FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of August, 2003
Commission File Number 1-15224
Energy Company of Minas Gerais
--------------------------------------------------------
(Translation of registrant's name into English)
Avenida Barbacena, 1200
30190-131 Belo Horizonte, Minas Gerais, Brazil
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(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
----------- -----------
Indicate by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): _____
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes No X
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If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A
Index
Item Description of Item
---- -------------------
1. Interim financial statements as of March 31, 2003 and for the
three-month period then ended, prepared in accordance with
accounting practices adopted in Brazil, in Brazilian reais
(convenience translation into English from the Portuguese-language
version filed with the Brazilian Comissao Nacional de Valores).
2. Management's discussion and analysis of results of operations
relating to the interim financial statements prepared under
accounting practices adopted in Brazil as of March 31, 2003 and for
the three-month period then ended, in Brazilian reais (convenience
translation into English from the Portuguese-language version filed
with the Brazilian Comissao Nacional de Valores).
3. Interim financial statements as of June 30, 2003 and for the
six-month period then ended, prepared in accordance with accounting
practices adopted in Brazil, in Brazilian reais (convenience
translation into English from the Portuguese-language version filed
with the Brazilian Comissao Nacional de Valores).
4. Management's discussion and analysis of results of operations
relating to the interim financial statements prepared under
accounting practices adopted in Brazil as of June 30, 2003 and for
the six-month period then ended, in Brazilian reais (convenience
translation into English from the Portuguese-language version filed
with the Brazilian Comissao Nacional de Valores).
i
Item 1
Companhia Energetica de Minas Gerais - CEMIG
Interim Financial Statements
Together with Independent Accountants' Report on Special Review
March 31, 2003
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
INDEPENDENT ACCOUNTANTS' SPECIAL REVIEW REPORT
----------------------------------------------
To the Shareholders and the Board of Directors of
Companhia Energetica de Minas Gerais - CEMIG
Belo Horizonte - MG
-------------------
1. We have performed a special review of the quarterly information,
presented in Brazilian reais, of Companhia Energetica de Minas
Gerais - CEMIG and subsidiaries as of March 31, 2003 and for the
quarter then ended, prepared under the responsibility of the
Company's management, in accordance with accounting practices
adopted in Brazil, consisting of the individual (Company) and
consolidated balance sheets, the individual (Company) and
consolidated statements of income, management's discussion and
analysis and relevant information.
2. We conducted our review in accordance with specific standards
established by the Brazilian Institute of Independent Accountants
(IBRACON), together with the Federal Accounting Council, which
consisted principally of: (a) inquiries of and discussions with
management responsible for the accounting, financial and operating
areas of the Company and its subsidiaries as to the principal
criteria adopted in the preparation of the quarterly information,
and (b) review of the information and subsequent events that had or
might have had significant effects on the Company's and its
subsidiaries' financial position and results of operations.
3. Based on our special review, we are not aware of any material
modifications that should be made to the quarterly information
referred to in paragraph 1 above for it to be in conformity with
accounting practices adopted in Brazil and accounting standards
issued by the Brazilian Securities Commission (CVM), specifically
applicable to the preparation of mandatory quarterly financial
information.
4. As mentioned in Note 4 to the quarterly information, as of March 31,
2003, the Company and its subsidiaries have recorded, in current and
noncurrent assets, accounts receivable in the amount of R$93,732,000
and R$463,357,000 respectively and, in current liabilities, accounts
payable in the amount of R$457,875,000, related to energy sale and
purchase transactions within the Wholesale Energy Market - MAE. Such
amounts were recorded based on calculations prepared and information
made available by the MAE. Those amounts are subject to change,
depending on the outcome of the claims currently in progress in
court, filed by electric energy companies, concerning the
interpretation of the market rules in force, as well as review by
independent accountants engaged by MAE of those amounts.
5. Executive Act No.14, issued on December 21, 2001 and converted into
Law No. 14,438 on April 26, 2002, regulates, among other matters,
recovery of the economic and financial equilibrium of Brazilian
electric energy distribution, transmission and generating companies
as guaranteed under their respective concession agreements. Detailed
information and the impacts of such regulation on the financial
position and results of operations of the Company and its
subsidiaries related to the General Agreement for the Electric
Energy Sector are disclosed in Notes 3 and 4 to the quarterly
information.
6. The individual (Company) and consolidated balance sheets as of
December 31, 2002, presented for comparative purposes, were audited
by us, as set forth in our report dated March 27, 2003, issued
without qualification and including comments regarding the matters
discussed in paragraphs 4 and 5 above and about noncompliance with
certain restrictive covenants in loan agreements. The individual
(Company) and consolidated statements of income for the quarter
ended March 31, 2002, presented for comparative purposes, were
reviewed by other independent accountants whose special review
report thereon, dated May 15, 2002, was issued without qualification
and including comments regarding: (i) the recording of assets and
liabilities related to special rate adjustments, recovery of Parcel
"A" cost variations and transactions within the Wholesale Energy
Market - MAE which were pending review and approval by ANEEL
(National Electric Energy Agency), and (ii) negotiations at the time
with the Minas Gerais State Government about the payment delay of
amounts receivable related to the credit assignment contract for the
remaining balance of the CRC (Recoverable Rate Deficit) account.
7. The translation of this quarterly information into English has been
made for the convenience of readers outside Brazil.
Belo Horizonte, May 15, 2003
/S/ Deloitte Touche Tohmatsu /S/ Jose Carlos Amadi
DELOITTE TOUCHE TOHMATSU Jose Carlos Amadi
Auditores Independentes Engagement Partner
2
(Convenience Translation into English from the Original Previously Issued in Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(Expressed in thousands of Brazilian reais - R$)
-----------------------------------------------------------------------------------------------------------------------------------
A S S E T S
----------------
Consolidated Company
-------------------------------------- -----------------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
---------------- -------------------- -------------------- -------------------
CURRENT ASSETS:
Cash and cash equivalents 278,340 122,975 183,980 50,303
Accounts receivable 861,224 882,421 846,003 842,631
Consumers - Special rate adjustment 269,977 257,577 269,977 257,577
Concessionaires - Energy transportation 20,386 18,271 20,386 18,271
Distributors - Energy supply 93,732 82,476 93,732 82,476
Recoverable taxes 76,145 21,322 72,339 15,576
Materials and supplies 19,787 20,663 13,073 13,086
Prepaid expenses - CVA 1,555 225,833 1,555 225,833
Electricity Rationing Plan - Bonus paid to
consumers and adoption costs incurred 27,312 - 27,312 -
Receivables from Federal Government - Revenue
losses from low-income consumers 63,956 42,386 63,956 42,386
Other 109,261 145,848 130,371 152,752
---------- ---------- ---------- ----------
1,821,675 1,819,772 1,722,684 1,700,891
---------- ---------- ---------- ----------
NONCURRENT ASSETS:
Receivable from Minas Gerais State Government 819,899 754,960 819,899 754,960
Consumers - Special rate adjustment 1,145,441 1,149,563 1,145,441 1,149,563
Prepaid expenses - CVA 521,332 195,208 521,332 195,208
Tax credits 539,795 540,839 518,685 520,393
Marketable securities 72,506 53,138 72,506 53,138
Electricity Rationing Plan - Bonus paid to
consumers and adoption costs incurred 24,643 52,083 24,643 52,083
Distributors - Energy supply 463,357 462,640 463,357 462,640
Recoverable taxes 91,083 81,583 79,368 68,432
Escrow deposits 66,878 66,317 66,786 66,225
Other 96,351 106,248 96,155 105,944
---------- ---------- --------- ----------
3,841,285 3,462,579 3,808,172 3,428,586
---------- ---------- ---------- ---------
PERMANENT ASSETS:
Investments 686,330 608,657 1,263,250 1,155,472
Property, plant and equipment 7,915,158 7,897,782 7,301,702 7,294,189
Deferred charges 23,991 25,096 869 1,045
---------- ---------- ---------- ----------
8,625,479 8,531,535 8,565,821 8,450,706
---------- ---------- ---------- ----------
Total assets 14,288,439 13,813,886 14,096,677 13,580,183
========== ========== ========== ==========
The accompanying condensed notes are an integral part of these financial statements.
3
(Convenience Translation into English from the Original Previously Issued in Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED BALANCE SHEETS
MARCH 31, 2003 AND DECEMBER 31, 2002
(Expressed in thousands of Brazilian reais - R$)
---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Consolidated Company
------------------------------------- -------------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
------------------ -------------------------------------- -------------------
SHORT-TERM LIABILITIES:
Suppliers 1,084,685 1,274,725 1,058,955 1,230,972
Taxes payable 277,023 150,757 269,233 144,504
Loans and financing 949,654 834,203 925,559 801,598
Payroll and related charges 103,543 108,515 102,357 107,295
Dividends and interest on capital 204,274 211,106 203,987 210,827
Employee post-retirement benefits 176,981 180,992 176,981 180,992
Regulatory charges 151,090 93,856 150,822 93,796
Other 104,989 106,492 103,650 90,782
---------- ---------- ---------- ---------
3,052,239 2,960,646 2,991,544 2,860,766
---------- ---------- ---------- ---------
LONG-TERM LIABILITIES:
Loans and financing 1,752,981 1,716,489 1,652,216 1,613,038
Debentures 913,047 834,052 913,047 834,052
Employee post-retirement benefits 1,603,588 1,656,488 1,603,588 1,656,488
Suppliers 354,758 334,295 354,758 334,295
Reserve for contingencies 333,971 315,045 333,971 315,045
Taxes payable 331,005 216,640 331,005 216,640
Other 85,418 70,313 83,858 68,976
---------- ---------- ---------- ---------
5,374,768 5,143,322 5,272,443 5,038,534
---------- ---------- ---------- ----------
MINORITY INTEREST 28,742 29,035 - -
SHAREHOLDERS' EQUITY:
Capital 1,621,538 1,621,538 1,621,538 1,621,538
Capital reserves 4,032,222 4,032,222 4,032,222 4,032,222
Income reserves 113 - 113 -
Retained earnings 151,694 - 151,694 -
---------- ---------- ---------- ---------
5,805,567 5,653,760 5,805,567 5,653,760
Funds for future capital increase 27,123 27,123 27,123 27,123
---------- ---------- ---------- ---------
5,832,690 5,680,883 5,832,690 5,680,883
---------- ---------- ---------- ----------
Total liabilities and shareholders equity 14,288,439 13,813,886 14,096,677 13,580,183
========== ========== ========== ==========
The accompanying condensed notes are an integral part of these financial statements.
4
(Convenience Translation into English from the Original Previously Issued in Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002
(Expressed in thousands of Brazilian reais - R$, except for per share data)
---------------------------------------------------------------------------------------------------------------------------------
Consolidated Company
------------------------------- ----------------------------
Three month periods Three month periods
ended March 31, ended March 31,
------------------------------- ----------------------------
2003 2002 2003 2002
---------- --------- --------- ---------
OPERATING REVENUES:
Electricity sales 1,457,840 1,179,895 1,444,157 1,173,369
Special rate adjustment - 315,164 - 315,164
Other operating revenues 125,922 80,968 72,350 56,293
---------- --------- --------- ---------
1,583,762 1,576,027 1,516,507 1,544,826
DEDUCTIONS FROM OPERATING REVENUES: (495,704) (337,223) (482,285) (334,629)
--------- ----------- --------- -----------
Net operating revenues 1,088,058 1,238,804 1,034,222 1,210,197
--------- --------- --------- ---------
OPERATING EXPENSES:
Personnel (157,384) (133,275) (153,351) (132,178)
Materials and supplies (20,239) (15,971) (19,830) (15,902)
Outside services (64,739) (51,503) (62,995) (49,939)
Charges for use of water resources (11,444) (8,673) (11,203) (8,444)
Electricity purchased for resale (291,933) (359,974) (291,933) (359,974)
Use of basic transmission network (77,206) (64,891) (77,206) (64,891)
Depreciation and amortization (140,464) (132,423) (130,979) (128,502)
Employee post-retirement benefits (6,529) (54,250) (6,529) (54,250)
Operating provisions (40,497) (14,245) (39,623) (14,245)
Fuel consumption quota - CCC (92,718) (69,537) (92,718) (69,537)
Gas purchased for resale (25,807) (17,915) - -
Employee profit sharing (4,079) (4,125) (4,069) (4,125)
Other (31,930) (36,190) (29,180) (35,128)
--------- --------- --------- ---------
(964,969) (962,972) (919,616) (937,115)
------- ------- ------- -------
Income from operations before equity in subsidiaries and
financial income (expenses) 123,089 275,832 114,606 273,082
---------- ---------- ---------- ----------
EQUITY IN SUBSIDIARIES - - 9,431 1,450
---------- ---------- ---------- ----------
FINANCIAL INCOME (EXPENSES)
Financial income 294,532 150,764 284,476 148,978
Financial expenses (136,474) (84,260) (132,130) (82,123)
---------- ---------- ---------- ----------
158,058 66,504 152,346 66,855
---------- ---------- ---------- ----------
Income from operations 281,147 342,336 276,383 341,387
---------- ---------- ---------- ----------
NON-OPERATING EXPENSES, NET (9,309) (6,977) (9,174) (6,977)
---------- ---------- ---------- ----------
Income before taxes on income 271,838 335,359 267,209 334,410
---------- ---------- ---------- ----------
Income and social contribution tax credits (120,415) (115,280) (115,515) (114,463)
---------- ---------- ---------- ----------
Income before minority interest 151,423 220,079 151,694 219,947
MINORITY INTEREST 271 (132) - -
---------- ---------- ---------- ----------
NET INCOME FOR THE PERIOD 151,694 219,947 151,694 219,947
=========== =========== =========== ===========
NUMBER OF THOUSANDS OF SHARES 162,084,691 158,931,714 162,084,691 158,931,714
=========== =========== =========== ===========
INCOME PER THOUSAND SHARES - R$ 0.00094 0.00138 0.00094 0.00138
=========== =========== =========== ===========
The accompanying condensed notes are an integral part of these financial statements.
5
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED CONDENSED NOTES TO THE INTERIM FINANCIAL STATEMENTS
AS OF MARCH 31, 2003
(Amounts expressed in thousands of Brazilian reais - R$, unless otherwise
indicated)
------------------------------------------------------------------------------
1) THE COMPANY AND ITS OPERATIONS
Companhia Energetica de Minas Gerais - CEMIG ("CEMIG" or the "Company"), a
company organized under the laws of the Federative Republic of Brazil, is an
electric power utility concessionaire and public utility controlled by the
Government of the State of Minas Gerais, Brazil (the "State Government"). Its
principal activities are the construction and operation of systems used in the
generation, transmission, distribution and sale of electric energy, as well as
in certain related business activities.
The Company has equity interests in the following operating companies:
o Sa Carvalho S.A. ("Sa Carvalho") (100.00% interest) - Its principal
activities are the production and sale of electric energy from the
Sa Carvalho hydroelectric power plant, as an electric energy public
service concessionaire;
o Usina Termica Ipatinga S.A. ("Ipatinga") (100.00% interest) - Its
principal activities are the production and sale of electric energy,
as an independent power producer, at the Ipatinga thermoelectric
power plant located at the facilities of Usinas Siderurgicas de
Minas Gerais - USIMINAS;
o Companhia de Gas de Minas Gerais - GASMIG ("GASMIG") (95.19%
interest) - Its principal activities are the operation, production,
acquisition, storage, transportation and distribution of natural gas
and related products. GASMIG was granted a concession by the Minas
Gerais State Government to distribute gas in the State of Minas
Gerais;
o Empresa de Infovias S.A. ("Infovias") (99.92% interest) - Its
principal activities are rendering telecommunications services and
developing activities related thereto, through multiservice networks
using optical fiber cable, coaxial cable, and other electronic
equipment. Infovias owns 64.91% of the capital stock of Way TV Belo
Horizonte S.A., a cable TV and internet services provider in the
State of Minas Gerais; and
o Efficientia S.A. - ("Efficientia") (100.00% interest) - Its
principal activities are rendering efficiency, optimization and
energy solutions services to energy supply facilities. Efficientia
S.A. initiated operations in the first quarter of 2003.
Additionally, the Company has a 100.00% interest in each of the following
pre-operating stage companies:
o Horizontes Energia S.A. - Its principal activities are expected to
be the production and sale of electric energy, as an independent
power producer, at the Machado Mineiro and Salto do Paraopeba
hydroelectric power plants, located in the State of Minas Gerais,
and the Salto Voltao and Salto do Passo Velho hydroelectric power
plants, located in the State of Santa Catarina.
o Cemig PCH S.A., Cemig Capim Branco Energia S.A. and UTE Barreiro
S.A. - Their principal activities are expected to be the production
and sale of electric energy, as independent power producers.
6
2) PRESENTATION OF THE FINANCIAL STATEMENTS
The accounting practices, methods and criteria used by the Company in the
preparation of these quarterly financial statements are consistent with those
applied in the financial statements as of and for the year ended December 31,
2002, including consolidation criteria.
The financial statements of controlled companies used to calculate the equity
and consolidation are dated March 31, 2003, except those with respect to
GASMIG, which are dated February 28, 2003.
3) CONSUMERS - SPECIAL RATE ADJUSTMENT
In December 2001, the Federal Government, through the Camara de Gestao da
Crise de Energia Eletrica (the Federal Government's electric energy crisis
committee or the "Energy Crisis Committee"), and the electricity distribution
and generation concessionaires entered into an agreement entitled Acordo Geral
do Setor Eletrico ("General Agreement of the Electricity Sector"). This
agreement was entered into to ensure the economic and financial equilibrium of
the concession contracts and to reimburse concessionaires for lost revenues
related to the period when the Electricity Rationing Plan was in force,
through a special rate adjustment.
Law No. 10,438, of April 26, 2002, and the Energy Crisis Committee's
Resolution No. 91, of December 21, 2001, established a special rate adjustment
applicable as of December 27, 2001. The rate increases were set forth in the
Energy Crisis Committee's Resolution No. 130, of April 30, 2002, as follows:
I. an increase of 2.90% for rural and residential consumers
(excluding low-income consumers), street lighting and high
tension industrial consumers whose costs related to electric
energy represent at least 18.00% of average production cost and
meet certain criteria, related to charge and demand energy
factors which were determined in the Resolution.
II. an increase of 7.90% for all other consumers.
The special rate adjustment mentioned above is being applied to reimburse
concessionaires for the following items:
a. Billing losses in the period from June 1, 2001 to February 28, 2002,
representing the difference between the Company's estimated revenue,
assuming that the Electricity Rationing Plan had not been
implemented, and the actual revenue earned during the rationing
period, as established by ANEEL (National Energy Authority). The
computation does not include overdue payment losses, which the
Company does not expect to be material, and the State VAT.
b. Variation in Parcel "A" Items (uncontrollable costs as established
by the concession contracts) related to the period from January 1,
2001 to October 25, 2001. The amount to be reimbursed is equal to
the difference (positive or negative) between the Parcel "A" costs
effectively paid and the estimated Parcel "A" costs used for
purposes of computing the most recent annual rate adjustment.
c. Amounts to be paid to generators for energy purchased on the MAE
from June 1, 2001 to February 28, 2002, at a price exceeding
R$49.26/MWh. This asset includes the related taxes and charges on
revenues; however, such taxes and charges are not required to be
transferred to the generators. Accordingly, taxes and charges are
excluded before transferring these amounts to generators. These
amounts may change, depending on the litigation currently in
progress, filed by market agents, including the Company, related to
the interpretation of the market rules in force.
7
Under ANEEL Resolution No. 484 of August 29, 2002, the special rate adjustment
will be in force for a maximum period of 82 months, January 2002 to October
2008. However, management has determined that the special rate adjustment
would not be sufficient to recover CEMIG's rationing losses. This
determination was based on certain assumptions, the most relevant of which
relate to rate adjustments, inflationary rates, SELIC (Brazilian Central Bank
overnight interest rate) and CEMIG's growth in the energy market. Accordingly,
the Company recorded a provision relating to rationing losses.
Considering that the assumptions used in management's determination may change
throughout the recovery period, management is periodically reviewing these
projections, and consequently, the provision mentioned in the prior paragraph.
Recovery of credits through the special rate adjustment, under ANEEL
Resolution No. 89 of February 25, 2003, is being made as follows: (i) credits
mentioned in item "a" have been in the process of being recovered since
January 2002; (ii) credits mentioned in items "a" and "c" have been in the
process of being recovered simultaneously since January 2003, in the
proportion of 69.22% and 30.78%, respectively; and (iii) credits mentioned in
item "b" will be the last to be recovered.
The amounts which will be realized through the special rate adjustment
described in items "a" and "b" above are being restated based on SELIC until
the month of their effective recovery.
50% of the credits described in item "c" above is being monetarily restated
based on SELIC as from January 1, 2003. The remaining 50% will be monetarily
restated after the conclusion of the MAE settlement, estimated to occur after
the completion of audit work. These procedures were established by ANEEL
Resolution No. 36, as of January 29, 2003.
Through Resolutions No. 480 to 482, as of August 29, 2002, ANEEL approved the
amounts of billing losses and recovery of variations of the Parcel "A" items.
Despite ANEEL Resolution No. 483, of August 29, 2002, which approved the
amounts to be paid to generators for the energy purchased on the MAE during
the rationing period, CEMIG recorded such transactions based on updated
information provided by MAE in October 2002, which resulted from the MAE's
revision of the calculation criteria and which are higher than amounts
approved in the mentioned Resolution.
ICMS (State VAT) on the special rate adjustment, related to future billings,
which is estimated at R$400,780, only becomes an obligation once the customers
are billed. However, because the Company's only responsibility is to transfer
this tax from consumers to the State tax authorities, the Company did not
record this obligation in advance.
8
The amounts to be recovered through the special rate adjustments mentioned in
items "a", "b" and "c" are as follows:
Company and Consolidated
-------------------------------------------------------------------
March 31, December 31,
2003 2002
------------------------------------------------ -----------------
SELIC
Principal restatement Total Total
---------------- --------------- ------------- -----------------
Billing losses during the Electricity Rationing Period 876,848 189,843 1,066,691 1,023,379
Amounts collected (262,594) - (262,594) (218,168)
---------------- --------------- ------------- -----------------
614,254 189,843 804,097 805,211
Recovery of spot market amounts by generators 456,176 13,045 469,221 456,176
Amounts collected (11,361) - (11,361) -
---------------- --------------- ------------- -----------------
444,815 13,045 457,860 456,176
Recovery of uncontrollable cost variations relating to Parcel
"A" 245,299 95,863 341,162 323,380
---------------- --------------- ------------- -----------------
1,304,368 298,751 1,603,119 1,584,767
( - ) Provision for losses on the realization of the special
rate adjustment (177,627) (10,074) (187,701) (177,627)
---------------- --------------- ------------- -----------------
1,126,741 288,677 1,415,418 1,407,140
================ =============== ============= =================
Current assets 269,977 257,577
Noncurrent assets 1,145,441 1,149,563
========= =========
9
The proceeds of Special rate adjustments to be paid to generators, as
described in item "c", are as follows:
Company and Consolidated
-------------------------------------------------------------------
March 31, December 31,
2003 2002
------------------------------------------------ -----------------
SELIC
Principal restatement Total Total
---------------- --------------- ------------- -----------------
Amounts to be paid to generators 418,269 12,056 430,325 418,269
( - ) Transference made (4,410) - (4,410) -
---------------- --------------- ------------- -----------------
413,859 12,056 425,915 418,269
================ =============== ============= =================
Short-term liabilities 71,157 83,974
Long-term liabilities 354,758 334,295
============= =================
4) WHOLESALE ENERGY MARKET - MAE
(a) Obligations and rights from MAE transactions
As established by the General Agreement of the Electricity Sector, the
difference between the amounts paid to generators and distributors related to
MAE transactions during the period in which the Electricity Rationing Plan was
in force and the amount of R$49.26/MWh will be reimbursed through the special
rate adjustment.
According to ANEEL Resolution No. 36, dated January 29, 2003, after March
2003, distribution concessionaires should collect and transfer, on a monthly
basis, the special rate adjustment amounts to generators and distributors,
including CEMIG, that have amounts receivable.
Of the Special rate adjustment credits to be transferred from distribution
concessionaires to CEMIG, corresponding to approximately R$8,263 as of March
31, 2003, CEMIG had received R$3,739. Some distribution concessionaires are
not transferring to CEMIG the Special rate adjustments because they believe,
based on ANEEL Resolution No. 36 and ANEEL Technical Note No. 004/2003, that
CEMIG is challenging the General Agreement of the Electricity Sector because
it is contesting the methodology applied to calculate CEMIG's obligations
resulting from MAE transactions (see item "b" of this note) and for this
reason, such distribution concessionaires are prevented from transferring such
amounts.
However, CEMIG does not believe that the injunction granted in December 2002,
contesting the methodology applied to calculate the CEMIG's rights and
obligations, represents a challenge of the General Agreement of the
Electricity Sector. Therefore, the Company is contesting restrictions included
in ANEEL Resolution No. 36 and ANEEL Technical Note No. 004/2003, to eliminate
any sanction or restriction on CEMIG's ability to receive amounts due.
The amounts to be received from distribution concessionaires are recorded in
Current and Noncurrent Assets, under Distributors - Energy supply.
50% of CEMIG's rights and obligations are being monetarily restated based on
the SELIC variation, as from January 1, 2003. The remaining 50% will be
monetarily restated after the conclusion of MAE settlement.
10
CEMIG's rights and obligations related to MAE transactions, are set forth
below:
March 31, December 31,
2003 2002
------------------- ------------------
ASSETS
Current
Distributors - Energy supply 93,732 82,476
Noncurrent
Distributors - Energy supply 463,357 462,640
------------------- ------------------
557,089 545,116
=================== ==================
LIABILITIES
Current
Suppliers 457,875 770,578
------------------- ------------------
457,875 770,578
=================== ==================
The MAE's revision of certain assumptions used to calculate the stated
amounts, differences between CEMIG's estimates and the effective values, and
judicial claims currently in progress, filed by market agents, related to the
interpretation of the market rules in force, may change the amounts recorded.
(b) Financial settlement of the MAE transactions
On February 18, 2003, CEMIG settled part of its outstanding obligations
relating to MAE transactions, in the amount of R$335,482, using financing
provided by BNDES.
CEMIG is required to settle the remaining outstanding MAE amounts after the
completion of an audit on the amounts due by the agents and additional
financing to be provided by BNDES.
The amounts paid to MAE were calculated according to an injunction granted to
CEMIG on December 25, 2002, determining that CEMIG should be considered as
both a distributor and generator for purposes of recording of MAE
transactions, notwithstanding ANEEL Resolution No. 447, of August 23, 2002,
which determined that CEMIG should be considered as a distribution
concessionaire only, not considering its generation activities.
The amounts provided by MAE, in accordance with the injunction, represented a
R$122,000 decrease in CEMIG's net liabilities. However, because the
methodology to be used to calculate CEMIG's rights and obligations is still
pending, the Company opted to keep the amounts previously recorded, according
to ANEEL Resolution No. 447.
5) CASH AND CASH EQUIVALENTS
Consolidated Company
----------------------------------------- ------------------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
------------------- -------------------- ------------------- ---------------------
Banks 135,123 20,162 132,344 18,280
Short term investments 143,217 102,813 51,636 32,023
------------------- -------------------- ------------------- ---------------------
278,340 122,975 183,980 50,303
=================== ==================== =================== =====================
The majority of the short-term investments of CEMIG and its subsidiaries are
invested in Bank Deposit Certificates and debentures issued by third parties
(Note 28), indexed primarily to the CDI (Interbank Certificate of deposit
rate) variation.
11
6) ACCOUNTS RECEIVABLE
Consolidated
---------------------------------------------------------------------------------------------------------------------------------
Past due Past due Total Total
accounts - up accounts - March 31, December 31,
Consumer Class Current to 90 days over 90 days 2003 2002
------------------------------------------------- ----------- ---------------- -------------- ------------- --------------
Residential 182,924 112,925 13,757 309,606 313,693
Industrial 127,413 31,601 78,308 237,322 301,764
Commercial 85,474 46,627 14,653 146,754 129,322
Rural 22,677 11,076 5,067 38,820 38,321
Public authorities 12,168 22,666 14,228 49,062 38,948
Public lighting 12,574 33,978 27,049 73,601 45,526
Public services 7,666 31,710 27,375 66,751 66,769
----------- ---------------- -------------- ------------- --------------
Subtotal - Consumers 450,896 290,583 180,437 921,916 934,343
Supply to other concessionaries 9,207 - - 9,207 6,056
Allowance for doubtful accounts - - (69,899) (69,899) (57,978)
----------- ---------------- -------------- ------------- --------------
460,103 290,583 110,538 861,224 882,421
=========== ================ ============== ============= ==============
Company
---------------------------------------------------------------------------------------------------------------------------------
Past due Past due Total Total
accounts - up accounts - March 31, December 31,
Consumer Class Current to 90 days over 90 days 2003 2002
------------------------------------------------- ----------- ---------------- -------------- ------------- --------------
Residential 182,924 112,925 13,757 309,606 313,693
Industrial 125,329 31,601 78,119 235,049 268,250
Commercial 73,026 46,133 13,220 132,379 123,046
Rural 22,677 11,076 5,067 38,820 38,321
Public authorities 12,168 22,666 14,228 49,062 38,948
Public lighting 12,574 33,978 27,049 73,601 45,526
Public services 7,666 31,710 27,375 66,751 66,769
----------- ---------------- -------------- ------------- --------------
Subtotal - Consumers 436,364 290,089 178,815 905,268 894,553
Supply to other concessionaries 9,207 - - 9,207 6,056
Allowance for doubtful accounts - - (68,472) (68,472) (57,978)
----------- ---------------- -------------- ------------- --------------
445,571 290,089 110,343 846,003 842,631
=========== ================ ============== ============= ==============
7) RECOVERABLE TAXES
Consolidated Company
-------------------------------------- --------------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
--------------- --------------------- ----------------- -------------------
Current Assets
State VAT - ICMS 32,232 17,978 23,851 15,239
Income and social contribution tax 39,874 2,842 44,747 -
Other 4,039 502 3,741 337
--------------- --------------------- ----------------- -------------------
76,145 21,322 72,339 15,576
=============== ===================== ================= ===================
Noncurrent Assets
State VAT - ICMS 91,083 81,583 79,368 68,432
=============== ===================== ================= ===================
The balances of income and social contribution taxes are primarily related to
withheld amounts on short-term investments and prepaid tax in 2003 in amounts
greater than due amounts. The credits will be offset in 2003.
The State VAT assets of the Company and its subsidiaries will be recovered
through offset against State VAT liabilities. Most of the balance recorded as
noncurrent assets is subject to a 48-month compensation period, as established
by Supplementary Federal Law No. 102/00. The Company is in a legal dispute
with the Minas Gerais State Government in order to compensate tax credits in
the amount of R$18,843, also recorded as Other - Noncurrent assets.
12
8) PREPAID EXPENSES - CVA
The balance of the recoverable variation account of Parcel "A" items - "CVA",
refers to the difference, beginning October 26, 2001, between the estimated
Parcel "A" costs of the Company, used in defining rate adjustments, and
payments in respect of parcel "A" items actually made. The variations will be
recovered in subsequent annual rate adjustments.
However, as a result of Executive Act No. 116, issued on April 4, 2003, the
compensation of the "CVA" costs was postponed for 12 months from April 8,
2003, the date of the next scheduled rate increase.
Additionally, the "CVA" balance, for which compensation was postponed, plus
the CVA balance to be calculated for the next 12 months, as from April 8,
2003, will be reimbursed though an increase in electric rates for a period of
24 months, beginning April 8, 2004.
The mentioned Executive Act included in "CVA" the variations of the Energy
Development Fund (a fund created by the Federal Government for energy
development and competitiveness of energy produced through wind farms, small
hydroelectric power plants, biomass, natural gas and coal) as from February
10, 2003.
Consolidated and Company
--------------------------------------------------------------------------------
Total Total
March 31, December 31,
Principal SELIC Restatement 2003 2002
-------------------- ------------------ ------------------ -----------------
System service charges - ESS 131,813 3,689 135,502 119,589
Itaipu Binacional electricity purchase tariff 351,218 34,202 385,420 323,860
Itaipu Binacional electricity transport tariff 2,983 524 3,507 2,985
Fuel usage quota - CCC (99,045) (8,693) (107,738) (78,203)
Tariff for use of basic transmission network 55,918 6,231 62,149 51,610
Energetic Development Account - CDE 40,455 - 40,455 -
Charges for use of water resources 3,382 210 3,592 1,200
-------------------- ------------------ ------------------ -----------------
486,724 36,163 522,887 421,041
-------------------- ------------------ ------------------ -----------------
Current 1,555 225,833
Noncurrent 521,332 195,208
================== =================
The above-mentioned amounts are updated based on the SELIC rate from the
payment date to effective recovery through annual rate adjustments.
The amounts to be compensated, recorded as Current Assets, refer to variations
of uncontrollable costs that were included in the annual rate adjustment on
April 8, 2002 and are being transferred monthly to operating expenses on a
linear basis.
The System service charges - ESS for the period from September 2000 to
December 2002 were accrued based on definitive information provided by MAE and
for the period from January 2003 to March 2003, were accrued based on Company
estimates and are subject to change. These amounts will be monetarily restated
based on SELIC, as from the effective payment (a portion was settled in
February 2003, as described in Note 4, item b). The amounts recorded may
change due to MAE's revision of certain assumptions used to calculate the
stated amounts and judicial claims currently in progress, filed by market
agents, related to the interpretation of the market rules in force.
13
9) RECEIVABLE FROM MINAS GERAIS STATE GOVERNMENT
The remaining balance of the CRC Account (Recoverable Rate Deficit) was
transferred to the State Government in 1995, through the CRC Credit Assignment
Contract, pursuant to Law No. 8,724/93. This balance is payable monthly, over
17 years beginning June 1, 1998, and accrues annual interest of 6% and is
subject to restatement based on the IGP-DI (General Price Index).
In 2002, CEMIG entered into the following amendments with the Minas Gerais
State Government:
(a) Second Amendment of the CRC Credit Assignment Contract, signed on October
14, 2002
This Amendment refers to 149 installments, maturing from January 1, 2003 to
May 1, 2015, in the total amount of R$1,415,497, as of March 31, 2003. These
installments are subject to annual interest of 6% and are updated based on the
IGP-DI.
Due to the non-inclusion in the Second Amendment of effective guarantees that
would assure the realization of the aforementioned asset, CEMIG recorded an
allowance for losses in 2002 that represents the total amount of the referred
amendment.
Due to the full allowance recorded, the financial income related to monetary
variation and interest on the Second Amendment, from January to March 2003, in
the amount of R$94,288, was excluded from the statement of income for 2003.
However, in compliance with the Brazilian tax legislation, CEMIG has recorded
the federal payable taxes on the mentioned financial income.
The installments of the mentioned Amendment, due from January 1 to May 1,
2003, totaling R$68,517, including monetary variation, interest and fine were
not paid. Company management is negotiating the collection of the
aforementioned past due amount with the Minas Gerais State Government, under
the conditions established by the contract.
(b) Third Amendment of the CRC Credit Assignment Contract, signed on October
24, 2002
The installments originally due from April 1, 1999 to December 1, 1999 and
from March 1, 2000 to December 1, 2002 totaling R$819,899 as of March 31,
2003, including interest and fines over past due installments, were
renegotiated with the Minas Gerais State Government to annual interest rate of
12.00% and are updated based on the IGP-DI. They will be paid in 149 monthly
installments from January 2003 to May 2015. This Amendment established an
additional guarantee which now allows the Company to retain dividends and
interest on capital to be paid to the Minas Gerais State Government, as a
Company shareholder.
The installments of the Third Amendment, due from January 1 to May 1, 2003,
totaling R$52,281, including monetary variation, interest and fine were not
paid. Company management is negotiating the collection of the aforementioned
past due amount with the Minas Gerais State Government, under the conditions
established by the contract.
The projection of the Company's future operations indicates that the dividends
attributable to the Minas Gerais State Government will be sufficient to assure
the full realization of the asset related to the Third Amendment.
Management will monitor future events, which may impact the Company's dividend
payment projection, in order to conclude if the above-mentioned guarantee is
still effective or an additional allowance under this amendment is necessary.
14
10) INCOME AND SOCIAL CONTRIBUTION TAXES
(a) Tax credits
The Company and its subsidiaries have tax credits recorded as noncurrent
assets. The income tax credits are recorded at a 25.00% rate and social
contribution tax credits are recorded at a 9.00% rate. The composition of the
balances is as follows:
Consolidated Company
--------------------------------- ---------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
--------- ------------- --------- ------------
Tax credits on:
Tax loss carryforwards 254,000 233,724 232,994 213,359
Employee post retirement benefits 79,548 113,081 79,548 113,081
Reserve for contingencies 135,338 126,799 135,338 126,799
Accrual for voluntary termination program - PDV 9,214 9,214 9,214 9,214
Allowance for doubtful accounts 23,318 19,750 23,318 19,750
Reserve for PASEP/COFINS - Special Rate Adjustment
26,404 26,214 26,404 26,214
Other 11,973 12,057 11,869 11,976
--------- ------------- --------- ------------
539,795 540,839 518,685 520,393
========= ============= ========= ============
CEMIG's Board of Directors approved, on March 27, 2003, the analysis made by
CEMIG's Financial and Investor Relations Office on the projected future
results of operations, adjusted to present value. According to such analysis,
the Company may be able to realize the tax credits set forth above over a
ten-year maximum period, in compliance with CVM Resolution No. 371, published
on June 27, 2002. CEMIG's Fiscal Council, on March 27, 2003, received such
study for consideration.
In accordance with CEMIG's estimates, future taxable income is expected to
permit realization of the tax credits, as of March 31, 2003 as follows:
Consolidated Company
----------------- -------------
2003 117.886 117.782
2004 114.461 114.032
2005 96.812 94.632
2006 32.032 28.320
2007 34.412 30.130
2008 to 2010 123.702 115.853
2011 to 2012 20.490 17.936
----------------- --------------
539.795 518.685
================= ==============
CEMIG has tax credits not recognized in its financial statements, in the
amount of R$19,364, resulting from management estimates that certain
obligations, due to their nature, will be realized in a period over ten years.
Additionally, Infovias has tax credits not recognized in its financial
statements, in the amount of R$5,902, resulting from estimates of future
results of operations approved by the Company's Board of Directors.
15
(b) Reconciliation of income tax and social contribution tax expenses
The reconciliation between the nominal expense of income tax (25% rate) and
social contribution tax (9% rate) and the effective expense presented in the
statement of income is as follows:
Consolidated Company
----------------------------- ------------------------------
Three months ended Three months ended
March 31, March 31,
----------------------------- ------------------------------
2003 2002 2003 2002
------------- -------------- -------------- --------------
Income before taxes on income 271,838 335,359 267,209 334,410
Income and social contribution expenses - nominal (92,425) (114,022) (90,851) (113,699)
Tax effects on:
Allowance for losses on receivable from Minas Gerais State
Government (32,037) (32,037)
Reversal of social contribution tax on additional monetary
restatement (2,331) (1,605) (2,331) (1,605)
Equity pick-up in subsidiaries - - 3,206 493
Contributions and grants not deductible (957) (749) (957) (749)
Other 7,335 1,096 7,455 1,097
Income and social contribution tax expenses in income statement (120,415) (115,280) (115,515) (114,463)
============= ============== ============== ==============
11) BONUS, NET OF SURCHARGE, AND COSTS TO BE REIMBURSED AS A RESULT OF THE
ELECTRICITY RATIONING PLAN
Through the Energy Crisis Committee, the Federal Government established
electric energy consumption targets for all consumers of areas affected by the
Electricity Rationing Plan in force during the period from June 2001 to
February 2002. A financial bonus was established for residential consumers
whose electric energy consumption was lower than the target, and surcharges
were established for all consumers whose consumption exceeded the target,
calculated based on the effective consumption in excess of such target, as
established by the Energy Crisis Committee. The balances related to the bonus,
costs and surcharge, to be reimbursed by the Federal Government, are as
follows:
Consolidated and Company
---------------------------------------
March 31, December 31,
2003 2002
------------------ -----------------
Bonus paid to consumers that consumed less than the target consumption 24,101 24,229
Costs incurred related to the adoption of the Electricity Rationing Plan in excess
of the 2.00% surcharge on consumer tariffs. 27,854 27,854
------------------ -----------------
51,955 52,083
------------------ -----------------
Current 27,312 -
Noncurrent 24,643 52,083
================== =================
Part of the surcharges, in the total amount of R$24,101, were not collected
from consumers since they were subject to a judicial dispute during the
Electricity Rationing Plan. As a result, ANEEL has not reimbursed the Company
for the bonuses relating to the unbilled surcharge. This issue is under
negotiation with ANEEL, and CEMIG does not expect losses on the realization of
this amount.
In conformity with ANEEL Resolution No. 600, dated October 31, 2002, the
operation costs related to the adoption of the Electricity Rationing Plan in
excess of the 2.00% surcharge on consumer rates are expected to be recovered,
after approval by ANEEL, through an increase in electricity rates in force
after April 8, 2003.
16
12) RECEIVABLES FROM FEDERAL GOVERNMENT - REVENUE LOSSES FROM LOW-INCOME
CONSUMERS
The new classification criteria established by the Federal Government for
low-income consumers resulted in a decrease in revenues from electricity sales
to final customers in the amount of R$63,956 (R$42,386 in 2002 and R$21,570 in
2003), due to the lower rate applied to those customers.
The loss on revenue in 2002 will be reimbursed by the Federal Government
according to criteria not yet established. Accordingly, in compliance with
ANEEL's request, CEMIG recorded these losses under this caption against
electricity sales to final customers in 2002 and 2003.
13) INVESTMENTS
Consolidated Company
---------------------------------- -------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
---------- ------------ ------------ ------------
Equity in subsidiaries
Empresa de Infovias S.A. - - 229,014 205,110
Companhia de Gas de Minas Gerais - GASMIG - - 89,208 84,035
Usina Termica Ipatinga S.A. - - 77,272 76,321
Sa Carvalho S.A. - - 95,563 100,119
Horizontes Energia S.A. - - 64,258 64,232
Cemig Capim Branco Energia S.A. - - 12,273 12,233
Cemig PCH S.A. - - 17,133 14,929
UTE Barreiro S.A. - - 4,526 4,448
Efficientia S.A. - - 1,565 1,435
---------- ------------ ------------ ------------
- - 590,812 562,862
In consortiums 666,363 588,910 654,091 576,674
Goodwill on purchase of Infovias 9,510 9,510 9,510 9,510
Other investments 10,457 10,237 8,837 6,426
---------- ------------ ------------ ------------
686,330 608,657 1,263,250 1,155,472
========== ============ ============ ============
(a) The principal information related to consolidated subsidiaries as of March
31, 2003, is as follows:
Three months
ended March 31,
March 31, 2003 2003
------------------------------------------------ ------------------
Cemig Interest Shareholders' Net income (loss)
Subsidiaries (%) Capital equity
---------------- ------------ ---------------- ------------------
Empresa de Infovias S.A. 99.92 291,000 229,190 (3,785)
Companhia de Gas de Minas Gerais -GASMIG * 95.19 46,067 93,735 6,078
Usina Termica Ipatinga S.A. 100.00 74,634 77,272 951
Sa Carvalho S.A. 100.00 86,833 95,563 4,244
Horizontes Energia S.A. 100.00 62,871 64,258 -
Cemig Capim Branco Energia S.A. 100.00 1 12,273 -
Cemig PCH S.A. 100.00 1 17,133 -
UTE Barreiro S.A. 100.00 1 4,526 -
Efficientia S.A. 100.00 10 1,565 (466)
In the first quarter of 2003, CEMIG made payments relating to a capital
increase in Infovias in the amount of R$26,568.
17
The independent accountants' report on the financial statements of Infovias,
as of December 31, 2002, included comments on: (i) deferred income and social
contribution taxes for which realization was based on management profit
projections which depend on contracts which are under negotiation; and (ii)
need of additional resources from shareholders or third-parties to fund its
operations, as well as to ensure the recoverability of its assets at the
amounts recorded in its financial statements, until Infovias' own operating
revenues reach a level sufficient to absorb these amounts. The interim
financial statements of Infovias for the quarter ended March 31, 2003 are
still being prepared.
(b) Consortiums
CEMIG and its subsidiary, Cemig Capim Branco Energia S.A., are partners with
other companies in certain consortiums for electricity generation projects.
The consortiums, which are not separate legal entities, were created to manage
the related concession contracts. The Company maintains accounting records of
its share in the consortium assets which are jointly managed with the other
consortium partners, as follows:
---------------------------------------
CEMIG's
Participation March 31, 2003 December 31, 2002
--------------- ------------------ ------------------
In Operation
Porto Estrela Hydroelectric Power Plant 33.33% 37,393 37,600
Igarapava Hydroelectric Power Plant 14.50% 49,948 50,304
Funil Hydroelectric Power Plant 49.00% 150,646 130,392
Under Construction
Queimado Hydroelectric Power Plant 82.50% 163,351 144,771
Aimores Hydroelectric Power Plant 49.00% 252,753 213,607
------------------ ------------------
Total Company 654,091 576,674
Cemig Capim Branco S.A.
Capim Branco Hydroelectric Power Plants I and II 21.05% 12,272 12,236
Total Consolidated 666,363 588,910
================= ==================
The realization of Consortiums investments will occur simultaneously with
depreciation on the Consortiums', Property, Plant and Equipment, calculated on
a straight-line basis, according to rates established by ANEEL.
18
14) PROPERTY, PLANT AND EQUIPMENT
Consolidated Company
------------------------------------ -------------------------------------
Annual average
depreciation rate March 31, December 31, March 31, December 31,
% 2003 2002 2003 2002
----------------- ------------------ ----------------- ------------------- ----------------
In service
Generation-
Hydroelectric 2.47 5,514,557 5,512,899 5,366,177 5,364,519
Thermoelectric 1.83 215,223 216,656 130,639 132,072
Transmission 3.08 1,029,931 1,021,836 1,029,931 1,021,836
Distribution 5.21 6,729,971 6,680,138 6,729,971 6,680,138
Administration 9.63 268,091 266,601 268,091 266,601
Other 7.48 384,242 379,014 - -
------------------ ----------------- ------------------- ----------------
14,142,015 14,077,144 13,524,809 13,465,166
Accumulated depreciation and
amortization
Generation (2,166,849) (2,131,769) (2,147,029) (2,114,013)
Transmission (472,454) (465,022) (472,454) (465,022)
Distribution (2,714,350) (2,654,365) (2,714,350) (2,654,365)
Administration (139,889) (133,596) (139,889) (133,596)
Other (43,516) (34,978) - -
------------------ ----------------- ------------------- ----------------
(5,537,058) (5,419,730) (5,473,722) (5,366,996)
------------------ ----------------- ------------------- ----------------
Total in service 8,604,957 8,657,414 8,051,087 8,098,170
------------------ ----------------- ------------------- ----------------
Construction in progress-
Generation 277,937 220,360 253,300 198,217
Transmission 121,824 107,312 121,824 107,312
Distribution 439,330 442,921 439,330 442,921
Administration 38,076 33,000 38,076 33,000
Other 34,949 22,206 - -
------------------ ----------------- ------------------- ----------------
Total construction in progress 912,116 825,799 852,530 781,450
------------------ ----------------- ------------------- ----------------
Total 9,517,073 9,483,213 8,903,617 8,879,620
------------------ ----------------- ------------------- ----------------
Special liabilities (1,601,915) (1,585,431) (1,601,915) (1,585,431)
------------------ ----------------- ------------------- ----------------
Total, net 7,915,158 7,897,782 7,301,702 7,294,189
Special liabilities refers primarily to consumers' contributions to support
construction necessary to meet energy supply orders. Our obligation to satisfy
these Special liabilities depends on ANEEL's disposition at the end of the
distribution concessions through reduction of residual value of Property,
plant and equipment to define the value that the Federal Government will pay
to concessionaires. According to accounting principles and electric energy
sector legislation in force in Brazil, these amounts are not subject to
updating, amortization or depreciation.
15) SUPPLIERS
Consolidated Company
------------------------------------ -------------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
------------------ ----------------- ------------------- ----------------
Short Term
Electricity suppliers
Furnas 448,902 259,437 448,902 259,437
Wholesale Energy Market - MAE 457,875 770,578 457,875 770,578
Transfer to Generators 71,157 83,974 71,157 83,974
Other 34,177 30,636 34,177 30,636
----------- ---------------- ------------------ ---------------
1,012,111 1,144,625 1,012,111 1,144,625
Supplies and services 72,574 130,100 46,844 86,347
----------- ---------------- ------------------ ---------------
1,084,685 1,274,725 1,058,955 1,230,972
=========== ================ ================== ===============
Long Term
Electricity suppliers -
Transfer to Generators 354,758 334,295 354,758 334,295
=========== ================ ================== ===============
19
The amounts to be paid related to energy purchased on the spot market and
system service charges - ESS during the period from September 2000 to December
2002 were recorded based on information provided by MAE. The amounts related
to the period from January 2003 to March 2003 were accrued based on Company
estimates. A portion of these liabilities were settled in February 2003 (Note
4).
The amounts recorded may change due to MAE's revision of certain assumptions
used to calculate the stated amounts and judicial claims currently in
progress, filed by market agents, including the Company, related to the
interpretation of the market rules in force.
As of March 31, 2003, CEMIG had overdue amounts to be paid to Furnas, relating
to purchase of energy from Itaipu, in the amount of R$203,511, which R$101,140
was paid on April 2003.
16) TAXES PAYABLE
Consolidated Company
------------------------------------ -------------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
------------------ ----------------- ------------------- ----------------
Current
Income Tax 66,548 20,559 66,548 17,259
Social Contribution Tax 23,839 27,856 23,839 27,380
ICMS (State VAT) 134,084 44,982 127,604 44,240
COFINS (tax on revenue) 25,995 29,646 25,351 28,938
INSS (social security) 12,694 11,828 12,387 11,482
Other 8,768 8,930 8,516 8,913
5,095 6,956 4,988 6,292
------------------ ----------------- ------------------- ----------------
277,023 150,757 269,233 144,504
================== ================= =================== ================
Long Term
Income Tax 195,333 111,651 195,333 111,651
Social Contribution Tax 70,320 40,195 70,320 40,195
COFINS 46,743 46,255 46,743 46,255
PASEP 18,609 18,539 18,609 18,539
------------------ ----------------- ------------------- ----------------
331,005 216,640 331,005 216,640
================== ================= =================== ================
The federal taxes recorded under long-term liabilities refer to net deferred
obligations on assets and liabilities in accordance with the General Agreement
of Electricity Sector. The increase in net obligations is due to the payment
of a portion of MAE obligations in February 2003.
The Company negotiated with certain financial institutions to prepay part of
the State VAT on December 30, 2002, originally due on January 2, 2003,
totaling R$76,000. The Company realized a financial gain in this transaction,
based on the Interbank certificate of deposit rate- CDI variation.
20
17) LOANS, FINANCING AND DEBENTURES
Composition of loan, financing and debentures by currency and indexes is as
follows:
Consolidated Company
------------------------------------ -----------------------------------
March 31, December 31, March 31, December 31,
2003 2002 2003 2002
---------------- ------------------- ---------------- ----------------
Currency -
U.S. dollar 1,829,372 1,994,957 1,711,134 1,872,393
EURO 34,247 73,037 34,247 73,037
Unit of account (basket of currencies) 41,509 51,053 41,509 51,053
---------------- ------------------- ---------------- ----------------
1,905,128 2,119,047 1,786,890 1,996,483
Indice Geral de Precos - IGP-M (General Price Index) 1,177,289 1,076,252 1,177,289 1,076,252
Indice Interno da Eletrobras - FINEL (Eletrobras
Internal Index) 151,196 154,028 151,196 154,028
UFIR (Tax Reference Unit) 159,995 152,228 159,995 152,228
SELIC (Brazilian benchmark interest rate) 336,339 - 336,339 -
Other 49,805 37,815 43,183 24,323
---------------- ------------------- ---------------- ----------------
1,874,624 1,420,323 1,868,002 1,406,831
Escrow accounts (1)
Income based on CDI (Interbank certificate of deposit)
rates (59,156) (52,130) (59,156) (52,130)
Income based on U.S. dollar variation
(104,914) (102,496) (104,914) (102,496)
---------------- ------------------- ---------------- ----------------
(164,070) (154,626) (164,070) (154,626)
---------------- ------------------- ---------------- ----------------
3,615,682 3,384,744 3,490,822 3,248,688
================ =================== ================ ================
(1) Refers to restricted use funds for payment of foreign currency-denominated financing, in compliance with Banco Central do
Brasil - BACEN (Brazilian Central Bank) Resolution No. 2,515 of June 29, 1998.
The variations in the principal currencies and indexes used to restate the
loans, financing and debentures are as follows:
Quarterly Quarterly
Variation Variation
Currency % Indexes %
---------------------------------------------------- ------------- --------------------------------------- -----------------
U.S. dollar (5.10) Indice Geral de Precos - IGP-M
(General Price Index) 6.27
Euro (0.94) Indice Interno da Eletrobras - FINEL
(Eletrobras Internal Index) 1.59
Unit of account (Basket of currencies) 0.53
Certain of the Company's loan, financing and debenture contracts, in the total
amount of R$510,946 as of March 31, 2003, of which R$328,613 are classified as
long-term liabilities, contain certain financial covenants that, in the event
of noncompliance, may cause the amounts due under the contracts to become
immediately due. In addition, the Company has financing contracts that contain
cross-default clauses. The Company has obtained waivers from the creditors
that are parties to contracts that contain covenants with respect to which it
is not in compliance. These waivers affirm that such creditors will not
exercise their rights to demand either accelerated or immediate payment of the
total amounts due as of December 31, 2002, March 31, 2003 and for most
contracts, June 30, 2003. The Company believes that the noncompliance with the
debt covenants was an unusual event, and that its operations for 2003 are
expected to allow full compliance with debt covenants. Loan, financing and
debentures are classified as current and long-term liabilities according to
the original contract terms, in compliance with the waivers obtained.
21
18) RESERVE FOR CONTINGENCIES
CEMIG and its subsidiaries are party to certain legal proceedings in Brazil
arising in the normal course of business and relating to tax, labor, civil and
other issues.
The Company believes that any loss in excess of the amounts provided for, in
respect of such contingencies, will not have a material adverse effect on the
Company's results of operations or financial position.
For those contingencies for which an adverse outcome has been deemed probable,
CEMIG has recognized reserves for losses:
The composition of provisions recorded is as follows:
Consolidated and Company
------------------------------------------
March 31, December 31,
2003 2002
--------------------- ------------------
Labor claims 76,620 69,706
Civil lawsuits - Consumers 91,533 85,727
Social contribution tax 96,495 93,137
Finsocial (tax on revenue) 19,558 19,393
Civil lawsuits - Others 27,929 26,157
Other 21,836 20,925
--------------------- ------------------
333,971 315,045
===================== ==================
Certain details relating to such reserves are as follows:
(a) Labor claims
The labor claims relate principally to overtime and hazardous occupation
compensation. The total exposure for those matters is estimated to be
R$95,776, as of March 31, 2003 (R$87,133 as of December 31, 2002). The Company
recorded in the first quarter ended March 31, 2003 reserve in the amount of
R$6,914 (R$910 in the first quarter of 2002). CEMIG determines the amounts to
be reserved based on the nature of the group of claims and the most recent
court decisions.
(b) Civil lawsuits - Consumers
A number of industrial consumers have brought legal action against the Company
seeking refunds of amounts paid to CEMIG as a result of a rate increase that
became effective during the Brazilian government's economic stabilization
"Cruzado Plan" in 1986, alleging that such increases violated the price
controls instituted as part of that plan. CEMIG determines the amounts to be
reserved based on the amount billed subject to consumers' claims and recent
court decisions.
The total estimated exposure to the Company for those claims, fully provided
for, was R$91,533 as of March 31, 2003 (R$85,727 at December 31, 2002).
(c) Social contribution tax
The Company is deducting the amounts of depreciation, amortization and
write-off of supplementary monetary restatement of property, plant and
equipment, for purposes of computation of social contribution tax. The Company
estimates that its potential exposure in this matter is approximately
R$96,495, as of March 31, 2003 (R$93,137 at December 31, 2002). The amount is
fully provisioned.
22
(d) Finsocial (tax on revenue)
In 1994, CEMIG was fined by the Brazilian federal tax authorities due to the
exclusion of State VAT from the Finsocial calculation, a tax on billing
extinguished in 1992. The Company estimates that its potential exposure in
this matter is approximately R$19,558 as of March 31, 2003 (R$19,393 at
December 31, 2002). The amount is fully provisioned.
(e) Other
Other reserves are related to a number of lawsuits involving the Federal
Government, pursuant to which the Company is disputing the constitutionality
of certain federal taxes that have been assessed against it and other general
claims arising in the ordinary course of business.
(f) Legal proceedings in which a favorable outcome is probable
CEMIG has other relevant legal proceedings with respect to which the Company
believes that a favorable outcome is probable. Certain details relating to
such matters are as follows:
(i) Litigation involving FORLUZ with possible financial effects on CEMIG
The Company is defending, together with FORLUZ, a claim brought by its
employees' labor union ("Sindieletro") contesting the suspension of
increases in the Company's required contribution to the pension fund
pursuant to periodic monetary restatements. The total amount sought in
this claim is R$633,878. No reserve has been recorded for this claim,
since the Company believes that it has a meritorious defense to such
claim and, consequently, does not expect to incur losses related thereto.
In addition, some of Forluz's participants are contesting a change in the
pension fund's contribution adjustment index from IGP-DI to IPCA of IPEAD
(consumer price index calculated by Minas Gerais Accounting Management
and Economic Research Institute of Minas Gerais Federal University). The
total amount sought in this claim is R$281,985. Management believes that
if the outcome is not favorable to Forluz, the additional obligation will
be guaranteed by Forluz's surplus, and does not expect to incur losses
related to such claim. Therefore, and considering that FORLUZ has a
meritorious defense to such claim, no accrual has been recorded for this
claim.
(ii) Income and social contribution taxes on post retirement benefits
On October 11, 2001, the Brazilian federal tax authorities issued an
assessment notice relating to a R$232,155 discrepancy with respect to tax
credits recorded by CEMIG in 2001 that had been partially recovered
during the year. These credits result from the change in accounting
method for recording post-retirement benefit liabilities, as required by
CVM Deliberation No. 371/00. CEMIG is defending the tax assessment notice
administratively against the tax authorities. No reserve has been
recorded as a result of this notice, since the Company believes that the
procedures which generated the tax credits are legally sound.
The tax credits mentioned in the preceding paragraph were offset against
federal taxes paid in 2001 and 2002. As a result, the Brazilian federal
tax authorities issued a decision against such offset due to the tax
assessment mentioned above. CEMIG's total potential exposure as of March
31, 2003 is approximately R$177,835. No reserve for contingencies has
been made to cover any liabilities that may result from the tax
assessment, since CEMIG believes that it has solid legal grounds, which
support the procedures adopted.
(iii) COFINS
The Company began contesting the payment of COFINS (tax on revenue)
beginning in 1992. As a result of an unfavorable court ruling, the
Company paid R$239,266 of COFINS tax on July 30, 1999.
23
The Federal Government is claiming that the Company owes approximately
R$136,388 in additional fines and interest relating to the non-payment of
COFINS. The Company is contesting such claims. No reserve has been
recorded for this claim, since the Company believes that it has a
meritorious defense against such claim and, consequently, does not expect
to incur losses related thereto.
(iv) Regulatory agency acts
ANEEL has a regulatory proceeding pending against CEMIG claiming that
CEMIG owes the Federal Government R$197,206 because of a miscalculation
of credits in the amount of the cumulative rate deficit (CRC) applied to
reduce amounts owed to the Federal Government. The Company believes that
it has a meritorious defense against such claim and has therefore
recorded no reserve in respect thereto.
On January 16, 2003, ANEEL sent a notice to the Company alleging that it
had failed to obtain necessary ANEEL authorization relating to the
Company's 5-year contract with Infovias related to the furnishing of data
and rendering of services related to geo-technology services. ANEEL may
seek to impose a fine upon the Company relating to this matter. The
maximum applicable penalty is a fine in an amount equal to 2.00% of
CEMIG's revenues during the 12-month period immediately prior to the
imposition of the fine. The Company believes that it has a meritorious
defense to such claim and has therefore recorded no accrual in respect of
such claim.
(v) Civil lawsuits - Consumers
Various consumers brought civil class-action claims against CEMIG
contesting rate adjustments applied in prior years, including the special
rate adjustment and the Emergency Capacity Charge (Encargo de Capacidade
Emergencial) applied starting in 2002. The Company believes that it has a
meritorious defense to such claims and has therefore recorded no reserve.
The Company is a defendant, with others enterprises of Consortium of
Capim Branco I and Capim Branco II hydroelectric power plants, in a class
action lawsuit contesting the construction of such plants. Additionally,
the Brazilian Attorney General's Office brought a lawsuit seeking to
nullify the Aimores Power Plant concession. Management believes that it
has a meritorious defense to these lawsuits and, consequently, does not
expect them to prevent the construction and operation of mentioned plants
and the realization of related assets.
19) EMPLOYEE POST-RETIREMENT BENEFITS
Since 1973, the Company has been the sponsor of Fundacao Forluminas de
Seguridade Social - FORLUZ, a non-profit entity with the purpose of providing
its associates, participants and their dependants with additional income to
supplement the government pension, in accordance with the pension plan to
which they are linked.
FORLUZ offers its associates the following supplementary pension plans:
Mixed Benefit Plan - A defined contribution plan for normal retirement and a
defined benefit plan for coverage of active participant's disability and
death. The Company's contribution is equivalent to the associate's monthly
basic contributions and is the only plan available for new participants.
Settled Benefit Plan - Includes all retired participants who opted for this
plan and the balances, at the option date, of active participants who opted
for migrating from the Defined Benefit Plan to the above-mentioned Mixed
Benefit Plan.
Defined Benefit Plan - Benefit plan adopted by FORLUZ up to 1998, in which the
Federal Government Social Security benefit is supplemented in relation to the
actual average salary of the employee's final years of service in the Company.
24
In addition to the pension plans provided by FORLUZ, the Company also pays
part of the life insurance premium for its retirees and of the health care
plan for employees, retirees and their dependants. These plans are also
managed by FORLUZ.
The changes in net post-retirement liabilities are as follows:
Defined Benefit
Pension Plan Health care Life insurance
------------------- ------------------- -------------------
Net liabilities as of December 31, 2002 1,392,088 198,175 247,217
Net periodic cost recorded in the income statement (8,276) 6,383 8,422
Contributions paid (56,231) (4,168) (3,041)
------------------- ------------------- -------------------
Net liabilities as of March 31, 2003 1,327,581 200,390 252,598
=================== =================== ===================
Part of the deficit in FORLUZ's actuarial reserves in the amount of
R$1,537,044 as of March 31, 2003 (R$1,495,334 at December 31, 2002) was
recognized as obligations payable by the Company. These obligations are being
amortized through monthly installments, through June 2024, calculated under
the fixed-installment system ("Price Table"), subject to annual restatement in
accordance with the salary correction index for the Company's employees (not
including productivity) included in the defined benefit plan and subject to
IPCA - IPEAD for other plans, plus 6% per year.
20) SHAREHOLDERS' EQUITY
The change in shareholders' equity is as follows:
Balance as of December 31, 2002 5,680,883
Reversal of dividends 113
Net income for the quarter ended March 31, 2003 151,694
------------------
Balance as of March 31, 2003 5,832,690
==================
In September 1999, the State of Minas Gerais filed a lawsuit seeking to
nullify the shareholders' agreement signed in 1997 with Southern Electric
Brasil Participacoes Ltda. On August 7, 2001, the Minas Gerais State Court of
Appeals declared the shareholders' agreement null and void. Southern Electric
Brasil Participacoes Ltda. appealed the decision which was rejected by the
Minas Gerais State Court of Appeals on October 2001. Southern Electric Brasil
Participacoes Ltda. has appealed the Court's latest decision.
21) ELECTRICITY SALES
The composition of electricity sales to final customers by class is as
follows:
Consolidated
--------------------------------------------------------------------------------------------------
(Not reviewed by accountants)
-----------------------------------------------------------------
No of consumers MWh R$
----------------------------- --------------------------------- ------------------------------
Three months ended Three months ended Three months ended
March 31, March 31, March 31,
----------------------------- --------------------------------- ------------------------------
2003 2002 2003 2002 2003 2002
------------- ----------- -------------- ------------- ------------------ -----------
Residential 4,655,848 4,517,756 1,698,335 1,500,186 515,585 381,126
Industrial 68,255 68,087 5,259,841 5,196,928 562,703 452,737
Commercial 518,529 506,064 886,503 808,195 228,330 175,706
Rural 344,001 326,009 343,294 298,132 59,961 44,851
Public authorities 43,831 42,055 119,439 96,120 28,656 20,131
Public lighting 2,145 2,713 249,302 173,569 38,441 23,540
Public services 6,870 6,591 240,987 221,824 35,259 26,328
Own consumption 1,339 1,377 14,214 11,302 - -
Unbilled, net - - - - (15,345) 16,321
------------- ----------- -------------- ------------- ------------------ -----------
5,640,818 5,470,652 8,811,915 8,306,256 1,453,590 1,140,740
Supply to other concessionaries 4 4 52,168 89,633 4,250 6,882
MAE transactions - - - - - 32,273
------------- ----------- -------------- ------------- ------------------ -----------
Total 5,640,822 5,470,656 8,864,083 8,395,889 1,457,840 1,179,895
------------- ----------- -------------- ------------- ------------------ -----------
25
Consolidated
--------------------------------------------------------------------------------------------------
(Not reviewed by accountants)
-----------------------------------------------------------------
No of consumers MWh R$
----------------------------- --------------------------------- ------------------------------
Three months ended Three months ended Three months ended
March 31, March 31, March 31,
----------------------------- --------------------------------- ------------------------------
2003 2002 2003 2002 2003 2002
------------- ----------- -------------- ------------- ------------------ -----------
Residential 4,655,848 4,517,756 1,698,335 1,500,186 515,585 381,126
Industrial 68,253 68,085 5,084,837 4,965,690 549,020 446,211
Commercial 518,529 506,064 886,503 808,195 228,330 175,706
Rural 344,001 326,009 343,294 298,132 59,961 44,851
Public authorities 43,831 42,055 119,439 96,120 28,656 20,131
Public lighting 2,145 2,713 249,302 173,569 38,441 23,540
Public services 6,870 6,591 240,987 221,824 35,259 26,328
Own consumption 1,339 1,377 14,214 11,302 - -
Unbilled, net - - - - (15,345) 16,321
------------- ----------- -------------- ------------- ------------------ -----------
5,640,820 5,470,650 8,636,911 8,075,018 1,439,907 1,134,214
Supply to other concessionaries 4 4 52,168 89,633 4,250 6,882
MAE transactions - - - - - 32,273
------------- ----------- -------------- ------------- ------------------ -----------
Total 5,640,820 5,470,654 8,689,079 8,164,651 1,444,157 1,173,369
============= =========== ============== ============= ================== ===========
22) OTHER OPERATING REVENUES
Consolidated Company
------------------------------- -----------------------------
Three months ended Three months ended
March 31, March 31,
------------------------------- -----------------------------
2003 2002 2003 2002
--------------- -------------- -------------- -------------
Use of basic transmission network 58,130 38,070 58,130 38,070
Gas sales 43,975 24,059 - -
Fuel consumption quota 3,755 8,543 3,755 8,543
Regulated services 1,629 1,545 1,629 1,545
Services rendered 14,587 3,658 4,990 3,658
Rent and leasing 3,592 3,648 3,592 3,648
Other 254 1,445 254 829
--------------- -------------- -------------- -------------
125,922 80,968 72,350 56,293
=============== ============== ============== =============
23) DEDUCTIONS FROM OPERATING REVENUES
Consolidated Company
------------------------------- -----------------------------
Three months ended Three months ended
March 31, March 31,
------------------------------- -----------------------------
2003 2002 2003 2002
--------------- -------------- -------------- -------------
State VAT (ICMS) on sales to final consumers 321,698 241,891 311,609 240,592
Tax on billing - COFINS 47,434 45,256 45,632 44,279
Global reserve for reversion quota - RGR 30,412 35,768 30,189 35,667
Tax on billing - PASEP 25,667 9,805 24,788 9,594
Emergency capacity charge 70,229 4,447 69,978 4,447
Other 264 56 89 50
--------------- -------------- -------------- -------------
495,704 337,223 482,285 334,629
=============== ============== ============== =============
CEMIG collected, in March 2003, retroactive amounts related to the Emergency
capacity charge for the period from July 2, 2002 to August 10, 2002, in the
amount of R$29,985. This charge was not collected in the prior year due to a
class action injunction which did not allow the amounts to be collected. On
April 2003, CEMIG collected the remaining parcel, in the amount of R$16,483.
CEMIG pays the State VAT on the Special rate adjustment according to
collection of the amounts in power bills.
26
24) ELECTRICITY PURCHASED FOR RESALE
Consolidated and Company
---------------------------------------
Three months ended
March 31,
---------------------------------------
2003 2002
------------------ ------------------
Itaipu Binacional (through FURNAS) 251,198 223,764
Energy traded on spot market - MAE 5,577 61,018
Initial contracts 29,780 30,086
Special rate adjustment - transfer to generators - 42,987
Other 5,378 2,119
------------------ ------------------
291,933 359,974
================== ==================
The electricity acquired from ITAIPU is denominated in US dollars and the
prices are defined by ANEEL.
25) OTHER EXPENSES
Consolidated Company
------------------------------- -----------------------------
Three months ended Three months ended
March 31, March 31,
------------------------------- -----------------------------
2003 2002 2003 2002
--------------- -------------- -------------- -------------
Fuel consumption quota 3,693 8,543 3,693 8,543
Rentals and leasing 3,122 3,926 3,057 3,902
Grants and donations 2,815 2,960 2,815 2,960
Advertising 1,422 3,436 1,422 3,432
ANEEL inspection fee 2,911 2,880 2,869 2,855
Own consumption - Electric energy 2,958 2,307 2,527 2,212
MAE contribution 832 2,109 832 2,109
Technological and scientific national fund 3,225 2,616 3,145 2,574
Other taxes (real estate, vehicle, etc.) 3,861 2,276 2,600 2,257
General expenses 7,091 5,137 6,220 4,284
--------------- -------------- -------------- -------------
31,930 36,190 29,180 35,128
The fuel costs incurred for the purpose of electricity generation are
reimbursed by Centrais Eletricas Brasileiras S.A. - ELETROBRAS and are
recorded as other operating revenues.
26) FINANCIAL INCOME (EXPENSES)
Consolidated Company
------------------------------- -----------------------------
Three months ended Three months ended
March 31, March 31,
------------------------------- -----------------------------
2003 2002 2003 2002
--------------- -------------- -------------- -------------
Financial income:
Investment income earned 19,476 30,149 15,672 28,367
Late charges on past-due electricity bills 13,385 7,835 13,385 7,835
Interest and monetary restatement on receivable from Minas Gerais
State Government 64,939 41,838 64,939 41,838
Monetary restatement on special rate adjustment 74,139 62,340 74,139 62,340
Foreign exchange gains 108,319 5,857 102,477 5,856
Taxes on financial income (PASEP and COFINS) (16,273) (5,687) (16,179) (5,687)
Other 30,547 8,432 30,043 8,429
-------------- --------------- --------------- -------------
294,532 150,764 284,476 148,978
Financial expenses:
Interest on loans and financing (74,204) (56,513) (70,771) (54,697)
Monetary restatement - electricity suppliers (26,363) (15,708) (26,363) (15,708)
Foreign exchange losses (2,491) (1,976) (2,491) (2,131)
Monetary restatement on loans and financing (36,461) (4,056) (36,461) (4,056)
Financial transaction tax ("CPMF") (8,704) (5,134) (8,356) (4,902)
Provision for valuation of marketable securities 25,905 5,400 25,905 5,400
Other (14,156) (6,273) (13,593) (6,029)
-------------- --------------- --------------- -------------
(136,474) (84,260) (132,130) (82,123)
-------------- --------------- --------------- -------------
158,058 66,504 152,346 66,855
============== =============== =============== =============
27
Financial charges and inflationary/exchange effects on financing of
construction in progress during the three-month period ended March 31, 2003,
in the amounts of R$18,301 and R$32,797, respectively, were transferred to
Property, plant and equipment and Investments (R$5.525 of financial charges
and R$359 of inflationary/exchange effects during the three-month period ended
March 31, 2002).
The interest and monetary restatement on Receivable from Minas Gerais State
Government, shown in the table above, are related to the Third Amendment
signed with the Minas Gerais State Government, taking into account that a full
provision for losses has been recorded on the Second Amendment. More
information see Note 9.
27) PRINCIPAL TRANSACTIONS WITH RELATED PARTIES
The main balances and transactions with related parties are as follows:
March 31, 2003 December 31, 2002
------------------------------ ----------------------------------
Minas Gerais Minas Gerais
State State
Government FORLUZ Government FORLUZ
--------------- -------------- ---------------- ----------------
ASSETS
Current assets
Accounts receivable 10,408 - 7,843 -
Recoverable taxes
State VAT - ICMS 23,851 - 15,239 -
Other
Advances for welfare benefits - 17,641 - 17,641
Noncurrent assets
Receivable from Minas Gerais State Government 819,899 - 754,960 -
Recoverable taxes
State VAT- ICMS 79,368 - 68,432 -
LIABILITIES
Current liabilities
Taxes payable-
State VAT - ICMS 127,604 - 44,240 -
Dividends and interest on capital 50,418 - 50,418 -
Employee post-retirement benefits - 176,981 - 180,992
Other
Transfer of contributions - 14,751 - 15,938
Long-term liabilities
Debentures 27,106 - 25,507 -
Employee post-retirement benefits - 1,603,588 - 1,656,488
Three months ended Three months ended
March 31, 2003 March 31, 2002
------------------------------ ----------------------------------
INCOME STATEMENT
Electricity sales to final customers 6,589 - 4,489 -
Deductions from operating revenues - State VAT (ICMS) (311,609) - (240,592) -
Employee post-retirement benefits - (6,529) - (54,250)
Personnel expenses - (8,421) - (7,160)
Financial income-
Monetary restatement and interest on receivable
from Minas Gerais State Government 64,939 - 41,838 -
Non-operating expenses-
FORLUZ - management expenses - (1,380) - (2,198)
The Accounts receivable from the Minas Gerais State Government in the amount
of R$10,408 are overdue. Management does not expect losses on the realization
of this asset.
28
28) FINANCIAL INSTRUMENTS
(a) Financial instruments
The financial instruments used by CEMIG, all recorded on its financial
statements, are: Cash and cash equivalents, Accounts receivable, Receivable
from Minas Gerais State Government, Marketable securities and Loans and
financing.
These instruments are managed through monitoring policies and operational
strategies focused on liquidity, profitability and safety. The Company
operates with banks which meet financial strength and trustworthiness
guidelines, according to pre-defined management criteria. The Company's
control policy includes continually comparing rates with market levels. The
investments of CEMIG and its subsidiaries in other securities, as of March 31,
2003, are as follows:
o The swap transactions of CEMIG and its subsidiaries are purchased
from financial institutions, in the amount of R$2,165 and R$17,845,
respectively, through the transfer of public or private securities
issued by third parties. These securities have repurchase clauses.
The contracts define the repurchase final date and interest rate,
which is based on the CDI. The Company and its subsidiaries have the
right to call for early redemption of these securities without
penalty or loss.
o Hedge transactions are contracted by CEMIG to reduce the exchange
rate risk from the valuation of the US dollar compared to the
Brazilian real, in the amount of US$14,387 thousand, equivalent to
R$48,241. The gain or loss on these operations arising from the
differences between the actual exchange variation and the exchange
variation agreed with financial institutions are recognized on the
accrual basis.
As of May 14, 2003, CEMIG had hedge transactions, in the amount of
US$57,272 thousand, for short-term foreign debt, which replaced
contracts' indexes from U.S. Dollar to CDI variation.
(b) The Company has Brazilian National Treasury Notes acquired from the State
Government of Minas Gerais, with final maturity on April 15, 2024,
subject to restatement based on the U.S. dollar exchange variation and
interest on the restated face value of 6.00% per year (from April 15,
2000 to maturity).
March 31, 2003
-----------------------
Face value 202,723
Market value 72.506
These securities are recorded at market value, determined based on a quotation
from ANDIMA (National Association of Open Market Institutions). This asset is
recorded under Marketable securities in noncurrent assets.
29) CORPORATE REORGANIZATION
Currently, CEMIG's electricity generation, transmission and distribution
operations are vertically integrated into and directly operated by CEMIG.
However, pursuant to CEMIG's principal concession agreements and in accordance
with certain changes in the regulatory framework of the Brazilian electricity
sector, CEMIG has to restructure its business, resulting in the "unbundling"
of its generation, transmission and distribution operations into separate
subsidiaries, each wholly owned by CEMIG. According to the concession
agreements, CEMIG was to have completed the reorganization process by December
31, 2000.
ANEEL later granted the Company an extension to September 21, 2002 to complete
the unbundling process.
29
The Minas Gerais State Government, the major shareholder, considering that the
"unbundling" must be approved in advance by the State Legislature, submitted
to the Minas Gerais State Legislature, on March 2, 2001, a bill proposing the
restructuring of the Company into three companies, but as this legislation has
not yet been adopted, the reorganization process has not yet been completed.
Additionally, The Company has submitted an extension request to ANEEL, which
has not yet been answered.
On November 11, 2002, ANEEL fined the Company the amount of R$5,507, because
CEMIG had not concluded the "unbundling". No accrual has been recorded for
this claim, as the Company believes it has a meritorious defense against the
fine and any other possible penalties that may be imposed regarding this
matter.
30) SUBSEQUENT EVENTS
Periodic Rate Review
The periodic rate review process refers to the revision, every 5 years, of the
authorized electricity rates that CEMIG may charge for the distribution of
electric energy. in determining the authorized rates, ANEEL considers the
Company's structural costs and market changes and return on its investments.
Due to the CEMIG periodic rate review occurred in the present year, the
electricity rates were increase by an average of 31.53% and have been in force
since April 8, 2003.
30
31) STATEMENTS OF CASH FLOWS
The individual (Company) and consolidated statements of cash flows for the
three-month periods ended March 31, 2003 and 2002 are presented for additional
analysis and are not required as part of the basic interim financial
statements.
Consolidated Company
-------------------------------------- ------------------------------------
Three month periods Three month periods
ended March 31, ended March 31,
-------------------------------------- ------------------------------------
2003 2002 2003 2002
--------------- ------------------ ---------------- ---------------
CASH FLOWS FROM OPERATIONS:
Net income for the period 151,694 219,947 151,694 219,947
Items not affecting cash -
Depreciation and amortization 140,464 132,423 130,979 128,502
Special rate adjustment - (315,164) - (315,164)
Purchased energy from MAE - suppliers - (32,272) - (32,272)
Energy purchased on spot market - 42,986 - 42,986
Disposals of property, plant and equipment, net 7,561 6,464 7,561 6,464
Equity in subsidiaries - - (9,431) (1,450)
Interest and monetary variations, net (128,368) (78,657) (125,682) (78,794)
Deferred income and social contribution taxes 1,044 35,720 1,708 37,433
Provisions for operating losses 16,948 12,662 16,948 12,662
Employee post-retirement benefits 6,529 54,250 6,529 54,250
Other (294) - - -
--------------- ------------------ ---------------- ---------------
195,578 78,359 180,306 74,564
--------------- ------------------ ---------------- ---------------
(Increase) Decrease in assets -
Accounts receivable 7,344 (69,043) (17,225) (73,889)
Consumers - Special rate adjustment 55,787 42,769 55,787 42,769
Recoverable taxes (54,823) 57,273 (56,763) 57,095
Other current assets 10,020 (6,017) (5,049) (4,327)
Prepaid expenses - CVA (84,613) (29,709) (84,613) (29,709)
Other noncurrent assets (155) (11,031) (1,580) (11,374)
--------------- ------------------ ---------------- ---------------
(66,440) (15,758) (109,443) (19,435)
--------------- ------------------ ---------------- ---------------
Increase (Decrease) in liabilities -
Suppliers (198,447) 53,405 (180,424) 58,279
Taxes payable 240,631 111,105 239,094 112,111
Payroll and related charges (4,972) (13,572) (4,938) (13,579)
Regulatory charges 57,234 (1,426) 57,026 (1,293)
Loans and financing 7,532 27,353 8,661 30,066
Employee post-retirement benefits (63,440) (41,046) (63,440) (41,046)
Electricity Rationing Plan - Bonus paid to consumers
and adoption costs incurred in excess of surcharge - (78,780) - (78,780)
applied to consumers
Other 13,642 (5,740) 36,550 (5,212)
--------------- ------------------ ---------------- ---------------
52,180 51,299 92,529 60,546
--------------- ------------------ ---------------- ---------------
CASH PROVIDED BY OPERATING ACTIVITIES 181,318 113,900 163,392 115,675
=============== ================== ================ ===============
31
Consolidated Company
-------------------------------------- ------------------------------------
Three month periods Three month periods
ended March 31, ended March 31,
-------------------------------------- ------------------------------------
2003 2002 2003 2002
--------------- ------------------ ---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITY
Proceeds from long-term financing 393,227 18,445 393,227 18,445
Payments on loans and financing (170,573) (100,489) (163,191) (100,489)
Special liabilities 16,484 28,213 16,484 28,213
Advanced billings of electric power - (15,716) - (15,716)
Dividends and interest on capital (6,719) (421) (6,727) (421)
--------------- ------------------ ---------------- ---------------
232,419 (69,968) 239,793 (69,968)
--------------- ------------------ ---------------- ---------------
TOTAL CASH PROVIDED 413,737 43,932 403,185 45,707
--------------- ------------------ ---------------- ---------------
CASH USED IN INVESTING ACTIVITIES
Additions to investments (77,816) (48,803) (107,262) (58,350)
Increase in property, plant and equipment (180,556) (83,440) (162,246) (81,085)
Increase in deferred charges - (1,977) - -
--------------- ------------------ ---------------- ---------------
(258,372) (134,220) (269,508) (139,435)
--------------- ------------------ ---------------- ---------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
155,365 (90,288) 133,677 (93,728)
=============== ================== ================ ===============
CHANGES IN CASH AND CASH EQUIVALENTS
At beginning of the period 122,975 696,088 50,303 642,492
At end of the period 278,340 605,800 183,980 548,764
--------------- ------------------ ---------------- ---------------
155,365 (90,288) 133,677 (93,728)
=============== ================== ================ ===============
32
Item 2
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF CONSOLIDATED OPERATIONS:
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2003 COMPARED TO THE THREE-MONTH
PERIOD ENDED MARCH 31, 2002
(Amounts expressed in thousands of Brazilian reais, unless otherwise indicated)
Net Income
The Company and its subsidiaries (the "CEMIG Group") had net income of
R$151,694 in the three-month period ended March 31, 2003 compared to a net
income of R$219,947 in the three-month period ended March 31, 2002.
In the first three months of 2003, consolidated income was positively impacted
by an increase in electricity sales and financial income arising from the
appreciation of the Brazilian real against the U.S. dollar. In the prior
period, the result was positively impacted due, primarily, to special rate
adjustment revenue in the amount of R$315,164.
Electricity gross sales
Electricity gross sales revenues were R$1,457,840 in the three-month period
ended in March 31, 2003 compared to R$1,179,895 in the three-month period
ended in March 31, 2002, an increase of 23.56%. This result was due primarily
to:
o an average rate increase of 10.51% starting in April 8, 2002;
o an increase in Emergency capacity charge collected in the three-month
period ended in March 31, 2003;
o a 5.55% increase in electricity volume to sold final customers.
Electricity sales to final customers
------------------------------------
Electricity sales to final customers were R$1,453,590 in the three-month
period ended March 31, 2003 compared to R$1,140,740 in the three-month period
ended March 31, 2002, representing an increase of 27.43%. This increase
resulted primarily from the rate increase of 10.51% in April 2002 and a 6.06%
rise in volume of electricity sales. The Electricity Rationing Plan in force
until February 2002 explains the significant change between both periods.
Sales to industrial, residential and commercial customers, increased 1.21%,
13.21% and 9.69% respectively.
The Emergency capacity charge, collected in power bills, additionally
contributed to the increase in electricity gross sales revenues: R$70,229 in
the three-month period ended March 31, 2003 compared to R$4,447 in the
three-month period ended March 31, 2002. The significant change between both
periods resulted from the retroactive amounts collected, in March 2003, of
part of the Emergency capacity charge related to the period from July 2, 2002
to October 8, 2002, in the amount of R$29,985, due to a class action
injunction which did not allow the amounts to be collected in the prior year.
Volume of electricity sold to final consumers - GWh
[GRAPH OMITTED]
Electricity supply to other concessionaires
-------------------------------------------
Electricity supply revenues from sales of electricity to other concessionaires
were R$4,250 in the three-month period ended in March 31, 2003 compared to
R$39,155 in the three-month period ended in March 31, 2002, representing a
decrease of 89.15%. This decrease resulted primarily from revenues from energy
traded in the spot market ("MAE"), in the prior period, in the amount of
R$32,273, corresponding to CEMIG's reimbursement for the difference between
the amounts payable to MAE and the price of R$49.26/MWh.
Special rate adjustment revenue
-------------------------------
In accordance with the General Agreement of the Electricity Sector, CEMIG
recorded in the three-month period ended March 31, 2002 additional revenue for
the special rate adjustment for billing losses and a portion of expenses for
energy purchased in the MAE, arising from the Electricity Rationing Plan, in
the amount of R$315,164. The amounts recorded as Special rate adjustment
revenue are being collected by CEMIG through an additional rate increase in
force for a maximum period of 82 months, since January 2002.
Operating expenses
Operating expenses were R$964,969 in the three-month period ended in March 31,
2003 compared to R$962,972 in the three-month period ended in March 31, 2002,
an increase of 0.21%, due primarily to an increase in Personnel expenses and
Fuel consumption quota, offset by a decrease in Electricity purchased for
resale and Employee post-retirement benefits. The main variations in expenses
are described below:
Personnel
---------
Personnel expenses were R$157,384 in the three-month period ended in March 31,
2003 compared to R$133,275 in the three-month period ended in March 31, 2002,
an increase of 18.09%, due primarily to an increase in salaries of 11.45% in
November 2002 and an increase of 2.22% in the average number of CEMIG's
employees (11,417 employees in the three-month period ended in March 31, 2003
compared to 11,169 employees in the three-month period ended in March 31,
2002).
2
Electricity purchased for resale
--------------------------------
Electricity purchased for resale was R$291,933 in the three-month period ended
in March 31, 2003 compared to R$359,974 in the same prior period, representing
a reduction of 18.90% as a result of a decrease in expenses for energy
purchased in the MAE, R$5,577 in the three-month period ended in March 31,
2003 compared to R$61,018 in the three-month period ended in March 31, 2002.
The higher amount of MAE expenses in the three-month period ended in March 31,
2002 was due to the higher free energy rates in effect during the Electricity
Rationing Plan.
Outside services
----------------
Outside services were R$64,739 in the three-month period ended in March 31,
2003 compared to R$51,503 in the three-month period ended in March 31, 2002,
representing an increase of 25.70%, due to the adjustment of prices for
service contracts, mainly related to delivery of bills to consumers and
maintenance of distribution and transmission lines and electric equipment.
Employee post-retirement benefits
---------------------------------
Employee post-retirement benefit expenses were R$6,529 in the three-month
period ended in March 31, 2003 compared to R$54,250 in the three-month period
ended in March 31, 2002, a reduction of 87.96%. The decrease was due to a
lower increase in projected benefit obligations compared to a higher
profitability estimated for plan assets.
Operating provisions
--------------------
Operating provisions were R$40,497 in the three-month period ended in March
31, 2003 compared to R$14,245 in the three-month period ended in March 31,
2002, an increase of 184.29%. This increase was due to the complementary
provision for losses on recovery of special rate adjustment in the three-month
period ended in March 31, 2003, in the amount of R$10,074, and a provision for
judicial contingencies of R$14,492 in the three-month period ended in March
31, 2003 compared to R$3,178 in the three-month period ended in March 31,
2002.
Fuel consumption quota - CCC
----------------------------
Fuel consumption quota - CCC expense of R$92,718 in the three-month period
ended in March 31, 2003 compared to R$69,537 in the three-month period ended
in March 31, 2002, representing an increase of 33.34%. Fuel consumption quota
refers to operating costs of thermoelectric plants in the Brazilian isolated
and interconnected energy system prorated among electric company
concessionaires through ANEEL resolution.
Financial income (expenses)
The main factors that impacted financial income (expenses) are as follows:
o Foreign net exchange gains of R$105,828 in the three-month period
ended March 31, 2003 compared to R$3,881 in the three-month period
ended March 31, 2002, which are primarily related to loans and
financing denominated in foreign currencies. In the three-month
period ended March 31, 2003, the Brazilian real appreciated 5.10%
against the U.S. dollar, compared to a 0.14% devaluation in the same
period of 2002.
o Monetary restatement expenses on loans and financing of R$36,461 in
the three-month period ended March 31, 2003 compared to R$4,056 in
the three-month period ended March 31, 2002 due primarily to an
increase in inflation indexes used to restate loans and financing
contracts in local currency. The IGP-M, which is the main index of
contracts, presented a variation of 6.27% in the three-month period
ended in March 31, 2003 compared to a 0.51% variation in the same
prior period.
3
o Reversion provision for valuation to market value on National
Treasury notes of R$25,905 in the three-month period ended in March
31, 2002 compared to a reversion provision of R$5,400 in the
three-month period ended March 31, 2002 due to the lower discount
imposed by financial markets on transactions involving Federal
Government long-term bonds.
Non-operating expenses, net
Non-operating expenses were R$9,309 in the three-month period ended in March
31, 2003 compared to R$6,977 in the three-month period ended in March 31,
2002, an increase of 33.42%. This increase was due primarily to losses on
projects and net losses on deactivation and disposal of Property, plant and
equipment.
Income and social contribution taxes
The CEMIG Group recorded income taxes expense of R$120,415 in the three-month
period ended in March 31, 2003, representing 44.30% on pre-tax income. In the
prior period, the income taxes expense were R$115,280, representing 34.38% on
pre-tax income.
In the prior year, the CEMIG Group recorded a loss provision relating to all
amounts due under the Second Amendment of the company's receivable from the
Minas Gerais State Government. Therefore, the interest and monetary
restatement on the mentioned amendment were not recorded in the statement of
income since then. However, in compliance with the Brazilian tax legislation,
CEMIG has recorded the federal taxes payable on the mentioned financial
income. This fiscal procedure explains the increase on percentage of income
taxes over pre-tax income.
4
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF COMPANY OPERATIONS: FOR THE
THREE-MONTH PERIOD ENDED MARCH 31, 2003 COMPARED TO THE THREE-MONTH PERIOD
ENDED MARCH 31, 2002
Management's discussion and analysis of results of the consolidated operations
also substantially covers the results of Company operations for the periods
presented.
5
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
OTHER RELEVANT INFORMATION
Information not reviewed by independent accountants
CORPORATE GOVERNANCE
CEMIG has sought to implement the best corporate governance practices in order
to optimize its performance and to offer better assurance, through
improvements in information disclosed to the markets and to all interested
parties, including investors, employees and creditors, facilitating its access
to capital. These practices mainly involve transparency, equitable treatment
to shareholders and being accountable for the Company's actions.
Highlighted below are practices that CEMIG has already adopted:
o The notices of general shareholders' meetings set forth in detail
the meeting's agenda, including relevant items suggested by
shareholders, and such meetings are held at convenient dates and
times.
o The share register, which sets forth the number of shares owned by
each shareholder, can be obtained at any time for a service charge,
in accordance with Article 100 of Law 6,404 of December 15, 1976.
o Documentation necessary to evidence the ownership of shares of CEMIG
is accurately maintained, in order to permit the participation of
its shareholders or their representatives at shareholders' meetings.
o The Board of Directors, which has a unified term, has 11 technically
qualified members, 2 of whom have finance and accounting experience.
The Board of Directors seeks to advise CEMIG's executive officers to
maximize its return on assets in order to aggregate value for the
enterprise.
o The shareholders' agreement is accessible to all shareholders at
CEMIG's headquarters.
o Preferred shares have priority in the redemption of capital and
participate equally with the common shares in net income. At the
Shareholders' meeting of April 30, 2002, the Company's Bylaws were
changed and the preferred shares became entitled to a minimum annual
dividend equal to the greatest of 10.00% of the preferred share
capital or 3.00% of the book value of the preferred shares equity.
The minimum dividends distributed cannot be less than 25.00% of the
adjusted net income for the year, in accordance with Brazilian
Corporate Law.
o On a quarterly basis, the Company discloses reports prepared
together with the financial statements to its Fiscal Council, which
analyzes and discusses the financial statements, including the
related internal and external risk factors.
o In order to avoid conflicts of interest, the Board of Directors does
not authorize its public accountants to provide consulting or other
services to CEMIG.
o CEMIG provides to the members of its Fiscal Council all information
that may contribute to analyze the Company's main issues.
6
o The Company adopts, in addition to the financial statements prepared
in accordance with accounting practices emanating from Brazilian
corporate law and with accounting standards established by the CVM -
Comissao de Valores Mobiliarios (Brazilian Securities Commission),
generally accepted accounting principles in the United States, or US
GAAP, in order to prepare financial statements to be filed with the
United States Securities and Exchange Commission - SEC.
o The memorandum of suggestions on accounting and internal control
procedures provided to CEMIG by its independent accountants is
submitted to the Board of Directors and to the Fiscal Council in
order to evaluate the proposals and adoption of applicable measures.
o Transactions with related parties are disclosed in CEMIG's financial
statements.
o CEMIG's investor relations policy seeks to provide access to a wide
range of investors through:
o CEMIG's Internet home page, which is accessible to all
investors and shareholders and contains material information
related to CEMIG and its operations.
o Broad dissemination of the disclosure of CEMIG's results.
o Live conferences accessible to everyone through CEMIG's
Internet home page.
o CEMIG has adopted Level 1 of the corporate governance standards
established by the Bolsa de Valores de Sao Paulo - BOVESPA (Sao
Paulo Stock Exchange).
o CEMIG has listed depositary receipts on foreign stock exchanges, in
New York and Madrid.
o CEMIG regularly pays dividends to its shareholders in accordance
with the provisions of its by-laws.
In addition, CEMIG is considering the adoption of additional corporate
governance practices that will be disclosed on a timely basis.
7
FINANCIAL INDICATORS
Information not reviewed by independent accountants
SHARE VALUE
(Expressed in Brazilian reais per thousand shares)
-----------------------------------------------------------------------------------------------
Item Unit March 31,2003 December 31,2002 March 31, 2002
-----------------------------------------------------------------------------------------------
Book value 35.99 35.03 44.81
-----------------------------------------------------------------------------------------------
Market value Common 19.27 23.50 32.11
Preferred 25.26 26.45 34.60
-----------------------------------------------------------------------------------------------
LIQUIDITY (excluding special liabilities)
--------------------------------------------------------------------------------------------------
Item Unit March 31, 2003 December 31,2002 March 31, 2002
--------------------------------------------------------------------------------------------------
Current ratio Ratio 0.60 0.61 0.80
--------------------------------------------------------------------------------------------------
Overall liquidity Ratio 0.67 0.65 0.87
--------------------------------------------------------------------------------------------------
DEBT LEVEL (excluding special liabilities)
--------------------------------------------------------------------------------------------------------------
Item Unit March 31, 2003 December 31,2002 March 31, 2002
--------------------------------------------------------------------------------------------------------------
Total assets % 59.18 58.67 47.54
--------------------------------------------------------------------------------------------------------------
Shareholders' equity % 144.97 142.65 90.83
--------------------------------------------------------------------------------------------------------------
Permanent assets % 98.03 94.99 81.20
--------------------------------------------------------------------------------------------------------------
PROFITABILITY
-----------------------------------------------------------------------------------------------------------------
Item Unit March 31, 2003 December 31, 2002 March 31, 2002
-----------------------------------------------------------------------------------------------------------------
Shareholders' equity % 2.67 (14.51) 3.09
-----------------------------------------------------------------------------------------------------------------
Return on property, plant and equipment % 1.92 (12.67) 2.91
-----------------------------------------------------------------------------------------------------------------
Operating margin % 11.31 (10.27) 22.60
-----------------------------------------------------------------------------------------------------------------
Net margin % 10.96 (16.73) 15.83
-----------------------------------------------------------------------------------------------------------------
OPERATING INDICES
Information not reviewed by independent accountants
INSTALLED CAPACITY
------------------------------------------------------------------------------
March 31, 2003 March 31, 2002
------------------------------------------------------------------------------
Installed capacity (in MW) 5,704 5,675
------------------------------------------------------------------------------
EFFICIENCY
---------------------------------------------------------------------------------------------------
For the three-month period ended
---------------------------------------------------------------------------------------------------
Item Unit March 31, 2003 March 31, 2002
---------------------------------------------------------------------------------------------------
MWh (*) per employee MWh 761 718
---------------------------------------------------------------------------------------------------
Consumers per employee No. 495 482
---------------------------------------------------------------------------------------------------
8
SERVICE QUALITY
--------------------------------------------------------------------------------------------------------
For the three-month period ended
--------------------------------------------------------------------------------------------------------
Item Unit March 31, 2003 March 31, 2002
--------------------------------------------------------------------------------------------------------
Average time needed to restore electricity Hours 5.48 4.97
--------------------------------------------------------------------------------------------------------
Electricity outage time - average per consumer Hours 3.38 4.09
--------------------------------------------------------------------------------------------------------
Outages experienced - average per consumer No. 1.75 2.35
--------------------------------------------------------------------------------------------------------
AVERAGE RATE
(Expressed in Brazilian reais per MWh)
-------------------------------------------------------------------------------
Including VAT
-------------------------------------------------------------------------------
Description March 31, 2003 March 31, 2002
-------------------------------------------------------------------------------
Industrial 106.98 89.86
-------------------------------------------------------------------------------
Residential 303.58 254.13
-------------------------------------------------------------------------------
Commercial 257.56 217.41
-------------------------------------------------------------------------------
Rural 174.66 150.44
-------------------------------------------------------------------------------
Others 167.87 142.18
-------------------------------------------------------------------------------
Final Consumers 166.97 138.63
-------------------------------------------------------------------------------
SHAREHOLDERS WHICH OWN MORE THAN 5% OF VOTING CAPITAL
AS OF MARCH 31, 2003
----------------------------------------------------------------------------------------------------------------
SHAREHOLDERS
--------------------------------------------------------------------------------------------
Minas Gerais Southern Electric Brasil
Number of shares State Government (*) % Part. Ltda. %
----------------------------------------------------------------------------------------------------------------
Common 36,116,291,643 50.96 23,362,956,173 32.96
----------------------------------------------------------------------------------------------------------------
Preferred 102 0.00 - -
----------------------------------------------------------------------------------------------------------------
TOTAL 36,116,291,745 22.27 23,362,956,173 14.41
----------------------------------------------------------------------------------------------------------------
(*) Refers merely to Minas Gerais State Government's Shares, not considering
shares of controlled companies by State Government.
OWNERS OF SOUTHERN ELECTRIC BRASIL PARTICIPACOES LTDA.
AS OF MARCH 31, 2003
-------------------------------------------------------------------------------
Item Name Number of Sharequotas %
-------------------------------------------------------------------------------
1 Cayman Energy Traders 321,480,876 91.75
-------------------------------------------------------------------------------
2 524 Participacoes S/A 28,913,419 8.25
-------------------------------------------------------------------------------
1 - Foreign Company
2 - Registered Company. Fundo Opportunity Alfa FIA has 99.99% of its capital.
9
CONTROLLING SHAREHOLDER, BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND
FISCAL COUNCIL MEMBERS INTEREST
------------------------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES
------------------------------------------------------------------------------------------------------------------------------
March 31, 2003 March 31, 2002
---------------------------------------------------------------------------
Common Preferred Common Preferred
---------------------------------------------------------------------------
CONTROLLING SHAREHOLDER 36,119,657,399 3,030,572,489 35,416,837,353 2,971,417,216
BOARD OF DIRECTORS
Wilson Nelio Brumer - 1 - -
Djalma Bastos de Morais - 13,400 - 13,140
Francelino Pereira dos Santos - 1 - -
Antonio Adriano Silva - 1 - 1
Flavio Jose Barbosa de Alencastro - 1 - -
Oderval Esteves Duarte Filho 5,099 - 5,000 -
Marcelo Pedreira de Oliveira 5,099 - 5,000 -
Joao Bosco Braga Garcia 5,099 - 5,000 -
Sergio Lustosa Botelho Martins 5,099 - 5,000 -
Maria Estela Kubistscheck Lopes - 1 - -
Alexandre Heringer Lisboa - 1 - -
Fernando Lage de Melo - 1 - -
Francisco Sales Dias Horta - 1 - -
Marco Antonio Rodrigues da Cunha - 1 - -
Luiz Antonio Athayde Vasconcelos - 290 - 285
Guilherme Horta Goncalves Junior - 1 - -
Geraldo Dannemann 1 1 1 1
Mario Lucio Lobato 5,000 - - -
Carlos Suplicy de Figueiredo Forbes 4,079 - 4,000 -
Marc Leal Claassen 5,099 - 5,000 -
Fernando Henrique Schuffner Neto - 101,218 - 99,251
Franklin Moreira Goncalves - 1 - -
EXECUTIVE OFFICERS
Djalma Bastos de Morais - 13,400 - 13,140
Celso Ferreira - - - -
Flavio Decat de Moura - - - -
Heleni de Mello Fonseca - - - -
Elmar de Oliveira Santana - - - -
Jose Maria de Macedo - 112,962 - 110,765
FISCAL COUNCIL
Luiz Guarita Neto - - - -
Aristoteles Luiz Menezes Vasconcellos Drummond - - - -
Luiz Otavio Nunes West - - - -
Bruno Constantino Alexandre dos Santos - - - -
Thales de Souza Ramos Filho - - - -
Ronald Gastao Andrade Reis - - - -
Marcos Eolo de Lamounier Bicalho - - - -
Livia Xavier de Mello - - - -
Aliomar Silva Lima - - - -
------------------------------------------------------------------------------------------------------------------------------
10
NUMBER OF SHARES AVAILABLE ON MARKET AS OF MARCH 31, 2003
------------------------------------------------------------------------------------------------------------
Common % Preferred % Total %
------------------------------------------------------------------------------------------------------------
March 31, 2003 34,754,510,524 49.04 88,179,950,210 96.60 122,934,460,734 75.81
------------------------------------------------------------------------------------------------------------
March 31, 2002 34,078,640,578 49.04 86,464,819,612 96.60 120,543,460,190 75.81
------------------------------------------------------------------------------------------------------------
11
Item 3
Companhia Energetica de Minas Gerais - CEMIG
Interim Financial Statements
Together with Independent Accountants' Report on Special Review
June 30, 2003
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
INDEPENDENT ACCOUNTANTS' SPECIAL REVIEW REPORT
To the Shareholders and the Board of
Directors of Companhia Energetica de Minas Gerais - CEMIG
Belo Horizonte - MG
-------------------
1. We have performed a special review of the quarterly information,
presented in Brazilian reais, of Companhia Energetica de Minas
Gerais - CEMIG and subsidiaries (Company and consolidated) as of
June 30, 2003 and for the quarter and semester then ended, prepared
under the responsibility of the Company's management, in accordance
with accounting practices adopted in Brazil, consisting of the
balance sheets, statements of income and management's discussion and
analysis.
2. We conducted our review in accordance with specific standards
established by the Brazilian Institute of Independent Accountants
(IBRACON), together with the Federal Accounting Council, which
consisted principally of: (a) inquiries of and discussions with
management responsible for the accounting, financial and operating
areas of the Company and its subsidiaries as to the principal
criteria adopted in the preparation of the quarterly information,
and (b) review of the information and subsequent events that had or
might have had significant effects on the Company's and its
subsidiaries' financial positions and results of operations.
3. Based on our special review, we are not aware of any material
modifications that should be made to the quarterly information
referred to in paragraph 1 above for it to be in conformity with
accounting practices adopted in Brazil and accounting standards
issued by the Brazilian Securities Commission (CVM), specifically
applicable to the preparation of mandatory quarterly financial
information.
4. As mentioned in Note 8 to the quarterly information, as of June 30,
2003, the Company and its subsidiaries have recorded, in current and
noncurrent assets, accounts receivable in the amount of
R$140,444,000 and R$436,073,000 respectively and, in current
liabilities, accounts payable in the amount of R$532,072,000,
related to energy sale and purchase transactions within the
Wholesale Energy Market - MAE. Such amounts were recorded based on
calculations prepared and information made available by the MAE
regarding transactions through March 2003 and based on Company
estimates for transactions in April, May and June 2003. Those
amounts are subject to change, depending on the outcome of claims
currently in progress in court, filed by electric energy companies,
concerning the interpretation of the market rules in force.
5. The balance sheets (Company and consolidated) as of March 31, 2003,
presented for comparative purposes, were reviewed by us and our
special review report, dated May 15, 2003, was issued without
qualification and including comments regarding: (i) the matter
discussed in paragraph 4 above, and (ii) the conversion of Executive
Act No.14, issued on December 21, 2001, into Law No. 14,438 on April
26, 2002, that regulates, among other matters, the recovery of the
economic and financial equilibrium of Brazilian electric energy
distribution, transmission and generating companies as guaranteed
under their respective concession agreements. Detailed information
and the impacts of such regulation on the financial position and
result of operations of the Company and its subsidiaries are
disclosed in Notes 5 and 8 to the quarterly information. The
statements of income (Company and consolidated) for the quarter and
semester ended June 30, 2002, presented for comparative purposes,
were reviewed by us, and our special review report, dated August 14,
2002 (except for item (ii), for which the date was January 21,
2003), was issued without qualification and including comments
regarding: (i) the recording of assets and liabilities related to
special rate adjustments, recovery of Parcel "A" cost variations and
transactions within the Wholesale Energy Market - MAE, which were
pending review and approval by ANEEL (National Electric Energy
Agency), and (ii) renegotiation of the receivable from the Minas
Gerais
State Government related to the CRC (Recoverable Rate Deficit)
account, including the obtention of guarantees represented by the
State Government's right to dividends as a shareholder for part of
the asset and the recording by CEMIG of a loss provision in the
amount of R$1,045,325,000 for the remaining asset. Due to the
recording of the loss provision, the quarterly information as of
June 30, 2002 was revised by the Company on January 21, 2003.
6. The translation of this quarterly information into English has been
made for the convenience of readers outside Brazil.
Belo Horizonte, July 31, 2003
/S/ Deloitte Touche Tohmatsu /S/ Jose Carlos Amadi
DELOITTE TOUCHE TOHMATSU Jose Carlos Amadi
Auditores Independentes Engagement Partner
2
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED BALANCE SHEETS
JUNE 30, 2003 AND MARCH 31, 2003
(Expressed in thousands of Brazilian reais - R$)
-------------------------------------------------------------------------------------------------------------------------
A S S E T S
----------------
Consolidated Company
------------------------------------ ---------------------------------
June 30, March 31, June 30, March 31,
2003 2003 2003 2003
------------------ ----------------- --------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 274,361 278,340 196,809 183,980
Accounts receivable 996,981 861,224 977,768 846,003
Consumers - Special rate adjustment 291,829 269,977 291,829 269,977
Concessionaires - Energy transportation 21,511 20,386 21,511 20,386
Distributors - Energy supply 140,444 93,732 140,444 93,732
Recoverable taxes 64,471 76,145 56,561 72,339
Materials and supplies 20,700 19,787 14,103 13,073
Prepaid expenses - CVA 47,243 1,555 47,243 1,555
Electricity Rationing Plan - Bonus paid to
consumers and adoption costs incurred 22,107 27,312 22,107 27,312
Receivables from Federal Government - Revenue
losses from low-income consumers 86,669 63,956 86,669 63,956
Other 113,523 109,271 118,695 130,371
------- ------- ------- -------
2,079,839 1,821,685 1,973,739 1,722,684
--------- --------- --------- ---------
NONCURRENT ASSETS:
Receivable from Minas Gerais State Government 836,971 819,899 836,971 819,899
Consumers - Special rate adjustment 1,115,819 1,145,441 1,115,819 1,145,441
Prepaid expenses - CVA 449,987 521,332 449,987 521,332
Tax credits 453,491 539,795 433,411 518,685
Marketable securities 74,691 72,506 74,691 72,506
Electricity Rationing Plan - Bonus paid to
consumers and adoption costs incurred 23,449 24,643 23,449 24,643
Distributors - Energy supply 436,073 463,357 436,073 463,357
Recoverable taxes 118,346 109,926 88,171 79,368
Escrow deposits 67,984 66,878 67,892 66,786
Accounts receivable 49,166 - 49,166 -
------ - ------ -
Other 78,439 77,508 97,119 96,155
------ ------ ------ ------
3,704,416 3,841,285 3,672,749 3,808,172
--------- --------- --------- ---------
PERMANENT ASSETS:
Investments 736,984 686,320 1,342,764 1,263,250
Property, plant and equipment 7,945,665 7,915,158 7,322,253 7,301,702
Deferred charges 22,957 23,991 780 869
------ ------ --- ---
8,705,606 8,625,469 8,665,797 8,565,821
--------- --------- --------- ---------
Total assets 14,489,861 14,288,439 14,312,285 14,096,677
========== ========== ========== ==========
The accompanying condensed notes are an integral part of these financial
statements.
3
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED BALANCE SHEETS
JUNE 30, 2003 AND MARCH 31, 2003
(Expressed in thousands of Brazilian reais - R$)
---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Consolidated Company
------------------------------- ----------------------------------
June 30, March 31, June 30, March 31,
2003 2003 2003 2003
-------------- --------------- ----------------- ---------------
SHORT-TERM LIABILITIES:
Suppliers 1,202,346 1,084,685 1,170,507 1,058,955
Taxes payable 346,890 277,023 334,081 269,233
Loans and financing 679,571 949,654 658,820 925,559
Payroll and related charges 118,347 103,543 117,189 102,357
Dividends and interest on capital 202,973 204,274 202,541 203,987
Employee post-retirement benefits 244,257 176,981 244,257 176,981
Regulatory charges 182,124 151,090 181,819 150,822
Other 143,452 104,989 141,872 103,650
------- ------- ------- -------
3,119,960 3,052,239 3,051,086 2,991,544
--------- --------- --------- ---------
LONG-TERM LIABILITIES:
Loans and financing 1,625,723 1,752,981 1,547,080 1,652,216
Debentures 867,631 913,047 867,631 913,047
Employee post-retirement benefits 1,533,142 1,603,588 1,533,142 1,603,588
Suppliers 333,974 354,758 333,974 354,758
Reserve for contingencies 357,415 333,971 357,415 333,971
Taxes payable 317,185 331,005 317,185 331,005
Other 90,071 85,418 88,313 83,858
------ ------ ------ ------
5,125,141 5,374,768 5,044,740 5,272,443
--------- --------- --------- ---------
MINORITY INTEREST 28,301 28,742 - -
SHAREHOLDERS' EQUITY:
Capital 1,621,538 1,621,538 1,621,538 1,621,538
Capital reserves 4,032,222 4,032,222 4,032,222 4,032,222
Income reserves 113 113 113 113
Accumulated earnings 535,463 151,694 535,463 151,694
------- ------- ------- -------
6,189,336 5,805,567 6,189,336 5,805,567
Funds for future capital increase 27,123 27,123 27,123 27,123
------ ------ ------ ------
6,216,459 5,832,690 6,216,459 5,832,690
--------- --------- --------- ---------
Total liabilities and shareholders equity 14,489,861 14,288,439 14,312,285 14,096,677
========== ========== ========== ==========
The accompanying condensed notes are an integral part of these financial
statements.
4
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED STATEMENTS OF INCOME
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2003 AND 2002
(Expressed in thousands of Brazilian reais - R$, except for per share data)
-------------------------------------------------------------------------------------------------------------------------------
Consolidated Company
--------------------------------- ----------------------------------
Six month periods Six month periods
ended June 30, ended June 30,
--------------------------------- ----------------------------------
2003 2002 2003 2002
-------------- ------------------ ----------------- -----------------
OPERATING REVENUES:
Electricity sales 3,343,434 2,592,824 3,314,773 2,572,982
Special rate adjustment - 261,425 - 261,425
Other operating revenues 281,452 183,004 150,259 117,205
-------------- ------------------ ----------------- -----------------
3,624,886 3,037,253 3,465,032 2,951,612
DEDUCTIONS FROM OPERATING REVENUES: (1,081,371) (755,903) (1,048,245) (748,092)
---------- --------- ---------- ---------
Net operating revenues 2,543,515 2,281,350 2,416,787 2,203,520
--------- --------- --------- ---------
OPERATING EXPENSES:
Personnel (316,324) (265,182) (309,208) (261,689)
Materials and supplies (41,546) (34,163) (40,904) (33,474)
Outside services (139,112) (111,736) (134,765) (107,694)
Charges for use of water resources (26,677) (22,176) (26,264) (21,631)
Electricity purchased for resale (680,338) (662,237) (680,338) (662,237)
Use of basic transmission network (156,801) (142,208) (156,801) (142,208)
Depreciation and amortization (280,999) (270,843) (262,256) (257,729)
Employee post-retirement benefits (23,753) (108,499) (23,753) (108,499)
Operating provisions (80,213) (8,419) (78,755) (8,419)
Fuel consumption quota - CCC (157,490) (160,004) (157,490) (160,004)
Gas purchased for resale (76,746) (45,059) - -
Employee profit sharing (23,166) (10,654) (23,150) (10,654)
Energetic development account (37,308) - (37,308) -
Other expenses (72,949) (75,259) (66,131) (71,819)
------- ------- ------- -------
(2,113,422) (1,916,439) (1,997,123) (1,846,057)
----------- ----------- ----------- -----------
Income from operations before equity in subsidiaries
and financial income (expenses) 430,093 364,911 419,664 357,463
------- ------- ------- -------
EQUITY IN SUBSIDIARIES - - 15,892 (280)
- - ------ -----
FINANCIAL INCOME (EXPENSES)
Financial income 666,532 380,302 644,694 375,159
Financial expenses (235,417) (687,132) (227,069) (659,824)
--------- --------- -------- --------
431,115 (306,830) 417,625 (284,665)
------- --------- ------- ---------
Income from operations 861,208 58,081 853,181 72,518
------- ------ ------- ------
NON-OPERATING EXPENSES, NET (12,693) (1,059,172) (12,695) (1,059,172)
-------- ---------- -------- -----------
Income (loss) before taxes on income 848,515 (1,001,091) 840,486 (986,654)
Income and social contribution taxes (313,765) (22,360) (305,023) (28,142)
--------- -------- --------- --------
Reversal of interest on capital - 120,000 - 120,000
- ------- - -------
Income (loss) before minority interest 534,750 (903,451) 535,463 (894,796)
MINORITY INTEREST 713 8,655 - -
-------------- ------------------ ----------------- -----------------
NET INCOME (LOSS) FOR THE PERIOD 535,463 (894,796) 535,463 (894,796)
======= ========= ======= =========
NUMBER OF THOUSANDS OF SHARES 162,084,691 162,084,691 162,084,691 162,084,691
=========== =========== =========== ===========
EARNINGS (LOSS) PER
THOUSAND SHARES - R$ 0.00330 (0.00552) 0.00330 (0.00552)
The accompanying condensed notes are an integral part of these financial
statements.
5
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED STATEMENTS OF INCOME
FOR THE QUARTERS ENDED JUNE 30, 2003 AND 2002
(Expressed in thousands of Brazilian reais - R$, except for per share data)
-----------------------------------------------------------------------------------------------------------------------------------
Consolidated Company
----------------------------------- -----------------------------------
Quarter Quarter
ended June 30, ended June 30,
----------------------------------- -----------------------------------
2003 2002 2003 2002
--------- --------- --------- -------
OPERATING REVENUES:
Electricity sales 1,885,594 1,412,929 1,870,616 1,399,613
Special rate adjustment - (53,739) - (53,739)
Other operating revenues 155,530 102,036 77,909 60,912
------- ------- ------ ------
2,041,124 1,461,226 1,948,525 1,406,786
DEDUCTIONS FROM OPERATING REVENUES: (585,667) (418,680) (565,960) (413,463)
-------- -------- -------- ---------
Net operating revenues 1,455,457 1,042,546 1,382,565 993,323
--------- --------- --------- -------
OPERATING EXPENSES:
Personnel (158,940) (131,907) (155,857) (129,511)
Materials and supplies (21,307) (18,192) (21,074) (17,572)
Outside services (74,373) (60,233) (71,770) (57,755)
Charges for use of water resources (15,233) (13,503) (15,061) (13,187)
Electricity purchased for resale (388,405) (302,263) (388,405) (302,263)
Use of basic transmission network (79,595) (77,317) (79,595) (77,317)
Depreciation and amortization (140,535) (138,420) (131,277) (129,227)
Employee post-retirement benefits (17,224) (54,249) (17,224) (54,249)
Operating provisions (39,716) 5,826 (39,132) 5,826
Fuel consumption quota - CCC (64,772) (90,467) (64,772) (90,467)
Gas purchased for resale (50,939) (27,144) - -
Employee profit sharing (19,087) (6,529) (19,081) (6,529)
Energetic development account (37,308) - (37,308) -
Other expenses (41,019) (39,069) (36,951) (36,691)
------- ------- ------- -------
(1,148,453) (953,467) (1,077,507) (908,942)
--------- -------- --------- --------
Income from operations before equity in subsidiaries
and financial income (expenses) 307,004 89,079 305,058 84,381
------- ------ ------- ------
EQUITY IN SUBSIDIARIES - - 6,461 (1,730)
- - ----- -------
FINANCIAL INCOME (EXPENSES)
Financial income 372,000 229,538 360,218 226,181
Financial expenses (98,943) (602,872) (94,939) (577,701)
------- -------- ------- --------
273,057 (373,334) 265,279 (351,520)
------- -------- ------- --------
Income (loss) from operations 580,061 (284,255) 576,798 (268,869)
------- -------- ------- --------
NON-OPERATING EXPENSES, NET (3,384) (1,052,195) (3,521) (1,052,195)
------ ---------- ------ ----------
Income (loss) before taxes on income 576,677 (1,336,450) 573,277 (1,321,064)
------- ---------- ------- ----------
Income and social contribution taxes (193,350) 92,920 (189,508) 86,321
Reversion of interest on capital - 120,000 - 120,000
- ------- - -------
Income (loss) before minority interest 383,327 (1,123,530) 383,769 (1,114,743)
MINORITY INTEREST 442 8,787 - -
--- ----- - -
NET INCOME (LOSS) FOR THE PERIOD 383,769 (1,114,743) 383,769 (1,114,743)
======= ========== ======= ==========
NUMBER OF THOUSAND OF SHARES 162,084,691 162,084,691 162,084,691 162,084,691
=========== =========== =========== ===========
EARNINGS (LOSS) PER THOUSAND SHARE - R$ 0.00237 (0.00688) 0.00237 (0.00688)
======= ========= ======= =========
The accompanying condensed notes are an integral part of these financial
statements.
6
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
UNAUDITED CONDENSED NOTES TO THE INTERIM FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
(Amounts expressed in thousands of Brazilian reais - R$, unless otherwise
indicated)
-------------------------------------------------------------------------------
1) THE COMPANY AND ITS OPERATIONS
Companhia Energetica de Minas Gerais - CEMIG ("CEMIG" or the "Company"), a
company organized under the laws of the Federative Republic of Brazil, is an
electric power concessionaire and public utility, controlled by the Government
of the State of Minas Gerais, Brazil (the "State Government"). Its principal
activities are the construction and operation of systems used in the
generation, transmission, distribution and sale of electric energy, as well as
in certain related business activities.
The Company has equity interests in the following operating companies:
o Sa Carvalho S.A. ("Sa Carvalho") (100.00% interest) - Its principal
activities are the production and sale of electric energy from the
Sa Carvalho hydroelectric power plant, as an electric energy public
service concessionaire;
o Usina Termica Ipatinga S.A. ("Ipatinga") (100.00% interest) - Its
principal activities are the production and sale of electric energy,
as an independent power producer, at the Ipatinga thermoelectric
power plant located at the facilities of Usinas Siderurgicas de
Minas Gerais - USIMINAS;
o Companhia de Gas de Minas Gerais - GASMIG ("GASMIG") (95.17%
interest) - Its principal activities are the operation, production,
acquisition, storage, transportation and distribution of natural gas
and related products. GASMIG was granted a concession by the State
Government to distribute gas in the State of Minas Gerais;
o Empresa de Infovias S.A. ("Infovias") (99.92% interest) - Its
principal activities are rendering telecommunications services and
developing activities related thereto, through multiservice networks
using optical fiber cable, coaxial cable and other electronic
equipment. Infovias owns 64.91% of the capital stock of Way TV Belo
Horizonte S.A., a cable TV and internet services provider in the
State of Minas Gerais, and
o Efficientia S.A. - ("Efficientia") (100.00% interest) - Its
principal activities are rendering efficiency, optimization and
energy solutions services to energy supply facilities. Efficientia
S.A. initiated operations in the first quarter of 2003.
Additionally, the Company has a 100% interest in each of the following
pre-operating stage companies:
o Horizontes Energia S.A. - Its principal activities are expected to
be the production and sale of electric energy, as an independent
power producer, at the Machado Mineiro and Salto do Paraopeba
hydroelectric power plants, located in the State of Minas Gerais,
and the Salto Voltao and Salto do Passo Velho hydroelectric power
plants, located in the State of Santa Catarina.
o Cemig PCH S.A., Cemig Capim Branco Energia S.A. and UTE Barreiro
S.A. - Their principal activities are expected to be the production
and sale of electric energy, as independent power producers.
7
o Cemig Trading S.A. - Its principal activities will be related energy
trading.
Additionally, CEMIG has minority interest of 48.50% in each of Central
Termeletrica de Cogeracao S.A. and Central Hidreletrica Pai Joaquim S.A., each
in pre-operating stage.
2) PRESENTATION OF THE FINANCIAL STATEMENTS
The accounting practices, methods and criteria used by the Company in the
preparation of these quarterly financial statements are consistent with those
applied in the financial statements as of and for the year ended December 31,
2002, including consolidation criteria.
The financial statements of companies mentioned in Note 1 were consolidated,
except Central Termeletrica de Cogeracao S.A. and Central Hidreletrica Pai
Joaquim S.A..
The financial statements of controlled companies used to calculate the equity
and consolidation are dated June 30, 2003, except those with respect to GASMIG
and Infovias, which are dated May 31, 2003.
3) CASH AND CASH EQUIVALENTS
The composition of the balance is as follows:
Consolidated Company
----------------------------------- ------------------------------------
June 30, 2003 March 31,2003 June 30, 2003 March 31,2003
----------------- ----------------- ----------------- -----------------
Banks 136,888 135,123 135,000 132,344
Short term investments 137,473 143,217 61,809 51,636
----------------- ----------------- ----------------- -----------------
274,361 278,340 196,809 183,980
================= ================= ================= =================
The majority of the short-term investments of CEMIG and its subsidiaries are
invested in Bank Deposit Certificates indexed basically to the CDI (Interbank
Certificate of Deposit rate) variation.
4) ACCOUNTS RECEIVABLE
Consolidated
------------------------------------------------------------------------------------------------------------------------
Past due Past due Total Total
accounts - up accounts - June 30, March 31,
Consumer Class Current to 90 days over 90 days 2003 2003
------------------------------------------------------------------------------------------------------------------------
Residential 202,443 160,778 19,840 383,061 309,606
Industrial 166,943 64,495 100,690 332,128 237,322
Commercial 96,252 51,571 15,652 163,475 146,754
Rural 28,909 12,806 4,756 46,471 38,820
Public authorities 15,042 20,978 13,025 49,045 49,062
Public lighting 16,541 30,408 30,667 77,616 73,601
Public services 9,006 8,335 90 17,431 66,751
------- ------- ------- ------- -------
Subtotal - Consumers 535,136 349,371 184,720 1,069,227 921,916
Supply to other concessionaries 10,009 - - 10,009 9,207
Allowance for doubtful accounts - - (82,255) (82,255) (69,899)
------- ------- ------- ------- -------
545,145 349,371 102,465 996,981 861,224
======= ======= ======= ======= =======
8
Company
------------------------------------------------------------------------------------------------------------------------
Past due Past due Total Total
accounts - up accounts - June 30, March 31,
Consumer Class Current to 90 days over 90 days 2003 2003
------------------------------------------------------------------------------------------------------------------------
Residential 202,443 160,778 19,840 383,061 309,606
Industrial 164,856 64,495 93,893 323,244 235,049
Commercial 83,696 51,571 15,463 150,730 132,379
Rural 28,909 12,806 4,756 46,471 38,820
Public authorities 15,042 20,978 13,025 49,045 49,062
Public lighting 16,541 30,408 30,667 77,616 73,601
Public services 9,006 8,335 90 17,431 66,751
------- ------- ------- ------- -------
Subtotal - Consumers 520,493 349,371 177,734 1,047,598 905,268
Supply to other concessionaries 10,009 - - 10,009 9,207
Allowance for doubtful accounts - - (79,839) (79,839) (68,472)
------- ------- ------- ------- -------
530,502 349,371 97,895 977,768 846,003
======= ======= ======= ======= =======
The Company has accounts receivable from Companhia de Saneamento de Minas
Gerais - COPASA ("COPASA"), a State Government controlled company, in the
total amount of R$69,296, which are recorded as current and long term assets,
in the amounts of R$20,130 and R$49,166 respectively, according to the
Company's expected realization. Company management is negotiating the
collection of the aforementioned past due amount and does not expect any loss
on its realization.
5) CONSUMERS - SPECIAL RATE ADJUSTMENT
In December 2001, the Federal Government, through the Camara de Gestao da
Crise de Energia Eletrica (the Federal Government's electric energy crisis
committee or the "Energy Crisis Committee"), and the electricity distribution
and generation concessionaires entered into an agreement entitled Acordo Geral
do Setor Eletrico ("General Agreement of the Electricity Sector"). This
agreement was entered into to ensure the economic and financial equilibrium of
the concession contracts and to reimburse concessionaires for lost revenues
related to the period when the Electricity Rationing Plan was in force,
through a special rate adjustment.
Law No. 10,438, of April 26, 2002, and the Energy Crisis Committee's
Resolution No. 91, of December 21, 2001, established a special rate adjustment
applicable as of g December 27, 2001. The rate increases were set forth in the
Energy Crisis Committee's Resolution No. 130, of April 30, 2002, as follows:
|_| an increase of 2.90% for rural and residential consumers (excluding
low-income consumers), street lighting and high tension industrial
consumers whose costs related to electric energy represent at least
18.00% of average production cost and meet certain criteria, related to
charge and demand energy factors which were determined in the
Resolution.
|_| an increase of 7.90% for all other consumers.
The special rate adjustment mentioned above is being applied to reimburse
concessionaires for the following items:
a. Billing losses in the period from June 1, 2001 to February 28, 2002,
representing the difference between the Company's estimated revenue,
assuming that the Electricity Rationing Plan had not been
implemented, and the actual revenue earned during the rationing
period, as established by ANEEL (National Energy Authority). The
computation does not include overdue payment losses which the
Company does not expect to be material.
b. Variation in Parcel "A" Items (uncontrollable costs as established
by the concession contracts) related to the period from January 1,
2001 to October 25, 2001. The amount to be reimbursed is equal to
the difference (positive or negative) between the Parcel "A" costs
effectively paid and the
9
estimated Parcel "A" costs used for purposes of computing the most
recent annual rate adjustment.
c. Amounts to be paid to generators for energy purchased on the MAE,
from June 1, 2001 to February 28, 2002, at a price exceeding
R$49.26/MWh. This asset includes the related taxes and charges on
revenues; however, such taxes and charges are not required to be
transferred to the generators. Accordingly, taxes and charges are
excluded before transferring these amounts to generators. These
amounts may change, depending on the litigation currently in
progress, filed by market agents, including the Company, related to
the interpretation of the market rules in force.
Under ANEEL Resolution No. 484 as of August 29, 2002, the special rate
adjustment will be in force for a maximum period of 82 months, January 2002 to
October 2008. However management has determined that the special rate
adjustment would hot be sufficient to recover CEMIG's rationing losses. This
determination was based on certain assumptions, the most relevant of which
relate to rate adjustments, inflationary rates, SELIC (Brazilian Central Bank
overnight interest rate) and CEMIG's growth in the energy market. Accordingly,
the Company recorded a provision relating rationing losses.
Considering that the assumptions used in management's determination may change
throughout the recovery period, management is periodically reviewing these
projections, and consequently, the provision recorded mentioned in the prior
paragraph.
Recovery of credits through the special rate adjustment, under ANEEL
Resolution No. 89 of February 25, 2003, is being made as follows: (i) credits
mentioned in item "a" have been in the process of being recovered since
January 2002; (ii) credits mentioned in items "a" and "c" have been in the
process of being recovered recovered simultaneously since January 2003, in the
proportion of 69.22% and 30.78%, respectively; and (iii) credits mentioned in
item "b" will be the last to be recovered.
The amounts which will be realized through the special rate adjustment,
described in items "a" and "b" above are being restated based on SELIC from
the month of their effective recovery.
39% of the credits described in item "c" above are being monetarily restated
based on SELIC as from January 1, 2003 and 45% as from July 2003, date of MAE
settlement (after the conclusion of the audit work). The remaining 16% will be
restated after the definition of MAE methodology applied to calculate the
CEMIG's rights and obligations, according injunction grated by CEMIG,
mentioned in Note 8, item "b".
Through Resolutions No. 480 to 482, as of August 29, 2002, ANEEL approved the
amounts of billing losses and recovery of variations of the Parcel "A" items.
Despite ANEEL Resolution No. 483, as of August 29, 2002, which approved the
amounts to be paid to generators for the energy purchased on the MAE during
the rationing period, CEMIG recorded such transactions based on information
provided by MAE and which are more updated.
ICMS (State VAT) on the special rate adjustment, net of provision for losses,
related to future billings, which is estimated at R$351,912, only becomes an
obligation once the customers are billed. However, because the Company's only
responsibility is to transfer this tax from consumers to the State tax
authorities, the Company did not record this obligation in advance.
10
The amounts to be recovered through the special rate adjustments mentioned in
items "a", "b", "c" are as follows:
Company and Consolidated
------------------------------------------------------------------
June 30, 2003 March 31, 2003
------------------------------------------------- ---------------
SELIC
Principal restatement Total Total
------------------------------------------------------------------
Billing losses during the Electricity Rationing Period 876,847 235,638 1,112,485 1,066,691
Amounts collected (310,464) - (310,464) (262,594)
--------- ------- --------- ---------
566,383 235,638 802,021 804,097
Recovery of spot market amounts by generators 456,177 19,731 475,908 469,221
Amounts collected (32,645) - (32,645) (11,361)
--------- ------- --------- ---------
423,532 19,731 443,263 457,860
Recovery of uncontrollable cost variations relating to
Parcel "A" 245,299 115,658 360,957 341,162
--------- ------- --------- ---------
1,235,214 371,027 1,606,241 1,603,119
Provision for losses on the realization of the special
rate adjustment (177,627) (20,966) (198,593) (187,701)
--------- ------- --------- ---------
1,057,587 350,061 1,407,648 1,415,418
========= ======= ========= =========
Current 291,829 269,977
Noncurrent 1,115,819 1,145,441
========= =========
The proceeds of Special rate adjustments to be paid generators, as described
in item "c", are as follows:
Company and Consolidated
------------------------------------------------------------------
June 30, 2003 March 31, 2003
------------------------------------------------- ---------------
SELIC
Principal restatement Total Total
------------------------------------------------------------------
Amounts to be paid to generators 418,269 18,100 436,369 430,325
( - ) Transference made (22,750) - (22,750) (4,410)
------- ------ ------- -------
395,519 18,100 413,619 425,915
======= ====== ======= =======
Short-term liabilities 79,645 71,157
Long-term liabilities 333,974 354,758
======= =======
11
6) RECOVERABLE TAXES
Consolidated Company
------------------------------- ---------------------------------
June 30, March 31, June 30, March 31,
2003 2003 2003 2003
---------------- ------------- ----------------- --------------
Current Assets
State VAT - ICMS 28,061 32,232 23,268 23,851
Income and social contribution tax 26,931 39,874 24,031 44,747
Other 9,479 4,039 9,262 3,741
------- ------- ------- ------
64,471 76,145 56,561 72,339
======= ======= ======= ======
Noncurrent Assets
State VAT - ICMS 99,503 91,083 88,171 79,368
State VAT - ICMS - Under discussion with Minas 18,843 18,843 18,843 18,843
Gerais State Government
------- ------- ------- ------
118,346 109,926 107,014 98,211
======= ======= ======= ======
The balances of income and social contribution taxes are primarily related to
prepaid income and social contribution taxes in amounts greater than due
amounts. The balances will be offset in 2003.
The State VAT assets of the Company and its subsidiaries will be recovered
through offset against State VAT liabilities. Most of the balance recorded as
noncurrent assets is subject to 48-month compensation period, as established
by Supplementary Federal Law No. 102/00. The Company is in a legal dispute
with the Minas Gerais State Government in order to compensate tax credits in
the amount of R$18,843.
7) PREPAID EXPENSES - CVA
The balance of the recoverable variation account of Parcel "A" items - CVA,
refers to the difference, beginning October 26, 2001, between the estimated
Parcel "A" costs of the Company, used in defining rate adjustments, and
payments in respect of parcel "A" items actually made. The variations will be
recovered in subsequent annual rate adjustments.
However, as a result of Executive Act No. 116, issued on April 4, 2003, the
compensation of the "CVA" costs was postponed for 12 months, from April 8,
2003, the date of the previously scheduled rate increase.
Additionally, the CVA balance, for which compensation was postponed, plus the
CVA balance to be calculated for the next 12 months, as from April 8, 2003,
will be reimbursed though an increase in electric rates for a period of 24
months, beginning on April 8, 2004.
The mentioned Executive Act included in "CVA" the variations of the Energy
Development Fund (a fund created by the Federal Government for energy
development and competitiveness of energy produced through wind farms, small
hydroelectric power plants, biomass, natural gas and coal) as from February
10, 2003.
12
Consolidated and Company
--------------------------------------------------------------------------
Total Total
SELIC June 30, March 31,
Principal Restatement 2003 2003
----------------- ------------- ------------ --------------
System service charges - ESS 168,880 5,761 174,641 135,502
Itaipu Binacional eletricity purchase tariff 257,387 45,760 303,147 385,420
Itaipu Binacional eletricity transport tariff 3,237 496 3,733 3,507
Fuel usage quota - CCC (88,271) (16,663) (104,934) (107,738)
Tariff for use of basic transmission network 63,068 8,330 71,398 62,149
Energetic development account 43,601 1,682 45,283 40,455
Charges for use of water resources 3,577 385 3,962 3,592
------------- ------------ ------------ ---------------
451,479 45,751 497,230 522,887
------------- ------------ ------------ ---------------
Current 47,243 1,555
Noncurrent 449,987 521,332
============ ===============
The above-mentioned amounts are updated based on the SELIC rate from the
payment date to effective recovery through annual rate adjustments.
The amounts to be compensated, recorded in current assets refer to variations
of uncontrollable costs that will be compensated as from the annual rate
adjustment on April 8, 2004.
The System service charges - ESS for the period from September 2000 to March
2003 were accrued based on information provided by MAE and for the period from
April 2003 to June 2003, were accrued based on Company estimates. These
amounts will be monetarily restated based on SELIC, as from the effective
payment (the initial portion was settled in February 2003 and the remaining
portion was settled in July 2003, as described in Note 8, item b). Certain
differences between Company's estimates and the effective amounts and the
outcome of judicial claims currently in progress, filed by market agents,
related to the interpretation of the market rules in force, may change the
amounts recorded.
8) DISTRIBUTORS - ENERGY SUPPLY
a) Obligations and rights from MAE transactions
As established by the General Agreement of the Electricity Sector, the
difference between the amounts paid to generators and distributors related to
MAE transactions during the period in which the Electricity Rationing Plan was
in force and the amount of R$49.26/MWh will be reimbursed through the special
rate adjustment.
According to ANEEL Resolution No. 36, dated January 29, 2003, distribution
concessionaires should collect and transfer, on a monthly basis, the special
rate adjustment amounts to generators and distributors, including CEMIG, that
have amounts receivable since March 2003.
Of the Special rate adjustment credits to be transferred from other
distribution concessionaires to CEMIG corresponding to approximately R$31,302,
from March 2003 to June 2003, which were received R$11,689 in the period. The
other distribution concessionaires are not transferring the entire amounts of
the Special rate adjustments due to CEMIG the because they believe, based on
their interpretation of Article 9th of the ANEEL Resolution No. 36 and ANEEL
Technical Note No. 004/2003, that CEMIG is challenging the General Agreement
of the Electricity Sector because it is contesting the methodology applied to
calculate CEMIG's obligations resulting from MAE transactions ( seetioned in
Item "b" of this note). For this reason, such distribution concessionaires are
prevented from transferring such amounts due to CEMIG.
CEMIG, however, does not believe that the injunction granted on December 2002,
contesting the methodology applied to calculate the CEMIG's rights and
obligations, represents a challenge of the General Agreement of the
Electricity Sector. Therefore, the Company is contesting the restrictions
13
included in ANEEL Resolution No. 36 and ANEEL Technical Note No.004/2003, to
eliminate any sanction or restriction on CEMIG's ability to receive amounts
due.
The amounts to be received from distribution concessionaires are recorded in
Current and Noncurrent Assets, under Distributors - Energy supply.
39% of CEMIG's rights and obligations within MAE are being monetarily restated
based on the SELIC variation, as from January 1, 2003 and 45% as from July
2003, date of MAE settlement. The remaining 16% will be restated after the
definition of MAE methodology applied to calculate the CEMIG's rights and
obligations, according injunction grated by CEMIG, mentioned in this Note,
Item "b".
CEMIG's rights and obligations related to MAE transactions, are set forth
below:
June 30, 2003 March 31, 2003
------------- --------------
ASSETS
Current
Distributors - Energy supply 140,444 93,732
Noncurrent
Distributors - Energy supply 436,073 463,357
------- -------
576,517 557,089
======= =======
LIABILITIES
Current
Suppliers 532,072 457,875
------- -------
532,072 457,875
======= =======
Eventual differences between the CEMIG's estimates and the effective values
and judicial claims currently in progress, filed by market agents, related to
the interpretation of the market rules in force, may change the amounts
recorded.
b) Financial settlement of the MAE transactions
On February 18, 2003, CEMIG settled part of its outstanding obligations
relating to MAE transactions, in the amount of R$335,482, using funds provided
by BNDES.
The remaining portion, in the amount of R$372,545, was settled in July 2003.
Part of the payment made was covered by a specific loan provided by BNDES in
July 2003, in the amount of R$176,483.
The amounts paid to MAE were calculated according to an injunction granted to
CEMIG, on December 25, 2002, determining that CEMIG should be considered as
both distributor and generator for purposes of recording of MAE transactions,
notwithstanding ANEEL Resolution No. 447, of August 23, 2002, which determined
that CEMIG should be considered as a distribution concessionaire only.
The amounts provided by MAE, in accordance with the injunction, represented an
R$134,509 decrease in CEMIG's net liabilities. However, because the
methodology to be used to calculate CEMIG's rights and obligations is still
pending, the Company opted to keep the amounts recorded according to ANEEL
Resolution No. 447. The difference between the amounts paid and provisioned is
recorded under Short-term liabilities, as Suppliers.
c) Review of amounts recorded from MAE transactions
In accordance with MAE's review of certain assumptions adopted to calculate
the rights and obligations of generators and distributors, CEMIG recorded the
following adjustments in the second quarter of 2003:
14
Total
-----
ASSETS
Noncurrent assets
Prepaid expenses - CVA (System service charges - ESS) 35,585
Distributors - Energy supply 23,734
------
59,319
======
LIABILITES
Short-term liabilities
Suppliers 68,534
------
68,534
======
Statement of income
Electricity sales - Suppliers 21,318
Operating expense - Electricity purchased for resale (30,533)
-------
(9,215)
======
9) RECEIVABLE FROM MINAS GERAIS STATE GOVERNMENT
The remaining balance of the CRC Account (Recoverable Rate Deficit) was
transferred to the State Government in 1995, through the CRC Credit Assignment
Contract, pursuant to Law No. 8,724/93. This balance is payable monthly, over
17 years beginning June 1, 1998, and accrues annual interest of 6% and is
subject to restatement based on the IGP-DI (General Price Index).
In 2002, CEMIG entered into the following amendments with the Minas Gerais
State Government:
(a) Second Amendment of the CRC Credit Assignment Contract, signed on October
14, 2002
This Amendment refers to 149 installments, maturing from January 1, 2003 to
May 1, 2015, in the total amount of R$1,424,589, as of June 30, 2003. These
installments are subject to annual interest of 6% and are updated based on the
IGP-DI.
Due to the non-inclusion in the Second Amendment of additional guarantees that
would assure the realization of the aforementioned asset, CEMIG recorded an
allowance for losses in 2002 that represents the total amount of the referred
amendment.
Due to the full allowance recorded, the financial income related to monetary
variation and interest on the Second Amendment, from January to June 2003, in
the amount of R$103,320, has not impacted the statement of income for 2003,
considering that a provision for loss was recorded in the same amount.
However, in compliance with the Brazilian tax legislation, CEMIG has recorded
the federal payable taxes on the mentioned financial income.
The installments of the mentioned Amendment, due from January 1 to July 1,
2003, totaling R$95,119, including monetary variation, interest and fine were
not paid. Company management is negotiating the collection of the
aforementioned past due amount with the Minas Gerais State Government, under
the conditions established by the contract.
(b) Third Amendment of the CRC Credit Assignment Contract, signed on October
24, 2002
CEMIG and the Minas Gerais State Government signed this Amendment in order to
reschedule the payment of the asset composed by the installments originally
due from April 1, 1999 to December 1, 1999 and from March 1, 2000 to December
1, 2002. These installments, in the total amount of R$836,971, including
interest and fines, as of June 30, 2003, were renegotiated to annual interest
rate of 12.00% and
15
are updated based on the IGP-DI. They will be paid in 149 monthly installments
from January 2003 to May 2015. This Amendment established an additional
guarantee which now allows the Company to retain dividends and interest on
capital to be paid to the Minas Gerais State Government, as a Company
shareholder.
The installments of the Third Amendment, due from January 1 to July 1, 2003,
totaling R$72,925, including monetary variation, interest and fine were not
paid. Company management is negotiating the collection of the aforementioned
past due amount with the Minas Gerais State Government, under the conditions
established by the contract.
The projection of the Company's future operations indicates that the dividends
attributable to the Minas Gerais State Government will be sufficient to assure
the full realization of the asset related to the Third Amendment.
Management will monitor future events which may impact the Company's dividend
payment projection, in order to conclude if the above-mentioned guarantee is
still effective or an additional allowance under this amendment is necessary.
10) INCOME AND SOCIAL CONTRIBUTION TAXES
(a) Tax credits
The Company and its subsidiaries have tax credits recorded as noncurrent
assets. The income tax credits are recorded at a 25% rate and social
contribution tax credits are recorded at a 9% rate. The composition of the
balances is as follows:
Consolidated Company
-------------------------------------- -----------------------------------
June 30, 2003 March 31,2003 June 30, 2003 March 31,2003
----------------- ----------------- ---------------- ----------------
Tax credits on:
Tax loss carryforwards 181,206 254,000 162,306 232,994
Employee post-retirement benefits 56,723 79,548 56,723 79,548
Reserve for contingencies 142,893 135,338 142,893 135,338
Accrual for voluntary termination program - PDV 8,611 9,214 8,611 9,214
Allowance for doubtful accounts 27,967 27,766 27,183 23,318
Reserve for PASEP/COFINS - Special Rate Adjustment 26,068 26,404 26,068 26,404
Other 10,023 11,525 9,627 11,869
----------------- ----------------- ---------------- ----------------
453,491 539,795 433,411 518,685
================= ================= ================ ================
CEMIG's Board of Directors approved, on March 27, 2003, the analysis made by
CEMIG's Financial and Investor Relations Office on the projected future
results of operations, adjusted to present value. According to such analysis,
the Company may be able to realize the tax credits set forth above over a
ten-year maximum period, in compliance with CVM Resolution No. 371, published
on June 27, 2002. CEMIG's Fiscal Council, on March 27, 2003, received such
study for consideration.
16
In accordance with CEMIG's estimates, future taxable income is expected to
permit realization of the tax credits, recorded as of June 30, 2003, as
follows:
Consolidated Company
----------------- -------------
2003 138,414 138,414
2004 85,828 84,894
2005 33,544 31,294
2006 34,613 31,038
2007 36,601 32,752
2008 to 2010 109,002 102,747
2011 to June, 2013 15,489 12,272
----------------- --------------
453,491 433,411
================= ==============
CEMIG has tax credits not recognized in its financial statements, in the
amount of R$15,084, resulting from Management estimates that certain
obligations, due to their nature will be realized in a period over ten years.
Additionally, Infovias has tax credits not recognized in its financial
statements, in the amount of R$5,814, resulting from Management estimates
approved by the Company's Board of Directors.
(b) Reconciliation of income tax and social contribution tax expenses
The reconciliation between the nominal expense/benefit of income tax (25%
rate) and social contribution tax (9% rate) and the expenses presented in the
statement of income is as follows:
Consolidated Company
--------------------------- --------------------------
Six months ended Six months ended
June 30, June 30,
--------------------------- --------------------------
2003 2002 2003 2002
----------- -------------- ----------- -------------
Income (loss) before taxes on income 848,515 (1,001,091) 840,486 (986,654)
Income and social contribution (expenses) benefits - nominal (288,495) 340,371 (285,765) 335,462
Tax effects on:
Allowance for losses on receivable from Minas Gerais State
Government (35,129) (355,411) (35,129) (355,411)
Reversal of social contribution tax on additional monetary restatement (3,202) (4,677) (3,202) (4,677)
Equity pick-up in subsidiaries - - 5,403 (1,374)
Contributions and grants not deductible (1,433) (1,682) (1,433) (1,682)
Other 14,494 (823) 15,103 (323)
----------- -------------- ----------- -------------
Income and social contribution tax (expenses) in income statement (313,765) (22,360) (305,023) (28,142)
=========== ============== =========== =============
17
11) BONUS, NET OF SURCHARGE, AND COSTS TO BE REIMBURSED AS A RESULT OF THE
ELECTRICITY RATIONING PLAN
Through the Energy Crisis Committee, the Federal Government established
electric energy consumption targets for all consumers of areas affected by the
Electricity Rationing Plan in force during the period from June 2001 to
February 2002. A financial bonus was established for residential consumers
whose electric energy consumption was lower than the target, and surcharges
were established for all consumers whose consumption exceeded the target,
calculated based on the effective consumption in excess of such target, as
established by the Energy Crisis Committee. The balances related to the bonus,
costs and surcharge, to be reimbursed by the Federal Government, are as
follows:
Consolidated and Company
---------------------------------------
June 30, March 31,
2003 2003
------------------ -----------------
Bonus paid to consumers that consumed less than the target consumption 23,449 24,101
Costs incurred related to the adoption of the Electricity Rationing Plan in excess
of the 2.00% surcharge on consumer tariffs 22,107 27,854
------------------ -----------------
45,556 51,955
------------------ -----------------
Current 22,107 27,312
Noncurrent 23,449 24,643
================== =================
Part of the surcharges, in the total amount of R$23,449, were not collected
from consumers since they were subject to a judicial dispute during the
Electricity Rationing Plan. As a result, ANEEL has not reimbursed the Company
for the bonuses relating to the unbilled surcharge. This issue is under
negotiation with Ministry of Mines and Energy, and Management does not expect
losses on the realization of this amount.
In conformity with ANEEL Resolution No. 600, dated October 31, 2002, the
operation costs related to the adoption of the Electricity Rationing Plan in
excess of the 2.00% surcharge on consumer rates is being recovered through a
rate increase in force since April 8, 2003.
12) RECEIVABLES FROM FEDERAL GOVERNMENT - REVENUE LOSSES FROM LOW-INCOME
CONSUMERS
The new classification criteria, established by the Federal Government, for
low income consumers resulted in a decrease in revenues from electricity sales
to final customers in the amount of R$86,669 (R$42,386 in 2002 and R$44,283 in
2003), due to the lower rate applied to those customers. Accordingly, in
compliance with ANEEL's request, CEMIG recorded these losses under this
caption against electricity sales to final customers in 2002 and 2003.
In July 2002, Eletrobras reimbursed CEMIG of billing losses in the period from
March 2002 to May 2003 in the amount of R$79,838. The resources were used to
pay part of Eletrobras previously conceded financing in the amount of R$34,959
and to pay part of the Energy development account in the amount of R$44,879.
18
13) INVESTMENTS
Consolidated Company
--------------------------- ------------------------
June 30, March 31, June 30, March 31,
2003 2003 2003 2003
---------- ------------- ----------- ---------
Equity in subsidiaries
Empresa de Infovias S.A. - - 248,409 229,014
Companhia de Gas de Minas Gerais - GASMIG - - 92,280 89,208
Usina Termica Ipatinga S.A. - - 77,458 77,272
Sa Carvalho S.A. - - 97,522 95,563
Horizontes Energia S.A. - - 64,258 64,258
Cemig Capim Branco Energia S.A. - - 15,790 12,273
Cemig PCH S.A. - - 23,023 17,133
UTE Barreiro S.A. - - 4,764 4,526
Efficientia S.A. - - 1,903 1,565
Cemig Trading S.A. - - 10 10
------- ------- ------- -------
- - 625,417 590,822
In consortiums for power plant construction 717,095 666,363 701,320 654,091
Goodwill on purchase of Infovias 9,510 9,510 9,510 9,510
Other investments 10,379 10,447 6,517 8,827
------- ------- ------- -------
736,984 686,320 1,342,764 1,263,250
======= ======= ========= =========
(a) The principal information related to consolidated subsidiaries is as
follows:
Six months ended
June 30, 2003 June 30, 2003
------------------------------------------------ ------------------
Subsidiaries Cemig Shareholders' Net income (loss)
Interest - % Capital equity
--------------- ------------ ---------------- ------------------
Empresa de Infovias S.A. * 99.92 266,363 230,680 (2,294)
Companhia de Gas de Minas Gerais -GASMIG * 95.17 46,067 96,963 9,306
Usina Termica Ipatinga S.A. 100.00 74,633 77,458 1,138
Sa Carvalho S.A. 100.00 86,833 97,522 6,203
Horizontes Energia S.A. 100.00 62,871 64,258 -
Cemig Capim Branco Energia S.A. 100.00 1 15,790 -
Cemig PCH S.A. 100.00 1 23,023 -
UTE Barreiro S.A. 100.00 1 4,764 -
Efficientia S.A. 100.00 10 1,903 (655)
Cemig Trading S.A. 100.00 10 10 -
(*) Information as of May 31, 2003.
Income derived from equity in subsidiaries for the first six months of 2003
includes a R$2,641 adjustment, due to the fact that the Company calculated its
equity in subsidiaries in its December 31, 2002 financial statements using
preliminary financial statements.
As of June 30, 2003, CEMIG had advances for a capital increase not yet
converted into equity in Infovias in the amount of R$17,914.
The special review report for the quarterly information as of June 30, 2003 of
the independent accountants of Infovias is not yet completed. The independent
accountants' special review report on the quarterly information of Infovias,
as of March 31, 2003, included comments on: (i) deferred income and social
contribution taxes and the maintenance of the recoverable State VAT - ICMS,
which realization is based on future taxable income and the continuity of the
investment plan; and (ii) need of additional resources from shareholders or
third parties to fund its operations, as well as to ensure the recoverability
of its assets at the recorded amounts in its financial statements, until
Infovias' own operating revenues reach a certain level to absorb these
amounts. The mentioned comments are applicable to Infovias and its controlled
company, Way TV.
19
The Company has signed agreements with Infovias for the lease of CEMIG's
network infrastructure, intra-company data transmission services,
geo-referenced information and data supply. These agreements are still subject
to approval by ANEEL.
ANEEL may seek to impose a fine relating to such agreements if it concludes
that they are not in compliance with its regulations. The maximum penalty is a
fine, in an amount equal to 2% of the Company's revenues during the 12-month
period immediately prior to the imposition of such fine. Management believes
that it has meritorious arguments to present to ANEEL in relation to this
matter. Additionally, ANEEL may impose restrictions on the agreements' terms
and conditions.
(b) Consortiums
CEMIG and its subsidiary, Cemig Capim Branco Energia S.A., are partners with
other companies in certain consortiums for electricity generation projects.
The consortiums, which are not separate legal entities, were created to manage
the related concession contracts. The Company and its subsidiary maintain
accounting records of their share in the consortia assets, as follows:
CEMIG's
participation in June 30, March 31,
energy generated 2003 2003
------------------ --------------- -------------
In Operation
Porto Estrela Hydroelectric Power Plant 33.33% 37,185 37,393
Igarapava Hydroelectric Power Plant 14.50% 49,593 49,948
Funil Hydroelectric Power Plant 49.00% 160,014 150,646
Under Construction
Queimado Hydroelectric Power Plant 82.50% 170,336 163,351
Aimores Hydroelectric Power Plant 49.00% 284,192 252,753
--------------- -------------
Total Company 701,320 654,091
Cemig Capim Branco S.A.
Capim Branco Hydroelectric Power Plants I and II 21.05% 15,775 12,272
--------------- -------------
Total Consolidated 717,095 666,363
=============== =============
The realization of Consortiums investments will occur simultaneously with
depreciation on the Consortiums assets, under Property, Plant and Equipment,
calculated on straight-line basis, according to rates established by ANEEL.
20
14) PROPERTY, PLANT AND EQUIPMENT
Consolidated Company
Annual average ----------------------------------------------------------------------
depreciation June 30, March 31, June 30, March 31,
rate - % 2003 2003 2003 2003
-------------- -------------- ----------------- ------------------- ----------------
In service
Generation-
Hydroelectric 2.47 5,515,358 5,514,557 5,366,978 5,366,177
Thermoelectric 1.83 216,708 215,223 132,124 130,639
Transmission 3.08 1,089,967 1,029,931 1,089,967 1,029,931
Distribution 5.21 6,805,836 6,729,971 6,805,836 6,729,971
Administration 9.63 272,041 268,091 271,567 268,091
Telecom 7.79 322,418 321,605 - -
Gas 5.96 64,309 62,215 - -
-------------- ----------------- ------------------- ----------------
14,286,637 14,142,015 13,666,472 13,524,809
Accumulated depreciation and
amortization
Generation (2,200,447) (2,166,849) (2,178,563) (2,147,029)
Transmission (480,469) (472,454) (480,469) (472,454)
Distribution (2,777,471) (2,714,350) (2,777,471) (2,714,350)
Administration (146,426) (139,889) (146,402) (139,889)
Telecom (35,082) (29,926) - -
Gas (17,136) (13,580) - -
-------------- ----------------- ------------------- ----------------
(5,657,031) (5,537,058) (5,582,905) (5,473,722)
-------------- ----------------- ------------------- ----------------
Total in service 8,629,606 8,604,957 8,083,567 8,051,087
-------------- ----------------- ------------------- ----------------
Construction in progress-
Generation 354,525 277,937 323,282 253,300
Transmission 76,842 121,824 76,842 121,824
Distribution 419,438 439,330 419,438 439,330
Administration 37,731 38,076 37,731 38,076
Telecom 22,438 18,827 - -
Gas 23,692 16,122 - -
-------------- ----------------- ------------------- ----------------
Total construction in progress 934,666 912,116 857,293 852,530
-------------- ----------------- ------------------- ----------------
9,564,272 9,517,073 8,940,860 8,903,617
-------------- ----------------- ------------------- ----------------
Special liabilities (1,618,607) (1,601,915) (1,618,607) (1,601,915)
-------------- ----------------- ------------------- ----------------
Total 7,945,665 7,915,158 7,322,253 7,301,702
============== ================= =================== ================
Special liabilities refers primarily to consumers' contributions to support
construction necessary to meet energy supply orders. Our obligation to satisfy
these Special liabilities depends on ANEEL's disposition at the end of the
distribution concessions through reduction of residual value of Property,
plant and equipment to define the value that the Federal Government will pay
to concessionaires. According to accounting principles and electric energy
sector legislation in force in Brazil, these amounts are not subject to
updating, amortization or depreciation.
21
15) SUPPLIERS
Consolidated Company
June 30, March 31, June 30, March 31,
2003 2003 2003 2003
Short term
Electricity supply
Eletrobras - Energy from Itaipu 413,737 309,252 413,737 309,252
Furnas 44,004 139,650 44,004 139,650
Wholesale Energy Market - MAE 532,072 457,875 532,072 457,875
Transfer to Generators 79,645 71,157 79,645 71,157
Other 32,786 34,177 32,786 34,177
-------------- ---------------- ------------------ ----------------
1,102,244 1,012,111 1,102,244 1,012,111
Supplies and services 100,102 72,574 68,263 46,844
-------------- ---------------- ------------------ ----------------
1,202,346 1,084,685 1,170,507 1,058,955
============== ================ ================== ================
Long term
Electricity supply -
Transfer to Generators 333,974 354,758 333,974 354,758
============== ================ ================== ================
The amounts to be paid for energy purchased on the spot market and System
service charges - ESS from September 2000 to March 2003 were recorded based on
information provided by MAE. The amounts related to the period from April 2003
to June 2003 were accrued based on Company estimates. In February and July
2003, the Company paid R$335,482 and R$372,545, respectively, as described in
Note 8.
Eventual differences between CEMIG's estimates and the effective values and
judicial claims currently in progress, filed by market agents, related to the
interpretation of the market rules in force, may change the amounts recorded.
As of June 30, 2003, CEMIG had overdue amounts to be paid to Eletrobras,
subject to exchange variation and monthly interest on 1%, relating to purchase
of energy from Itaipu, in the amount of R$236,414, of which R$29,545 was paid
in July 2003.
16) TAXES PAYABLE
Consolidated Company
------------------------------------- ----------------------------------
June 30, March 31, June 30, March 31,
2003 2003 2003 2003
--------------- ------------------ --------------- --------------
Short term
Income tax 84,670 66,548 83,958 66,548
Social contribution tax 38,961 23,839 37,025 23,839
State VAT - ICMS 157,179 134,084 155,265 127,604
COFINS - Tax on revenue 32,091 25,995 31,300 25,351
PASEP - Tax on revenue 13,594 12,694 13,185 12,387
INSS - social security 8,799 8,768 8,510 8,516
Other 11,596 5,095 4,838 4,988
------- ------- ------- -------
346,890 277,023 334,081 269,233
======= ======= ======= =======
Long Term
Income tax 185,899 195,333 185,899 195,333
Social contribution tax 66,924 70,320 66,924 70,320
COFINS 45,870 46,743 45,870 46,743
PASEP 18,492 18,609 18,492 18,609
------- ------- ------- -------
317,185 331,005 317,185 331,005
======= ======= ======= =======
The federal taxes recorded under long-term liabilities refer to net deferred
obligations on assets and liabilities in accordance with the General Agreement
of Electricity Sector, which are due according to the realization of these
assets and liabilities.
22
17) LOANS, FINANCING AND DEBENTURES
Composition of the financing by currency and local currency by index is as
follow:
Consolidated Company
------------------------------- ---------------------------
June 30, March 31, June 30, March 31,
2003 2003 2003 2003
-------------- --------------- ------------ -------------
Currency -
U.S. dollar 1,439,475 1,829,372 1,346,486 1,711,134
EURO 66,597 34,247 66,597 34,247
Unit of account (basket of currencies) 39,185 41,509 39,185 41,509
-------------- --------------- ------------ -------------
1,545,257 1,905,128 1,452,268 1,786,890
Indexes -
Indice Geral de Precos - IGP-M (General Price Index) 1,107,713 1,177,289 1,107,713 1,177,289
Indice Interno da Eletrobras - FINEL (Eletrobras Internal
Index) 146,478 151,196 146,478 151,196
UFIR (Tax Reference Unit) 152,813 159,995 152,813 159,995
SELIC (Brazilian benchmark interest rate) 328,062 336,339 328,062 336,339
Other 63,581 49,805 57,176 43,183
-------------- --------------- ------------ -------------
1,798,647 1,874,624 2 1,868,002
Escrow accounts (1)
Income based on CDI (Interbank certificate of deposit) (54,982) (59,156) (54,982) (59,156)
Income based on U.S. dollar variation (115,997) (104,914) (115,997) (104,914)
-------------- --------------- ------------ -------------
(170,979) (164,070) (170,979) (164,070)
-------------- --------------- ------------ -------------
3,172,925 3,615,682 3,073,531 3,490,822
============== =============== ============ =============
(1) Refers to restricted use funds for payment of foreign currency-denominated
financing, in compliance with Banco Central do Brasil - BACEN (Brazilian
Central Bank) Resolution No. 2,515 of June 29, 1998.
The variations in the principal currencies and indexes used to restate the
loans, financing and debentures are as follows:
Variation Variation
Variation From Variation From
From January 1 From January 1
April 1 to to June April 1 to to June 30,
June 30, 2003 30, 2003 June 30, 2003 2003
Currency % % Indexes % %
------------------------------------ --------------- ---------- -------------------------------------- ------------- ----------
Indice Geral de Precos - IGP-M
U.S. dollar (14.35) (18.72) (General Price Index) (0.35) 5.90
Indice Interno da Eletrobras - FINEL
Euro (9.69) (10.54) (Eletrobras Internal Index) (0.42) 1.17
SELIC (Brazilian benchmark interest
Unit of account (Basket of 1.70 2.23 rate) 5.81 11.82
currencies)
One of the Company's financing contracts, in the total amount of R$413,159 as
of June 30, 2003, of which R$274,161 is classified under long-term liabilities
and, contains certain financial covenants, with which we are not in
compliance. Such noncompliance may cause the amounts due under the contract to
become immediately due. In addition, the Company has financing contracts that
contain cross-default clauses. The Company has obtained a waiver from a
creditor that is party to two contracts containing debt covenants with respect
to which the Company is not in compliance. The waiver affirms that such
creditor will not exercise its rights to demand either accelerated or
immediate payment of the total amounts due as of December 31, 2002, March 31,
2003 and June 30, 2003. The Company believes that such noncompliance with debt
covenants was an unusual event, and that its operations for 2003 will allow
the full compliance with all debt covenants. In order to avoid acceleration,
the aforementioned waiver must be maintained in effect until the original
terms of the contracts are fully met. Financing and debentures are
23
classified as current and long-term liabilities according to the original
contract terms, in compliance with the waiver obtained.
Infovias' financing from MBK Furukawa Sistemas S.A. / Unibanco, in the total
amount of R$91,632 as of May 31, 2003, of which R$72,982 is classified under
long-term liabilities, contains certain covenants that, in the event of
noncompliance, may cause the amount due under the contract to become
immediately due. Infovias has obtained a waiver from the creditors that are
parties to this contract. The waiver affirms that such creditors will not
exercise their rights to demand either accelerated or immediate payment of the
total amount due. The waiver obtained must be renewed every quarter until the
original terms of the restricted clauses are met. This financing is classified
as short-term and long-term liabilities according to the original terms of the
respective contracts, in compliance with the waiver obtained. CEMIG guarantees
this contract and any payments made by CEMIG will be converted into preferred
shares of Infovias.
18) RESERVE FOR CONTINGENCIES
CEMIG and its subsidiaries are party to certain legal proceedings in Brazil
arising from the normal course of business and relating to tax, labor and
civil and other issues.
The Company believes that any loss in excess of the amounts provided for, in
respect of such contingencies, will not have a material adverse effect on the
Company's results of operations or financial position.
For those contingencies for which an adverse outcome has been deemed probable,
the Company has recognized reserves for losses, as follows:
Consolidated and Company
------------------------------------------
June 30, March 31,
2003 2003
--------------------- ------------------
Labor claims 81,772 76,620
Civil lawsuits - Consumers 95,000 91,533
Social contribution tax 102,797 96,495
Finsocial (tax on revenue) 19,726 19,558
Civil lawsuits - Others 30,289 27,929
Other 27,831 21,836
--------------------- ------------------
357,415 333,971
===================== ==================
Certain details relating to such reserves are as follows:
(a) Labor claims
The labor claims relate principally to overtime and hazardous occupation
compensation. The total exposure for those matters is estimated to be
R$102,215 as of June 30, 2003 (R$95,776 as of March 31, 2003). The Company
recorded in the first semester of 2003 a provision in the amount of R$12,066
(R$6,144 in the first semester of 2002). CEMIG determines the amounts to be
reserved based on the nature of the group of claims and the most recent court
decisions.
(b) Civil lawsuits - Consumers
A number of industrial consumers have brought legal action against the Company
seeking refunds of amounts paid to CEMIG as a result of a rate increase that
became effective during the Brazilian government's economic stabilization
"Cruzado Plan" in 1986, alleging that such increases violated the price
controls instituted as part of that plan. CEMIG determines the amounts to be
reserved based on the amount billed subject to consumers' claims and recent
court decisions.
The total estimated exposure to the Company for those claims, fully provided
for, was R$95,000 as of June 30, 2003 (R$91,533 as of March 31, 2003). The
amount is fully provided for.
24
(c) Social contribution tax
The Company is deducting the amounts of depreciation, amortization and
write-off of the supplementary monetary restatement of property, plant and
equipment, for purposes of computation of social contribution tax. The Company
estimates that its potential exposure in this matter is approximately
R$102,797, as of June 30, 2003 (R$96,495 as of March 31, 2003). The amount is
fully provisioned.
(d) Finsocial
In 1994, CEMIG was fined by the Brazilian federal tax authorities due to the
exclusion of State VAT from the Finsocial calculation, a tax on billing
extinguished in 1992. The Company that its potential exposure in this matter
is approximately R$19,726 as of June 30, 2003 (R$19,558 as of March 31, 2003).
The amount is fully provisioned.
(e) Other
Other reserves are related to a number of lawsuits involving the Federal
Government, pursuant to which the Company is disputing the constitutionality
of certain federal taxes that have been assessed against it and other general
claims arising from the ordinary course of business.
(f) Legal proceedings in which a favorable outcome is probable
CEMIG has other relevant legal proceedings with respect to which the Company
considers that a favorable outcome is probable. Certain details relating to
such matters are as follows:
(i) Litigation involving FORLUZ
The Company is defending, together with FORLUZ, a claim brought by its
employees' labor union ("Sindieletro") contesting the suspension of
increases in the Company's required contribution to the pension fund
pursuant to periodic monetary restatements. The total amount sought in
this claim is R$656,484. No reserve has been recorded for this claim,
since the Company believes that it has a meritorious defense to such
claim and, consequently, does not expect to incur losses related
thereto.
Sindieletro is contesting FORLUZ for changing the pension fund's
contribution adjustment index from IGP-DI to IPCA of IPEAD (consumer
price index calculated by Minas Gerais Accounting Management and
Economic Research Institute of Minas Gerais Federal University). The
total amount sought in this claim is R$286,028. Considering that FORLUZ
has a meritorious defense to such claim, no reserve has been recorded
for this potential claim.
(ii) Income and social contribution taxes on post retirement benefits
On October 11, 2001, the Brazilian Federal Tax Authorities (Secretaria
da Receita Federal) issued an assessment notice, in the amount of
R$237,494, arising from the utilization of tax credits that resulted
from the amendment of the Company's 1997, 1998, 1999 and 2000 tax
returns. The tax returns were amended as a result of a change in
accounting method for recording post-retirement benefit liabilities.
The additional liability that resulted from the accounting change was
attributed to the tax year that was amended, resulting in net operating
tax loss and social contribution negative basis carryforwards. No
reserve has been recorded as a result of this notice, since the Company
believes that the procedures which generated the tax credits are
legally sound.
The tax credits mentioned in the preceding paragraph were offset
against federal taxes paid in 2001 and 2002. Due to this offset, CEMIG
was exposed to additional penalties in the amount of R$184,881. No
reserve for contingencies has been made to cover any liabilities that
may result from the tax assessment, since CEMIG believes that it has
solid legal grounds, which support the procedures adopted.
25
(iii) COFINS
The Company began contesting the payment of COFINS (tax on revenue) in
1992. As a result of an unfavorable court ruling, the Company paid
R$239,266 of COFINS tax on July 30, 1999. The Federal Government is
claiming that the Company owes approximately R$141,675 in additional
fines and interest relating to the non-payment of COFINS. The Company
is contesting such claims. No reserve has been recorded for this claim,
since the Company believes that it has a meritorious defense against
such claim and, consequently, does not expect to incur losses related
thereto.
(iv) Regulatory agency acts
ANEEL has a regulatory proceeding pending against CEMIG claiming that
CEMIG owes the Federal Government R$200,033 due to a miscalculation of
credits in the amount of the cumulative rate deficit (CRC) applied to
reduce amounts owed to the Federal Government. On October 31, 2002,
ANEEL issued a final decision against the Company. The Company believes
that it has a meritorious judicial defense against such claim and has
therefore recorded no reserve in respect thereto.
(v) Settlement of MAE obligations
In December 2002, CEMIG filed a lawsuit against ANEEL and MAE
contesting the amounts charged during the settlement process carried
out by the MAE in December 2002 and January 2003. This process was
intended to settle the outstanding amounts that the Company and other
electric concessionaires owed to MAE in connection with spot market
energy purchases as from September 2000.
As a result of the lawsuit filed, CEMIG did not settle its outstanding
MAE obligations at the date determined by MAE. The Company has filed an
additional lawsuit to prevent the imposition of a fine relating to the
non-compliance with the MAE determination. Such fine, if imposed, would
amount to approximately R$4,048. The Company expects to be successful
in this lawsuit and, accordingly, no provision has been recorded for
this contingency.
(vi) Civil lawsuits - Consumers
Various consumers have brought civil claims against CEMIG contesting
rate adjustments applied in prior years, including rate subsidies
granted to low-income consumers and the Special rate adjustment. It is
not possible at the present time to estimate the amounts involved in
these claims. The Company believes that it has a meritorious defense
and, therefore, no provision has been recorded to such claims.
The Company is a defendant in five lawsuits contesting the Emergency
capacity charge. The Company collects the Emergency capacity charge
from its customers on behalf of Comercializadora Brasileira de Energia
Eletrica - CBEE, a Federal Government agency set up to supply energy to
utilities in the event of future shortages. It is not possible at the
present time to estimate the amounts involved in these claims. No
accrual has been recorded for these claims since the Company believes
that it has a meritorious defense.
The Company is a defendant, with CVRD, Comercial e Agricola Paineiras
and Companhia Mineira de Metais, in a class action lawsuit, brought by
the citizens of the State Minas Gerais. This lawsuit seeks to nullify
the environmental licenses relating to the Capim Branco I and Capim
Branco II hydroelectric power plants. The Company believes that it has
a meritorious defense to this lawsuit.
The Company is also a defendant together with CVRD, in a class action
lawsuit, brought by the citizens of the State of Minas Gerais. This
lawsuit seeks to nullify the environmental license relating to Aimores
hydroelectric power plant as well as the related concession. Management
believes that it has a meritorious defense to this lawsuit.
26
In addition to the matters described above, CEMIG and its subsidiaries are
involved as a plaintiff or defendant in a variety of routine litigation
arising from the normal course of business. Management believes that it has an
adequate defense in respect of such litigation and that any losses therefrom
would not have a material adverse effect on the consolidated financial
position and results of operations of the Company.
19) EMPLOYEE POST-RETIREMENT BENEFITS
Since 1973, the Company has been the sponsor of Fundacao Forluminas de
Seguridade Social - FORLUZ, a non-profit entity with the purpose of providing
its associates, participants and their dependants with additional income to
supplement the government pension, in accordance with the pension plan to
which they are linked.
FORLUZ offers its associates the following supplementary pension plans:
Mixed Benefit Plan - A defined contribution plan for normal retirement and a
defined benefit plan for coverage of active participant's disability and
death. The Company's contribution is equivalent to the associate's monthly
basic contributions and is the only plan available for new participants.
Settled Benefit Plan - Includes all retired participants who opted for this
plan and the balances, at the option date, of active participants who opted
for migrating from the Defined Benefit Plan to the above-mentioned Mixed
Benefit Plan.
Defined Benefit Plan - Benefit plan adopted by FORLUZ up to 1998, in which the
Federal Government Social Security benefit is supplemented in relation to the
actual average salary of the employee's final years of service in the Company.
In addition to the pension plans provided by FORLUZ, the Company also pays
part of the life insurance premium for its retirees and of the health care
plan for employees, retirees and their dependants. These plans are also
managed by FORLUZ.
The changes in net post-retirement liabilities are as follows:
Pension plan and
supplementation of
retirement Health care Life insurance
---------- ----------- --------------
Net liabilities as of March 31, 2003 1,327,581 200,390 252,598
Net periodic cost recorded in the income statement 2,418 6,383 8,423
Contributions paid (14,955) (4,113) (1,326)
--------- ------- -------
Net liabilities as of June 30, 2003 1,315,044 202,660 259,695
========= ======= =======
Part of the deficit in FORLUZ's actuarial reserves in the amount of
R$1,601,007 as of June 30, 2003 (R$1,537,044 as of March 31, 2003) was
recognized as obligations payable by the Company. These obligations are being
amortized through monthly installments, through June 2024, calculated under
the fixed-installment system ("Price Table"), subject to annual restatement in
accordance with the salary correction index for the Company's employees (not
including productivity) included in the defined benefit plan and subject to
IPCA - IPEAD for other plans, plus 6% per year.
27
20) SHAREHOLDERS' EQUITY
The change in shareholders' equity is as follows:
Balance as of March 31, 2003 5,832,690
Net Income for the quarter ended June 30, 2003 383,769
------------------
Balance as of June 30, 2003 6,216,459
==================
In September 1999, the State of Minas Gerais filed a lawsuit seeking to
nullify the shareholders' agreement signed in 1997 with Southern Electric
Brasil Participacoes Ltda. On August 7, 2001, the Minas Gerais State Court of
Appeals upheld the March 2000 lower court ruling declaring the shareholders'
agreement null and void. Southern Electric Brasil Participacoes Ltda. appealed
the decision which was rejected by the Minas Gerais State Court of Appeals on
October 9, 2001. Southern Electric Brasil Participacoes Ltda. has appealed the
Court's latest decision.
28
21) ELECTRICITY SALES
The composition of electricity sales to final customers is as follows:
Consolidated
--------------------------------------------------------------------------------------------------
(Not reviewed by accountants)
--------------------------------------------------------------
No of consumers MWh R$
---------------------------- ------------------------------ -----------------------------
Six months ended Six months ended Six months ended
June 30, June 30, June 30,
----------------------------- ------------------------------ -----------------------------
2003 2002 2003 2002 2003 2002
------------- ------------- ------------- -------------- -------------- ------------
Residential 4,663,858 4,559,274 3,315,583 3,123,939 1,101,002 835,354
Industrial 68,477 68,110 10,713,332 10,794,168 1,289,312 1,021,778
Commercial 518,266 509,599 1,722,015 1,641,481 485,208 377,678
Rural 351,753 329,619 758,441 713,061 138,353 107,251
Public authorities 44,233 42,567 249,323 216,945 65,722 47,926
Public lighting 2,153 2,733 497,480 412,464 83,138 59,290
Public services 6,897 6,658 480,218 466,709 77,911 60,236
Own consumption 1,337 1,364 27,443 24,425 - -
Unbilled, net - - - - 73,041 33,939
--------- --------- ---------- ---------- --------- ---------
5,656,974 5,519,924 17,763,835 17,393,192 3,313,687 2,543,452
Supply to other concessionaries 4 4 103,411 158,412 8,429 10,685
MAE transactions - - - - 21,318 38,687
--------- --------- ---------- ---------- --------- ---------
Total 5,656,978 5,519,928 17,867,246 17,551,604 3,343,434 2,592,824
========= ========= ========== ========== ========= =========
Company
--------------------------------------------------------------------------------------------------
(Not reviewed by accountants)
--------------------------------------------------------------
No of consumers MWh R$
---------------------------- ------------------------------ -----------------------------
Six months ended Six months ended Six months ended
June 30, June 30, June 30,
----------------------------- ------------------------------ -----------------------------
2003 2002 2003 2002 2003 2002
------------- ------------- ------------- -------------- -------------- ------------
Residential 4,663,858 4,559,274 3,315,583 3,123,939 1,101,002 835,354
Industrial 68,471 68,108 10,351,732 10,379,266 1,260,651 1,001,936
Commercial 518,266 509,599 1,722,015 1,641,481 485,208 377,678
Rural 351,753 329,619 758,441 713,061 138,353 107,251
Public authorities 44,233 42,567 249,323 216,945 65,722 47,926
Public lighting 2,153 2,733 497,480 412,464 83,138 59,290
Public services 6,897 6,658 480,218 466,709 77,911 60,236
Own consumption 1,337 1,364 27,443 24,425 - -
Unbilled, net - - - - 73,041 33,939
--------- --------- ---------- ---------- --------- ---------
5,656,968 5,519,922 17,402,235 16,978,290 3,285,026 2,523,610
Supply to other concessionaries 4 4 103,411 158,412 8,429 10,685
MAE transactions - - - - 21,318 38,687
--------- --------- ---------- ---------- --------- ---------
Total 5,656,972 5,519,926 17,505,646 17,136,702 3,314,773 2,572,982
========= ========= ========== ========== ========= =========
22) OTHER OPERATING REVENUES
Consolidated Company
------------------------------- -----------------------------
Six months ended Six months ended
------------------------------ ----------------------------
June 30, June 30,
2003 2002 2003 2002
--------------- -------------- -------------- -------------
Use of basic transmission network 122,940 79,756 122,940 79,756
Gas sales 114,799 63,071 - -
Fuel consumption quota 4,358 16,102 4,358 16,102
Regulated services 3,561 3,560 3,561 3,560
Electricity services 8,802 7,842 8,749 7,842
Telecom and cable TV services 16,341 2,728 - -
Rent and leasing 9,669 8,997 9,669 8,997
Other 982 948 982 948
--------------- -------------- -------------- -------------
281,452 183,004 150,259 117,205
=============== ============== ============== =============
29
23) DEDUCTIONS FROM OPERATING REVENUES
Consolidated Company
------------------------------- -----------------------------
Six months ended Six months ended
------------------------------ ----------------------------
June 30, June 30,
2003 2002 2003 2002
--------------- -------------- -------------- -------------
State VAT - ICMS on sales to final consumers 704,129 542,058 680,184 538,124
COFINS - Tax on revenue 107,404 88,568 103,204 85,906
Global reserve for reversion quota - RGR 71,352 64,659 70,894 64,355
PASEP - Tax on revenue 58,512 19,190 56,393 18,613
Emergency capacity charge 139,228 41,237 137,431 40,932
Other 746 191 139 162
--------------- -------------- -------------- -------------
1,081,371 755,903 1,048,245 748,092
=============== ============== ============== =============
CEMIG collected, in the first semester of 2003, retroactive amounts related to
the Emergency capacity charge for the period from July 2, 2002 to October 10,
2002, in the amount of R$46,468, due to a class action injunction which did
not allow the amounts to be collected in the prior year.
CEMIG pays the State VAT on the Special rate adjustment according to
collection of the amounts in power bills.
24) ELECTRICITY PURCHASED FOR RESALE
Consolidated and Company
---------------------------------------
Six months ended
June 30,
--------------------------------------
2003 2002
------------------ ------------------
Itaipu Binacional (through FURNAS) 558,225 475,033
Energy traded on spot market - MAE 39,428 109,966
Initial contracts 69,325 74,509
Other 13,360 2,729
------------------ ------------------
680,338 662,237
================== ==================
In 2003, the electricity volume purchased by the Company through initial
contracts was reduced by 25%, in accordance with the timetable for
deregulation of the electric energy sector, that establishes an annual
reduction of electricity volume purchased through initial contracts from 2003
and 2006.
The electricity acquired from ITAIPU is denominated in US dollars and the
prices are defined by ANEEL.
25) OPERATING PROVISIONS
Consolidated Company
------------------------------ ---------------------------------
Six months ended Six months ended
June 30, June 30,
------------------------------ ---------------------------------
2003 2002 2003 2002
----------- --------------- -------------- ---------------
Allowance for doubtful accounts 31,160 (3,162) 29,702 (3,162)
Provision for losses on the realization of the Special rate
adjustment 20,965 - 20,965 -
Labor claims 12,066 6,144 12,066 6,144
Judicial claims - class actions 13,404 3,847 13,404 3,847
Other 2,618 1,590 2,618 1,590
----------- --------------- -------------- ---------------
80,213 8,419 78,755 8,419
=========== =============== ============== ===============
The reversal of the Allowance for doubtful accounts in the previous period was
due from the collection of overdue credits of industrial consumer that were
reserved.
30
26) ENERGY DEVELOPMENT ACCOUNT
The Energy Development Account - CDE was created by Law No. 10,438/02 to
foster energy development of States and the competitiveness of energy produced
through wind farms, PCHs (small hydroelectric power plants), biomass, natural
gas and coal. The amounts to be paid by CEMIG were defined by ANEEL Resolution
No. 42 as of January 31, 2003.
27) OTHER EXPENSES
Consolidated Company
------------------------------- -----------------------------
Six months ended Six months ended
June 30, June 30,
------------------------------ ----------------------------
2003 2002 2003 2002
--------------- -------------- -------------- -------------
Fuel consumption quota 4,286 16,104 4,286 16,102
Rentals and leasing 8,517 7,566 7,929 7,472
Grants and donations 5,712 6,938 5,712 6,938
Advertising 3,600 10,619 3,371 10,599
ANEEL inspection fee 6,736 5,772 6,656 5,699
Own consumption - Electric energy 6,043 5,509 5,215 4,957
MAE contribution 1,730 3,775 1,730 3,771
Energetic efficiency expenses 6,472 4,556 6,310 4,429
Other taxes (real estate, vehicle, etc.) 8,202 2,871 6,669 2,858
General expenses 21,651 11,549 18,253 8,994
--------------- -------------- -------------- -------------
72,949 75,259 66,131 71,819
=============== ============== ============== =============
The fuel costs incurred for the purpose of electricity generation are
reimbursed by Centrais Eletricas Brasileiras S.A. - ELETROBRAS and are
recorded as other operating revenues.
28) FINANCIAL INCOME (EXPENSES)
Consolidated Company
---------------------------- ------------------------------
Six months ended Six months ended
June 30, June 30,
---------------------------- ------------------------------
2003 2002 2003 2002
------------ --------------- --------------- -------------
Financial income:
Investment income earned 14,953 95,095 6,955 89,941
Late charges on past-due electricity bills 25,715 19,037 25,715 19,037
Interest and monetary restatement on receivable from Minas
Gerais State Government 82,011 97,326 82,011 97,326
Monetary restatement on special rate adjustment 146,415 137,546 146,415 137,546
Monetary restatement of CVA 52,122 6,031 52,122 6,031
Monetary restatement - Distributors - Energy supply 24,738 8,803 24,738 8,803
Foreign exchange gains 355,845 29,441 337,317 29,439
Taxes on financial income (PASEP and COFINS) (38,682) (14,398) (38,506) (14,376)
Other 3,415 1,421 7,927 1,412
------------ --------------- --------------- -------------
666,532 380,302 644,694 375,159
============ =============== =============== =============
Financial expenses:
Interest on loans and financing (150,463) (123,673) (144,712) (115,449)
Monetary restatement - Electricity supply (25,819) (34,835) (25,819) (34,835)
Monetary restatement of CVA (11,078) - (11,078) -
Foreign exchange losses (14,654) (344,439) (14,654) (326,661)
Monetary restatement on loans and financing (32,110) (16,060) (32,110) (16,060)
Financial transaction tax ("CPMF") (16,044) (12,128) (15,037) (11,368)
Reversion (Provision) for valuation of marketable securities 45,543 (20,828) 45,543 (20,828)
Interest on capital - (120,000) - (120,000)
Other (30,792) (15,169) (29,202) (14,623)
------------ --------------- --------------- -------------
(235,417) (687,132) (227,069) (659,824)
------------ --------------- --------------- -------------
431,115 (306,830) 417,625 (284,665)
============ =============== =============== =============
31
Financial charges and inflationary/exchange effects on financing of
construction in progress during the first semester of 2003, in the amounts of
R$38,031 and R$38,654, respectively, were transferred to Property, plant and
equipment, and Investments (R$11,557 of financial charges and R$14,441 of
inflationary/exchange effects during the first semester of 2002).
The interest and monetary variation on the above mentioned Receivables from
Minas Gerais State Government are related, primarily, to the Third Amendment
signed with the Minas Gerais State Government, considering that a full
provision for losses has been recorded on the Second Amendment. More
information in Note 9.
29) PRINCIPAL TRANSACTIONS WITH RELATED PARTIES
June 30, 2003 March 31, 2003
Minas Gerais Minas Gerais
State State
Government FORLUZ Government FORLUZ
---------- ------ ---------- ------
ASSETS
Current assets
Accounts receivable 33,464 - 78,868 -
Recoverable taxes
State VAT - ICMS 23,268 - 23,851 -
Other
Advances for welfare benefits - 14,916 - 17,641
Noncurrent assets
Receivable from Minas Gerais State Government 836,971 - 819,899 -
Recoverable taxes
State VAT- ICMS 88,171 - 79,368 -
State VAT - ICMS - Under discussion with Minas
Gerais State Government 18,843 - 18,843 -
Accounts receivable 49,167 - - -
LIABILITIES
Short term liabilities
Taxes payable-
State VAT - ICMS 155,265 - 127,604 -
Dividends and interest on capital 50,418 - 50,418 -
Employee post-retirement benefits - 244,257 - 176,981
Other
Transfer of contributions - 26,161 - 14,751
Long-term liabilities
Debentures 27,010 - 27,106 -
Employee post-retirement benefits - 1,533,142 - 1,603,588
Six months ended Six months ended
June 30, 2003 June 30, 2002
-------------------------- --------------------------
INCOME STATEMENT
Electricity sales to final customers 15,231 - 10,952 -
Deductions from operating revenues - State VAT - ICMS (680,184) - (538,124) -
Employee post-retirement benefits - (23,753) - (108,499)
Personnel expenses - (16,606) - (17,484)
Financial income-
Interest and monetary restatement on receivable from Minas
Gerais State Government 185,331 - 134,769 -
Provision for losses on account receivable from Minas Gerais
State Government (103,320) - (37,443) -
Financial expenses-
Monetary restatement of debentures (1,503) - - -
Non-operating expenses-
Provision for losses on account receivable from Minas Gerais
State Government - - (1,045,325) -
FORLUZ - management expenses - (3,123) - (4,552)
32
The account receivable from Minas Gerais State Government, in the amount of
R$82,630 as of June 30, 2003, which includes accounts receivable from COPASA,
are overdue. Management does not expect losses on the realization of this
asset.
30) FINANCIAL INSTRUMENTS
The financial instruments used by CEMIG, all recorded on its financial
statements, are: Cash and cash equivalents, Accounts receivable, Receivable
from Minas Gerais State Government, Marketable securities and loans, financing
and debentures, and gains and losses from the transactions are fully recorded.
These instruments are managed through monitoring policies and operational
strategies focused on liquidity, profitability and safety. The Company
operates with banks which meet financial strength and trustworthiness
guidelines, according to pre-defined management criteria. The Company's
control policy includes continually comparing rates with market levels.
As of June 30, 2003, CEMIG and its subsidiaries have short term investments
with interest rate swap, in the amount of R$5,840 and R$14,286. These short
term investments have repurchase clauses and interest rate based on the CDI
(Interbank Certificate Rate). The Company and its subsidiaries have the right
to call for early redemption of these securities without penalty or loss.
a) Derivatives
The Company has derivative financial instruments in order to protect its
operations from exchange rate risk. The derivative financial instruments are
not used for speculative purposes. CEMIG's subsidiaries have no derivative
financial instruments as of June 30, 2003 and March 31, 2003.
As of June 30, 2003, the Company has derivative financial instruments
("swaps") with financial institutions, in connection with potential exchange
losses resulting from the devaluation of the Brazilian real compared to U.S.
Dollar, in the amount equivalent to US$98,701 thousand. The Company did not
have swaps in amounts considered significant as of March 31, 2003.
The principal amounts of the derivative financial instruments are not recorded
in the balance sheet. The net unrealized losses from these operations, in the
amount of R$17,747, were recorded as a credit to Other - Short term
liabilities, in counterpart of a debt to Financial expenses - Investments
earned.
The unrealized gains (losses) from derivative financial instruments are
recorded on an accrual basis, which may result in significant differences when
compared to the estimated market value of such instruments, due to the fact
that the market value represents the present value of future gains and losses
incurred in these operations.
33
The table below presents the Company's derivative financial instruments, the
gains (losses) recorded and the respective estimated market value of these
instruments as of June 30, 2003:
Gains (Losses)
---------------------------------
Recorded on
Principal financial Estimated
Value statements Market value
Contracted -------------- ----------------
US$ June 30, June 30,
CEMIG's rights CEMIG's obligations Length thousand 2003 2003
-------------- ------------------- ------ -------- ------------- ---------------
US$ R$ From 07/2003
Plus interest rate Indexed to CDI variation to
(1,0% 14,2% per year) (100% CDI) 12/2003 57,708 (17,312) (16,583)
R$ From
Indexed to pre-fixed interest rates 07/2003 to
US$ (3.7% to 26.6% per year) 11/2003 40,993 (435) (534)
------ ------- -------
98,701 (17,747) (17,117)
====== ======= =======
b) The Company has Brazilian National Treasury Notes acquired from the Minas
Gerais State Government, with final maturity on April 15, 2024, subject to
restatement based on the U.S. dollar exchange variation and interest on the
restated face value of 6.00% per year (from April 15, 2000 to maturity).
June 30, 2003
-----------------------
Face value 173,645
Market value 74,691
These securities are recorded at market value, determined based on a quotation
from ANDIMA (National Association of Open Market Institutions). This asset is
recorded under Marketable securities in noncurrent assets.
31) CORPORATE REORGANIZATION
Currently, CEMIG's electricity generation, transmission and distribution
operations are vertically integrated into and directly operated by CEMIG.
However, pursuant to CEMIG's principal concession agreements and in accordance
with certain changes in the regulatory framework of the Brazilian electricity
sector, CEMIG has to restructure its business, resulting in the "unbundling"
of its generation, transmission and distribution operations into separate
subsidiaries, each wholly owned by CEMIG. According to the concession
agreements, CEMIG was to have completed the reorganization process by December
31, 2000.
ANEEL later granted the Company an extension to September 21, 2002 to complete
the unbundling process.
The Minas Gerais State Government, the major shareholder, considering that the
"unbundling" must be approved in advance by the State Legislature, submitted
to the Legislature, on March 2, 2001, a bill proposing the restructuring of
the Company into three companies, but as this legislation has not yet been
adopted, the reorganization process has not yet been completed. Additionally,
The Company has submitted an extension request to ANEEL, which has not yet
been answered.
On November 11, 2002, ANEEL fined the Company the amount of R$6,046, because
CEMIG had not concluded the "unbundling". No accrual has been recorded for
this claim, as the Company believes it has a meritorious defense against the
fine and any other possible penalties that may be imposed regarding this
matter.
34
32) SUBSEQUENT EVENTS
a) Financing obtained from BNDES for settlement of MAE transactions:
On July 1, 2003, CEMIG obtained financing from BNDES, in the amount of
R$176,483, for settlement of obligations arising from MAE transactions during
the period which the Electricity Rationing Plan was in force. The financing
will be paid through 55 monthly installments as from August 15, 2003. It bears
interest of 1% per year and monetary variation based on SELIC and it is
guaranteed by 1.36% of the Company's monthly electricity sales to final
customers.
b) Settlement of obligations pursuant to the Energy Development Account
The obligations pursuant to the Energy Development Account, in the amount of
R$84,055, from January to June 2003, recorded under Regulatory charges in
Short term liabilities, were entirely settled by the Company in July 2003.
Part of the funds used in this settlement were obtained from the collection of
Receivables from Federal Government - Revenue losses from low income consumers
as described in Note 12.
35
33) STATEMENTS OF CASH FLOWS
The individual (Company) and consolidated statements of cash flows for the
six-month periods ended June 30, 2003 and 2002 are presented for additional
analysis and are not required as part of the basic interim financial
statements.
Consolidated Company
------------------------------------- ----------------------------------
Six month periods Six month periods
ended June 30, ended June 30,
------------------------------------- ----------------------------------
2003 2002 2003 2002
--------------- ----------------- ------------- ----------------
CASH FLOWS FROM OPERATIONS:
Net income (loss) for the period 535,463 (894,796) 535,463 (894,796)
Items not affecting cash -
Depreciation and amortization 280,999 270,843 262,256 257,729
Special rate adjustment - (261,425) - (261,425)
Purchased energy from MAE - Suppliers (21,318) (32,272) (21,318) (32,272)
Energy purchased on spot market - 42,986 - 42,986
Disposals of property, plant and equipment, net 21,385 11,208 21,385 11,208
Equity in subsidiaries - - (15,892) 280
Interest and monetary variations, net (451,122) 51,965 (428,407) 34,231
Deferred income and social contribution taxes 87,348 (99,404) 86,982 (86,780)
Provisions for operating losses 48,951 19,845 47,493 19,845
Provision for losses on account receivable
from Minas Gerais State Government - 1,045,325 - 1,045,325
Employee post-retirement benefits 23,753 108,499 23,753 108,499
Other (733) (9,773) - -
--------------- ----------------- ------------- ----------------
524,726 253,001 511,715 244,830
--------------- ----------------- ------------- ----------------
(Increase) Decrease in assets -
Accounts receivable (194,886) (216,267) (214,005) (221,558)
Consumers - Special rate adjustment 124,941 120,426 124,941 120,426
Recoverable taxes (62,888) (35,216) (60,724) (20,903)
Receivables from Federal Government - revenue losses
from low-income consumers (44,283) - (44,283)
Electricity Rationing Plan - Bonus paid to consumers
and adoption costs incurred in excess of surcharge
applied to consumers - (87,565) - (87,565)
Prepaid expenses - CVA 19,534 (47,921) 19,534 (47,921)
Judicial deposits - (48,801) - (48,801)
Other noncurrent assets 61,551 (44,667) 60,558 (39,831)
--------------- ----------------- ------------- ----------------
(96,031) (360,011) (113,979) (346,153)
--------------- ----------------- ------------- ----------------
Increase (Decrease) in liabilities -
Suppliers (90,800) 109,467 (78,886) 111,342
Taxes payable 288,530 194,063 281,874 180,834
Payroll and related charges 9,832 1,866 9,994 1,245
Regulatory charges 44,667 (2,461) 44,422 (2,203)
Loans and financing (97,524) 128,720 (98,251) 129,527
Employee post-retirement benefits (83,834) (68,500) (83,834) (68,500)
Other 56,987 (23,142) 79,227 (26,676)
-------------- ----------------- ------------ ----------------
127,858 340,013 154,546 325,569
-------------- ----------------- ------------ ----------------
CASH PROVIDED BY OPERATING ACTIVITIES 556,553 233,003 552,282 224,246
-------------- ----------------- ------------ ----------------
36
Consolidated Company
------------------------------------- ----------------------------------
Six month periods Six month periods
ended June 30, ended June 30,
------------------------------------- ----------------------------------
2003 2002 2003 2002
-------------- ----------------- ------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITY
Proceeds from long-term financing 407,358 147,512 407,358 147,512
Payments of loans and financing (335,732) (227,257) (321,469) (214,343)
Special liabilities 33,176 67,410 33,176 67,410
Advanced billings of electric power - (30,370) - (30,370)
Advance for future capital increase - 11,526 (25) -
Dividends and interest on capital 128 (367) (25) (367)
-------------- ----------------- ------------ -----------------
104,930 (31,546) 119,040 (30,158)
-------------- ----------------- ------------ -----------------
TOTAL CASH PROVIDED 661,483 201,457 671,322 194,088
-------------- ----------------- ------------ -----------------
CASH USED IN INVESTING ACTIVITIES
Additions to investments (128,018) (187,629) (179,838) (223,600)
Increase in property, plant and equipment (381,794) (285,099) (344,978) (244,517)
Increase in deferred charges (285) (10,260) - -
-------------- ----------------- ------------ -----------------
(510,097) (482,988) (524,816) (468,117)
-------------- ----------------- ------------ -----------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 151,386 (281,531) 146,506 (274,029)
============== ================= ============ =================
CHANGES IN CASH AND CASH EQUIVALENTS
At beginning of the period 122,975 705,844 50,303 642,492
At end of the period 274,361 424,313 196,809 368,463
-------------- ----------------- ------------ -----------------
151,386 (281,531) 146,506 (274,029)
============== ================= ============ =================
37
Item 4
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS -- CEMIG
---------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF CONSOLIDATED OPERATIONS:
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2003 COMPARED TO THE SIX-MONTH PERIOD
ENDED JUNE 30, 2002
(Amounts expressed in thousands of Brazilian reais, unless otherwise indicated)
Net Income (loss)
The Company and its subsidiaries ("the CEMIG Group") had net income of
R$535,463 in the six-month period ended June 30, 2003 compared to a net loss
of R$894,796 in the six-month period ended in June 30, 2002.
In the first six months of 2003, consolidated income was positively impacted
mainly due to an increase in electricity sales and in financial income arising
from appreciation the Brazilian real against the U.S. dollar. In the same
period of 2002, the result was negatively impacted due primarily to the
provision for losses on receivables from Minas Gerais State Government and
financial expenses arising from devaluation of the Brazilian real against the
U.S. dollar.
Electricity sales
Electricity gross sales were R$3,343,434 in the six-month period ended in June
30, 2003 compared to R$2,592,824 in the six-month period ended June 30, 2002,
an increase of 28.95%. This result was due primarily to:
o an average rate increase of 10.51% starting in April 8, 2002 (full effect in
2003);
o an average rate increase of 31.53% starting in April 8, 2003;
o an increase in Emergency capacity charge collected in the six-month period
ended in June 30, 2003;
o a 1.78% increase in electricity volume sold to final customers.
Electricity sales to final customers
------------------------------------
Electricity gross sales to final customers were R$3,313,687 in the six-month
period ended June 30, 2003 compared to R$2,543,452 in the six-month period
ended June 30, 2002, representing an increase of 30.28%. This increase
resulted from the average rate increases of 10.51% and 31.53% in April 2002
and 2003, respectively, and a 2.12% raise in electricity sales volume. Sales
to the most representative markets, residential and commercial, increased
6.13% and 4.91% respectively, and sales to the industrial market decreased
0.75%.
The increase in gross electricity sales was additionally impacted by Emergency
capacity charge collected in power bills of R$139,228 in the six-month period
ended June 30, 2003 compared to R$41,237 in the six-month period ended June
30, 2002 (this charge started being collected in March 2002). The significant
change between these periods is a result of the retroactive amounts collected,
in 2003, of part of the Emergency capacity charge related to the period from
July 2, 2002 to October 8, 2002, in the amount of R$46,468, due to a
injunction which did not allow these amounts to be collected in the such
period.
Volume of electricity sold to final consumers - GWh
[GRAPHIC OMITTED]
Electricity supply to other concessionaires
-------------------------------------------
The revenues arising from the electricity supply to other concessionaires were
R$29,747 in the six-month period ended in June 30, 2003 compared to R$49,372
in the six-month period ended in June 30, 2002, a decrease of 39.75%. This
decrease is primarily a result of higher revenues from energy traded in the
spot market ("MAE") in the prior period, due to the Electricity Rationing Plan
in force in January and February of 2002.
Special rate adjustment revenue
-------------------------------
In accordance with the General Agreement of the Electricity Sector, CEMIG
recorded in the six-month period ended in June 30, 2002 revenue for the
special rate adjustment for billing losses and a portion of expenses for
energy traded on the MAE, arising from the Electricity Rationing Plan, in the
amount of R$261,425. The amounts recorded as Special rate adjustment revenue
are being collected by CEMIG through an additional rate increase in force for
a maximum period of 82 months, since January 2002.
Operating expenses
The operating expenses were R$2,113,422 in the six-month period ended in June
30, 2003 compared to R$1,916,439 in the six-month period ended in June 30,
2002, an increase of 10.28%, due primarily to a increase in Personnel
expenses, Gas purchased for resale and Operating provisions in counterpart of
a decrease in Employee post-retirement benefits. The main variations in
expenses are described below:
Personnel
---------
Personnel expenses were R$316,324 in the six-month period ended in June 30,
2003 compared to R$265,182 in the six-month period ended in June 30, 2002, an
increase of 19.29%, due primarily to an increase in salaries of 11.45% in
November 2002, an increase of 0.63% in the average number of CEMIG's employees
(11,420 employees in the six-month period ended in June 30, 2003 compared to
11,348 employees in the six-month period ended in June 30, 2002), and a
reduction in Personnel expenses transferred to Construction in progress.
Electricity purchased for resale
--------------------------------
Electricity purchased for resale was R$680,338 in the six-month period ended
in June 30, 2003 compared to R$662,237 in the six-month period ended in June
30, 2002, representing an increase of 2.73%. This variation is a result of an
increase in expenses for energy purchased from Itaipu, R$558,225 in the
six-month period ended in June 30, 2003 compared to R$475,033 in the six-month
period ended in June 30,
2
2002, partially offset by a decrease in MAE transaction expenses, R$39,428 in
the six-month period ended in June 30, 2003 compared to R$109,966 in the
six-month period ended in June 30, 2002. The higher MAE expenses in the
six-month period ended in June 30, 2002 were due to the significant higher
rates presented during that period, principally in January and February,
months in which the Electricity Rationing Plan was in force.
Depreciation and amortization
-----------------------------
Depreciation and amortization expenses were R$280,999 in the six-month period
ended in June 30, 2003 compared to R$270,843 in the six-month period ended in
June 30, 2002, representing an increase of 3.75%, due primarily to the launch
of additional distribution network and lines.
Outside services
----------------
Outside services were R$139,112 in the six-month period ended in June 30, 2003
compared to R$111,736 in the six-month period ended in June 30, 2002,
representing an increase of 24.50%, due to the adjustment of service contract
prices, mainly related to delivery of bills to consumers, maintenance of
facilities and electric equipment.
Employee post-retirement benefits
---------------------------------
Employee post-retirement benefit expenses were R$23,753 in the six-month
period ended in June 30, 2003 compared to R$108,499 in the six-month period
ended in June 30, 2002, representing a reduction of 78.11%. The decrease in
expenses is due basically to the estimate, for the year of 2003, of a lower
increase in projected benefit obligations compared to a higher profitability
expected for plan assets.
Operating provisions
--------------------
Operating provisions were R$80,213 in the six-month period ended in June 30,
2003 compared to R$8,419 in the six-month period ended in June 30, 2002,
representing an increase of 852.76%. This increase is due to the additional
provision for losses on realization of the special rate adjustment, in the
amount of R$20,966, recorded in the six-month period ended in June 30, 2003
and to the Allowance for doubtful accounts of R$31,160 recorded in the
six-month period ended in June 30, 2003 compared to a reversion of R$3,162
recorded in the six-month period ended in June 30, 2002. The reversion in
Allowance for doubtful accounts recorded in the prior period was a result of
significant overdue amounts collected from an industrial customer.
Fuel consumption quota - CCC
----------------------------
Fuel consumption quota expenses were R$157,490 in the six-month period ended
in June 30, 2003 compared to R$160,004 in the six-month period ended June 30,
2002, representing a reduction of 1.57%. Fuel consumption quota refers to
operating costs of thermoelectric plants in the Brazilian energy system
prorated among electric concessionaires through ANEEL resolution.
Gas purchased for resale
------------------------
Gas purchased for resale expenses were R$76,746 in the six-month period ended
in June 30, 2003 compared to R$45,059 in the six-month period ended in June
30, 2002, an increase of 70.32%. These expenses refer to gas purchased by
GASMIG. This variation is a result of gas prices increase partially offset by
a 10.03% reduction in the volume of gas acquired, 199,628 thousand m3 in the
six-month period ended in June 30, 2003 compared to 221,876 thousand m3 in the
six-month period ended in June 30, 2002 as a result of lower purchase volumes
from thermoelectric plants.
3
Financial income (expenses)
The main factors that impacted the financial items are as follows:
o Investment income earned in the amount of R$14,953 in the six-month
period ended in June 30, 2003 compared to R$95,095 in the six-month
period ended in June 30, 2002. In the prior period, there was a
higher volume of investments because of the debentures issued on
November 2001, the proceeds of which were applied to CEMIG's
Investment Plan during 2002, in connection with the reduction in
revenues. Additionally, losses from unredeemed financial instruments
denominated in U.S. dollars contributed to the decrease of
Investment income in the six-month period ended in June 30, 2003, as
the Company recorded an expense in the amount of R$17,747.
o Foreign net exchange gains in the amount of R$341,191 in the
six-month period ended in June 30, 2003, compared to foreign net
exchange losses of R$314,998 in the six-month period ended in June
30, 2002. These gains are principally related to loans and financing
denominated in foreign currencies. In the six-month period ended
June 30, 2003, the Brazilian real appreciated 18.72% over the U.S.
dollar, compared to a 22.58% devaluation in the same period of 2002.
o Net revenues from monetary restatement of CVA amounting to R$41,044
in the six-month period ended in June 30, 2003, compared to R$6,031
in the six-month period ended in June 30, 2002. This variation is a
result of higher average balance of CVA, as restated by SELIC, in
the six-month period ended in June 30, 2003 compared to the prior
period.
o Interest and monetary restatement expenses on loans and financing
amounting to R$182,573 in the six-month period ended in June 30,
2003, compared to R$139,733 in the same prior period. This increase
is due to the higher debt level denominated in local currency and
the increase in its inflationary restatement indexes in the
six-month period ended in June 30, 2003. The Indice Geral de Precos
- IGP-M (General Price Index), the main index applicable to these
contracts, presented a variation of 5.89% in the six-month period
ended in June 30, 2003 compared to a 3.48% variation in the same
prior period.
o Reversion of the provision for valuation of marketable securities of
Brazilian National Treasury Notes in the amount of R$45,543 in the
six-month period ended in June 30, 2003 compared to a provision of
R$20,828 in the six-month period ended in June 30, 2002 due to the
lower discount imposed by financial markets on transactions
involving Federal Government long-term bonds.
o Interest on capital declared in the six-month period ended in June
30, 2002 in the amount of R$120,000.
Non-operating expenses, net
Non-operating expenses were R$12,693 in the six-month period ended in June 30,
2003 compared to R$1,059,172 in the six-month period ended in June 30, 2002.
This variation is due to a provision for loss recorded in the prior period, in
the amount of R$1,045,325, related to the Second Amendment of Credit
Assignment Contract for CRC signed with the Minas Gerais State Government.
Income and social contribution taxes
The CEMIG Group recorded income tax expenses of R$313,765 in the six-month
period ended in June 30, 2003, representing 36.98% of pre-tax income.
In the six-month period ended in June 30, 2002, the income tax expenses were
R$22,360 in relation to a pre-tax loss of R$1,001,091. This result is
primarily due to the provision for loss recorded in the amount of R$1,045,325,
which was not considered a deductible expense for Income and Social
Contribution Tax purposes.
4
(Convenience Translation into English from the Original Previously Issued in
Portuguese)
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
--------------------------------------------
OTHER RELEVANT INFORMATION
Information not reviewed by independent accountants
CORPORATE GOVERNANCE
CEMIG has sought to implement the best corporate governance practices in order
to optimize its performance and offer more protection, through improvements in
information disclosed to the markets and to all interested parties, including
investors, employees and creditors, facilitating its access to capital. These
practices mainly involve transparency, equitable treatment of shareholders
being accountable for the Company's actions.
Highlighted below are practices that CEMIG has already adopted:
o The notices of general shareholders' meetings set forth in detail
the meeting's agenda, including relevant items suggested by
shareholders, and such meetings are held at convenient dates and
times.
o The share register, which sets forth the number of shares owned by
each shareholder, can be obtained at any time for a service charge,
in accordance with Article 100 of Law 6,404 of December 15, 1976.
o Documentation necessary to evidence the ownership of shares of CEMIG
is accurately maintained, in order to permit the participation and
vote of its shareholders or their representatives at shareholders'
meetings.
o The Board of Directors, which has a unified term, has 14 technically
qualified members, 9 of whom have finance, economic, law and
accounting experience. The Board of Directors seeks to advise
CEMIG's executive officers to maximize its return on assets in order
to aggregate value for the enterprise.
o In accordance with Law 10,303 of October 31, 2001, and the major
shareholder's decision in compliance with the best corporate
governance practices, minority shareholders owners of preferred
shares have elected a member of the Board of Directors.
o The shareholders' agreement is accessible to all shareholders at
CEMIG's headquarters.
o Preferred shares have priority in the redemption of capital and
participate equally with the common shares in net income. At the
Shareholders' meeting of April 30, 2002, the Company's Bylaws were
changed and the preferred shares became entitled to a minimum annual
dividend equal to the greatest of 10% of the preferred capital
according to the Brazilian corporate law or 3% of the book value of
the preferred shares. The minimum dividends cannot be less than 25%
of the adjusted net income for the year, in accordance with
Brazilian corporate law.
o On a quarterly basis, the Company discloses reports prepared
together with the financial statements to its Fiscal Council, which
analyzes and discusses the financial statements, including the
related internal and external risk factors.
5
o In order to avoid conflicts of interest, the Board of Directors does
not authorize its public accountants to provide consulting or other
services to CEMIG.
o CEMIG provides to the members of its Fiscal Council all information
that may be needed to analyze the Company's main issues.
o The Company adopts, in addition to the financial statements prepared
in accordance with accounting practices emanating from Brazilian
corporate law and with accounting standards established by the CVM -
Comissao de Valores Mobiliarios (Brazilian Securities Commission),
generally accepted accounting principles in the United States, or US
GAAP, in order to prepare financial statements to be filed with the
United States Securities and Exchange Commission - SEC.
o The memorandum of suggestions on accounting and internal control
procedures provided to CEMIG by its public accountants is submitted
to the Board of Directors and to the Fiscal Council in order to
evaluate the proposals and adoption of applicable measures.
o Transactions with related parties are disclosed in CEMIG's financial
statements and are conducted on an arm's length basis.
o CEMIG's investor relations policy seeks to provide access to a wide
range of investors through:
o CEMIG's Internet home page, which is accessible to all
investors and shareholders, contains material information
related to CEMIG and its operations.
o Broad dissemination of the disclosure of CEMIG's results.
o Live conferences accessible to everyone through CEMIG's
Internet home page.
o CEMIG has adopted Level 1 of the corporate governance standards
established by the Bolsa de Valores de Sao Paulo - BOVESPA (Sao
Paulo Stock Exchange).
o CEMIG has listed depositary receipts on foreign stock exchanges, in
New York and Madrid.
o CEMIG regularly pays dividends to its shareholders in accordance
with the provisions of its by-laws.
In addition, CEMIG is considering the adoption of additional corporate
governance practices that will be disclosed on a timely basis.
6
FINANCIAL INDICATORS
SHARE VALUE
(Expressed in Brazilian reais per thousand shares)
---------------------------------------------------------------------------------------------------
Item Unit June 30,2003 March 31,2003 June 30, 2002
---------------------------------------------------------------------------------------------------
Book value 38.35 35.99 36.32
---------------------------------------------------------------------------------------------------
Market value Common 21.10 19.27 29.79
Preferred 26.35 25.26 32.00
---------------------------------------------------------------------------------------------------
LIQUIDITY (excluding special liabilities)
---------------------------------------------------------------------------------------------------
Item Unit June 30,2003 March 31,2003 June 30, 2002
---------------------------------------------------------------------------------------------------
Current ratio Ratio 0.67 0.60 0.75
---------------------------------------------------------------------------------------------------
Overall liquidity Ratio 0.70 0.67 0.68
---------------------------------------------------------------------------------------------------
DEBT LEVEL (excluding special liabilities)
---------------------------------------------------------------------------------------------------
Item Unit June 30,2003 March 31,2003 June 30, 2002
---------------------------------------------------------------------------------------------------
Total assets % 57.10 59.18 55.11
---------------------------------------------------------------------------------------------------
Shareholders' equity % 133.09 144.97 122.75
---------------------------------------------------------------------------------------------------
Permanent assets % 95.04 98.03 88.12
---------------------------------------------------------------------------------------------------
PROFITABILITY
--------------------------------------------------------------------------------------------------------------
Item Unit June 30,2003 March 31,2003 June 30, 2002
--------------------------------------------------------------------------------------------------------------
Shareholders' equity % 9.43 2.67 (15.20)
--------------------------------------------------------------------------------------------------------------
Return on property, plant and equipment % 6.74 1.92 (11.58)
--------------------------------------------------------------------------------------------------------------
Operating margin % 16.91 11.31 16.00
--------------------------------------------------------------------------------------------------------------
Net margin % 16.58 10.96 (33.61)
--------------------------------------------------------------------------------------------------------------
OPERATING INDICES
INSTALLED CAPACITY
-----------------------------------------------------------------------
June 30,2003 June 30, 2002
-----------------------------------------------------------------------
Installed capacity (in MW) 5,713 5,675
-----------------------------------------------------------------------
EFFICIENCY
----------------------------------------------------------------------------------------
For the six-month period ended
----------------------------------------------------------------------------------------
Item Unit June 30,2003 June 30, 2002
----------------------------------------------------------------------------------------
MWh (*) per employee MWh 1.533 1.510
----------------------------------------------------------------------------------------
Consumers per employee No. 495 488
----------------------------------------------------------------------------------------
(*) excludes energy transactions on spot market
7
SERVICE QUALITY
---------------------------------------------------------------------------------------------------------
For the six-month period ended
---------------------------------------------------------------------------------------------------------
Item Unit June 30,2003 June 30,2002
---------------------------------------------------------------------------------------------------------
Average time needed to restore electricity Hours 4.81 4.28
---------------------------------------------------------------------------------------------------------
Electricity outage time - average per consumer Hours 5.12 5.93
---------------------------------------------------------------------------------------------------------
Outages experienced - average per consumer No. 2.91 3.48
---------------------------------------------------------------------------------------------------------
AVERAGE RATE
(Expressed in Brazilian reais per MWh)
------------------------------------------------------------------------------------
Including VAT
------------------------------------------------------------------------------------
Description June 30, 2003 June 30, 2002
------------------------------------------------------------------------------------
Industrial 120.35 94.66
------------------------------------------------------------------------------------
Residential 332.07 267.40
------------------------------------------------------------------------------------
Commercial 281.77 230.08
------------------------------------------------------------------------------------
Rural 182.42 150.41
------------------------------------------------------------------------------------
Others 184.81 152.77
------------------------------------------------------------------------------------
Final Consumers 182.71 144.48
------------------------------------------------------------------------------------
SHAREHOLDERS WHICH OWN MORE THAN 5% OF VOTING CAPITAL
AS OF JUNE 30, 2003
---------------------------------------------------------------------------------------------------------------------------
ACIONISTA COMMOM SHARES % PREFERRED SHARES % TOTAL SHARES %
---------------------------------------------------------------------------------------------------------------------------
Minas Gerais
State Government 36,116,291,643 50.96 102 - 36,116,291,745 22.27
Other State's entities 3,365,756 - 3,030,572,387 3.31 3,033,938,143 1.86
------------------- --------- ------------------------ --------- -------------------- ---------
State's Total 36,119,657,399 50.96 3,030,572,489 3.31 39,150,229,888 24.13
Southern Electric Brasil
Part. Ltda. 23,362,956,173 32.96 - - 23,362,956,173 14.41
---------------------------------------------------------------------------------------------------------------------------
OWNERS OF SOUTHERN ELECTRIC BRASIL PARTICIPACOES LTDA.
AS OF JUNE 30, 2003
------------------------------------------------------------------------------
Item Name Number of Share quotas %
------------------------------------------------------------------------------
1 Cayman Energy Traders 321,480,876 91.75
------------------------------------------------------------------------------
2 524 Participacoes S/A 28,913,419 8.25
------------------------------------------------------------------------------
1 - Foreign Company
2 - Registered Company. Fundo Opportunity Alfa FIA has 99.99% of its capital.
8
CONTROLLING SHAREHOLDER, BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND FISCAL
COUNCIL MEMBERS INTEREST AS OF JUNE 30, 2003 AND 2002
-------------------------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES
-------------------------------------------------------------------------------------------------------------------------------
June 30, 2003 June 30, 2002
----------------------------------------------------------------------------
Common Preferred Common Preferred
----------------------------------------------------------------------------
CONTROLLING SHAREHOLDER 36,119,657,399 3,030,572,489 36,119,456,294 3,030,365,843
BOARD OF DIRECTORS
Wilson Nelio Brumer - 1 - -
Djalma Bastos de Morais - 13,400 - 13,140
Francelino Pereira dos Santos - 1 - -
Antonio Adriano Silva - 1 - 1
Flavio Jose Barbosa de Alencastro - 1 - -
Oderval Esteves Duarte Filho 5,099 - 5,099 -
Marcelo Pedreira de Oliveira 5,099 - 5,099 -
Joao Bosco Braga Garcia 5,099 - - -
Sergio Lustosa Botelho Martins 5,099 - - -
Aecio Ferreira da Cunha 5,866 1,461 - -
Francisco Roberto Andre Gros - 1 - -
Mario Lucio Lobato 5,000 - - -
Maria Estela Kubistscheck Lopes - 1 - -
Alexandre Heringer Lisboa - 1 - -
Luiz Antonio Athayde Vasconcelos - 290 - -
Marco Antonio Rodrigues da Cunha - 1 - -
Francisco Sales Dias Horta - 1 - -
Guilherme Horta Goncalves Junior - 1 - -
Geraldo Dannemann 1 1 - -
Luiz Felippe Leal da Fonseca Junior 1,000 - - -
Carlos Suplicy de Figueiredo Forbes 4,079 - - -
Marc Leal Claassen 5,099 - 5,000 -
Arnaldo Jose Vollet - 1 - -
Fernando Lage de Melo - 1 - -
Eduardo Lery Vieira - 1 - -
Andre Luis Garbuglio 1,000 - - -
Fernando Henrique Schuffner Neto - 101,218 - -
Franklin Moreira Goncalves - 1 - -
EXECUTIVE OFFICERS
Djalma Bastos de Morais - - - -
Francisco Sales Dias Horta - - - -
Celso Ferreira - - - -
Flavio Decat de Moura - - - -
Heleni de Mello Fonseca - - - -
Elmar de Oliveira Santana - - 582 376
Jose Maria de Macedo - 112,962 - -
9
-------------------------------------------------------------------------------------------------------------------------------
NAME NUMBER OF SHARES
-------------------------------------------------------------------------------------------------------------------------------
June 30, 2003 June 30, 2002
----------------------------------------------------------------------------
Common Preferred Common Preferred
----------------------------------------------------------------------------
FISCAL COUNCIL
Luiz Guarita Neto - - - -
Aristoteles Luiz Menezes Vasconcellos Drummond - - - -
Luiz Otavio Nunes West - - - -
Bruno Constantino Alexandre dos Santos - - - -
Thales de Souza Ramos Filho - - - -
Beatriz Oliveira Fortunato - 10 - -
Augusto Cezar Calazans Lopes - - - -
Ronald Gastao Andrade Reis - - - -
Marcos Eolo de Lamounier Bicalho - - - -
Aliomar Silva Lima - - - -
--------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES AVAILABLE ON MARKET
(EXCLUDES SHARES OF MINAS GERAIS STATE GOVERNMENT)
--------------------------------------------------------------------------------------------------------------
Common % Preferred % Total %
--------------------------------------------------------------------------------------------------------------
06/30/2003 34,754,510,524 49.04 88,179,950,210 96.68 122,934,460,734 75.85
--------------------------------------------------------------------------------------------------------------
06/30/2002 34,754,711,629 49.04 88,180,156,856 96.68 122,934,868,485 75.85
--------------------------------------------------------------------------------------------------------------
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Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
By: /s/ Flavio Decat de Moura
-------------------------------------
Name: Flavio Decat de Moura
Title: Chief Financial Officer
and Investor Relations Officer
Date: August 21, 2003
11