Apresentação do PowerPoint

Distribution:

Periodic Tariff Review

Methodology

Maura Galuppo Botelho Martins

WACC

PARAMETERS

Third Periodic Tariff

Review

(2011 to 2014)

2015 to 2017

Capital structure: (Debt / Debt+Equity) 55% 48.76% Risk free rate (rf) 4.87% 5.64% Expected market return (rm) 10.96% 13.20%
Average levered beta (β) 0,74 0,70
Country risk premium (rB) 4.25% 2.62% Credit risk premium (rc) 2.14% 3.37% Nominal cost of own capital (Ke) 13.43% 13.57%
Nominal cost of third party capital (Kd) 11.26% 11.62% Real cost of own capital after taxes (34%) 10.72% 10.90%
Real cost of third party capital after taxes (34%) 4.86% 5.14% Real WACC after taxes 7.50% p.a. 8.09% p.a.

WACC required to offset NPV negative effect

of Cemig D investments

Exclusion:

WACC:

WACC:

Investments made during

3rd Tariff Review Cycle

8%

10%

Valuation using Current Investments Rule made during 4th Tariff Review Cycle (Nov. 2012 - Apr. 2015)

(20)

12%

Valuation using 'Price Bank'

Aneel Proposal for 3rd Phase Public Hearing 23/2014

Investments made during

4th Tariff Review Cycle (Nov. 2012 - Apr. 2015)

4%

9%

ASSET BASE REMUNERATION (BRR)

3rd Public Hearing Phase 23/2014

Aneel Proposal:

• Adoption of the regulatory values for items like COM (Minor Components) and CA (Additional Costs) that comprise investments.

Adoption of

Price Bank

ASSET BASE REMUNERATION (BRR)

3rd Public Hearing Phase 23/2014

Non- standardization of inspection Need for more transparency in process ANEEL's reasons Unpredictability of results Information uncertainty There are no comparative analysis between companies

ASSET BASE REMUNERATION (BRR)

3rd Public Hearing Phase 23/2014

Aneel Price Bank vs. Initial Book Value [VOC] Ratio of VNR (Price Bank) to VOC for large companies

-3.6%

Source: Aneel Technical Note 071/2015 SGT of April 2, 2015.

TECHNICAL LOSSES

Public Hearing 26/2014

3rd Tariff Review Cycle Method 4th Tariff Review Cycle Method

Regulatory Technical Losses

Single statistical model Energy Balance General data table

Does not reflect the real technical losses of the distributors' electricity system

Regulatory Technical Losses

Network Simulation Metering campaign Geographical database

Tends to approximate the technical losses to the distributors' electricity system

NON-TECHNICAL LOSSES

3rd Tariff Review Cycle Method

New methodology

12 econometric models to calculate

the complexity index

3 econometric models to calculate

complexity index

Two complexity groups Single complexity group

Defining the loss of speed reduction

per cluster for each complexity

group

Defining the loss of speed reduction

per new clusters using a single

complexity group

Starting point for Cemig D: maximum value of 7.50% and lower value between regulatory target set

by the 3rd Tariff Review Cycle (7.63%) and the average of non-technical losses in past 4 years.

CEMIG D: DEBT PROFILE

Maturities timetable - Average tenor: 3.4 years Main indices

Total net debt: R$ 5.8 billion

OTHER

Average real cost of debt - % Leverage - %

Net debt

Ebitda

Net debt


Source: www.cemig.com.br

Stockholders'

equity + Net debt

OPERATIONAL COSTS

CYCLE

Lower limit

Middle band

Upper limit

3rd Tariff Review Cycle

Efficiency

48%

58%

68%

4th Tariff Revew Cycle

Efficiency

65%

69%

73%

4th Tariff Revew Cycle

Normalized

Efficiency

85%

91%

96%

Investor Relations

Telephone: (55-31) 3506-5024

Fax: (55-31) 3506-5025

Email: ri@cemig.com.br

Website: http://ri.cemig.com.br

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