig D, we have already mentioned, I believe that the main effects have already been offset. We are working on an efficient management, and we have been working on the management of right of way cleaning and everything that we need to do to provide a better service to clients, and we are under the regulatory limits, as we should.

Now for operating efficiency, our indicators for Cemig D are within the regulatory indicators for losses. Here, you have the losses indicator. For our spot price, we did have a change in criteria in 2025. We went from 24 to 35 months, and that's why we had a positive effect. And over the period, it balances out. So this was just because of a changing criteria, but we see that our delinquency is very low. We have positive indicators. And here, we are very proud to bring these results. Our DEC of 8.75, the best one in our history. And also FEC, that has a positive performance, bringing better services and better conditions to our clients.

For Cemig GT, as I mentioned, and it's important to stress, Cemig GT today, obviously, it has generation transmission. And it also has a share of the contracts coming from the trading company.

So the main facts, and we already mentioned, and I'll talk more about them. But the main one is here is the management of hydrological risk [ at G ]. But when we break it down for business for generation, in fact, here, we had that hydrological risk and energy purchase at a much higher price. And in transmission, we had a lower IPCA. And we know that our contract asset is remunerated by IPCA or inflation, and that's the impact in the transmission company.

Now turning to the trading area. Here, we see the main challenge in the quarter. And the main impact has been the closing of positions. And that was because we did not fulfill contracts that were not delivering P90 and some contracts that we are able to recover part of this amount at the end of the year because some of the positions have been sold and also because of some credit events, and I believe the whole market is seeing that. But the main effect here, yes, is really price.

Cemig SIM is adding capacity to its portfolio, and it did have a significant increase in recurring EBITDA of around 100%. That's very nice to see Cemig SIM's growth and the addition of new operations that will be bringing more energy to our portfolio.

And Gasmig this quarter also posted this effect. As clients migrate to the free market, this margin is reduced, and that is the main effect that we see in Gasmig. We will be seeing that happening over time because there is a migration of clients to the free market.

And now we end the presentation, very proudly honoring our electricians. They are the heart of Cemig. We do exist because of them. They represent us, and they were the winners of the Rodeo champion team in Costa Rica. We went there for the competition. We did compete, we were the winners and we did not have any safety failure.

And this is the main message. We want to be efficient, we want to provide the best services to our clients, but we also want to deliver service in a safe way. So a special congratulations to our champions because they move Cemig's energy.

So thank you all very much. And now we will open the floor for the Q&A session.

[Operator Instructions] Our first question is from Andre Sampaio, sell-side from Santander Bank.

I'm going to read his question. Andre's question is, I would like to understand how the discussion on the plant's renewal is going? I will turn that question to Marco da Camino Lopez.

Hello, Andre. Thank you very much for your question. And this discussion about the concessions renewal, Sa Carvalho, Emborcacao and Nova Ponte is going well. We have great contact and interaction with the Ministry of Energy and ANEEL, and we expect to renew these constructions in the next few months before they are due.

Okay. Still a question to Marco Soligo. So the question is for Marco and Marcus Vinicius. How can we reduce hydrological risk with alternative energy so that we can address these efficiencies?

Good afternoon. Thank you very much for your question. Well, to reduce hydrological risks, if we diversify our portfolio, we are able to avoid the dependency of a single generation. So our portfolio is already designed like that. We have our hydrological plants. But also, we have other wind and solar components. So we do have the GSF impact. But we believe that this is at a lower proportion rather than if we have everything concentrated on HPPs.

The other way of managing that is really to hire ahead of time, and we are paying attention to that. There was a reduction of GSF in the beginning of the year. But the second half of the year that would concern us and GSF could be at a lower level, but we already have an adequate reserve for that to avoid significant impacts over the year.

Thank you very much, Marcus Vinicius. I have two questions to our CFO and IR Officer, Andrea Almeida. The first question is, what can we expect from the next tariff review in 2028? And the second question is related to the increase of the debt vis-a-vis the investments, considering that we have 2 digit interest rates?

Well, talking about the tariff review, obviously, we are making the most affecting investments according to our plans in the distributing company. And we are sure that these investments will be well acknowledged in our tariff review. And of course, and we will know that in the future, but we take into consideration the increase of the asset base discount, the depreciation, and we will see the impact of the rebuilding of the EBITDA based on what we will see in the 5 years. Maybe we will have BRL 22 billion.

So considering these investments, we will have a rebuilding of the base. We reduce depreciation, and then we will get to a variation that's going to vary the level of the EBITDA in 2028. We are very optimistic about the recognition of this investment because we are very cautious in our investments.

Now -- and thank you for your questions. I forgot to thank you. Now moving to the other question on the leverage. Cemig finds itself at a very healthy leverage stage. And we do believe that over the investment program, leverage tends to grow so that we can carry out the investment program of BRL 44 billion in the next 5 years. Leverage tends to increase, to grow up to 2028 when it's going to come down, and of course, with the tariff review of the distributing company.

So always considering very healthy levels. And so much so that we got another AAA. So now we have 2 AAA ratings by Fitch and Moody's, proving that Cemig's credit quality is very positive.

So yes, we have high interest rates right now in the country, but we do have a return on our investments that are higher than -- and that's why we are focusing investments, especially in the regulated sectors of distribution and transmission. And yes, we do believe that these investments generate value for shareholders, and this leverage is at a level that is very comfortable for the company.

Thank you, Andrea. Our next questions are for Marcus Vinicius. First, from Ricardo Bello from Safra. He would like to understand which are the possible impacts with the change of the risk parameters of [ CFR ] in the price curve. Is that already impacting you at the trading level?

Thank you for your question. We are following up this discussion. We did have a public hearing, and the SMA is going to discuss the change of these parameters for next year. There is an initial assessment of maintaining them. But we have seen that in the public hearing, a lot of contributions arose considering a possibility to reduce the levels of [ CFR ]. Considering that we already have a more controlled situation and simulations show that it is possible to have a risk level, the right protection at a lower price, so we would not be so risk averse.

So if that changes, of course, we are going to have prices impact, and the prices could be lower. And that would be beneficial for our position because we still have open positions. We have long positions for '27, '28, which are the closure years and the ones that will be more affected in the spot price if that happens. And we are observing this movement as might be interesting for us to start closing these positions.

Thank you, Marcus. Next question is for you again from [ Rafael Cohiya ]. He would like to understand, he wants us to talk more about the strategy of the company's trading branch. And considering that for 2026, we have a challenging GSF, and what are going to be the impact in the market?

Thank you. 2026 is a challenging year for us. And we did discuss that in our Cemig Day because we did have a development of our margins in [ '26 ] that would be the lower margin of our history. And it's going to recover in the future. But in 2026, because of the history of prices in the market, we contract ahead of time. And we know that we had a decrease in the contracts and the contracts had a reduced margin. And in addition to that, we have short-term elements that could reduce results. So difference in submarket prices that are high in the beginning of the year, we expect them to drop for the rest of the year, but that's an impact, also reduction in some contracts.

So there are situations, factors that could turn this year into a more challenging one. But our vision is that in the future, these impacts will come down because of the systemic progress. And our margin, because of the prices of the market, it also is going to evolve. So the hydrological risk, once again, we had in the first quarter, a realization that was lower than the expectation.

So the challenging situation usually comes in the second quarter. We believe that's going to happen according to what we are planning in a way that in the second half of the year, that's not going to be an impact as we had in the first quarter.

Thank you, Marcus. Another question now coming from Joao Fagundes from Banco Bradesco. Can you tell us how is the seasonal profile of our plants, if it's like MREs? And what is our discussion in the risk parameters? You already talked about this, right?

Well, our seasonality is very close to MRE. We did have smallest difference in January. Maybe we suffered this effect a little bit more because it's compensated in the rest of the year, but it is very close.

And about [ CFR ], as I mentioned, there is a perception that you can see because of the contributions from the public hearing. And we see that there is room for reduction. We had 45 contributions, and 2/3 of them were force of our parameters that were not averse or less averse to risk. So we might have a review, and by having a review, we will see this beneficial effect to close the positions, as I mentioned.

Thank you, Marcus Vinicius. And we thank you all very much for your participation. The IR superintendents are available for any other questions you might have.

So we end the videoconference for the earnings of the first quarter of 2026 for Cemig. Have a nice afternoon.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning, everyone, and thank you for waiting. I'm Carolina Senna, Cemig's Investor Relations Superintendent. Welcome to Cemig's Fourth Quarter 2025 Earnings Video Conference Call. We inform you that this video conference is being recorded and will be available on the company's IR website at ri.cemig.com.br, where you also find the company's presentation. [Operator Instructions]

We now start Cemig's video conference with Reynaldo Passanezi Filho, our CEO; Andrea Marques de Almeida, CFO and IR Officer; Luis Claudio Correa Villani, Chief Information Officer; Marco da Camino Ancona Lopez Soligo, Chief Generation & Transmission Officer; Marney Tadeu Antunes, Chief Distribution Officer; Sergio Lopes Cabral, Chief Trading Officer; Sergio Pessoa de Paula Castro, Chief Legal Officer; Marcos Montes Cordeiro, Institutional Officer; Carlos Ivan Camargo de Colon, Gasmig CEO; Iuri Araujo de Mendonca, Cemig SIM CEO.

And for the initial remarks, I'll turn the floor to our CEO, Reynaldo Passanezi Filho.

Good morning, everyone. Welcome to our fourth quarter video conference call. Also talking about the results for 2025. We may turn to the highlights of the presentation. I would like to go over the main figures. They show the recurrence of very positive results of Cemig in this full transformation process, which has allowed a cash generation that is very significant to face a record investment program. And this is what we see in these two first topics.

Recurring EBITDA of BRL 7.3 billion, very consistent with the different sectors with very consistent results in all of the sectors. And this amount goes up to BRL 8.3 billion when we include the nonrecurring ones, and that is what allows us to finance this record investment program for Cemig. Over the year, we had BRL 6.6 billion, probably one of the most successful investments in Cemig's history. And this is a major transformation when we compare to the past. Some years ago, Cemig was investing less than BRL 1 billion a year. Now we are investing BRL 6.6 billion. And as all of you know, basically, we're investing in regulated sector with warranted profitability.

We have the works that are guaranteeing our profitability. Some of them already showing the results and all the other ones, which we will see in the tariff review times, but they are already here. You can see them as accumulated results because we already have almost BRL 10 billion accumulated in the distribution area, for instance, which are not yet open or posted on this value because they will show in the next tariff review. And it's exactly this combination of cash generation that is very consistent with investments that will generate revenue in regulated sectors that are very stable that allow us to have this result.

We are very happy to see our credit quality. Moody's just raised Cemig's rating to AAA in September. This is a huge transformation. We have increased and grown almost 7 notches in less than 3 years. This is a historical result. Very few companies have this type of speeder credit rating transformation. So now we have a AAA from Moody's as we already have that kind of rating from other companies. Also relevant, an important topic for this quarter was the solution of the post-employment liability regarding our retirees, we had a relevant topic regarding the liabilities of the company, which was the funding of the healthcare plan of retirees and pension holders. Cemig had a responsibility on part of that funding, we were able to come to an agreement with the union. This agreement was approved by the labor regional court, and we have a contribution here.

We will have 6 installments that will total [ BRL 1.25 billion ]. We will have 2 installments this year and then 2 installments every year for the next years until the end of the process. And that changes the contribution of Cemig in the funding of the healthcare plan, and it turns to a financial debt. But that's important because we no longer have an actuarial risk. Now we have a financial debt and that's going to support the transition of the retirees to make sure that, and that's crucial for us to guarantee that they have a healthcare plan.

And that also as part of our results. And you know that we have a policy of sharing our 50% of our net profit, so we paid in dividends and [ IOE ] of BRL 3.5 billion. So this is a public policy. It's in our bylaws, the distribution of 50% of our net profit. That shows that our dividend yield is double because 50% is being reinvested. So when we look at other companies that distribute 100%, we see how much this is a significant result. The company is a good company for dividend payments. And more than that, it reinvest 50% of that result to generate value. And we see that value generation because our capital cost is much lower than the WACC of the regulated sectors, where we are making a larger part of our investments.

And the last topic that we have here is also something very important to us. We have some concessions that were due, and we were able to extend these concessions. That's very positive. We have a very clear objective to extend all our concessions, and we were able to extend Irape, Queimado, and Pai Joaquim in an auction that we had also in 2025. And the Trindade chamber, we participated in the auction, and we were awarded these 3 concessions. I would say that these are the main highlights.

We are very happy once again to have these results, they do show Cemig's strength and resilience and the way we prepare ourselves to the future, not only the resilience of the results, but especially building the future, and I stress this. We already have BRL 10 billion in investments for distribution after 2023. And we are moving on in this process. This is a record process for investments and distribution. And we have our distribution officer by me here because these are cautious investments. In fact, they are supporting Minas Gerais development. We have new loads coming in. There is an improvement in the quality of service. So we feel fine about quality of these investments and its remuneration, and by the time we have our tariff review.

So these are my initial remarks. We will be open for your questions later. But now I will turn the floor to Andrea. And once again, I would like to thank you all for being here with us in this video conference.

Good morning, everyone. It's a pleasure to be here, bringing to you the results of another year that ends sustainable results and results that make us very proud to be delivering. We are delivering not only figures, but also what we are delivering to society, to our clients, our stakeholders, these are very nice results. So moving on after what Reynaldo already mentioned, in terms of the main highlights. Here, we have a snapshot of the BRL 6.6 billion of investments that were made in 2025. Of course, our flagship here is distribution, as Reynaldo mentioned, and within this whole framework of investments that we're making, we had 23 new substations over 12,000 kilometers in low and medium voltage networks, and that, of course, will bring the energy to our clients and the capacity of the state to grow after that.

And for generation, also mentioned by Reynaldo, we had a GSF auction, which involved around BRL 199 million, and we had a delta and this amount that reaches BRL 411 million that was invested in expansion and maintenance. In transmission, our main investment is in reinforcements and improvements. And last year, we invested BRL 410 million, that's a very relevant amount, I believe, Minas Gerais is at the heart of Brazil. So it has a huge opportunity in this area. Therefore, we also show that we were able to add an allowed annual revenue in 2025.

For Gasmig, we had the Midwest project, BRL 217 million being invested in the project; and Cemig SIM, we had BRL 361 million with 19 new solar plants and 68-megawatt installed capacity. And I also think it's very important to show you the development and distribution. We show how much CapEx regarding our regulatory depreciation has grown. So it's good to see this number 4. This is a very relevant figure. It's a highlight, Cemig as well.

Now going over consolidated results year-on-year. comparing to 2024, we had a recurring EBITDA of BRL 7.3 billion, as Reynaldo mentioned, and a full EBITDA of BRL 8.3 billion. And the main difference between the 2 is really the effect of the adjustment in the post-employment liabilities. And the variations in these years, the main effect here that represent this drop in 4% were mainly GSF, because we had to address the hydrological risk and the generating company. We purchased energy at higher spot prices. We are seeing a scenario of higher prices and we also had in the trading company, the main effect year-on-year, which was the difference in prices among submarkets, that was negative BRL 234 million.

Now turning to the recurring net profit of [ 4.2 ] and the nonrecurring of [ 4.9 ], once again, that is the main difference here of the adjustment of post-employee and also the impact of the net profit in addition to the ones that we already mentioned. Also, we are taking that to finance our investments, therefore that generates higher financial expenses. So we have higher leverage with higher financial expenses in the year when that compares to the prior year. So looking at the nonrecurring effects, you see that we had effects last year that were very relevant. We already talked about those over the year. And the main effect now for '25 was a very positive one, and we will go over it in details.

So as Reynaldo mentioned, this was an intense negotiation, but it allowed us to bring a sustainable healthcare plan to our pension holders, especially thinking about the ones that have lower income. And that is important for the company because it allows us to have a financial balance. If we look at the expenses that we posted in the results in 2024 and 2025 regarding the post-employment whether for pension plan or healthcare plan the amounts were very relevant.

So now starting in 2026, we expect to no longer have this impact of BRL 300 million that we had last year regarding the healthcare plan. This is the impact that we expect to see from now on in addition to the impact that we had in the year, which was BRL 1.19 billion in the EBITDA and in the net profit around BRL 800 million, also with a positive effect in our net profit. As Reynaldo mentioned, we now have to contribute to this new healthcare plan, a compensation that's an obligation of BRL 1.28 billion to be paid in 6 installments.

Now turning to our OpEx focused on Cemig D. We see 2 larger effects that are from headcount and outsourced services. For headcount, we are going to go into the details further on, but we have been adding new personnel in bases that we consider important for Cemig Agro to be closer to our rural clients who are agribusiness clients, so that we can deliver better services to them. So we do have this responsibility, and we have to improve the service. This was very important. And the item of outsourced services, we have all the work that the distributing company does of cleaning of power line pathways and pruning trees and these are services that will allow us to have a better quality delivery to our clients. So this is -- these are the main impacts here.

Now turning to the right of the chart. We know that we have a robust investment plan, which has added kilometers of network and substations to provide this capacity to our clients. Now comparing this performance of OpEx against the assets that we are adding to our portfolio, you can see that these percentages are much lower. Therefore, we should say that when we increase the assets base, we have to have a service associated to that to keep delivering the deserved quality to our clients.

In terms of operational efficiency of Cemig D, we are abiding by all indicators. So another year that we deliver indicators as expected by the regulating agents, whether it is in total losses, credit losses that are expected that have reduced year-on-year. Also those represent in 2025, 0.63% of the revenue from energy supply, that's a very low figure, very good result. For collection, also a strong work by Cemig trying to bring in this collection to the digital channels, which are the most efficient ones in terms of cost and also they are easier for our clients, and we have been able to increase collection by these channels over time. In addition to that, our ARFA indicator, the receivables collection index shows that our delinquency is very low, and it's now at 99.51%.

This is some of the results of all the services that we mentioned that we are looking for. We had higher OpEx, but it's there to deliver a better quality to our clients. And then we can bring to you the best DEC of history, the best average outage duration per consumer unit that's 8.97, that's a reduction of 29 minutes compared to the prior year. And the perceived DEC, it was even a higher reduction of 1 hour and 50 minutes. That's very important for us at Cemig and we are very proud of it.

So how are we financing our investment program? In addition to the operating cash generation in the company, we also have outsourced our third-party financing, and we are working to increase the average tenure of this debt so that it can be extended. We have 5 years between the investment and revenue and the tariff review for the distribution company. So it's a long period of time, of course, we only see that posted back and the tariff review. So we have to comply with it, and we are able to reach 6.9 years of average tenure by the last issuances that we had in the market, which were of 9.3 million of debentures. All of them priced under the sovereign risk, which is something else that makes us very proud.

We are able and despite of high interest rates and all of us know that we can price our operations lower than the sovereign risk. And of course, with the investment plan and with the leverage to support this plan, we reached leverage level of 2.3, as Reynaldo mentioned, part of the revenue will only be posted or recognized in 2028. By the time we have the tariff review, part of the investment that already happened.

Now looking at our debt index. We had 87% of the CDI of the average cost and we have a distribution of our debt between IPCA and CDI of 59% and 41%. Now balancing out all of the issues here, and this is the company's responsibility. Of course, we are also delivering great shareholder return. And we got to a dividend yield of 14.9%, BRL 3.5 billion, [ BRL 835 million ], our profit reserve to be unrealized from past periods, we announced part of this amount in still last year, and we paid those in 2025. And part of that will come now to be paid to our shareholders in the next shareholders meeting. And also Cemig has delivered a total shareholder return of 17.5% to our investors, also a level very compatible with our market peers.

Now let's focus on the deliveries of the quarter. Recurring EBITDA of BRL 1.8 billion and equivalent EBITDA with nonrecurring items of BRL 2.9 billion. And we already mentioned the healthcare plan is the main effect. We issued in the quarter BRL 4.3 billion in debentures, this was a quarter in which we were able to bring together all the units to the same agreement for the healthcare plan. We had an elimination of ownership crossover at Cemig companies where we had a smaller stakes. So now we have 100% of our own equity interest at [ Cemig's Inc ] and we added 37 megawatts peak in the quarter. And also, we had an impact in generation. We had an increase in energy purchase due to hydrological risk. We had to manage that because the hydrological risk was lower than the prior year. Therefore, we had to purchase energy at higher prices.

Now talking about the results I already mentioned the recurring EBITDA variation in the quarter of 6.5% was mainly due to GSF effect that measures one quarter against the other 0.8 against 0.67. And also, you see that the adjustment of the post-employee liabilities. Now -- sorry, about distribution that had a positive impact. We had a Parcel B in May that added a higher contribution margin in the distribution company. And to the negative side, a reduction of 1.4% in the market, we already talked about that because some of the clients migrated to the base now recurring net profit similar effects. And once again, we have some of the effects of the higher financial expenses on net profit and also higher depreciation because of investments that we are making over time.

Now here, we show GSF as I mentioned. This is the difference between the difference of 2025 GSF compared to 2024 GSF. Effectively, we worked at lower GSF rates and we had to purchase to manage this hydrological risk at much higher prices. These are the prices that we have seen over 2025 ending December at BRL 265 per megawatt. Once again, here and consolidated operating costs and expenses, we had a similar effect that we already mentioned. In the year for personnel, we added to what we call our Cemig Agro program, 228 new electricians. These are people that will be there. They will be able to take actions quicker in places where needed and places that are further away, we are in a large state with lots of towns is scattered in the state. So we need to have people close to clients to be able to cater them effectively and efficiently.

For outsourced services, we do have intensified the preventive maintenance. We believe this is the better one than the corrective maintenance, of course. So we are working on cleaning of power line pathways and pruning and because of this expense cost also, we have effects that we already see such as in the financial compensations. We were able to reduce quarter-on-quarter 22%, and this is -- it does not stop there, this is an intense work we are doing and the financial compensation is something that we still need to work on in the future.

Now, bringing to you how our EBITDA turns into cash and the cash pays the bills, right? So we start at the EBITDA of BRL 8.3 billion. We have the noncash effect, the post-employment obviously, so we get to an EBITDA of BRL 7.2 billion. We had the CVA effect, the value of variation account prices that are higher than expected. We know that CVA we can recover next year, but it is impacting the cash, our cash in the current year. We have dividends received from companies of the group, such as Taesa. And also we had an impact of the working capital of around BRL 1 billion, reaching an operating cash flow of BRL 5.7 billion.

And then the other effects, taxes, interest, investments, net financing from issuance BRL 9.3 billion issued and with the repayment of the debt, BRL 6.5 billion. Cash before IOE and dividend payments, BRL 4.3 billion. And with the payment of IOE and dividends, we have the cash generated of BRL 270 million, which -- and then we have the cash availability for 2024 and 2025 in the chart to our right.

I think we talked a lot already, so I'll go quickly here. At Cemig D, as I mentioned, we had effect of Parcel B, an improvement in the contribution margin in the quarter, BRL 138 million. And also, we had a reduction of 1.4% in the market, including DG. And in the net profit, of course, this investment program requires a higher debt to be financed and then we have financial expenses that are higher. Here, we have a snapshot of the market. Whether this is the transported energy market that we mentioned that we have lost some clients to the basic network or total energy. This is the performance.

And when we add the drop of the market with the DG come to a reduction of 1.4%. And that's basically it. For Cemig GT, once again, we have the effect from the management of hydrological risk of BRL 81 million reduction here. That's the main effect quarter-on-quarter. For Gasmig, the EBITDA is in line and the net profit was affected by the increase of interest on equity with a higher limit of long-term interest rates. And of course, we are using this limit to have a higher net profit. And we already mentioned the program, the Midwest gas pipeline project and the opening of this Midwest gas pipeline marks the arrival of pipe gas in the cities, such as Betim, Itauna, Divinopolis. This was a very important event in the quarter as well.

Well, here, we have our awards for sustainability. Cemig is very proud of those results because we always have a lot of awards. For the Dow Jones Sustainability Index, this was the 25th consecutive year that we got this award, and maybe the only a company that has been at Dow Jones for such a long time. Also, the Sustainability Yearbook 2025, we are there as well. CDP we are in the A list and to reach the A list, we met 10 of the 16 criteria. Most of these criteria analyze our real plans to come to Net Zero for 2040. We also have a 5.4 million renewable energy certificates issued in 2025.

We are also in B3 sustainability index for B3. In sustainalytics, we have the risk of our economic value arising from ESG factor, and we had a score of low risk. This range goes from 10 to 20. And here, we have other awards, the market recognition by Cemig's work, 2 recognitions from companies that like best company in the year, one coming from Veja Negocios, another one of Best Company in the sector. CFO and CEO were also recognized by Elite InfoMoney 2025 Magazine. We were the fifth most innovative company in the electric sector, that's something that is really valuable to us. And it's very important award. We are very happy about this award.

Our financial team, we are very proud of our financial team because it got an award for best financial team in the infrastructure and energy sector in Brazil by FILASA. And also, we had the ANEFAC Transparency Trophy. And a second ANEFAC ESG Award Transformative Stage.

So I end the presentation here. And now I open the session for the Q&A session. I turn the floor to Carolina, who will help us there.

[Operator Instructions] Our first question is from [ Banco Safra, Ricardo Bello ].

The question was about the trading result in the fourth quarter, which was positive in BRL 97 million. Can you revert or reduce the short positions that you had? And what is the gain? What is the current perspective of your energy balance?

Good morning. This is [ Ricardo Bello ].

Thank you for your question. I think the results show that. We were very cautious when we closed the positions this year. We are still working on it. 2026, the positions are already closed, and we are now aiming to close 2027 as well. We are analyzing that very cautiously. This was a result of something that we just showed in this quarter, our balance sheet. But by 2027, still has an open position that we are closing also another position in 2028. Starting in 2029, we no longer have any open positions when we see future prices going up. This is a good opportunity for us to sell this energy starting in 2029 as we were planning to do.

Our next question is from Luiz Eduardo. What is the ideal level of leverage for the company? And what is the annual percentage of interest and the debt?

I don't think we have a target number, but we know that our leverage is going to increase over this investment cycle. We are fine at 2.3 now. We believe that it will grow over the cycle up to 2028 when we have the tariff review of D. So -- and the contract covenants that we have that are read limit the ratio to 3.5, I believe that within this range, we will be very well placed when Moody's evaluates Cemig and gives us a AAA. It is evaluating us by -- through the cycle. So in fact, they know about the investment program. They know about the increase in leverage. And so we are in a very good place. We believe that we are going to be within the expected AAA rating. And of course, increasing over 2.3 over the cycle and reducing again this leverage in 2028 when we, in fact, receive the impact of the tariff D in the tariff review and the process that we are doing throughout this period in terms of average rate for interest.

And we mentioned here, we have 13% of nominal cost, and that corresponds to 87% of the CDI. So this is an average cost that is very good for utilities company. And once again, remember, that we have been pricing all our debts that are debentures in the local market lower than the sovereign risk.

Andrea, just adding to your answer, I think it's important to mention how much this debt is generating value to the company because we have an average that is financed at 87% of the CDI with an investment which is more than 90% regulated. And you know what is the amount of the debt and the calculation of the respective WACCs. We see that this debt is much lower than what we see in the WACC calculation, therefore, it is generating value to the company.

Our next question is about if there are any plans to pay bonus to shareholders in 2026? I'll turn the floor to Andrea.

Thank you for your question. Actually, that happens when our profit reserve goes higher than the capital stock. So we'll analyze this over the year to see if it's going to happen. But of course, you can follow Cemig's figures, and as soon as we have anything new on that topic, we will let you know.

Thank you all very much for your questions. And since there are no other questions, we thank you very much for participating in this call. And we would like to say that the Investor Relations superintendence is available to provide you additional comments, should you need them. Thank you all very much, and have a nice day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good afternoon, everyone. I am Carolina Sena, Cemig's IR Superintendent. Welcome to Cemig's Third Quarter 2025 Earnings Video Conference Call. This video conference is being recorded, and it will be available on the company's IR website at ri.cemig.com.br, where you also find the full package on our earnings call. [Operator Instructions]

We will now start Cemig's video conference call with Reynaldo Passanezi Filho, CEO; Andrea Marques de Almeida, CFO and IR Officer; Luis Cláudio Correa Villani, Chief Information Officer; Sergio Lopes Cabral, Chief Commercialization Officer; Sérgio Pessoa de Paula Castro, Chief Legal Officer; Carlos Camargo de Colón, Gasmig's CEO; Iuri Araújo de Mendonça, Cemig SIM's CEO.

For their initial remarks, I turn the floor over to our CEO, Reynaldo Passanezi Filho.

Good afternoon, everyone. Welcome to our earnings call for the third quarter. It's always an opportunity and a pleasure to be able to bring to you our results and our efforts in another quarter. This is a quarter in which we have more difficult news. Of course, I would like to highlight some important topics that show the strength and the resilience of Cemig's earnings.

About specific news on the quarter, we had distribution results that were affected by large clients that left the network. They migrated to the basic network about trading. We tried to decrease some positions. Also, that involves the submarket prices that have affected the results. What's important, and you know that when we look at our net position, it is very favorable in the scenario that we have for pricing today. The same thing happened with generation because of the difference in the GSF and the need to offset that with the spot price.

This is what I would like to highlight. And despite of these topics, we moved on with a recurring EBITDA, proving the company's resilience, and we have confirmed the AAA rating by Moody's. We have 2 agencies now guaranteeing us a AAA rating, showing our resilience capacity to any type of scenario. We also had an award by a magazine called Veja

Negócios, as the best energy company in Brazil in the top 30 award.

And we also had the approval of our health care plan for retired employees. So we finalized a collective agreement with the union and that allows us to look for a positive structural solution that will preserve a positive transition to all of us. Therefore, they can keep their health care plan and also we'll be able to guarantee the company's sustainability.

And the final topic, and Andrea is going to go over the details, which is our investment program. We are, once again, making the largest investment program in the company. For this quarter, we have BRL 4.7 billion, a significant increase when compared to last year. I believe we have a very positive message here, and we are maintaining our investment plan. And that means very positive results for the tariff review situation when that comes. So here, we have BRL 3.6 billion in distribution by itself. If we multiply that by the WACC, we know that the results bring additional revenue of a little over BRL 500 million just for that 9 months.

So these are very cautious investments in regulated areas that when they get mature and the agency recognizes that we are going to have very positive results for the company. This is what allows us to have resilience today, and this is what allows us to have very positive results in the future, whether by these investments or by a very favorable position in the trading business in the near future.

These are my initial remarks. Obviously, we are here to take your questions after the company's presentation. I'll turn the floor to Andrea, but I would like to stress the strength of this company and that we are very confident that we are going to move on with this investment plan and maintain the company's debt levels and the covenants and therefore, to keep on investing, keep on generating value. And this is going to get more mature according to the regulations and tariff regulations as expected. Thank you very much.

Good afternoon, everyone. It's also a pleasure to be here with all of you today, going over our third quarter earnings.

Now moving on, talking about our investments, as Reynaldo mentioned, we invested in the 9 months of 2025, BRL 4.7 billion. And this is how they break down BRL 3.6 billion in distribution, focused obviously in substations. This is a milestone and we have some pictures to show you the substations that we had in the quarter, but also 5,349 kilometers of low and medium voltage networks, which are very important to bring good service to Minas Gerais.

For generation, we also mentioned our participation in the GSF credit auction with BRL 199 million. That's very nice. It guaranteed the extension of our concession in some of our plants. But also we had investments of BRL 149 million in expansion and maintenance.

For transmission, we have our Verona project, around BRL 30 million, and we are still investing in reinforcements and improvements, and we are going to mention some of those and how the allowed annual revenue is performing in transmission.

For Gasmig, the centralized project is the most representative one, around BRL 180 million being invested in the project. And for Cemig SIM, the delivery of new photovoltaic plants and 31 megawatts of installed capacity.

Moving forward, we have the pictures of the 5 new substations, the ones this quarter, Andrelândia, Coronel Xavier Chaves, João Pinheiro, São Tiago, Fronteira. These are our highlights of new substations for distribution.

Now turning to transmission. We see where in our operation we had improvements: Taquaril, Três Marias, São Simão, Itajubá, Volta Grande, Lafaiete. And we were able to add over the year, BRL 32 million of allowed annual revenue in our transmission business. And of course, this brings great results as well.

Moving over to the figures. As Reynaldo mentioned, we have BRL 1.5 billion of EBITDA, and we see a drop in our EBITDA in around 16.3% when we analyze the recurring EBITDA, and I will talk about the recurring numbers, and then I'll talk about the nonrecurring events of last year, which were significant. We can talk about them as well.

In generation, we already mentioned we had the effects of a lower GSF. We had to buy energy to cover for the GSF. So we had an impact of BRL 54 million. In the trading business, there was an impact here. And we already had the reduction in margin in the trading comparing '24 to '25. And we ended positions. We closed positions and of course, came from our exposure and other positions that were also open. So the closing of these positions and the purchasing of energy and the prices -- the spot prices that we have seen ended up having this impact of BRL 136 million for distribution.

In '24, we had a change in the methodology, which was a reversal of our ADA and that reverted how we provisioned our ADA. We didn't have that in 2025. Therefore, there is a negative delta effect in distribution. And you will see that the market also has reduced it. And as Reynaldo mentioned, some clients left and went to the basic network. Therefore, this impacted distribution.

Now turning to our net profit, the major investment that we are making has a greater depreciation impact than the funding, the increase of the interest rates, and of course, the increase of leverage of the debt also affects our net profit, the recurring net profit, and we realized that there was this drop of around 30.2%. For nonrecurring effects of last year, just let me remind you, they were very relevant. We had BRL 1.6 billion of the disposal of Aliança last year. Of course, this is not happening this year, and the tariff review for the transmission business of BRL 1.5 billion. These did not show in 2025. That's why we have also this relevant delta here.

Let's move on. Here, zooming in, in GSF, when we compare GSF of 2024, we see the performance of July and September. GSF for 2024 going from 0.8 to up to 0.7. So we did have to purchase to deal with the hydrological risk and also the level of the energy price that we see this year. Of course, higher levels than what we have seen last year. Just September of last year, we had higher prices than this year, as you can check in the charts. So this is the impact.

Now operating costs and expenses. We are growing below the inflation rate. And outsourced services, which is what draws our attention, we have an increase in areas where distribution has to invest more efforts to guarantee the improvement of services, whether maintaining, installations or in technology, and we still are working on the improvement with smart meters. We have to invest in that. And we have to fund technology. We have to prune trees and also clear the pathway. So that's where we have a higher increase in other expenses. Also, we had the sale of a plot.

For personnel, we see a performance -- a good performance here. But here, we have in-sourcing of employees. We are bringing in our own teams so that we can cater to our clients faster in specific regions. And we really want to be more efficient in our service in regions. And we know that Minas Gerais is a largest state. So we want to be quicker serving further away areas. So we have an increase here in personnel in our headcount.

Moving on, in line with our capital structure, we, yes, need the debt to fund our investments, but our leverage is at very safe levels. We are at 1.76 or net debt over recurring EBITDA. That's why we have our best rating in history. As Reynaldo mentioned, two AAAs and one AA+, and we are structuring our debt in a way to increase the average tenure. We reached 5.7 with the average term -- as average term. And the cost performance, we see the fact of the high cost of the interest rates, which affect all of us in the market and as well as Cemig, of course.

Now for our cash flow. This is how we have been financing our activity, our investments. We start with cash. This is for 9 months, okay? So we start with cash of 2024 at BRL 2.3 billion. We have cash from operations of BRL 3.4 billion. We have the debentures issuance in May of BRL 5.1 billion, the debentures payments, of course, obviously. These are prior debentures of BRL 2.4 billion. Dividends and IOC, BRL 1.7 billion. Our activities for investments of BRL 4.5 billion. Earmarked funds here, BRL 187 million. We have to have this amount aside. So we come to our final cash of BRL 2.3 billion.

For Cemig D, everything is more or less explained already. But effectively, we show a drop in EBITDA of 4.7%, especially because of the market reduction, whether it is by economic activity, once it's not that positive and also the temperature that was mild and the market dropped. Once again, the client that has migrated in the second quarter to the basic network. And of course, now in the third quarter, we see the full impact of this migration.

In addition to that, we have the reversal of the constitution that I said of the ADA, as I mentioned before. And of course, in the net profit for Cemig D, we see the effect of our fundings and also the interest rates affecting that result.

Talking a little bit now about the energy market. We had a drop of 4.4%, and we see the full effect in all the different markets and our distributing company coming from the rural, commercial, industrial, all the effects coming from all the markets. And in fact, here, we see this drop being caused by this client that has migrated for the basic network.

Our operating indicators show that our collection is still very strong, focusing in the digital channels and Pix, our payment method is the cheapest. And now we are going to have the auto Pix as well. And we will be able to have campaigns so that people choose this payment mode, which helps us all and also reduces our costs. And this is growing as a good option of payment.

And now our ARFA, the receivables collection index is at good, stable levels, and our regulatory OpEx and EBITDA show that we are within the regulatory standards. In terms of regulatory losses, we are also within the standards. There was a change in the criteria which already happened. We are now are integrating the effects of micro and mini generations that are distributed. So we are continuing to work. We have always keep working on losses. We have to install the armored meeting panels. We have to install the smart meters. And all the actions that we have to keep on taking so that this indicator is within the regulatory limits.

For Cemig GT, once again, we talked about it. GSF was the main impact. We had to purchase energy to tackle the hydrological risk and the recurring net profit. Here, you can see the results as well. And Cemig GT was the one that had the main nonrecurring effects from 2024. So the major impacts are there represented last year. Therefore, we had a higher EBITDA in 2024 effects that are not replicated in 2025.

And Gasmig, that also had impact for EBITDA reduction because there was a drop of 6% in the market and also the clients that migrated to the free market. This, once again, effect on Gasmig.

And on this page, we have Cemig's recognitions. Reynaldo already mentioned, and that we are very proud to be recognized as the best energy company in Brazil by Veja Negócios. And there are other recognitions. We are also recognized as the best financial team in the infrastructure and energy sector by FILASA. We also got the transparency award from ANEFAC. We have always room to improve, but it's already great to be recognized by the 19th time by ANEFAC. And there is a new one, the ESG award. Cemig has thousands of awards in sustainability. And we are very proud, and it's always great to have another one. So ESG from ANEFAC in this category, Transformative Internship category.

Therefore, I end my presentation, and I turn the floor back to Carol to ask -- to open the Q&A session and take your questions.

[Operator Instructions] Our first question is from Victor Sousa, Genial Investimentos.

Hello, can you hear us?

Yes, we can hear you, Victor. Go ahead.

My question is about Technical Note 53 that changes how you post losses in the distribution sector. I would like to understand if there is a possibility of republishing the level of losses that Cemig had. Now looking backwards here, I would like to understand if this change can end up generating any accounting retroactive effect regarding the application of this technical note if your concerned amount receivables, provisions and other adjustments, or is this just a prospective impact, just an accounting impact?

And another question still on this note. How would have been the level of losses for distribution if this technical note did not exist? So in the same comparison base, what would have been the performance of Cemig losses? Would they have increased, decreased, or they would have been the same? I think this is important to understand for the process of assessing the distributing companies.

Thank you, Vitor, for your question. Denis Mollica, our Strategy, Innovation and Sustainability Officer. Please, Dennis.

Thank you for your question, Vitor. About the method used for calculation of losses. The method, even having it being reviewed, it does not -- it's not applied to past calculations. Even if we were to simulate that in the prior losses and the older losses, we would still be within the limits. So for practical accounting effects, adjustments have done from now on. And as it was said already, we are still within the regulatory losses, both before and after this technical note. So we have major actions to manage and to fight our losses, and they are within the limits with no effects that might affect accounting at all. And of course, yes, we also have here a positive effect on the tariff once we have the recognition of the impacts of the DG in the method of calculating losses.

[Operator Instructions] Our next question is from Luiza Candiota from Banco Itaú.

It is about your trading strategy. Analyzing the changes in the energy balance in this quarter compared to the prior one. I would like to go over the details of the rationale regarding the short exposure when we look at '25, '26 and '28. What could be explaining this change that we see?

Thank you, Luiza. I'll turn the floor to our Chief Trading Officer, Sergio Lopes.

First, thank you for your question. We have been doing a great effort to close our positions. Of course, we have some marginal sales that we are executing with clients that are strategic, but our position is not to open more positions. We want to close, as Andrea has mentioned. For this quarter, we could close positions in these past months. And also, we have the impact of gold that ended up making us go to the market to buy energy, but we are not opening positions. We are rather than that closing them.

There are no further questions. We thank you all very much for your participation. And the superintendents of IR is available to take any other questions you might have. Therefore, we end Cemig's third call -- video conference call. Have a nice afternoon, and thank you very much.