Edgar Filing: ENERGY CO OF MINAS GERAIS

6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

PURSUANT TO RULE 13A-16 OR 15D-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of February, 2019

Commission File Number: 1-15224

Energy Company of Minas Gerais

(Translation of Registrant’s Name Into English)

Avenida Barbacena, 1219

30190-131 Belo Horizonte, Minas Gerais, Brazil

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒ 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 ☒

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 Items
1. Market Announcement Dated November 27, 2018: CEMIG and CEMIG D submit restated ITR for 2Q and 3Q 2018
2. Revision of Quarterly Information (ITR) for 2Q 2018 (Restatement)
3. Revision of Quarterly Information (ITR) for 3Q 2018 (Restatement)
4. Market Announcement Dated December 20, 2018: Cross-holding elimination between CEMIG GT and Energimp is completed
5. Summary of Minutes of the 750^th Meeting of the Board of Directors Dated December 28, 2018
6. Market Announcement Dated January 2, 2019: Renova’s Board of Directors does not approve AES’s offer for Power Generation Complex
7. Market Announcement Dated January 3, 2019: TAESA’s Extraordinary General Meeting approves acquisition of transmission companies
8. Market Announcement Dated January 15, 2019: TAESA places winning bid on Eletrobras Auction
9. Market Announcement Dated January 15, 2019: Eletrobras accepts CEMIG’s exercise of first refusal right on Auction 01/2018
10. Summary of Minutes of the 751^th Meeting of the Board of Directors Dated January 18, 2019
11. Market Announcement Dated January 29, 2019: Cemig named most sustainable electricity company in the Americas

Forward-Looking Statements

This report contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Actual results could differ materially from those predicted in such forward-looking statements. Factors which may cause actual results to differ materially from those discussed herein include those risk factors set forth in our most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. CEMIG undertakes no obligation to revise these forward-looking statements to reflect events or circumstances after the date hereof, and claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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 ENERGÉTICA DE MINAS GERAIS – CEMIG
By:		/s/ Maurício Fernandes Leonardo Júnior
		Name: Maurício Fernandes Leonardo Júnior Title: Chief Finance and Investor Relations Officer

Date: February 8, 2019

1. MARKET ANNOUNCEMENT DATED NOVEMBER 27, 2018: CEMIG AND CEMIG D SUBMIT RESTATED ITR FOR 2Q AND 3Q 2018

LOGO

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Revision of Quarterly Information (ITR) for 2Q and 3Q 2018

Cemig (Companhia Energética de Minas Gerais, listed in São Paulo, New York and Madrid), in compliance with CVM Instruction 358 of January 3, 2002 as amended, hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (B3) and the market as follows:

On today’s date Cemig and its wholly-owned subsidiary Cemig Distribuição S.A. (Cemig D) have voluntarily re-presented their formal Quarterly Information (ITR) reports for the second and third quarters of 2018.

The re-presentation arose from differences identified in the manner of accounting of the amortization of certain concession financial assets and liabilities related to the CVA (Portion A Compensation) Account and Other Financial Components in the tariff-setting process, approved in Cemig D’s 4th Periodic Tariff Review.

The adjustments result in higher net profit for Cemig D than in the figures published to the market in the Quarterly Information (ITR) for the second and third quarters of 2018.

The Company has opted to re-present this Interim Accounting Information, so as to better reflect its equity situation and operational performance.

Cemig invites its investors to participate in a webcast and conference call on its third quarter 2018 results, on Wednesday, November 28, 2018 at 2 p.m., as specified in its Corporate Events Calendar.

Belo Horizonte, November 27, 2018.

Maurício Fernandes Leonardo Júnior

Diretor de Finanças e Relações com Investidores

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

2. REVISION OF QUARTERLY INFORMATION (ITR) FOR 2Q 2018 (RESTATEMENT)

LOGO

CONTENTS


STATEMENTS OF FINANCIAL POSITION		5
STATEMENTS OF INCOME		7
STATEMENTS OF COMPREHENSIVE INCOME		9
STATEMENTS OF CHANGES IN EQUITY—CONSOLIDATED		11
STATEMENTS OF CASH FLOWS		13
STATEMENTS OF ADDED VALUE		15
CONDENSED NOTES TO THE INTERIM FINANCIAL INFORMATION		16
1.	OPERATING CONTEXT	16
2.	BASIS OF PREPARATION	18
3.	PRINCIPLES OF CONSOLIDATION	28
4.	CONCESSIONS AND AUTHORIZATIONS	29
5.	CASH AND CASH EQUIVALENTS	30
6.	SECURITIES	30
7.	CUSTOMERS, TRADERS AND TRANSPORT OF ENERGY CONCESSION HOLDERS	31
8.	RECOVERABLE TAXES	32
9.	INCOME AND SOCIAL CONTRIBUTION TAXES	33
10.	RESTRICTED CASH	35
11.	ACCOUNTS RECEIVABLE FROM THE STATE OF MINAS GERAIS	35
12.	ESCROW DEPOSITS	36
13.	REIMBURSEMENT OF TARIFF SUBSIDIES	37
14.	CONCESSION FINANCIAL ASSETS AND LIABILITIES	37
15.	INVESTMENTS	44
16.	PROPERTY, PLANT AND EQUIPMENT	54
17.	INTANGIBLE ASSETS	56
18.	SUPPLIERS	58
19.	TAXES PAYABLE, INCOME TAX AND SOCIAL CONTRIBUTION TAX AND AMOUNTS TO BE REIMBURSED TO CUSTOMERS	58
20.	LOANS, FINANCINGS AND DEBENTURES	60
21.	REGULATORY CHARGES	65
22.	POST-RETIREMENT OBLIGATIONS	65
23.	PROVISIONS	66
24.	EQUITY AND REMUNERATION TO SHAREHOLDERS	75
25.	REVENUE	77
26.	OPERATING COSTS AND EXPENSES	82
27.	FINANCE INCOME AND EXPENSES	87
28.	RELATED PARTY TRANSACTIONS	88
29.	FINANCIAL INSTRUMENTS AND RISK MANAGEMENT	92
30.	ASSETS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS	105
31.	OPERATING SEGMENTS	106
32.	THE ANNUAL TARIFF ADJUSTMENT	109
33.	NON-CASH TRANSACTIONS	109
34.	SUBSEQUENT EVENTS	109
CONSOLIDATED RESULTS		112
OTHER INFORMATION THAT THE COMPANY BELIEVES TO BE MATERIAL		126
REPORT ON THE REVIEW OF INTERIM INFORMATION—ITR		133

LOGO

STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

ASSETS

(Thousands of Brazilian Reais)


	Note		Consolidated				Holding company
	Note		June 30, 2018 (Restated)		Dec. 31, 2017		June 30, 2018 (Restated)		Dec. 31, 2017
CURRENT
Cash and cash equivalents		5		940,937		1,030,257		63,045		38,672
Securities		6		288,035		1,058,384		37,107		63,960
Customers and traders and Concession holders – Transport of electricity		7		3,759,200		3,885,392		24,274		—
Concession financial assets		14		646,904		847,877		—		—
Recoverable taxes		8		150,367		173,790		3,402		43
Income and Social Contribution taxes recoverable		9a		389,828		339,574		25,889		19,722
Dividends receivable				9,648		76,893		409,398		603,049
Restricted cash		10		111,220		106,227		90,663		87,872
Inventories				33,730		38,134		10		10
Advances to suppliers				96,563		116,050		—		—
Accounts receivable from the State of Minas Gerais		11		—		235,018		—		235,018
Reimbursement of tariff subsidies		13		85,827		77,086		—		—
Low-income subscriber subsidy				25,140		26,660		—		—
Derivative financial instruments—Swaps		29		6,854		—		—		—
Other				487,047		525,961		9,250		10,473

				7,031,300		8,537,303		663,038		1,058,819
Assets classified as Held for sale		30		281,578		—		281,578		—

TOTAL, CURRENT				7,312,878		8,537,303		944,616		1,058,819

NON-CURRENT
Securities		6		63,847		29,753		9,525		1,737
Advance to suppliers		28		99,118		6,870		—		—
Customers and traders and Concession holders – Transport of electricity		7		76,594		255,328		—		—
Recoverable taxes		8		230,781		230,678		4,100		1,810
Income and Social Contribution taxes recoverable		9a		11,248		20,617		11,248		20,617
Deferred income and Social Contribution taxes		9b		1,936,021		1,871,228		791,360		756,739
Escrow deposits		12		2,380,376		2,335,632		280,876		277,791
Derivative financial instruments—Swaps		29		125,577		8,649		—		—
Accounts receivable from the State of Minas Gerais		11		248,100		—		248,100		—
Other				666,606		628,443		29,150		34,978
Concession financial assets		14		7,277,562		6,604,625		—		—
Investments – Equity method		15		7,703,552		7,792,225		14,101,036		13,692,183
Property, plant and equipment		16		2,420,914		2,762,310		2,506		1,810
Intangible assets		17		11,184,952		11,155,928		6,730		2,458

TOTAL, NON-CURRENT				34,425,248		33,702,286		15,484,631		14,790,123

TOTAL ASSETS				41,738,126		42,239,589		16,429,247		15,848,942

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

LIABILITIES

(Thousands of Brazilian Reais)


	Note		Consolidated						Holding company
	Note		June 30, 2018 (Restated)			Dec. 31, 2017			June 30, 2018 (Restated)			Dec. 31, 2017
Suppliers		18		2,152,676			2,342,757			8,812			4,667
Regulatory charges		21		434,349			512,673			5,836			—
Profit sharing				19,490			9,089			1,135			348
Taxes payable		19a		294,755			704,572			6,546			5,841
Income and Social Contribution tax		19b		67,648			115,296			—			—
Interest on Equity and Dividends payable		24		427,790			427,832			425,832			425,838
Loans, financings and debentures		20		2,740,647			2,370,551			18,653			—
Payroll and related charges				222,530			207,091			15,921			11,072
Post-retirement obligations		22		236,663			231,894			12,906			12,974
Concessions payable				2,326			2,987			—			—
Concession financial liabilities		14		16,751			414,800			—			—
Derivative financial instruments—put options		29		569,286			507,232			569,286			507,232
Advances from clients		7		150,728			232,762			—			—
Derivative financial instruments—Swaps		29		1,214			12,596			—			—
Other obligations				523,782			570,152			12,990			6,218

				7,860,635			8,662,284			1,077,917			974,190
Liabilities directly associated with assets classified as held for sale		30		5,905			—			5,905			—

TOTAL, CURRENT				7,866,540			8,662,284			1,083,822			974,190

NON-CURRENT
Regulatory charges		21		278,888			249,817			—			—
Loans, financings and debentures		20		11,863,407			12,027,146			43,484			—
Taxes payable		19a		28,267			28,199			—			—
Deferred income tax and Social Contribution tax		9b		717,902			734,689			—			—
Provisions		23		668,434			678,113			75,316			63,194
Post-retirement obligations		22		4,004,593			3,954,287			460,706			446,523
Concessions payable				16,151			18,240			—			—
Concession financial liabilities		14		6,295			—			—			—
Pasep and Cofins taxes to be reimbursed to customers		19a		1,105,572			1,087,230			—			—
Derivative financial instruments—put options		29		336,199			307,792			—			—
Derivative financial instruments—Swaps		29		—			28,515			—			—
Other obligations				117,575			133,141			41,713			39,049

TOTAL, NON-CURRENT				19,143,283			19,247,169			621,219			548,766

TOTAL LIABILITIES				27,009,823			27,909,453			1,705,041			1,522,956

EQUITY		24
Share capital				7,293,763			6,294,208			7,293,763			6,294,208
Capital reserves				2,249,721			1,924,503			2,249,721			1,924,503
Profit reserves				5,728,574			5,728,574			5,728,574			5,728,574
Equity valuation adjustments				(836,528	)		(836,522	)		(836,528	)		(836,522	)
Subscription of shares, to be capitalized				—			1,215,223			—			1,215,223
Retained earnings				288,676			—			288,676			—

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT				14,724,206			14,325,986			14,724,206			14,325,986

NON-CONTROLLING INTERESTS				4,097			4,150			—			—

TOTAL EQUITY				14,728,303			14,330,136			14,724,206			14,325,986

TOTAL LIABILITIES AND EQUITY				41,738,126			42,239,589			16,429,247			15,848,942

The Condensed Notes are an integral part of the interim financial information.

LOGO

STATEMENTS OF INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Thousands of Brazilian Reais except earnings per share)


			Consolidated						Holding company
	Note		Jan to Jun 2018 (Restated)			Jan to Jun 2017			Jan to Jun 2018 (Restated)			Jan to Jun 2017
GOING CONCERN OPERATIONS
NET REVENUE		25		10,541,969			10,017,959			146			178
OPERATING COSTS
COST OF ENERGY AND GAS		26
Energy purchased for resale				(5,082,598	)		(4,742,418	)		—			—
Charges for use of the national grid				(808,580	)		(404,261	)		—			—
Gas purchased for resale				(556,459	)		(485,163	)		—			—

				(6,447,637	)		(5,631,842	)		—			—
OTHER COSTS		26
Personnel and managers				(532,260	)		(688,847	)		—			—
Materials				(22,966	)		(17,599	)		—			—
Outsourced services				(413,971	)		(341,397	)		—			—
Depreciation and amortization				(374,523	)		(385,455	)		—			—
Operating provisions, net				(1,901	)		(172,079	)		—			—
Infrastructure construction cost				(383,643	)		(441,034	)		—			—
Other				(41,227	)		(21,314	)		—			—

				(1,770,491	)		(2,067,725	)		—			—
TOTAL COST				(8,218,128	)		(7,699,567	)		—			—
GROSS PROFIT				2,323,841			2,318,392			146			178
OPERATING EXPENSES		26
Selling expenses				(167,557	)		(141,472	)		—			—
General and administrative expenses				(313,117	)		(437,894	)		(34,438	)		(28,293	)
Operating provisions				(102,795	)		(56,954	)		(78,189	)		(15,311	)
Other operating revenues (expenses)				(256,325	)		(313,114	)		(29,545	)		(25,030	)

				(839,794	)		(949,434	)		(142,172	)		(68,634	)
Share of (loss) profit, net, of associates and joint ventures		15		(26,233	)		60,118			529,803			511,625

Income before finance income (expenses) and taxes				1,457,814			1,429,076			387,777			443,169
Finance income		27		491,169			348,901			18,792			33,018
Finance expenses		27		(1,345,801	)		(1,083,201	)		(3,085	)		(1,961	)

Income before income tax and social contribution tax				603,182			694,776			403,484			474,226
Current income and Social Contribution taxes		9c		(196,419	)		(292,722	)		—			(2,533	)
Deferred income and Social Contribution taxes		9c		25,574			78,794			38,569			8,885

Net income for the period from going concern operations				432,337			480,848			442,053			480,578

DISCONTINUED OPERATIONS
Net income for the period from discontinued operations		30		21,372			—			11,358			—

NET INCOME FOR THE PERIOD				453,709			480,848			453,411			480,578

Total of net income for the period attributed to:
Equity holders of the parent
Net income for the period from going concern operations				432,039			480,578			442,053			480,578
Net income for the period from discontinued operations				21,372			—			11,358			—

Net income for the period attributable to equity holders of the parent				453,411			480,578			453,411			480,578

Non-controlling interests
Net income for the period from going concern operations				298			270			—			—
Net income for the period from discontinued operations				—			—			—			—

Net income for the period attributable to non-controlling interests				298			270			—			—

				453,709			480,848			453,411			480,578

Basic and diluted earnings per preferred share – R$		24		0.31			0.38			0.31			0.38
Basic and diluted earnings per common share – R$		24		0.31			0.38			0.31			0.38

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF INCOME

FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(In thousands of Brazilian Reais – except earnings per share)


			Consolidated						Holding company
	Note		Apr to Jun 2018 (Restated)			Apr to Jun 2017			Apr to Jun 2018 (Restated)			Apr to Jun 2017
GOING CONCEERN OPERATIONS
NET REVENUE		25		5,606,538			5,205,029			73			84
OPERATING COSTS
COST OF ENERGY AND GAS		26
Energy purchased for resale				(2,818,905	)		(2,649,330	)		—			—
Charges for use of the national grid				(416,038	)		(197,764	)		—			—
Gas purchased for resale				(293,225	)		(262,651	)		—			—

				(3,528,168	)		(3,109,745	)		—			—
OTHER COSTS		26
Personnel and managers				(291,458	)		(401,340	)		—			—
Materials				(15,811	)		(11,301	)		—			—
Outsourced services				(243,201	)		(194,961	)		—			—
Depreciation and amortization				(179,837	)		(199,011	)		—			—
Operating provisions, net				10,876			(93,147	)		—			—
Infrastructure construction cost				(202,974	)		(240,475	)		—			—
Other				(37,941	)		(14,159	)		—			—

				(960,346	)		(1,154,394	)		—			—
TOTAL COST				(4,488,514	)		(4,264,139	)		—			—
GROSS PROFIT				1,118,024			940,890			73			84
OPERATING EXPENSES		26
Selling expenses				(91,374	)		(75,277	)		—			—
General and administrative expenses				(96,468	)		(231,896	)		(24,842	)		(8,789	)
Operating provisions				(59,109	)		6,450			(38,878	)		1,157
Other operating expenses				(124,165	)		(140,437	)		(15,170	)		(11,630	)

				(371,116	)		(441,160	)		(78,890	)		(19,262	)
Share of (loss) profit, net, of associates and joint ventures		15		(83,107	)		30,477			(31,433	)		152,163

Income before finance income (expenses) and taxes				663,801			530,207			(47,384	)		132,985
Finance income		27		249,315			169,010			7,544			9,438
Finance expenses		27		(946,147	)		(510,564	)		(2,191	)		(834	)

Income before income tax and social contribution tax				(33,031	)		188,653			(42,031	)		141,589
Current income and Social Contribution taxes		9c		(11,393	)		(59,265	)		—			(2,533	)
Deferred income and Social Contribution taxes		9c		12,166			8,726			19,635			(1,074	)

Net income (loss) for the period from going concern operations				(32,258	)		138,114			(22,396	)		137,982
DISCONTINUED OPERATIONS
Net income (loss) for the period from discontinued operations		30		21,372			—			11,358			—

NET INCOME (LOSS) FOR THE PERIOD				(10,886	)		138,114			(11,038	)		137,982

Total of net income for the period attributed to:
Equity holders of the parent
Net income for the period from going concern operations				(32,410	)		138,114			(22,396	)		137,982
Net income for the period from discontinued operations				21,372			—			11,358			—

Net income for the period attributable to equity holders of the parent				(11,038	)		137,982			(11,038	)		137,982

Non-controlling interests
Net income for the period from going concern operations				152			132			—			—

Net income for the period attributable to non-controlling interests				152			132			—			—

				(10,886	)		138,114			(11,038	)		137,982

Basic and diluted earnings (loss) per preferred share – R$		24		(0.01	)		0.11			(0.01	)		0.11
Basic and diluted earnings (loss) per common share – R$		24		(0.01	)		0.11			(0.01	)		0.11

The Condensed Notes are an integral part of the interim financial information.

LOGO

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Consolidated						Holding company
	Jan to Jun 2018 (Restated)			Jan to Jun 2017			Jan to Jun 2018 (Restated)			Jan to Jun 2017
NET INCOME FOR THE PERIOD		453,709			480,848			453,411			480,578
OTHER COMPREHENSIVE INCOME
Items not to be reclassified to statements of income in subsequent periods
Post retirement obligations – premeasurement of obligations of the defined benefit plans, net of taxes		(416	)		(680	)		—			—
Equity gain (loss) on other comprehensive income in subsidiary and jointly-controlled entity, net of taxes		—			(4,851	)		(416	)		(5,531	)

		(416	)		(5,531	)		(416	)		(5,531	)
Items to be reclassified to statements of income in subsequent periods
Equity gain on other comprehensive income, in subsidiary and jointly-controlled entity, relating to fair value of financial asset, net of taxes		—			(38,134	)		—			(38,134	)

COMPREHENSIVE INCOME FOR THE PERIOD		453,293			437,183			452,995			436,913

Total of comprehensive income for the period attributed to:
Equity holders of the parent		452,995			436,913			452,995			436,913
Non-controlling interests		298			270			—			—

		453,293			437,183			452,995			436,913

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Consolidated						Holding company
	Apr to Jun 2018 (Restated)			Apr to Jun 2017			Apr to Jun 2018 (Restated)			Apr to Jun 2017
NET INCOME FOR THE PERIOD		(10,886	)		138,114			(11,038	)		137,982
OTHER COMPREHENSIVE INCOME
Items not to be reclassified to statements of income in subsequent periods
Equity gain (loss) on other comprehensive income in jointly-controlled entity, net of tax		—			(3,984	)		—			(3,984	)

		—			(3,984	)		—			(3,984	)
Items to be reclassified to statements of income in subsequent periods
Equity gain on other comprehensive income, in subsidiary and jointly-controlled entity, relating to fair value of financial assets, net of taxes		—			(73,825	)		—			(73,825	)

COMPREHENSIVE INCOME FOR THE PERIOD		(10,886	)		60,305			(11,038	)		60,173

Total of comprehensive income for the period attributed to:
Equity holders of the parent		(11,038	)		60,173			(11,038	)		60,173
Non-controlling interests		152			132			—			—

		(10,886	)		60,305			(11,038	)		60,173

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF CHANGES IN EQUITY - CONSOLIDATED

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Share capital		Subscription of shares to be capitalized			Capital reserves		Profit reserves		Equity valuation adjustments			Retained earnings			Total equity holders of the parent			Non-controlling interests			Total Equity
BALANCES ON DEC. 31, 2017		6,294,208		1,215,223			1,924,503		5,728,574		(836,522	)		—			14,325,986			4,150			14,330,136

First adoption CPC 48		—		—			—		—		—			(181,846	)		(181,846	)		—			(181,846	)
Net income for the period		—		—			—		—		—			453,411			453,411			298			453,709
Other comprehensive income
Measurement of obligations of the defined benefit plans, net of taxes		—		—			—		—		(416	)		—			(416	)		—			(416	)

Total comprehensive income for the period		—		—			—		—		(416	)		453,411			452,995			298			453,293

Subscription of Shares to be Capitalized		—		109,550			—		—		—			—			109,550			—			109,550
Capital subscribed		999,555		(999,555	)		—		—		—			—			—			—			—
Constitution of reserves				(325,218	)		325,218		—		—			—			—			—			—
Other changes in Equity:
Interest on Equity		—		—			—		—		—			—			—			(351	)		(351	)
Realization of reserves
Realization of deemed cost of PP&E		—		—			—		—		410			17,111			17,521			—			17,521

BALANCES ON JUNE 30, 2018 (RESTATED)		7,293,763		—			2,249,721		5,728,574		(836,528	)		288,676			14,724,206			4,097			14,728,303

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF CHANGES IN EQUITY—CONSOLIDATED

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2017 AND 2016

(Thousands of Brazilian Reais)


	Share capital		Capital reserves		Profit reserves		Equity valuation adjustments			Retained earnings			Total equity holders of the parent			Non-controlling interests			Total Equity
BALANCES ON DECEMBER 31, 2016		6,294,208		1,924,503		5,199,855		(488,285	)		—			12,930,281			4,090			12,934,371

Net income for the period		—		—		—		—			480,578			480,578			270			480,848
Other comprehensive income
Measurement of obligations of the defined benefit plans, net of taxes		—		—		—		(680	)		—			(680	)		—			(680	)
Equity gain (loss) on Other comprehensive income in subsidiary and jointly-controlled entity		—		—		—		(42,985	)		—			(42,985	)		—			(42,985	)

Total comprehensive income for the period		—		—		—		(43,665	)		480,578			436,913			270			437,183
Other changes in Equity:
Additional dividends proposed to non-controlling interests		—		—		—		—			—			—			(424	)		(424	)
Tax incentives reserve		—		—		2,192		—			(2,192	)		—			—			—
Realization of reserves
Realization of deemed cost of PP&E		—		—		—		(854	)		598			(256	)		—			(256	)

BALANCES ON JUNE 30, 2017		6,294,208		1,924,503		5,202,047		(532,804	)		478,984			13,366,938			3,936			13,370,874

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018 AND 2017

(Thousands of Brazilian Reais)


			Consolidated						Holding company
	Note		Jan to Jun 2018 (Restated)			Jan to Jun 2017			Jan to Jun 2018 (Restated)			Jan to Jun 2017
CASH FLOW FROM OPERATIONS
Net income for the period from going concern operations				432,337			480,848			442,053			480,578
Adjustments to reconcile net income to net cash flows:
Income tax and Social Contribution taxes				170,845			213,928			(38,569	)		(6,352	)
Depreciation and amortization		26		411,300			410,800			216			236
Loss on write off of net residual value of unrecoverable Concession financial assets, PP&E and Intangible assets				14,818			14,651			155			23
Share of profit (loss) in associates and joint ventures		15		26,233			(60,118	)		(529,803	)		(511,625	)
Interest and monetary variation				279,744			624,221			(23,933	)		(952	)
Foreign exchange variation on loans		20		554,278			121			—			—
Amortization of loans’ transaction costs		20		15,548			29,827			153			—
Provisions for operating losses, net		26		267,319			369,918			78,189			15,311
Fair value adjustment of derivative financial instruments – Swap		29		(180,429	)		—			—			—
CVA (Portion A Compensation) Account and Other Financial Components in tariff adjustments		25		(1,150,672	)		331,896			—			—
Post-retirement obligations		22		202,556			228,012			21,990			21,242

				1,043,877			2,644,104			(49,549	)		(1,539	)

(Increase) / decrease in assets
Customers and traders and Concession holders				(14,147	)		(220,199	)		3,928			—
CVA (Portion A Compensation) Account and Other Financial Components, in tariff adjustments		14		280,453			145,502			—			—
Energy Development Account (CDE)				(8,741	)		(9,594	)		—			—
Recoverable taxes				(45,383	)		526			285			(141	)
Income and Social Contribution taxes credit				(72,663	)		55,284			3,652			79,081
Escrow deposits				(29,521	)		(13,655	)		9,472			6,448
Dividends received from investments				197,247			157,445			484,408			228,196
Concession financial assets				379,893			(36,162	)		—			—
Advances to suppliers				(63,707	)		5,656			—			—
Gas drawing rights				317			366,954			—			—
Others				92,759			30,053			(1,110	)		5,857

				716,507			481,810			500,635			319,441

Increase (decrease) in liabilities
Suppliers				(190,081	)		(23,660	)		(552	)		594
Taxes payable				(307,204	)		(225,049	)		831			(80,821	)
Income and Social Contribution taxes payable				—			128,753			—			(452	)
Payroll and related charges				15,439			9,357			2,869			1,309
Regulatory charges				(49,253	)		15,439			5,836			—
Advances from clients				(88,849	)		57,560			—			—
Post-retirement obligations		22		(147,481	)		(133,592	)		(7,875	)		(7,381	)
Others				(86,407	)		(193,594	)		59			(9,202	)

				(853,836	)		(364,786	)		1,168			(95,953	)

Cash generated by going concern operations				906,548			2,761,128			452,254			221,949

Interest paid on loans and financings		20		(671,651	)		(711,474	)		(438	)		—
Income and Social Contribution taxes paid				(292,981	)		(283,024	)		(38	)		(2,081	)
Settlement of derivative financial instruments (Swap)				12,981			—			—			—

NET CASH FROM (USED IN) GOING CONCERN OPERATIONS				(45,103	)		1,766,630			451,778			219,868

Net cash from (used in) Discontinued operations		30		36,602			—			18,944			—

NET CASH FROM (USED IN) OPERATING ACTIVITIES				(8,501	)		1,766,630			470,722			219,868

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	Note		Consolidated						Holding company
	Note		Jan to Jun 2018 (Restated)			Jan to Jun 2017			Jan to Jun 2018 (Restated)			Jan to Jun 2017
INVESTING ACTIVITIES
Marketable securities				738,632			(103,864	)		19,065			117,226
Restricted cash				(4,993	)		(20,810	)		(2,500	)		(20,719	)
Investments
Capital contributions in investees				(149,918	)		(186,231	)		(569,105	)		(100,111	)
Cash received through merger				—			—			428			—
Property, plant and equipment		16		(18,641	)		(31,364	)		—			—
Intangible assets		17		(368,570	)		(407,733	)		(15	)		—

NET CASH FROM (USED IN) INVESTING IN GOING CONCERN OPERATIONS				196,510			(750,002	)		(552,127	)		(3,604	)

Net cash used in investment activities—discontinued operations		30		(7,631	)		—			—			—

NET CASH FROM (USED IN) INVESTING ACTIVITIES				188,879			(750,002	)		(552,127	)		(3,604	)

FINANCING ACTIVITIES
New loans and debentures		20		395,860			60,109			—			—
Capital increase		24		109,550			—			109,550			—
Payment of loans, financings and debentures		20		(774,715	)		(855,057	)		(3,766	)		—
Interest on capital and dividends paid				(393	)		(270,709	)		(6	)		(270,709	)

NET CASH FROM (USED IN) FINANCING ACTIVITIES				(269,698	)		(1,065,657	)		105,778			(270,709	)

Increase (decrease) in cash and cash equivalents				(89,320	)		(49,029	)		24,373			(54,445	)

Cash and cash equivalents at the beginning of the period		5		1,030,257			995,132			38,672			69,352

Cash and cash equivalents at the end of the period		5		940,937			946,103			63,045			14,907

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF ADDED VALUE

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Consolidated								Holding company
	Jan to Jun 2018 (Restated)				Jan to Jun 2017				Jan to Jun 2018 (Restated)					Jan to Jun 2017
REVENUES
Sales of electricity, gas and services (1)		15,214,311				14,282,104				161					196
Distribution construction revenue		378,911				434,009				—					—
Transmission construction revenue		4,732				7,025				—					—
Gain on financial updating of the Concession Grant Fee		156,980				150,476				—					—
Adjustment to expectation of cash flow from the indemnifiable Financial assets of the distribution concession		3,066				1,511				—					—
Transmission indemnity revenue		146,519				269,855				—					—
Generation indemnity revenue		34,463				—				—					—
Investments in PP&E		28,539				12,149				—					—
Other revenues		3,717				1,479				—					—
Provision for Doubtful Receivables (PECLD)		(162,063	)			(140,885	)			—					—

		15,809,175				15,017,723				161					196
INPUTS ACQUIRED FROM THIRD PARTIES
Energy purchased for resale		(5,575,380	)			(5,197,883	)			—					—
Charges for use of national grid		(900,253	)			(451,216	)			—					—
Outsourced services (1)		(663,913	)			(638,744	)			(9,377	)				(3,602	)
Gas purchased for resale		(556,458	)			(485,163	)			—					—
Materials (1)		(195,821	)			(217,936	)			3,707					(66	)
Other operational costs (1)		(229,758	)			(356,713	)			(82,895	)				(20,872	)

		(8,121,583	)			(7,347,655	)			(88,565	)				(24,540	)
GROSS VALUE ADDED		7,687,592				7,670,068				(88,404	)				(24,344	)
RETENTIONS
Depreciation and amortization (1)		(411,300	)			(410,800	)			(216	)				(236	)

NET ADDED VALUE PRODUCED BY GOING CONCERN OPERATIONS		7,276,292				7,259,268				(88,620	)				(24,580	)
NET ADDED VALUE PRODUCED BY DISCONTINUED OPERATIONS		21,372				—				11,358					—
ADDED VALUE RECEIVED BY TRANSFER
Share of (loss) profit, net, of associates and joint ventures		(26,233	)			60,118				529,803					511,625
Finance income (1)		491,169				348,901				18,792					33,018

ADDED VALUE TO BE DISTRIBUTED		7,762,600				7,668,287				471,333					520,063

DISTRIBUTION OF ADDED VALUE
				%				%				%					%

Employees		816,235		10.52		1,072,781		13.99		43,703		9.27			39,991		7.69
Direct remuneration		521,283		6.72		600,072		7.83		19,122		4.06			14,217		2.73
Post-employment obligations and Other benefits		236,605		3.05		270,294		3.52		21,998		4.67			20,729		3.99
FGTS		32,681		0.42		36,993		0.48		762		0.16			682		0.13
Programmed Voluntary Retirement Plan		25,666		0.33		165,422		2.16		1,821		0.38			4,363		0.84
Taxes		5,079,531		65.44		4,945,812		64.50		(35,652	)	(7.56	)		(4,071	)	(0.78	)
Federal		2,551,327		32.87		2,285,738		29.81		(36,137	)	(7.67	)		(4,613	)	(0,89	)
State		2,520,154		32.47		2,652,340		34.59		267		0.06			392		0.08
Municipal		8,050		0.10		7,734		0.10		218		0.05			150		0.03
Remuneration of external capital		1,413,125		18.20		1,168,846		15.24		9,871		2.09			3,565		0.69
Interest		1,360,908		17.53		1,122,148		14.63		3,085		0.65			1,961		0.38
Rentals		52,217		0.67		46,698		0.61		6,786		1.44			1,604		0.31
Remuneration of own capital		453,709		5.84		480,848		6.27		453,411		96.20			480,578		92.40
Retained earnings		453,411		5.84		480,578		6.27		453,411		96.20			480,578		92.40
Non-controlling interest in Retained earnings		298		—		270		—		—		—			—		—

		7,762,600		100.00		7,668,287		100.00		471,333		100.00			520,063		100.00

(1)	Includes the effect of net incomes arising from the discontinued operations.

The Condensed Notes are an integral part of the interim financial information.

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CONDENSED NOTES TO THE INTERIM FINANCIAL INFORMATION

FOR THE SIX-MONTH PERIOD ENDED AS OF JUNE 30, 2018

(In Thousands of Brazilian Reais – except where otherwise indicated)

1.	OPERATING CONTEXT

a)	The Company

Companhia Energética de Minas Gerais (´Parent company’ or ‘Holding Company’) is a listed corporation, registered in the Brazilian Registry of Corporate Taxpayers (CNPJ) under number 17.155.730/0001-64, with shares traded on the São Paulo Stock Exchange (‘B3’) at Corporate Governance Level 1; through ADRs on the New York Stock Exchange (‘NYSE’); and on the stock exchange of Madrid (‘Latibex’). It is domiciled in Brazil, Belo Horizonte, Minas Gerais. It operates exclusively as a holding company, with subsidiaries and investments in associates or jointly controlled entities (collectively referred to as “Cemig” or the “the Company”), which are engaged in the construction and operation of infrastructure used in the generation, transformation, transmission, distribution and sale of electricity, and also activities in the various fields of the energy sector, for the purpose of commercial operation.

As of June 30, 2018 Company´s current liabilities exceeded its current assets by R$ 553,662 and R$ 139,206, respectively, in the consolidated and the Holding Company. In the half-year then ended, the Company generated negative consolidated operating cash flow in the amount of R$ 8,501 (positive in the amount of R$ 1,766,630 in the same period of 2017), arising mainly from higher than budgeted costs on purchase of energy – which will be the subject of reimbursement in the next tariff adjustment. The Holding Company generated a positive operating cash flow of R$ 470,722 (R$ 219,868 in the same period of 2017). Additionally, as of June 30, 2018, Cemig’s consolidated indebtedness from loans, financings and debentures on current and non-current liabilities comprised R$ 2,740,647 and R$ 11,863,407, respectively. The Company’s Management monitors its cash flow and, in that way, studies actions in order to the adjustment of its current financial position to the levels considered adequate to meet its necessities.

As part of the Company’s indebtness management, in December 2017 and July 2018 the subsidiary Cemig GT issued Eurobonds for an amount of US$ 1 billion (R$ 3.2 billion) and US$ 500 million (R$ 1.9 billion), respectively, which mature in 2024. In addition, at the end of 2017, Cemig entered into negotiations with its main creditors aiming at a Bank Debt Refinancing representing up to R$ 3.4 billion of which R$ 2.7 billion of the subsidiary Cemig D and R$ 741 million of the subsidiary Cemig GT. These initiatives have balanced the Company’s cash flows, extended average debt maturities, and improved its credit quality.

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Based on the facts and circumstances that existed on this reporting date, Management has evaluated the Company’s ability to continue on a going concern basis and is convinced that its operations have the capacity to generate funds to continue its business in the future. In addition, Management is not aware of any material uncertainties that could generate significant doubts about its ability to continue operating. Therefore, these interim financial information have been prepared on a going concern basis.

Merger of Cemig Telecomunicações S.A. (‘Cemig Telecom’) and sale of telecom assets

On March 31, 2018, Cemig completed the merger of its wholly-owned subsidiary Cemig Telecom at book value. As a result, Cemig Telecom has been wound up and Cemig has taken over all the subsidiary’s assets, rights and obligations. Considering this is a wholly-owned subsidiary merger there has not been capital increase nor new shares issuance. The Cemig Telecom shares have been extinguished on the merger date.

The balance sheet of Cemig Telecom used for the merger, at March 31, 2018, is as follows:


	Mar. 31, 2018			Mar. 31, 2018
Assets			Liabilities
Current		24,986	Current		33,816
Non-current			Non-current		55,407
Non-current assets		15,313
Investments		17,116
Net PP&E		271,766
Intangible assets		11,716

		315,911	Equity		251,674

Total assets		340,897	Total liabilities and Equity		340,897

The Company’s Management is in the process of sale of the assets merged from Cemig Telecom. See details in Note 30.

Changes in the Company’s by-laws – improvement of corporate governance

On June 11, 2018 a General Meeting of Shareholders approved changes to the Company’s by-laws, to formalize best corporate governance practices and meet the requirements of Law 13303/2016 (the ‘State Companies Law’). The improvements now formally incorporated in the by-laws include:

◾	Reduction of the number of members of the Board of Directors from 15 to 9, in line with the IBGC Best Corporate Governance Practices Code, and the Corporate Sustainability Evaluation Manual of the Dow Jones Sustainability Index.

◾	Creation of the Audit Committee (Comitê de Auditoria). The Fiscal Council (Conselho Fiscal) remains in existence.

The changes in the by-laws have had no effect on the Company’s dividend policy.

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2.	BASIS OF PREPARATION

2.1

Statement of compliance

The interim financial information has been prepared in accordance with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), Technical Pronouncement 21 (R1) – ‘CPC 21’, which applies to interim financial information, and the rules issued by the Brazilian Securities Commission (Comissão de Valores Mobiliários, or CVM), applicable to preparation of Interim Financial Information (Informações Trimestrais, or ITR).

This interim financial information have been prepared according to principles, practices and criteria consistent with those adopted in the preparation of the December 31, 2017 financial statements, except for the adoption of new pronouncements that came into force as from January 1, 2018, which impacts are presented in Note 2.2 to this interim financial information.

Thus, this consolidated interim financial information should be read in conjunction with the said financial statements, approved by the Company’s Fiscal Council on March 28, 2018.

Material information in the interim financial information is being disclosed, which is used by Management in its administration of the Company.

On August 13, 2018, the Company’s Executive Board authorized the issuance of this interim financial information for the six-month period ended on June 30, 2018. On November 27, 2018 the Company’s Executive Board authorized its restatement to reflect the effect of adjustments described in note 2.3.

2.2

Adoption of new pronouncements effective as from January 1, 2018

IFRS 15/CPC 47 – Revenue from contracts with customers

IFRS 15/CPC 47 – Revenue from contracts with customers establishes a five-step model to account for revenues arising from contracts with customers. Under IFRS 15, revenue is recognized at an amount which reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. This new pronouncement will supersede all current requirements for recognition of revenue under the CPCs/IFRS. Additionally, IFRS 15/CPC 47 establishes requirements for more detailed presentation and disclosure than the standards currently in effect.

The Company and its subsidiaries adopted the new standard based on the prospective method, with the impacts accounted for as of January 1, 2018.

The Company and its subsidiaries performed an assessment of the five steps for recognition and measurement of revenue, as required by IFRS 15/CPC 47:

Identify the contracts signed with its customers;

Identify the performance obligations in each type of contract;

Determine the price of each type of transaction;

Allocate the price to the performance obligations contained in the contract; and

Recognize the revenue when (or to the extent that) the entity satisfies each performance obligation of the contract.

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The impact of the adoption of this pronouncement occurred in the recognition of reimbursements to customers resulting from the penalties for breach of quality indicators in the electricity supply, mainly the indicators DIC, FIC, DMIC and DICRI, as a reduction of revenues from use of the distribution network (TUSD). Until December 31, 2017, these reimbursements were recognized as operating expense.

This table shows the impact of adoption of IFRS 15 (CPC 47) on the statement of income for the periods of six and three months ended June 30, 2018:


	Jan to Jun 2018 with adoption of IFRS 15/CPC 47			Adjustment (1) IFRS 15/CPC 47			Jan to Jun 2018 without adoption of IFRS 15/CPC 47
GOING CONCERN OPERATIONS
NET REVENUE		10,541,969			25,681			10,567,650
OPERATING COSTS		(8,218,128	)		—			(8,218,128	)
OPERATING EXPENSES		(839,794	)		(25,681	)		(865,475	)
Share of (loss) profit, net, of associates and joint ventures		(26,233	)		—			(26,233	)
Net Finance income (expenses)		(854,632	)		—			(854,632	)
Income and Social Contribution taxes		(170,845	)		—			(170,845	)

Net income from going concern operations in the period		432,337			—			432,337


	Apr to Jun 2018 with adoption of IFRS 15/CPC 47			Adjustment (1) IFRS 15/CPC 47			Apr to Jun 2018 without adoption of IFRS 15/CPC 47
GOING CONCERN OPERATIONS
NET REVENUE		5,606,538			9,235			5,615,773
OPERATING COSTS		(4,488,514	)		—			(4,488,514	)
OPERATING EXPENSES		(371,116	)		(9,235	)		(380,351	)
Share of (loss) profit, net, of associates and joint ventures		(83,107	)		—			(83,107	)
Net Finance income (expenses)		(696,832	)		—			(696,832	)
Income and Social Contribution taxes		773			—			773

Net income from going concern operations in the period		(32,258	)		—			(32,258	)

(1)	Refers to penalties for violation of energy supply quality indicators, mainly the indicators DIC, FIC, DMIC and DICRI, reclassified from Other operational revenue (expenses).

IFRS 9/CPC 48 – Financial instruments

IFRS 9/CPC 48 establishes that all financial activities recognized that are within the scope of IAS 39 (equivalent to CPC 38) should subsequently be measured at amortized cost or fair value, reflecting the business model in which the assets are administered, and their cash flow characteristics, not affecting accounting recognition of the Company’s financial assets and liabilities. IFRS 9/CPC 48 contains three categories of accounting for financial instruments: Amortized cost; Fair value through other comprehensive income; and fair value through profit or loss. The standard has eliminated the existing categories under IAS 39/CPC 38 and, thus, the Company and its subsidiaries have reclassified those categories to comply with the new standard, as follows:

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Consolidated	Classification
Consolidated	IFRS 39/CPC 38		IFRS 9/CPC 48
Financial assets:
Cash equivalents – Investments		Loans and receivables		Amortized cost
Securities – Investments (1)		Held to maturity		Amortized cost
Securities – Investments (1)		Available for sale		Fair value through profit or loss
Customers and Traders; Concession holders (Transport of energy)		Loans and receivables		Amortized cost
Restricted cash		Loans and receivables		Amortized cost
Advances to suppliers		Loans and receivables		Amortized cost
Accounts receivable from the State of Minas Gerais		Loans and receivables		Amortized cost
Receivables from related parties		Loans and receivables		Amortized cost
Concession financial assets – CVA (Portion ‘A’ Costs Variation Compensation) Account, and Other financial components, in tariff adjustments		Loans and receivables		Amortized cost
Reimbursement of tariff subsidies		Loans and receivables		Amortized cost
Low-income subsidy		Loans and receivables		Amortized cost
Escrow deposits		Loans and receivables		Amortized cost
Derivative financial instruments (swap transactions)		Fair value through profit or loss		Fair value through profit or loss
Concession financial assets – Transmission infrastructure		Loans and receivables		Amortized cost
Concession financial assets – Distribution infrastructure		Available for sale		Fair value through profit or loss
Indemnities receivable – Transmission		Loans and receivables (2)		Fair value through profit or loss
Indemnities receivable – Generation		Loans and receivables (2)		Fair value through profit or loss
Concession grant fee – Generation concessions		Loans and receivables		Amortized cost
Other		Loans and receivables		Amortized cost
Financial liabilities
Loans, financings and debentures		Amortized cost		Amortized cost
Debt agreed with pension fund (Forluz)		Amortized cost		Amortized cost
Concession financial liabilities – CVA (Portion ‘A’ Costs Variation Compensation) Account, and Other financial components, in tariff adjustments		Amortized cost		Amortized cost
Concessions payable		Amortized cost		Amortized cost
The Minas Gerais State Tax Debits Regularization Plan (PRCT)		Amortized cost		Amortized cost
Suppliers		Amortized cost		Amortized cost
Advances from clients		Amortized cost		Amortized cost
Derivative financial instruments (swap transactions)		Fair value through profit or loss		Fair value through profit or loss
Derivative financial instruments – Put options		Fair value through profit or loss		Fair value through profit or loss

(1)	The Company has ‘securities’ with various classifications under IFRS 9 / CPC 48.

(2)	Recognized at their nominal realization values, which are similar to fair value.

Impairment

The material impact resulting from the adoption of the standard as from January 1, 2018 is related to the impairment of trade accounts receivable. The new pronouncement also establishes that in relation to the impairment losses of financial assets, the expectation of loss model in the credit is no longer losses incurred, but a prospective model of expected credit losses, based on probabilities. Based on the new pronouncement, provisions for expected losses were measured based on the losses expected in the next 12 months, as a function of the potential default events, or losses of credit expected for the whole life of a financial instrument, if the credit risk has significantly increased since its initial recognition.

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The Company and its subsidiaries have adopted, in its analyses, a simplified approach, considering that the balance of its accounts receivable from clients do not have a significant financial component, and have calculated the expectation of loss considering the historic average of non-collection over the total billed in each month (based on the last 12 months of billing), segregated by type of customers and projected for the next 12 months, taking into account the aging of receivables, including those not yet due. The estimated loss for the past due balances of customers who renegotiated their debt has been calculated based on the maturity date of the original invoice, with the new terms negotiated not being taken into account. For the balances that are more than 12 months past due, expectation of total loss was assumed.

The estimated effects at January 1, 2018 arising from adoption of IFRS 9/CPC 48, resulted in an increase in the provision for doubtful accounts and a corresponding effect in Equity, as follows:


	Jan. 1, 2018
Customers and Traders; Transport of energy (a)		150,114
Reflex of the adjustment due to the jointly controlled—Light		82,770
Deferred income and Social Contribution taxes (a)		(51,038	)

		181,846

(a)	Refers to estimated losses on doubtful accounts receivable from customers of Cemig D.

2.3

Restatement of the interim financial information

As mentioned in Note 32, on May 28, 2018 Aneel confirmed the result of the Fourth Tariff Review of Cemig Distribuição S.A. (‘Cemig D’), a wholly-owned subsidiary of the Company. Part of this result comprised direct pass-throughs to the tariff of amounts arising from variations in non-manageable costs (‘Portion A’), arising primarily from: purchase ofpower supply, transmission charges, and other financial components of the tariff, for which Cemig D recorded the accounting effects as from May 2018.

After publication of the interim financial information for the quarter and six months ended June 30, 2018, differences were identified in the accounting of the amortization of certain concession financial assets and liabilities related to CVA Account (Portion A Compensation) and Other Financial Components approved in the tariff review referred to above. The effect of these differences on the individual interim financial information of the Company is limited to the share of profit, recorded by the equity method, related to the equity ownership that the company holds in Cemig D. As a result, Cemig and its subsidiary have opted to re-present the individual and consolidated interim financial information, so as to better reflect their financial position and operational performance. These changes caused no effects on the individual and consolidated financial statements for the year ended December 31, 2017, which are presented for the purposes of comparison, nor in the individual and consolidated financial statements for the quarter ended March 31, 2018.

Based on the orientation given in CPC 23 / IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, the interim financial information is being restated with the following adjustments:

(a)

Correction of the divergences in the accounting of the amortization of certain Concession financial assets and liabilities related to the CVA (Variation in ‘Portion A’ Items) account and Other Financial Components approved in the Tariff Review of May 28, 2018 – in the net amount of R$ 81,623 for the six and three-month periods ended June 30, 2018.

(b)	Effects of the adjustment indicated in item (a) on calculations of current and deferred income tax and Social Contribution tax, in the amount of R$ 16,375 and R$ 7,480, respectively, for the six and three-month periods ended June 30, 2018.

(c)	Effects of the adjustment indicated in item (a) on calculations of Pasep and Cofins taxes, in the amounts of R$ 7,550 for the six and three-month periods ended June 30, 2018.

(d)	Effects of the adjustment indicated in item (a) on calculations of the regulatory charges, in the amounts of R$ 734 for the six and three-month periods ended June 30, 2018.

(e)	Net aggregate effects, of the adjustments indicated in items (a), (b), (c), and (d), in the amount of R$ 49,484, in calculation of the gain by the equity method arising from the Company’s investment in Cemig D, for the six and three-month periods ended June 30, 2018.

(f)	Net effect of all the adjustments, in the amount of R$ 49,484, in the profit of the six and three-month periods ended June 30, 2018.

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STATEMENTS OF FINANCIAL POSITION


Assets	Consolidated							Holding company
Assets	Jun. 30, 2018		Adjustments			Jun. 30, 2018 (Restated)		Jun. 30, 2018		Adjustments		Jun. 30, 2018 (Restated)
CURRENT
Concession financial assets (a)		565,281		81,623			646,904		—		—		—
Income and Social Contribution taxes recoverable (b) and (e)		406,203		(16,375	)		389,828		25,889		—		25,889
Other		5,994,568		—			5,994,568		637,149		—		637,149

		6,966,052		65,248			7,031,300		663,038		—		663,038
Assets classified as Held for sale		281,578		—			281,578		281,578		—		281,578

TOTAL, CURRENT		7,247,630		65,248			7,312,878		944,616		—		944,616

NON-CURRENT
Deferred income and Social Contribution taxes (b)		1,943,501		(7,480	)		1,936,021		791,360		—		791,360
Investments – Equity method (g)		7,703,552		—			7,703,552		14,051,552		49,484		14,101,036
Other		24,785,675		—			24,785,675		592,235		—		592,235

TOTAL, NON-CURRENT		34,432,728		(7,480	)		34,425,248		15,435,147		49,484		15,484,631

TOTAL ASSETS		41,680,358		57,768			41,738,126		16,379,763		49,484		16,429,247


Liabilities	Consolidated								Holding company
Liabilities	Jun. 30, 2018			Adjustments		Jun. 30, 2018 (Restated)			Jun. 30, 2018			Adjustments		Jun. 30, 2018 (Restated)
CURRENT
Regulatory charges (d)		434,129			220		434,349			5,836			—		5,836
Taxes payable (c)		287,205			7,550		294,755			6,546			—		6,546
Other obligations		7,131,531			—		7,131,531			1,065,535			—		1,065,535

		7,852,865			7,770		7,860,635			1,077,917					1,077,917
Liabilities directly associated with assets classified as held for sale		5,905			—		5,905			5,905			—		5,905

TOTAL, CURRENT		7,858,770			7,770		7,866,540			1,083,822			—		1,083,822

NON-CURRENT
Regulatory charges (d)		278,374			514		278,888			—			—		—
Other obligations		18,864,395			—		18,864,395			621,219			—		621,219

TOTAL, NON-CURRENT		19,142,769			514		19,143,283			621,219			—		621,219

TOTAL LIABILITIES		27,001,539			8,284		27,009,823			1,705,041			—		1,705,041

EQUITY
Share capital		7,293,763			—		7,293,763			7,293,763			—		7,293,763
Capital reserves		2,249,721			—		2,249,721			2,249,721			—		2,249,721
Profit reserves		5,728,574			—		5,728,574			5,728,574			—		5,728,574
Equity valuation adjustments		(836,528	)		—		(836,528	)		(836,528	)		—		(836,528	)
Subscription of shares, to be capitalized		—			—		—			—					—
Retained earnings (f)		239,192			49,484		288,676			239,192			49,484		288,676

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT		14,674,722			49,484		14,724,206			14,674,722			49,484		14,724,206

NON-CONTROLLING INTERESTS TOTAL EQUITY		4,097			—		4,097			—			—		—

TOTAL EQUITY		14,678,819			49,484		14,728,303			14,674,722			49,484		14,724,206

TOTAL LIABILITIES AND EQUITY		41,680,358			57,768		41,738,126			16,379,763			49,484		16,429,247

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STATEMENTS OF INCOME

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2018


	Consolidated									Holding company
	Jan to Jun 2018			Adjustments			Jan to Jun 2018 (Restated)			Jan to Jun 2018			Adjustments		Jan to Jun 2018 (Restated)
Going concern operations
Net revenue (a), (c) and (d)		10,468,630			73,339			10,541,969			146			—		146
Total cost		(8,218,128	)		—			(8,218,128	)		—			—		—

GROSS PROFIT		2,250,502			73,339			2,323,841			146			—		146
Operating expenses		(839,794	)		—			(839,794	)		(142,172	)		—		(142,172	)
Share of (loss) profit, net, of associates and joint ventures (e)		(26,233	)		—			(26,233	)		480,319			49,484		529,803

Income before finance income (expenses) and taxes		1,384,475			73,339			1,457,814			338,293			49,484		387,777
Finance income		491,169			—			491,169			18,792			—		18,792
Finance expenses		(1,345,801	)		—			(1,345,801	)		(3,085	)		—		(3,085	)

Income before income tax and Social Contribution tax		529,843			73,339			603,182			354,000			49,484		403,484
Current income and Social Contribution taxes (b)		(180,044	)		(16,375	)		(196,419	)		—			—		—
Deferred income and Social Contribution taxes (b)		33,054			(7,480	)		25,574			38,569			—		38,569

Net income (loss) for the period from going concern operations		382,853			49,484			432,337			392,569			49,484		442,053

Net income (loss) for the period from discontinued operations		21,372			—			21,372			11,358			—		11,358

Net income (loss) for the period (f)		404,225			49,484			453,709			403,927			49,484		453,411

Basic and diluted earnings (loss) per share – R$		0.28			0.03			0.31			0.28			0.03		0.31

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STATEMENTS OF INCOME

FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 2018


	Consolidated									Holding company
	Apr to Jun 2018			Adjustments			Apr to Jun 2018 (Restated)			Apr to Jun 2018			Adjustments		Apr to Jun 2018 (Restated)
Net revenue (a), (c) and (d)		5,533,199			73,339			5,606,538			73			—		73
Total cost		(4,488,514	)		—			(4,488,514	)		—			—		—

GROSS PROFIT		1,044,685			73,339			1,118,024			73			—		73
Operating expenses		(371,116	)		—			(371,116	)		(78,890	)		—		(78,890	)
Share of (loss) profit, net, of associates and joint ventures (e)		(83,107	)		—			(83,107	)		(18,051	)		49,484		31,433

Income before finance income (expenses) and taxes		590,462			73,339			663,801			(96,868	)		49,484		(47,384	)
Finance income		249,315			—			249,315			7,544			—		7,544
Finance expenses		(946,147	)		—			(946,147	)		(2,191	)		—		(2,191	)

Income before income tax and Social Contribution tax		(106,370	)		73,339			(33,031	)		(91,515	)		49,484		(42,031	)
Current income and Social Contribution taxes (b)		4,982			(16,375	)		(11,393	)		—			—		—
Deferred income and Social Contribution taxes (b)		19,646			(7,480	)		12,166			19,635			—		19,635

Net income (loss) for the period from going concern operations		(81,742	)		49,484			(32,258	)		(71,880	)		49,484		(22,396	)

Net income (loss) for the period from discontinued operations		21,372			—			21,372			11,358			—		11,358

Net income (loss) for the period (f)		(60,370	)		49,484			(10,886	)		(60,522	)		49,484		(11,038	)

Basic and diluted earnings (loss) per share – R$		(0.04	)		0.03			(0.01	)		(0.04	)		0.03		(0.01	)

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2018

Consolidated

Holding company

Jan to
Jun 2018

Adjustments

Jan to
Jun 2018
(Restated)

Jan to
Jun 2018

Adjustments

Jan to
Jun 2018
(Restated)

Net income for the period (f)

404,225

49,484

453,709

403,927

49,484

453,411

Other comprehensive income

(416

)

—

(416

)

(416

)

—

(416

)

Comprehensive income for the period

403,809

49,484

453,293

403,511

49,484

452,995

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 2018

Consolidated

Holding company

Apr to
Jun 2018

Adjustments

Apr to
Jun 2018
(Restated)

Apr to Jun
2018

Adjustments

Apr to
Jun 2018
(Restated)

Net income for the period (f)

(60,370

)

49,484

(10,886

)

(60,522

)

49,484

(11,038

)

Comprehensive income for the period

(60,370

)

49,484

(10,886

)

(60,522

)

49,484

(11,038

)

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STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2018


	Consolidated									Holding company
	Jan to Jun 2018			Adjustments			Jan to Jun 2018 (Restated)			Jan to Jun 2018			Adjustments			Jan to Jun 2018 (Restated)
CASH FLOW FROM OPERATIONS
Net income for the period from going concern operations (f)		382,853			49,484			432,337			392,569			49,484			442,053
Adjustments to reconcile net income to net cash flows
Income tax and Social Contribution taxes (b)		146,990			23,855			170,845			(38,569	)					(38,569	)
Share of profit (loss) in associates and joint ventures (e)		26,233						26,233			(480,319	)		(49,484	)		(529,803	)
CVA (Portion A Compensation) Account and Other Financial Components in tariff adjustments (a)		(1,069,049	)		(81,623	)		(1,150,672	)		—			—			—
Others		1,565,134			—			1,565,134			76,770			—			76,770

		1,052,161			(8,284	)		1,043,877			(49,549	)		—			(49,549	)

(Increase) / decrease in assets		716,507			—			716,507			500,635			—			500,635

Increase (decrease) in liabilities
Taxes payable (c)		(314,754	)		7,550			(307,204	)		831						831
Regulatory charges (d)		(49,987	)		734			(49,253	)		5,836						5,836
Others		(497,379	)		—			(497,379	)		(5,499	)		—			(5,499	)

		(862,120	)		8,284			(853,836	)		1,168						1,168

Cash generated by going concern operations		906,548			—			906,548			452,254			—			452,254

Interest paid on loans and financings		(671,651	)		—			(671,651	)		(438	)		—			(438	)
Income and Social Contribution taxes paid		(292,981	)		—			(292,981	)		(38	)		—			(38	)
Settlement of derivative financial instruments (Swap)		12,981			—			12,981			—			—			—

NET CASH FROM (USED IN) GOING CONCERN OPERATIONS		(45,103	)		—			(45,103	)		451,778			—			451,778

Net cash from (used in) Discontinued operations		36,602			—			36,602			18,944			—			18,944

NET CASH FROM (USED IN) OPERATING ACTIVITIES		(8,501	)		—			(8,501	)		470,722			—			470,722

NET CASH FROM (USED IN) INVESTING IN GOING CONCERN OPERATIONS		196,510			—			196,510			(552,127	)		—			(552,127	)
Net cash used in investment activities—discontinued operations		(7,631	)		—			(7,631	)		—			—			—

NET CASH FROM (USED IN) INVESTING ACTIVITIES		188,879			—			188,879			(552,127	)		—			(552,127	)
NET CASH FROM (USED IN) FINANCING ACTIVITIES		(269,698	)		—			(269,698	)		105,778			—			105,778
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(89,320	)		—			(89,320	)		24,373			—			24,373
Cash and cash equivalents at the beginning of the period		1,030,257			—			1,030,257			38,672			—			38,672

Cash and cash equivalents at the end of the period		940,937			—			940,937			63,045			—			63,045

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STATEMENTS OF ADDED VALUE

FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2018


	Consolidated								Holding company
	Jan to Jun 2018			Adjustments		Jan to Jun 2018 (Restated)			Jan to Jun 2018			Adjustments		Jan to Jun 2018 (Restated)
Gross value added (a)		7,605,969			81,623		7,687,592			(88,404	)		—		(88,404	)
Retentions		(411,300	)		—		(411,300	)		(216	)		—		(216	)

Net added value produced by going concern operations		7,194,669			81,623		7,276,292			(88,620	)		—		(88,620	)
Net added value produced by discontinued operations		21,372			—		21,372			11,358			—		11,358
Added value received by transfer (e)		464,936			—		464,936			499,111			49,484		548,595

Added value to be distributed		7,680,977			81,623		7,762,600			421,849			49,484		471,333

Distribution of added value
Employees		816,235			—		816,235			43,703			—		43,703
Taxes (b), (c) and (d)		5,047,392			32,139		5,079,531			(35,652	)		—		(35,652	)
Remuneration of external capital		1,413,125			—		1,413,125			9,871			—		9,871
Remuneration of own capital (f)		404,225			49,484		453,709			403,927			49,484		453,411

		7,680,977			81,622		7,762,600			421,849			49,484		471,333

2.4

Correlation between the Explanatory Notes published in the annual financial statements and those in the interim financial information

The table below shows the correlation between the Explanatory Notes published in the financial statements at December 31, 2017 and the interim financial information at June 30, 2018.

The Company understands that this interim financial information presents the material updating of information relating to its financial position, and its results for the six-month period ended June 30, 2018, in compliance with the requirements for disclosure stated by the CVM (Brazilian Securities Commission).

LOGO


Number of the Note		Title of the Note
Dec. 31, 2017	Jun. 30, 2018	Title of the Note
1	1	Operational context
2	2	Basis of preparation
3	3	Consolidation principles
4	4	Concessions and authorizations
5	31	Operational segments
6	5	Cash and cash equivalents
7	6	Securities
8	7	Customers and traders; Concession holders (transport of energy)
9	8	Recoverable taxes
10	9	Income and Social Contribution tax
11	10	Restricted cash
12	11	Accounts Receivable from the State of Minas Gerais
13	12	Escrow deposits
14	13	Reimbursement of tariff subsidies
15	14	Concession financial assets and liabilities
16	15	Investments
17	16	Property, plant and equipment
18	17	Intangible assets
19	18	Suppliers
20	19	Taxes payable, Income tax and Social Contribution tax and amounts to be reimbursed to customers
21	20	Loans, financings and debentures
22	21	Regulatory charges
23	22	Post-retirement obligations
24	23	Provisions
25	24	Equity and remuneration to shareholders
26	25	Revenue
27	26	Operating costs and expenses
28	27	Finance income and expenses
29	28	Related party transactions
30	29	Financial instruments and risk management
31	29	Measurement at fair value
—	30	Assets classified as held for sale
35	33	Transactions not involving cash
36	34	Subsequent events

LOGO

The Notes to the 2017 financial statements that have not been included in these interim financial information because they had no material changes, and/or were not applicable to the interim information, are as follows:


Number		Title of the Note
32		Insurance
33		Commitments
34		Annual tariff adjustment

3.	PRINCIPLES OF CONSOLIDATION

The reporting dates for the interim financial information of subsidiaries and jointly-controlled entities used for the purposes of consolidation and equity method gains (losses), respectively, coincide with those of the Company. Accounting practices are applied uniformly in line with those used by the Company.

The following subsidiaries are included in the consolidated interim financial information:


Subsidiary	Criteria		Jun. 30, 2018		Dec. 31, 2017
Subsidiary	Criteria		Direct interest,%		Direct interest,%
Cemig Geração e Transmissão		Consolidated		100.00		100.00
Cemig Distribuição		Consolidated		100.00		100.00
Gasmig		Consolidated		99.57		99.57
Cemig Telecom (2)		Consolidated		—		100.00
Rosal Energia		Consolidated		100.00		100.00
Sá Carvalho		Consolidated		100.00		100.00
Horizontes Energia		Consolidated		100.00		100.00
Cemig Geração Distribuída (Usina Térmica Ipatinga) (1)		Consolidated		100.00		100.00
Cemig PCH		Consolidated		100.00		100.00
Cemig Trading		Consolidated		100.00		100.00
Efficientia		Consolidated		100.00		100.00
Cemig Comercializadora de Energia Incentivada		Consolidated		100.00		100.00
UTE Barreiro		Consolidated		100.00		100.00
Empresa de Serviços e Comercialização de Energia Elétrica		Consolidated		100.00		100.00
Luce Empreendimentos e Participações S.A.		Consolidated		100.00		100.00

(1)	In 2018, the corporate name of UTE Ipatinga was changed to Cemig Geração Distribuída S.A.

(2)	Company merged into Cemig on March 31, 2018.

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4.	CONCESSIONS AND AUTHORIZATIONS

Cemig and its subsidiaries hold the following concessions and authorizations with Aneel:


	Company holding concession or authorization	Concession or authorization contract	Expiration date
POWER GENERATION
Hydroelectric plants
Emborcação (1)	Cemig GT	07/1997	07/2025
Nova Ponte (1)	Cemig GT	07/1997	07/2025
Santa Luzia (1)	Cemig GT	07/1997	02/2026
Sá Carvalho (1)	Sá Carvalho	01/2004	12/2024
Rosal (1)	Rosal Energia	01/1997	05/2032
Machado Mineiro (1) Salto Voltão (1) Salto Paraopeba (1) Salto do Passo Velho (1)	Horizontes Energia	Resolution 331/2002	07/2025 10/2030 10/2030 10/2030
PCH Pai Joaquim (1)	Cemig PCH	Resolution 377/2005	04/2032
Irapé (1)	Cemig GT	14/2000	02/2035
Queimado (Consortium) (1)	Cemig GT	06/1997	01/2033
Salto Morais (1)	Cemig GT	02/2013	07/2020
Rio de Pedras (1)	Cemig GT	02/2013	09/2024
Luiz Dias (1)	Cemig GT	02/2013	08/2025
Poço Fundo (1)	Cemig GT	02/2013	08/2025
São Bernardo (1)	Cemig GT	02/2013	08/2025
Xicão (1)	Cemig GT	02/2013	08/2025
Três Marias (2)	Cemig Geração Três Marias	08/2016	01/2046
Salto Grande (2)	Cemig Geração Salto Grande	09/2016	01/2046
Itutinga (2)	Cemig Geração Itutinga	10/2016	01/2046
Camargos (2)	Cemig Geração Camargos	11/2016	01/2046
Coronel Domiciano, Joasal, Marmelos, Paciência and Piau (2)	Cemig Geração Sul	12/2016 and 13/2016	01/2046
Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras (2)	Cemig Geração Leste	14/2016 and 15/2016	01/2046
Cajurú, Gafanhoto and Martins (2)	Cemig Geração Oeste	16/2016	01/2046
Thermal plants
Igarapé (1)	Cemig GT	07/1997	08/2024
POWER TRANSMISSION
National grid (3)	Cemig GT	006/1997	01/2043
Itajubá Substation (3)	Cemig GT	79/2000	10/2030
ELECTRICITY DISTRIBUTION (4)	Cemig D	002/1997 003/1997 004/1997 005/1997	12/2045
GAS DISTRIBUTION (4)	Gasmig	State Law 11,021/1993	01/2053

(1)	Generation concession contracts that are not within the scope of ICPC 01/IFRC 12, whose infrastructure assets are recorded as PP&E since the concession grantor does not have control over whom the service is provided to as the output is being sold mainly in the Free Market (‘ACL’).

(2)	Generation concession contracts whose revenue related to the Concession Grant Fee is within the scope of ICPC 01 /IFRIC 12, and is classified as concession financial assets.

(3)

Transmission concession contracts that are within the scope of ICPC 01 /IFRIC 12, considering the financial asset model, andthe income and costs of the construction works related to the formation of the financial asset is recognized as expenses are incurred. The financial asset to be reimbursed is identified when the implementation of the infrastructure is finalized and included as remuneration for the services of implementation of the infrastructure.

(4)	Concession contracts that are within the scope of ICPC 01 /IFRIC 12 and under which the concession infrastructure assets are recorded under the intangible and financial assets bifurcation model.

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5.	CASH AND CASH EQUIVALENTS


	Consolidated				Holding Company
	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018		Dec. 31, 2017
Bank accounts		43,984		113,495		4,669		4,645
Cash equivalents
Bank certificates of deposit (CDBs) (1)		786,378		685,826		44,748		20,799
Overnight (2)		110,575		226,629		13,628		13,228
Others		—		4,307		—		—

		896,953		916,762		58,376		34,027

		940,937		1,030,257		63,045		38,672

(1)

Bank Certificates of Deposit (Certificados de Depósito Bancário, or CDBs), accrued interest at 60% to 106% of the CDI Rate (Interbank Rate for Interbank Certificates of Deposit or Certificados de Depósito Inter-bancário – CDIs) published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip) on June 30, 2018 (50% to 106% on December 31, 2017). For these CDBs, the Company has repo transactions which state, on their trading notes, the bank’s commitment to repurchase the security, on demand, on the maturity date of the transaction, or earlier, at the Company’s option.

(2)

Overnight transactions are repos available for redemption on the following day.They are usually backed by Treasury Bills, Notes or Bonds and referenced to a pre-fixed rate of 6.39%, on June 30, 2018 (6.89% on December 31, 2017). Their purpose is to settle the Company’s short-term obligations, or to be used in the acquisition of other assets with better return to replenish the portfolio.

The Company’s exposure to interest rate risks and sensitivity analysis for financial assets and liabilities are disclosed in Note 29.

6.	SECURITIES


	Consolidated				Holding Company
	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018		Dec. 31, 2017
Investments
Current
Bank certificates of deposit (CDBs) (1)		935		2,652		115		144
Financial Notes (LFs) – Banks (2)		158,949		303,355		19,589		17,706
Treasury Financial Notes (LFTs) (3)		121,124		739,945		14,928		43,189
Debentures (4)		4,775		10,663		1,825		2,142
Others		2,252		1,769		650		779

		288,035		1,058,384		37,107		63,960
Non-current
Bank certificates of deposit (CDBs) (1)		234		—		43		—
Financial Notes (LFs) – Banks (2)		57,957		—		7,143		—
Debentures (4)		4,951		29,753		2,339		1,737
Others		705		—		—		—

		63,847		29,753		9,525		1,737

		351,882		1,088,137		46,632		65,697

(1)

Investments in Bank Certificates of Deposit – CDBs – accrued interest at a percentage of the Interbank Certificates of Deposit (CDI) rate, published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip) which was 100.50% to 105.25% on June 30, 2018 (100.25% to 105.25% on December 31, 2017).

(2)

Bank Financial Notes (Letras Financeiras, or LFs) are fixed-rate fixed-income securities, issued by banks, and that accrued interest at a percentage of the CDI rate published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip). The LFs accrued interest of 102% to 111.25% of the CDI rate on June 30, 2018 (102.01% to 112% on December 31, 2017).

(3)	Treasury Financial Notes (LFTs) are fixed-rate securities, their yield on which follows the daily changes in the Selic rate between the date of purchase and the date of maturity.

(4)	Debentures are medium and long-term debt securities, which give their holders a right of credit against the issuing company. The debentures have remuneration varying from 104.25% to 151% of the CDI rate on June 30, 2018 (104.25% to 161.54% on December 31, 2017).

Note 29 provides further information on these securities. Investments in securities of related parties are shown in Note 28.

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7.	CUSTOMERS, TRADERS AND TRANSPORT OF ENERGY CONCESSION HOLDERS


	Consolidated
	Balances not yet due			Up to 90 days past due			More than 90 days past due			Jun. 30, 2018			Dec. 31, 2017
Billed supply		1,166,017			627,811			809,168			2,602,996			2,688,622
Unbilled supply		1,058,559			—			—			1,058,559			993,699
Other concession holders – wholesale supply		3,008			18,617			3,569			25,194			25,642
Other concession holders – wholesale supply, unbilled		217,120			—			—			217,120			283,061
CCEE (Wholesale Electricity Trading Chamber)		46,908			214,127			259			261,294			381,150
Concession Holders – Transport of energy		69,137			6,634			94,898			170,669			159,194
Concession Holders – Transport of energy, unbilled		231,550			—			—			231,550			177,308
(–) Provision for doubtful receivables		(191,250	)		(17,475	)		(522,863	)		(731,588	)		(567,956	)

		2,601,049			849,714			385,031			3,835,794			4,140,720

Current assets											3,759,200			3,885,392
Non-current assets											76,594			255,328


	Holding Company
	Balances not yet due		Up to 90 days past due		More than 90 days past due			Jun. 30, 2018			Dec. 31, 2017
Billed supply (Telecom services)		15,277		4,945		5,185			25,407			—
(–) Provision for doubtful receivables		—		—		(1,133	)		(1,133	)		—

		15,277		4,945		4,052			24,274			—

Current assets									24,274			—

Note 29 presents the Company and its subsidiaries’ exposure to credit risk related to customers and traders.

The allowance for doubtful accounts is considered to be sufficient to cover any potential losses in the realization of accounts receivable, and the breakdown by type of customers is as follows:


	Jun. 30, 2018		Dec. 31, 2017
Residential		130,624		160,482
Industrial		205,834		178,058
Commercial, services and others		171,540		117,438
Rural		29,036		17,334
Public authorities		94,386		11,984
Public lighting		5,680		4,740
Public services		26,758		10,187
Charges for use of the network (TUSD)		67,730		67,733

		731,588		567,956

Changes in the allowance for doubtful accounts are as follows:


Balance at December 31, 2016	660,105
Additions, net	140,885

Balance at June 30, 2017	800,990

Balance at December 31, 2017	567,956

Additions, net	317,671
Write-off	(154,039	)

Balance at June 30, 2018	731,588

The Company recorded, on January 1, 2018, the effects arising from the adoption of IFRS 9 / CPC 48, as a result of the retained earnings. More detail in Note 2 of this interim financial information.

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Advances from clients

Cemig GT and Cemig D receives advance payments for the sale of energy from certain customers. Advance payments related to services not yet provided are as follows:


Balance at December 31, 2016	181,200
Addition	142,601
Supply completed	(85,041	)
Monetary adjustment	24,680

Balance at June 30, 2017	263,440

Balance at December 31, 2017	232,762
Supply completed	(88,849	)
Monetary adjustment	6,815

Balance at June 30, 2018	150,728

Advance payments are adjusted until the actual delivery of the power supply by Cemig GT and Cemig D under the following terms:

June 30, 2018

Balance
on Jun.
30, 2018

Balance
on Dec.
31, 2017

Counterparty

Specified period
for energy billing

Index for adjusting
prepaid amounts

MWh
deliverable

BTG Pactual

Jan. 2018

1.57% p.m.

—

17,287

BTG Pactual

Jan. 2018

1.2% p.m.

—

25,633

Deal Comercializadora

Jan. 2018

1.2% p.m.

—

772

White Martins Gases Industriais Ltda

May 2018 – Mar. 2019

124% of CDI

214,642

121,396

147,066

White Martins Gases Industriais Ltda

May 2018 – Mar. 2019

124% of CDI

—

29,332

42,004

150,728

232,762

Revenue from advanced sales of power supply is recognized in the statement of income only when the supply actually take place.

8.	RECOVERABLE TAXES


	Consolidated				Holding Company
	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018		Dec. 31, 2017
Current
ICMS (VAT)		78,750		71,430		3,186		—
PIS and Pasep		8,672		12,130		20		6
Cofins		39,484		56,023		100		37
Others		23,461		34,207		96		—

		150,367		173,790		3,402		43
Non-current
ICMS (VAT)		228,317		224,752		2,290		—
PIS and Pasep		43		569		3		2
Cofins		196		3,131		12		12
Others		2,225		2,226		1,795		1,796

		230,781		230,678		4,100		1,810

		381,148		404,468		7,502		1,853

The ICMS (VAT) credits that are reported in non-current assets arise from acquisitions of property, plant and equipment, and intangible assets, and can be offset against taxes payable in the next 48 months. The transfer to non-current was made in accordance with Management’s best estimate of the amounts which will likely be realized after June 2019.

Credits of PIS, Pasep and COFINS taxes generated by the acquisition of machinery and equipment can be offset immediately.

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9.	INCOME AND SOCIAL CONTRIBUTION TAXES

a)	Income and Social Contribution tax recoverable

The balances of income tax and social contribution tax refer to tax credits in the corporate income tax returns of prior years and to advance payments which will be offset against federal taxes eventually payable.


	Consolidated				Holding Company
	Jun. 30, 2018 (Restated)		Dec. 31, 2017		Jun. 30, 2018		Dec. 31, 2017
Current
Income tax		244,642		223,539		23,141		19,124
Social Contribution tax		145,186		116,035		2,748		598

		389,828		339,574		25,889		19,722
Non-current
Income tax		—		6,685		—		6,685
Social Contribution tax		11,248		13,932		11,248		13,932

		11,248		20,617		11,248		20,617

		401,076		360,191		37,137		40,339

b)	Deferred income tax and Social Contribution tax

The Company and its subsidiaries have tax credits for income tax and the social contribution tax, arising from balances of tax losses, negative base for the social contribution tax, and temporary differences, at the rates of 25% (for income tax) and 9% (for the Social Contribution tax), as follows:


	Consolidated						Holding Company
	Jun. 30, 2018 (Restated)			Dec. 31, 2017			Jun. 30, 2018			Dec. 31, 2017
Deferred tax assets
Tax loss carryforwards		498,792			523,595			165,505			165,235
Provisions		1,110,876			1,092,557			555,145			527,166
Post-retirement obligations		1,210,792			1,179,257			150,691			144,176
Estimated provision for doubtful receivables		264,591			207,415			8,161			7,775
Taxes with suspended liability		12,858			14,093			—			—
Paid concession		7,473			8,227			—			—
Adjustment to fair value: Swap/loss		—			12,923			—			—
Others		17,710			14,212			5,630			—

Total		3,123,092			3,052,279			885,132			844,352

Deferred tax liabilities
Funding cost		(26,980	)		(31,115	)		—			—
Deemed cost		(252,511	)		(275,543	)		—			—
Cost of acquisition of equity interests		(454,616	)		(463,573	)		(86,365	)		(87,613	)
Borrowing costs capitalized		(167,044	)		(165,582	)		—			—
Taxes on revenues not redeemed – Presumed Profit accounting method		(1,253	)		(785	)		—			—
Adjustment to expectation of cash flow from the indemnifiable Concession financial assets		(919,083	)		(937,485	)		—			—
Adjustment to fair value of derivative financial instruments		(44,614	)		(1,524	)		—			—
Others		(38,872	)		(40,133	)		(7,407	)		—

Total		(1,904,973	)		(1,915,740	)		(93,772	)		(87,613	)

Total, net		1,218,119			1,136,539			791,360			756,739

Total assets		1,936,021			1,871,228			791,360			756,739
Total liabilities		(717,902	)		(734,689	)		—			—

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The changes in income tax and the Social Contribution tax are as follows:


	Consolidated			Holding Company
Balance at Dec. 31, 2016		1,215,247			789,318
Effects allocated to Statement of income		78,794			8,885
Variations in deferred tax assets and liabilities		4,544			—

Balance at June 30, 2017		1,298,585			798,203

Balance at Dec. 31, 2017		1,136,539			756,739
Telecom merger		—			1,049
Effects allocated to Statement of income – Going concern operations		25,574			38,569
Effects allocated to Statement of income – Discontinued operations		(9,815	)		(5,742	)
Effects allocated to Equity		68,586			—
Transfer to assets held for sale		745			745
Variations in deferred tax assets and liabilities		(3,510	)		—

Balance on Jun. 30, 2018 (Restated)		1,218,119			791,360

c)	Reconciliation of income tax and Social Contribution tax effective rate

This table reconciles the statutory income tax (rate 25%) and the Social Contribution tax (rate 9%) with the current expense on these taxes in the statement of income:


	Consolidated						Holding Company
	Jan to Jun 2018 (Restated)			Jan to Jun 2017			Jan to Jun 2018 (Restated)			Jan to Jun 2017
Income on going concern operations before income and Social Contribution taxes		603,182			694,776			403,484			474,226
Income tax and Social Contribution tax – nominal expense		(205,082	)		(236,224	)		(137,185	)		(161,237	)
Tax effects applicable to:
Gain (loss) in subsidiaries by equity method (net of effects of Interest on Equity)		(16,633	)		9,096			176,535			166,824
Non-deductible contributions and donations		(1,583	)		(1,512	)		(401	)		—
Tax incentives		5,983			6,088			25			43
Voluntary retirement provision		(146	)		—			(14	)		—
Difference between Presumed profit and Real profit		48,506			38,819			—			—
Non-deductible penalties		(6,964	)		(8,405	)		(35	)		(11	)
Excess reactive power and demand		—			(6,112	)		—			—
Others		5,074			(15,678	)		(356	)		733

Income tax and Social Contribution – effective gain (expense)		(170,845	)		(213,928	)		38,569			6,352

Current tax		(196,418	)		(292,722	)		—			(2,533	)
Deferred tax		25,573			78,794			38,569			8,885

		(170,845	)		(213,928	)		38,569			6,352

Effective rate		28.32%			30.79%			9.56%			1.34%

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	Consolidated						Holding Company
	Apr to Jun 2018 (Restated)			Apr to Jun 2017			Apr to Jun 2018 (Restated)			Apr to Jun 2017
Income on going concern operations before income and Social Contribution taxes		(33,031	)		188,653			(42,031	)		141,589
Income tax and Social Contribution tax – nominal expense		11,231			(64,142	)		14,290			(48,140	)
Tax effects applicable to:
Share of (loss) profit of associates and joint ventures (net of effects of Interest on Equity)		(34,370	)		503			6,466			43,983
Non-deductible contributions and donations		(1,214	)		(680	)		(401	)		—
Tax incentives		2,792			2,292			25			43
Voluntary retirement provision		108			—			(12	)		—
		—			(93	)		—			—
Difference between Presumed profit and Real profit		21,296			36,192			—			—
Non-deductible penalties		(2,958	)		(3,647	)		(29	)		(5	)
Excess reactive power and demand		—			(3,037	)		—			—
Others		3,888			(17,927	)		(704	)		512

Income tax and Social Contribution – effective gain (expense)		773			(50,539	)		19,635			(3,607	)

Current tax		(11,393	)		(59,265	)		—			(2,533	)
Deferred tax		12,166			8,726			19,635			(1,074	)

		773			(50,539	)		19,635			(3,607	)

Effective rate		2.34%			26.79%			46.72%			2.55%

10.

RESTRICTED CASH

The balance of Restricted cash amounting to R$ 111,220 in the Consolidated (R$ 106,227 on December 31, 2017), and R$ 90,663 in the Holding Company (R$ 87,872 on December 31, 2017), refers mainly to amounts deposited with a financial institution, in accordance with the Shareholders’ agreement of the jointly controlled Rio Minas Energia Participações – RME, as a guarantee for the settlement of the options to sell an interest in RME.

11.

ACCOUNTS RECEIVABLE FROM THE STATE OF MINAS GERAIS

On October 25, 2017 the Company signed a Debt Recognition Agreement with Minas Gerais State, through its Tax Office, where the state committed to reimburse to the Company the total amount deposited, after adjusting it for inflation using the IGP-M index, related to the dispute on the criteria to be used to adjust the amounts passed through by the Minas Gerais State government as an advance for future capital contributions in the previous year.

The parties agreed that the Minas Gerais State will reimburse the Company R$ 294,390, of which R$ 239,445 relates to the historical amounts deposited, and R$ 54,945 relates to the monetary adjustment, of which R$ 13,082 is related to the six-month period ended June 30, 2018, which will be paid in 12 consecutive monthly installments, each adjusted by the IGP-M inflation index through the settlement date, starting on November 10, 2017. Further, the agreement states that, in the event of arrears or default by the State in the payment of the agreed consecutive monthly installments, Cemig is authorized to retain dividends or Interest on Equity distributable to the State in proportion to the State’s equity interest, for as long as the arrears and/or default continues. Until June 30, 2018, a total of R$ 46,290 had been received regarding two installments and the remaining balance of R$ 248,100 is still outstanding, recognized in Non-current assets, due to installments being overdue since January 2018. Company’s Management believes that no impairment losses is expected on these receivables, considering the aforementioned guarantees, which Company intends to execute in the event of non-receipt of the amount agreed in the debt recognition agreement.

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12.

ESCROW DEPOSITS

These deposits are mainly related to legal proceeding relating to labor and tax contingencies.

Escrow deposits mainly relate to tax disputes, mainly on the calculation of Pasep/Cofins, for which the Company believes the amounts of ICMS (VAT) should be exclude from the taxable amount on which the Pasep/Cofins taxes are charged.


	Consolidated				Holding Company
	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018		Dec. 31, 2017
Labor claims		332,362		303,699		37,737		35,270
Tax contingencies
Income tax on Interest on Equity		27,418		26,861		255		244
Pasep/Cofins taxes (1)		1,374,109		1,337,086		—		—
Donations and legacy tax (ITCD)		50,031		48,981		49,592		48,541
Urban property tax (IPTU)		85,425		79,505		68,947		68,675
Finsocial tax		37,978		37,170		37,978		37,170
Income and social contribution taxes on indemnity for employees ‘Anuênio’ benefit (2)		271,520		267,432		13,057		12,853
IRRF on Inflation Gain		8,359		—		8,359		—
Others		86,593		116,585		21,335		31,252

		1,941,433		1,913,620		199,523		198,735
Others
Regulatory
Third party		54,008		60,243		30,395		29,589
Customer relations		11,394		16,094		6,028		5,811
Court embargo		6,427		6,204		1,537		1,561
Others		13,194		14,358		4,323		5,515

		21,558		21,414		1,333		1,310

		106,581		118,313		43,616		43,786

		2,380,376		2,335,632		280,876		277,791

(1)	The escrow deposits relating to Pasep and Cofins taxes refer to the case challenging the constitutionality of inclusion of the ICMS (VAT), which has been charged, within the amount on which the Pasep and Cofins taxes are calculated.

(2)	See more details in Note 23 – Provisions (Indemnity of employees’ future benefit—the ‘Anuênio’).

Inclusion of ICMS (VAT) in the taxable base for Pasep /Cofins

Refers to the escrow deposits made in the action challenging the constitutionality of inclusion of ICMS (VAT), already charged, within the taxable amount for calculation of these two contributions. The subsidiaries Cemig D and Cemig GT obtained interim relief from the Court allowing them not to make the payment, and authorizing payment as escrow deposits, starting in 2008, and maintained this procedure until August 2011. After that date, while continuing to challenge the basis of the calculation in court, they opted to pay the taxes monthly.

◾

Cemig GT reversed the provision in the amount of R$ 101,233, with effect on the net income for 2017, and recorded the reversal as a deduction on revenue, in the fourth quarter of that year, remaining an escrow deposit in amount of R$ 186,784.

◾

Cemig D wrote down the liabilities relating to these contributions; and recorded a liability for reimbursement to customers. More details in Note 19.

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13.

REIMBURSEMENT OF TARIFF SUBSIDIES

Subsidies on tariffs charged to users of distribution services are reimbursed to distributors through the funds from the Energy Development Account (CDE).

On June 30, 2018, the amount recognized as subsidies revenues was R$ 458,321 (R$ 401,695 in first half 2017). Of such amounts, Cemig D recorded a receivable of R$ 82,470 (R$ 73,345 in 2017), and Cemig GT recorded a receivable of R$ 3,357 (R$ 3,741 in 2017), in current assets.

14.

CONCESSION FINANCIAL ASSETS AND LIABILITIES


Consolidated	Jun. 30, 2018 (Restated)		Dec. 31, 2017
Financial assets related to infrastructure (1)
Distribution concessions		384,341		369,762
Receivable for residual value – Transmission (1.1)		1,822,294		1,928,038
Transmission concessions – assets remunerated by tariff (1.2)		552,019		547,800
Receivable for residual value – Generation (1.3)		1,935,220		1,900,757
Concession grant fee – Generation concessions (1.4)		2,371,831		2,337,135

		7,065,705		7,083,492
CVA (Portion A Compensation) Account and Other Financial Components in tariff adjustments (2)		858,761		369,010

Total		7,924,466		7,452,502

Current assets		646,904		847,877
Non-current assets		7,277,562		6,604,625


Consolidated Concession financial liabilities	Jun. 30, 2018		Dec. 31, 2017
CVA (Portion A Compensation) Account and Other Financial Components in tariff adjustments (2)		23,046		414,800
Current liabilities		16,751		414,800
Non-current liabilities		6,295		—

The changes in concession financial assets related to infrastructure are as follows:


	Transmission			Generation			Distribution			Consolidated
Balances at December 31, 2016		2,287,511			2,800,389			216,107			5,304,007
Additions		156,280			—			—			156,280
Transfers of indemnity – plants not renewed (Volta Grande)		—			70,252			—			70,252
Disposals		(380	)		—			(15	)		(395	)
Amounts received		(8,890	)		(111,228	)		—			(120,118	)
Transfers between PP&E, Financial assets and Intangible assets		—			—			34,789			34,789
Adjustment to expectation of cash flow from the indemnifiable Concession financial assets		—			—			1,511			1,511
Monetary updating		120,600			150,477			—			271,077

Balances at June 30, 2017		2,555,121			2,909,890			252,392			5,717,403

Balances at December 31, 2017		2,475,838			4,237,892			369,762			7,083,492
Additions		4,732			—			—			4,732
Amounts received		(262,341	)		(122,284	)		—			(384,625	)
Transfers between PP&E, Financial assets and Intangible assets		(106	)		—			11,302			11,196
Other transfers		—			—			269			269
Adjustment to expectation of cash flow from the indemnifiable Concession financial assets		9,671			—			3,066			12,737
Monetary updating		146,519			191,443			—			337,962
Disposals		—			—			(58	)		(58	)

Balances at June 30, 2018		2,374,313			4,307,051			384,341			7,065,705

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1)	Financial assets related to infrastructure

The energy distribution and transmission concession contracts and the gas distribution contracts are within the scope of ICPC 01 (IFRIC 12). The financial assets under these contracts refer to the investment made in infrastructure that will be returned to the grantor at the end of the concession contract and for which the Company has a contractual right to receive cash from the grantor during the concession contract as well as at the end of the concession contract.

1.1)	Transmission – Residual value receivable

Cemig’s transmission concession contracts are within the scope of ICPC 01 (IFRC 12). The financial assets under these contracts refer to the investment made in infrastructure that will be returned to the grantor at the end of the concession contract and for which the Company is entitled to receive an amount corresponding to the residual value of the infrastructure assets at the end of the concession contract.

On April 22, 2016 the Mining and Energy Ministry (Ministério de Minas e Energia, or MME) published its Ministerial Order 120, setting the deadline and method of payment for the remaining amount corresponding to the residual value of the assets. The Ministerial Order determined that the amounts homologated by the regulator should become part of the Regulatory Remuneration Asset Base (Base de Remuneração Regulatória, or BRR) and that the cost of capital should be added to the related Permitted Annual Revenues (‘RAP’).

On August 16, 2016, the regulator, through its Dispatch 2,181, homologated the amount of R$ 892,050, in Reais as of December 2012, for the portion of the residual value of assets to be paid to the Cemig GT. Such amount was recorded as a financial asset, with specific maturity and interest rate.

The amount of indemnity to be received, updated until June 30, 2018, amounted to R$ 1,822,294 (R$ 1,928,038 as of December 31, 2017), corresponding to the following:

Portions of remuneration and depreciation not paid since the extensions of concessions

An amount of R$ 964,679 , corresponding to the portions of remuneration and depreciation not paid since the extensions of the concessions, through the tariff adjustment in 2017 (R$ 992,802 as of December 31, 2017), which will be inflation adjusted using the IPCA (Expanded National Customer Price) index, and remunerated at the weighted average cost of capital of the transmission industry as defined by the regulator for the periodic tariff review, to be paid over a period of eight years, in the form of reimbursement through the RAP.

Residual Value of transmission assets – injunction awarded to industrial customers

On April 10, 2017, an preliminary injunction was granted to the Brazilian Large Free Customers’ Association (Associação Brasileira de Grandes Consumidores Livres), the Brazilian Auto Glass Industry Technical Association (Associação Técnica Brasileira das Indústrias Automáticas de Vidro) and the Brazilian Ferro-alloys and Silicon Metal Producers’ Association (Associação Brasileira dos Produtores de Ferroligas e de Silicio Metálico) in their legal action against the regulator and the Federal Government requesting suspension of the effects on their tariffs of payment of the residual value of transmission assets payable to agents of the electricity sector who accepted the terms of Law 12,783/2013.

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The preliminary injunction was partial, with effects related to suspension of the inclusion in the customer tariffs paid by these associations of the portion of the indemnity corresponding to the remuneration at cost of capital included since the date of extension of the concessions – amounting to R$ 385,259 at June 30, 2018 (R$ 316,138 at December 31, 2017) updated by the IPCA.

In compliance with the court decision, the regulator, in its Technical Note 183/2017-SGT/ Aneel of June 22, 2017, presented a new calculation, excluding the amounts that refer to the cost of own capital. Cemig believes that this is a provisional decision, and that its right to receive the amount referring to the assets of the basic national grid system (Rede Básica Sistema Elétrico, or RBSE) is guaranteed by law, so that no adjustment to the amount recorded at June 30, 2018 is necessary.

Adjustment of the BRR of Transmission Assets – Aneel Technical Note 183/2017

In the tariff review processes of Cemig GT, ratified on June 23, 2009 and on June 8, 2010 the addition of certain conducting cables was not included in the tariff calculation. The new values calculated with the inclusion of the said conducting cables in the Remuneration Assets Base for the period from July 2005 to December 2012 resulted in the amount of R$ 149,255 as of July 2017, received by Cemig GT in 12 months up to June, 2018, through RAP.

Remaining balance to be received through RAP

The remaining balance, of R$ 472,356 on June 30, 2018 (R$ 544,471 on December 31, 2017) was incorporated into the regulatory remuneration base of assets, and is being recovered through RAP. The Company expects to receive in full the receivables in relation to the residual value of the transmission assets.

1.2)	Transmission – Assets remunerated by tariff

For new assets related to improvements and upgrades of facilities constructed by transmission concession holders, the regulator calculates an additional portion of Permitted Annual Revenue (RAP) in accordance with a methodology specified in the Proret – Tariff Regulation Procedures.

Under the Proret, the revenue established in the Resolutions is payable to the transmission concessionaires as from the date of start of commercial operation of the facilities. In the periods between tariff reviews, the revenues associated with the improvements and upgrades of facilities are provisional. They are then ultimately determined in the review immediately subsequent to the start of commercial operation of the facilities; this review then has effect starting the date when commercial operations begin. On June 30, 2018, the receivable amounts are R$ 552,019 (R$ 547,800 on December 31, 2017).

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1.3)	Generation – Residual value financial asset

Plants operated under the ‘Quotas’ regime as from January 1, 2016

Starting August 2013, various concessions under the Concession Contract 007/1997 started expiring. Upon expiration of the concession contract, the Company has a right to receive an amount corresponding to the residual value of the infrastructure assets, as specified in such concession contract. The financial asset balance corresponding to such amounts, including Deemed Cost, are recognized in Financial Assets, and amounted to R$ 816,411 on June 30, 2018 and December 31, 2017.


Generation plant	Concession expiration date		Installed capacity (MW)		Net balance of assets based on historical cost		Net balance of assets based on fair value (replacement cost)
Generation plant	Concession expiration date		Installed capacity (MW)		Net balance of assets based on historical cost
Lot D:
Três Marias Hydroelectric Plant		July 2015		396		71,694		413,450
Salto Grande Hydroelectric Plant		July 2015		102		10,835		39,379
Itutinga Hydroelectric Plant		July 2015		52		3,671		6,589
Camargos Hydroelectric Plant		July 2015		46		7,818		23,095
Piau Small Hydroelectric Plant		July 2015		18.01		1,531		9,005
Gafanhoto Small Hydroelectric Plant		July 2015		14		1,232		10,262
Peti Small Hydroelectric Plant		July 2015		9.4		1,346		7,871
Dona Rita Small Hydroelectric Plant		Sep. 2013		2.41		534		534
Tronqueiras Small Hydroelectric Plant		July 2015		8.5		1,908		12,323
Joasal Small Hydroelectric Plant		July 2015		8.4		1,379		7,622
Martins Small Hydroelectric Plant		July 2015		7.7		2,132		4,041
Cajuru Small Hydroelectric Plant		July 2015		7.2		3,576		4,252
Paciência Small Hydroelectric Plant		July 2015		4.08		728		3,936
Marmelos Small Hydroelectric Plant		July 2015		4		616		4,265
Others:
Volta Grande Hydroelectric Plant		Feb. 2017		380		25,621		70,118
Miranda Hydroelectric Plant		Dec. 2016		408		26,710		22,546
Jaguara Hydroelectric Plant		Aug. 2013		424		40,452		174,203
São Simão Hydroelectric Plant		Jan. 2015		1,710		2,258		2,920

				3,601.70		204,041		816,411

As stated in Aneel Normative Resolution 615/2014, the valuation reports that support the amounts to be received by the Company in relation to the residual value of the plants, previously operated by Cemig GT, that were included in Lot D and for the Volta Grande plant have submitted to the regulator. The Company do not expect any losses in the realization of these amounts.

On June 30, 2018, investments made after the Jaguara, São Simão and Miranda plants came into operation, in the amounts of R$ 174,203, R$ 2,920 and R$ 22,546 respectively, are recorded as concession financial assets, and the determination of the final amounts to be paid to the Company are under discussions with the regulator. Management does not expect any losses in realization of these amounts.

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Miranda and São Simão plants – basic plans

In accordance with the Mining and Energy Ministry Order 291/17, the amounts of the basic project of Miranda and São Simão plants were recorded as concession financial asset and are being monetary adjusted, as shown below:

Plants

Miranda

São Simão

Total

Concession termination date

Dec. 2016

Jan. 2015

Residual value of assets based on deemed cost on 12/31/2017

609,995

202,744

812,739

Adjustment (1)

174,157

40,855

215,012

Amounts based on MME Order

784,152

243,599

1,027,751

Monetary updating

25,373

31,222

56,595

Residual value of assets of basic project on 12/31/2017

809,525

274,821

1,084,346

Monetary updating

25,729

8,734

34,463

Residual value of assets of basic project on 06/30/2018

835,254

283,555

1,118,809

(1)	Adjustment of the residual value of the São Simão and Miranda plant, as per MME Order 291/17.

On August 31, 2018 the Company received the indemnity relating to the basic plans of the São Simão and Miranda hydroelectric plants, totaling R$ 1,139,355, as specified in Ministerial Order 291/17 of the Mining and Energy Ministry (MME). The amounts of the reimbursement were subjected to monetary updating by the variation in the Selic rate up to the date of receipt.

1.4) Concession grant fee – Generation concessions

In June 2016, the Concession Contracts 08 to 16/2016, relating to 18 hydroelectric plants of Lot D of Aneel Auction 12/2015, won by Cemig GT, were transferred to the related specific-purpose entities (SPEs), wholly-owned subsidiaries of Cemig GT, as follows:


SPE	Plants		Balances on Dec. 31, 2017		Monetary updating		Amounts received			Balances on Jun. 30, 2018
Cemig Geração Três Marias S.A.		Três Marias		1,330,134		84,877		(65,703	)		1,349,308
Cemig Geração Salto Grande S.A.		Salto Grande		417,393		26,758		(20,721	)		423,430
Cemig Geração Itutinga S.A.		Itutinga		155,594		11,237		(8,809	)		158,022
Cemig Geração Camargos S.A.		Camargos		116,710		8,372		(6,558	)		118,524
Cemig Geração Sul S.A.		Coronel Domiciano, Joasal, Marmelos, Paciência and Piau		152,170		11,680		(9,227	)		154,623
Cemig Geração Leste S.A.		Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras		103,133		8,746		(7,007	)		104,872
Cemig Geração Oeste S.A.		Cajurú, Gafanhoto and Martins		62,001		5,310		(4,259	)		63,052

Total				2,337,135		156,980		(122,284	)		2,371,831


SPE	Plants	Balances on Dec. 31, 2016		Monetary updating		Amounts received			Balances on Jun. 30, 2017
Cemig Geração Três Marias S.A.	Três Marias		1,283,197		80,959		(59,763	)		1,304,393
Cemig Geração Salto Grande S.A.	Salto Grande		402,639		25,530		(18,847	)		409,322
Cemig Geração Itutinga S.A.	Itutinga		149,904		10,825		(8,013	)		152,716
Cemig Geração Camargos S.A.	Camargos		112,447		8,060		(5,965	)		114,542
Cemig Geração Sul S.A.	Coronel Domiciano, Joasal, Marmelos, Paciência and Piau		146,553		11,320		(8,393	)		149,480
Cemig Geração Leste S.A.	Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras		99,315		8,573		(6,373	)		101,515
Cemig Geração Oeste S.A.	Cajurú, Gafanhoto and Martins		59,710		5,210		(3,874	)		61,046

Total			2,253,765		150,477		(111,228	)		2,293,014

LOGO

Cemig GT paid a concession fee of R$ 2,216,353 for a 30-year concession contract related to 18 hydroelectric plants. The amount of the concession fee was recognized as a financial asset, as Cemig GT has an unconditional right to receive the amount paid, updated by the IPCA Index and remuneratory interest (the total amounts is equivalent to the project’s internal return rate), during the period of the concession. Of the energy produced by these plants, 70% is sold in the Regulated Market (ACR) and 30% in the Free Market (ACL).

2)	Account for compensation of variation of Portion A items (CVA) and Other financial components

The Amendment that extended the period of the concession of Cemig D guarantees that, in the event of termination of the concession contract, for any reason, the remaining balances (assets and liabilities) of any shortfall in payment or reimbursement through the tariff must also be included as payable to Cemig D by the grantor. The balances on (i) the CVA (Compensation for Variation of Portion A items) Account, (ii) the account for Neutrality of Sector Charges, and (iii) Other financial components in the tariff calculation, refer to the positive and negative differences between the estimate of the Company’s non-manageable costs and the payments actually made. The variations are subject to monetary adjustment using the Selic rate and considered in the subsequent tariff adjustments.

The balances of these financial assets and liabilities are shown below. It should be noted that in the balance sheet amounts are presented net, in assets or liabilities, in accordance with the tariff adjustments approved or to be approved:


Statement of financial position	Jun. 30, 2018									Dec. 31, 2017
Statement of financial position	Amounts ratified by Aneel in the last tariff adjustment (Restated)			Amounts to be ratified by Aneel in the next tariff adjustments			Total (Restated)			Amounts ratified by Aneel in the last tariff adjustment			Amounts to be ratified by Aneel in the next tariff adjustments			Total
Assets		2,620,956			1,242,387			3,863,343			381,588			2,330,978			2,712,566
Current assets		2,620,956			110,267			2,731,223			381,588			1,379,162			1,760,750
Non-current assets		—			1,132,120			1,132,120			—			951,816			951,816
Liabilities		(2,527,435	)		(500,193	)		(3,027,628	)		(796,388	)		(1,961,968	)		(2,758,356	)
Current liabilities		(2,521,140	)		(127,018	)		(2,648,158	)		(796,388	)		(1,220,637	)		(2,017,025	)
Non-current liabilities		(6,295	)		(373,175	)		(379,470	)		—			(741,331	)		(741,331	)

Total current, net		99,816			(16,751	)		83,065			(414,800	)		158,525			(256,275	)

Total non-current, net		(6,295	)		758,945			752,650			—			210,485			210,485

Total, net		93,521			742,194			835,715			(414,800	)		369,010			(45,790	)

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Financial components	Jun. 30, 2018									Dec. 31, 2017
Financial components	Amounts ratified by Aneel in the last tariff adjustment (Restated)			Amounts to be ratified by Aneel in the next tariff adjustments			Total (Restated)			Amounts ratified by Aneel in the last tariff adjustment			Amounts to be ratified by Aneel in the next tariff adjustments			Total
Items of ‘Portion A’
Energy Development Account (CDE) quota		(61	)		48,335			48,274			(154,234	)		(89,414	)		(243,648	)
Tariff for use of transmission facilities of grid participants		52,907			37,073			89,980			9,058			23,448			32,506
Tariff for transport of Itaipu supply		4,888			4,462			9,350			2,332			1,306			3,638
Alternative power source program (Proinfa)		6,972			—			6,972			(5,148	)		1,513			(3,635	)
ESS/EER System Service/Energy Charges)		(555,088	)		(52,761	)		(607,849	)		(40,105	)		(586,413	)		(626,518	)
Energy purchased for resale (1)		1,487,358			695,912			2,183,270			(90,616	)		1,326,263			1,235,647
Other financial components
Over contracting of supply		(448,923	)		165,400			(283,523	)		8,357			(211,337	)		(202,980	)
Neutrality of Portion A		116,617			1,206			117,823			(30,581	)		74,076			43,495
Other financial items		(519,118	)		(66,720	)		(585,838	)		(111,825	)		—			(111,825	)
Tariff Flag balances (2)		—			(76,607	)		(76,607	)		—			(134,008	)		(134,008	)
Excess demand and reactive power		(52,031	)		(14,106	)		(66,137	)		(2,038	)		(36,424	)		(38,462	)

TOTAL		93,521			742,194			835,715			(414,800	)		369,010			(45,790	)

(1)

The amount of the CVA for power supply constituted in 2018 after the Tariff Review, for inclusion in the tariff adjustment of 2019, is due mainly to the increased expenses on purchase of energy and coverage of hydrological risk, in view of the increase in the price of energy in the wholesale market, and operation of the thermoelectric plants due to the low level of reservoirs.

(2)	Billing arising from the ‘Flag’ Tariff System not yet homologated by Aneel.

Changes in balances of financial assets and liabilities:


Balance on December 31, 2016	(407,250	)
Net constitution of financial liabilities	1,297
Amortization	(333,193	)
Payments from the Flag Tariff Centralizing Account	(145,502	)
Updating – Selic rate	(28,080	)

Balance on June 30, 2017	(912,728	)

Balance on December 31, 2017	(45,790	)
Net constitution of financial liabilities	742,106
Amortization	408,566
Other – P&D Reimbursement	(114,782	)
Payments from the Flag Tariff Centralizing Account	(165,671	)
Updating – Selic rate	11,286

Balance on June 30, 2018 (Restated)	835,715

Payments from the Flag Tariff Centralizing Account – CCRBT

The ‘Flag Account’ (Conta Centralizadora de Recursos de Bandeiras Tarifárias – CCRBT or ‘Conta Bandeira’) manages the funds that are collected from captive customers of distribution concession and permission holders operating in the national grid, and are paid, on behalf of the CDE, directly to the Flag Account. The resulting funds are passed through by the Wholesale Electricity Trading Chamber (CCEE) to distribution agents, based on the difference between the realized amounts of costs of thermal generation and the exposure to short term market prices, and the amount covered by the tariff in force.

Pass-through of funds from the Flag Account from January to June 2018 totaled R$ 165,671 (R$ 145,502 from January to June, 2017) and were recognized as a partial realization of the CVA receivable previously constituted.

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15.

INVESTMENTS

This table provides information of investments in the subsidiaries, jointly-controlled entities and affiliated companies. The information below was presented by the percentage of interest held by the Company.


	Control	Consolidated				Holding Company
	Control	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018 (Restated)		Dec. 31, 2017
Cemig Geração e Transmissão	Subsidiary		—		—		4,860,721		4,793,832
Hidrelétrica Cachoeirão	Jointly-controlled		48,346		57,957		—		—
Guanhães Energia	Jointly-controlled		59,608		25,018		—		—
Hidrelétrica Pipoca	Jointly-controlled		28,177		26,023		—		—
Retiro Baixo	Jointly-controlled		165,700		157,773		—		—
Aliança Norte (Belo Monte Plant)	Jointly-controlled		635,489		576,704		—		—
Madeira Energia (Santo Antônio Plant)	Affiliated		457,410		534,761		—		—
FIP Melbourne (Santo Antônio Plant)	Affiliated		516,571		582,504		—		—
Lightger	Jointly-controlled		41,361		40,832		—		—
Baguari Energia	Jointly-controlled		160,952		148,422		—		—
Renova	Jointly-controlled		193,432		282,524		—		—
Aliança Geração	Jointly-controlled		1,280,382		1,242,170		—		—
Central Eólica Praias de Parajuru	Jointly-controlled		54,015		60,101		—		—
Central Eólica Volta do Rio	Jointly-controlled		54,089		67,725		—		—
Central Eólica Praias de Morgado	Jointly-controlled		45,821		50,569		—		—
Amazônia Energia (Belo Monte Plant)	Jointly-controlled		964,978		866,554		—		—
Usina Hidrelétrica Itaocara S.A.	Jointly-controlled		3,621		3,699		—		—
Cemig Distribuição	Subsidiary		—		—		4,375,890		3,737,310
Light	Jointly-controlled		1,471,649		1,534,294		1,039,507		1,083,140
Taesa	Jointly-controlled		1,111,914		1,101,462		1,111,914		1,101,462
Cemig Telecom (3)	Subsidiary		—		—		—		247,313
Ativas Data Center	Affiliated		16,988		17,450		16,988		—
Gasmig	Subsidiary		—		—		1,398,287		1,418,271
Rosal Energia	Subsidiary		—		—		118,060		106,897
Sá Carvalho	Subsidiary		—		—		99,963		102,536
Horizontes Energia	Subsidiary		—		—		56,754		53,165
Usina Térmica Ipatinga	Subsidiary		—		—		4,724		4,932
Cemig PCH	Subsidiary		—		—		96,218		96,944
Lepsa (1)	Subsidiary		—		—		437,204		455,861
RME	Jointly-controlled		367,103		383,233		367,103		383,233
UTE Barreiro	Subsidiary		—		—		18,102		17,982
Empresa de Comercialização de Energia Elétrica	Subsidiary		—		—		26,815		18,403
Efficientia	Subsidiary		—		—		16,653		7,084
Cemig Comercializadora de Energia Incentivada	Subsidiary		—		—		2,212		2,004
Companhia de Transmissão Centroeste de Minas	Jointly-controlled		18,226		20,584		18,226		20,584
Cemig Trading	Subsidiary		—		—		27,782		29,206
Axxiom Soluções Tecnológicas	Jointly-controlled		7,720		11,866		7,720		11,866
Cemig Overseas (2)	Subsidiary		—		—		193		158

Total of investments			7,703,552		7,792,225		14,101,036		13,692,183

(1)

On November 30, 2017, the Company acquired all the shares of Lepsa, and therefore as from that date now consolidates that company in its interim financial information. Lepsa’s sole asset is comprised of an investment in common and preferred shares in Light. Hence the Company no longer presents the investment that it previously held in Lepsa in its interim financial information, presenting only the interest in Light.

(2)	Company in Spain to evaluate opportunities for investments abroad. As of June 30, 2018, the company has no operations.

(3)	On March 31, 2018 Cemig Telecom was merged into the Company.

The Company’s investees that are not consolidated are jointly-controlled entities, with the exception of the interest in the Santo Antônio power plant, and Ativas Data Center, investees in which Cemig has significant influence.

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a) Right to exploitation of the regulated activity

In the process of allocation of the acquisition price of the jointly-controlled subsidiaries, a valuation was made of the intangible assets relating to the right to operate the regulated activity. This asset is presented together with the acquisition cost of the investments in the previous table. These assets will be amortized over the remaining period of the concessions on the straight-line basis.


Holding Company	Dec. 31, 2016		Amortization			Jun. 30, 2017		Dec. 31, 2017		Amortization			Jun. 30, 2018
Cemig Geração e Transmissão		303,937		(6,852	)		297,085		285,768		(6,671	)		279,097
Retiro Baixo		29,525		(592	)		28,933		28,344		(591	)		27,753
Central Eólica Praias de Parajuru		19,341		(764	)		18,577		16,503		(707	)		15,796
Central Eólica Volta do Rio		13,807		(504	)		13,303		11,035		(436	)		10,599
Central Eólica Praias de Morgado		27,406		(1,028	)		26,378		23,956		(972	)		22,984
Madeira Energia (Santo Antônio plant)		157,340		(2,978	)		154,362		151,384		(2,979	)		148,405
Aliança Norte (Belo Monte plant)		56,518		(986	)		55,532		54,546		(986	)		53,560
Taesa		288,146		(6,780	)		281,366		188,745		(4,660	)		184,085
Light		208,800		(11,180	)		197,620		186,437		(11,181	)		175,256
Gasmig		207,498		(3,956	)		203,542		199,586		(3,955	)		195,631
Lepsa		48,429		(2,532	)		45,897		—		—			—
RME		48,429		(2,532	)		45,897		43,365		(2,532	)		40,833

TOTAL		1,105,239		(33,832	)		1,071,407		903,901		(28,999	)		874,902


Consolidated	Dec. 31, 2016		Amortization			Jun. 30, 2017		Dec. 31, 2017		Amortization			Jun. 30, 2018
Taesa		288,146		(6,780	)		281,366		188,745		(4,660	)		184,085
Light		208,800		(11,180	)		197,620		186,437		(11,181	)		175,256
Gasmig		207,498		(3,956	)		203,542		199,586		(3,955	)		195,631
Lepsa		48,429		(2,532	)		45,897		—		—			—
RME		48,429		(2,532	)		45,897		43,365		(2,532	)		40,833

TOTAL		801,302		(26,980	)		774,322		618,133		(22,328	)		595,805

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b) Changes of investments in the subsidiaries, jointly-controlled and affiliated entities are as follows:


Holding Company	Dec. 31, 2017		Gain (loss) by equity method (Income statement) (Restated)			Gain (loss) by equity method (Other comprehensive income)			Dividends			Injections / acquisitions		Others			Jun. 30, 2018 (Restated)
Cemig Geração e Transmissão		4,793,832		66,889			—			—			—		—			4,860,721
Cemig Distribuição (2)		3,737,310		177,656			—			—			560,000		(99,076	)		4,375,890
Cemig Telecom (1)		247,313		4,778			(416	)		—			—		(251,675	)		—
Ativas Data Center (1)		—		(128	)		—			—			—		17,116			16,988
Rosal Energia		106,897		9,958			—			(16,342	)		—		17,547			118,060
Sá Carvalho		102,536		13,574			—			(16,147	)		—		—			99,963
Gasmig		1,418,271		61,324			—			(81,308	)		—		—			1,398,287
Horizontes Energia		53,165		11,604			—			(8,015	)		—		—			56,754
Usina Térmica Ipatinga		4,932		106			—			(314	)		—		—			4,724
Cemig PCH		96,944		15,396			—			(16,122	)		—		—			96,218
Lepsa (2)		455,861		6,389			—			(2,963	)		—		(22,083	)		437,204
RME (2)		383,233		1,635			—			(1,200	)		—		(16,565	)		367,103
UTE Barreiro		17,982		120			—			—			—		—			18,102
Empresa de Comercialização de Energia Elétrica		18,403		26,232			—			(17,820	)		—		—			26,815
Efficientia		7,084		730			—			(231	)		9,070		—			16,653
Cemig Comercializadora de Energia Incentivada		2,004		428			—			(220	)		—		—			2,212
Companhia de Transmissão Centroeste de Minas		20,584		2,446			—			(4,804	)		—		—			18,226
Light (2)		1,083,140		8,202			—			(7,689	)		—		(44,146	)		1,039,507
Cemig Trading		29,206		26,582			—			(28,006	)		—		—			27,782
Axxiom Soluções Tecnológicas		11,866		(4,146	)		—			—			—		—			7,720
Taesa		1,101,462		100,028			—			(89,576	)		—		—			1,111,914
Cemig Overseas		158		—			—			—			35		—			193

		13,692,183		529,803			(416	)		(290,757	)		569,105		(398,882	)		14,101,036

(1)	The changes included in the ‘Others’ column arise from the merger of Cemig Telecom in March, 2018. See Note 1.

(2)	The changes included in the ‘Other’ column result from the impacts arising from the first adoption of the new accounting pronouncements on January 1, 2018 recognized by the investees directly in Equity, without passing through the period’s result. See Note 2.2.

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Advance for Future Capital Increase (‘AFAC’), in Cemig D

On December 11, 2017 and February 8, 2018, the Company’s Board of Directors authorized the transfer to Cemig Distribuição (Cemig D) the amounts of up to R$ 1,600,000 and R$ 600,000, respectively, totaling R$ 2,200,000, as an Advance for Future Capital Increase (Adiantamento para Futuro Aumento de Capital, or AFAC) to be subsequently converted into a capital increase through approval by future Extraordinary General Meeting of Shareholders.

As of June 30, 2018 the total amount transferred was R$ 2,060,000.


Consolidated	Dec. 31, 2017		Equity method gain (Statement of income)			Dividends			Injections / acquisitions		Other			Jun. 30, 2018
Companhia de Transmissão Centroeste de Minas		20,584		2,446			(4,804	)		—		—			18,226
Light (1)		1,534,294		15,107			(11,532	)		—		(66,220	)		1,471,649
Axxiom Soluções Tecnológicas		11,866		(4,146	)		—			—		—			7,720
RME (1)		383,233		1,635			(1,200	)		—		(16,565	)		367,103
Hidrelétrica Cachoeirão		57,957		6,739			(16,350	)		—		—			48,346
Guanhães Energia		25,018		(299	)		—			34,889		—			59,608
Hidrelétrica Pipoca		26,023		3,357			(1,203	)		—		—			28,177
Madeira Energia (Santo Antônio Plant)		534,761		(77,435	)		—			84		—			457,410
FIP Melbourne (Santo Antônio Plant)		582,504		(65,933	)		—			—		—			516,571
Lightger		40,832		2,308			(1,779	)		—		—			41,361
Baguari Energia		148,422		16,088			(3,558	)		—		—			160,952
Central Eólica Praias de Parajuru		60,101		(6,086	)		—			—		—			54,015
Central Eólica Volta do Rio		67,725		(13,636	)		—			—		—			54,089
Central Eólica Praias de Morgado		50,569		(4,748	)		—			—		—			45,821
Amazônia Energia (Belo Monte Plant)		866,554		28,243			—			70,181		—			964,978
Ativas Data Center		17,450		(891	)		—			—		429			16,988
Taesa		1,101,462		100,028			(89,576	)		—		—			1,111,914
Renova		282,524		(89,092	)		—			—		—			193,432
Usina Hidrelétrica Itaocara S.A.		3,699		(3,477	)		—			3,399		—			3,621
Aliança Geração		1,242,170		38,212			—			—		—			1,280,382
Aliança Norte (Belo Monte Plant)		576,704		17,420			—			41,365		—			635,489
Retiro Baixo		157,773		7,927			—			—		—			165,700

Total of investments		7,792,225		(26,233	)		(130,002	)		149,918		(82,356	)		7,703,552

(1)	The changes included in the “Other” column derive from the impacts arising from the first adoption of the new accounting pronouncements on January 1, 2018 recognized by the investees directly in Equity, without passing through the result for the period. See Note 2.2.

LOGO


Holding Company	Dec. 31, 2016		Equity method gain (Statement of income)			Equity method gain (Other comprehensive income)			Dividends			Injections / acquisitions		Others			Jun. 30, 2017
Cemig Geração e Transmissão		4,583,195		530,551			(33,852	)		—			100,000		—			5,179,894
Cemig Distribuição		2,499,867		(191,095	)		—			—			—		—			2,308,772
Cemig Telecom		191,515		(97	)		(680	)		—			—		—			190,738
Rosal Energia		141,038		(9,363	)		—			(30,968	)		—		—			100,707
Sá Carvalho		106,111		17,071			—			(18,631	)		—		—			104,551
Gasmig		1,419,492		54,844			—			(98,079	)		—		—			1,376,257
Horizontes Energia		52,396		6,878			—			(7,818	)		—		—			51,456
Usina Térmica Ipatinga		4,009		191			—			—			—		—			4,200
Cemig PCH		91,969		9,133			—			(10,065	)		—		—			91,037
Lepsa		343,802		(4,508	)		(1,876	)		—			—		(127	)		337,291
RME		340,063		(4,591	)		(1,815	)		—			—		(127	)		333,530
Companhia Transleste de Transmissão		21,588		2,627			—			(1,265	)		—		—			22,950
UTE Barreiro		39,266		(2,769	)		—			924			—		—			37,421
Companhia Transudeste de Transmissão		20,505		2,044			—			—			—		—			22,549
Empresa de Comercialização de Energia Elétrica		20,154		17,877			—			(19,570	)		—		—			18,461
Companhia Transirapé de Transmissão		23,952		2,359			—			—			—		—			26,311
Efficientia		4,868		2,804			—			(1,171	)		—		1			6,502
Cemig Comercializadora de Energia Incentivada		1,867		338			—			—			—		—			2,205
Companhia de Transmissão Centroeste de Minas		21,171		2,532			—			(1,346	)		—		—			22,357
Light		1,070,477		(30,740	)		(5,442	)		—			—		—			1,034,295
Cemig Trading		28,635		28,120			—			(27,435	)		—		—			29,320
Axxiom Soluções Tecnológicas		19,264		(4,437	)		—			—			—		—			14,827
Taesa		1,582,633		81,856			—			(111,297	)		—		—			1,553,192
Cemig Overseas		20		—			—			—			111		—			131

		12,627,857		511,625			(43,665	)		(326,721	)		100,111		(253	)		12,868,954

LOGO


Consolidated	Dec. 31, 2016			Equity method gain (Statement of income)			Equity method gain (Other comprehensive income)			Dividends			Injections / acquisitions		Others			Jun. 30, 2017
Companhia Transleste de Transmissão		21,588			2,627			—			(1,265	)		—		—			22,950
Companhia Transudeste de Transmissão		20,505			2,044			—			—			—		—			22,549
Companhia Transirapé de Transmissão		23,952			2,359			—			—			—		—			26,311
Companhia de Transmissão Centroeste de Minas		21,171			2,532			—			(1,346	)		—		—			22,357
Light		1,070,477			(30,740	)		(5,442	)		—			—		—			1,034,295
Axxiom Soluções Tecnológicas		19,264			(4,437	)		—			—			—		—			14,827
Lepsa		343,802			(4,508	)		(1,876	)		—			—		(127	)		337,291
RME		340,063			(4,591	)		(1,815	)		—			—		(127	)		333,530
Hidrelétrica Cachoeirão		50,411			6,396			—			(2,641	)		—		—			54,166
Guanhães Energia (1)		—			(2,081	)		—			—			78,641		(59,071	)		17,489
Hidrelétrica Pipoca		31,809			2,716			—			(1,284	)		—		—			33,241
Madeira Energia (Santo Antônio Plant)		643,890			(48,633	)		—			—			—		—			595,257
FIP Melbourne (Santo Antônio Plant)		677,182			(42,517	)		—			—			—		—			634,665
Lightger		41,543			3,530			—			(642	)		—		—			44,431
Baguari Energia		162,106			12,529			—			(5,752	)		—		1			168,884
Central Eólica Praias de Parajuru		63,307			(1,125	)		—			(406	)		—		—			61,776
Central Eólica Volta do Rio		81,228			(4,054	)		—			—			—		—			77,174
Central Eólica Praias de Morgado		59,586			(2,830	)		—			—			—		—			56,756
Amazônia Energia(Belo Monte Plant)		781,022			6,194			—			—			55,941		—			843,157
Ativas Data Center (2)		17,741			(1,491	)		—			—			—		2,003			18,253
Taesa		1,582,633			81,856			—			(111,297	)		—		—			1,553,192
Renova		688,625			36,553			(33,852	)		—			18,000		—			709,326
Usina Hidrelétrica Itaocara S.A.		2,782			—			—			—			—		—			2,782
Aliança Geração		1,319,055			39,043			—			(51,576	)		—		—			1,306,522
Aliança Norte (Belo Monte Plant)		527,498			2,304			—			—			33,649		—			563,451
Retiro Baixo		161,848			6,442			—			—			—		—			168,290

Total of investments		8,753,088			60,118			(42,985	)		(176,209	)		186,231		(57,321	)		8,722,922

Guanhães – uncovered liabilities of jointly-controlled entity (1)		(59,071	)		—			—			—			—		59,071			—


Total		8,694,017			60,118			(42,985	)		(176,209	)		186,231		1,750			8,722,922

(1)	Transfer to uncovered liabilities.

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c)	Information from the subsidiaries, jointly-controlled and affiliated entities, not adjusted for the percentage represented by the Company’s ownership interest


Company	Number of shares		Jun. 30, 2018						Dec. 31, 2017
Company	Number of shares		Cemig interest %		Share capital		Equity (Restated)		Cemig interest %		Share capital		Equity
Cemig Geração e Transmissão		2,896,785,358		100.00		1,837,710		4,860,721		100.00		1,837,710		4,793,832
Hidrelétrica Cachoeirão		35,000,000		49.00		35,000		98,665		49.00		35,000		118,280
Guanhães Energia		358,511,000		49.00		386,139		121,650		49.00		330,536		51,058
Hidrelétrica Pipoca		41,360,000		49.00		41,360		57,504		49.00		41,360		53,108
Retiro Baixo		222,850,000		49.90		222,850		276,447		49.90		222,850		257,880
Aliança Norte (Belo Monte Plant)		39,919,934,434		49.00		1,203,675		1,187,611		49.00		1,119,255		1,065,628
Madeira Energia (Santo Antônio Plant)		9,730,201,137		18.13		9,546,672		4,552,760		18.13		9,546,672		5,327,114
Lightger		79,078,937		49.00		79,232		84,410		49.00		79,232		83,331
Baguari Energia (1)		26,157,300,278		69.39		186,573		231,961		69.39		186,573		213,895
Renova		417,197,244		36.23		2,919,019		534,119		36.23		2,919,019		779,808
Aliança Geração		1,291,582,500		45.00		1,291,488		1,970,945		45.00		1,291,488		1,857,905
Central Eólica Praias de Parajuru		70,560,000		49.00		70,560		77,999		49.00		70,560		88,976
Central Eólica Volta do Rio		117,230,000		49.00		117,230		88,752		49.00		117,230		115,694
Central Eólica Praias de Morgado		52,960,000		49.00		52,960		46,605		49.00		52,960		54,312
Amazônia Energia (1) (Belo Monte Plant)		1,281,030,446		74.50		1,323,660		1,295,273		74.50		1,229,600		1,163,160
Usina Hidrelétrica Itaocara S.A.		17,014,114		49.00		18,038		7,390		49.00		11,102		7,549
Cemig Distribuição		2,359,113,452		100.00		2,771,998		4,375,890		100.00		2,771,998		3,737,310
Light		203,934,060		26.06		2,225,822		3,330,378		26.06		2,225,822		3,461,971
Cemig Telecom (2)		—		—		—		—		100.00		292,399		247,313
Ativas Data Center		456,540,718		19.60		182,063		100,071		—		—		—
Rosal Energia		46,944,467		100.00		46,944		118,060		100.00		46,944		106,897
Sá Carvalho		361,200,000		100.00		36,833		99,963		100.00		36,833		102,536
Gasmig		409,255,483		99.57		665,429		952,739		99.57		665,429		1,223,948
Horizontes Energia		39,257,563		100.00		39,258		56,754		100.00		39,258		53,165
Usina Térmica Ipatinga		174,281		100.00		174		4,724		100.00		174		4,932
Cemig PCH		35,952,000		100.00		35,952		96,218		100.00		35,952		96,944
Lepsa		1,379,839,905		100.00		406,341		439,069		100.00		406,341		455,861
RME		1,365,421,406		75.00		403,040		436,891		75.00		403,040		453,157
UTE Barreiro		16,902,000		100.00		16,902		18,102		100.00		16,902		17,982
Empresa de Comercialização de Energia Elétrica		486,000		100.00		486		26,815		100.00		486		18,403
Efficientia		6,051,994		100.00		6,052		16,653		100.00		6,052		7,084
Cemig Comercializadora de Energia Incentivada		1,000,000		100.00		1,000		2,206		100.00		1,000		2,004
Companhia de Transmissão Centroeste de Minas		28,000,000		51.00		28,000		35,737		51.00		28,000		40,361
Cemig Trading		1,000,000		100.00		1,000		27,782		100.00		1,000		29,206
Axxiom Soluções Tecnológicas		17,200,000		49.00		46,600		15,756		49.00		46,600		24,216
TAESA		1,033,496,721		21.68		3,042,034		4,410,910		21.68		3,042,034		4,346,746

(1)	Jointly-control under a Shareholders’ Agreement.

(2)	On March 31, 2018 Cemig Telecom was merged into the Company.

LOGO

On June 30, 2018, the current liabilities of some jointly-controlled entities exceeded their current assets, as follows:

Madeira Energia S.A. (‘Mesa’): The excess of current liabilities over current assets, equal to R$ 1,749,729, arises mainly from the balances of the accounts ‘Suppliers’ and ‘Loans and financings’. To resolve the situation of negative working capital, Mesa is renegotiating the flow of debt servicing payments with the BNDES and onlending banks, and the release of funds from the Reserve account, as a result of this renegotiation. The process of debt reprofiling is at an advanced stage of approval by the creditors and shareholders, and the remaining requirement for its conclusion is the definition of part of the corporate guarantees to be offered.

Renova Energia: In the period ended June 30, 2018, Renova Energia reported a loss of R$ 245,689, accumulated losses of R$ 2,440,279 and current liabilities in excess of current assets in the amount of R$ 59,190. Renova Energia is required to obtain capital to comply with the construction commitments of wind and solar generating plants.

Due to this scenario, Renova has been taking actions to rebalance its liquidity and cash flow structure, and is working together with its controlling shareholders on a new restructuring plan, aiming to rebalance its capital structure and honor its commitments.

The Management of Renova Energia believes that with the success of these measures, it will be possible to recover the economic and financial equilibrium, and liquidity.

The events or conditions described above indicate the existence of relevant uncertainty that may cast significant doubt on Renova Energia ability to continue as a going concern as of June 30, 2018.

The Company is committed to the plans of the investee’s management and has concluded that, at the present moment, there are no indicators of additional impairment need other than that already posted in the Quarterly Information of the Investee for the period ended June 30, 2018 – which has been recognized by the Company thru equity method. The Company will timely reflect any need for additional impairment of this investment.

Investment in the Santo Antônio hydroelectric plant, through Madeira Energia S.A. (‘Mesa’) and FIP Melbourne

The Company has an indirect investment, of 18.13%, in Madeira Energia S.A. (which holds an investment in Santo Antônio Energia S.A.), of R$ 973,981 on June 30, 2018 (R$ 1,117,265 on December 31, 2017).

Madeira Energia S.A. (‘Mesa’) and its subsidiary Santo Antônio Energia S.A. (‘Saesa’) are incurring construction costs related to the construction of the Santo Antônio hydroelectric plant. On June 30, 2018 the total PP&E and intangible assets constituted by these costs amounted to R$ 21,202,427 (Mesa, consolidated). According to financial projections prepared by its Management, these construction costs will be recovered through future revenues from operations as all the entity’s generation plants are currently under operation.

The Federal Public Attorneys’ Office has conducted and is in the process of conducting investigations, and other legal measures are in progress, involving other indirect shareholders of Madeira Energia S.A. and certain executives of those other indirect shareholders. In this context, the Federal Public Attorneys have started investigations on irregularities involving contractors and suppliers of Mesa and of its other shareholders. In response to allegations of possible illegal activities, the investee and its other shareholders have started an independent internal investigation. It is not possible to determine the results of these investigations, or the developments arising from them, which may at some time in the future affect the investee.

The effects of any changes to the current scenario will be reflected, appropriately, in the interim financial information of the Company and its subsidiary Cemig GT.

LOGO

The FID (Availability Factor)

On July 31, 2015, the Regional Federal Appeal Court accepted the request by SAESA for interim relief on appeal. This relief suspended the application of the Availability Factor (FID) related to the generating units of the Santo Antônio hydroelectric plant not dispatched by the National System Operator (ONS). This decision, which had ordered the regulator, Aneel, and the Wholesale Electricity Trading Chamber, CCEE, to adopt the necessary procedures to make that decision effective in the CCEE’s accounting and settlement, was suspended by the Higher Appeal Court (STJ), was suspended by the Higher Appeal Court (STJ), and subsequently reinstated, after an interim remedy was granted in a Constitutional Complaint to the Federal Supreme Court. However, on April 10, 2018 the Supreme Court ruled against allowing the Constitutional complaint to go forward, re-establishing the effects of the decision given by the STJ. Due to the decision by the Supreme Court the CCEE, after authorization by Aneel, agreed the payment by installments of the debt, of R$ 738,000, relating to the Availability Factor.

This was posted in the Liabilities of Saesa in Suppliers, as follows:

(a)

payment in 36 equal installments, adjusted by inflation, plus interest;

(b)

the installments to start with the CCEE accounting of July 2018, with financial settlement set for September 5, 2018.

Arbitration proceedings

In 2014, Cemig GT and SAAG Investimentos S.A. (SAAG), a vehicle through which Cemig GT holds an indirect equity interest in Mesa, opened arbitration proceedings, in the Market Arbitration Chamber, challenging the following: (a) the increase approved in the capital of Mesa of approximately R$ 750 million partially to be allocated to payment of the claims by the Santo Antonio Construction Consortium (‘CCSA’), based on absence of quantification of the amounts supposedly owed, and absence of prior approval by the Board of Directors, as required by the bylaws and Shareholders’ Agreement of Mesa; and also on the existence of credits owed to Mesa by CCSA, for an amount greater than the claims; and (b) the adjustment for impairment carried out by the Executive Board of Mesa, in the amount of R$ 750 million, relating to certain credits owed to Mesa by CCSA, on the grounds that those credits are owed in their totality by express provision of contract.

The arbitration judgment by the Market Arbitration Chamber recognized the right of Cemig GT and SAAG in full, and ordered the annulment of the acts being impugned. As a consequence of this decision, Mesa reversed the impairment, and posted a provision for doubtful accounts in the amount of R$ 678,551 in its financial statements as of December 31, 2017.

To resolve the question of the liability of the CCSA consortium to reimburse the costs of re-establishment of the collateral and use of the contractual limiting factor, the affiliated company opened arbitration proceedings with the International Chamber of Commerce (ICC) against CCSA, which are in progress. This process is confidential under the Arbitration Regulations of the ICC.

Investment in the Belo Monte Plant through Amazônia Energia S.A. and Aliança Norte

Amazônia Energia and Aliança Norte are Shareholders in Norte Energia S.A. (‘NESA’), which holds the concession to operate the Belo Monte Hydroelectric Plant, on the Xingu River, in the State of Pará, and manages that interest. Through the jointly-controlled entities referred to above, Cemig GT owns an indirect equity interest in NESA of 11.74%.

NESA will still require significant funds for costs of organization, development and pre-operating costs, resulting in negative net working capital of R$ 2,324,202 as of June 30, 2018. The completion of the construction works for Belo Monte plant, and consequent generation of revenues, in turn, depend on the capacity of the investee to continue to comply with the schedule of works envisaged, as well as obtaining the necessary financial resources, either from its shareholders and / or from third parties.

On April 7, 2015, NESA was awarded a preliminary injunction ordering the regulator to “abstain, until hearing of the application for an injunction made in the original case, from applying to Appellant any penalties or sanctions in relation to the Belo Monte Hydroelectric Plant not starting operations on the date established in the original timetable for the project, including those specified in an Aneel Normative Resolution and in the Concession Contract for the Belo Monte Hydroelectric Plant” – Aneel nº 595/2013 and its Concession contract 01/2010-MME. The legal advisers of NESA have classified the probability of loss as ‘possible’ and estimated the potential loss on June 30, 2018 to approximately R$ 616,000.

LOGO

Investigations and other legal measures are in progress, conducted by the Federal Public Attorneys’ Office, which involve other shareholders of NESA and certain executives of those other shareholders. In this context, the Federal Public Attorneys have started investigations on irregularities involving contractors and suppliers of NESA and of its other Shareholders, which are still in progress. At present it is not possible to determine the outcome of these investigations, and their possible consequences. These might at some time in the future affect the investee. In addition, based on the results of the independent internal investigation conducted by NESA and its other Shareholders, a write-down of the value of the infrastructure of NESA, by R$ 183,000 was already recorded in 2015.

The effects of any changes in the current scenario will be reflected, appropriately, in the Company’s interim financial information.

Investment in Renova Energia S.A. (‘Renova’)

Negotiations relating to the Alto Sertão III wind farm complex

Renova is negotiating sale of the Alto Sertão III wind farm complex and has received non-binding proposals for acquisition of this Project from certain investors, which are at a final stage of the due diligence process.

Risks related to compliance with laws and regulations

On January 19, 2018, Renova responded to a formal statement by the Civil Police of Minas Gerais State received in November 2017, relating to the investigation being carried out by that Police Force related to certain capital injections made by the controlling shareholders of Renova, including Cemig GT, and capital injections made by Renova in certain projects under development in previous years. As a consequence, the governance bodies of Renova requested the opening of an internal investigation, which is being conducted by an independent party.

In addition, a monitoring committee was set up, composed by an independent counselor, the Chairman of the Fiscal Council and the chairman of the Board of Directors, who, together with the Audit Committee, will monitor the internal investigation.

The investigation is in progress, and it is not possible to determine any effects of this investigation, nor any impacts on the interim financial information of Renova, or the Company, for the six-month period ended June 30, 2018.

Non-binding proposal by Taesa for Centroeste

On May 16, 2018, the Company received a non-binding offer from Taesa for acquisition of Cemig’s 51% shareholding position in Companhia Centroeste de Minas Gerais S.A. – Centroeste. This offer is under consideration by Management.

Resolution of crossover assets of Cemig GT and Energimp

On May 17, 2018, a document entitled ‘Private Transaction Agreement’ was signed between the subsidiary Cemig GT and Energimp S.A. (‘Energimp’), for resolution of crossover Shareholdings currently held by Cemig GT and Energimp in the companies Central Eólica Praias de Parajuru S.A. (‘Parajuru ‘), Central Eólica Volta do Rio S.A. (‘Volta do Rio’) and Central Eólica Praia de Morgado S.A. (‘Morgado’).

The transaction will result in 100% of the share capital of Parajuru and Volta do Rio being wholly owned by the subsidiary Cemig GT, and 100% of the shares in Morgado being wholly owned by Energimp.

This transaction to resolve crossover shareholding was approved by the competition authority, CADE, and is in the process of approval by the financing bank.

Internal procedures on risks related to compliance with law and regulations

Considering the investigations that are being made in relation to the Company and certain investees, the governance bodies of the Company have authorized contracting of a specialized company to analyze the internal procedures related to these investments.

Considering that the work is still preliminary, at present it is not possible to measure any effects of these analyses or any impacts on the Company’s interim financial information for the period ended June 30, 2018.

LOGO

16.

PROPERTY, PLANT AND EQUIPMENT


Consolidated	Jun. 30, 2018							Dec. 31, 2017
Consolidated	Historical cost		Accumulated depreciation			Net value		Historical cost		Accumulated depreciation			Net value
In service
Land		224,921		(14,899	)		210,022		224,924		(13,652	)		211,272
Reservoirs, dams and watercourses		3,281,570		(2,090,870	)		1,190,700		3,284,948		(2,051,372	)		1,233,576
Buildings, works and improvements		1,117,019		(794,684	)		322,335		1,116,990		(785,628	)		331,362
Machinery and equipment		2,251,004		(1,660,519	)		590,485		2,935,643		(2,062,092	)		873,551
Vehicles		31,629		(26,368	)		5,261		28,816		(25,711	)		3,105
Furniture and utensils		16,115		(12,392	)		3,723		16,109		(12,714	)		3,395

		6,922,258		(4,599,732	)		2,322,526		7,607,430		(4,951,169	)		2,656,261

In progress		98,388		—			98,388		106,049		—			106,049

Net property, plant and equipment		7,020,646		(4,599,732	)		2,420,914		7,713,479		(4,951,169	)		2,762,310


Holding Company	Jun. 30, 2018							Dec. 31, 2017
Holding Company	Historical cost		Accumulated depreciation			Net value		Historical cost		Accumulated depreciation			Net value
In service
Land		82		—			82		—		—			—
Buildings, works and improvements		408		(293	)		115		—		—			—
Machinery and equipment		5,841		(4,393	)		1,448		3,627		(2,289	)		1,338
Furniture and utensils		2,240		(1,838	)		402		657		(644	)		13

		8,571		(6,524	)		2,047		4,284		(2,933	)		1,351

In progress
Development Assets		459		—			459		459		—			459

Net property, plant and equipment		9,030		(6,524	)		2,506		4,743		(2,933	)		1,810

The changes in PP&E are as follows:


Consolidated	Balance on Dec. 31, 2017		Addition		Disposals			Depreciation			Transfer to Held for sale			Transfers / capitalizations			Balance on Jun. 30, 2018
In service
Land		211,272		—		(3	)		(1,247	)		—			—			210,022
Reservoirs, dams and watercourses		1,233,576		—		(2,575	)		(40,447	)		—			146			1,190,700
Buildings, works and improvements		331,362		—		(237	)		(9,358	)		—			568			322,335
Machinery and equipment		873,551		—		(5,095	)		(41,444	)		(255,758	)		19,231			590,485
Vehicles		3,105		—		—			(666	)		—			2,822			5,261
Furniture and utensils		3,395		—		—			(169	)		—			497			3,723

		2,656,261		—		(7,910	)		(93,331	)		(255,758	)		23,264			2,322,526

In progress		106,049		26,272		(1,152	)		—			—			(32,781	)		98,388

Net property, plant and equipment		2,762,310		26,272		(9,062	)		(93,331	)		(255,758	)		(9,517	)		2,420,914

LOGO


Consolidated	Balance on Dec. 31, 2016		Addition		Jaguara, Miranda and Volta Grande Plants (1)			Disposals			Depreciation			Transfers / capitalizations			Balance on Jun. 30, 2017
In service
Land		278,650		—		(61,287	)		—			(4,686	)		—			212,677
Reservoirs, dams, and watercourses		1,761,013		—		(440,923	)		(3	)		(44,579	)		639			1,276,147
Buildings, works, and improvements		418,480		—		(68,971	)		—			(9,859	)		463			340,113
Machinery and equipment		1,171,189		—		(298,058	)		(4,720	)		(47,611	)		57,989			878,789
Vehicles		4,230		—		—			—			(563	)		—			3,667
Furniture and utensils		3,408		—		—			—			(203	)		57			3,262

		3,636,970		—		(869,239	)		(4,723	)		(107,501	)		59,148			2,714,655

In progress		138,106		31,364		(130	)		(1,814	)		—			(59,148	)		108,378

Net property, plant and equipment		3,775,076		31,364		(869,369	)		(6,537	)		(107,501	)		—			2,823,033


Holding Company	Balance on Dec. 31, 2017		Merger of Telecom (2)		Transfer to Held for sale			Transfers (2)			Depreciation			Write-off			Balance on Jun. 30, 2018
In service
Land		—		82		—			—			—			—			82
Buildings, works, improvements		—		116		—			—			(1	)					115
Machinery and equipment		1,338		262,138		(255,758	)		—			(5,802	)		(468	)		1,448
Furniture and utensils		13		405		—			—			(16	)		—			402

		1,351		262,741		(255,758	)		—			(5,819	)		(468	)		2,047

In progress		459		9,025		—			(9,025	)		—			—			459

Net property, plant and equipment		1,810		271,766		(255,758	)		(9,025	)		(5,819	)		(468	)		2,506

(1)	Transferred to Generation concession assets, in relation to the Jaguara, Miranda and Volta Grande Plants in the amount of R$ 799,117 and to Concession financial assets, in relation to the Volta Grande Plant, in the amount of R$ 70,252.

(2)	Related to the merged of its subsidiary Cemig Telecom. The amount of R$ 9,025 was transferred to Inventories. See Note 1.

The average annual depreciation rate for the Company and its subsidiaries for the first six months of 2018 is 3.10%. Depreciation rates, which take into consideration the expected useful life of the assets, are revised annually by Management.

The Company and its subsidiaries have not identified any evidence of impairment of its Property, plant and equipment assets. The generation concession contracts provide that at the end of each concession the grantor must determine the amount to be paid to Cemig GT for the residual value of the infrastructure assets. Management believes that the amounts ultimately received will be higher than the historical residual value.

The residual value of the assets is the residual balance of the assets at the end of the concession contract which will be transferred to the grantor at the end of the concession contract and for which Cemig GT is entitled to receive in cash. For contracts under which Cemig GT does not have a right to receive such amounts or there is uncertainty related to collection of the amounts, such as in the case of thermal generation and hydroelectric generation as an independent power producer, no residual value is recognized, and the depreciation rates are adjusted so that all the assets are depreciated within the concession term.

Consortium

Cemig GT is a partner in the electricity generation consortium for the Queimado plant, for which no separate company with independent legal existence was formed to manage the object of the concession, whose controls are being kept in Fixed assets and Intangible assets. Cemig GT’s portion in the consortium is recorded and controlled separately in the respective categories of PP&E and Intangible assets.


Holding Company and Consolidated	Interest in power output,%		Average annual depreciation rate%		Jun. 30, 2018			Dec. 31, 2017
In service
Queimado plant		82.50		4.03		217,210			217,109
Accumulated depreciation		—		—		(95,018	)		(90,649	)

Total in operation						122,192			126,460

In progress
Queimado plant		82.50		—		240			340

Total in construction						240			340

LOGO

17.

INTANGIBLE ASSETS

Composition of the balance on June 30, 2018 and on December 31, 2017:


Consolidated	Jun. 30, 2018							Dec. 31, 2017
Consolidated	Historical cost		Accumulated amortization			Residual value		Historical cost		Accumulated amortization			Residual value
In service
Useful life defined
Temporary easements		11,749		(2,327	)		9,422		11,749		(1,990	)		9,759
Paid concession		19,169		(11,591	)		7,578		19,169		(11,251	)		7,918
Assets of concession		18,146,605		(7,714,250	)		10,432,355		17,837,687		(7,402,296	)		10,435,391
Others		75,676		(62,225	)		13,451		81,721		(64,533	)		17,188

		18,253,199		(7,790,393	)		10,462,806		17,950,326		(7,480,070	)		10,470,256
In progress		722,146		—			722,146		685,672		—			685,672

Net intangible assets		18,975,345		(7,790,393	)		11,184,952		18,635,998		(7,480,070	)		11,155,928


Holding Company	Jun. 30, 2018							Dec. 31, 2017
Holding Company	Historical cost		Accumulated amortization			Residual value		Historical cost		Accumulated amortization			Residual value
In service
Useful life defined
Rights of software		12,405		(8,004	)		4,401		3,789		(3,748	)		41
Brands and patents		239		(239	)		—		9		(7	)		2
		12,644		(8,243	)		4,401		3,798		(3,755	)		43
In progress		2,329		—			2,329		2,415		—			2,415

Net intangible assets		14,973		(8,243	)		6,730		6,213		(3,755	)		2,458

Changes in Intangible assets:


Consolidated	Balance on Dec. 31, 2017		Addition		Disposals			Amortization			Transfers to Held for sale			Transfer (1)			Other Transfers		Balance on Jun. 30, 2018
In service
Useful life defined
Temporary easements		9,759		—		—			(337	)		—			—			—		9,422
Paid concession		7,918		—		—			(340	)		—			—			—		7,578
Assets of concession		10,435,391		—		(5,197	)		(328,997	)		—			330,811			347		10,432,355

Others		17,188		1,064		(112	)		(2,795	)		(6,947	)		5,053					13,451

		10,470,256		1,064		(5,309	)		(332,469	)		(6,947	)		335,864			347		10,462,806
In progress		685,672		383,898		(856	)		—			—			(346,568	)		—		722,146

Net intangible assets		11,155,928		384,962		(6,165	)		(332,469	)		(6,947	)		(10,704	)		347		11,184,952

(1)	The residual balance of the transfers refers to the balances transferred to financial assets.

LOGO


Consolidated	Balance on Dec. 31, 2016		Addition		Special obligations – write-down (1)		Jaguara, Volta Grande and Miranda plants			Disposals			Amortization			Transfer			Balance on Jun. 30, 2017
In service
Useful life defined
Temporary easements		10,434		—		—		—			—			(336	)		—			10,098
Paid concession		8,597		—		—		—			—			(340	)		—			8,257
Assets of concession		9,247,923		—		17,069		—			(2,423	)		(299,633	)		787,778			9,750,714
Others		17,430		—		—		(80	)		—			(2,990	)		737			15,097

		9,284,384		—		17,069		(80	)		(2,423	)		(303,299	)		788,515			9,784,166

In progress		1,535,296		448,132		—		—			(5,296	)		—			(823,304	)		1,154,828

Net intangible assets		10,819,680		448,132		17,069		(80	)		(7,719	)		(303,299	)		(34,789	)		10,938,994


Holding Company	Balance on Dec. 31, 2017		Merger of Telecom (2)		Transfers to Held for sale			Transfers			Addition		Amortization			Balance on Jun. 30, 2018
In service
Useful life defined
Rights of software		41		11,716		(6,947	)		101			—		(510	)		4,401
Brands and patents		2		—		—			—			—		(2	)		—

		43		11,716		(6,947	)		101			—		(512	)		4,401

In progress		2,415		—		—			(101	)		15		—			2,329

Net intangible assets		2,458		11,716		(6,947	)		—			15		(512	)		6,730

(1)	The write-down of a Special Obligation arises for restitution of amounts calculated in the final settlement of Financing and Subsidy Contracts for the Luz Para Todos (‘Light for All’) program, with funds from the CDE account, and return of funds related to the Global Reversion Reserve (RGR).

(2)	On March 31, Cemig Telecom was merged into the Company, see Note 1.

The intangible asset easements, concessions payable, assets of concession, and others, are amortizable by the straight-line method, taking into account the consumption pattern of these rights. The Company and its subsidiaries have not identified any evidence of impairment of its intangible assets. The Company and its subsidiaries have no intangible assets with non-defined useful life. The amount of additions on June 30, 2018 includes R$ 16,392 (R$ 40,399 in the first half of 2017) of capitalized borrowing costs, as presented in Note 20.

The annual average amortization rate is 3.85% on the first half of 2018. The main annual amortization rate reflects the expected useful life of assets and pattern of their consumption by the Management.

Under the regulations of the electricity sector, goods and facilities used in the distribution are linked to these services, and cannot be withdrawn, disposed of, assigned or given in mortgage guarantee without the prior express authorization of the Regulator. Undoing of that link, for assets of an electricity concession, requires that the proceeds of the disposal are used for purposes of the concession.

LOGO

18.

SUPPLIERS


	Consolidated
	Jun. 30, 2018		Dec. 31, 2017
Energy on spot market – CCEE		684,398		468,216
Charges for use of energy network		136,964		153,146
Energy purchased for resale		704,389		870,654
Itaipu Binational		274,236		240,220
Gas purchased for resale		86,306		186,401
Materials and services		266,383		424,120

		2,152,676		2,342,757

19.

TAXES PAYABLE, INCOME TAX AND SOCIAL CONTRIBUTION TAX AND AMOUNTS TO BE REIMBURSED TO CUSTOMER S

a)	Taxes payable and amounts to be reimbursed to customers


	Consolidated				Holding Company
	Jun. 30, 2018 (Restated)		Dec. 31, 2017		Jun. 30, 2018		Dec. 31, 2017
Current
ICMS (VAT) (I)		138,678		496,916		2,043		—
Cofins		97,714		126,065		600		2,484
Pasep		21,208		27,154		119		484
Social security contributions		18,981		19,522		2,312		1,913
Others		18,174		34,915		1,472		960

		294,755		704,572		6,546		5,841
Non-current
Cofins		24,312		24,216		—		—
Pasep		3,955		3,983		—		—

		28,267		28,199		—		—

		323,022		732,771		6,546		5,841

Amounts to be reimbursed to customers
Non-current
Pasep and Cofins (II)		1,105,572		1,087,230		—		—

		1,105,572		1,087,230		—		—

(I)	The Tax Amnesty Program (PRCT).

In 2017 the subsidiaries Cemig D and Cemig GT joined the terms of the Minas Gerais State Tax Amnesty Program (Plano de Regularização de Créditos Tributários, or PRCT), for payment of ICMS (VAT) through installments, updated and net of the reductions of penalty payments and interest, as specified in State Law 22,549, and subsequent decrees that specified the conditions for payment of tax debits by installments.

The main tax issues that led to the decision of Cemig D to subscribe to the PRCT relate to ICMS (VAT) on the CDE subvention in the period January 2013 to October 2016, and also to the classification of residential condominiums in the commercial category, which has a different ICMS (VAT) rate, generating disagreement with the tax authority on interpretation, over the period 2013 to 2015. The amount included in the PRCT for Cemig D, in the amount of R$ 557,673, net of the reduction in interest and penalty payments by 90%, was paid in 6 (six) installments, adjusted at a 50% of the Selic rate and the 6^th installment was paid on April 2, 2018.

LOGO

(II)

The long-term obligations for the Pasep and Cofins included the amounts relating to the Court challenge of the constitutionality of inclusion of the amount of ICMS (VAT) tax within the base amount on which these contributions are calculated. The subsidiaries Cemig D and Cemig GT obtain interim relief from the Court allowing them not to make the payment and authorizing payment of the deposits into court (starting in 2008), and maintained this procedure until August 2011. After that date, while continuing to challenge the basis of the calculation in court, it opted to pay the taxes monthly.

On October 2017, the Federal Supreme Court (STF) published its Joint Judgment on the Extraordinary Appeal, on the basis of setting a global precedent, in favor of the argument of the subsidiaries. Based on the opinion of its legal advisers, the Company wrote down the liabilities relating to these contributions and recorded a potential liability related to the reimbursement to its customers. On June 30, 2018, the liability to its customers was R$ 1,105,572 (R$ 1,087,230 on December 31, 2017), which is equivalent to the updated amount of the escrow deposits already made which total R$ 1,129,612 (R$ 1,110,376 on December 31, 2017), net of the Pasep and Cofins incident on its revenue from updating, in the amount of R$ 24,040 (R$ 23,146 on December 31, 2017). This liability was recorded considering that the subsidiary passes to its Customers the tax effects incident upon its electricity bill, maintaining the neutrality of tariffs. The restitution to Customers will depend upon the court escrow deposit being lifted and a decision by Aneel on the mechanisms to be adopted. The net effect arising from the recognition of this matter on the net income for the year 2017 was null.

b)	Income tax and Social Contribution tax


	Consolidated
	Jun. 30, 2018		Dec. 31, 2017
Current
Income tax		50,393		88,152
Social Contribution tax		17,255		27,144

		67,648		115,296

LOGO

20. LOANS, FINANCINGS AND DEBENTURES


Financing source	Principal maturity		Annual financial cost		Currency		Consolidated
							Jun. 30, 2018									Dec. 31, 2017
							Current			Non-current			Total			Total
FOREIGN CURRENCY
Banco do Brasil: Various Bonds (1)		2024		Various		US$		1,834			27,404			29,238			22,933
Eurobonds (2)		2024		9.25%		USD		29,139			3,855,800			3,884,939			3,333,149
KfW		2019		1.78%		EURO		4,936			—			4,936			4,383
(-) Transaction costs								—			(15,566	)		(15,566	)		(15,400	)
(-) Interest paid in advance								—			(46,312	)		(46,312	)		(47,690	)

Debt in foreign currency								35,909			3,821,326			3,857,235			3,297,375
BRAZILIAN CURRENCY
Banco do Brasil S.A.		2021		140.00% of CDI Rate		R$		124,665			617,622			742,287			742,364
Banco do Brasil S.A.		2022		146.50% of CDI		R$		2,527			500,000			502,527			500,193
Caixa Econômica Federal		2018		119.00% of CDI		R$		—			—			—			8,346
Caixa Econômica Federal		2022		146.50% of CDI		R$		1,345			625,499			626,844			626,667
Eletrobras		2023		UFIR + 6.00 to 8.00%		R$		13,245			27,713			40,958			49,789
Large customers		2024		Various		R$		2,222			2,437			4,659			4,304
FINEP		2018		TJLP + 5.00% and TJLP + 8.00%		R$		786			—			786			2,359
Consórcio Pipoca		2018		IPCA		R$		185			—			185			185
Banco da Amazônia S.A.		2018		CDI + 1.90%		R$		126,494			—			126,494			121,470
Sonda (3)		2021		110.00% of CDI		R$		—			44,005			44,005			41,993
9^th Note issue – single series (4)		2019		151.00% of CDI		R$		6,114			400,000			406,114			—
(– ) FIC Pampulha fund – securities of subsidiary companies (6)								—			(13,321	)		(13,321	)		—
(-) Transaction costs								(728	)		(20,680	)		(21,408	)		(26,435	)
Debt in Brazilian currency								276,855			2,183,275			2,460,130			2,071,235

Total of loans and financings								312,764			6,004,601			6,317,365			5,368,610

Debentures ^–3rd Issue^,2nd Series (2)		2019		IPCA + 6.00		R$		149,006			—			149,006			301,065
Debentures ^–3rd Issue^,3rd Series (2)		2022		IPCA + 6.20		R$		21,934			977,097			999,031			1,010,202
Debentures—5th Issue—Single series (2)		2018		CDI + 1.70		R$		731,386			—			731,386			703,021
Debentures ^–6th Issue^,1st series (2)		2018		CDI + 1.60		R$		527,921			—			527,921			507,692
Debentures ^–6th Issue^,2nd series (2)		2020		IPCA + 8.07		R$		2,399			31,556			33,955			32,093
Debentures ^–7th Issue^,1st series (2)		2021		140.00% of CDI		R$		293,413			1,248,401			1,541,814			1,683,557
Debentures – 3rd Issue—1st series (4)		2018		CDI + 0.69		R$		—			—			—			447,114
Debentures – 3rd Issue—2nd series (4)		2021		IPCA + 4.70		R$		522,382			1,008,361			1,530,743			1,537,147
Debentures – 3rd Issue—3rd series (4)		2025		IPCA + 5.10		R$		16,638			898,024			914,662			920,197
Debentures ^–4th Issue, single series (4)		2018		CDI + 4.05		R$		21,051			—			21,051			20,008
Debentures ^–5th Issue, single series (4)		2022		146.50% of CDI		R$		5,681			1,574,999			1,580,680			1,576,220
Debentures (5)		2018		CDI + 1.60		R$		100,309			—			100,309			100,328
Debentures (5)		2018		CDI + 0.74		R$		—			—			—			33,350
Debentures (5)		2022		TJLP+1.82 (75%) e Selic+1.82 (25%)		R$		33,075			106,996			140,071			155,377
Debentures (5)		2019		116.50% of CDI		R$		100			50,000			50,100			50,330
Debentures – 2^nd Issue, single series (3)		2019		128.50% of CDI		R$		18,864			—			18,864			26,552
(–) FIC Pampulha: Securities of subsidiary companies (6)								(9,794	)		—			(9,794	)		(25,492	)
(-) Transaction costs								(6,482	)		(36,628	)		(43,110	)		(49,674	)

Total, debentures								2,427,883			5,858,806			8,286,689			9,029,087

Overall total								2,740,647			11,863,407			14,604,054			14,397,697

LOGO


Financing source	Principal maturity		Annual financial cost		Currency	Holding Company
						Jun. 30, 2018									Dec. 31, 2017
						Current			Non-current			Total			Total
BRAZILIAN CURRENCY
Sonda (2)		2021		110.00% do CDI	R$		—			44,005			44,005			—
(-) Transaction costs							—			(521	)		(521	)		—

Total of loans and financings							—			43,484			43,484			—

Debentures – 2^nd Issue, single series (3)		2019		128.50% do CDI	R$		18,864			—			18,864			—
(-) Transaction costs							(211	)		—			(211	)		—

Total, debentures							18,653			—			18,653			—

Overall total Holding Company							18,653			43,484			62,137			—

(1)	Net balance of the Restructured Debt comprising bonds at par and discounted, with balance of R$ 173,903, less the amounts given as Deposits in guarantee, with balance of R$ 144,665.Interest rates vary – from 2 to 8% p.a.; six-month Libor plus spread of 0.81% to 0.88% p.a.

(2)	Cemig Geração e Transmissão

(3)	Cemig holding company. Arising from merger of Cemig Telecom.

(4)	Cemig Distribuição

(5)

Gasmig

(6)	FIC Pampulha has financial investments in securities issued by subsidiaries of the Company. For more information on this fund, see Note 28.

The debentures issued by the subsidiaries are not convertible; there are no agreements for renegotiation, nor debentures held in treasury. There is an early maturity clause for cross- default in the event of non-payment, by Company or Cemig GT, of any pecuniary obligation with individual or aggregate value greater than R$ 50 million (“cross default”).

Funding raised

Financing source

Date of
signature

Principal
maturity

Annual
financial cost

R$’000

Brazilian currency

Promissory Notes – 9^th Issue – Single series (1)

May 2018

2019

151% of CDI

400,000

(-) Transaction costs

(4,140

)

Total funding raised

395,860

(1)	In May 2018 Cemig D made its 9th Issue of Notes, with maturity of 18 months, and remuneration of 151% of the CDI rate, for payment bullet on October 24, 2019. Net proceeds will be allocated to replenishment of cash position and working capital.

Guarantees

The guarantees of the debtor balance on loans and financings, on June 30, 2018, were as follows:


	Jun. 30, 2018
Promissory notes and sureties		8,845,768
Receivables		3,952,964
Shares		1,642,990
Without guarantee		162,332

TOTAL		14,604,054

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The composition of loans, financings and debentures, by currency and indexers, with the respective amortization, is as follows:


Consolidated	2018			2019			2020			2021			2022			2023			2024			2025			Total
Currency
Euros		4,704			232			—			—			—			—			—			—			4,936
US dollar		30,973			—			—			—			—			—			3,883,204			—			3,914,177

Total, currency-denominated		35,677			232			—			—			—			—			3,883,204			—			3,919,113
Indexers
IPCA (1)		70,053			658,269			834,875			834,148			556,719			224,506			224,506			224,506			3,627,582
UFIR/RGR (2)		7,781			12,917			11,209			3,407			3,265			2,379			—			—			40,958
CDI (3)		1,580,426			1,380,796			1,118,917			1,520,024			1,432,136			—			—			—			7,032,299
URTJ/TJLP (4)		14,110			22,966			23,111			22,777			22,875			—			—			—			105,839
IGP-DI (5)		1,895			351			349			715			539			539			271			—			4,659

Total, governed by Indexers		1,674,265			2,075,299			1,988,461			2,381,071			2,015,534			227,424			224,777			224,506			10,811,337

(-) Transaction costs		(1,227	)		(16,928	)		(14,773	)		(18,430	)		(12,602	)		(186	)		(15,752	)		(186	)		(80,084	)
(-) Interest paid in advance		—			—			—			—			—			—			(46,312	)		—			(46,312	)

Overall total		1,708,715			2,058,603			1,973,688			2,362,641			2,002,932			227,238			4,045,917			224,320			14,604,054


Holding Company	2018			2019			2020		2021			2022		2023		2024		2025		Total
Indexers
CDI (3)		18,096			7,533			—		37,240			—		—		—		—		62,869
Total, governed by Indexers		18,096			7,533			—		37,240			—		—		—		—		62,869

(-) Transaction costs		(127	)		(84	)		—		(521	)		—		—		—		—		(732	)

Overall total		17,969			7,449			—		36,719			—		—		—		—		62,137

(1)	Expanded National Customer Price (IPCA) Index.

(2)	Fiscal Reference Unit (Ufir / RGR).

(3)	CDI: Interbank Rate for Certificates of Deposit.

(4)	URTJ: Interest rate reference unit.

(5)	IGP-DI (‘General – Domestic Availability’) Price Index.

The principal currencies and Indexers used for monetary updating of loans and financings had the following variations:


Currency	Accumulated change in 06/30/2018, %		Accumulated change in 06/30/2017, %		Indexer	Accumulated change in 06/30/2018, %			Accumulated change in 06/30/2017, %
US dollar		16.56		1.51	IPCA		2.60			1.18
Euro		13.45		9.79	CDI		3.17			5.61
					TJLP		(5.71	)		(6.67	)

LOGO

The changes in loans, financings and debentures were as follows:


	Consolidated			Holding Company
Balance on December 31, 2016		15,179,280			—
Loans and financings obtained		60,870			—
Transaction costs		(761	)		—
Financings obtained net of transaction costs		60,109			—

Monetary variation		68,973			—
Exchange rate variation		121			—
Financial charges provisioned		868,249			—
Amortization of transaction costs		29,827			—
Financial charges paid		(711,474	)		—
Amortization of financings		(855,057	)		—

Subtotal		14,640,028			—

(–) FIC Pampulha: Securities of subsidiary companies		(33,378	)		—

Balance on June 30, 2017		14,606,650			—

Balance on December 31, 2017		14,397,697			—
Balance of loans arising from the merged of Cemig Telecom		—			65,032

Loans and financings obtained		400,000			—
Transaction costs		(4,140	)		—

Financings obtained net of transaction costs		395,860			—
Monetary variation		65,305			—
Exchange rate variation		554,278			—
Financial charges provisioned		619,355			1,156
Amortization of transaction costs		15,548			153
Financial charges paid		(671,651	)		(438	)
Amortization of financings		(774,715	)		(3,766	)

Subtotal		14,601,677			(62,137	)

(–) FIC Pampulha: Securities of subsidiary companies		2,377			—
Balance on June 30, 2018		14,604,054			62,137

Borrowing costs, capitalized

Costs of loans directly related to acquisition, construction or production of an asset which necessarily requires a significant time to be concluded for the purpose of use or sale are capitalized as part of the cost of the corresponding asset. All other costs of loans are recorded as finance costs in the period in which they are incurred. Costs of loans include interest and other costs incurred by the Company in relation to the loan.

The subsidiaries Cemig D and Gasmig transferred to Intangible assets the costs of loans and financings linked to working in progress, as follows:


	Jan to Jun 2018			Jan to Jun 2017
Costs of loans and financings		634,903			898,076
Financing costs on Intangible assets (1)		(16,392	)		(40,399	)

Net effect in Net income or loss		618,511			857,677

(1)	The average rate of capitalization was 9.55% p.a. in 2018 (15.84% p.a. in 2017).

The amounts of the capitalized borrowing costs have been excluded from the statement of cash flows, in the additions to cash flow of investment activities, because they do not represent an outflow of cash for acquisition of the related asset.

LOGO

Restrictive covenants

The Company has contracts with covenants linked to financial index, as follows:


Title	Parameter	Ratio required – Issuer	Ratio required – Cemig (Guarantor)	Compliance required
Banco do Brasil: Bank Credit Notes, and Fixed Credit Cemig GT (1)	Net debt / (Ebitda + Dividends received)	The following, or less: 5.5 on June 30, 2018 5.0 on December 31, 2018 5.0 on June 30, 2019 4.5 on December 31, 2019 4.5 on June 30, 2020 3.0 on December 31, 2020 3.0 on June 30, 2021 2.5 on /after Dec. 31, 2021	The following, or less: 4.5 on June 30, 2018 4.25 on December 31, 2018 4.25 on June 30, 2019 3.5 on December 31, 2019 3.5 on June 30, 2020 3.0 on December 31, 2020 3.0 on June 30, 2021 2.5 on /after Dec. 31, 2021	Half-yearly
7th Debenture Issue Cemig GT (2)	Net debt / (Ebitda + Dividends received)	The following, or less: 5.5 in 2017 5.0 in 2018 4.5 in 2019 3.0 in 2020 2.5 in 2021	The following, or less: 4.5 in 2017 4.25 in 2018 3.5 in 2019 3.0 in 2020 2.5 in 2021	Half-yearly
Eurobonds Cemig GT (3)	Net debt / Ebitda adjusted for the Covenant	The following, or less: 5.5 on December 31, 2017 5.5 on June 30, 2018 5.0 on December 31, 2018 5.0 on June 30, 2019 4.5 on December 31, 2019 4.5 on June 30, 2020 3.0 on December 31, 2020 3.0 on June 30, 2021 2.5 on / after Dec. 31, 2021	The following, or less: 5.0 on December 31, 2017 5.0 on June 30, 2018 4.25 on December 31, 2018 4.25 on June 30, 2019 3.5 on December 31, 2019 3.5 on June 30, 2020 3.0 on December 31, 2020 3.0 on June 30, 2021 3.0 on and after Dec. 31, 2021	Half-yearly
Bank Credit Notes of Banco do Brasil and Caixa Econômica Federal; and 5th Debenture Issue CEMIG D (4)	Net debt / (Ebitda + Dividends received)	The following, or less: 7.5 on December 31, 2017 7.5 on June 30, 2018 4.5 on December 31, 2018 3.8 on June 30, 2019 3.8 on December 31, 2019 3.3 on June 30, 2020 3.3 on December 31, 2020 3.3 on June 30, 2021 3.3 on / after Dec. 31, 2021	The following, or less: 4.5 on December 31, 2017 4.5 on June 30, 2018 4.25 on December 31, 2018 4.25 on June 30, 2019 3.5 on December 31, 2019 3.5 on June 30, 2020 3.0 on December 31, 2020 3.0 on June 30, 2021 2.5 on /after Dec. 31, 2021	Half-yearly
	Current liquidity	0.6x on / after Dec. 31, 2017	0.6x on /after Dec. 31, 2027	Half-yearly
Gasmig – Debentures (5)	Overall indebtedness (Total liabilities/Total assets)	Less than 0.6	—	Annual
	Ebitda / Debt servicing	1.3 or more	—	Annual
	Ebitda / Net finance income (expenses)	2.5 or more	—	Annual
	Net debt / Ebitda	2.5 or less	—	Annual
9th Promissory Note Issue Cemig D	Net debt / (Ebitda + dividends received) Current liquidity	The following, or less: 7.5 on June 30, 2018 4.5 on December 31, 2018 3.8 on June 30, 2019 The following, or more: 0.6x on and after June 30, 2018	The following, or less: 4.5 on June 30, 2018 4.25 on December 31, 2018 3.25 on June 30, 2019 The following, or more: 0.6x on and after June 30, 2018	Half-yearly

(1)	Through contractual amendments, a further early maturity clause was added to Cemig GT’s Bank Credit Notes and Fixed Credit Line with Banco do Brasil, requiring compliance with a financial ratio similar to that required by the 7^th Debenture Issue.

(2)	7th Issue of Debentures by Cemig GT, in December 2016, of R$ 2,240 million.

(3)

In the event that ‘maintenance financial covenants’ are exceeded at any time, the interest rate will automatically be increased by 2% p.a. as long as the excess continues.There is also an obligation to comply with a ‘maintenance’ covenant – which requires that the debt in Cemig Consolidated (as per financial statements), shall have asset guarantee for debt of 1.75x Ebitda (2.0 x in December 2017); and a ‘damage’ covenant, requiring real guarantee for debt in Cemig GT of 1.5x Ebitda.

(4)	The Bank Credit Notes of Banco do Brasil and Caixa Econômica Federal were amended in December 2017, to include requirement for 6-monthly compliance with covenants as described above. The 5^th Debenture Issue included demand ability of compliance with the Covenants.

(5)

If Gasmig does not achieve the required covenants, Gasmig must, within 120 days from the date of notice in writing from BNDES or BNDESPar, constitute guarantees acceptable to the debenture holders for the total amount of the debt, subject to the rules of the National Monetary Council (CMN), unless the required ratios are restored within that period. Cross-default: Certain contractually specified situations can cause early maturity of other debts.

LOGO

As of June 30, 2018, the Company was in compliance with the restrictive covenants.

21.

REGULATORY CHARGES


	Consolidated
	Jun. 30, 2018 (Restated)		Dec. 31, 2017
Liabilities
Global Reversion Reserve (RGR)		27,368		36,591
Energy Development Account (CDE)		141,006		206,022
Aneel inspection charge		2,217		2,154
Energy Efficiency		244,714		223,767
Research and development		242,618		233,398
Energy System Expansion Research		2,250		2,696
National Scientific and Technological Development Fund		4,174		5,066
Proinfa – Alternative Energy Program		5,991		6,612
Royalties for use of water resources		4,054		15,172
Emergency capacity charge		30,994		30,996
Customer charges –‘Tariff Flag’ amounts		2,015		16
Others		5,836		—

		713,237		762,490

Current liabilities		434,349		512,673
Non-current liabilities		278,888		249,817

22.

POST-RETIREMENT OBLIGATIONS

Changes in net liabilities were as follows:


Holding Company	Pension plans and retirement supplement plans			Health Plan			Dental Plan			Life insurance			Total
Net liabilities on December 31, 2016		257,933			95,655			2,452			41,424			397,464
Expense recognized in Statement of income		13,558			5,219			138			2,327			21,242
Contributions paid		(3,846	)		(3,256	)		(80	)		(199	)		(7,381	)

Net liabilities on June 30, 2017		267,645			97,618			2,510			43,552			411,325

Net liabilities on December 31, 2017		333,484			111,568			2,659			11,786			459,497
Expense recognized in Statement of income		15,833			5,387			129			641			21,990
Contributions paid		(4,292	)		(3,330	)		(78	)		(175	)		(7,875	)

Net liabilities on June 30, 2018		345,025			113,625			2,710			12,252			473,612


										Jun. 30, 2018			Dec. 31, 2017
Current liabilities											12,906			12,974
Non-current liabilities											460,706			446,523

LOGO


Consolidated	Pension plans and retirement supplement plans			Health Plan			Dental Plan			Life insurance			Total
Net liabilities on December 31, 2016		1,679,154			1,710,787			37,549			813,921			4,241,411
Expense recognized in Statement of income		86,979			94,632			2,086			44,315			228,012
Contributions paid		(78,138	)		(50,633	)		(1,206	)		(3,615	)		(133,592	)

Net liabilities on June 30, 2017		1,687,995			1,754,786			38,429			854,621			4,335,831

Net liabilities on December 31, 2017		2,068,355			1,809,441			38,505			269,880			4,186,181
Expense recognized in Statement of income		95,967			91,162			1,906			13,521			202,556
Contributions paid		(87,249	)		(54,435	)		(1,237	)		(4,560	)		(147,481	)

Net liabilities on June 30, 2018		2,077,073			1,846,168			39,174			278,841			4,241,256


										Jun. 30, 2018			Dec. 31, 2017
Current liabilities											236,663			231,894
Non-current liabilities											4,004,593			3,954,287

The amounts recorded in current liabilities refer to the contributions to be made by Cemig and its subsidiaries in the next 12 months to amortize the post-retirement obligations.

The amounts reported as ‘Expense recognized in the statement of income refer to the costs of post-retirement obligations, totaling R$ 169,397 on June 30, 2018 (R$ 192,028 on June 30, 2017), plus the finance expenses and monetary updating on the debt with Forluz, in the amounts of R$ 33,159 on June 30, 2018 (R$ 35,984 on June 30, 2017).

Debt agreed with the pension fund (Forluz)

On June 30, 2018 the Company had an obligation recorded for past actuarial deficits relating to the pension fund in the amount of R$ 686,191 (R$ 720,498 on December 31, 2017). This amount has been recognized as an obligation payable by the Company, and is being amortized up to June 2024, through monthly installments calculated by the system of constant installments (known as the ‘Price’ table), and adjusted by the IPCA (Expanded National Customer Price) inflation index (published by the Brazilian Geography and Statistics Institute – IBGE) plus 6% per year. Because the Company is required to pay this debt even if Forluz has a surplus, the Company and its subsidiaries maintain the record of the debt in full, and the effects of inflation adjustment and interest are recorded in the statement of income as finance expense.

Agreement to cover the deficit on Forluz Pension Plan ‘A’

Forluz and the sponsors Cemig, Cemig GT and Cemig D signed Debt Assumption Instruments to cover the Deficit of Plan A for the years 2015 and 2016. On June 30, 2018 the total amount payable by Cemig and its subsidiaries Cemig D and Cemig GT as a result of the deficit found in Plan A is R$ 380,311 (R$ 283,291 on December 31, 2017) with monthly amortizations up to 2031, calculated by the system of constant installments (known as the ‘Price Table’). Remuneratory interest applicable to the outstanding balance is 6% p.a., plus the effect of the IPCA (Expanded National Customer Price) index published by the IBGE. If the plan reaches actuarial surplus before the full period of amortization of the contracts, the Company and its subsidiaries will be exempted from payment of the remaining installments and the contracts will be extinguished.

23.

PROVISIONS

The Company and its subsidiaries are involved in certain legal and administrative proceedings in various courts and government bodies, arising from the normal course of business, regarding employment-law, civil, tax, environmental and regulatory matters, and other issues.

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Actions in which the Company is defendant

The Company and its subsidiaries recorded Provisions for contingencies in relation to the legal actions in which, based on the assessment of the Company and its legal advisors, the chances of loss are assessed as ‘probable’ (i.e. an outflow of funds to settle the obligation will be necessary), as follows:


	Consolidated
	Dec. 31, 2017		Additions		Reversals			Settled			Jun. 30, 2018
Labor		473,874		32,812		(35,872	)		(14,689	)		456,125
Civil
Consumer relations		18,632		11,522		(362	)		(9,393	)		20,399
Other civil actions		43,105		2,985		(1,617	)		(2,496	)		41,977

		61,737		14,507		(1,979	)		(11,889	)		62,376
Tax		57,048		199		(3,405	)		(139	)		53,703
Environmental		45		31		—			(27	)		49
Regulatory		39,812		10,069		—			(744	)		49,137
Other		45,597		4,408		(2,734	)		(227	)		47,044

Total		678,113		62,026		(43,990	)		(27,715	)		668,434


	Consolidated
	Dec. 31, 2016		Additions		Reversals			Settled			Jun. 30, 2017
Labor		349,273		181,199		(3,474	)		(33,829	)		493,169
Civil
Consumer relations		14,741		8,038		(2,758	)		(7,645	)		12,376
Other civil actions		40,443		4,178		(61	)		(999	)		43,561

		55,184		12,216		(2,819	)		(8,644	)		55,937
Tax		69,922		1,272		(4,436	)		(437	)		66,321
Environmental		39		3		—			—			42
Regulatory		43,100		2,619		(13,454	)		(591	)		31,674
Corporate		239,445		—		—			—			239,445
Other		58,054		6,633		—			(2,132	)		62,555

Total		815,017		203,942		(24,183	)		(45,633	)		949,143


	Holding Company
	Dec. 31, 2017		Merger of Telecom		Additions		Reversals			Settled			Jun. 30, 2018
Labor		38,603		22		10,884		—			(3,230	)		46,279
Civil											—
Consumer relations		1,024		—		1,055		—			(365	)		1,714
Other civil actions		958		—		490		—			(1	)		1,447

		1,982		—		1,545		—			(366	)		3,161
Tax		7,473		—		74		(87	)		(14	)		7,446
Regulatory		13,959		—		3,709		—			(409	)		17,259
Other		1,177		—		77		(67	)		(16	)		1,171

Total		63,194		22		16,289		(154	)		(4,035	)		75,316

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	Holding Company
	Dec. 31, 2016		Additions		Reversals			Settled			Jun. 30, 2017
Labor		34,928		15,037		(3,016	)		(4,906	)		42,043
Civil												—
Consumer relations		1,435		422		(999	)		(8	)		850
Other civil actions		3,238		527		(61	)		(2	)		3,702

		4,673		949		(1,060	)		(10	)		4,552
Tax		8,869		209		(2,817	)		(125	)		6,136
Regulatory		21,614				(2,079	)					19,535
Corporate		239,445		—		—			—			239,445
Other		466		457		—			(34	)		889

Total		309,995		16,652		(8,972	)		(5,075	)		312,600

The Company’s Management and its subsidiaries, in view of the long periods and manner of working of the Brazilian judiciary and tax and regulatory systems, believes that it is not practical to provide information that would be useful to the users of this interim financial information in relation to the timing of any cash outflows, or any possibility of reimbursements, might occur. The Management of the Company and its subsidiaries believe that any disbursements in excess of the amounts provisioned, when the respective processes are completed, will not significantly affect the result of operations or financial position of the Company and its subsidiaries.

The details on the main provisions and contingent liabilities are provided below, with the best estimation of expected future disbursements for these contingencies:

Provisions, made for legal actions in which the chances of loss have been assessed as ‘probable’; and contingent liabilities, for actions in which the chances of loss are assessed as ‘possible’

Labor claims

The Company and its subsidiaries are involved in various legal claims filed by its employees and by employees of service providing companies. Most of these claims relate to overtime and additional pay, severance payments, various benefits, salary adjustments and the effects of such items on a supplementary retirement plan. In addition to these actions, there are others relating to outsourcing of labor, complementary additions to or re-calculation of retirement pension payments by Forluz, and salary adjustments.

The aggregate amount of the contingency is approximately R$ 1,814,490 (R$ 1,854,257 on December 31, 2017), of which R$ 456,125 (R$ 473,874 on December 31, 2017) has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

Customers claims

The Company and its subsidiaries are involved in various civil actions relating to indemnity for moral and material damages, arising, principally, from allegations of irregularity in measurement of consumption, and claims of undue charging, in the normal course of business, totaling R$ 46,165 (R$ 56,017 on December 31, 2017), of which R$ 20,399 (R$ 18,632 on December 31, 2017) has been provisioned – this being the probable estimate for funds needed to settle these disputes.

Other civil proceedings

The Company and its subsidiaries are involved in various civil actions claiming indemnity for moral and material damages, among others, arising from incidents occurred in the normal course of business, in the amount of R$ 233,327 (R$ 218,455 on December 31, 2017), of which R$ 41,977 (R$ 43,105 on December 31, 2017) has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

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Tax

The Company and its subsidiaries are involved in numerous administrative and judicial claims actions relating to taxes, including, among other matters, subjects relating to the Rural Property Tax (ITR); the Urban Property Tax (Imposto sobre a Propriedade Territorial Urbana, or IPTU); the Tax on Donations and Legacies (ITCD); the Social Integration Program (Programa de Integração Social, or PIS); the Contribution to Finance Social Security (Contribuição para o Financiamento da Seguridade Social, or Cofins); Corporate Income Tax (Imposto de Renda Pessoa Jurídica, or IRPJ); the Social Contribution (Contribuição Social sobre o Lucro Líquido, or CSLL); and motions to stay tax enforcement. The aggregate amount of this contingency is approximately R$ 302,538 (R$ 281,057 on December 31, 2017), of which R$ 53,703 (R$ 57,048 on December 31, 2017) has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

Environmental

The Company and its subsidiaries are involved in environmental matters, in which the subjects include protected areas, environmental licenses, recovery of environmental damage, and other matters, in the approximate total amount of R$ 70,889 (R$ 68,097 on December 31, 2017) of which R$ 49 (R$ 45 on December 31, 2017) has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

Regulatory

The Company and its subsidiaries are involved in numerous administrative and judicial proceedings, challenging, mainly: (i) tariff charges in invoices for use of the distribution system by a self-producer; (ii) alleged violation of targets for continuity indicators in retail supply of electricity; and (iii) the tariff increase made during the Federal Government’s economic stabilization plan referred to as the ‘Cruzado Plan’, in 1986. The aggregate amount of the contingency is approximately R$ 223,522 (R$ 222,434 on December 31, 2017), of which R$ 49,137 (R$ 39,812 on December 31, 2017) has been recognized as provision – the amount estimated as probably necessary for settlement of these disputes.

Corporate

Difference of monetary updating on the Advance against Future Capital Increase (AFAC) made by the Minas Gerais State Government

On December 19, 2014 the Finance Secretary of Minas Gerais State sent an Official Letter to Cemig requesting recalculation of the amounts relating to the Advances against Future Capital Increase made in 1995, 1996, and 1998, which were returned to Minas Gerais State in December 2011, for review of the criterion used by the Company for monetary updating, arguing that application of the Selic rate would be more appropriate, replacing the IGP-M index.

On December 29, 2014 the Company made an administrative deposit applying for suspension of enforceability of the credit being requested by the state, and for its non-inclusion in the Register of Debts owed to the state and in the Registry of Defaulted Payments owed to the State (Cadin).

The Company’s Management held negotiations with the government of the State of Minas Gerais, and obtained the approvals requested by its governance bodies to sign a Debt Recognition Agreement with Minas Gerais State, through the State’s Tax Office, under which the State undertook to return to the Company the total amount deposited, after monetary updating by the IGP-M index. This was signed on October 25, 2017. With this new scenario the chances of loss in this action were re-assessed to ‘remote’, and as a result the Company has reversed the provision of R$ 239,445, due to the expectation that there will be no future disbursement to liquidate this obligation, which had until then been provisioned. More details in Note 11.

Other legal actions in the normal course of business

Breach of contract – Power line pathways and accesses cleaning services contract

The Company and its subsidiaries are involved in disputes alleging losses suffered as a result of supposed breaches of contract at the time of provision of services of cleaning of power line pathways and firebreaks. The amount recorded is R$ 33,975 (R$ 31,987 on December 31, 2017), this being estimated as the likely amount of funds necessary to settle this dispute.

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Other legal proceedings

The Company and its subsidiaries are involved as plaintiff or defendant, in other less significant claims, including environmental claims, related to the normal course of their operations, with an estimated total amount of R$ 165,205 (R$ 170,158 on December 31, 2017), of which R$ 13,118 (R$ 13,655 on December 31, 2017) – the amount estimated as probably necessary for settlement of these disputes – has been provisioned. Management believes that it has appropriate defense for these proceedings, and does not expect these issues to give rise to significant losses that could have an adverse effect on the Company’s financial position or profit.

Contingent liabilities in which losses are assessed as ‘possible’, and the Company believes it has arguments of merit for legal defense

Taxes and contributions

The Company and its subsidiaries are involved in numerous administrative and judicial proceedings in relation to taxes. Below are details of the main claims:

Indemnity of employees’ future benefit (the ‘Anuênio’)

In 2006 The Company and its subsidiaries paid an indemnity to its employees, totaling R$ 177,686, in exchange for rights to future payments (referred to as the Anuênio) for time of service, which would otherwise be incorporated, in the future, into salaries. The Company and its subsidiaries did not pay income tax and Social Security contributions on this amount because it considered that those obligations are not applicable to amounts paid as an indemnity. However, to avoid the risk of a future fine, the Company and its subsidiaries obtained an injunction, which permitted to make an escrow deposit of R$ 121,834, which updated now represents the amount of R$ 271,520 (R$ 267,432 on December 31, 2017). The updated amount of the contingency is R$ 317,437 (R$ 311,138 on December 31, 2017) and, based on the arguments above, Management has classified the chance of loss as ‘possible’.

Social Security contributions

The Brazilian federal tax authority (Secretaria da Receita Federal) has filed administrative proceedings related to various matters: employee profit sharing; the Workers’ Food Program (Programa de Alimentação do Trabalhador, or PAT); education benefit; food benefit; Special Additional Retirement payment; overtime payments; hazardous occupation payments; matters related to Sest/Senat (transport workers’ support programs); and fines for non-compliance with accessory obligations. The Company and its subsidiaries have presented defenses and await judgment. The amount of the contingency is approximately R$ 1,269,989 (R$ 1,647,343 on December 31, 2017). Management has classified the chance of loss as ‘possible’, also taking into account assessment of the chance of loss in the judicial sphere, (the claims mentioned are in the administrative sphere), based on the evaluation of the claims and the related case law.

Non-homologation of offsetting of tax credit

The federal tax authority did not ratify the Company’s declared offsetting, in Corporate income tax returns, of carry-forwards and undue or excess payment of federal taxes – IRPJ, CSLL, PIS and Cofins – identified by official tax deposit receipts (‘DARFs’ and ‘DCTFs’). The Company and its subsidiaries are contesting the non-homologation of the amounts offset. The amount of the contingency is R$ 285,620 (R$ 274,836 on December 31, 2017), and the chance of loss was classified as ‘possible’, since the relevant requirements of the National Tax Code (CTN) have been complied with.

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Corporate tax returns – restitution and offsetting

The Company was a party in an administrative case involving requests for restitution and compensation of credits arising from tax losses carry-forward balances indicated in the corporate tax returns for the calendar years from 1997 to 2000, and also for over payments identified in the corresponding tax payment receipts (DARFs and DCTFs). The case against the Company was dismissed in a final judgement, with no further appeal possible. The amount of the contingency on December 31, 2017 was R$ 576,386.

Income tax withheld on capital gain in a shareholding transaction

The federal tax authority issued a tax assessment on Cemig as a jointly responsible party with its jointly-controlled entity Parati S.A. Participações em Ativos de Energia Elétrica (Parati), relating to withholding income tax (Imposto de Renda Retido na Fonte, or IRRF) allegedly applicable to returns paid by reason of a capital gain in a shareholding transaction relating to the purchase by Parati, and sale, by Enlighted, on July 7, 2011, of 100% of the equity interests in Luce LLC (a company with head office in Delaware, USA), holder of 75% of the shares in the Luce Brasil equity investment fund (FIP Luce), which was indirect holder, through Luce Empreendimentos e Participações S.A., of approximately 13.03% of the total and voting shares of Light S.A. (Light). The amount of the contingency is approximately R$ 216,920 (R$ 212,393 on December 31, 2017), and the loss has been assessed as ‘possible’.

The Social Contribution tax on net income (CSLL)

The federal tax authority issued a tax assessment against the Company and its subsidiaries for the years of 2012 and 2013, alleging undue non-addition, or deduction, of amounts in calculating the Social Contribution tax on net income relating to the following items: (i) taxes with liability suspended; (ii) donations and sponsorship (Law 8,313/91); and (iii) fines for various alleged infringements. The amount of this contingency is R$ 295,738 (R$ 322,196 on December 31, 2017). The Company has classified the chances of loss as ‘possible’, in accordance with the analysis of the case law on the subject.

Regulatory matters

Public Lighting Contribution (CIP)

Cemig and its subsidiary Cemig D are defendants in several public civil claims (class actions) requesting nullity of the clause in the Electricity Supply Contracts for public illumination signed between the Company and the various municipalities of its concession area, and restitution by the Company of the difference representing the amounts charged in the last 20 years, in the event that the courts recognize that these amounts were unduly charged. The actions are grounded on a supposed error by Cemig in the estimation of the period of time that was used in calculation of the consumption of electricity for public illumination, funded by the Public Lighting Contribution (Contribuição para Iluminação Pública, or CIP).

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The Company believes it has arguments of merit for defense in these claims, since the charge at present made is grounded on Aneel Normative Resolution 456/2000. As a result it has not constituted a provision for this action, the amount of which is estimated at R$ 1,050,500 (R$ 1,224,274 on December 31, 2017). The Company has assessed the chances of loss in this action as ‘possible’, due to the Customer Defense Code (Código de Defesa do Consumidor, or CDC) not being applicable, because the matter is governed by the specific regulation of the electricity sector, and because Cemig complied with Aneel Resolutions 414 and 456, which deal with the subject.

Accounting of electricity sale transactions in the Wholesale Electricity Trading Chamber (CCEE)

In a claim dating from August 2002, AES Sul Distribuidora challenged in the courts the criteria for accounting of electricity sale transactions in the wholesale electricity market (Mercado Atacadista de Energia, or MAE) (predecessor of the present Wholesale Electricity Trading Chamber – Câmara de Comercialização de Energia Elétrica, or CCEE), during the period of rationing. It obtained a favorable interim judgment in February 2006, which ordered Aneel, working with the CCEE, to comply with the claim by AES Sul and recalculate the settlement of the transactions during the rationing period, not considering Aneel’s Dispatch 288 of 2002.This should take effect in the CCEE as from November 2008, resulting in an additional disbursement for Cemig GT, related to the expense on purchase of energy in the spot market on the CCEE, in the approximate amount of R$ 300,362 (R$ 287,515 on December 31, 2017). On November 9, 2008 Cemig GT obtained an interim decision in the Regional Federal Appeal Court (Tribunal Regional Federal, or TRF) suspending the obligatory nature of the requirement to pay into court the amount that would have been owed under the Special Financial Settlement made by the CCEE.

Cemig GT has classified the chance of loss as ‘possible’, since this action deals with the General Agreement for the Electricity Sector, in which the Company has the full documentation to support its arguments.

System Service Charges (ESS) – Resolution of the National Energy Policy Council

Resolution 3 of the National Energy Policy Council (Conselho Nacional de Política Energética, or CNPE) of March 6, 2013 established new criteria for the prorating of the cost of additional dispatch of thermal plants. Under the new criteria, the costs of the System Service Charges for Electricity Security (Encargos do Serviço do Sistema, or ESS), which were previously prorated in full between free customers and distributors, was now to be prorated between all the agents participating in the National Grid System, including generators and traders.

In May 2013, the Brazilian Independent Electricity Producers’ Association (Associação Brasileira dos Produtores Independentes de Energia Elétrica, or Apine), of which Cemig GT is a member, obtained an interim court decision suspending the effects of Articles 2 and 3 of Resolution CNPE 3, exempting generators from payment of the ESS under that Resolution.

As a result of the interim decision, the CCEE carried out the financial settlement for transactions from April through December 2013 using the criteria prior to Resolution. As a result, Cemig GT recorded the costs of the ESS in accordance with the criteria for financial settlement published by the CCEE, without the effects of Resolution CNPE 3.

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The applications by the plaintiff (Apine) were granted in the first instance, confirming the interim decision granted in favor of its members, which include Cemig GT and its subsidiaries. This decision was subject of an appeal, distributed to the 7th Panel of the Regional Federal Court (Tribunal Federal Regional, or TRF) of the 1st Region, which is still pending of judgment.

The amount of the contingency is approximately R$ 212,399 (R$ 201,586 on December 31, 2017). In spite of the successful judgment at first instance, the Association’s legal advisers still considered the chances of loss of this contingency as ‘possible’. Cemig GT agrees with this, since there are not yet elements to make it possible to foresee the outcome of the Appeal filed by the federal government.

Tariff increases

Exclusion of customers classified as low-income

The Federal Public Attorneys’ Office filed a class action against the Company and Aneel, to avoid exclusion of customers from classification in the Low-income residential tariff sub-category, requesting an order for Cemig D to pay twice the amount paid in excess by customers. Judgment was given in favor of the plaintiffs, but the Company and Aneel have filed an interlocutory appeal and await judgment. The amount of the contingency is approximately R$ 287,271 (R$ 275,458 on December 31, 2017). Cemig D has classified the chances of loss as ‘possible’ due to other favorable decisions on this matter.

Environmental claims

Impact arising from construction of power plants

The Public Attorneys of Minas Gerais State, together with an association and individuals, have brought class actions requiring Cemig GT to invest at least 0.5% of the annual gross operating revenue of the Emborcação, Pissarrão, Funil, Volta Grande, Poquim, Paraúna, Miranda, Nova Ponte, Rio de Pedras and Peti plants in environmental protection and preservation of the water tables of the counties where these power plants are located, and proportional indemnity for allegedly irrecoverable environmental damage caused, arising from omission to comply with Minas Gerais State Law 12,503/1997. Cemig GT has filed appeals to the Higher Appeal Court (STJ) and the Federal Supreme Court (STF). Based on the opinions of its legal advisers, Cemig GT believes that this is a matter involving legislation at infra-constitutional level (there is a Federal Law with an analogous object) and thus a constitutional matter, on the issue of whether the state law is constitutional or not, so that the final decision is one for the national Higher Appeal Court (STJ) and the Federal Supreme Court (STF). No provision has been made, since based on the opinion of its legal advisers Management has classified the chance of loss as ‘possible’. The amount of the contingency is R$ 133,933 (R$ 126,664 on December 31, 2017).

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The Public Attorneys’ Office of Minas Gerais State has filed class actions requiring the formation of a Permanent Preservation Area (APP) around the reservoir of the Capim Branco hydroelectric plant, suspension of the effects of the environmental licenses, and recovery of alleged environmental damage. Based on the opinion of its legal advisers in relation to the changes that have been made in the new Forest Code and in the case law on this subject, Cemig GT has classified the chance of loss in this dispute as ‘possible’. The estimated value of the contingency is R$ 82,906 (R$ 79,378 on December 31, 2017).

Other contingent liabilities

Early settlement of the CRC (Earnings Compensation) Account

The Company is involved in an administrative proceeding at the Audit Court of the State of Minas Gerais which challenges: (i) a difference of amounts relating to the discount offered by Cemig for early repayment of the credit owed to Cemig by the State under the Receivables Assignment Contract in relation to the CRC Account (Conta de Resultados a Compensar, or Earnings Compensation Account) – this payment was completed in the first quarter of 2013; and also (ii) possible undue financial burden on the State after the signature of the Amendments that aimed to re-establish the economic and financial balance of the Contract. The amount of the contingency is approximately R$ 403,418 (R$ 397,897 on December 31, 2017), and, based on the Opinion of the Public Attorneys’ Office of the Audit Board of the State of Minas Gerais, the Company believes that it has met the legal requirements. Thus, it has assessed the chances of loss as ‘possible’, since it believes that the adjustment was made in faithful obedience to the legislation applicable to the case.

Contractual imbalance

Cemig D is a party in disputes alleging losses suffered by third parties as a result of supposed breach of contract at the time of implementation of part of the rural electrification program known as Luz Para Todos (‘Light for All’). The estimated amount is R$ 275,032 (R$ 261,281 on December 31, 2017), and no provision has been made. Cemig D has classified the chances of loss as ‘possible’ as a result of the analysis that has been made of the argument and documentation used by the contracted parties in attempting to make the Company liable for any losses that allegedly occurred.

The Cemig D is also a party in other disputes arising from alleged non-compliance with contracts in the normal course of business, for an estimated total of R$ 84,745 (R$ 79,985 on December 31, 2017). Cemig D has classified the chance of loss as ‘possible’, after analysis of the case law on this subject.

Irregularities in competitive tender proceedings

Cemig D is a party in a dispute alleging irregularities in competitive tender proceedings, governed by an online invitation to bid. The estimated amount is R$ 26,511 (R$ 26,149 on December 31, 2017), and no provision has been made. Cemig D has classified the chance of loss as ‘possible’, after analysis of the case law on this subject.

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24.

EQUITY AND REMUNERATION TO SHAREHOLDERS

The Company’s issued and outstanding share capital on June 30, 2018 is R$ 7,293,763, represented by 487,614,213 common shares and 971,138,388 preferred shares, all with nominal value of R$ 5.00 (five Reais). On December 31, 2017, the Company’s share capital was R$ 6,294,208, represented by 420,764,708 common shares and 838,076,946 preferred shares, all with nominal value of R$ 5.00 (five Reais).

(a)

Capital increase

On October 26, 2017, the Extraordinary General Meeting (‘EGM’) of Shareholders unanimously approved the proposal by the Board of Directors for a capital increase through issuance of up to 199,910,947 new shares, each with par value of R$ 5.00 with the same rights providing to those shares in the same class of shares that resulted in the capital increase.

Up to December 31, 2017, R$ 1,215,223 had been subscribed by Shareholders, corresponding to 184,965,518 shares at the price of R$ 6.57. The remaining shares not subscribed were 14,945,429, comprising 13,139,679 ON (common) shares and 1,815,750 PN (preferred) shares.

On March 21, 2018, Cemig sold the totality of the remaining shares not subscribed through a public offer of a single and indivisible lot of shares, which resulted in a financial volume of R$ 110,700. A total of 13,139,799 remaining common shares (ON) were sold for an average price of R$ 7.30, totaling R$ 95,773; and 1,815,750 remaining preferred shares (PN) were sold for an average price of R$ 8.22, for a total of R$ 14,927.

On April 23, 2018, the EGM approved a Company capital increase in the amount of R$ 999,555, whose capital increased from R$ 6,294,208 to R$ 7,293,763, throughout the issue and subscription of 199,910,947 new shares, each with par value of R$ 5.00 (five Reais), comprising 66,849,505 common shares and 133,061,442 preferred shares.

The capital increase, considering the issuance price, represented proceeds of R$ 1,324,773. The difference, in the amount of R$ 325,218, has been allocated to the Capital reserve account.

(b)

Earnings per share

Considering the capital increase on April 23, 2018 described above, the calculation of basic and diluted earnings is presented as follows:


Number of shares	Jan to Jun 2018			Jan to Jun 2017			Apr to Jun 2018			Apr to Jun 2017
Common shares already paid up		487,614,213			420,764,708			487,614,213			420,764,708
Treasury shares		(69	)		(69	)		(69	)		(69	)

		487,614,144			420,764,639			487,614,144			420,764,639
Preferred shares already paid up		971,138,388			838,076,946			971,138,388			838,076,946
Treasury shares		(560,649	)		(560,649	)		(560,649	)		(560,649	)

		970,577,739			837,516,297			970,577,739			837,516,297

Total		1,458,191,883			1,258,280,936			1,458,191,883			1,258,280,936

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Basic and diluted earnings per share


	Jan to Jun 2018 (Restated)		Jan to Jun 2017		Apr to Jun 2018 (Restated)			Apr to Jun 2017
Net income for the period (A)		453,411		480,578		(11,038	)		137,982
Total of shares (B)		1,458,191,883		1,258,280,936		1,458,191,883			1,258,280,936

Basic and diluted earnings (loss) per share – going concern (R$)		0.29		0.38		(0.03	)		0.11

Basic and diluted earnings per share – discontinued operations (R$)		0.02		—		0.02			—

Basic and diluted earnings (loss) per share (R$)		0.31		0.38		(0.01	)		0.11

The shares that were subscribed in the capital increase of April 23, 2018, were considered in full in the calculation of basic and diluted net income for the first half of 2018, since the proposal for subscription of new shares was decided in an EGM of October 26, 2017, and these new shares already had potential for subscription since that date, as decided by the shareholders.

Considering that the subscribed and paid up shares have the right to dividends for the 2017 business year, if these shares had been considered in the calculation of the basic and diluted earnings per share for the six-month period ended June 30, 2017, the result of the calculation would have been R$ 0.3296.

The call and put options related to investments described in Note 29 could potentially dilute basic earnings per share in the future; however, they have not caused dilution on the earning per share in the presented periods.

(c)

Equity valuation adjustments


Equity valuation adjustments	Consolidated
Equity valuation adjustments	Jun. 30, 2018			Dec. 31, 2017
Adjustments to actuarial obligations – Employee benefits		(234,519	)		(234,519	)
Subsidiary and jointly-controlled subsidiary Variation in fair value of financial asset in jointly-controlled entity		—			139
Cumulative Translation adjustments		536			398
Adjustments to actuarial obligations – Employee benefits		(1,241,559	)		(1,241,144	)
Cash flow hedge financial instruments		87			87

Deemed cost of PP&E (1)		(1,475,455	)		(1,475,039	)

Equity valuation adjustments		638,927			638,517

		(836,528	)		(836,522	)

(1)

The variation, in 2018, in the balance of deemed cost attributable to PP&E, is net of the reversal of the deferred taxes on the deemed cost of the subsidiary Rosal Energia, in the amount of R$ 17,547, arising from the change of tax criterion for this subsidiary from the Real Net income method to the Presumed Net income method, and adjustments made by other investees totaling R$ 26.

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25.

REVENUE

The revenue of the Company and its subsidiaries are as follows:


	Consolidated
	Jan to Jun 2018 (Restated)			Jan to Jun 2017
Revenue from supply of energy (a)		11,236,009			11,572,133
Revenue from use of the electricity distribution systems (TUSD) (b)		814,340			900,476
CVA, and Other financial components in tariff increases (c)		1,150,672			(331,896	)
Transmission revenue
Transmission concession revenue (d)		206,582			177,437
Transmission construction revenue (e)		4,732			7,025
Transmission indemnity revenue (g)		146,519			269,855
Generation indemnity revenue (h)		34,463			—
Distribution construction revenue (e)		378,911			434,009
Adjustment to expectation of cash flow from indemnifiable Financial assets of the distribution concession (i)		3,066			1,511
Revenue from updating of the Concession Grant Fee (f)		156,980			150,476
Energy transactions on the CCEE (i)		159,966			425,177
Supply of gas		898,979			821,145
Fine for breach of standard continuity indicator (1)		(25,681	)		—
Other operating revenues (k)		773,444			717,632
Deductions on revenue (l)		(5,397,013	)		(5,127,021	)

Net operating revenue		10,541,969			10,017,959


	Consolidated
	Apr to Jun 2018 (Restated)			Apr to Jun 2017
Revenue from supply of energy (a)		5,838,104			5,800,520
Revenue from use of the electricity distribution systems (TUSD) (b)		440,599			437,427
CVA, and Other financial components in tariff increases (c)		709,516			(29,294	)
Transmission revenue
Transmission concession revenue (d)		105,591			84,937
Transmission construction revenue (e)		3,669			4,105
Transmission indemnity revenue (g)		96,678			204,025
Generation indemnity revenue (h)		17,218			—
Distribution construction revenue (e)		202,114			236,370
Adjustment to expectation of cash flow from indemnifiable Financial assets of the distribution concession (i)		2,274			284
Revenue from updating of the Concession Grant Fee (f)		75,153			70,970
Energy transactions on the CCEE (h)		25,639			198,529
Supply of gas		470,908			410,604
Fine for breach of standard continuity indicator (1)		(9,235	)		—
Other operating revenues (j)		311,331			369,763
Deductions on revenue (k)		(2,683,021	)		(2,583,211	)

Net operating revenue		5,606,538			5,205,029

(1)	As mentioned in Note 2.2, as from January 1, 2018, these amounts are now recognized as a reduction of revenue rather than operating expenses, as amended by Pronouncement CPC 47 / IFRS 15.

For details on the revenue from discontinued operations, please see Note 30.

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a)	Revenue from energy supply

This table shows energy supply by type of customer:


	MWh (1)				R$
	Jan to Jun 2018		Jan to Jun 2017		Jan to Jun 2018			Jan to Jun 2017
Residential		5,150,879		5,033,072		3,866,049			3,919,020
Industrial		8,552,810		8,704,150		2,254,923			2,423,508
Commercial, Services and Others		4,198,424		3,804,836		2,144,297			2,236,494
Rural		1,720,268		1,752,185		748,147			779,383
Public authorities		434,389		436,654		252,319			269,345
Public lighting		688,807		675,900		252,165			264,456
Public services		653,232		639,342		276,281			286,753

Subtotal		21,398,809		21,046,139		9,794,181			10,178,959

Own consumption		23,481		18,050		—			—
Unbilled revenue		—		—		48,142			(34,436	)

		21,422,290		21,064,189		9,842,323			10,144,523

Wholesale supply to other concession holders (2)		5,607,369		5,740,378		1,468,016			1,501,839
Wholesale supply unbilled, net		—		—		(74,330	)		(74,229	)

Total		27,029,659		26,804,567		11,236,009			11,572,133


	MWh (1)				R$
	Apr to Jun 2018		Apr to Jun 2017		Apr to Jun 2018			Apr to Jun 2017
Residential		2,557,762		2,496,022		1,948,068			1,927,607
Industrial		4,524,750		4,450,891		1,149,137			1,241,737
Commercial, Services and Others		2,155,487		1,892,746		1,075,019			1,096,355
Rural		954,766		953,709		405,384			411,069
Public authorities		220,791		226,041		131,469			138,206
Public lighting		345,401		341,420		127,749			134,604
Public services		331,174		324,405		142,009			142,495

Subtotal		11,090,131		10,685,234		4,978,835			5,092,073

Own consumption		11,357		8,788		—			—
Unbilled revenue		—		—		130,096			(70,182	)

		11,101,488		10,694,022		5,108,931			5,021,891

Wholesale supply to other concession holders (2)		2,974,570		2,846,261		766,525			1,044,045
Wholesale supply unbilled, net		—		—		(37,352	)		(265,416	)

Total		14,076,058		13,540,283		5,838,104			5,800,520

(1)	Data not reviewed by external auditors.

(2)	Includes a CCEAR (Regulated Market Sales Contract), ‘bilateral contracts’ with other agents, and the revenues from management of generation assets (GAG) for the 18 hydroelectric plants of Lot D of Auction no 12/2015.

b)	Revenue from Use of the Distribution System (the TUSD charge)

A significant part of the large industrial customers in the concession areas of Cemig D are now ‘Free Customers’ – energy is sold to them by the Cemig group’s generation and transmission company, Cemig GT, and also by other generators. Thus, the charges for use of the distribution network (‘TUSD’) of these Free customers are charged separately from the posting under this line.

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c)	The CVA Account, and *Other financial components*

The results from variations in (i) the CVA Account (Portion A Costs Variation Compensation Account), and in (ii) Other financial components in calculation of tariffs, refer to the positive and negative differences between the estimate of non-manageable costs of the subsidiary Cemig D and the payments actually made. The amounts recognized arise from balances recorded in the current period, homologated or to be homologated in tariff adjustment processes. For more information please see Note 14.

d)	Transmission concession revenue

Transmission concession revenue comprises the amount received from agents of the electricity sector for operation and maintenance of transmission lines of the national grid, in the form of the Permitted Annual Revenue (Receita Anual Permitida, or RAP), plus an adjustment for expectation of cash flow arising from the variation in the fair value of the Remuneration Assets Base in the amount of R$ 9,671 in the six-month period ended June 30, 2018.

e)	Construction revenue

Entities that are within the scope of ICPC 01 (R1) should record a construction or improvement of the infrastructure of the concession in accordance with CPC 17 (R1) – Construction Contracts. The costs of infrastructure construction carried out by the Company are measured reliably; the revenues and expenses corresponding to these construction services are recognized as and when they are incurred, up to the reporting date. Any expected loss on construction contracts is recognized immediately as an expense. Considering that the regulatory model currently in effect does not provide for specific remuneration for construction or improvement of the infrastructure of the concession; that constructions and improvements are substantially executed through specialized services of outsourced parties; and that all construction revenues is related to the construction of the infrastructure of the energy distribution services, the Company’s Management believed that revenues related to construction services are immaterial.

f)	Gain on financial updating of the Concession Grant Fee

Represents the inflation adjustment using the IPCA inflation index, plus interest, on the Concession Grant Fee for the concession awarded as Lot D of Auction 12/2015. See Note 14.

g)	Transmission indemnity revenue

In the half year ended June 30, 2018, the Company recognized revenue in the total amount of R$ 146,519 (R$ 269,855 in the half year ended June 30, 2017), corresponded to updating, by the IPCA index, of the balance of indemnity receivable existing. See Note 14.

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h)	Generation indemnity revenue

In the first semester of 2018, the Company recognized revenue of R$ 34,463, for the adjustment to the balance of non-amortized indemnities for the concessions of the São Simão and Miranda Hydroelectric Plants, as per Ministerial Order 291/17, also taking into account the updating of the amounts. See Note 14.

i)	Revenue from energy transactions in the CCEE (Wholesale Electricity Trading Chamber)

The revenue from transactions made through the Wholesale Electricity Trading Chamber (Câmara de Comercialização de Energia Elétrica, or CCEE) is the monthly positive net balance of settlements of transactions for purchase and sale of energy in the Spot Market, through the CCEE.

j)	Adjustment to expectation of cash flow from indemnifiable Financial assets of the distribution concession

Monetary adjustment of the Regulatory Remuneration Asset Base resulting in the recognition of income from the adjustments on the expectation of cash flow from the Financial asset on the residual value of the infrastructure assets of distribution concessions.

k)	Other operating revenues


	Consolidated
	Jan to Jun 2018		Jan to Jun 2017
Charged service		5,800		4,599
Telecoms services (3)		—		72,822
Services rendered		90,440		75,532
Subsidies (1)		546,907		503,020
Rental and leasing		42,560		58,338
Unpaid energy reimbursement (2)		84,092		—
Other		3,645		3,321

		773,444		717,632


	Consolidated
	Apr to Jun 2018			Apr to Jun 2017
Charged service		2,864			2,543
Telecoms services (3)		(44,037	)		36,580
Services rendered		48,729			40,248
Subsidies (1)		281,635			260,338
Rental and leasing		21,645			29,402
Other		495			652

		311,331			369,763

(1)	Revenue recognized for the tariff subsidies applied to users of distribution services, including low-income tariff subsidies – reimbursed by Eletrobras.

(2)	Renewal of uncontracted energy due to alteration of electricity sales agreements CCEAR agreed between Santo Antônio Energia S. A., subsidiary of Madeira Energia, and Cemig Distribuição. The amount will be settled in 24 monthly installments and monthly updated by SELIC.

(3)	Due to the classification of certain telecommunications assets as held for sale, the revenues from the discontinued operations were segregated. For more information please see Note 30.

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l)	Taxes and charges reported as deductions on revenue


	Consolidated
	Jan to Jun 2018 (Restated)		Jan to Jun 2017
Taxes on revenue
ICMS (VAT)		2,517,921		2,651,348
Cofins		1,170,609		1,069,593
PIS and Pasep		252,149		232,205
Others		3,711		3,827

		3,944,390		3,956,973
Charges to the customer
Global Reversion Reserve (RGR) (recovery of expense)		10,412		(50	)
Energy Efficiency Program		29,845		25,690
Energy Development Account (CDE)		1,180,960		859,370
Research and Development (P&D)		18,639		18,987
National Scientific and Technological Development Fund (FNDCT)		18,639		18,987
Energy System Expansion Research (EPE of MME)		9,320		9,494
Customer charges – Proinfa alternative sources program		19,443		19,577
Energy Services Inspection Charge		12,594		16,636
Royalties for use of water resources		27,712		44,922
Customer charges – the‘Flag Tariff’ system		125,059		156,435

		1,452,623		1,170,048

		5,397,013		5,127,021


	Consolidated
	Apr to Jun 2018 (Restated)		Apr to Jun 2017
Taxes on revenue
ICMS (VAT)		1,264,824		1,320,102
Cofins		612,229		540,306
PIS and Pasep		130,917		117,298
Others		1,463		1,927

		2,009,433		1,979,633
Charges to the customer
Global Reversion Reserve (RGR) (recovery of expense)		5,172		(9,917	)
Energy Efficiency Program		16,632		12,903
Energy Development Account (CDE)		593,105		415,749
Research and Development (P&D)		10,126		8,534
National Scientific and Technological Development Fund (FNDCT)		10,126		8,534
Energy System Expansion Research (EPE of MME)		5,063		4,267
Customer charges – Proinfa alternative sources program		9,202		9,914
Energy Services Inspection Charge		6,377		8,326
Royalties for use of water resources		9,498		18,091
Customer charges – the‘Flag Tariff’ system		8,287		127,177

		673,588		603,578

		2,683,021		2,583,211

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26.

OPERATING COSTS AND EXPENSES

Composition of costs and expenses of the Company and its subsidiaries:


	Consolidated				Holding Company
	Jan to Jun 2018		Jan to Jun 2017		Jan to Jun 2018		Jan to Jun 2017
Personnel (a)		680,240		917,162		19,967		21,066
Employees’ and managers’ profit sharing		22,727		24,891		5,926		962
Post-retirement obligations – Note 22		169,397		192,028		20,359		19,472
Materials		33,706		27,108		764		66
Outsourced services (b)		490,346		446,764		9,403		3,602
Energy purchased for resale (c)		5,082,598		4,742,418		—		—
Depreciation and amortization		411,300		410,800		216		236
Operating provisions (d)		267,319		369,918		78,189		15,311
Charges for use of the national grid		808,580		404,261		—		—
Gas purchased for resale		556,459		485,163		—		—
Construction costs (e)		383,643		441,034		—		—
Other operating expenses, net (f)		151,607		187,454		7,348		7,919

		9,057,922		8,649,001		142,172		68,634


	Consolidated				Holding Company
	Apr to Jun 2018		Apr to Jun 2017		Apr to Jun 2018		Apr to Jun 2017
Personnel (a)		348,576		535,954		12,498		4,390
Employees’ and managers’ profit sharing		3,150		6,007		4,515		470
Post-retirement obligations – Note 22		86,126		97,390		10,250		9,804
Materials		18,416		15,829		722		50
Outsourced services (b)		254,553		238,140		7,436		885
Energy purchased for resale (c)		2,818,905		2,649,330		—		—
Depreciation and amortization		198,309		209,435		98		101
Operating provisions (d)		134,112		161,386		38,878		(1,157	)
Charges for use of the national grid		416,038		197,764		—		—
Gas purchased for resale		293,225		262,651		—		—
Construction costs (e)		202,974		240,475		—		—
Other operating expenses, net (f)		85,246		90,938		4,493		4,719

		4,859,630		4,705,299		78,890		19,262

For details on the costs and expenses from discontinued operations, please see note 30.

Personnel expenses

Programmed Voluntary Retirement Plan (PDVP)

In March 2018, the Company approved the 2018 Employee Voluntary Severance Program (‘the 2018 PDVP’). Those eligible to take part were any employees who have worked with Cemig for 25 years or more by December 31, 2018. The acceptance period was from April 2 to 30, 2018 and it will pay the standard legal severance payments – including: payment for the period of notice, an amount equal to the ‘penalty’ payment of 40% of the Base Value of the employee’s FGTS fund, as well as the other payments specified by the legislation and there is no provision for additional premium payment. In the first semester of 2018, the amount appropriated as expense related to the 2018 PDVP, including severance payments, was R$ 25,666, corresponding to the acceptance by 151 employees.

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In the first semester of 2017, the amount appropriated as expense related to the 2017 PDVP, including severance payments, was R$ 165,422, corresponding to the acceptance by 891 employees.

Outsourced services


	Consolidated				Holding Company
	Jan to Jun 2018		Jan to Jun 2017		Jan to Jun 2018		Jan to Jun 2017
Meter reading and bill printing and delivery of energy bills		65,538		71,217		—		—
Communication		35,945		34,089		2,208		113
Maintenance and conservation of electrical facilities and equipment		152,048		126,852		12		21
Building conservation and cleaning		52,765		50,102		294		425
Contracted labor		10,829		5,106		102		—
Freight and airfares		3,214		3,368		716		939
Accommodation and meals		5,616		6,437		97		100
Security services		10,125		10,936		—		—
Consultancy		4,863		7,800		898		704
Maintenance and conservation of furniture and utensils		1,351		1,616		13		—
Information technology		22,498		24,152		1,325		628
Maintenance and conservation of vehicles		1,045		924		—		—
Disconnection and reconnection		22,725		12,332		—		—
Environment		4,659		8,210		—		—
Legal services		11,101		8,801		460		440
Legal procedural costs		986		1,230		—		35
Tree pruning		9,917		8,967		—		—
Cleaning of power line pathways		13,692		4,050		—		—
Copying and legal publications		8,620		9,851		334		59
Inspection of customer units		4,674		57		—		—
Other expenses		48,135		50,667		2,944		138

		490,346		446,764		9,403		3,602


	Consolidated					Holding Company
	Apr to Jun 2018		Apr to Jun 2017			Apr to Jun 2018		Apr to Jun 2017
Meter reading and bill printing and delivery of energy bills		34,342		37,141			—		—
Communication		17,536		19,243			2,082		51
Maintenance and conservation of electrical facilities and equipment		73,655		62,819			7		2
Building conservation and cleaning		26,835		27,600			236		258
Contracted labor		6,888		2,720			102		—
Freight and airfares		2,367		2,073			601		557
Accommodation and meals		3,032		3,439			58		59
Security services		5,147		5,623			—		—
Consultancy		1,575		4,806			860		554
Maintenance and conservation of furniture and utensils		756		834			13		—
Information technology		11,337		11,837			1,133		487
Maintenance and conservation of vehicles		547		505			—		—
Disconnection and reconnection		12,586		8,053			—		—
Environment		2,525		3,421			—		—
Legal services		6,320		5,908			189		148
Legal procedural costs		615		787			—		25
Tree pruning		5,888		5,310			—		—
Cleaning of power line pathways		7,719		2,974			—		—
Copying and legal publications		4,413		6,075			263		29
Inspection of customer units		2,811		(571	)		—		—
Other expenses		27,659		27,543			1,892		(1,285	)

		254,553		238,140			7,436		885

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Energy purchased for resale


	Consolidated
	Jan to Jun 2018			Jan to Jun 2017
Supply from Itaipu Binacional		633,420			616,817
Physical guarantee quota contracts		311,625			224,452
Quotas for Angra I and II nuclear plants		133,423			121,888
Spot market		929,226			771,921
Proinfa Program		159,696			150,644
‘Bilateral’ contracts		211,751			148,391
Energy acquired in Regulated Market auctions		1,480,756			1,377,210
Energy acquired in the Free Market		1,715,482			1,786,560
Pasep and Cofins credits		(492,781	)		(455,465	)

		5,082,598			4,742,418


	Consolidated
	Apr to Jun 2018			Apr to Jun 2017
Supply from Itaipu Binacional		345,177			322,771
Physical guarantee quota contracts		140,241			115,298
Quotas for Angra I and II nuclear plants		66,711			60,944
Spot market		710,115			614,518
Proinfa Program		79,848			75,322
‘Bilateral’ contracts		106,666			76,478
Energy acquired in Regulated Market auctions		757,243			634,978
Energy acquired in the Free Market		891,546			998,450
Pasep and Cofins credits		(278,642	)		(249,429	)

		2,818,905			2,649,330

Operating provisions (reversals)


	Consolidated						Holding Company
	Jan to Jun 2018			Jan to Jun 2017			Jan to Jun 2018			Jan to Jun 2017
Estimated losses on doubtful receivables		167,557			140,885			—			—
Estimated losses on other accounts receivables (1)		(4,934	)		—			—			—
Contingency provisions (reversals) (2)
Labor claims		(3,060	)		177,725			10,884			12,021
Civil		12,528			9,397			1,545			(111	)
Tax		(3,206	)		(3,164	)		(13	)		(2,608	)
Environmental		31			3			—			—
Regulatory		10,069			(10,835	)		3,709			(2,079	)
Other		1,674			6,633			10			457

		18,036			179,759			16,135			7,680

		180,659			320,644			16,135			7,680

Adjustment for losses
Put option – Sonda (Note 29)		—			41			—			—
Put option – Parati (Note 29)		62,054			7,631			62,054			7,631
Put option – SAAG (Note 29)		24,606			41,602			—			—

		86,660			49,274			62,054			7,631

		267,319			369,918			78,189			15,311

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	Consolidated						Holding Company
	Apr to Jun 2018			Apr to Jun 2017			Apr to Jun 2018			Apr to Jun 2017
Estimated losses on doubtful receivables		91,374			74,690			—			—
Estimated losses on other accounts receivables (1)		(5,494	)		—			—			—
Contingency provisions (reversals) (2)
Labor claims		(20,114	)		114,419			9,774			12,574
Civil		13,827			1,952			817			(273	)
Tax		(3,275	)		(4,758	)		(28	)		(3,212	)
Environmental		3			2			—			—
Regulatory		6,684			(11,913	)		750			(2,648	)
Other		3,357			307			46			422

		482			100,009			11,359			6,863

		86,362			174,699			11,359			6,863

Adjustment for losses
Put option – Sonda (Note 29)		—			41			—			—
Put option – Parati (Note 29)		27,519			(8,020	)		27,519			(8,020	)
Put option – SAAG (Note 29)		20,231			(5,334	)		—			—

		47,750			(13,313	)		27,519			(8,020	)

		134,112			161,386			38,878			(1,157	)

(1)	The estimate for loss on Other accounts receivable is presented in the Statement of income as an operating expenses.

(2)	The contingency provisions of Holding Company are presented in the consolidated Statement of income as operating expenses.

Construction cost


	Consolidated
	Jan to Jun 2018		Jan to Jun 2017
Personnel and managers		34,060		24,154
Materials		149,614		183,160
Outsourced services		164,089		191,183
Others		35,880		42,537

		383,643		441,034


	Consolidated
	Apr to Jun 2018		Apr to Jun 2017
Personnel and managers		19,490		13,908
Materials		73.680		103.530
Outsourced services		90.061		103.386
Others		19.743		19.651

		202.974		240.475

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Other operating expenses (revenues), net


	Consolidated				Holding Company
	Jan to Jun 2018		Jan to Jun 2017		Jan to Jun 2018		Jan to Jun 2017
Leasing and rentals		45,364		44,907		2,197		1,474
Advertising		3,093		8,314		158		176
Own consumption of energy		13,475		10,813		—		—
Subsidies and donations		6,569		6,524		1,311		—
Paid concession		1,446		1,529		—		—
Insurance		3,643		4,429		780		1,307
CCEE annual charge		3,751		4,045		1		1
Net loss (gain) on deactivation and disposal of assets		7,695		5,338		468		—
Forluz – Administrative running cost		14,582		13,033		604		645
Collection agents		35,398		35,287		—		—
Fine for violation of standard continuity indicator (1)		—		20,860		—		—
Taxes and charges		6,758		5,386		480		543
Other expenses		9,833		26,989		1,349		3,773

		151,607		187,454		7,348		7,919


	Consolidated				Holding Company
	Apr to Jun 2018		Apr to Jun 2017		Apr to Jun 2018		Apr to Jun 2017
Leasing and rentals		22,869		20,919		1,368		879
Advertising		1,581		7,482		154		176
Own consumption of energy		6,878		5,303		—		—
Subsidies and donations		4,764		2,991		1,311		—
Paid concession		668		777		—		—
Insurance		1,725		1,905		378		456
CCEE annual charge		1,827		2,017		1		1
Net loss (gain) on deactivation and disposal of assets		5,713		2,778		468		—
Forluz – Administrative running cost		6,720		6,562		326		325
Collection agents		17,940		17,835		—		—
Fine for violation of standard continuity indicator (1)		—		6,306		—		—
Taxes and charges		2,176		1,617		180		20
Other expenses		12,385		14,446		307		2,862

		85,246		90,938		4,493		4,719

(1)

As mentioned in Note 2.2, as from January 1, 2018 these amounts are now recognized as a reduction of revenue rather than operating expenses, as amended by Pronouncement CPC 47 / IFRS 15.

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27. FINANCE INCOME AND EXPENSES


	Consolidated						Holding Company
	Jan to Jun 2018			Jan to Jun 2017			Jan to Jun 2018			Jan to Jun 2017
FINANCE INCOME
Income from cash investments		41,850			125,493			4,931			28,709
Arrears fees on sale of energy		167,950			137,923			44			—
Foreign exchange variations		2,561			17,589			7			—
Monetary variations		11,496			13,993			8			1,568
Monetary variations – CVA		11,286			—			—			—
Monetary updating on Court escrow deposits		15,223			23,147			12,261			952
Pasep and Cofins charged on finance income		(20,044	)		(22,322	)		(2,301	)		(4,056	)
Gain on Financial instruments (Note 29)		180,396			—			(33	)		—
Other		80,451			53,078			3,875			5,845

		491,169			348,901			18,792			33,018
FINANCE EXPENSES
Costs of loans and financings		(602,963	)		(827,850	)		(1,156	)		—
Cost of debt – Amortization of transaction costs		(15,548	)		(29,827	)		(153	)
Foreign exchange variations		(580,747	)		(18,596	)		(7	)		(9	)
Monetary updating – loans and financings		(65,305	)		(68,973	)		—			—
Monetary updating – Concessions payable		(2,257	)		742			—			—
Charges and monetary updating on post-retirement obligation		(33,159	)		(35,984	)		(1,631	)		(1,770	)
Monetary updating – CVA		—			(28,080	)		—			—
Monetary updating – Advance sales of power supply		(6,815	)		(24,680	)		—			—
Other		(39,007	)		(49,953	)		(138	)		(182	)

		(1,345,801	)		(1,083,201	)		(3,085	)		(1,961	)

NET FINANCE INCOME (EXPENSES)		(854,632	)		(734,300	)		15,707			31,057


	Consolidated						Holding company
	Apr to Jun 2018			Apr to Jun 2017			Apr to Jun 2018			Apr to Jun 2017
FINANCE INCOME
Income from cash investments		18,123			60,663			2,356			12,944
Arrears fees on sale of energy		92,288			65,059			44			—
Foreign exchange variations		53			9,202			7			—
Monetary variations		6,310			5,595			8			540
Monetary variations – CVA		10,839			—			—			—
Monetary updating on Court escrow deposits		8,771			13,211			4,914			(3,280	)
Pasep and Cofins charged on finance income		(11,117	)		(11,210	)		(1,752	)		(2,906	)
Gain on Financial instruments (Note 29)		82,880			—			(33	)		—
Other		41,168			26,490			2,000			2,140

		249,315			169,010			7,544			9,438
FINANCE EXPENSES
Costs of loans and financings		(315,615	)		(382,076	)		(1,156	)		—
Cost of debt – Amortization of transaction costs		(6,548	)		(14,180	)		(153	)
Foreign exchange variations		(561,373	)		(18,596	)		(7	)		(9	)
Monetary updating – loans and financings		(26,632	)		(25,566	)		—			—
Monetary updating – Concessions payable		(1,593	)		1,122			—			—
Charges and monetary updating on post-retirement obligation		(15,152	)		(16,616	)		(745	)		(817	)
Monetary updating – CVA		—			(21,911	)		—			—
Monetary updating – Advance sales of power supply		(3,196	)		(12,119	)		—			—
Other		(16,038	)		(20,622	)		(130	)		(8	)

		(946,147	)		(510,564	)		(2,191	)		(834	)

NET FINANCE INCOME (EXPENSES)		(696,832	)		(341,554	)		5,353			8,604

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28. RELATED PARTY TRANSACTIONS

Cemig’s main balances and transactions with related parties and its jointly-controlled entities are as follows:


	ASSETS				LIABILITIES				REVENUE				EXPENSES

Company / Item	Jun. 30, 2018		Dec. 31, 2017		Jun. 30, 2018		Dec. 31, 2017		Jan to Jun 2018		Jan to Jun 2017		Jan to Jun 2018			Jan to Jun 2017
Shareholder
Minas Gerais State Government
Current
Customers and traders (1)		140,122		54,926		—		—		81,249		69,390		—			—
Public Lighting Contribution (CIP) (1)		1,708		1,220		—		—		—		—		—			—
Accounts Receivable—AFAC (2)		—		235,018
Non-current
Customers and traders (1)		27,091		50,349		—		—		—		—		—			—
Public Lighting Contribution (CIP) (1)		342		1,119		—		—		—		—		—			—
Accounts Receivable—AFAC (2)		248,100		—		—		—		13,082		—		—			—
Jointly-controlled entity
Aliança Geração
Current
Transactions with energy (3)		—		—		6,915		7,105		15,150		247		(75,255	)		(65,133	)
Provision of services (4)		1,515		1,657		—		—		5,964		5,570		—			—
Interest on Equity, and dividends		—		72,315		—		—		—		—		—			—
Baguari Energia
Current
Transactions with energy (3)		—		—		846		858		—		—		(3,666	)		(3,457	)
Services (4)		211		211		—		—		446		431		—			—
Interest on Equity, and dividends		3,558		—		—		—		—		—		—			—
Madeira Energia
Current
Transactions with energy (3)		—		—		26,191		56,531		17,146		10,513		(332,788	)		(299,092	)
Advance for future power supply (5)		45,117		66,185		—		—		4,549		—		—			—
Reimbursement for decontracted supply (6)		42,046		—		—		—		411		—		—			—
Non-current
Advance for future power supply (5)		—		6,870		—		—		—		—		—			—
Reimbursement for decontracted supply (6)		24,527		—		—		—		—		—		—			—
Norte Energia
Current
Transactions with energy (3)		130		130		5,621		3,640		8,287		2,926		(94,143	)		(55,813	)
Lightger
Current
Transactions with energy (3)		—		—		—		—		—		—		(9,012	)		(10,463	)
Hidrelétrica Pipoca
Current
Transactions with energy (3)		—		—		1,589		—		—		—		(9,154	)		(7,172	)
Interest on Equity, and dividends		—		584		—		—		—		—		—			—
Retiro Baixo
Current
Transactions with energy (3)		—		—		520		528		—		—		(3,207	)		(2,910	)
Interest on Equity, and dividends		2,581		2,581		—		—		—		—		—			—
Hidrelétrica Cachoeirão
Current
Interest on Equity, and dividends		2,291		—		—		—		—		—		—			—
Renova
Current
Transactions with energy (3)		—		—		11,963		1,744		—		—		(66,548	)		(102,750	)
Non-current
Advance for future delivery of power supply (7)		99,118		—		—		—		2,550		26,486		—			—
Accounts receivable (8)		367,436		350,200		—		—		17,326		—		—			—
Empresa Amazonense de Transmissão de Energia (EATE)
Current
Transactions with energy (3)		—		—		2,433		2,882		—		—		(11,706	)		(13,097	)

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	ASSETS						LIABILITIES				REVENUE				EXPENSES
Company / item	Jun. 30, 2018			Dec. 31, 2017			Jun. 30, 2018		Dec. 31, 2017		Jan to Jun 2018		Jan to Jun 2017		Jan to Jun 2018			Jan to Jun 2017
Light
Current
Transactions with energy (3)		84			1,128			492		483		31,736		24,291		(535	)		(862	)
Interest on Equity, and dividends		1,200			—			—		—		—		—		—			—
Taesa
Current
Transactions with energy (3)		—			—			9,929		12,105		—		—		(61,659	)		(58,757	)
Services (4)		172			404			—		—		282		528		—			—
Interest on Equity, and dividends		18			—			—		—		—		—		—			—
Companhia Transirapé de Transmissão
Current
Transactions with energy (3)		—			—			893		964		—		—		(4,692	)		(4,890	)
Services (4)		90			90			—		—		637		634		—			—
Interest on Equity, and dividends		—			1,413			—		—		—		—		—			—
Axxiom
Current
Provision of services (9)		—			—			1,055		2,982		—		—		—			—
Transudeste
Current
Transactions with energy (3)		—			—			160		191		—		—		(788	)		(721	)
Services (4)		156			175			—		—		304		279		—			—
Transleste
Current
Transactions with energy (3)		—			—			259		308		—		90		(1,271	)		(1,162	)
Services (4)		120			120			—		—		552		543		—			—
Other related parties
FIC Pampulha
Current
Cash and cash equivalents		121,953			322,423			—		—		—		—		—			—
Securities		297,939			1,037,423			—		—		7,535		38,169		—			—
(-) Securities issued by subsidiary companies (10)		(9,794	)		(25,493	)		—		—		—		—		—			—
Non-current
Securities		77,047			30,124			—		—		—		—		—			—
(-) Securities issued by subsidiaries (10)		(13,321	)		—			—		—		—		—		—			—
Forluz
Current
Post-retirement obligations (11)		—			—			117,447		108,843		—		—		(95,967	)		(86,979	)
Supplementary pension contributions (12) - Defined contribution plan		—			—			—		—		—		—		(36,692	)		(42,917	)
Administrative running costs (13)		—			—			—		—		—		—		(14,582	)		(13,033	)
Operational leasing (14)		—			—			1,662		4,998		—		—		(23,065	)		(24,295	)
Non-current
Post-retirement obligations (11)		—			—			1,959,626		1,959,512		—		—		—			—
Cemig Saúde
Current
Health Plan and Dental Plan (15)		—			—			109,601		115,045		—		—		(93,068	)		(96,718	)
Non-current
Health Plan and Dental Plan (15)		—			—			1,775,741		1,633,291		—		—		—			—

The main conditions and characteristics of interest with reference to the related party transactions are:

(1)

This refers to sale of energy supply to the Minas Gerais State government. The price of the supply is the one set by Aneel through a Resolution relating to the annual tariff adjustment of Cemig D. In 2017 the government of Minas Gerais State signed a debt recognition agreement with Cemig D for payment of debits relating to the supply of power due and unpaid, in the amount of R$ 113,032 , to be settled in 24 installments, updated monthly by the variation of the IGP-M. The first portion, in the amount of R$ 5,418, was settled in December 2017, and the others have due dates up to November, 2019. These receivables have guarantee in the form of Cemig’s right to retain dividends and Interest on Equity otherwise payable to the State (in proportion to the State’s equity interest in the Company), for as long as any payments are overdue or in default.

(2)	This refers to the recalculation of the monetary updating of amounts relating to the Advance for Future Capital Increase (AFAC), which were returned to the State of Minas Gerais. Amount transferred to Accounts Receivable from Minas Gerais State, on September 30, 2017 (see Note 11).

(3)

Transactions with energy between generators and distributors were made in auctions organized by the federal government; transactions for transport of electricity, made by transmission companies, arise from the centralized operation of the National Grid carried out by the National System Operator (ONS).

(4)	Refers to a contract to provide plant operation and maintenance services.

(5)

In 2017, advance payments of R$ 70,100 were made to Santo Antônio Energia, subsidiary of Madeira Energia: R$ 51,874 by Cemig GT, and R$ 11,917 and R$ 6,309 by Sá Carvalho and Rosal, respectively. For the purposes of settlement, invoices for energy supply to be issued by Santo Antônio Energia starting in 2018, in 12 tranches, will be used;

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(6)

This refers to reimbursement of supply of energy that was decontracted due to alteration of Regulated Market Electricity Sale Contracts (CCEARs) between Santo Antônio Energia (subsidiary of Madeira Energia) and Cemig D (Distribution), with value totaling R$ 84,092, to be settled in 24 monthly installments, with monetary adjustment by the Selic rate, with due dates up to January 2020.

(7)	This refers to advance payments under Agreements for Incentive-bearing Power Supply becoming due in April 2018 through May 2019, discounted at 155% of the rate for Interbank Certificates of Deposit published by Cetip.

(8)

Cemig GT has an item of R$ 367 million receivable from Renova that will be paid in monthly installments over 2021 with adjustment at 150% to 155% of the CDI rate. The pre-payments have guarantees, shared between Cemig and Light, related to the stockholding positions in and dividends from investees of Renova, and also the wind projects to be developed.

(9)	This refers to a contract for development of management software between Cemig D and Axxiom Soluções Tecnológicas S.A., instituted in Aneel Dispatch 2,657/2017.

(10)	FIC Pampulha has financial investments in securities issued by subsidiary companies of the Company. There is more information, and characteristics of the fund, in the description below.

(11)	The contracts of Forluz are updated by the Expanded Customer Price Index (IPCA) calculated by the Brazilian Geography and Statistics Institute (Instituto Brasileiro de Geografia e Estatística, or IBGE) (See Note 22), and will be amortized up to the business year of 2024.

(12)	The Company’s contributions to the pension fund for the employees participating in the Mixed Plan, and calculated on the monthly remuneration, in accordance with the regulations of the Fund.

(13)	Funds for annual current administrative costs of the Pension Fund in accordance with the specific legislation of the sector. The amounts are estimated as a percentage of the Company’s payroll.

(14)	Rental of the Company’s administrative head offices, in effect to March 2019 and May 2034, adjusted annually by IPCA inflation index.

(15)	Post-retirement obligations relating to the employees’ health and dental plan (see Note 22).

Dividends receivable from subsidiaries

Dividends receivable

Consolidated

Holding Company

Jun. 30, 2018

Dec. 31, 2017

Jun. 30, 2018

Dec. 31, 2017

Cemig GT

—

364,230

564,230

Other

9,648

76,893

45,168

38,819

9,648

76,893

409,398

603,049

Guarantees on loans, financings and debentures

Cemig has provided guarantees on loans, financings and debentures of the following related parties – not consolidated in the interim financial information because they relate to jointly-controlled entities or affiliated companies:

Related party

Relationship

Type

Objective

Jun. 30, 2018

Maturity

Norte Energia (NESA)

Affiliated

Surety

Financing

2,548,450

2042

Light (1)

Jointly-controlled entity

Counter-guarantee

Financing

683,615

2042

Santo Antônio Energia (SAESA)

Jointly-controlled entity

Surety

Financing

1,892,193

2034

Santo Antônio Energia (SAESA)

Jointly-controlled entity

Surety

Debentures

815,497

2037

Centroeste

Jointly-controlled entity

Surety

Financing

7,572

2023

5,947,327

(1)	Related to execution of guarantees of the Norte Energia financing.

On June 30, 2018, Management believes that there is no need to recognize any provisions in the Company’s interim financial information for the purpose of meeting any obligations arising under these sureties and/or guarantees.

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Cash investments in FIC Pampulha – investment fund of Cemig, its subsidiaries and affiliates

Cemig and its subsidiaries and affiliates invest part of their financial resources in an investment fund which has the characteristics of fixed income and obeys the Company’s cash investment policy. The amounts invested by the fund on June 30, 2018 are reported in Securities in Current or Non-current assets, or presented after deduction of the account line Debentures in Current or Non-current liabilities.

The funds applied are allocated only in public and private fixed income securities, subject only to credit risk, with various maturity periods, obeying the unit holders’ cash flow needs.

The financial investments of the investment fund in securities of related parties are as follows:

Issuer of security

Type

Annual contractual
conditions

Maturity

Jun. 30, 2018

Cemig
3.23%

Cemig GT
8.51%

Cemig D
0,58%

Other
subsidiaries
26.25% (1)

Total
38.57%

ETAU

Debentures

108.00% of CDI

Dec. 01, 2019

325

856

1,401

2,641

LIGHT

Promissory Note

CDI + 3.50%

Jan. 22, 2019

222

584

957

1,803

547

1,440

2,358

4,444

Issuer of security

Type

Annual contractual
conditions

Maturity

Dec. 31, 2017

Cemig
4.17%

Cemig GT
26.85%

Cemig D
19.90%

Other
subsidiaries
21.36% (1)

Total
72.28%

ETAU

Debentures

108.00% of CDI

Dec. 01, 2019

420

2,706

2,005

2,152

7,283

LIGHT

Promissory Note

CDI + 3.50%

Jan. 22, 2019

834

5,375

3,983

4,276

14,468

1,254

8,081

5,988

6,428

21,751

(1)	Refers to the other companies consolidated by Cemig, which also have a stake in the investment funds.

Remuneration of key Management personnel

The total costs of key personnel, comprising the Executive Board, the Fiscal Council and the Board of Directors, for the six-month periods ended June 30, 2018 and 2017, are as follows:


	Jan to Jun 2018		Jan to Jun 2017
Remuneration		16,906		15,435
Profit sharing		3,599		158
Assistance benefits		1,327		780

Total		21,832		16,373

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29. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Classification of financial instruments and fair value

The principal financial instruments, classified according to the accounting practices adopted by the Company, are:


	Level		Jun. 30, 2018						Dec. 31, 2017
	Level		Book value (Restated)			Fair value (Restated)			Book value			Fair value
Assets
Amortized cost (1)
Cash equivalents – Investments		2		896,953			896,953			916,762			916,762
Securities – Investments		2		67,658			67,658			44,244			44,244
Customers and Traders; Concession holders (Transport of energy)		2		3,666,531			3,666,531			4,033,106			4,033,106
Restricted cash		2		111,220			111,220			106,227			106,227
Advances to suppliers		2		195,681			195,681			122,920			122,920
Accounts receivable from the State of Minas Gerais		2		417,363			417,363			342,632			342,632
Concession financial assets: CVA (Portion ‘A’ Costs Variation Compensation) Account, and Other financial components, in tariff adjustments		3		858,761			858,761			369,010			369,010
Reimbursement of tariff subsidies		2		85,827			85,827			77,086			77,086
Low-income subsidy		2		25,140			25,140			26,660			26,660
Escrow deposits		2		2,380,376			2,380,376			2,335,632			2,335,632
Concession grant fee – Generation concessions		3		2,371,831			2,371,831			2,337,135			2,337,135
Accounts receivable – Renova		2		367,436			367,436			350,200			350,200
Reimbursement – Decontracting of supply		2		66,573			66,573			—			—

				11,511,350			11,511,350			11,061,614			11,061,614
Fair value through profit or loss
Securities
Bank certificates of deposit		2		935			935			2,652			2,652
Treasury Financial Notes (LFTs)		1		121,124			121,124			739,945			739,945
Financial Notes – Banks		2		158,949			158,949			290,004			290,004
Debentures		2		3,216			3,216			11,292			11,292

				284,224			284,224			1,043,893			1,043,893
Concession financial assets – Transmission – Assets remunerated by tariff		3		552,019			552,019			547,800			547,800
Derivative financial instruments – Swaps		3		132,431			132,431			8,649			8,649
Derivative financial instruments (Ativas and Sonda put options) (2)		3		3,849			3,849			3,801			3,801
Concession financial assets – Distribution infrastructure		3		384,341			384,341			369,762			369,762
Indemnities receivable – Transmission		3		1,822,294			1,822,294			1,928,038			1,928,038
Indemnities receivable – Generation		3		1,935,220			1,935,220			1,900,757			1,900,757

				5,114,378			5,114,378			5,802,700			5,802,700

				16,625,728			16,625,728			16,864,314			16,864,314

Liabilities
Amortized cost (1)
Loans, financings and debentures		2		(14,604,054	)		(14,604,054	)		(14,397,697	)		(14,397,697	)
Debt agreed with pension fund (Forluz)		2		(686,191	)		(686,191	)		(720,498	)		(720,498	)
Settlement of deficit of pension fund (FORLUZ)		2		(380,311	)		(380,311	)		(283,291	)		(283,291	)
Concession financial assets: CVA (Portion ‘A’ Costs Variation Compensation) Account, and Other financial components, in tariff adjustments		3		(23,046	)		(23,046	)		(414,800	)		(414,800	)
Concessions payable		3		(18,477	)		(18,477	)		(21,227	)		(21,227	)
The Minas Gerais State Tax Amnesty Plan (PRCT)		2		—			—			(282,876	)		(282,876	)
Suppliers		2		(2,152,676	)		(2,152,676	)		(2,342,757	)		(2,342,757	)
Advances from clients		2		(150,728	)		(150,728	)		(232,762	)		(232,762	)

				(18,015,483	)		(18,015,483	)		(18,695,908	)		(18,695,908	)
Fair value through profit or loss
Derivative financial instruments – Swaps		3		(1,214	)		(1,214	)		(41,111	)		(41,111	)
Derivative financial instruments – RME put options		2		(569,286	)		(569,286	)		(507,232	)		(507,232	)
Derivative financial instruments (SAAG put options)		3		(336,199	)		(336,199	)		(311,593	)		(311,593	)

				(906,699	)		(906,699	)		(859,936	)		(859,936	)

				(18,922,182	)		(18,922,182	)		(19,555,844	)		(19,555,844	)

(1)	On Saturday, June 30, 2018 December 31, 2017, the book values of financial instruments were similar to the fair values.

(2)	Options in shares of Sonda in the amount of R$ 3,849, posted in the Company’s Assets due to the merger of Cemig Telecom.

LOGO

In the initial recognition the Company measures its financial assets and liabilities at fair value and classifies them according to the accounting rules currently in effect. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Fair Value Hierarchy aims to increase consistency and comparability: it divides the inputs used in measuring fair value into three broad levels, as follows:

◾

Level 1 – Active market – Quoted prices: A financial instrument is considered to be quoted in an active market if the prices quoted are promptly and regularly made available by an exchange or organized over-the-counter market, by operators, by brokers or by a market association, by entities whose purpose is to publish prices, or by regulatory agencies, and if those prices represent regular arm’s length market transactions made without any preference.

◾

Level 2 – No active market – Valuation technique: For an instrument that does not have an active market, fair value should be found by using a method of valuation/pricing. Criteria such as data on the current fair value of another instrument that is substantially similar, or discounted cash flow analysis or option pricing models, may be used. The objective of the valuation technique is to establish what would be the transaction price on the measurement date in an arm’s-length transaction motivated by business considerations.

◾

Level 3 – No active market – No observable inputs: The fair value of investments in securities for which there are no prices quoted on an active market, or of derivatives linked to them which are to be settled by delivery of unquoted securities, is determined based on generally accepted valuation techniques, based on discounted cash flow analysis and other valuation techniques, such as new replacement Value (Valor novo de reposição, or VNR).

Fair value calculation of financial positions

Concession financial assets related to Distribution infrastructure and related to Transmission infrastructure – assets remunerated by tariff: measured at New Replacement Value (VNR), according to criteria established in regulations by the Concession grantor (‘Grantor’), based on fair value of the assets in service belonging to the concession and which will be revertible at the end of the concession, and on the Weighted average cost of capital (WACC) used by the Grantor, which reflects the concession holder’s return on the operations of the concession. The VNR and the WACC are public information disclosed by the Grantor and by Cemig. The movement in Concession financial assets is shown in Note 14.

Indemnities receivable – Transmission: measured at New Replacement Value (Valor Novo de Reposição, or VNR), according to criteria established by the Concession-granting power (‘Grantor’), based on fair value of the assets to be indemnified as a result of acceptance of the terms of Law 12,783/13, and on the weighted average cost of capital (WACC) used by the Grantor, which reflects the concession holder’s return on the operations of the concession. The VNR and the WACC are public information disclosed by the Grantor and by Cemig.

Indemnities receivable – Generation: measured at New Replacement Value (Valor Novo de Reposição, or VNR), according to criteria established by the concession Grantor, based on the assets fair value to be indemnified by the termination of the concession.

Cash investments: The fair value of cash investments is calculated taking into consideration the market prices of the security, or market information that makes such calculation possible, and future rates in the fixed income and FX markets applicable to similar securities. The market value of the security is deemed to be its maturity value discounted to present value by the discount factor obtained from the market yield curve in Reais.

Put options: The Company adopted the Black-Scholes-Merton method for measuring the fair value of the SAAG, RME, and Sonda options. The fair value of these options was calculated based on the estimated exercise price on the day of exercise of the option, less the fair value of the underlying shares, also estimated for the date of exercise, and brought to present value at the reporting date.

Swap transactions: The fair value of the swap transactions was calculated based on the security market value at the due date brought to present value using the discount factor from the market yield curve in Reais.

Other financial liabilities: The Company has calculated the fair value of its loans, financings and debentures using 147.66% of the CDI rate – based on its most recent borrowings. For those loans, financings and debentures, and for debt renegotiated with Forluz, with annual rates between IPCA + 4.70% to 8.07% and CDI + 1.60% to 4.05%, the Company considered fair value to be substantially equal to book value.

LOGO

Derivative financial instruments:

Put options

The Company holds options to sell certain securities to it (put options) for which it has calculated the fair value based On the Black and Scholes Merton (BSM) model. This takes the following variables into account: exercise price of the option; closing price of the underlying asset on June 30, 2018; the risk-free interest rate; the volatility of the price of the underlying asset; and the time to maturity of the option.

Analytically, calculation of the exercise price of the options, the risk-free interest rate and the time to maturity is primarily deterministic, so that the main divergence in the put options takes place in the measurement of the closing price and the volatility of the underlying asset.

On June 30, 2018, the existing options were as follows:


Consolidated	Balance on Jun. 30, 2018			Balance on Dec. 31, 2017
Put option – RME		569,286			507,232
Put option – SAAG		336,199			311,593
Put / call options – Ativas and Sonda		(3,849	)		(3,801	)

		901,636			815,024

Put option – SAAG

Option Contracts were signed between Cemig GT and the private pension entities that participate in the investment structure of SAAG (comprising FIP Melbourne, Parma Participações S.A. and FIP Malbec, jointly, ‘the Investment Structure’), giving those entities the right to sell units in the Funds that comprise the Investment Structure, at the option of the Funds, in the 84^th (eighty-fourth) month from June 2014. The exercise price of the Put Options will correspond to the amount invested by each private pension plan in the Investment Structure, updated pro rata temporis by the Expanded National Customer Price (IPCA) index published by the IBGE, plus interest at 7% per year, less such dividends and Interest on Equity as shall have been paid by SAAG to the pension plan entities. This option was considered to be a derivative instrument, accounted at fair value through profit or loss.

For measurement of the fair value of SAAG put options Cemig GT uses the Black-Scholes-Merton (‘BSM’) model. The assumption was made that the future expenditures of FIP Malbec and FIP Melbourne are insignificant, so that the options are valued as if they were direct equity interests in Mesa. However, neither SAAG nor Mesa are traded on a securities exchange, so that some assumptions are necessary for calculation of the price of the asset and its volatility for application of the BSM model. The closing price of the share of Mesa on June 30, 2018 is ascertained on the basis of free cash flow to equity holders (FCFE), expressed by equivalence of the indirect interests held by the FIPs. Volatility, in turn, is measured as an average of historic volatility (based on the hypothesis that the series of the difference of continuously capitalized returns follows a normal distribution) of comparable companies in the electricity generation sector that are traded on the Bovespa.

Based on the studies made, a liability of R$ 336,199 (R$ 311,593 on December 31, 2017) is recorded in the Company’s Interim Financial Information, for the difference between the exercise price and the estimated fair value of the assets.

The changes in the value of the options are as follows:


	Consolidated
Balance at Dec. 31, 2016		196,173
Adjustment to fair value		46,936
Reversals		(5,334	)

Balance on June 30, 2017		237,775

Balance at Dec. 31, 2017		311,593
Adjustment to fair value		24,606

Balance on June 30, 2018		336,199

LOGO

Cemig GT has made an analysis of the sensitivity of the exercise price of the option, varying the risk-free interest rate and the volatility, keeping the other variables of the model unchanged. In this context, scenarios for the risk-free interest rate at 5.44% p.a. to 9.44% p.a., and for volatility between 21% and 81% p.a., were used, resulting in estimates of minimum and maximum price for the put option of R$ 306,536 and R$ 391,101, respectively.

Put options of RME

Cemig granted a put option to Fundo de Participações Redentor – which is now a shareholder of Rio Minas Energia Participações S.A. (RME) – the right for Redentor to sell all RME’s shares, originally exercisable in May 2016. The exercise price of the option is calculated based on the sum of the value of the amounts injected by the Fund into the investee, plus the running expenses of the fund, less Interest on Equity, and dividends, distributed by RME.

The exercise price is subject to monetary updating by the CDI (Interbank CD) Rate plus financial remuneration at 0.9% per year.

RME owns common and preferred shares of Light, and currently exercise jointly control, with the Company, over the activities of that investee. Therefore, this option was considered to be a derivative instrument, accounted at fair value through profit or loss.

On November 22, 2017 Cemig signed the First Amendment to the Shareholders’ Agreement of RME – Rio Minas Energia Participações S.A. (‘RME’), with: Banco Santander (Brasil) S.A. (‘Santander’), BV Financeira S.A. – Crédito Financiamento e Investimento (‘BV’ Financeira’) and BB-Banco de Investimento S.A. (‘BB-BI’), (jointly, ‘the Shareholder banks’) to formalize the partial postponement of the date of the Put option granted by Cemig to the Shareholder Banks, the new exercise date being moved from November 30, 2017 to November 30, 2018.

On September 21, 2018 Cemig received Cemig Notices of Intention to Exercise Put Option – in the Third Exercise Window, from RME – Rio Minas Energia Participações S.A. (‘RME’), BB-Banco de Investimento S.A., BV Financeira S.A. Crédito, Financiamento e Investimento, and Banco Santander (Brasil) S.A., (‘the Stockholder Banks’) giving irrevocable and irreversible notice of exercise of the right to sell the totality of their respective holdings, representing a total of 50% of the voting stock and 25% of the total share capital of RME, to be acquired by Cemig or by a third party indicated by Cemig, until November 30, 2018.

Amount of the Company’s exposure

The change in the value of the options – the difference between the estimated fair value for the assets and the corresponding exercise price, for the six-month periods ended June 30, 2018 and 2017, has been as follows:


	Consolidated
Balance at Dec. 31, 2016		1,149,881
Variation in fair value		15,651
Reversals		(8,020	)

Balance on June 30, 2017		1,157,512

Balance at Dec. 31, 2017		507,232
Variation in fair value		62,054

Balance on Jun. 30, 2018		569,286

In the calculation of the fair value of the option based on the Black-Scholes-Merton analysis, the following variables are taken into account: exercise price of the option; closing price of the share of Light on June 30, 2018 (as a reference for the value of the indirect equity interest held by the direct Shareholders of RME in Light); the risk-free interest rate; the volatility of the price of the underlying asset; and the time to maturity of the option.

LOGO

The Company has made an analysis of the sensitivity of the exercise price of the option, varying the risk-free interest rate and the volatility, keeping the other variables of the model unchanged. In this context, scenarios for the risk-free interest rate at 2.09% to 10.09% p.a., and for volatility between 10.0% and 80.0% p.a., were used, resulting in estimates of minimum and maximum price for the put option of R$ 558,541 and R$ 580,214, respectively.

Sonda options

As part of the shareholding restructuring process, Cemig Telecom and Sonda signed a Purchase Option Agreement (issued by Cemig Telecom) and a Sale Option Agreement (issued by Sonda). Considering the merger of Cemig Telecom into Cemig, occurred on June 30, 2018, the option contract is now between Cemig and Sonda.

These resulted in Cemig simultaneously having a right (put option) and an obligation (call option). The exercise price of the put option will be equivalent to fifteen times the adjusted net income of Ativas in the business year prior to the exercise date. The exercise price of the call option will be equivalent to seventeen times the adjusted net income of Ativas in the business year prior to the exercise date. Both options, if exercised, result in the sale of the shares in Ativas currently owned by the Company, and the exercise of one of the options results in nullity of the other. The options may be exercised as from January 1, 2021.

The put and call options in Ativas (‘the Ativas Options’) were measured at fair value and posted at their net value, i.e. the difference between the fair values of the two options on the reporting date of the interim financial information for June 30, 2018. Depending on the value of the options, the net value of the Ativas Options may be an asset or a liability of the Company.

The measurement has been made using the Black-Scholes-Merton (BSM) model. In the calculation of the fair value of the Ativas Options based on the BSM model, the following variables are taken into account: closing price of the underlying asset on June 30, 2018; the risk-free interest rate; the volatility of the price of the underlying asset; the time to maturity of the option; and the exercise prices on the exercise date.

The closing price of the underlying asset was based on the valuation prepared by the same specialized consulting firm responsible for calculating the options. The valuation base date is June 30, 2018, the same date of closing of the Company’s interim financial information, and the methodology used to calculate the Company’s fair value is Discounted Cash Flow (DCF) based on the value of the transaction in shares of Ativas by Sonda, held on October 19, 2016. The calculation of the risk-free interest rate was based on yields of National Treasury Bills. The time to maturity was calculated assuming exercise date on June 30, 2021.

Considering that the exercise prices of the options are contingent upon the future financial accounting results of Ativas, the estimate of the exercise prices on the date of maturity was based on statistical analysis and on information of comparable listed companies.

Swap transactions

Considering that part of the loans and financings of the Company’s subsidiaries is denominated in foreign currency, the companies use derivative financial instruments (swap transactions) to protect the servicing associated with these debts (principal plus interest).

The derivative instruments contracted have the purpose of protecting the operations against the risks arising from foreign exchange variation and are not used for speculative purposes.

The amounts of the principal of derivative transactions are not presented in the balance sheet, since they refer to transactions that do not require cash principal payments to be made: only the gains or losses that actually occur are recorded. The net result of these transactions on June 30, 2018 was a positive adjustment of R$ 180,429, recorded in finance income (expenses).

The Company has a Financial Risks Management Committee, created to monitor the financial risks in relation to volatility and trends of inflation indices, exchange rates and interest rates that affect its financial transactions and which could negatively affect its liquidity and profitability. The Committee implements action plans and sets guidelines for proactive control of the financial risks environment.

The counterparties of the derivative transactions are the banks Bradesco, Itaú, Goldman Sachs and BTG Pactual and the Company is guarantor of the derivative instruments contracted by Cemig GT.

LOGO

The table below shows the derivative instruments contracted by Cemig GT as of June 30, 2018 and December 31, 2017.

Cemig’s right (1)

Cemig’s
obligation

Maturity
period

Trading
market

Value of
principal
contracted (2)

Unrealized gain / loss

Amount
according to
contract –Jun.
30, 2018

Fair value –
Jun. 30,
2018

Amount
according to
contract –
Dec. 31,
2017

Fair value
– Dec. 31,
2017

US$:

FX variation +

Rate (9.25% p.a.)

In R$:

150.49% of
CDI rate

From July
2018

to Dec.
2024

Over-the-counter

US$ 1,000,000

584,388

131,217

50,792

(32,462)

(1)	The full transaction is: Combination of (a) Call Spread on the principal, with a low limit of R$ 3.25 and a high limit of R$ 5.00, and (b) Swap of 100% of the interest, exchanging coupon of 9.25% p.a. (on the US$ amount) for local rate equivalent to 150.49% of the CDI.

(2)	In thousands of US$.

The Company uses a mark-to-market methodology for the derivative financial instruments used to protect the Eurobond, in accordance with market practices. The main indicators to measure the fair value of the swap are the market curves for the DI rate, and dollar future traded in the B3 future market. To price the call spread (options) the Black & Scholes model is used.

The fair value at June 30, 2018 was R$ 131,217, which would be a reference if the Company had settled of the derivative instrument on June 30, 2018; however, the swap contracts protect the Company’s cash flow up to maturity of the bonds in 2024, and have a contractual value of R$ 584,388, on June 30, 2018, underlining the effectiveness of the hedge strategy adopted by the Company.

Risk management

Corporate risk management is a management tool that is an integral part of the Company’s corporate governance practices, and is aligned with the process of planning, which sets the Company’s strategic business objectives.

The Company has a Financial Risks Management Committee, the purpose of which is to implement guidelines and monitor the financial risk of transactions that could negatively affect the Company’s liquidity or profitability, recommending hedge strategies to control the Company’s exposure to foreign exchange rate risk, interest rate risk, and inflation risks.

The principal risks to which the Company and its subsidiaries are exposed are as follows:

Exchange rate risk

Cemig and its subsidiaries are exposed to the risk of increase in exchange rates, with effect on Loans and financings, Suppliers, and cash flow.

The net exposure to exchange rates is as follows:


Exposure to exchange rates	Jun. 30, 2018				Dec. 31, 2017
Exposure to exchange rates	Foreign currency		R$		Foreign currency		R$
US dollar
Loans and financings (Note 20)		1,015,140		3,914,177		1,014,535		3,356,082
Suppliers (Itaipu Binacional)		71,046		274,236		73,698		240,220

		1,086,186		4,188,413		1,088,233		3,596,302
Euros
Loans and financings – Euros (Note 20)		1,096		4,936		1,105		4,383

Net liabilities exposed				4,193,349				3,600,685

LOGO

Sensitivity analysis

Based on information from its financial consultants, the Company estimates that in a probable scenario the variation of the exchange rates of foreign currencies in relation to the Real on June 30, 2019 will an appreciation of the dollar by 7.51%, to R$ 3.57/US$, and depreciation of the Euro by 6.67%, to R$ 4.20/€. The Company has made a sensitivity analysis of the effects on the Company’s net income arising from depreciation of the Real exchange rate by 25%, and by 50%, in relation to this ‘probable’ scenario.


Risk: foreign exchange rate exposure	Book value		‘Probable’ scenario US$1= R$ 3.57 EUR1= R$ 4.20			‘Possible’ scenario US$1= R$ 4.46 EUR1= R$ 5.25		‘Remote’ scenario US$1= R$ 5.36 EUR1= R$ 6.30
US dollar
Loans and financings		3,914,177		3,620,107			4,522,599		5,435,231
Suppliers (Itaipu Binacional)		274,236		253,633			316,864		380,805

		4,188,413		3,873,740			4,839,463		5,816,036

Euros
Loans and financings		4,936		4,607			5,759		6,911

Net liabilities exposed		4,193,349		3,878,347			4,845,222		5,822,947

Net effect of exchange rate variation				(315,002	)		651,873		1,629,598

Note that the Company has contracted a swap transaction to replace the exposure to the US dollar with exposure to variation in the CDI Rate, as described in more detail in the item Swap Transactions in this Note.

Interest rate risk

On June 30, 2018 the Company is exposed to the risk of increase in Brazilian domestic interest rates. This exposure occurs as a result of net liabilities indexed to variation in interest rates, as follows:


Risk: Exposure to domestic interest rate changes	Consolidated
Risk: Exposure to domestic interest rate changes	Jun. 30, 2018 (Restated)			Dec. 31, 2017
Assets
Cash equivalents – investments (Note 5)		896,953			916,762
Securities (Note 6)		351,882			1,088,137
Accounts receivable – Renova (Note 28)		367,436			350,200
Advances to suppliers		195,681			122,920
Restricted cash		111,220			106,227
CVA and Other financial components in tariffs – Selic rate * (Note 14)		858,761			369,010
Receivable for residual value – Generation – SELIC (Note 14)		1,935,220			1,084,346
Reimbursement – Energy Depletion (Note 28)		66,573			—
Credits owed by Eletrobras		4,216			4,216

		4,787,942			4,041,818
Liabilities
Loans, financings and debentures – CDI rate (Note 20)		(7,032,299	)		(7,202,558	)
Loans, financings and debentures – TJLP (Note 20)		(105,839	)		(118,891	)
Advances from customers – CDI		(150,728	)		(188,344	)
CVA and Other financial components in tariffs – Selic rate (Note 14)		(23,046	)		(414,800	)
Adherence to the Tax Amnesty Program – PRCT (Note 19)		—			(282,876	)

		(7,311,912	)		(8,207,469	)

Net liabilities exposed		(2,523,970	)		(4,165,651	)

(*)	Amounts of CVA and Other financial components indexed by the Selic rate.

LOGO

Sensitivity analysis

In relation to the most significant interest rate risk, the Company and its subsidiaries estimate that, in a probable scenario, on June 30, 2019 the Selic and TJLP rates will be 6.50%. The Company has made a sensitivity analysis of the effects on its net income arising from increases in rates of 25% and 50% in relation to the ‘probable’ scenario. Variation in the CDI rate accompanies the variation in the Selic rate.

Estimation of scenarios for the path of interest rates considers the projections made by the Company and its subsidiaries, based on its financial consultants.


Risk: Increase in Brazilian interest rates (Restated)	June 30, 2018			June 30, 2019
	Book value			‘Probable’ Scenario Selic 6.50% TJLP 6.56%			‘Possible’ Scenario Selic 8.13% TJLP 8.20%			‘Remote’ Scenario Selic 9.75% TJLP 9.84%
Assets
Cash equivalents – Short-term investments (Note 5)		896,953			955,255			969,875			984,406
Securities (Note 6)		351,882			374,754			380,490			386,190
Accounts receivable – Renova (Note 28)		367,436			391,319			397,309			403,261
Advances to suppliers		195,681			208,400			211,590			214,760
Restricted cash		111,220			118,449			120,262			122,064
CVA and Other financial components in tariffs – Selic rate * (Note 14)		858.761			914.580			928.578			942.490
Receivable for residual value – Generation – SELIC (Note 14)		1,935,220			2,061,009			2,092,553			2,123,904
Reimbursement – Energy Depletion (Note 28)		66,573			70,900			71,985			73,064
Credits owed by Eletrobras		4,216			4,490			4,559			4,627

		4.787.942			5.099.156			5.177.201			5.254.766
Liabilities
Loans, financings and debentures – CDI rate (Note 20)		(7,032,299	)		(7,489,398	)		(7,604,025	)		(7,717,948	)
Loans, financings and debentures – TJLP (Note 20)		(105,839	)		(112,782	)		(114,518	)		(116,254	)
Advances from customers – CDI		(150,728	)		(160,525	)		(162,982	)		(165,424	)
CVA and Other financial components in tariffs – Selic rate (Note 14)		(23,046	)		(24,544	)		(24,920	)		(25,293	)

		(7,311,912	)		(7,787,249	)		(7,906,445	)		(8,024,919	)

Net liabilities exposed		(2,523,970	)		(2,688,093	)		(2,729,244	)		(2,770,153	)

Net effect of variation in interest rates					(164.123	)		(205.274	)		(246.183	)

(*)	Amounts of CVA and Other financial components are indexed by the Selic rate.

LOGO

Inflation risk

The Company and its subsidiaries are exposed to the risk of inflation fall due to having more assets than liabilities indexed to the variation of inflation indicators, as follows:


Exposure to decrease in inflation	Jun. 30, 2018 (restated)			Dec. 31, 2017
Assets
Concession financial assets related to Distribution infrastructure – IPCA (*)		114,225			110,832
Amounts receivable from the Government of the State of Minas Gerais—IGP-M (Note 28)		169,263			107,614
Amounts receivable from the Government of the State of Minas Gerais—IGP-M (AFAC) (Note 11)		248,100			235,018
Receivable for residual value – Transmission – IPCA (Note 14)		1,822,294			1,928,038
Assets remunerated by tariff – Transmission – IPCA (note 14)		463,686			496,121
Concession Grant Fee – IPCA (Note 14)		2,371,831			2,337,135

		5,189,399			5,214,758
Liabilities
Loans, financings and debentures – IPCA (Note 20)		(3,627,582	)		(3,800,889	)
Debt agreed with pension fund (Forluz) – IPCA		(686,191	)		(720,498	)
Forluz deficit of pension plan		(380,311	)		(283,291	)

		(4,694,084	)		(4,804,678	)

Net assets		495,315			410,080

(*)	Part of the Concession financial assets related to the Regulatory Remuneration Base approved by Aneel after the third tariff review cycle.

Sensitivity analysis

In relation to the most significant risk of decrease in inflation, the Company and its subsidiaries estimate that, in a probable scenario, on June 30, 2019 the IPCA inflation index will be 3.40%. The Company and its subsidiaries have made a sensitivity analysis of the effects on its net income arising from decreases in inflation of 25% and 50% in relation to the ‘probable’ scenario, naming these the ‘possible’ and ‘remote’ scenarios, respectively.


Risk: Decrease in inflation (Restated)	June 30, 2018			June 30, 2019
Risk: Decrease in inflation (Restated)	Book value			‘Probable’ scenario IPCA 3.40% IGP-M 2.84%			‘Possible’ scenario (-25%) IPCA 2.55% Selic 2.13%			‘Remote’ scenario (-50%) IPCA 1.70% IGP-M 1.42%
Assets
Concession financial assets related to Distribution infrastructure – IPCA (*)		114,225			118,109			117,138			116,167
Amounts receivable from the Government of the State of Minas Gerais—IGP-M (TARD) (Note 28)		169,263			174,070			172,868			171,667
Amounts receivable from the Government of the State of Minas Gerais—IGP-M (AFAC) (Note 11)		248,100			255,146			253,385			251,623
Receivable for residual value – Transmission – IPCA (Note 14)		1,822,294			1,884,252			1,868,762			1,853,273
Assets remunerated by tariff – Transmission – IPCA (note 14)		463,686			479,451			475,510			471,569
Concession financial assets related to Distribution infrastructure – IPCA (*)(Note 14)		2,371,831			2,452,473			2,432,313			2,412,152

		5,189,399			5,363,501			5,319,976			5,276,451
Liabilities
Loans, financings and debentures – IPCA		(3,627,582	)		(3,750,920	)		(3,720,085	)		(3,689,251	)
Debt agreed with pension fund (Forluz) – IPCA		(686,191	)		(709,521	)		(703,689	)		(697,856	)
Forluz deficit of pension plan		(380,311	)		(393,242	)		(390,009	)		(386,776	)

		(4,694,084	)		(4,853,683	)		(4,813,783	)		(4,773,883	)

Net assets		495,315			509,818			506,193			502,568

Net effect of variation in IPCA and IGP-M indices					14,503			10,878			7,253

(*)	Portion of the Concession financial assets relating to the Regulatory Remuneration Base of Assets ratified by Aneel after the third tariff review cycle.

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Liquidity risk

Cemig has sufficient cash flow to cover the cash needs related to its operating activities.

The Company manages liquidity risk with a group of methods, procedures and instruments that are coherent with the complexity of the business, and applied in permanent control of the financial processes, to guarantee appropriate risk management.

Cemig manages liquidity risk by permanently monitoring its cash flow in a conservative, budget-oriented manner. Balances are projected monthly, for each one of the companies, over a period of 12 months, and daily liquidity is projected over 180 days.

Short-term investments must comply with certain rigid investing principles established in the Company’s Cash Investment Policy, which was approved by the Financial Risks Management Committee. These include applying its resources in private credit investment funds, without market risk, and investment of the remainder directly in bank CDBs or repo contracts which earn interest at the CDI rate.

In managing cash investments, the Company seeks to obtain profitability through a rigid analysis of financial institutions’ credit, applying operational limits for each bank, based on assessments that take into account their ratings, exposures and balance sheets. It also seeks greater returns on investments by strategically investing in securities with longer investment maturities, while bearing in mind the Company’s minimum liquidity control requirements.

The greater part of the energy sold by the Company is generated by hydroelectric plants. A prolonged period of scarce rainfall can result in lower water volumes in the plants’ reservoirs, possibly causing losses due to increased costs of purchasing energy, due to replacement by thermoelectric generation, or reduction of revenues due to reduction in consumption caused by implementation of wide-ranging programs for saving energy. Prolongation of generation by thermoelectric plants can pressure costs of acquisition of energy by the distributors, causing a greater need for cash, and can impact future tariff increases – as indeed has happened with the Extraordinary Tariff Review granted to the distributors in March 2015.

Any reduction in the Company’s ratings could result in a reduction of its ability to obtain new financings and could also make refinancings of debts not yet due more difficult or more costly. In this situation, any financing or refinancing of the Company’s debt could have higher interest rates or might require compliance with more onerous covenants, which could additionally cause restrictions to the operations of the business.

The flow of payments of the Company’s obligations to suppliers, for debts agreed with the pension fund, loans, financings and debentures, at floating and fixed rates, including future interest up to contractual maturity dates, is shown in this table:


Consolidated	Up to 1 month		1 to 3 months		3 months to 1 year		1 to 5 years		Over 5 years		Total
Financial instruments at (interest rates):
- Floating rates
Loans, financings and debentures		576,104		85,419		2,961,696		11,146,811		5,894,630		20,664,660
Concessions payable		203		401		1,766		8,087		14,255		24,712
Debt agreed with pension plan (Forluz) (Note 22)		11,414		22,873		104,626		620,770		175,120		934,803
Solution plan for deficit of the Pension Plan (Forluz) (Note 22)		3,498		7,024		32,084		190,186		522,425		755,217

		591,219		115,717		3,100,172		11,965,854		6,606,430		22,379,392
- Fixed rate
Suppliers		1,986,049		151,075		15,552		—		—		2,152,676

		2,577,268		266,792		3,115,724		11,965,854		6,606,430		24,532,068

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Holding company	Up to 1 month		1 to 3 months		3 months to 1 year		1 to 5 years		Over 5 years		Total
Financial instruments at (interest rates):
- Floating rates
Loans, financings and debentures		2,010		3,994		13,530		55,038		—		74,572
Debt agreed with pension plan (Forluz) (Note 22)		562		1,125		5,148		30,542		8,616		45,993
Solution plan for deficit of the Pension Plan (Forluz) (Note 22)		172		346		1,579		9,357		25,703		37,157

		2,744		5,465		20,257		94,937		34,319		157,722
- Fixed rate
Suppliers		8,812		—		—		—		—		8,812

		11,556		5,465		20,257		94,937		34,319		166,534

Credit risk

The distribution concession contract requires levels of service on a very wide basis within the concession area, and disconnection of supply of defaulting customers is permitted. Additionally, the Company used numerous tools of communication and collection to avoid increase in default. These include: telephone contact, emails, text messages, collection letters, posting of clients with credit protection companies, and collection through the courts.

The risk arising from the possibility of Cemig and its subsidiaries incurring losses as a result of difficulty in receiving amounts billed to its customers is considered to be low. The credit risk is also reduced by the extremely wide customer’s base.

The allowance for doubtful debtors constituted on June 30, 2018, considered to be adequate in relation to the credits in arrears receivable by the Company and its subsidiaries, was R$ 731,587.

In relation to the risk of losses resulting from declaration of insolvency of a financial institutions at which the Company has deposits, a Cash Investment Policy was approved and has been in effect since 2004, and is reviewed annually.

Cemig manages the counterparty risk of financial institutions based on an internal policy approved by its Financial Risks Management Committee.

This Policy assesses and scales the credit risks of the institutions, the liquidity risk, the market risk of the investment portfolio and the Treasury operational risk.

All investments are made in financial securities that have fixed-income characteristics, always indexed to the CDI rate. The Company does not carry out any transactions that would incorporate volatility risk into its interim financial information.

As a management instrument, Cemig divides the investment of its funds into direct purchases of securities (own portfolio) and investment funds. The investment funds invest the funds exclusively in fixed income products, and companies of the Group are the only unit holders. They obey the same policy adopted in the investments for the Company’s directly-held own portfolio.

The minimum requirements for concession of credit to financial institutions are centered on three items:

Rating by three risk rating agencies.

Equity greater than R$ 400 million.

Basel ratio one percentage point above the minimum set by the Brazilian Central Bank.

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Banks that exceed these thresholds are classified in three groups, by the value of their equity. Within this classification, limits of concentration by group and by institution are set:


Group	Equity	Concentration	Limit per bank (% of shareholders’ equity)*
A1	Over R$ 3.5 billion	Minimum 80%	Between 6% and 9%
A2	R$ 1.0 billion to R$ 3.5 billion	Maximum 20%	Between 5% and 8%
B	R$ 400 million to R$ 1.0 billion	Maximum 20%	Between 5% and 7%

(*)	The percentage assigned to each bank depends on individual assessment of indicators, e.g. liquidity and quality of the credit portfolio.

Further to these points, Cemig also sets two concentration limits:

No bank may have more than 30% of the Group’s portfolio.

No bank may have more than 50% of the portfolio of any individual company.

Risk of over-contracting and under-contracting of energy supply

Sale or purchase of power supply in the spot market to cover a positive or negative exposure of supply contracted, to serve the captive market of Cemig D, is a risk inherent to the energy distribution business.

The regulatory limit for 100% pass-through to customers of exposure to the spot market, valued at the difference between the distributor’s average purchase price and the spot price (PLD), is only the margin between 95% and 105% of the distributor’s contracted supply.

Any exposure that can be proved to have arisen from factors outside the distributor’s control (‘involuntary exposure’) may also be passed through in full to customers.

The Company’s Management is continually managing its contracts for purchase of power supply to mitigate the risk of exposure to the spot market.

Risk of continuity of the concession

The risk to continuity of the distribution concession arises from the new terms included in the extension of Cemig D’s concession for 30 years from January 1, 2016, as specified by Law 12,783/13. The extension brought changes to the contract. Under the new contract, continuity of the concession is conditional upon compliance by the Distributor with new criteria for quality and economic-financial sustainability.

The extension is conditional on compliance with indicators contained in the contract itself, which aim to guarantee quality of the service provided and economic and financial sustainability of the company. These are determinant for actual continuation of the concession in the first five years of the contract, since non-compliance with them in two consecutive years, or in the fifth year, results in cancellation of the concession.

Additionally, as from 2021, non-compliance with the quality criteria for three consecutive years, or with the minimum parameters for economic/financial sustainability for two consecutive years, results in opening of proceedings with a view to termination of the distribution concession.

Hydrological risk

The greater part of the energy sold by the Company’s subsidiaries is generated by hydroelectric plants. A prolonged period of scarce rainfall can result in lower water volumes in the plants’ reservoirs, possibly causing losses due to increased costs of purchasing electricity, due to replacement by thermoelectric generation, or reduction of revenues due to reduction in consumption caused by implementation of wide-ranging programs for saving of electricity. Prolongation of the generation of energy using the thermal plants potentially could lead to cost increases for the energy distributors, causing a greater need for cash, and could result in future increases in tariffs.

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Risk of early maturity of debt

The Company’s subsidiaries have loan contracts with restrictive covenants normally applicable to this type of transaction, related to compliance with a financial index. Non-compliance with these covenants could result in earlier maturity of debts. For more details please see Note 20.

Capital management

This table shows comparisons of the Company’s consolidated net liabilities and its Equity:


	Consolidated						Holding company
	Jun. 30, 2018 (Restated)			Dec. 31, 2017			Jun. 30, 2018 (Restated)			Dec. 31, 2017
Total liabilities		27,009,823			27,909,453			1,705,041			1,522,956
(–) Cash and cash equivalents		(940,937	)		(1,030,257	)		(63,045	)		(38,672	)
(–) Restricted cash		(111,220	)		(106,227	)		(90,663	)		(87,872	)

Net liabilities		25,957,666			26,772,969			1,551,333			1,396,412

Total equity		14,728,303			14,330,136			14,726,206			14,325,986

Net liabilities / equity		1.76			1.87			0.11			0.10

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30.

ASSETS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS

On May 25, 2018 Cemig published Tender Announcement 500-Y12121 for disposal of certain telecom assets that were absorbed in the merger of Cemig Telecomunicações on March 31, 2018.

The assets that were the subject of the tender are a group of the Company’s infrastructure assets and contractual positions in relation to service contracts. They were separated into two lots which were sold based on the best economic proposal for each lot, with minimum auction prices set for each one of the lots, based on formal valuation of the assets – these prices were R$ 335,070 for Lot 1, and R$ 32,473 for Lot 2.

The winning bid for Lot 1, presented by American Tower do Brasil – Comunicação Multimídia Ltda., was for R$ 575,906, i.e. 71.87% above the minimum sale value specified in the Tender Announcement. The winning bid for Lot 2, presented by Algar Soluções em TIC S.A., was for R$ 78,555, or 141.05% above the minimum sale value specified in the Tender Announcement.

On August 24, 2018 Cemig signed Asset Sale Agreements with American Tower do Brasil – Comunicação Multimídia Ltda., winner of Lot 1, and with Algar Soluções em TIC S.A., winner of Lot 2.

On November 1, 2018, sale transactions were completed, after the prior conditions stated in the Tender – including approval by the monopolies authority, CADE – had been complied with.

Thus, for the preparation of the interim financial information in the six-month period ended June 30, 2018 the Company understands that the telecom assets in the Tender comply with the classification requirements of Pronouncement CPC 31 – Non-current assets held for sale, and discontinued operations, and are thus presented separately in the balance sheet, with measurement based on book value, since in both cases book value is lower than fair value less the sales expenses.

The composition of the assets of the associated liabilities is as follows:


	Consolidated			Holding company
	Jun. 30, 2018			Jun. 30, 2018
ASSETS
Assets
Accounts receivable		840			840
Inventories		7,160			7,160
PP&E and Intangible		262,705			262,705
Other current assets – Non-current		10,873			10,873

Total assets		281,578			281,578

LIABILITIES
Liabilities directly related to assets held for sale
Other non-current liabilities		(5,160	)		(5,160	)
Deferred income tax and Social Contribution tax		(745	)		(745	)

Total liabilities		(5,905	)		(5,905	)

As a result of the classification as held for sale, depreciation of these assets was terminated, and the revenues, costs and expenses resulting from these assets is presented in the Statement of income in a single amount as discontinued operation, separately from the result of the going concern operations.

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This table shows the revenues, costs and expenses arising from the discontinued operations, related to the assets classified as held for sale, on June 30, 2018:


	Consolidated			Holding company
	Jan to Jun 2018			Jan to Jun 2018
Results of discontinued operations
Operating revenues
Other operating revenues
Telecoms services		90,099			45,325
Leasing and Rentals		3,389			1,690
Other operating revenues		509			7

		93,997			47,022

Deductions from operational revenue
PIS, Pasep and Cofins taxes		(3,424	)		(1,775	)
ICMS tax		(18,649	)		(8,858	)
Others		(1,032	)		(522	)

		(23,105	)		(11,155	)

		70,892			35,867

Operating expenses
Outsourced services		(12,801	)		(7,853	)
Depreciation and amortization		(14,500	)		(6,115	)
Other operating expenses, net		(11,720	)		(4,944	)

		(39,021	)		(18,912	)

Finance income		511			254
Income and Social Contribution tax
Current income tax and Social Contribution tax		(1,195	)		(109	)
Deferred income tax and Social Contribution tax		(9,815	)		(5,742	)

		(11,010	)		(5,851	)

Net income		21,372			11,358

The cash flows of the discontinued operations, related to the assets classified as held for sale, on June 30, 2018, are as follows:


	Consolidated			Holding company
	Jan to Jun 2018			Jan to Jun 2018
Cash flow from discontinued operations
Net cash flow from operations		36,602			18,944
Cash flow from investment activities		(7,631	)		—

Increase in cash and cash equivalents		28,971			18,944

The amounts of results and cash flows of the holding company are different from the consolidated amounts due to the merger of Cemig Telecom, on March, 31, 2018. For more details please see Note 1.

The assets classified as held for sale and the results of the discontinued operations are presented in Note 31 as Telecom segment.

31.

OPERATING SEGMENTS

The operating segments of the Company and its subsidiaries reflect their management and their organizational structure, used to monitoring its results and are aligned with the regulatory framework of the Brazilian electricity sector, with different legislation for the sectors of generation and transmission of energy.

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The Company also operates in the markets of gas and telecommunications, through its subsidiaries Gasmig and Cemig Telecom (see Note 1), and other businesses which are not material to its operations results. These segments are reflected in the Company’s management, organizational structure, and monitoring of results.

The information by segment relating to the period ending on June 30, 2018 and 2017 is shown below in a consolidated manner:


INFORMATION BY SEGMENT ON JUNE 30, 2018 (Restated)
	ELECTRICITY									GAS			TELECOMS (1)			OTHER			ELIMINATIONS			TOTAL (Restated)
	GENERATION			TRANSMISSION			DISTRIBUTION (Restated)			GAS			TELECOMS (1)			OTHER			ELIMINATIONS			TOTAL (Restated)
SEGMENT ASSETS		14,368,687			3,811,813			19,790,695			1,812,803			311,017			1,689,160			(46,049	)		41,738,126
INVESTMENT IN AFFILIATES AND JOINTLY-CONTROLLED ENTITIES		4,709,952			1,130,140			1,838,752			—			—			24,708			—			7,703,552
ADDITIONS TO THE SEGMENT		170,045			—			361,492			20,969			7,631			1,016			—			561,153
ADDITIONS TO FINANCIAL ASSETS		—			4,732			—			—			—			—			—			4,732
GOING CONCERN
NET REVENUE		3,038,039			326,689			6,528,045			730,704			—			65,045			(146,553	)		10,541,969
COST OF ENERGY AND GAS
Energy purchased for resale		(1,705,024	)		—			(3,412,396	)		—			—			(3	)		34,825			(5,082,598	)
Charges for use of the national grid		(126,922	)		—			(780,585	)		—			—			—			98,927			(808,580	)
Gas purchased for resale		—			—			—			(556,459	)		—			—			—			(556,459	)

Operational costs, total		(1,831,946	)		—			(4,192,981	)		(556,459	)		—			(3	)		133,752			(6,447,637	)
OPERATING COSTS AND EXPENSES
Personnel		(114,985	)		(52,575	)		(460,306	)		(24,147	)		(9,893	)		(18,334	)		—			(680,240	)
Employees’ and managers’ Profit sharing		(2,901	)		(1,577	)		(12,674	)		—			351			(5,926	)		—			(22,727	)
Post-retirement obligation		(23,053	)		(13,317	)		(112,669	)		—			—			(20,358	)		—			(169,397	)
Materials		(3,436	)		(1,727	)		(26,875	)		(854	)		(709	)		(115	)		10			(33,706	)
Outsourced services		(49,049	)		(18,880	)		(410,579	)		(8,275	)		(2,878	)		(9,123	)		8,438			(490,346	)
Depreciation and amortization		(81,980	)		—			(292,240	)		(36,142	)		(704	)		(234	)		—			(411,300	)
Operating provisions (reversals)		(36,369	)		(3,962	)		(148,588	)		—			(213	)		(78,187	)		—			(267,319	)
Construction costs		—			(4,732	)		(361,492	)		(17,419	)		—			—			—			(383,643	)
Other operating expenses, net		(23,434	)		(7,800	)		(110,686	)		(5,674	)		(1,991	)		(6,375	)		4,353			(151,607	)

Total cost of operation		(335,207	)		(104,570	)		(1,936,109	)		(92,511	)		(16,037	)		(138,652	)		12,801			(2,610,285	)

OPERATING COSTS AND EXPENSES		(2,167,153	)		(104,570	)		(6,129,090	)		(648,970	)		(16,037	)		(138,655	)		146,553			(9,057,922	)
Share of (loss) profit, net, of associates and joint ventures		(140,412	)		102,474			16,743			—			(763	)		(4,275	)		—			(26,233	)

OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES) AND TAXES		730,474			324,593			415,698			81,734			(16,800	)		(77,885	)		—			1,457,814
Finance income		244,465			14,640			182,241			27,825			780			21,218			—			491,169
Finance expenses		(1,006,540	)		(2,343	)		(312,299	)		(19,984	)		(2,861	)		(1,774	)		—			(1,345,801	)

INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX		(31,601	)		336,890			285,640			89,575			(18,881	)		(58,441	)		—			603,182
Income and Social Contribution taxes		(22,990	)		(61,996	)		(91,241	)		(27,954	)		5,769			27,567			—			(170,845	)

RESULT OF GOING CONCERN OPERATIONS		(54,591	)		274,894			194,399			61,621			(13,112	)		(30,874	)		—			432,337

DISCONTINUED OPERATIONS
Income for the period from discontinued operations (Note 30)		—			—			—			—			21,372			—			—			21,372

NET INCOME (LOSS) FOR THE PERIOD		(54,591	)		274,894			194,399			61,621			8,260			(30,874	)		—			453,709

Equity holders of the parent		(54,591	)		274,894			194,399			61,323			8,260			(30,874	)		—			453,411
Non-controlling interests		—			—			—			298			—			—			—			298

		(54,591	)		274,894			194,399			61,621			8,260			(30,874	)		—			453,709

(1)	As stated in Note 30, certain telecommunications assets were classified as held for sale. The revenues and expenses of the telecommunications segment resulting from continued operations continue to be recognized in the statement of income of the telecoms segment.

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INFORMATION BY SEGMENT ON JUNE 30, 2017
	ELECTRICITY									GAS			TELECOMS			OTHER			ELIMINATIONS			TOTAL
	GENERATION			TRANSMISSION			DISTRIBUTION			GAS			TELECOMS			OTHER			ELIMINATIONS			TOTAL
SEGMENT ASSETS		20,025,471			2,739,099			16,525,323			2,098,567			350,555			2,720,320			(2,519,536	)		41,939,799
INVESTMENT IN AFFILIATES AND JOINTLY-CONTROLLED ENTITIES		8,030,138			—			—			—			—			18,252			—			8,048,390
ADDITIONS TO THE SEGMENT		196,558			—			421,112			26,689			21,368			—			—			665,727
ADDITIONS TO FINANCIAL ASSETS		—			156,280			—			—			—			—			—			156,280
NET REVENUE		3,305,994			449,145			5,619,766			663,318			57,721			54,778			(132,763	)		10,017,959
COST OF ENERGY AND GAS
Energy purchased for resale		(1,721,290	)		—			(3,054,465	)		—			—			(9	)		33,346			(4,742,418	)
Charges for use of the national grid		(168,552	)		166			(314,264	)		—			—			—			78,389			(404,261	)
Gas purchased for resale		—			—			—			(485,163	)		—			—			—			(485,163	)

Operational costs, total		(1,889,842	)		166			(3,368,729	)		(485,163	)		—			(9	)		111,735			(5,631,842	)
OPERATING COSTS AND EXPENSES
Personnel		(154,656	)		(58,470	)		(643,937	)		(25,239	)		(9,846	)		(25,014	)		—			(917,162	)
Employees’ and managers’ net income shares		(4,136	)		(1,821	)		(17,640	)		—			(315	)		(979	)		—			(24,891	)
Post-retirement obligation		(28,068	)		(12,684	)		(131,804	)		—			—			(19,472	)		—			(192,028	)
Materials		(4,749	)		(1,323	)		(20,053	)		(888	)		(66	)		(84	)		55			(27,108	)
Outsourced services		(65,918	)		(13,863	)		(360,937	)		(7,504	)		(14,675	)		(3,809	)		19,942			(446,764	)
Depreciation and amortization		(102,917	)		—			(263,051	)		(27,571	)		(17,008	)		(253	)					(410,800	)
Operating provisions (reversals)		(57,000	)		(4,426	)		(293,044	)		—			(137	)		(15,311	)		—			(369,918	)
Construction costs		—			(7,025	)		(421,112	)		(12,897	)		—			—			—			(441,034	)
Other operating expenses, net		(44,069	)		(3,773	)		(139,118	)		(4,026	)		(11,505	)		(29,483	)		44,520			(187,454	)

Total cost of operation		(461,513	)		(103,385	)		(2,290,696	)		(78,125	)		(53,552	)		(94,405	)		64,517			(3,017,159	)

OPERATING COSTS AND EXPENSES		(2,351,355	)		(103,219	)		(5,659,425	)		(563,288	)		(53,552	)		(94,414	)		176,252			(8,649,001	)
Share of (loss) profit, net, of associates and joint ventures		182,054			—			—			—			(1,492	)		—			(120,444	)		60,118
OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES) AND TAXES		1,136,693			345,926			(39,659	)		100,030			2,677			(39,636	)		(76,955	)		1,429,076
Finance income		89,161			3,605			205,427			12,832			921			36,955			—			348,901
Finance expenses		(617,297	)		(1,223	)		(433,533	)		(21,534	)		(7,648	)		(1,966	)		—			(1,083,201	)

INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX		608,557			348,308			(267,765	)		91,328			(4,050	)		(4,647	)		(76,955	)		694,776
Income and Social Contribution taxes		(154,767	)		(106,991	)		76,670			(28,586	)		807			(1,061	)		—			(213,928	)

NET INCOME (LOSS) FOR THE PERIOD		453,790			241,317			(191,095	)		62,742			(3,243	)		(5,708	)		(76,955	)		480,848
Equity holders of the parent		453,790			241,317			(191,095	)		62,472			(3,243	)		(5,708	)		(76,955	)		480,578
Non-controlling interests		—			—			—			270			—			—			—			270

		453,790			241,317			(191,095	)		62,742			(3,243	)		(5,708	)		(76,955	)		480,848

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32.

THE ANNUAL TARIFF ADJUSTMENT AND TARIFF REVIEW OF CEMIG D

On May 28, 2018 Aneel confirmed the result of the Fourth Tariff Review of Cemig D. The result of the Tariff Review was a tariff increase of 23.19%. It is worth noting that the percentage increase relating to Cemig D’s manageable (‘Portion B’) costs was 4.30%. The remaining portion, of 18.89%, has a null economic effect for Cemig D – i.e. does not affect its profitability – since it consists of direct pass-throughs to the tariff of the following items of increased costs: (i) increase of 9.00% in non-manageable (‘Portion A’) costs – mainly purchase of power supply and transmission charges; and (ii) increase of 9.89% in the item ‘Other financial components of the tariff’.

The increase is in effect from May 28, 2018 to May 27, 2019.

33.

NON-CASH TRANSACTIONS

In the half-year periods ended June 30, 2018 and 2017, the subsidiaries made the following transactions not involving cash, which are not reflected in the Cash flow statements:

◾

Capitalized borrowing costs of R$ 16,392 in the six-month period ended june 30, 2018 (R$ 40,399 in the six-month period ended june 30, 2017);

◾

Except for the balance of cash and equivalents received in the merged of Cemig Telecom, in the amount of R$ 428, in the period ended June 30, 2018 the remaining balances merged have no effect on the Company’s cash flow.

34.

SUBSEQUENT EVENTS

Advance payment for future energy supply

On July 10 and August 8 of 2018 the amounts of R$ 26,300 and R$ 25,800, respectively, were advanced by Cemig GT to the jointly controlled subsidiary Renova, for energy supply invoices becoming due in the period from June to November 2019. These advances are adjusted to present value at a rate of 155% of the CDI Rate (Interbank Rate for Certificates of Deposit or Certificados de Depósito Inter-bancário – CDIs).

Additional Eurobond issue

On July 18, 2018, the Company completed the financial settlement of an additional tranche to its initial Eurobond issuance completed on December 5, 2017, in the amount of US$ 500 million, corresponding to R$ 1.9 billion. The issue has six-monthly coupon of 9.25% p.a., with maturity of the principal in December, 2024.

Concomitantly with the settlement a hedge transaction was contracted, for the whole period of the issue, comprising: a call spread on the principal, in which Cemig GT is protected over the interval between R$ 3.85/US$ and R$ 5.00/US$; and a swap for 100% of the interest, exchanging the 9.25% annual coupon in US$ for a rate equivalent to 125.52% of the CDI rate.

Payment of debentures

On July 16, 2018, Cemig GT amortized the first and second series of its 6^th debenture issue, in the amount of R$ 533 million.

On July 27, 2018, with the additional tranche of the Eurobond issue, Cemig GT made early settlement of R$ 385 million, or 25%, of the balance of the nominal unit value of its 7^th issue of non-convertible debentures, of which the cost was 140% of the CDI rate with original maturity on December 23, 2021.

Suspension of supply of power by Renova

On August 3, 2018 the Company signed the seventh amendment to the contract for purchase of wind power with the jointly controlled subsidiary Renova, suspending the supply of incentive-bearing wind energy for the period from July through December 2018, and defining the calculation of possible financial compensations to the Company, which will be recognized in the statement of income of the second half of 2018, in accordance with the proper accounting period, with settlement contractually specified for January 10, 2019.

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Taking into account this suspension of supply, the advances of payment made to Renova for the period from July through December 2018, in the total amount of R$ 55,880, were the subject of a Debt Recognition Agreement (‘TARD’) signed on August 3, 2018, which specifies repayment of the amount in question in a single payment, updated at 155% of the CDI rate, on January 10, 2019.

Capital increase in Madeira Energia S.A.

On August 28, 2018 an Extraordinary General Meeting of Shareholders approved an increase in the capital of Mesa of up to R$ 972,512. Simultaneously the shareholders Furnas Centrais Elétricas S.A., Odebrecht Energia do Brasil S.A. and Caixa Fundo de Investimento em Participações Amazônia Energia subscribed and paid up in full the credits that they hold against Mesa, in a total of R$ 754,669, such that an amount of capital equal to R$ 217,843 remained, referring to the subscription right of the Company and of its indirect affiliate SAAG Investimento S.A.

On October 2, 2018, since Cemig GT and SAAG had not exercised their right to subscribe in the said capital increase, the shareholder Furnas Centrais Elétricas S.A. subscribed these remaining shares, paying them up in part in the amount of R$ 85,000. On the same date the Board of Directors of Mesa partially ratified the capital increase approved on August 28, 2018, in the amount of R$ 839,670. The total of funds subscribed will be allocated in full to subscription of shares in Santo Antônio Energia S.A. With the homologation of the increase, the share capital of Mesa was increased to R$ 10,386,341, and the Company then held a direct equity interest of 8.44% and an indirect equity interest of 6.86%.

In EGM held on October 3, 2018, a further capital increase in Mesa of up to R$ 300,000 was approved. On that date Cemig GT, SAAG and Furnas Centrais Elétricas S.A. subscribed shares in the amount of R$ 25,320, R$ 26,068 and R$ 124,620, respectively, paid up in full on October 5, 2018. The other shareholders, thus did not exercise their right of first refusal in the capital increase that had been approved, the period for which expired on November 3, 2018. Thus, after homologation of this increase, the share capital of Mesa was R$ 10,562,350, and the Company’s direct and indirect equity interests in Mesa are now 8.63% and 7.05%, respectively.

ICMS – advance payment

On September 14, 2018 the State of Minas Gerais issued Decree 47488 ordering that payments of ICMS tax relating to November and December 2018 should be paid on September 20, 2018. The ICMS tax paid, in the amount of R$ 697,360 from Cemig D and R$ 55,854 from Cemig GT, is being updated at the Selic rate until the date of payment of the remaining balance, based on payment of 75% of the amount paid by Cemig D and Cemig GT in August 2018. The balance of the actual amount calculated as becoming due for the months of November and December 2018 will be paid by December 7, 2018 and January 8, 2019, respectively.

Loans with related parties

On September 18, 2018 a loan agreement was signed between Cemig GT (lender) and Cemig (borrower), for R$ 400,000, to be settled in a single payment in December 2019, with addition of interest at 125.52% of the CDI rate. As guarantee, Cemig signed a promissory note in the global amount of R$ 442,258, corresponding to the amount of the debt plus the estimated interest for the 15-month period of the agreement.

In the same period Cemig GT (lender) and Cemig D (borrower) also signed a loan agreement for R$ 630,000, to be settled in two payments becoming due in November and December 2018, plus interest at 125.52% of the CDI rate, p.a. As guarantee, Cemig D signed a promissory note in the global amount of R$ 639,110, corresponding to the amount of the debt plus the estimated interest for the period of the agreement.

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Eurobonds – Payment limit temporary exceeded

On October 10, 2018 Cemig’s wholly-owned subsidiary Cemig GT, in the scope of its Eurobond issuance, notified the issuer’s trustee that the permitted threshold level of investments by Cemig GT under the issue’s Limitation on Restricted Payments clause has, exceptionally, been momentarily exceeded, and that this excess would be reversed within the cure period established in the Issue Deed.

The situation is due to a loan made by Cemig GT to Cemig D on September 18, 2018.

On November 20, 2018 Cemig GT received payment of R$ 486 million, the first installment of principal and interest on its loan. Therefore, Cemig GT is once again compliant with the ‘Limitation on Restricted Payments’ clause in its Eurobond issue.

Debt prepayment

On November 6, 2018 Cemig GT has repurchased 24,565 debentures of its Fifth Issue – in the amount of R$ 132 million, in order to reduce debt, increase profitability and enhance its credit quality. These debentures were cancelled in CETIP.

Cancellation of public offer of shares issued by Light and sale of shares held by RME in this investee

On November 26, 2018 the stockholders of the controlling stockholding block of Light – namely: Companhia Energética de Minas Gerais – Cemig, Rio Minas Energia Participações S.A. (‘RME’) and Luce Empreendimentos e Participações S.A. (Lepsa) – considered that the terms and conditions proposed for the anchoring do not meet the interests of the Company and its shareholders, taking into account, among other factors, the present conditions of the market.

Therefore, on November 27, 2018, the Company and its jointly-controlled entity reported to the market the cancellation of public offer of shares issued by Light, and, on the same date, in the context of the exercise of the Put Option for shares in Rio Minas Energia Participações S.A. (‘RME’) described in note 29, RME sold 4,350,000 shares, representing 2.13% of the share capital of Light, for a total amount of R$ 64.5 million. With this sale, the aggregate of the equity holdings in Light of Cemig, RME and Luce Empreendimentos e Participações S.A. now totals 49.99%.

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CONSOLIDATED RESULTS

(Thousands of Brazilian Reais – R$ except where otherwise indicated)

Net income (loss) for the period

On the first half of 2018 (‘1H18’) Cemig reports net income of R$ 453,709, which compares with its net income of R$ 480,848 in first half 2017 (‘1H17’). The following notes describe the main variations between the two periods in revenues, costs, expenses and financial items.

A significant effect on the net income for 1H18 was a non-operational net expense of R$ 367,371, from the effect of exchange rate variation on the debt raised (in the Eurobond issue) in December 2017 – partially offset by gains under the swap transaction made by the Company to replace: (a) for the purposes of payment of the interest on the Eurobonds, variation in the US dollar plus 9.25% p.a. by 150.49% of the Brazilian domestic CDI rate, and (b) for the principal, a hedge against variation in the US dollar exchange rate between a floor of R$ 3.25 and a ceiling of R$ 5.00 – in this case the value the Company will pay at maturity will be will be the floor value. This effect results from the instability of the macroeconomic scenario in the first half of 2018, with increased expectations for future variations in the CDI and Foreign exchange variations – the main variables for calculation of fair value of financial instruments.

Ebitda (earnings before interest, tax, depreciation and amortization)

Cemig’s consolidated Ebitda in 1H18 was slightly (2.75%) above its Ebitda of 1H17. The most significant factors in this variation are set out below. Ebitda margin was lower, at 17.93%, in 1Q18, than in 1Q17 – when it was 18.37%.


*Ebitda – R$ ‘000*	Jan to Jun 2018		Jan to Jun 2017		Change,%
Net income for the period		453,709		480,848		(5.64	)
+ Income tax and Social Contribution tax		170,845		213,928		(20.14	)
+ Finance income (expenses)		854,632		734,300		16.39
+ Depreciation and amortization		411,300		410,800		0.12

= Ebitda		1,890,486		1,839,876		2.75

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Ebitda is a non-accounting measure prepared by the Company, reconciled with the consolidated interim financial information in accordance with CVM Circular SNC/SEP 1/2007 and CVM Instruction 527 of October 4, 2012. It comprises Net income adjusted by the effects of net Finance income (expenses), Depreciation and amortization, and Income tax and Social Contribution tax. Ebitda is not a measure recognized by Brazilian GAAP nor by IFRS; it does not have a standard meaning; and it may be non-comparable with measures with similar titles provided by other companies. Cemig publishes Ebitda because it uses it to measure its own performance. Ebitda should not be considered in isolation or as a substitution for Net income or operating income, nor as an indicator of operational performance or cash flow, nor to measure liquidity nor the capacity for payment of debt.

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Revenue from supply of energy

Total revenue from supply of energy in 1H18 totaled R$ 11,236,009, compared to R$ 11,572,133 in 1H17, 2.90% lower period-on-period.

Final customers

Total revenue from supply of energy to final customers, excluding Cemig’s own consumption, was R$ 9,842,323 in 1H18 – this was 2.98% lower than the figure for 1H17, of R$ 10,144,523.

The main factors for this reduction were:

◾

The annual tariff adjustment for Cemig D effective May 28, 2017 (full effect in 2018) with average downward effect on customer tariffs of 10.66%.

◾

The annual tariff adjustment for Cemig D effective May 28, 2018, with an average positive effect on customer tariffs of 23.19%.

◾

Volume of energy sold to final customers 1.68% higher.

Cemig’s electricity market

The total for sales at Cemig’s consolidated electricity market comprises sales to: (i) Captive customers in Cemig’s concession area in the State of Minas Gerais; (ii) Free customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ACL); (iii) Other agents of the electricity sector – traders, generators and independent power producers, also in the Free Market; (iv) Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and (v) The Wholesale Power Exchange (Câmara de Comercialização de Energia Elétrica – CCEE), eliminating transactions between companies of the Cemig Group.

The table below describe Cemig’s market and the change in the sale of energy by category of customers, comparing 1H18 with 1H17:


	MWh
	Jan to Jun 2018		Jan to Jun 2017		Change,%
Residential		5,150,879		5,033,072		2.34
Industrial		8,552,810		8,704,150		(1.74	)
Commercial, Services and Others		4,198,424		3,804,836		10.34
Rural		1,720,268		1,752,185		(1.82	)
Public authorities		434,389		436,654		(0.52	)
Public lighting		688,807		675,900		1.91
Public services		653,232		639,342		2.17

Subtotal		21,398,809		21,046,139		1.68

Own consumption		23,481		18,050		30.09

		21,422,290		21,064,189		1.70

Wholesale supply to other concession holders (1)		5,607,369		5,740,378		(2.32	)

Total		27,029,659		26,804,567		0.84

(1)	Includes Regulated Market Electricity Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.

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We highlight the volume of energy sold to the industrial customer category, which was 1.74% lower, basically due to three factors: (a) disconnections of customer units; (b) customers leaving the status of captive customer to become customers in the Free Market; and (c) reduction of consumption due to the truck drivers’ strike, which took place at the end of May 2018.

The volume sold to the rural customer category was also down 1.82% period-on-period, due to the higher rainfall in 1H18, resulting in less use of energy for irrigation.

On the other hand, sales were higher in three other categories: 10.34% higher in the commercial category; 2.34% higher in the residential customer category; 1.91% higher in public lighting category; and 2.17% higher in public services category – basically due to addition of new customers units.

Revenue from Use of Distribution Systems (the TUSD charge)

This is revenue from charging Free Customers the Tariff for Use of the Distribution System (Tarifa de Uso do Sistema de Distribuição, or TUSD) on the volume of energy distributed. In 1H18 this revenue totaled R$ 814,340, compared to R$ 900,476 in 1H17 – a period-on-period reduction of 9.57%, mainly due to the following factors:

◾

reduction of approximately 40% in the TUSD, which took place in the Cemig D’s 2017 annual tariff adjustment, applied as from May 28, 2017 (full effect in 2018);

◾

increase of approximately 36% in the TUSD, which took place in the Cemig D’s 2018 annual tariff adjustment, applied as from May 28, 2018; and

◾

volume of energy transported 11.08% higher, due to a higher level of activity by industrial customers, mainly related to the ferro-alloys sector.

CVA and Other financial components in tariff adjustment

In its interim financial information Cemig recognizes the difference between actual non-controllable costs (in which the CDE, and energy purchased for resale, are significant components) and the costs that were used in calculating tariffs. The amount of this difference is passed through to the clients in Cemig D’s next tariff adjustment. In 1H18 this represented a net gain in revenue of R$ 1,150,672, whereas 1H17 it produced a reduction of R$ 331,896. The difference in this case is mainly due to the increase in costs of energy in 2018, in relation to tariff coverage, and in comparison to the previous period, generating a financial asset to be reimbursed to the Company through the next tariff adjustment.

For more details please see Note 14 of this interim financial information.

Transmission concession revenue

Cemig GT’s revenue from transmission comprises the sum of the revenues from all the transmission assets. The concession contracts establish the Permitted Annual Revenue (Receita Anual Permitida, or RAP) for the assets of the existing system, updated annually based on the variation in the IPCA index. Whenever there is a strengthening, improvement or adaptation to an existing asset made under a specific authorization from Aneel, an addition is made to the RAP.

This revenue was R$ 206,582 in 1H18, compared to R$ 177,437 in 1H17 – or 16.43% higher period-on-period. This variation arises basically from the inflation adjustment of the annual RAP, which was applied in July 2017, plus the new revenues related to the investments authorized to be included. It includes an additional adjustment for expectation of cash flow from financial assets, arising from change in the fair value of the Regulatory Remuneration Asset Base (BRR).

The percentages and the indices applied in this adjustment vary according to the concessions. In 2017 the adjustment was 3.59% (the IPCA index) for the concession of Cemig GT, and 1.57% (the IGP-M Index) for the concession of Cemig Itajubá.

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Transmission indemnity revenue

The revenue from the transmission Indemnities in 1H18 was R$ 146,519, which was 45.70% less than in 1H17 (R$ 269,855). We highlight the amount of R$ 149,255 recorded for 1H17, relating to the backdated difference of transmission concession assets the values of which were not included in the calculation basis for revenues in the previous tariff reviews.

The Company reports the updating of the amount of indemnity receivable based on the average regulatory cost of capital, as specified in the sector regulations.

For more details please see Note 14 of these interim financial information.

Generation indemnity revenue

In 1H18 the Company recognized revenue of R$ 34,463 for the adjustment to the balance not yet amortized relating to the basic plans of the concessions for the São Simão and Miranda hydroelectric plants, to be indemnified as per Ministerial Order 291/17.

For more details see Note 14 of these interim financial information.

Revenue from transactions in the Wholesale Electricity Trading Chamber (CCEE)

Revenue from energy transactions at CCEE in 1H18 was R$ 159,966, compared to R$ 425,177 in 1H17 – a reduction of 62.38%. The lower revenue from this source reflects the lower quantity of energy available for settlement in the wholesale market in 2018, in spite of the average Spot Price (PLD) being 8.46% higher (R$ 249.88/MWh in 1H18, vs. R$ 230.39/MWh in 1H17).

Revenue from supply of gas

Cemig reported revenue from supply of gas totaling R$ 898,979 in 1H18, compared to R$ 821,145 in 1H17 – 9.48% higher than prior year. This basically is due to higher tariffs the volume of gas sold was 6.83% lower than prior year (564,940 m³ in 1H18, compared to 606,365 m³ in 1H17).

Construction revenue

Infrastructure construction revenue in 1H18 was R$ 383,643, which was 13.01% less than in 1H17 (R$ 441,034). This revenue is fully offset by Construction costs, of the same amount, and corresponds to the Company’s investments in assets of the concession in the period.

Other operating revenues

The Company’s Other revenues in 1H18 were R$ 773,444, or 7.78% more than in 1H17 (R$ 717,632). See Note 25 for the composition of operating revenues.

Sector / Regulatory charges reported as Deductions from revenue

The charges that are recorded as deductions from operational revenue totaled R$ 5,397,013 in 1H18, or 5.27% more than in 1H17 (R$ 5,127,021).

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The Energy Development Account – CDE

The amounts of payments to the Energy Development Account (CDE) are decided by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities, tariff subsidies, and the subsidy for balanced tariff reduction, the low-income customer subsidy, the coal consumption subsidy, and the Fuels Consumption Account. Charges for the CDE in 1H18 were R$ 1,180,960, compared to R$ 859,370 in 1H17.

This is a non-manageable cost: the difference between the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Customer charges – the ‘Flag’ Tariff system

Charges to the customer arising from the ‘Flag Tariff’ system in 1H18 were 20.06% lower – at R$ 125,059 in 1H18, vs. R$ 156,435 in 1H17. In the ‘Flag’ Tariff system, higher rates come into effect depending on the level of water in the country’s reservoirs – the yellow and red flags are for when water is more scarce: the ‘red flag’ imposes the highest extra tariff. Activation of the flag tariffs generates an impact on billing in the subsequent month. The first half of 2017 was impacted by activation of the yellow flag in March, with effect on the billing of April, and the red flag in April and May, with effects on the billing of May and June respectively. In the same period of 2018 there was an effect only in the month of June, following activation of the yellow flag in May.

Other taxes and charges on revenue

The deductions and charges with the most significant impact on revenue are mainly taxes, calculated as a percentage of sales revenue. Thus, their variations arise, substantially, from the changes in revenue.

Operating costs and expenses (excluding Finance income/expenses)

Operating costs and expenses in 1H18 totaled R$ 9,057,922, or 4.73% more than in 1H17 (R$ 8,649,001). For more on the components of Operational costs and expenses see Note 26.

The following paragraphs outline the main variations in expenses:

Energy purchased for resale

This expense in 1H18 was 7.17% higher than prior year, at R$ 5,082,598, compared to R$ 4,742,418 in 1H17. This is mainly due to the following:

◾

Average spot price (PLD) 8.46% higher, at R$ 249.88/MWh in 2018, compared to R$ 230.39/MWh in 2017, directly affecting the price paid for spot supply.

◾

The expense on supply acquired at auction in the Regulated Market was 7.52% higher, at R$ 1,480,756, in 1H18, compared to R$ 1,377,210 in 1H17. This is mainly due to inclusion of supply originating in assignments of new-built energy from the Surpluses and Deficits Compensation Mechanism (MCSD), representing an increase of R$ 341,518 in the expense in the first half of 2018, partially offset by the reduction in volume of supply in the contracts for quantity and availability (11,347,202 MWh in 1H18, and 12,957,063 MWh in 1H17); and

◾

expenses on energy acquired through physical guarantee quota contracts 38.84% higher in 1H18, at R$ 311,625, compared to R$ 224,452 in 1H17. This is basically due to the increase of 41.81% in the quotas tariff – it was R$ 87.27 in 1H18 and R$ 61.54 in 1H17.

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Charges for use of the transmission network

Charges for use of the transmission network in 1H18 totaled R$ 808,580, an increase of 100.01% period-on-period, compared to R$ 404,261 in 1H17.

This expense is payable by electricity distribution and generation agents for use of the facilities that are components of the national grid. The amounts to be paid are set by an Aneel Resolution. The higher amounts in 2018 are due to increased transmission costs related to the payment of the transmission indemnities to the agents of the electricity sector that accepted the terms of Law 12,783/13.

This is a non-manageable cost: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Operating provisions

Operating costs and expenses in 1H18 totaled R$ 267,319, or 27.74% less than in 1H17 (R$ 369,918). The main factors are:

◾

Variation in fair value of the investment options related to Parati/RME and SAAG, totaling R$ 62,054 in 1H18, compared to a total provision of R$ 7,631 in 1H17. More details on the criteria for making of these provisions are in Note 29 (Put options).

◾

Lower expenses on labor contingencies, with reversal of R$ 3,060 in 1H18, compared to constitution of a new expense of R$ 177,725 in 1H17. The reversal is the consequence of judgments given in favor of the Company – against claims by plaintiffs.

For more information see Note 23.

Personnel

The expense on personnel in 1H18 was R$ 680,240, or 25.83% lower than in 1H17 (R$ 917,162). This arises mainly from the following factors:

◾

Expense of R$ 25,666 on the voluntary retirement program in 1H18, compared to R$ 165,422 in 1H17 – i.e. 84.48% lower;

◾

Salary increases, from November 2017 under the Collective Agreement (with full effect in 2018), of 1.83%.

◾

The average number of employees was reduced by 17.66%, from 6,864 in 1H17 to 5,892 in 1H18.

Construction cost

Infrastructure construction cost in 1H18 was R$ 383,643, or 13.01% less than in 1H17 (R$ 441,034). This line records the Company’s investment in assets of the concession in the period, and is fully offset by the line Construction Revenue, in the same amount.

Gas purchased for resale (*)

In 1H18 the company recorded an expense of R$ 556,459 on acquisition of gas, 14.70% more than its comparable expense of R$ 485,163 in 1H17. This higher expense mainly reflects increases in the prices of gas purchased, since the volume of Gas purchased for resale was lower (562,390 m³ in 1H18 vs. 599,360 m³ in 1H17).

Share of profit (loss) in associates and joint ventures

The result of equity method valuation of interests in investees was an expense of R$ 26,233 in 1H18, compared to a gain of R$ 60,118 in 1H17. This basically reflects losses in 2018 on the interests in Renova and Santo Antônio Energia.

The breakdown of the results from the investees recognized under this line is given in detail in Note 15.

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Net finance income (expenses)

Cemig reports net Finance expenses in 1H18 of R$ 854,632, compared to net Finance expenses of R$ 734,300 in 1H17. The main factors are:

◾

Cash investment income 66.65% lower period-on-period, at R$ 41,850 in 1H18, compared to R$ 125,493 in 1H17. This is mainly due to a lower volume of cash invested in 2018, and also to the lower CDI rate in the period: 3.17% in 1H18 vs. 5.61% in 1H17.

◾

Expense arising from exchange rate variation on funding indexed to the US dollar (Eurobonds), raised in December 2017 – the expense totals R$ 547,800, and is partially offset by gains arising from the swap transactions relating to that Eurobond issue, of R$ 180,429 – so that the net expense in 1H18 is R$ 367,371. The swap transaction replaced the issue’s interest rate of 9.25% p.a. in US dollars with 150.49% of the Brazilian domestic CDI rate; and a hedge was contracted for the principal for US dollar exchange rates between a floor of R$ 3.25 and a ceiling of R$ 5.00 – in this case, at maturity, the Company will pay the floor value. The net negative effect of the transaction in the half-year, consequence of the foreign exchange variation expense not being offset by the hedge instruments contracted, arises basically from the higher variation in the expected future curve for the CDI than in the expected future variation in the R$/US$ exchange rate – this situation occurred basically in the months of May and June 2018, due to the instability of the macroeconomic scenario. Expectations for future variations in the CDI rate and the US dollar exchange rate are the main variables used in the calculation of fair value of the hedge transactions referred to.

◾

Costs of loans and financings 27.09% lower, at R$ 604,051 in 1H18, compared to R$ 828,467 in 1H17. This is mainly due to the lower variation resulting from the CDI rate, the main indexer of the debt, which was 3.17% in 1H18, and 5.61% in 1H17.

◾

Revenue from late charges on client energy bills 21.77% higher, at R$ 167,950 in 1H18, compared to R$ 137,923 in 1H17. A major component of this increase comes from the effects of renegotiation of amounts owed on energy bills by entities of the Minas Gerais State administration – as recognition of interest due is finalized.

◾

Higher net result of monetary updating on the balances of CVA and Other financial components: net revenue of R$ 11,286 in 1H18, compared to a net expense of R$ 28,080 in 1H17, basically reflecting the higher balance of net assets in 1H18 than in 1H17.

For a breakdown of Finance income and expenses please see Note 27 of these interim financial information.

Income and Social Contribution taxes

In 1H18, the expense on income tax and the Social Contribution tax totaled R$ 170,845, on Income before income tax and social contribution tax of R$ 603,182, representing an effective rate of 28.32%. In 1H17, the expense on income tax and the Social Contribution tax totaled R$ 213,928, on Income before income tax and social contribution tax of R$ 694,776, representing an effective rate of 30.79%. These effective rates are reconciled with the nominal tax rates in Note 9c.

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Net income (loss) for the second quarter 2018

On the second quarter of 2018 (‘2Q18’) Cemig reports a loss of R$ 10,886, which compares to net income of R$ 138,114 in 2Q17. The following notes describe the main variations between the two periods in revenues, costs, expenses and financial items.

This primarily reflected significant net non-operating expenses of R$ 449,088, arising from FX variation on the debt raised in December 2017 (Eurobond issue); partially offset by the effects of gains under the swap transaction made by the Company to replace: payment of the interest on the Eurobonds, 9.25% p.a. in US dollars, by 150.49% of the Brazilian domestic CDI rate; and for the principal, a hedge contracted for variation in the US dollar exchange rate between a floor of R$ 3.25 and a ceiling of R$ 5.00 – in this case the Company, at maturity, will pay the floor value. This effect results from the instability of the macroeconomic scenario in the second half of 2018, with increased expectations for future variations in the CDI and FX rates – the main variables for calculation of fair value of financial instruments.

Ebitda (earnings before interest, tax, depreciation and amortization)

Cemig’s consolidated Ebitda in 2Q18 was 19.45% below its Ebitda of 2Q17: The most significant factors in this variation are set out below. Ebitda margin in 2Q18 was 15.75%, compared to the 14.21% in 2Q17.


*Ebitda – R$ ‘000*	Apr to Jun 2018			Apr to Jun 2017		Change,%
Net income for the period		(10,886	)		138,114		—
+ Income tax and Social Contribution tax		(773	)		50,539		—
+ Finance income (expenses)		696,832			341,554		104.02
+ Depreciation and amortization		198,309			209,435		(5.31	)

= Ebitda		883,482			739,642		19.45

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Revenue from supply of energy

Total revenue from supply of energy was R$ 5,838,104 in 2Q18, compared to R$ 5,800,520 in 2Q17, 0.65% higher period-on-period.

Final Customers

Total revenue from supply of energy to final customers, excluding Cemig’s own consumption, in 2Q18 was R$ 4,978,835, or 2.22% less than the figure for 2Q17, of R$ 5,092,073.

The main factors for this reduction were:

◾

The Annual Tariff Adjustment for Cemig D effective May 28, 2017, with an average downward effect on customer tariffs of 10.66%.

◾

The Annual Tariff Adjustment for Cemig D effective May 28, 2018, with an average positive effect on customer tariffs of 23.19%.

◾

Volume of energy sold to final customers 3.79% higher.

Cemig’s electricity market

The total for sales at Cemig’s consolidated electricity market comprises sales to: (i) Captive customers in Cemig’s concession area in the State of Minas Gerais; (ii) Free customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ACL); (iii) Other agents of the electricity sector – traders, generators and independent power producers, also in the Free Market; (iv) Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and (v) The Wholesale Electricity Trading Chamber (Câmara de Comercialização de Energia Elétrica—CCEE), eliminating transactions between companies of the Cemig Group.

The table below describe Cemig’s market and the change in the sale of energy by category of customers, comparing 2Q18 with 2Q17:


	MWh (1)
	Apr to Jun 2018		Apr to Jun 2017		Change,%
Residential		2,557,762		2,496,022		2.47
Industrial		4,524,750		4,450,891		1.66
Commercial, Services and Others		2,155,487		1,892,746		13.88
Rural		954,766		953,709		0.11
Public authorities		220,791		226,041		(2.32	)
Public lighting		345,401		341,420		1.17
Public services		331,174		324,405		2.09

Subtotal		11,090,131		10,685,234		3.79

Own consumption		11,357		8,788		29.23

		11,101,488		10,694,022		3.81

Wholesale supply to other concession holders (2)		2,974,570		2,846,261		4.51

Total		14,076,058		13,540,283		3.96

(1)	Information in MWh has not been reviewed by external auditors.

(2)	Includes Regulated Market Electricity Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.

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We highlight the growth in volume sold in numerous sectors: 2.47% in the residential customer category, 1.66% in the industrial customer category, 13.88% in the commercial customer category, and 13.05% in the public service category – mainly reflecting addition of new customer units, and overall better economic activity than in the previous year.

In contrast, consumption by public authorities was 2.32% lower, basically reflecting the truck drivers’ strike, which affected lessons in schools and universities, and declaration of optional working days in various spheres of government during the strike.

Revenue from Use of Distribution Systems (the TUSD charge)

This is revenue from charging Free customers the Tariff for Use of the Distribution System (Tarifa de Uso do Sistema de Distribuição, or TUSD), for transport of energy sold. In 2Q18 this revenue was R$ 440,599, a period-on-period increase of 0.73% from R$ 437,427 in 2Q17, mainly due to the following factors:

◾

reduction of approximately 40% in the TUSD, which took place in the Cemig D’s 2017 annual tariff adjustment, applied as from May 28, 2017 (full effect in 2018);

◾

Increase of approximately 36% in the TUSD, which took place in the Cemig D’s 2018 annual tariff adjustment, applied as from May 28, 2018; and

◾

volume of energy transported 13.66% higher, due to a higher level of activity by industrial customers, mainly related to the ferro-alloys sector.

CVA and Other financial components in tariff adjustment

In its interim financial information Cemig recognizes the difference between actual non-controllable costs (in which the CDE, and energy purchased for resale, are significant components) and the costs that were used in calculating tariffs. The amount of this difference is passed through to the clients in Cemig D’s next tariff adjustment. In 2Q18 this represented a gain in revenue of R$ 709,516, whereas 2Q17 it produced a reduction of R$ 29,294. The difference in this case is mainly due to the increase in costs of energy in 2018, in relation to tariff coverage, and in comparison to the previous period, generating a financial asset to be reimbursed to the Company through the next tariff adjustment.

For more details please see Note 14 of this interim financial information.

Revenue from transactions in the Wholesale Electricity Trading Chamber (CCEE)

Revenue from energy sales on the CCEE in 2Q18 was R$ 25,639, compared to R$ 198,529 in 2Q17 – a reduction of 87.09%. The difference is due to the lower quantity of energy available for settlement in the wholesale market in 2018.

Transmission indemnity revenue

In 2Q18 this revenue was R$ 96,678, compared to R$ 204,025 in 2Q17 – or 52.61% lower period-on-period. We highlight the amount of R$ 149,255 recorded for 2Q17, relating to the backdated difference of transmission concession assets the values of which were not included in the calculation basis for revenues in the previous tariff reviews.

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The Company reports the updating of the amount of indemnity receivable based on the average regulatory cost of capital, as specified in the sector regulations. For more details see Note 14 – Concession financial assets.

Revenue from supply of gas

The Company reported revenue from supply of gas 14.69% higher in 2Q18, at R$ 470,908, compared to R$ 410,604 in 2Q17, mainly due to the higher volume of gas sold: 456,458 m³ in 2Q18, compared to 310,240 m³ in 2Q17.

Construction revenue

Construction and infrastructure revenues (transmission, distribution and gas) totaled R$ 205,783 in 2Q18, which was 14.43% less than their total of R$ 240,475 in 2Q17. This revenue is fully offset by Construction costs, of the same amount, and corresponds to the Company’s investments in assets of the concession in the period.

Other operating revenues

Other revenues were 15.80% lower in 2Q18 (at R$ 311,332), than in 2Q17 (R$ 369,763).

Sector / Regulatory charges reported as Deductions from revenue

The total of these taxes and charges incident upon operational revenue in 2Q18 was R$ 2,683,021 – an increase of 3.86% in relation to their total of R$ 2,583,211 in 2Q17.

The Energy Development Account – CDE

The amounts of payments to the Energy Development Account (CDE) are decided by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities, tariff subsidies, the subsidy for balanced tariff reduction, the low-income customer subsidy, the coal consumption subsidy, and the Fuels Consumption Account (CCC). The charges for the CDE in 2Q18 were R$ 593,105, compared to R$ 415,749 in 2Q17.

This is a non-manageable cost: the difference between the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Customer charges – the ‘Flag’ Tariff system

Charges to the customer arising from the ‘Flag Tariff’ system in 2Q18 were 93.48% lower – at R$ 8,287 in 2Q18, vs. R$ 127,177 in 2Q17. In the ‘Flag’ Tariff system, higher rates come into effect depending on the level of water in the country’s reservoirs: the ‘yellow’ and ‘red’ flags represent higher charges in situations of low level of the reservoirs, due to the scarcity of rainfall.

Activation of the flag tariffs generates an impact on billing in the subsequent month. This effect took place in 2Q17 – application of the yellow flag in March resulting in increased billing in April; and the red flag in April and May had its effects in May and June of that year.

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In the same period of 2018 there was an effect only in the month of June, following activation of the yellow flag in May.

Operating costs and expenses (excluding Finance income/expenses)

Operational costs and expenses were up 3.28%: R$ 4,859,630 in 2Q18, and R$ 4,705,299 in 2Q17. For more on the components of Operational costs and expenses see Note 26.

The following paragraphs outline on the main variations in expenses:

Energy purchased for resale

The expense on energy purchased for resale in 2Q18 was R$ 2,818,905, compared to R$ 2,649,330 in 2Q17 – or 6.40% higher than prior year. The main factors are:

◾

The expense on energy supply bought at auction was 19.25% higher, at R$ 757,243 in 2Q18, vs. R$ 634,978 in 2Q17. This in turn was mainly due to inclusion of the supply coming from MCSD (Excess/Deficit Compensation Mechanism) assignments for new-build projects, which resulted in Cemig D’s expense being R$ 127,780 higher than in 2Q17 – partially offset by lower volume in quantity and availability contracts (5,709,270 MWh in 2Q18 vs. 6,522,682 MWh in 2Q17).

◾

Expenses on supply acquired through physical guarantee quota contracts 21.63% higher, at R$ 140,241 in second quarter of 2018, compared to R$ 115,298 in 2Q17. This was basically due to the increase of 40.95% in the quota tariffs – at R$ 84.88 in 2Q18, compared to R$ 60.22 in 2Q17.

◾

Expense on supply acquired in the Free Market 10.71% lower at R$ 891,546 in 2Q18, compared to R$ 998,450 in 2Q17. This reflects a volume of energy purchased 11.88% lower in 2Q18 – at 4,726,875 MWh, vs. 5,364,064 MWh in 2Q17; partially offset by the effect of average price per MWh in 2Q18 being 3.82% higher (at R$ 189.79 in 2Q18, vs. R$ 182.81 in 2Q17);

◾

The expense on purchase of supply in the spot market, at R$ 710,115 in 2Q18, was 15.56% higher, vs. R$ 614,518 in 2Q17, due to the higher cost of supply in the wholesale market in 2018.

Charges for use of the transmission network

Charges for use of the transmission network in 2Q18 totaled R$ 416,038, compared to R$ 197,764 in 2Q17, an increase of 110.37% period-on-period.

This expense is payable by electricity distribution and generation agents for use of the facilities that are components of the national grid. The amounts to be paid are set by an Aneel Resolution.

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Operating provisions

Operating provisions were 16.90% lower in the quarter – an expense of R$ 134,112 in 2Q18, compared to R$ 161,386 in 2Q17. The main factors are:

(i)

Provisions of R$ 27,519, and R$ 20,231, respectively, were made in 2Q18 for the investment options of RME/Lepsa and SAAG – these compare with reversals of provisions, in 2Q17, of R$ 8,021 and R$ 5,334 respectively, for these items. More details on the criteria for making of these provisions are in Note 29 (Put options).

(ii)

A reversal, of R$ 20,114, in the total provision for labor contingencies, in 2Q18, compared with new provisions totaling R$ 114,419 made in 2Q17. The reversal recognizes judgments given in favor of the Company – against claims by plaintiffs.

Personnel

The expense on personnel in 2Q18 was R$ 348,576, or 34.96% less than in 2Q17 (R$ 535,954). This arises mainly from the following factors:

◾

Salary increase of 1.83% under the Collective Work Agreement, from November 2017.

◾

Expense of R$ 25,666 on the voluntary retirement program in 2Q18, compared to R$ 165,422 in 2Q17.

◾

Reduction of the average number of employees by 10.43%, from 6,618 in 2Q17 to 5,928 in 2Q18.

Construction cost

Infrastructure Construction Cost in 2Q17 was R$ 202,974, 15.59% less than in 2Q17 (R$ 240,475). This line records the Company’s investment in assets of the concession in the period, and is fully offset by the line Construction Revenue, in the same amount.

Gas purchased for resale

In 2Q18 the Company recorded an expense of R$ 293,225 on acquisition of gas, 11.64% higher than its comparable expense of R$ 262,651 in 2Q17. This is basically due to a higher volume of gas purchased (454,622 m³ in 2Q18, vs. 308,850 m³ in 2Q17).

Share of profit (loss) in associates and joint ventures

In 2Q18 Cemig posted a net loss of R$ 83,107 by the equity method – compared to with a net gain of R$ 30,477 in 2Q17. These losses mainly come from the interests in Renova and Santo Antônio Energia. More details in Note 15.

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Net finance income (expenses)

Cemig reported net Finance expenses in 2Q18 of R$ 696,832, which compares with net Finance expenses of R$ 341,554 in 2Q17. The main factors are:

◾	Costs of loans and financings 17.11% lower, at R$ 316,703 in 2Q18, compared to R$ 382,076 in 2Q17. The lower figure reflects lower debt indexed to the CDI rate, and the lower value of the CDI – 1.56% over the period of 2Q18, compared to 2.55% over 2Q17.

◾

Revenue from late charges on customer electricity bills 41.85% higher, at R$ 92,288 in 2Q18, compared to R$ 65,069 in 2Q17. A major component of this increase comes from the effects of renegotiation of amounts owed on electricity bills by entities of the Minas Gerais State administration – as recognition of interest due is finalized.

◾	Cash investment income 70.13% lower period-on-period, at R$ 18,123 in 2Q18, compared to R$ 60,663 in 2Q17. This mainly reflects (a) the lower CDI rate in the quarter (1.56% over the period of 2Q18, vs. 2.55% over 2Q17), and (b) a lower volume of cash invested in 2Q18.

◾

An expense of R$ 532,000 for foreign exchange variation on US dollar-denominated funding (the Eurobond issue); this being partially offset by a gain of R$ 82,912 on financial instruments – the swap transaction contracted to cover the Eurobond issue – thus resulting in a net expense in 2Q18 of R$ 449,088. The swap transaction replaced the issue’s interest rate of 9.25% p.a. in US dollars with 150.49% of the Brazilian domestic CDI rate; and a hedge was contracted for the principal for US dollar exchange rates between a floor of R$ 3.25 and a ceiling of R$ 5.00 – in this case, at maturity, the Company will pay the floor value. The net negative effect of the transaction in the half-year, consequence of the foreign exchange variation expense not being offset by the hedge instruments contracted, arises basically from the higher variation in the expected future curve for the CDI than in the expected future variation in the R$/US$ exchange rate – this situation occurred basically in the months of May and June 2018, due to the instability of the macroeconomic scenario. Expectations for future variations in the CDI rate and the US dollar exchange rate are the main variables used in the calculation of fair value of the hedge transactions referred to.

◾

The result of monetary updating of the balances of CVA was a gain of R$ 10,839, but in 2Q17 it was an expense of R$ 21,911. The positive and negative balances of CVA are updated by the Selic rate. This variation arises from there being an asset balance of CVA on June 30, 2018, leading to recording of a financial gain for updating the balance. In the same period of 2017, the Company had a net negative balance of CVA, recorded as a financial liability from updating of the obligation. For more information, see Note 14.

For a breakdown of Finance income and expenses please see Note 27 of these interim financial information.

Income and Social Contribution taxes

In 2Q18, the expense on income tax and the Social Contribution tax was R$ 773, on Losses before income tax and social contribution tax of R$ 33,031.

In 2Q17, the expense on income tax and the Social Contribution tax was R$ 50,539, on Income before income tax and social contribution tax of R$ 188,653.

These effective rates are reconciled with the nominal tax rates in Note 9c.

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OTHER INFORMATION THAT THE COMPANY BELIEVES TO BE MATERIAL

The Board of Directors:

Meetings

Our Board of Directors met 19 times up to June 30, 2018, for matters of strategic planning, projects, acquisition of new assets, various investments, and other subjects.

Membership, election and period of office

The present period of office began with the AGM on June 11, 2018, with election by the multiple voting system.

The periods of office of the present members of the Board of Directors expire at the Annual General Meeting of shareholders to be held in 2020.

Principal responsibilities and duties:

Under the by-laws, the Board of Directors has the following responsibilities and duties, as well as those conferred on it by law:

◾	Decision on any sale of assets, loans or financings, charge on the company’s property, plant or equipment, guarantees to third parties, or other legal acts or transactions, with value equal to 1% or more of the Company’s total Shareholders’ equity.

◾	Authorization for issuance of securities in the domestic or external market to raise funds.

◾	Approval of the Long-term Strategic and the Multi-year Business Plan, and alterations and revisions of them, and the Annual Budget.

Qualification and remuneration

The Board of Directors of the Company comprises 9 (nine) sitting members and the same number of substitute members. One is the Chair, and another the Vice-Chair. The members of the Board of Directors are elected for concurrent periods of office of 2 (two) years, and may be dismissed at any time, by the General Meeting of shareholders. Re-election for a maximum of 3 (three) consecutive periods of office is permitted, subject to the requirements and prohibitions established in the applicable legislation and regulations.

A list with the names of the members of the Board of Directors and their résumés is on our website at: http://ri.cemig.com.br.

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The Audit Committee

The Audit Committee is an independent, consultative, permanent body, with its own budget allocation. Its objective is to provide advice and support to the Board of Directors, to which it reports. It also has the responsibility of other activities attributed to it by legislation.

The Audit Committee has three members, the majority of them independent, nominated and elected by the Board of Directors in the first meeting after the Annual General Meeting for periods of office of three years, not to run concurrently. One re-election is permitted.

Under the by-laws, the Audit Committee of Cemig has the following duties, among others:

◾

to supervise the activities of the independent auditors, evaluating their independence, the quality of the services provided and the appropriateness of such services to the Company’s needs;

◾

to supervise activities in the areas of internal control, internal audit and preparation of the financial statements;

◾

to evaluate and monitor, jointly with the Management and the Internal Audit Unit, the appropriateness of the transactions with related parties.

The Executive Board

The Executive Board is made up of eleven members, whose individual functions are set by the Company’s by-laws. They are elected by the Board of Directors, for a period of office of two years, subject to the applicable requirements of law and regulation, and may be re-elected up to three times.

Members are allowed simultaneously to hold non-remunerated positions in the Management of wholly-owned subsidiaries, subsidiaries or affiliates of Cemig, upon decision by the Board of Directors. They are also, obligatorily, members, with the same positions, of the Boards of Directors of Cemig GT (Generation and Transmission) and Cemig D (Distribution).The period of office of the present Chief Officers expires at the first meeting of the Board of Directors held after the Annual General Meeting of 2020.

The members of the Executive Board and brief résumés are on our website: http://ri.cemig.com.br

The members of the Executive Board (the Company’s Chief Officers) have individual responsibilities established by the Board of Directors and the by-laws. These include:

◾	Current Management of the Company’s business, complying with the Long-term Strategy, the Multi-year Business Plan, and the Annual Budget, prepared and approved in accordance with the by-laws.

◾

Authorization of the Company’s capital expenditure projects, signing of agreements or other legal transactions, contracting of loans and financings, and creation of any obligation in the name of the Company, based on the Annual Budget approved, which individually or in aggregate have values less than 1% (one per cent) of the Company’s Equity, including injection of capital into wholly-owned or other subsidiaries, affiliated companies, and the consortia in which the Company participates;

◾

The Executive Board meets, ordinarily, at least two times per month; and, extraordinarily, whenever called by the Chief Executive Officer or by two Executive Officers with at least two days’ prior notice in writing or by email or other digital medium, such notice not being required if all the Executive Officers are present. The decisions of the Executive Board shall be taken by vote of the majority of its members, and in the event of a tie the Chief Executive Officer shall have a casting vote.

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The Audit Board

Meetings

◾	The Audit Board held eight meetings in the six months to June 30, 2018.

Membership, election and period of office

◾	We have a permanent Audit Board, made up of five sitting members and their respective substitute members. They are elected by the Annual General Meeting of shareholders, for periods of office of two years.

◾	Nominations to the Audit Board must obey the following:

Two groups – (i) the minority shareholders of common shares, and (ii) the holders of the preferred shares – each have the right to elect one member, in separate votes, in accordance with the applicable legislation.

The majority of the members must be elected by the Company’s controlling shareholder; at least one must be a public employee, with a permanent employment link to the Public Administration.

◾	The members of the Audit Board are listed on Cemig’s website: http://ri.cemig.com.br

Under the by-laws, the Audit Board has the duties and competencies set by the applicable legislation and, to the extent that they do not conflict with Brazilian legislation, those required by the laws of the countries in which the Company’s shares are listed and traded.

Qualification and remuneration

The global or individual compensation of the members of the Audit Board shall be set by the General Meeting of Shareholders which elects it, in accordance with the applicable legislation.

Résumé information on its members is on our website: http://ri.cemig.com.br

The Sarbanes-Oxley Law

Cemig obtained the first certification of its internal controls for mitigation of risks involved in the preparation and disclosure of the financial statements, issued in accordance with Section 404 of the Sarbanes-Oxley Law and the rules of the Public Company Accounting Oversight Board (PCAOB), which is included in the annual 20-F Report relating to the business year ended December 31, 2006, filed with the US Securities and Exchange Commission (SEC) on July 23, 2007.

Corporate risk management

Corporate risk management is a management tool that is an integral part of Cemig’s corporate governance practices. It identifies the events that can interfere in the process of the Company achieving its strategic objectives.

The Corporate Risks and Compliance Management Unit has been subordinated to the CEO’s office since 2016. This change underlines the intention to increase independence of these processes and to provide information to senior management for decision-making, preserving the value of the company. The practice of risk management is thus a competitive differentiation factor, to be used not only defensively, but also as an opportunity for improvement. The structuring and analysis of operations from the point of view of risk management are factors that optimize investment in the control of the activity. They reduce costs, improve performance, and consequently help the Company achieve its targets.

In risk management processes, in planning of operations and in development of new business initiatives, Cemig always acts in consideration of the precautionary principle. During planning, all the factors that might present risks to health and/or safety of employees, suppliers, clients, the general population or the environment are taken into account. Further, the fact that the Company is recognized by the Dow Jones Sustainability Index and the Corporate Sustainability Index (ISE) reflects the implementation of structural elements of the risk management system, and commitment to sustainability.

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Statement of Ethical Principles and Code of Professional Conduct

On May 11, 2004 Cemig’s Board of Directors approved the Statement of Ethical Principles and Code of Professional Conduct, which aims to orient and discipline everyone acting in the name of, or interacting with, Cemig, to ensure ethical behavior at all times, and always in accordance with the law and regulations. The code can be seen at http://ri.cemig.com.br. It was updated in 2018.

The Ethics Committee

Cemig’s Ethics Committee was created on August 12, 2004, to coordinate all actions relating to management (interpretation, publicizing, application and updating) of the Statement of Ethical Principles and Code of Professional Conduct, including assessment of and decision on any possible non-compliances with Cemig’s Code of Ethics.

The Committee has three sitting members and three substitute members. It may be contacted through our Ethics Channel – the anonymous reporting channel on the corporate Intranet, or by email, internal or external letter or by an exclusive phone line – these means of communication are widely publicized internally to all staff. The channels enable both reports of adverse activity and also consultations. Reports may result in opening of proceedings to assess any non-compliances with Cemig’s Statement of Ethical Principles and Code of Professional Conduct.

The Ethics Channel

Cemig installed this means of communication, available on the internal corporate Intranet, on December 13, 2006.

Through it the Ethics Committee can receive anonymous reports or accusations that can enable Cemig to detect irregular practices that are contrary to its interest, such as: financial fraud, including adulteration, falsification or suppression of financial, tax or accounting documents; misappropriation of goods or funds; receipt of undue advantages by managers or employees; irregular contracting; and other practices considered to be illegal.

It is one more step in improving Cemig’s transparency, compliance with legislation, and alignment with best corporate governance practices. It improves the management of internal controls and dissemination of the ethical culture to Cemig’s employees in the cause of optimum compliance by our business.

SHAREHOLDING POSITION OF HOLDERS OF

MORE THAN 5% OF THE VOTING SHARE

ON JUNE 30, 2018


	COMMON SHARES		%		PREFERRED SHARES		%		TOTAL SHARES		%
State of Minas Gerais		248,480,146		50.96		—		—		248,480,146		17.03
FIA Dinâmica Energia S.A.		41,635,754		8.54		62,469,590		6.43		104,105,344		7.14
BNDESPar		54,342,992		11.14		26,220,938		2.70		80,563,930		5.52

CONSOLIDATED SHAREHOLDING POSITION OF

THE EQUITY HOLDERS OF THE PARENT AND MANAGERS,

AND FREE FLOAT ON JUNE 30, 2018


	June 30, 2018
	Common (ON) shares		Preferred (PN) shares
Equity holders of the parent		248,480,146
Board of Directors:		100,501		190,000
The Executive Board		1		45,430
Treasury Shares		69		560,649
Free float		238,976,793		969,694,662

TOTAL		487,614,213		971,138,388

129

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Investor Relations

In 2017, through strategic actions intended to enable investors and shareholders to make a correct valuation of our businesses and our prospects for growth and addition of value, we have increased Cemig’s exposure to the Brazilian and global capital markets.

We maintain a constant and proactive flow of communication with Cemig’s investor market, continually reinforcing our credibility, seeking to increase investors’ interest in the Company’s shares, and to ensure their satisfaction with our shares as an investment.

Our results are published through presentations transmitted via video webcast and telephone conference calls, with simultaneous translation in English, always with members of the Executive Board present, developing a relationship that is increasingly transparent and in keeping with best corporate government practices.

To serve our shareholders – who are spread over more than 40 countries – and to facilitate optimum coverage of investors, Cemig has been present in and outside Brazil at a very large number of events, including seminars, conferences, investor meetings, congresses, roadshows, and events such as Money Shows; as well as holding phone and video conference calls with analysts, investors and others interested in the capital markets.

At the end of May 2018 we held our 23rd Annual Meeting between Cemig and the Capital Markets in the city of Belo Horizonte, Minas Gerais – where these professionals had the opportunity to interact with the Company’s Directors and principal executives.

Corporate governance

Our corporate governance model is based on principles of transparency, equity and accountability, focusing on clear definition of the roles and responsibilities of the Board of Directors and the Executive Board in the formulation, approval and execution of policies and guidelines for managing the Company’s business.

We seek sustainable development of the Company through balance between the economic, financial, environmental and social aspects of our enterprises, aiming always to improve the relationship with our shareholders, clients, and employees, the public at large and other stakeholders.

Cemig’s preferred and common shares (tickers: CMIG3 and CMIG4 respectively) have been listed at Corporate Governance Level 1 on the São Paulo Stock Exchange since 2001. This classification represents a guarantee to our shareholders of optimum reporting of information, and also that shareholdings are relatively widely dispersed. Because Cemig has ADRs (American Depositary Receipts) listed on the New York Stock Exchange, representing preferred (PN) shares (with ticker CIG) and common (ON) ticker CIG.C), it is also subject to the regulations of the US Securities and Exchange Commission (SEC) and the New York Stock Exchange Listed Company Manual. Our preferred shares have also been listed on the Latibex of the Madrid stock exchange (with ticker XCMIG) since 2002.

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In June 2018 an Extraordinary General Meeting of Shareholders approved alterations to the Company’s bylaws, to maintain adoption of best corporate governance practices, and adaptation to Law 13303/2016 (also known as the State Companies Law).

The improvements now formally incorporated in the by-laws include:

•

Reduction of the number of members of the Board of Directors from 15 to 9, in line with the IBGC Best Corporate Governance Practices Code, and the Corporate Sustainability Evaluation Manual of the Dow Jones Sustainability Index.

•

Creation of the Audit Committee (Comitê de Auditoria). The Audit Board (Conselho Fiscal) remains in existence.

•

The Policy on Eligibility and Evaluation for nomination of a member of the Board of Directors and/or the Executive Board in subsidiary and affiliated companies,

•

The Related Party Transactions Policy.

•

Formal designation for the Board of Directors to ensure implementation of and supervision of the Company’s systems of risks and internal controls.

•

Optional power for the Executive Board to expand the technical committees (on which members are career employees), with autonomy to make decisions in specific subjects.

•

The CEO now to be ‘responsible for directing compliance and corporate risk management activities.

•

Greater emphasis on the Company’s control functions: internal audit, compliance, and corporate risk management.

•

Adoption of an arbitration chamber for resolution of any disputes between the Company, its shareholders, managers, and/or members of the Audit Board.

* * * * * * * * * * * *

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(The original is signed by the following signatories:)


Bernardo Afonso Salomão de Alvarenga	Luiz Humberto Fernandes	Maurício Fernandes Leonardo Júnior
Chief Executive Officer	Deputy CEO	Chief Finance and Investor Relations Officer

Ronaldo Gomes de Abreu	Franklin Moreira Gonçalves	Maura Galuppo Botelho Martins
Chief Distribution and Sales Officer	Chief Generation and Transmission Officer	Chief Officer for Human Relations

José de Araújo Lins Neto	Thiago de Azevedo Camargo	Dimas Costa
Chief Corporate Management Officer	Chief Institutional Relations and Communication Officer	Chief Trading Officer

Daniel Faria Costa		Neila Maria Barreto Leal
Chief Officer for Management of Holdings		Chief Counsel

Leonardo George de Magalhães		Leonardo Felipe Mesquita
Controller CRC-MG 53.140		Accounting Manager Accountant – CRC-MG-85.260

132

Edifĺcio Phelps Offices Towers

Rua Antônio de Albuquerque, 156

11º andar - Savassi

30112-010 - Belo Horizonte - MG - Brasil

Tel: +55 31 3232-2100

Fax: +55 31 3232-2106

ey.com.br

A free translation from Portuguese into English of Independent Auditor’s Report on the Review of Interim Information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS), issued by International Accounting Standards Board – IASB

Report on the review of interim information—ITR

To the Shareholders and Management of

Companhia Energética de Minas Gerais - CEMIG

Belo Horizonte - MG

Introduction

We have reviewed the individual and consolidated interim financial information of Companhia Energética de Minas Gerais—CEMIG (“Company”), contained in the Quarterly Information Form (ITR) for the quarter ended June 30, 2018, which comprise the statement of financial position as at June 30, 2018 and the statements of profit or loss and comprehensive income for the three and six-month periods then ended and the statements of changes in equity and cash flows for the six-month period then ended, including notes to the interim financial information.

Management is responsible for the preparation of the individual and consolidated interim financial information in accordance with Accounting Pronouncement CPC 21 (R1) – Interim Financial Reporting and in accordance with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair presentation of this information in conformity with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of review

We conducted our review in accordance with Brazilian and International Standards on review of interim financial information (NBC TR 2410—Review of Interim Financial Information Performed by the Independent Auditor of the Entity, and ISRE 2410—Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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Conclusion on the individual and consolidated interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the quarterly information referred to above is not prepared, in all material respects, in accordance with CPC 21(R1) and IAS 34, applicable to the preparation of Quarterly Financial Information—ITR, consistently with the rules issued by the Brazilian Securities and Exchange Commission.

Emphasis of matter

Risks related to compliance with laws and regulations

As mentioned in Note 15 to the interim financial information, currently investigations and other legal measures are being conducted by public authorities in connection with Company and certain investees regarding certain expenditures and their allocations, which involve and also include some of their other shareholders and certain executives of these other shareholders. The governance bodies of the Company have authorized contracting of a specialized company to analyze the internal procedures related to these certain investments and to ascertain such claims. At this point, it is not possible to forecast future developments arising from these internal investigation procedures and conducted by the public authorities, nor their possible effects on the Company and its subsidiaries’ interim financial information. Our conclusion is not modified in respect of this matter.

Risk regarding the ability of non-controlled investee Renova Energia S.A. to continue as a going concern

As disclosed in Note 15 to the interim financial information, the non-controlled indirect investee Renova Energia S.A. has incurred recurring losses and, as at June 30, 2018, has negative net working capital. These events or conditions indicate the existence of relevant uncertainty that may raise significant doubt about its ability to continue as a going concern. Our conclusion is not modified in respect of this matter.

Restatement of the individual and consolidated interim financial information

On August 14, 2018, we issued an unqualified review report on the Company’s individual and consolidated interim financial information for the quarter ended June 30, 2018, which are now being restated. As mentioned in note 2.3, these interim financial information have been amended and are being restated to reflect the correction of error relating to the amortization of accounts balances related to CVA Account (Portion A) and other financial components. Our conclusion is not modified in respect of this matter.

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Other matters

Statements of value added

We have also reviewed the individual and consolidated Statements of Value Added (SVA) for the six-month period ended June 30, 2018, prepared under the responsibility of Company management, the presentation of which in the interim financial information is required by the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information (ITR), and as supplementary information under the IFRS, whereby no SVA presentation is required. These statements have been subject to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that they are not consistently prepared, in all material respects, in relation to the overall accompanying interim financial information.

November 27, 2018.

ERNST & YOUNG

Auditores Independentes S.S.

CRC-2SP015199/O-6

Shirley Nara S. Silva

Accountant CRC-1BA022650/O-0

135

3. REVISION OF QUARTERLY INFORMATION (ITR) FOR 3Q 2018 (RESTATEMENT)

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CONTENTS


STATEMENTS OF FINANCIAL POSITION		138
STATEMENTS OF INCOME		140
STATEMENTS OF COMPREHENSIVE INCOME		142
STATEMENTS OF CHANGES IN EQUITY—CONSOLIDATED		143
STATEMENTS OF CASH FLOWS		145
STATEMENTS OF ADDED VALUE		147
CONDENSED NOTES TO THE INTERIM FINANCIAL INFORMATION		148
1.	OPERATING CONTEXT	148
2.	BASIS OF PREPARATION	150
3.	PRINCIPLES OF CONSOLIDATION	161
4.	CONCESSIONS AND AUTHORIZATIONS	162
5.	CASH AND CASH EQUIVALENTS	163
6.	SECURITIES	163
7.	CUSTOMERS, TRADERS AND TRANSPORT OF ENERGY CONCESSION HOLDERS	164
8.	RECOVERABLE TAXES	166
9.	INCOME AND SOCIAL CONTRIBUTION TAXES	166
10.	RESTRICTED CASH	169
11.	ACCOUNTS RECEIVABLE FROM THE STATE OF MINAS GERAIS	169
12.	ESCROW DEPOSITS	169
13.	REIMBURSEMENT OF TARIFF SUBSIDIES	170
14.	CONCESSION FINANCIAL ASSETS AND LIABILITIES	170
15.	INVESTMENTS	177
16.	PROPERTY, PLANT AND EQUIPMENT	187
17.	INTANGIBLE ASSETS	189
18.	SUPPLIERS	191
19.	TAXES PAYABLE, INCOME TAX AND SOCIAL CONTRIBUTION TAX AND AMOUNTS TO BE REIMBURSED TO CUSTOMERS	192
20.	LOANS, FINANCINGS AND DEBENTURES	193
21.	REGULATORY CHARGES	199
22.	POST-RETIREMENT OBLIGATIONS	200
23.	PROVISIONS	201
24.	EQUITY AND REMUNERATION TO SHAREHOLDERS	208
25.	REVENUE	210
26.	OPERATING COSTS AND EXPENSES	215
27.	FINANCE INCOME AND EXPENSES	220
28.	RELATED PARTY TRANSACTIONS	222
29.	FINANCIAL INSTRUMENTS AND RISK MANAGEMENT	226
30.	ASSETS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS	242
31.	OPERATING SEGMENTS	244
32.	THE ANNUAL TARIFF ADJUSTMENT	247
33.	NON-CASH TRANSACTIONS	247
34.	SUBSEQUENT EVENTS	247
CONSOLIDATED RESULTS		248
OTHER INFORMATION THAT THE COMPANY BELIEVES TO BE MATERIAL		261
REPORT ON THE REVIEW OF INTERIM INFORMATION—ITR		268

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STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

ASSETS

(Thousands of Brazilian Reais)


	Note		Consolidated				Holding company
	Note		Sep. 30, 2018 (Restated)		Dec. 31, 2017		Sep. 30, 2018 (Restated)		Dec. 31, 2017
CURRENT
Cash and cash equivalents		5		1,493,383		1,030,257		39,974		38,672
Securities		6		571,620		1,058,384		18,902		63,960
Customers and traders and Concession holders – Transport of electricity		7		4,195,075		3,885,392		25,602		—
Concession financial assets		14		918,734		847,877		—		—
Recoverable taxes		8		911,067		173,790		3,492		43
Income and Social Contribution taxes recoverable		9a		321,435		339,574		26,728		19,722
Dividends receivable				15,150		76,893		422,973		603,049
Restricted cash		10		113,041		106,227		93,112		87,872
Inventories				30,911		38,134		10		10
Advances to suppliers				51,767		116,050		—		—
Accounts receivable from the State of Minas Gerais		11		—		235,018		—		235,018
Reimbursement of tariff subsidies		13		85,096		77,086		—		—
Low-income subscriber subsidy				28,237		26,660		—		—
Derivative financial instruments – Swaps		29		46,789		—		—		—
Other				473,014		525,961		7,895		10,473

				9,255,319		8,537,303		638,688		1,058,819
Assets classified as Held for sale		30		281,197		—		281,197		—

TOTAL, CURRENT				9,536,516		8,537,303		919,885		1,058,819

NON-CURRENT
Securities		6		78,459		29,753		3,057		1,737
Advance to suppliers		28		85,277		6,870		—		—
Customers and traders and Concession holders – Transport of electricity		7		75,974		255,328		—		—
Recoverable taxes		8		229,404		230,678		3,915		1,810
Income and Social Contribution taxes recoverable		9a		7,651		20,617		7,651		20,617
Deferred income and Social Contribution taxes		9b		1,930,774		1,871,228		789,615		756,739
Escrow deposits		12		2,427,726		2,335,632		279,382		277,791
Derivative financial instruments – Swaps		29		226,847		8,649		—		—
Accounts receivable from the State of Minas Gerais		11		254,930		—		254,930		—
Other				774,959		628,443		27,881		34,978
Concession financial assets		14		6,309,798		6,604,625		—		—
Investments – Equity method		15		7,637,095		7,792,225		14,763,617		13,692,183
Property, plant and equipment		16		2,409,600		2,762,310		2,365		1,810
Intangible assets		17		11,198,086		11,155,928		6,493		2,458

TOTAL, NON-CURRENT				33,646,580		33,702,286		16,138,906		14,790,123

TOTAL ASSETS				43,183,096		42,239,589		17,058,791		15,848,942

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

LIABILITIES

(Thousands of Brazilian Reais)


	Note		Consolidated						Holding company
	Note		Sep. 30, 2018 (Restated)			Dec. 31, 2017			Sep. 30, 2018 (Restated)			Dec. 31, 2017
Suppliers		18		2,444,705			2,342,757			9,107			4,667
Regulatory charges		21		418,594			512,673			5,837			—
Profit sharing				19,288			9,089			1,062			348
Taxes payable		19a		406,927			704,572			8,355			5,841
Income and Social Contribution tax		19b		95,595			115,296			—			—
Interest on Equity and Dividends payable				427,787			427,832			425,828			425,838
Loans, financings and debentures		20		2,392,155			2,370,551			13,088			—
Payroll and related charges				235,029			207,091			17,283			11,072
Post-retirement obligations		22		243,057			231,894			13,097			12,974
Concessions payable				2,484			2,987			—			—
Concession financial liabilities		14		—			414,800			—			—
Derivative financial instruments – Put options		29		569,207			507,232			569,207			507,232
Advances from clients		7		89,896			232,762			—			—
Derivative financial instruments – Swaps		29		—			12,596			—			—
Payables to related parties		28		—			—			400,494			—
Other obligations				525,272			570,152			3,716			6,218

				7,869,996			8,662,284			1,467,074			974,190
Liabilities directly associated with assets classified as held for sale		30		5,917			—			5,917			—

TOTAL, CURRENT				7,875,913			8,662,284			1,472,991			974,190

NON-CURRENT
Regulatory charges		21		279,382			249,817			—			—
Loans, financings and debentures		20		13,001,900			12,027,146			44,286			—
Taxes payable		19a		28,841			28,199			—			—
Deferred income tax and Social Contribution tax		9b		652,288			734,689			—			—
Provisions		23		683,453			678,113			64,711			63,194
Post-retirement obligations		22		4,024,447			3,954,287			467,511			446,523
Concessions payable				16,495			18,240			—			—
Concession financial liabilities		14		41,383			—			—			—
Pasep and Cofins taxes to be reimbursed to customers		19a		1,114,802			1,087,230			—			—
Derivative financial instruments—put options		29		374,185			307,792			—			—
Derivative financial instruments—Swaps		29		—			28,515			—			—
Other obligations				117,156			133,141			40,758			39,049

TOTAL, NON-CURRENT				20,334,332			19,247,169			617,266			548,766

TOTAL LIABILITIES				28,210,245			27,909,453			2,090,257			1,522,956

EQUITY		24
Share capital				7,293,763			6,294,208			7,293,763			6,294,208
Capital reserves				2,249,721			1,924,503			2,249,721			1,924,503
Profit reserves				5,728,574			5,728,574			5,728,574			5,728,574
Equity valuation adjustments				(861,862	)		(836,522	)		(861,862	)		(836,522	)
Subscription of shares, to be capitalized				—			1,215,223			—			1,215,223
Retained earnings				558,338			—			558,338			—

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT				14,968,534			14,325,986			14,968,534			14,325,986

NON-CONTROLLING INTERESTS				4,317			4,150			—			—

TOTAL EQUITY				14,972,851			14,330,136			14,968,534			14,325,986

TOTAL LIABILITIES AND EQUITY				43,183,096			42,239,589			17,058,791			15,848,942

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF INCOME

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(Thousands of Brazilian Reais except earnings per share)


	Note		Consolidated						Holding company
	Note		Jan to Sep 2018 (Restated)			Jan to Sep 2017			Jan to Sep 2018 (Restated)			Jan to Sep 2017
GOING CONCERN OPERATIONS
NET REVENUE		25		16,794,251			15,153,781			233			250
OPERATING COSTS
COST OF ENERGY AND GAS		26
Energy purchased for resale				(8,576,061	)		(7,685,392	)		—			—
Charges for use of the national grid				(1,140,903	)		(791,339	)		—			—
Gas purchased for resale				(897,903	)		(789,861	)		—			—

				(10,614,867	)		(9,266,592	)		—			—
OTHER COSTS		26
Personnel and managers				(770,661	)		(992,908	)		—			—
Materials				(59,654	)		(30,589	)		—			—
Outsourced services				(633,257	)		(542,357	)		—			—
Depreciation and amortization				(563,672	)		(570,031	)		—			—
Operating provisions				(44,719	)		(195,345	)		—			—
Infrastructure construction cost				(592,206	)		(736,754	)		—			—
Other				(61,182	)		(58,101	)		—			—

				(2,725,351	)		(3,126,085	)		—			—
TOTAL COST				(13,340,218	)		(12,392,677	)		—			—
GROSS PROFIT				3,454,033			2,761,104			233			250
OPERATING EXPENSES		26
Selling expenses				(227,789	)		(191,343	)		—			—
General and administrative expenses				(470,180	)		(548,075	)		(52,744	)		(43,214	)
Operating provisions				(134,544	)		(172,105	)		(71,952	)		(104,037	)
Other operating revenues (expenses)				(407,489	)		(505,239	)		(40,972	)		(40,435	)

				(1,240,002	)		(1,416,762	)		(165,668	)		(187,686	)
Share of (loss) profit, net, of associates and joint ventures		15		(75,986	)		(20,680	)		780,029			320,979

Income before finance income (expenses) and taxes				2,138,045			1,323,662			614,594			133,543
Finance income		27		851,462			550,065			28,962			84,893
Finance expenses		27		(2,038,792	)		(1,271,951	)		(13,457	)		236,553

Income before income tax and Social Contribution tax				950,715			601,776			630,099			454,989
Current income and Social Contribution taxes		9c		(379,231	)		(305,956	)		—			(13,949	)
Deferred income and Social Contribution taxes		9c		91,117			101,362			41,998			(44,290	)

Net income for the period from going concern operations				662,601			397,182			672,097			396,750

DISCONTINUED OPERATIONS
Net income for the period from discontinued operations		30		35,648			—			25,634			—

NET INCOME FOR THE PERIOD				698,249			397,182			697,731			396,750

Total of net income for the period attributed to:
Equity holders of the parent
Net income for the period from going concern operations				662,083			396,750			672,097			396,750
Net income for the period from discontinued operations				35,648			—			25,634			—

Net income for the period attributable to equity holders of the parent				697,731			396,750			697,731			396,750

Non-controlling interests
Net income for the period from going concern operations				518			432			—			—
Net income for the period attributable to non-controlling interests				518			432			—			—

				698,249			397,182			697,731			396,750

Basic and diluted earnings per preferred share – R$		24		0.48			0.32			0.48			0.32
Basic and diluted earnings per common share – R$		24		0.48			0.32			0.48			0.32

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF INCOME

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(In thousands of Brazilian Reais – except earnings per share)


	Note		Consolidated						Holding company
	Note		Jul to Sep 2018 (Restated)			Jul to Sep 2017			Jul to Sep 2018 (Restated)			Jul to Sep 2017
NET REVENUE		25		6,252,282			5,135,822			87			72
OPERATING COSTS
COST OF ENERGY AND GAS		26								—			—
Energy purchased for resale				(3,493,463	)		(2,942,974	)		—			—
Charges for use of the national grid				(332,323	)		(387,078	)		—			—

Gas purchased for resale				(341,445	)		(304,698	)		—

				(4,167,231	)		(3,634,750	)
OTHER COSTS		26
Personnel and managers				(238,401	)		(304,061	)		—			—
Materials				(36,688	)		(13,035	)		—			—
Outsourced services				(219,286	)		(200,960	)		—			—
Depreciation and amortization				(189,149	)		(184,576	)		—			—
Operating provisions, net				(42,818	)		(23,266	)		—			—
Infrastructure construction cost				(208,563	)		(295,720	)		—			—
Other				(19,954	)		(36,742	)		—			—

				(954,859	)		(1,058,360	)		—			—
TOTAL COST				(5,122,090	)		(4,693,110	)		—			—
GROSS PROFIT				1,130,192			442,712			87			72
OPERATING EXPENSES		26
Selling expenses				(60,232	)		(50,458	)		—			—
General and administrative expenses				(157,063	)		(110,181	)		(18,306	)		(14,921	)
Operating provisions				(31,749	)		(115,151	)		6,237			(88,726	)
Other operating expenses				(151,164	)		(191,538	)		(11,427	)		(15,405	)

				(400,208	)		(467,328	)		(23,496	)		(119,052	)
Share of (loss) profit, net, of associates and joint ventures		15		(49,753	)		(80,798	)		250,226			(190,646	)

Income before finance income (expenses) and taxes				680,231			(105,414	)		226,817			(309,626	)
Finance income		27		362,795			201,164			10,170			51,875
Finance expenses		27		(695,493	)		(188,750	)		(10,372	)		238,514

Income before income tax and Social Contribution tax				347,533			(93,000	)		226,615			(19,237	)
Current income and Social Contribution taxes		9c		(182,812	)		(13,234	)		—			(11,416	)
Deferred income and Social Contribution taxes		9c		65,543			22,568			3,429			(53,175	)

Net income (loss) for the period from going concern operations				230,264			(83,666	)		230,044			(83,828	)
DISCONTINUED OPERATIONS
Net income (loss) for the period from discontinued operations		30		14,276			—			14,276			—

NET INCOME (LOSS) FOR THE PERIOD				244,540			(83,666	)		244,320			(83,828	)

Total of net income for the period attributed to:
Equity holders of the parent
Net income for the period from going concern operations				230,044			(83,828	)		230,044			(83,828	)
Net income for the period from discontinued operations				14,276			—			14,276			—

Net income for the period attributable to equity holders of the parent				244,320			(83,828	)		244,320			(83,828	)

Non-controlling interests
Net income for the period from going concern operations				220			162			—			—

Net income for the period attributable to non-controlling interests				220			162			—			—

				244,540			(83,666	)		244,320			(83,828	)

Basic and diluted earnings (loss) per preferred share – R$		24		0.17			(0.06	)		0.17			(0.06	)
Basic and diluted earnings (loss) per common share – R$		24		0.17			(0.06	)		0.17			(0.06	)

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Consolidated						Holding company
	Jan to Sep 2018 (Restated)			Jan to Sep 2017			Jan to Sep 2018 (Restated)			Jan to Sep 2017
NET INCOME FOR THE PERIOD		698,249			397,182			697,731			396,750
OTHER COMPREHENSIVE INCOME
Items not to be reclassified to statements of income in subsequent periods
Post retirement obligations – premeasurement of obligations of the defined benefit plans, net of taxes		(416	)		(680	)		—			—
Equity gain (loss) on other comprehensive income in subsidiary and jointly-controlled entity, net of taxes		—			(4,851	)		(416	)		(5,531	)

		(416	)		(5,531	)		(416	)		(5,531	)
Items to be reclassified to statements of income in subsequent periods
Equity gain on other comprehensive income, in subsidiary and jointly-controlled entity, relating to fair value of financial asset and conversion of operations abroad, net of taxes		—			(38,134	)		8			(38,134	)
Foreign exchange conversion differences on transactions outside Brazil		8			—			—			—

COMPREHENSIVE INCOME FOR THE PERIOD		697,841			353,517			697,323			353,085

Total of comprehensive income for the period attributed to:
Equity holders of the parent		697,323			353,085			697,323			353,085
Non-controlling interests		518			432			—			—

		697,841			353,517			697,323			353,085

The Condensed Notes are an integral part of the interim financial information.

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Consolidated					Holding company
	Jul to Sep 2018 (Restated)		Jul to Sep 2017			Jul to Sep 2018 (Restated)		Jul to Sep 2017
NET INCOME FOR THE PERIOD		244,540		(83,666	)		244,320		(83,828	)
OTHER COMPREHENSIVE INCOME
Items not to be reclassified to statements of income in subsequent periods		—		—			—		—
Items to be reclassified to statements of income in subsequent periods		—		—			—		—
Equity gain on other comprehensive income, in subsidiary and jointly-controlled entity, relating to conversion of operations abroad		—		—			8		—
Foreign exchange conversion differences on transactions outside Brazil		8		—			—		—

COMPREHENSIVE INCOME FOR THE PERIOD		244,548		(83,666	)		244,328		(83,828	)

Total of comprehensive income for the period attributed to:
Equity holders of the parent		244,328		(83,828	)		244,328		(83,828	)
Non-controlling interests		220		162			—		—

		244,548		(83,666	)		244,328		(83,828	)

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF CHANGES IN EQUITY—CONSOLIDATED

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Share capital		Subscription of shares to be capitalized			Capital reserves		Profit reserves		Equity valuation adjustments			Retained earnings			Total equity holders of the parent			Non-controlling interests			Total Equity
BALANCES ON DEC. 31, 2017		6,294,208		1,215,223			1,924,503		5,728,574		(836,522	)		—			14,325,986			4,150			14,330,136

First adoption CPC 48		—		—			—		—		—			(181,846	)		(181,846	)		—			(181,846	)
Net income for the period		—		—			—		—		—			697,731			697,731			518			698,249
Other comprehensive income
Measurement of obligations of the defined benefit plans, net of taxes		—		—			—		—		(416	)		—			(416	)		—			(416	)
Foreign exchange conversion differences on transactions outside Brazil		—		—			—		—		8			—			8			—			8

Total comprehensive income for the period		—		—			—		—		(408	)		697,731			697,323			518			697,841

Subscription of Shares to be Capitalized		—		109,550			—		—		—			—			109,550			—			109,550
Capital subscribed		999,555		(999,555	)		—		—		—			—			—			—			—
Constitution of reserves				(325,218	)		325,218		—		—			—			—			—			—
Other changes in Equity:
Interest on Equity		—		—			—		—		—			—			—			(351	)		(351	)
Realization of reserves
Realization of deemed cost of PP&E		—		—			—		—		(24,932	)		42,453			17,521			—			17,521

BALANCES ON SEPTEMBER 30, 2018 (RESTATED)		7,293,763		—			2,249,721		5,728,574		(861,862	)		558,338			14,968,534			4,317			14,972,851

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF CHANGES IN EQUITY—CONSOLIDATED

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2017 AND 2016

(Thousands of Brazilian Reais)


	Share capital		Capital reserves		Profit reserves		Equity valuation adjustments			Retained earnings		Total equity holders of the parent			Non-controlling interests			Total Equity
BALANCES ON DECEMBER 31, 2016		6,294,208		1,924,503		5,199,855		(488,285	)		—		12,930,281			4,090			12,934,371

Net income for the period		—		—		—		—			396,750		396,750			432			397,182
Other comprehensive income
Measurement of obligations of the defined benefit plans, net of taxes		—		—		—		(680	)		—		(680	)		—			(680	)
Equity gain (loss) on Other comprehensive income in subsidiary and jointly-controlled entity		—		—		—		(42,985	)		—		(42,985	)		—			(42,985	)

Total comprehensive income for the period		—		—		—		(43,665	)		396,750		353,085			432			353,517
Other changes in Equity:
Additional dividends proposed to non-controlling interests		—		—		—		—			—		—			(424	)		(424	)
Realization of reserves
Realization of deemed cost of PP&E		—		—		—		(43,923	)		43,666		(257	)		—			(257	)

BALANCES ON SEPTEMBER 30, 2017		6,294,208		1,924,503		5,199,855		(575,873	)		440,416		13,283,109			4,098			13,287,207

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Note		Consolidated						Holding company
	Note		Jan to Sep 2018 (Restated)			Jan to Sep 2017			Jan to Sep 2018 (Restated)			Jan to Sep 2017
CASH FLOW FROM OPERATIONS
Net income for the period from going concern operations				662,601			397,182			672,097			396,750
Adjustments to reconcile net income to net cash flows:
Income tax and Social Contribution taxes				288,114			204,594			(41,998	)		58,239
Depreciation and amortization		26		619,104			616,783			761			351
Loss on write off of net residual value of unrecoverable Concession financial assets, PP&E and Intangible assets				57,775			23,060			154			25
Share of profit (loss) in associates and joint ventures		15		75,986			20,680			(780,029	)		(320,979	)
Interest, monetary variation and updating of Concession financial assets				438,451			834,151			(35,988	)		(44,696	)
Reversal of monetary updating on AFAC				—			(239,445	)		—			(239,445	)
The Minas Gerais State Tax Amnesty Plan (PRCT)				—			587,624			—			—
Foreign exchange variation on loans		20		781,297			—			—			—
Amortization of loans’ transaction costs		20		26,323			—			285			—
Provisions for operating losses		26		402,117			558,793			71,952			104,037
Fair value adjustment of derivative financial instruments – Swap		29		(322,847	)		—			—			—
CVA (Portion A Compensation) Account and Other Financial Components in tariff adjustments		25		(1,783,790	)		(148,216	)		—			—
Provision for reimbursement due to suspension of supply – Renova				(51,635	)		—			—			—
Adjustment of indemnity – plants with non-renewed concessions (Ministerial Order 291)				—			(259,516	)		—			—
Post-retirement obligations		22		303,832			342,018			32,984			31,863

				1,497,328			2,937,708			(79,782	)		(13,855	)

(Increase) / decrease in assets
Customers and traders and Concession holders				(510,468	)		(397,144	)		1,765			—
CVA (Portion A Compensation) Account and Other Financial Components, in tariff adjustments		14		568,432			304,841			—			—
Energy Development Account (CDE)				(8,010	)		(9,594	)		—			—
Recoverable taxes				(858,104	)		(22,057	)		380			(116	)
Income and Social Contribution taxes credit				(31,689	)		(24,460	)		(4,526	)		88,723
Escrow deposits				(59,786	)		(47,440	)		18,042			1,598
Dividends received from investments				235,163			247,824			598,485			361,293
Concession financial assets				1,645,708			314,473			—			—
Advances to suppliers				(55,383	)		(199,400	)		—			—
Gas drawing rights				317			658,444			—			—
Others				51,205			(155,307	)		2,098			19,077

				977,385			670,180			616,244			470,575

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	Note		Consolidated						Holding company
	Note		Jan to Sep 2018 (Restated)			Jan to Sep 2017			Jan to Sep 2018 (Restated)			Jan to Sep 2017
Increase (decrease) in liabilities
Suppliers				57,666			246,855			(257	)		2,635
Taxes payable				(131,409	)		(399,038	)		6,237			(78,693	)
Income and Social Contribution taxes payable				29,549			175,273			2,930			(9,191	)
Payroll and related charges				27,938			22,914			4,231			1,388
Regulatory charges				(84,304	)		60,478			5,837			—
Advances from clients				(152,050	)		93,246			—			—
Post-retirement obligations		22		(222,509	)		(203,090	)		(11,873	)		(11,132	)
Others				(73,863	)		(123,032	)		(14,691	)		(11,488	)

				(548,982	)		(126,394	)		(7,586	)		(106,481	)

Cash generated by going concern operations				1,925,731			3,481,494			528,876			350,239

Interest paid on loans, financings and debentures		20		(834,053	)		(1,030,773	)		(787	)		—
Income and Social Contribution taxes paid				(379,628	)		(307,860	)		(151	)		(4,758	)
Settlement of derivative financial instruments (Swap)				12,981			—			—			—

NET CASH FROM GOING CONCERN OPERATIONS				725,031			2,142,861			527,938			345,481

Net cash from Discontinued operations		30		51,271			—			43,310			—

NET CASH FROM OPERATING ACTIVITIES				776,302			2,142,861			571,248			345,481

INVESTING ACTIVITIES
Marketable securities		6		443,654			331,069			43,738			116,984
Financial assets				—			(160,481	)		—			—
Restricted cash		10		(6,814	)		(38,020	)		(4,949	)		(29,470	)
Investments
Capital contributions in investees		15		(176,632	)		(228,205	)		(1,109,105	)		(100,121	)
Cash received through merger				—			—			428			—
Property, plant and equipment		16		(50,661	)		(53,883	)		—			—
Intangible assets		17		(563,470	)		(691,017	)		(182	)		—

NET CASH USED IN INVESTING IN GOING CONCERN OPERATIONS				(353,923	)		(840,537	)		(1,070,070	)		(12,607	)

Net cash used in investment activities—discontinued operations		30		(7,631	)		—			—			—

NET CASH USED IN INVESTING ACTIVITIES				(361,554	)		(840,537	)		(1,070,070	)		(12,607	)

FINANCING ACTIVITIES
New loans and debentures		20		2,443,878			60,108			—			—
Loans with related parties				—			—			400,000			—
Capital increase		24		109,550			—			109,550			—
Payment of loans, financings and debentures		20		(2,504,654	)		(1,506,459	)		(9,416	)		—
Interest on capital and dividends paid				(396	)		(268,723	)		(10	)		(270,685	)

NET CASH FROM (USED IN) FINANCING ACTIVITIES				48,378			(1,715,074	)		500,124			(270,685	)

Increase (decrease) in cash and cash equivalents				463,126			(412,750	)		1,302			62,189

Cash and cash equivalents at the beginning of the period		5		1,030,257			995,132			38,672			69,352

Cash and cash equivalents at the end of the period		5		1,493,383			582,382			39,974			131,541

The Condensed Notes are an integral part of the interim financial information.

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STATEMENTS OF ADDED VALUE

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018 AND 2017

(Thousands of Brazilian Reais)


	Consolidated								Holding company
	Jan to Sep 2018 (Restated)				Jan to Sep 2017				Jan to Sep 2018 (Restated)					Jan to Sep 2017
REVENUES
Sales of electricity, gas and services (1)		24,478,915				21,927,158				257					276
Distribution construction revenue		579,480				725,528				—					—
Transmission construction revenue		12,726				11,226				—					—
Gain on financial updating of the Concession Grant Fee		245,730				240,420				—					—
Adjustment to expectation of cash flow from the indemnifiable Financial assets of the distribution concession		3,875				2,277				—					—
Transmission indemnity revenue		208,164				295,749				—					—
Generation indemnity revenue		82,331				259,516				—					—
Investments in PP&E		52,513				24,549				—					—
Other revenues		7,219				1,479				—					—
Provision for Doubtful Receivables (PECLD)		(227,789	)			(191,343	)			—					—

		25,443,164				23,296,559				257					276
INPUTS ACQUIRED FROM THIRD PARTIES
Energy purchased for resale		(9,391,800	)			(8,424,585	)			—					—
Charges for use of national grid		(1,271,326	)			(882,536	)			—					—
Outsourced services (1)		(1,036,667	)			(983,908	)			(17,327	)				(6,796	)
Gas purchased for resale		(1,129,295	)			(789,861	)			—					—
Materials (1)		(320,372	)			(392,871	)			(1,101	)				(89	)
Other operational costs (1)		(410,121	)			(587,938	)			(76,835	)				(107,183	)

		(13,559,581	)			(12,061,699	)			(95,263	)				(114,068	)
GROSS VALUE ADDED		11,883,583				11,234,860				(95,006	)				(113,792	)
RETENTIONS
Depreciation and amortization (1)		(619,104	)			(616,783	)			(761	)				(351	)

NET ADDED VALUE PRODUCED BY GOING CONCERN OPERATIONS		11,264,479				10,618,077				(95,767	)				(114,143	)
NET ADDED VALUE PRODUCED BY DISCONTINUED OPERATIONS		35,648				—				25,634					—
ADDED VALUE RECEIVED BY TRANSFER
Share of (loss) profit, net, of associates and joint ventures		(75,986	)			(20,680	)			780,029					320,979
Finance income		851,462				550,065				28,962					84,893

ADDED VALUE TO BE DISTRIBUTED		12,075,603				11,147,462				738,858					291,729

DISTRIBUTION OF ADDED VALUE
				%				%				%					%

Employees		1,178,568		9.77		1,507,087		13.52		61,658		8.34			65,849		22.56
Direct remuneration		755,504		6.26		850,936		7.63		25,933		3.51			26,795		9.18
Post-employment obligations and Other benefits		349,619		2.90		406,373		3.65		32,766		4.43			31,928		10.94
FGTS		47,779		0.40		52,452		0.47		1,138		0.15			1,891		0.65
Programmed Voluntary Retirement Plan		25,666		0.21		197,326		1.77		1,821		0.25			5,235		1.79
Taxes		8,065,427		66.79		7,833,994		70.28		(37,804	)	(5.11	)		62,821		21.54
Federal		4,094,793		33.91		3,351,706		30.07		(38,382	)	(5.19	)		62,186		21.32
State		3,960,135		32.79		4,472,137		40.12		283		0.04			485		0.17
Municipal		10,499		0.09		10,151		0.09		295		0.04			150		0.05
Remuneration of external capital		2,133,359		17.66		1,409,199		12.64		17,273		2.34			(233,691	)	(80.11	)
Interest		2,060,541		17.06		1,326,887		11.90		13,457		1.82			(236,553	)	(81.09	)
Rentals		72,818		0.60		82,312		0.74		3,816		0.52			2,862		0.98
Remuneration of own capital		698,249		5.78		397,182		3.56		697,731		94.43			396,750		136.00
Retained earnings		697,731		5.78		396,750		3.56		697,731		94.43			396,750		136.00
Non-controlling interest in Retained earnings		518		—		432		—		—		—			—		—

		12,075,603		100.00		11,147,462		100.00		738,858		100.00			291,729		100.00

(1)	Includes the effect of net incomes arising from the discontinued operations.

The Condensed Notes are an integral part of the interim financial information.

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CONDENSED NOTES TO THE INTERIM FINANCIAL INFORMATION

FOR THE NINE-MONTH PERIOD ENDED AS OF SEPTEMBER 30, 2018

(In Thousands of Brazilian Reais – except where otherwise indicated)

1.	OPERATING CONTEXT

a)	The Company

As of September 30, 2018, Company’s current liabilities exceeded its current assets by R$ 553,106 in the holding company, mainly due to the loan contract signed with its subsidiary Cemig Geração e Transmissão S.A. (“Cemig GT”), in the amount of R$ 400,000 (more details in note 28). The Company presented positive consolidated net working capital of R$ 1,660,603. In the period from January to September of 2018, the Company generated positive operating cash flows in the amounts of R$ 527,938 and R$ 725,031, in the holding company and consolidated, respectively (R$ 345,481 and R$ 2,142,861 in the prior year). In addition, on September 30, 2018 Company’s consolidated indebtedness loans, financings and debentures on current and non-current liabilities totaled R$ 2,392,155 and R$ 13,001,900, respectively.

As part of the Company indebtedness management, in July 2018 the subsidiary Cemig GT issued new Eurobonds for an amount of US$ 500 million (R$ 1,9 billion), through Eurobonds’ reopening originally issued in December 2017, with maturity in 2024 and a half-yearly coupon of 9.25% p.a.. In addition, in 2018 Cemig GT made early settlement of debts in the amount of R$ 1.3 billion, which had been contracted at a cost of 140% of the CDI rate, with original maturity in December 2021. These initiatives have balanced the Company’s cash flows, extended average debt maturities, and improved credit quality.

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Merger of Cemig Telecomunicações S.A. (‘Cemig Telecom’) and sale of telecom assets

The balance sheet of Cemig Telecom used for the merger, at March 31, 2018, is as follows:


	Mar. 31, 2018			Mar. 31, 2018
Assets			Liabilities
Current		24,986	Current		33,816
Non-current			Non-current		55,407
Non-current assets		15,313			—
Investments		17,116			—
Net PP&E		271,766			—
Intangible assets		11,716			—

		315,911	Equity		251,674

Total assets		340,897	Total liabilities and Equity		340,897

The Company’s Management completed on November 1, 2018, the sale process of the assets merged from Cemig Telecom. See details in Note 30.

Changes in the Company’s by-laws – improvement of corporate governance

◾	Reduction of the number of members of the Board of Directors from 15 to 9, in line with the IBGC Best Corporate Governance Practices Code, and the Corporate Sustainability Evaluation Manual of the Dow Jones Sustainability Index.

◾	Creation of the Audit Committee (Comitê de Auditoria). The Fiscal Council (Conselho Fiscal) remains in existence.

The changes in the by-laws have had no effect on the Company’s dividend policy.

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2.	BASIS OF PREPARATION

2.1

Statement of compliance

Thus, this consolidated interim financial information should be read in conjunction with the said financial statements, approved by the Company’s Fiscal Council on March 28, 2018.

Material information in the interim financial information is being disclosed, which is used by Management in its administration of the Company.

The Company’s Executive Board authorized the issuance of this interim financial information on August 13, 2018 and on November 27, 2018 the company authorized its restatement to reflect the effect of adjustments described in note 2.3.

2.2

Adoption of new pronouncements effective as from January 1, 2018

IFRS 15/CPC 47 – Revenue from contracts with customers

The Company and its subsidiaries adopted the new standard based on the prospective method, with the impacts accounted for as of January 1, 2018.

The Company and its subsidiaries performed an assessment of the five steps for recognition and measurement of revenue, as required by IFRS 15/CPC 47:

Identify the contracts signed with its customers;

Identify the performance obligations in each type of contract;

Determine the price of each type of transaction;

Allocate the price to the performance obligations contained in the contract; and

Recognize the revenue when (or to the extent that) the entity satisfies each performance obligation of the contract.

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This table shows the impact of adoption of IFRS 15 (CPC 47) on the statement of income for the periods of nine and three months ended September 30, 2018:


	Jan to Sep 2018 with adoption of IFRS 15/CPC 47 (Restated)			Adjustment (1) IFRS 15/CPC 47			Jan to Sep 2018 without adoption of IFRS 15/CPC 47 (Restated)
GOING CONCERN OPERATIONS
NET REVENUE		16,794,251			31,596			16,825,847
OPERATING COSTS		(13,340,218	)		—			(13,340,218	)
OPERATING EXPENSES		(1,240,002	)		(31,596	)		(1,271,598	)
Share of (loss) profit, net, of associates and joint ventures		(75,986	)		—			(75,986	)
Net Finance income (expenses)		(1,187,330	)		—			(1,187,330	)
Income and Social Contribution taxes		(288,114	)		—			(288,114	)

Net income from going concern operations in the period		662,601			—			662,601


	Jul to Sep 2018 with adoption of IFRS 15/CPC 47 (Restated)			Adjustment (1) IFRS 15/CPC 47			Jul to Sep 2018 without adoption of IFRS 15/CPC 47 (Restated)
GOING CONCERN OPERATIONS
NET REVENUE		6,252,282			5,915			6,258,197
OPERATING COSTS		(5,122,090	)		—			(5,122,090	)
OPERATING EXPENSES		(400,208	)		(5,915	)		(406,123	)
Share of (loss) profit, net, of associates and joint ventures		(49,753	)		—			(49,753	)
Net Finance income (expenses)		(332,698	)		—			(332,698	)
Income and Social Contribution taxes		(117,269	)		—			(117,269	)

Net income from going concern operations in the period		230,264			—			230,264

(1)	Refers to penalties for violation of energy supply quality indicators, mainly the indicators DIC, FIC, DMIC and DICRI, reclassified from Other operational revenue (expenses).

IFRS 9/CPC 48 – Financial instruments

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The standard has eliminated the existing categories under IAS 39/CPC 38 and, thus, the Company and its subsidiaries have reclassified those categories to comply with the new standard, as follows:


Consolidated	Classification
Consolidated	IFRS 39/CPC 38		IFRS 9/CPC 48
Financial assets:
Cash equivalents – Investments		Loans and receivables		Amortized cost
Securities – Investments (1)		Held to maturity		Amortized cost
Securities – Investments (1)		Available for sale		Fair value through profit or loss
Customers and Traders; Concession holders (Transport of energy)		Loans and receivables		Amortized cost
Restricted cash		Loans and receivables		Amortized cost
Advances to suppliers		Loans and receivables		Amortized cost
Accounts receivable from the State of Minas Gerais		Loans and receivables		Amortized cost
Receivables from related parties		Loans and receivables		Amortized cost
Concession financial assets – CVA (Portion ‘A’ Costs Variation Compensation) Account, and Other financial components, in tariff adjustments		Loans and receivables		Amortized cost
Reimbursement of tariff subsidies		Loans and receivables		Amortized cost
Low-income subsidy		Loans and receivables		Amortized cost
Escrow deposits		Loans and receivables		Amortized cost
Derivative financial instruments (swap transactions)		Fair value through profit or loss		Fair value through profit or loss
Concession financial assets – Transmission – Assets remunerated by tariff		Loans and receivables (2)		Fair value through profit or loss
Concession financial assets – Distribution infrastructure		Available for sale		Fair value through profit or loss
Indemnities receivable – Transmission		Loans and receivables (2)		Fair value through profit or loss
Indemnities receivable – Generation		Loans and receivables (2)		Fair value through profit or loss
Concession grant fee – Generation concessions		Loans and receivables		Amortized cost
Other		Loans and receivables		Amortized cost
Financial liabilities
Loans, financings and debentures		Amortized cost		Amortized cost
Debt agreed with pension fund (Forluz)		Amortized cost		Amortized cost
Concession financial liabilities – CVA (Portion ‘A’ Costs Variation Compensation) Account, and Other financial components, in tariff adjustments		Amortized cost		Amortized cost
Concessions payable		Amortized cost		Amortized cost
The Minas Gerais State Tax Amnesty Plan (PRCT)		Amortized cost		Amortized cost
Suppliers		Amortized cost		Amortized cost
Advances from clients		Amortized cost		Amortized cost
Derivative financial instruments (swap transactions)		Fair value through profit or loss		Fair value through profit or loss
Derivative financial instruments – Put options		Fair value through profit or loss		Fair value through profit or loss

(1)	The Company has ‘securities’ with various classifications under IFRS 9 / CPC 48.

(2)	Recognized at their nominal realization values, which are similar to fair value.

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Impairment

The material impact resulting from the adoption of the standard as from January 1, 2018 is related to the impairment of trade accounts receivable.

The new pronouncement also establishes that in relation to the impairment losses of financial assets, the expectation of loss model in the credit is no longer losses incurred, but a prospective model of expected credit losses, based on probabilities.

Based on the new pronouncement, provisions for expected losses were measured based on the losses expected in the next 12 months, as a function of the potential default events, or losses of credit expected for the whole life of a financial instrument, if the credit risk has significantly increased since its initial recognition.

The estimated effects at January 1, 2018 arising from adoption of IFRS 9/CPC 48, resulted in an increase in the provision for doubtful accounts and a corresponding effect in Equity, as follows:


	Jan. 1, 2018
Customers and Traders; Transport of energy (a)		150,114
Reflex of the adjustment due to the jointly controlled—Light		82,770
Deferred income and Social Contribution taxes (a)		(51,038	)

		181,846

(a)	Refers to estimated losses on doubtful accounts receivable from customers of Cemig D.

2.3

Restatement of the interim financial information

As mentioned in Note 32, on May 28, 2018 Aneel confirmed the result of the Fourth Tariff Review of Cemig Distribuição S.A. (‘Cemig D’), a wholly-owned subsidiary of the Company. Part of this result comprised direct pass-throughs to the tariff of amounts arising from variations in non-manageable costs (‘Portion A’), arising primarily from: purchase of power supply, transmission charges, and other financial components of the tariff, for which Cemig D recorded the accounting effects as from May 2018.

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After publication of the interim financial information for the quarter and nine months ended September 30, 2018, differences were identified in the accounting of the amortization of certain concession financial assets and liabilities related to CVA Account (Portion A Compensation) and Other Financial Components approved in the tariff review referred to above. The effect of these differences on the individual interim financial information of the Company is limited to the share of profit, recorded by the equity method, related to the equity ownership that the Company holds in Cemig D. As a result, the Company and its subsidiary have opted to restate the individual and consolidated interim financial information, so as to better reflect their financial position and operational performance. These changes caused no effects on the individual and consolidated financial statements for the year ended December 31, 2017, which are presented for the purposes of comparison, nor in the individual and consolidated financial statements for the quarter ended March 31, 2018.

Based on the orientation given in CPC 23 / IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, the Interim financial information is being restated with the following adjustments:

(a)

Correction of the divergences in the accounting of the amortization of certain Concession financial assets and liabilities related to the CVA (Variation in ‘Portion A’ Items) account and Other Financial Components approved in the Tariff Review of May 28, 2018 – in the net amounts of R$ 326,490 and R$ 244,867 for the nine and three-month periods ended September 30, 2018, respectively.

(b)

Effects of the adjustment indicated item (a) on calculations of current and deferred income tax and social contribution tax, in the amount of R$ R$ 64,386 and R$ 29,857, respectively, for the nine-month period ended September 30, 2018 and R$ 48,011 and R$ 22,377, respectively, for the three-month period then ended.

(c)	Effects of the adjustment indicated in item (a) on calculations of Pasep and Cofins taxes, in the amounts of R$ 30,200 and R$ 22,650 for the nine and three-month periods ended September 30, 2018, respectively.

(d)	Effects of the adjustment indicated in item (a) on calculations of the regulatory charges, in the amounts of R$ 2,936 and R$ 2,202 for the nine and three-month periods ended September 30, 2018, respectively.

(e)	Aggregate effect, in penalty payment and arrears interest, arising from the calculations of Income tax and Social Contribution tax, Pasep and Cofins, and regulatory charges in the amount of R$ 414, R$ 194 and R$ 27, respectively, for the nine and three-month periods ended September 30, 2018.

(f)

Net aggregate effects of the adjustments indicated in items (a), (b), (c), (d) and (e), in calculation of the gain by the equity method arising from the Company’s investment in Cemig D in the amounts of R$ 198,476 and R$ 148,992, for the nine and three-month periods ended September 30, 2018, respectively.

(g)	Net effect of all the adjustments, in the amounts of R$ 198,476 and R$ 148,992 in the profit of the nine and three-month periods ended September 30, 2018, respectively.

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STATEMENTS OF FINANCIAL POSITION


	Consolidated							Holding company
Assets	Sep. 30, 2018		Adjustments			Sep. 30, 2018 (Restated)		Sep. 30, 2018		Adjustments		Sep. 30, 2018 (Restated)
CURRENT
Concession financial assets (a)		818,517		100,217			918,734		—		—		—
Income and Social Contribution taxes recoverable (b) and (e)		386,235		(64,800	)		321,435		26,728		—		26,728
Other		8,015,150		—			8,015,150		611,960		—		611,960

		9,219,902		35,417			9,255,319		638,688		—		638,688
Assets classified as Held for sale		281,197		—			281,197		281,197		—		281,197

TOTAL, CURRENT		9,501,099		35,417			9,536,516		919,885		—		919,885

NON-CURRENT
Deferred income and Social Contribution taxes (b)		1,960,631		(29,857	)		1,930,774		789,615		—		789,615
Investments – Equity method (g)		7,637,095		—			7,637,095		14,565,141		198,476		14,763,617
Other		24,078,711		—			24,078,711		585,674		—		585,674

TOTAL, NON-CURRENT		33,676,437		(29,857	)		33,646,580		15,940,430		198,476		16,138,906

TOTAL ASSETS		43,177,536		5,560			43,183,096		16,860,315		198,476		17,058,791


	Consolidated									Holding company
Liabilities	Sep. 30, 2018			Adjustments			Sep. 30, 2018 (Restated)			Sep. 30, 2018			Adjustments		Sep. 30, 2018 (Restated)
CURRENT
Regulatory charges (d) and (e)		417,686			908			418,594			5,837			—		5,837
Taxes payable (c) and (e)		376,533			30,394			406,927			8,355			—		8,355
Concession financial liabilities (a)		226,273			(226,273	)		—			—			—		—
Other obligations		7,044,475			—			7,044,475			1,452,882			—		1,452,882

		8,064,967			(194,971	)		7,869,996			1,467,074			—		1,467,074
Liabilities directly associated with assets classified as held for sale		5,917			—			5,917			5,917			—		5,917

TOTAL, CURRENT		8,070,884			(194,971	)		7,875,913			1,472,991			—		1,472,991

NON-CURRENT
Regulatory charges (d) and (e)		277,327			2,055			279,382			—			—		—
Other obligations		20,054,950			—			20,054,950			576,508			—		576,508

TOTAL, NON-CURRENT		20,332,277			2,055			20,334,332			617,266			—		617,266

TOTAL LIABILITIES		28,403,161			(192,916	)		28,210,245			2,090,257			—		2,090,257

EQUITY
Share capital		7,293,763			—			7,293,763			7,293,763			—		7,293,763
Capital reserves		2,249,721			—			2,249,721			2,249,721			—		2,249,721
Profit reserves		5,728,574			—			5,728,574			5,728,574			—		5,728,574
Equity valuation adjustments		(861,862	)		—			(861,862	)		(861,862	)		—		(861,862	)
Subscription of shares, to be capitalized		—			—			—			—			—		—
Retained earnings (g)		359,862			198,476			558,338			359,862			198,476		558,338

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT		14,770,058			198,476			14,968,534			14,770,058			198,476		14,968,534

NON-CONTROLLING INTERESTS TOTAL EQUITY		4,317			—			4,317			—			—		—

TOTAL EQUITY		14,774,375			198,476			14,972,851			14,770,058			198,476		14,968,534

TOTAL LIABILITIES AND EQUITY		43,177,536			5,560			43,183,096			16,860,315			198,476		17,058,791

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STATEMENTS OF INCOME

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018


	Consolidated									Holding company
	Jan to Sep 2018			Adjustments			Jan to Sep 2018 (Restated)			Jan to Sep 2018			Adjustments		Jan to Sep 2018 (Restated)
Going concern operations
Net revenue (a), (c) and (d)		16,500,897			293,354			16,794,251			233			—		233
Total cost		(13,340,218	)		—			(13,340,218	)		—			—		—

GROSS PROFIT		3,160,679			293,354			3,454,033			233			—		233
Operating expenses		(1,240,002	)		—			(1,240,002	)		(165,668	)		—		(165,668	)
Share of (loss) profit, net, of associates and joint ventures (f)		(75,986	)		—			(75,986	)		581,553			198,476		780,029

Income before finance income (expenses) and taxes		1,844,691			293,354			2,138,045			416,118			198,476		614,594
Finance income		851,462			—			851,462			28,962			—		28,962
Finance expenses (e)		(2,038,157	)		(635	)		(2,038,792	)		(13,457	)		—		(13,457	)

Income before income tax and Social Contribution tax		657,996			292,719			950,715			431,623			198,476		630,099
Current income and Social Contribution taxes (b)		(314,845	)		(64,386	)		(379,231	)		—			—		—
Deferred income and Social Contribution taxes (b)		120,974			(29,857	)		91,117			41,998			—		41,998

Net income (loss) for the period from going concern operations		464,125			198,476			662,601			473,621			198,476		672,097

Net income (loss) for the period from discontinued operations		35,648			—			35,648			25,634			—		25,634

Net income (loss) for the period (g)		499,773			198,476			698,249			499,255			198,476		697,731

Basic and diluted earnings (loss) per share – R$		0.34			0.14			0.48			0.34			0.14		0.48

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STATEMENTS OF INCOME

FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2018


	Consolidated									Holding company
	Jul to Sep 2018			Adjustments			Jul to Sep 2018 (Restated)			Jul to Sep 2018			Adjustments		Jul to Sep 2018 (Restated)
Net revenue (a), (c) and (d)		6,032,267			220,015			6,252,282			87			—		87
Total cost		(5,122,090	)		—			(5,122,090	)		—			—		—

GROSS PROFIT		910,177			220,015			1,130,192			87			—		87
Operating expenses		(400,208	)		—			(400,208	)		(23,496	)		—		(23,496	)
Share of (loss) profit, net, of associates and joint ventures (f)		(49,753	)		—			(49,753	)		101,234			148,992		250,226

Income before finance income (expenses) and taxes		460,216			220,015			680,231			77,825			148,992		226,817
Finance income		362,795			—			362,795			10,170			—		10,170
Finance expenses (e)		(694,858	)		(635	)		(695,493	)		(10,372	)		—		(10,372	)

Income before income tax and Social Contribution tax		128,153			219,380			347,533			77,623			148,992		226,615
Current income and Social Contribution taxes (b)		(134,801	)		(48,011	)		(182,812	)		—			—		—
Deferred income and Social Contribution taxes (b)		87,920			(22,377	)		65,543			3,429			—		3,429

Net income (loss) for the period from going concern operations		81,272			148,992			230,264			81,052			148,992		230,044

Net income (loss) for the period from discontinued operations		14,276			—			14,276			14,276			—		14,276

Net income (loss) for the period (g)		95,548			148,992			244,540			95,328			148,992		244,320

Basic and diluted earnings (loss) per share – R$		0.07			0.10			0.17			0.07			0.10		0.17

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018

Consolidated

Holding company

Jan to
Sep 2018

Adjustments

Jan to
Sep 2018
(Restated)

Jan to
Sep 2018

Adjustments

Jan to
Sep 2018
(Restated)

Net income for the period (g)

499,773

198,476

698,249

499,255

198,476

697,731

Other comprehensive income

(408

)

—

(408

)

(408

)

—

(408

)

Comprehensive income for the period

499,365

198,476

697,841

498,847

198,476

697,323

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2018


	Consolidated						Holding company
	Jul to Sep 2018		Adjustments		Jul to Sep 2018 (Restated)		Jul to Sep 2018		Adjustments		Jul to Sep 2018 (Restated)
Net income for the period (g)		95,548		148,992		244,540		95,328		148,992		244,320

Other comprehensive income		8		—		8		8		—		8

Comprehensive income for the period		95,556		148,992		244,548		95,336		148,992		244,328

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STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2018


	Consolidated									Holding company
	Jan to Sep 2018			Adjustments			Jan to Sep 2018 (Restated)			Jan to Sep 2018			Adjustments			Jan to Sep 2018 (Restated)
CASH FLOW FROM OPERATIONS
Net income for the period from going concern operations (g)		464,125			198,476			662,601			473,621			198,476			672,097
Adjustments to reconcile net income to net cash flows
Income tax and Social Contribution taxes (b)		193,871			94,243			288,114			(41,998	)		—			(41,998	)
Share of profit (loss) in associates and joint ventures (f)		75,986			—			75,986			(581,553	)		(198,476	)		(780,029	)
Interest, monetary variation and updating of Concession financial assets (e)		437,816			635			438,451			(35,988	)		—			(35,988	)
CVA (Portion A Compensation) Account and Other Financial Components in tariff adjustments (a)		(1,457,300	)		(326,490	)		(1,783,790	)		—			—			—
Others		1,815,966			—			1,815,966			106,136			—			106,136

		1,530,464			(33,136	)		1,497,328			(79,782	)		—			(79,782	)

(Increase) / decrease in assets		977,385			—			977,385			616,244						616,244

Increase (decrease) in liabilities
Taxes payable (c)		(161,609	)		30,200			(131,409	)		6,237			—			6,237
Regulatory charges (d)		(87,240	)		2,936			(84,304	)		5,837			—			5,837
Others		(333,269	)		—			(333,269	)		(19,660	)		—			(19,660	)

		(582,118	)		33,136			(548,982	)		(7,586	)		—			(7,586	)

Cash generated by going concern operations		1,925,731			—			1,925,731			528,876			—			528,876

Interest paid on loans and financings		(834,053	)		—			(834,053	)		(787	)		—			(787	)
Income and Social Contribution taxes paid		(379,628	)		—			(379,628	)		(151	)		—			(151	)
Settlement of derivative financial instruments (Swap)		12,981			—			12,981			—			—			—

NET CASH FROM (USED IN) GOING CONCERN OPERATIONS		725,031			—			725,031			527,938			—			527,938

Net cash from (used in) Discontinued operations		51,271			—			51,271			43,310			—			43,310

NET CASH FROM (USED IN) OPERATING ACTIVITIES		776,302			—			776,302			571,248			—			571,248

NET CASH FROM (USED IN) INVESTING IN GOING CONCERN OPERATIONS		(353,923	)		—			(353,923	)		(1,070,070	)		—			(1,070,070	)
Net cash used in investment activities—discontinued operations		(7,631	)		—			(7,631	)		—			—			—

NET CASH FROM (USED IN) INVESTING ACTIVITIES		(361,554	)		—			(361,554	)		(1,070,070	)		—			(1,070,070	)
NET CASH FROM (USED IN) FINANCING ACTIVITIES		48,378			—			48,378			500,124			—			500,124
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		463,126			—			463,126			1,302			—			1,302

Cash and cash equivalents at the beginning of the period		1,030,257						1,030,257			38,672						38,672

Cash and cash equivalents at the end of the period		1,493,383			—			1,493,383			39,974			—			39,974

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STATEMENTS OF ADDED VALUE

FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2018


	Consolidated								Holding company
	Jan to Sep 2018			Adjustments		Jan to Sep 2018 (Restated)			Jan to Sep 2018			Adjustments		Jan to Sep 2018 (Restated)
Gross value added (a)		11,557,093			326,490		11,883,583			(95,006	)		—		(95,006	)
Retentions		(619,104	)		—		(619,104	)		(761	)		—		(761	)

Net added value produced by going concern operations		10,937,989			326,490		11,264,479			(95,767	)		—		(95,767	)
Net added value produced by discontinued operations		35,648			—		35,648			25,634			—		25,634
Added value received by transfer (f)		775,476			—		775,476			610,515			198,476		808,991

Added value to be distributed		11,749,113			326,490		12,075,603			540,382			198,476		738,858

Distribution of added value
Employees		1,178,568			—		1,178,568			61,658			—		61,658
Taxes (b), (c) and (d)		7,938,048			127,379		8,065,427			(37,804	)		—		(37,804	)
Remuneration of external capital (e)		2,132,724			635		2,133,359			17,273			—		17,273
Remuneration of own capital (g)		499,773			198,476		698,249			499,255			198,476		697,731

		11,749,113			326,490		12,075,603			540,382			198,476		738,858

1.1

Correlation between the Explanatory Notes published in the annual financial statements and those in the interim financial information

The table below shows the correlation between the Explanatory Notes published in the financial statements at December 31, 2017 and the Interim financial information at September 30, 2018.

The Company understands that this interim financial information presents the material updating of information relating to its financial position, and its results for the nine-month period ended September 30, 2018, in compliance with the requirements for disclosure stated by the CVM (Brazilian Securities Commission).

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Number of the Note			Title of the Note
Dec. 31, 2017	Sep. 30, 2018		Title of the Note
1		1	Operational context
2		2	Basis of preparation
3		3	Consolidation principles
4		4	Concessions and authorizations
5		31	Operational segments
6		5	Cash and cash equivalents
7		6	Securities
8		7	Customers and traders; Concession holders (transport of energy)
9		8	Recoverable taxes
10		9	Income and Social Contribution tax
11		10	Restricted cash
12		11	Accounts Receivable from the State of Minas Gerais
13		12	Escrow deposits
14		13	Reimbursement of tariff subsidies
15		14	Concession financial assets and liabilities
16		15	Investments
17		16	Property, plant and equipment
18		17	Intangible assets
19		18	Suppliers
20		19	Taxes payable, Income tax and Social Contribution tax and amounts to be reimbursed to customers
21		20	Loans, financings and debentures
22		21	Regulatory charges
23		22	Post-retirement obligations
24		23	Provisions
25		24	Equity and remuneration to shareholders
26		25	Revenue
27		26	Operating costs and expenses
28		27	Finance income and expenses
29		28	Related party transactions
30		29	Financial instruments and risk management
31		29	Measurement at fair value
—		30	Assets classified as held for sale
34		32	Annual tariff adjustment
35		33	Transactions not involving cash
36		34	Subsequent events


Number		Title of the Note
32		Insurance
33		Commitments

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3.	PRINCIPLES OF CONSOLIDATION

The reporting dates for the interim financial information of subsidiaries (used for consolidation) and jointly-controlled and affiliated entities (used for the purposes of equity method calculation) coincide with those of the Company. Accounting practices are applied uniformly in line with those used by the Company.

The following subsidiaries are included in the consolidated interim financial information:


Subsidiary	Criteria		Sep. 30, 2018		Dec. 31, 2017
Subsidiary	Criteria		Direct interest, %		Direct interest, %
Cemig Geração e Transmissão		Consolidated		100.00		100.00
Cemig Distribuição		Consolidated		100.00		100.00
Gasmig		Consolidated		99.57		99.57
Cemig Telecom (2)		Consolidated		—		100.00
Rosal Energia		Consolidated		100.00		100.00
Sá Carvalho		Consolidated		100.00		100.00
Horizontes Energia		Consolidated		100.00		100.00
Cemig Geração Distribuída (Usina Térmica Ipatinga) (1)		Consolidated		100.00		100.00
Cemig PCH		Consolidated		100.00		100.00
Cemig Trading		Consolidated		100.00		100.00
Efficientia		Consolidated		100.00		100.00
Cemig Comercializadora de Energia Incentivada		Consolidated		100.00		100.00
UTE Barreiro		Consolidated		100.00		100.00
Empresa de Serviços e Comercialização de Energia Elétrica		Consolidated		100.00		100.00
Luce Empreendimentos e Participações S.A.		Consolidated		100.00		100.00

(1)	In 2018, the corporate name of UTE Ipatinga was changed to Cemig Geração Distribuída S.A.

(2)	Company merged into Cemig on March 31, 2018.

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4.	CONCESSIONS AND AUTHORIZATIONS

Cemig and its subsidiaries hold the following concessions and authorizations with ANEEL:


	Company holding concession or authorization	Concession or authorization contract		Expiration date
POWER GENERATION
Hydroelectric plants
Emborcação (1)	Cemig GT		07/1997		07/2025
Nova Ponte (1)	Cemig GT		07/1997		07/2025
Santa Luzia (1)	Cemig GT		07/1997		02/2026
Sá Carvalho (1)	Sá Carvalho		01/2004		12/2024
Rosal (1)	Rosal Energia		01/1997		05/2032
Machado Mineiro (1) Salto Voltão (1) Salto Paraopeba (1) Salto do Passo Velho (1)	Horizontes Energia		Resolution 331/2002		07/2025 10/2030 10/2030 10/2030
PCH Pai Joaquim (1)	Cemig PCH		Resolution 377/2005		04/2032
Irapé (1)	Cemig GT		14/2000		02/2035
Queimado (Consortium) (1)	Cemig GT		06/1997		01/2033
Salto Morais (1)	Cemig GT		02/2013		07/2020
Rio de Pedras (1)	Cemig GT		02/2013		09/2024
Luiz Dias (1)	Cemig GT		02/2013		08/2025
Poço Fundo (1)	Cemig GT		02/2013		08/2025
São Bernardo (1)	Cemig GT		02/2013		08/2025
Xicão (1)	Cemig GT		02/2013		08/2025
Três Marias (2)	Cemig Geração Três Marias		08/2016		01/2046
Salto Grande (2)	Cemig Geração Salto Grande		09/2016		01/2046
Itutinga (2)	Cemig Geração Itutinga		10/2016		01/2046
Camargos (2)	Cemig Geração Camargos		11/2016		01/2046
Coronel Domiciano, Joasal, Marmelos, Paciência and Piau (2)	Cemig Geração Sul		12/2016 and 13/2016		01/2046
Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras (2)	Cemig Geração Leste		14/2016 and 15/2016		01/2046
Cajurú, Gafanhoto and Martins (2)	Cemig Geração Oeste		16/2016		01/2046
Thermal plants
Igarapé (1)	Cemig GT		07/1997		08/2024
POWER TRANSMISSION
National grid (3)	Cemig GT		006/1997		01/2043
Itajubá Substation (3)	Cemig GT		79/2000		10/2030
ELECTRICITY DISTRIBUTION (4)	Cemig D		002/1997 003/1997 004/1997 005/1997		12/2045
GAS DISTRIBUTION (4)	Gasmig		State Law 11,021/1993		01/2053

(1)	Generation concession contracts that are not within the scope of ICPC 01/IFRC 12, whose infrastructure assets are recorded as PP&E since the concession grantor does not have control over whom the service is provided to as the output is being sold mainly in the Free Market (‘ACL’).

(2)	Generation concession contracts whose revenue related to the Concession Grant Fee is within the scope of ICPC 01 /IFRIC 12, and is classified as concession financial assets.

(3)

Transmission concession contracts that are within the scope of ICPC 01/IFRIC 12, considering the financial asset model, andthe income and costs of the construction works related to the formation of the financial asset is recognized as expenses are incurred. The financial asset to be reimbursed is identified when the implementation of the infrastructure is finalized and included as remuneration for the services of implementation of the infrastructure.

(4)	Concession contracts that are within the scope of ICPC 01 /IFRIC 12 and under which the concession infrastructure assets are recorded under the intangible and financial assets bifurcation model.

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5.	CASH AND CASH EQUIVALENTS


	Consolidated				Holding Company
	Sep. 30, 2018		Dec. 31, 2017		Sep. 30, 2018		Dec. 31, 2017
Bank accounts		100,181		113,495		4,472		4,645
Cash equivalents
Bank certificates of deposit (CDBs) (1)		1,256,652		685,826		31,161		20,799
Overnight (2)		136,550		226,629		4,341		13,228
Others		—		4,307		—		—

		1,393,202		916,762		35,502		34,027

		1,493,383		1,030,257		39,974		38,672

(1)

Bank Certificates of Deposit (Certificados de Depósito Bancário, or CDBs), accrued interest at 60% to 106% of the CDI Rate (Interbank Rate for Interbank Certificates of Deposit or Certificados de Depósito Inter-bancário – CDIs) published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip) on September 30, 2018 (50% to 106% on December 31, 2017). For these CDBs, the Company has repo transactions which state, on their trading notes, the bank’s commitment to repurchase the security, on demand, on the maturity date of the transaction, or earlier, at the Company’s option.

(2)

Overnight transactions are repos available for redemption on the following day.They are usually backed by Treasury Bills, Notes or Bonds and referenced to a pre-fixed rate of 6.39%, on September 30, 2018 (6.89% on December 31, 2017). Their purpose is to settle the Company’s short-term obligations, or to be used in the acquisition of other assets with better return to replenish the portfolio.

The Company’s exposure to interest rate risks and sensitivity analysis for financial assets and liabilities are disclosed in Note 29.

6.	SECURITIES


	Consolidated				Holding Company
	Sep. 30, 2018		Dec. 31, 2017		Sep. 30, 2018		Dec. 31, 2017
Investments
Current
Bank certificates of deposit (CDBs) (1)		—		2,652		—		144
Financial Notes (LFs) – Banks (2)		247,423		303,355		7,867		17,706
Treasury Financial Notes (LFTs) (3)		315,136		739,945		10,020		43,189
Debentures (4)		7,334		10,663		361		2,142
Others		1,727		1,769		654		779

		571,620		1,058,384		18,902		63,960
Non-current
Bank certificates of deposit (CDBs) (1)		2,287		—		43		—
Financial Notes (LFs) – Banks (2)		71,332		—		2,268		—
Debentures (4)		4,840		29,753		746		1,737

		78,459		29,753		3,057		1,737

		650,079		1,088,137		21,959		65,697

(1)

Investments in Bank Certificates of Deposit – CDBs – accrued interest at a percentage of the Interbank Certificates of Deposit (CDI) rate, published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip) which was 80% on September 30, 2018 (100.25% to 105.25% on December 31, 2017).

(2)

Bank Financial Notes (Letras Financeiras, or LFs) are fixed-rate fixed-income securities, issued by banks, and that accrued interest at a percentage of the CDI rate published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip). The LFs accrued interest of 102% to 111.25% of the CDI rate on September 30, 2018 (102.01% to 112% on December 31, 2017).

(3)	Treasury Financial Notes (LFTs) are fixed-rate securities, their yield on which follows the daily changes in the Selic rate between the date of purchase and the date of maturity.

(4)	Debentures are medium and long-term debt securities, which give their holders a right of credit against the issuing company. The debentures have remuneration varying from 104.25% to 151% of the CDI rate on September 30, 2018 (104.25% to 161.54% on December 31, 2017).

Note 29 provides further information on these securities. Investments in securities of related parties are shown in Note 28.

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7.	CUSTOMERS, TRADERS AND TRANSPORT OF ENERGY CONCESSION HOLDERS


	Consolidated
	Balances not yet due			Up to 90 days past due			More than 90 days past due			Sep. 30, 2018			Dec; 31, 2017
Billed supply		1,456,134			783,602			822,497			3,062,233			2,688,622
Unbilled supply		1,084,923			—			—			1,084,923			993,699
Other concession holders – wholesale supply		—			21,062			3,698			24,760			25,642
Other concession holders – wholesale supply, unbilled		249,050			—			—			249,050			283,061
CCEE (Wholesale Electricity Trading Chamber)		283			223,322			10,801			234,406			381,150
Concession Holders – Transport of energy		72,562			11,747			90,439			174,748			159,194
Concession Holders – Transport of energy, unbilled		204,081			—			—			204,081			177,308
(–) Provision for doubtful receivables		(57,503	)		(20,494	)		(685,155	)		(763,152	)		(567,956	)

		3,009,530			1,019,239			242,280			4,271,049			4,140,720

Current assets											4,195,075			3,885,392
Non-current assets											75,974			255,328


	Holding Company
	Balances not yet due		Up to 90 days past due		More than 90 days past due			Sep. 30, 2018			Dec; 31, 2017
Billed supply (Telecom services)		17,488		3,978		22,986			44,452			—
Unbilled supply (Telecom services)		3,438		—		—			3,438			—
(–) Provision for doubtful receivables		—		—		(22,288	)		(22,288	)		—

		20,926		3,978		698			25,602			—

Current assets									25,602			—

Note 29 presents the Company and its subsidiaries’ exposure to credit risk related to customers and traders.

The allowance for doubtful accounts is considered to be sufficient to cover any potential losses in the realization of accounts receivable, and the breakdown by type of customers is as follows:


	Sep. 30, 2018		Dec. 31, 2017
Residential		147,319		160,482
Industrial		195,679		178,058
Commercial, services and others		185,002		117,438
Rural		33,622		17,334
Public authorities		101,840		11,984
Public lighting		5,461		4,740
Public services		26,499		10,187
Charges for use of the network (TUSD)		67,730		67,733

		763,152		567,956

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Changes in the allowance for doubtful accounts are as follows:


Balance at December 31, 2016	660,105
Additions, net	191,343

Balance at September 30, 2017	851,448

Balance at December 31, 2017	567,956

Effects arising from the adoption of IFRS 9 / CPC 48 on January 1, 2018 (1)	150,114
Additions, net – recorded on results	227,789
Write-off	(182,707	)

Balance at September 30, 2018	763,152

(1)	The Company recorded, on January 1, 2018, the effects arising from the adoption of IFRS 9 / CPC 48, as a result of the retained earnings. More details in Note 2 of this interim financial information.

Advances from clients

Cemig GT and Cemig D receives advance payments for the sale of energy from certain customers. Advance payments related to services not yet provided are as follows:


Balance at December 31, 2016	181,200

Addition	282,601
Supply completed	(189,355	)
Monetary adjustment	37,666

Balance at September 30, 2017	312,112

Balance at December 31, 2017	232,762

Supply completed	(152,050	)
Monetary adjustment	9,184

Balance at September 30, 2018	89,896

Advance payments are adjusted until the actual delivery of the power supply by Cemig GT and Cemig D under the following terms:


Sep. 30, 2018							Balance on Sep. 30, 2018		Balance on Dec. 31, 2017
Counterparty	Specified period for energy billing		Index for adjusting prepaid amounts		MWh deliverable		Balance on Sep. 30, 2018		Balance on Dec. 31, 2017
BTG Pactual		—		1.57% p.m.		—		—		17,287
BTG Pactual		—		1.2% p.m.		—		—		25,633
Deal Comercializadora		—		1.2% p.m.		—		—		772
White Martins Gases Industriais Ltda		until March 2019		124% of CDI		143,094		76,042		147,066
White Martins Gases Industriais Ltda (1)		until March 2019		124% of CDI		—		13,854		42,004

								89,896		232,762

(1)	Advance repayable by Cemig D, under an agreement for prepayment of the Contract for Use of the Distribution System (CUSD), comprising the components transport, losses and charges.

Revenue from advanced sales of power supply is recognized in the statement of income only when the supply actually take place.

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8.	RECOVERABLE TAXES


	Consolidated				Holding Company
	Sep. 30, 2018		Dec. 31, 2017		Sep. 30, 2018		Dec. 31, 2017
Current
ICMS (VAT)		101,758		71,430		3,265		—
ICMS – advance payment (1)		754,513				—
PIS and Pasep		6,250		12,130		20		6
Cofins		31,123		56,023		107		37
Others		17,423		34,207		100		—

		911,067		173,790		3,492		43
Non-current
ICMS (VAT)		226,939		224,752		2,105		—
PIS and Pasep		43		569		3		2
Cofins		196		3,131		12		12
Others		2,226		2,226		1,795		1,796

		229,404		230,678		3,915		1,810

		1,140,471		404,468		7,407		1,853

(1)

On September 14, 2018 the State of Minas Gerais issued Decree 47488 ordering that payments of ICMS tax relating to November and December 2018 should be paid on September 20, 2018. The ICMS tax paid, in the amount of R$ 697,360 from Cemig D and R$ 55,854 from Cemig GT, is being updated at the Selic rate until the date of payment of the remaining balance and was defined based on 75% of the amount paid by Cemig D and Cemig GT in August 2018. The remaining balance for the months of November and December 2018 will be paid by December 7, 2018 and January 8, 2019, respectively. The updated balance at September 30, 2018 is R$ 754,513 (R$ 698,563 from Cemig D and R$ 55,950 from Cemig GT).

Credits of PIS, Pasep and COFINS taxes generated by the acquisition of machinery and equipment can be offset immediately.

9.	INCOME AND SOCIAL CONTRIBUTION TAXES

a)	Income and Social Contribution tax recoverable


	Consolidated				Holding Company
	Sep. 30, 2018 (Restated)		Dec. 31, 2017		Sep. 30, 2018		Dec. 31, 2017
Current
Income tax		197,725		223,539		24,296		19,124
Social Contribution tax		123,710		116,035		2,432		598

		321,435		339,574		26,728		19,722
Non-current
Income tax		—		6,685		—		6,685
Social Contribution tax		7,651		13,932		7,651		13,932

		7,651		20,617		7,651		20,617

		329,086		360,191		34,379		40,339

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b) Deferred income tax and Social Contribution tax


	Consolidated						Holding Company
	Sep. 30, 2018 (Restated)			Dec. 31, 2017			Sep. 30, 2018			Dec. 31, 2017
Deferred tax assets
Tax loss carryforwards		446,594			523,595			164,240			165,235
Provisions		1,116,269			1,092,557			551,465			527,166
Post-retirement obligations		1,224,173			1,179,257			153,356			144,176
Estimated provision for doubtful receivables		276,975			207,415			8,161			7,775
Taxes with suspended liability		—			14,093			—			—
Paid concession		7,704			8,227			—			—
Adjustment to fair value: Swap/loss		2,007			12,923			—			—
Others		38,386			14,212			5,631			—

Total		3,112,108			3,052,279			882,853			844,352

Deferred tax liabilities
Funding cost		(26,039	)		(31,115	)		—			—
Deemed cost		(241,316	)		(275,543	)		—			—
Cost of acquisition of equity interests		(450,137	)		(463,573	)		(85,740	)		(87,613	)
Borrowing costs capitalized		(167,427	)		(165,582	)		—			—
Taxes on revenues not redeemed – Presumed Profit accounting method		(926	)		(785	)		—			—
Adjustment to expectation of cash flow from the indemnifiable Concession financial assets		(767,931	)		(937,485	)		—			—
Adjustment to fair value of derivative financial instruments		(93,036	)		(1,524	)		—			—
Others		(86,810	)		(40,133	)		(7,498	)		—

Total		(1,833,622	)		(1,915,740	)		(93,238	)		(87,613	)

Total, net		1,278,486			1,136,539			789,615			756,739

Total assets		1,930,774			1,871,228			789,615			756,739
Total liabilities		(652,288	)		(734,689	)		—			—

The changes in income tax and the Social Contribution tax are as follows:


	Consolidated			Holding Company
Balance at Dec. 31, 2016		1,215,247			789,318
Effects allocated to Statement of income		101,362			(44,290	)
Variations in deferred tax assets and liabilities		4,543			—

Balance at Sep. 30, 2017		1,321,152			745,028

Balance at Dec. 31, 2017		1,136,539			756,739
Telecom merger		—			1,050
Effects allocated to Statement of income – Going concern operations		91,117			41,998
Effects allocated to Statement of income – Discontinued operations		(15,019	)		(10,947	)
Effects allocated to Equity		68,586			—
Transfer to assets held for sale		775			775
Variations in deferred tax assets and liabilities		(3,512	)		—

Balance on Sep. 30, 2018 (Restated)		1,278,486			789,615

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c)	Reconciliation of income tax and Social Contribution tax effective rate

This table reconciles the statutory income tax (rate 25%) and the Social Contribution tax (rate 9%) with the current expense on these taxes in the statement of income:


	Consolidated						Holding Company
	Jan to Sep 2018 (Restated)			Jan to Sep 2017			Jan to Sep 2018 (Restated)			Jan to Sep 2017
Income on going concern operations before income and Social Contribution taxes		950,715			601,776			630,099			454,989
Income tax and Social Contribution		(323,243	)		(204,604	)		(214,234	)		(154,696	)
Tax effects applicable to:
Gain (loss) in subsidiaries by equity method (net of effects of Interest on Equity)		(40,311	)		(34,968	)		256,890			95,207
Non-deductible contributions and donations		(3,245	)		(2,171	)		(647	)		—
Tax incentives		17,170			4,053			160			66
Voluntary retirement provision		(502	)		—			(36	)		—
Difference between Presumed profit and Real profit		66,657			59,692			—			—
Non-deductible penalties		(8,910	)		(10,077	)		(36	)		(11	)
Excess reactive power and demand		—			(9,229	)		—			—
Others		4,270			(7,290	)		(99	)		1,195

Income tax and Social Contribution – effective gain (expense)		(288,114	)		(204,594	)		41,998			(58,239	)

Current tax		(379,231	)		(305,956	)		—			(13,949	)
Deferred tax		91,117			101,362			41,998			(44,290	)

		(288,114	)		(204,594	)		41,998			(58,239	)

Effective rate		30.30	%		34.00	%		6.67	%		12.80	%


	Consolidated						Holding Company
	Jul to Sep 2018 (Restated)			Jul to Sep 2017			Jul to Sep 2018 (Restated)			Jul to Sep 2017
Income on going concern operations before income and Social Contribution taxes		347,533			(93,000	)		226,615			(19,237	)
Income tax and Social Contribution tax		(118,161	)		31,620			(77,049	)		6,541
Tax effects applicable to:
Share of (loss) profit of associates and joint ventures (net of effects of Interest on Equity)		(23,678	)		(44,064	)		80,355			(71,617	)
Non-deductible contributions and donations		(1,662	)		(659	)		(246	)		—
Tax incentives		11,187			(2,035	)		135			23
Voluntary retirement provision		(356	)		—			(22	)		—
Difference between Presumed profit and Real profit		18,151			20,873			—			—
Non-deductible penalties		(1,946	)		(1,672	)		(1	)		—
Excess reactive power and demand		—			(3,117	)		—			—
Others		(804	)		8,388			257			462

Income tax and Social Contribution – effective gain (expense)		(117,269	)		9,334			3,429			(64,591	)

Current tax		(182,812	)		(13,234	)		—			(11,416	)
Deferred tax		65,543			22,568			3,429			(53,175	)

		(117,269	)		9,334			3,429			(64,591	)

Effective rate		33.74	%		10.04	%		1.51	%		335.77	%

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10.

RESTRICTED CASH

The balance of Restricted cash amounting to R$ 113,041 in the Consolidated (R$ 106,227 on December 31, 2017), and R$ 93,112 in the Holding Company (R$ 87,872 on December 31, 2017), refers mainly to amounts deposited with a financial institution, in accordance with the Shareholders’ agreement of the jointly controlled Rio Minas Energia Participações – RME, as a guarantee for the settlement of the options to sell an interest in RME. For more details about RME sale options, see note 29.

11.

ACCOUNTS RECEIVABLE FROM THE STATE OF MINAS GERAIS

The parties agreed that the Minas Gerais State will reimburse the Company R$ 294,390, of which R$ 239,445 relates to the historical amounts deposited, and R$ 61,775 relates to the monetary adjustment, of which R$ 19,912 is related to the nine-month period ended September 30, 2018, which will be paid in 12 consecutive monthly installments, each adjusted by the IGP-M inflation index through the settlement date, starting on November 10, 2017. Further, the agreement states that, in the event of arrears or default by the State in the payment of the agreed consecutive monthly installments, Cemig is authorized to retain dividends or Interest on Equity distributable to the State in proportion to the State’s equity interest, for as long as the arrears and/or default continues. Until September 30, 2018, a total of R$ 46,290 had been received regarding two installments and the remaining balance of R$ 254,930 is still outstanding, recognized in Non-current assets, due to installments being overdue since January 2018. Company’s Management believes that no impairment losses is expected on these receivables, considering the aforementioned guarantees, which Company intends to execute in the event of non-receipt of the amount agreed in the debt recognition agreement.

12.

ESCROW DEPOSITS


	Consolidated				Holding Company
	Sep. 30, 2018		Dec. 31, 2017		Sep. 30, 2018		Dec. 31, 2017
Labor claims		346,176		303,699		38,796		35,270
Tax contingencies
Income tax on Interest on Equity		27,574		26,861		259		244
Pasep/Cofins taxes (1)		1,387,070		1,337,086		—		—
Donations and legacy tax (ITCD)		50,573		48,981		50,134		48,541
Urban property tax (IPTU)		86,320		79,505		69,198		68,675
Finsocial tax		38,205		37,170		38,205		37,170
Income and social contribution taxes on indemnity for employees ‘Anuênio’ benefit (2)		273,270		267,432		13,122		12,853
IRRF on Inflation Gain		8,387		—		8,387		—
Social contribution on net income (CSLL) (3)		18,062		—		—		—
Others		87,844		116,585		21,469		31,252

		1,977,305		1,913,620		200,774		198,735
Others
Regulatory		52,597		60,243		29,634		29,589
Third party		9,169		16,094		3,564		5,811
Customer relations		6,361		6,204		1,287		1,561
Court embargo		13,366		14,358		3,949		5,515
Others		22,752		21,414		1,378		1,310

		104,245		118,313		39,812		43,786

		2,427,726		2,335,632		279,382		277,791

(1)	The escrow deposits relating to Pasep and Cofins taxes refer to the case challenging the constitutionality of inclusion of the ICMS (VAT), which has been charged, within the amount on which the Pasep and Cofins taxes are calculated.

(2)	See more details in Note 23 – Provisions (Indemnity of employees’ future benefit—the ‘Anuênio’).

(3)	Escrow deposit due to an infringement notice related to CSLL tax on the amounts of cultural and artistic donations and sponsorships, expenses of punitive fines, and taxes with enforcement suspended.

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Inclusion of ICMS (VAT) in the taxable base for Pasep /Cofins

◾

Cemig D wrote down the liabilities relating to these contributions; and recorded a liability for reimbursement to customers. More details in Note 19.

13.

REIMBURSEMENT OF TARIFF SUBSIDIES

Subsidies on tariffs charged to users of the distribution network (‘TUSD’) and charges for use of the transmission system (‘EUST’) are reimbursed to distributors through the funds from the Energy Development Account (CDE).

On September 30, 2018, the amount recognized as subsidies revenues was R$ 705,730 (R$ 621,731 in the same period of 2017). Of such amounts, Cemig D recorded a receivable of R$ 82,470 (R$ 73,345 in 2017), and Cemig GT recorded a receivable of R$ 2,626 (R$ 3,741 in 2017), in current assets.

14.

CONCESSION FINANCIAL ASSETS AND LIABILITIES


Consolidated	Sep. 30, 2018 (Restated)		Dec. 31, 2017
Financial assets related to infrastructure (1)
Distribution concessions		393,137		369,762
Receivable for residual value – Transmission (1.1)		1,817,663		1,928,038
Transmission concessions – assets remunerated by tariff (1.2)		557,960		547,800
Receivable for residual value – Generation (1.3)		816,734		1,900,757
Concession grant fee – Generation (1.4)		2,396,907		2,337,135

		5,982,401		7,083,492
CVA (Portion A Compensation) Account and Other Financial Components in tariff adjustments (2)		1,246,131		369,010

Total		7,228,532		7,452,502

Current assets		918,734		847,877
Non-current assets		6,309,798		6,604,625


Consolidated Concession financial liabilities	Sep. 30, 2018 (Restated)		Dec. 31, 2017
CVA (Portion A Compensation) Account and Other Financial Components in tariff adjustments (2)		41,383		414,800
Current liabilities		—		414,800
Non-current liabilities		41,383		—

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The changes in concession financial assets related to infrastructure are as follows:


	Transmission			Generation			Distribution			Consolidated
Balances at December 31, 2016		2,287,511			2,800,389			216,107			5,304,007

Additions		11,226			—			—			11,226
Transfers of indemnity – plants not renewed (Volta Grande, Miranda and São Simão)		—			879,818			—			879,818
Disposals		(3,232	)		—			(25	)		(3,257	)
Amounts received		(142,105	)		(172,368	)		—			(314,473	)
Transfers between PP&E, Financial assets and Intangible assets		—			—			53,252			53,252
Adjustment of the BRR of Transmission Assets		149,255			—			—			149,255
Adjustment of indemnity – plants not renewed (Ministerial Order 291)		—			259,516			—			259,516
Adjustment to expectation of cash flow from the indemnifiable Concession financial assets		—			—			2,278			2,278
Monetary updating		146,494			240,420			—			386,914

Balances at September 30, 2017		2,449,149			4,007,775			271,612			6,728,536

Balances at December 31, 2017		2,475,838			4,237,892			369,762			7,083,492

Additions		12,726			—			—			12,726
Amounts received		(333,122	)		(1,325,312	)		—			(1,658,434	)
Transfers between PP&E, Financial assets and Intangible assets		40			—			19,696			19,736
Other transfers		—			—			(50	)		(50	)
Adjustment to expectation of cash flow from the indemnifiable Concession financial assets		11,977			—			—			11,977
Monetary updating (1)		208,164			301,061			3,874			513,099
Disposals		—			—			(145	)		(145	)

Balances at September 30, 2018		2,375,623			3,213,641			393,137			5,982,401

(1)	The revenue corresponding to financial updating is shown net of a write-off of R$ 26,999 of the deemed cost of the Miranda and São Simão plants, due to reimbursement receipt related to basic projects of these power plants.

1)	Financial assets related to infrastructure

1.1)	Transmission – Residual value receivable

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The amount of indemnity to be received, updated until September 30, 2018, amounted to R$ 1,817,663 (R$ 1,928,038 as of December 31, 2017), corresponding to the following:

Portions of remuneration and depreciation not paid since the extensions of concessions

An amount of R$ 957,872, corresponding to the portions of remuneration and depreciation not paid since the extensions of the concessions, through the tariff adjustment in 2017 (R$ 992,802 as of December 31, 2017), which will be inflation adjusted using the IPCA (Expanded National Customer Price) index, and remunerated at the weighted average cost of capital of the transmission industry as defined by the regulator for the periodic tariff review, to be paid over a period of eight years from July 2017, in the form of reimbursement through the RAP.

Residual Value of transmission assets – injunction awarded to industrial customers

The preliminary injunction was partial, with effects related to suspension of the inclusion in the customer tariffs paid by these associations of the portion of the indemnity corresponding to the remuneration at cost of capital included since the date of extension of the concessions – amounting to R$ 399,796 at September 30, 2018 (R$ 316,138 at December 31, 2017) updated by the IPCA.

In compliance with the court decision, the regulator, in its Technical Note 183/2017-SGT/ ANEEL of June 22, 2017, presented a new calculation, excluding the amounts that refer to the cost of own capital. Cemig believes that this is a provisional decision, and that its right to receive the amount referring to the assets of the basic national grid system (Rede Básica Sistema Elétrico, or RBSE) is guaranteed by law, so that no adjustment to the amount recorded at September 30, 2018 is necessary.

Adjustment of the BRR of Transmission Assets – Aneel Technical Note 183/2017

Remaining balance to be received through RAP

The remaining balance, of R$ 459,995 on September 30, 2018 (R$ 544,471 on December 31, 2017) was incorporated into the regulatory remuneration base of assets, and is being recovered through RAP.

The Company expects to receive in full the receivables in relation to the residual value of the transmission assets.

1.2)	Transmission – Assets remunerated by tariff

Under the Proret, the revenue established in the Resolutions is payable to the transmission concessionaires as from the date of start of commercial operation of the facilities. In the periods between tariff reviews, the revenues associated with the improvements and upgrades of facilities are provisional. They are then ultimately determined in the review immediately subsequent to the start of commercial operation of the facilities; this review then has effect starting the date when commercial operations begin. On September 30, 2018, the receivable amounts are R$ 557,960 (R$ 547,800 on December 31, 2017).

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1.3)	Generation – Residual value financial asset


Generation plant	Concession expiration date		Installed capacity (MW)		Net balance of assets based on historical cost		Net balance of assets based on fair value (replacement cost)
Generation plant	Concession expiration date		Installed capacity (MW)		Net balance of assets based on historical cost
Lot D:
Três Marias Hydroelectric Plant		July 2015		396		71,694		413,450
Salto Grande Hydroelectric Plant		July 2015		102		10,835		39,379
Itutinga Hydroelectric Plant		July 2015		52		3,671		6,589
Camargos Hydroelectric Plant		July 2015		46		7,818		23,095
Piau Small Hydroelectric Plant		July 2015		18.01		1,531		9,005
Gafanhoto Small Hydroelectric Plant		July 2015		14		1,232		10,262
Peti Small Hydroelectric Plant		July 2015		9.4		1,346		7,871
Dona Rita Small Hydroelectric Plant		Sep. 2013		2.41		534		534
Tronqueiras Small Hydroelectric Plant		July 2015		8.5		1,908		12,323
Joasal Small Hydroelectric Plant		July 2015		8.4		1,379		7,622
Martins Small Hydroelectric Plant		July 2015		7.7		2,132		4,041
Cajuru Small Hydroelectric Plant		July 2015		7.2		3,576		4,252
Paciência Small Hydroelectric Plant		July 2015		4.08		728		3,936
Marmelos Small Hydroelectric Plant		July 2015		4		616		4,265
Others:
Volta Grande Hydroelectric Plant		Feb. 2017		380		25,621		70,118
Miranda Hydroelectric Plant		Dec. 2016		408		26,710		22,546
Jaguara Hydroelectric Plant		Aug. 2013		424		40,452		174,203
São Simão Hydroelectric Plant		Jan. 2015		1,710		2,258		3,243

				3,601.70		204,041		816,734

On September 30, 2018, investments made after the Jaguara, São Simão and Miranda plants came into operation, in the amounts of R$ 174,203, R$ 3,243 and R$ 22,546 respectively, are recorded as concession financial assets, and the determination of the final amounts to be paid to the Company are under discussions with the regulator. Management does not expect any losses in realization of these amounts.

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Miranda and São Simão plants – basic plans


Plants	Miranda			São Simão			Total
Concession termination date	Dec. 2016			Jan. 2015			Total
Residual value of assets based on deemed cost on 12/31/2017		609,995			202,744			812,739
Adjustment (1)		174,157			40,855			215,012

Amounts based on MME Order		784,152			243,599			1,027,751
Monetary updating		25,373			31,222			56,595

Residual value of assets of basic project on 12/31/2017		809,525			274,821			1,084,346
Monetary updating (2)		42,118			12,891			55,009
Receivables		(851,643	)		(287,712	)		(1,139,355	)

Residual value of assets of basic project on 09/30/2018		—			—			—

(1)	Adjustment of the residual value of the São Simão and Miranda plant, as per MME Order 291/17.

(2)	The revenue corresponding to financial updating is shown net of a write-off of R$ 26,999 of the deemed cost of the Miranda and São Simão plants.

1.4)	Concession grant fee – Generation concessions


SPE	Plants		Balances on Dec. 31, 2017		Monetary updating		Amounts received			Balances on Sep. 30, 2018
Cemig Geração Três Marias S.A.		Três Marias		1,330,134		133,096		(99,914	)		1,363,316
Cemig Geração Salto Grande S.A.		Salto Grande		417,393		41,952		(31,510	)		427,835
Cemig Geração Itutinga S.A.		Itutinga		155,594		17,549		(13,396	)		159,747
Cemig Geração Camargos S.A.		Camargos		116,710		13,077		(9,973	)		119,814
Cemig Geração Sul S.A.		Coronel Domiciano, Joasal, Marmelos, Paciência and Piau		152,170		18,207		(14,032	)		156,345
Cemig Geração Leste S.A.		Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras		103,133		13,596		(10,655	)		106,074
Cemig Geração Oeste S.A.		Cajurú, Gafanhoto and Martins		62,001		8,252		(6,477	)		63,776

Total				2,337,135		245,729		(185,957	)		2,396,907


SPE	Plants	Balances on Dec. 31, 2016		Monetary updating		Amounts received			Balances on Sep. 30, 2017
Cemig Geração Três Marias S.A.	Três Marias		1,283,197		129,986		(92,612	)		1,320,571
Cemig Geração Salto Grande S.A.	Salto Grande		402,639		40,973		(29,207	)		414,405
Cemig Geração Itutinga S.A.	Itutinga		149,904		17,193		(12,418	)		154,679
Cemig Geração Camargos S.A.	Camargos		112,447		12,809		(9,244	)		116,012
Cemig Geração Sul S.A.	Coronel Domiciano, Joasal, Marmelos, Paciência and Piau		146,553		17,884		(13,007	)		151,430
Cemig Geração Leste S.A.	Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras		99,315		13,424		(9,876	)		102,863
Cemig Geração Oeste S.A.	Cajurú, Gafanhoto and Martins		59,710		8,151		(6,004	)		61,857

Total			2,253,765		240,420		(172,368	)		2,321,817

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2)	Account for compensation of variation of Portion A items (CVA) and Other financial components


	Sep. 30, 2018									Dec. 31, 2017
Statement of financial position	Amounts ratified by Aneel in the last tariff adjustment (Restated)			Amounts to be ratified by Aneel in the next tariff adjustments (Restated)			Total (Restated)			Amounts ratified by Aneel in the last tariff adjustment			Amounts to be ratified by Aneel in the next tariff adjustments			Total
Assets		1,916,374			2,437,573			4,353,947			381,588			2,330,978			2,712,566
Current assets		1,916,374			825,428			2,741,802			381,588			1,379,162			1,760,750
Non-current assets		—			1,612,145			1,612,145			—			951,816			951,816
Liabilities		(1,847,178	)		(1,302,021	)		(3,149,199	)		(796,388	)		(1,961,968	)		(2,758,356	)
Current liabilities		(1,805,795	)		(569,134	)		(2,374,929	)		(796,388	)		(1,220,637	)		(2,017,025	)
Non-current liabilities		(41,383	)		(732,887	)		(774,270	)		—			(741,331	)		(741,331	)

Total current, net		110,579			256,294			366,873			(414,800	)		158,525			(256,275	)

Total non-current, net		(41,383	)		879,258			837,875			—			210,485			210,485

Total, net		69,196			1,135,552			1,204,748			(414,800	)		369,010			(45,790	)


Financial components	Sep. 30, 2018									Dec. 31, 2017
Financial components	Amounts ratified by Aneel in the last tariff adjustment (Restated)			Amounts to be ratified by Aneel in the next tariff adjustments (Restated)			Total (Restated)			Amounts ratified by Aneel in the last tariff adjustment			Amounts to be ratified by Aneel in the next tariff adjustments			Total
Items of ‘Portion A’
Energy Development Account (CDE) quota		506			76,998			77,504			(154,234	)		(89,414	)		(243,648	)
Tariff for use of transmission facilities of grid participants		38,931			14,097			53,028			9,058			23,448			32,506
Tariff for transport of Itaipu supply		3,601			10,098			13,699			2,332			1,306			3,638
Alternative power source program (Proinfa)		5,069			—			5,069			(5,148	)		1,513			(3,635	)
ESS/EER System Service/Energy Charges)		(403,515	)		(269,637	)		(673,152	)		(40,105	)		(586,413	)		(626,518	)
Energy purchased for resale (1)		1,085,449			1,659,612			2,745,061			(90,616	)		1,326,263			1,235,647
Other financial components
Over contracting of supply		(326,490	)		(28,188	)		(354,678	)		8,357			(211,337	)		(202,980	)
Neutrality of Portion A		84,812			4,797			89,609			(30,581	)		74,076			43,495
Other financial items		(377,543	)		(138,556	)		(516,099	)		(111,825	)		—			(111,825	)
Tariff Flag balances (2)		—			(161,323	)		(161,323	)		—			(134,008	)		(134,008	)
Excess demand and reactive power		(41,624	)		(32,346	)		(73,970	)		(2,038	)		(36,424	)		(38,462	)

TOTAL		69,196			1,135,552			1,204,748			(414,800	)		369,010			(45,790	)

(1)

(2)	Billing arising from the ‘Flag’ Tariff System not yet homologated by Aneel.

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Changes in balances of financial assets and liabilities:


Balance on December 31, 2016	(407,250	)

Net constitution of financial liabilities	222,233
Amortization	(74,017	)
Payments from the Flag Tariff Centralizing Account	(304,841	)
Updating – Selic rate	(40,086	)

Balance on September 30, 2017	(603,961	)

Balance on December 31, 2017	(45,790	)
Net constitution of financial liabilities	1,408,786
Amortization	375,004
Other – P&D Reimbursement	(114,782	)
Payments from the Flag Tariff Centralizing Account	(453,650	)
Updating – Selic rate	35,180

Balance on September 30, 2018 (Restated)	1,204,748

Payments from the Flag Tariff Centralizing Account – CCRBT

Pass-through of funds from the Flag Account from January to September 2018 totaled R$ 453,650 (R$ 304,841 from January to September, 2017) and were recognized as a partial realization of the CVA receivable previously constituted.

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15.

INVESTMENTS


	Control	Consolidated				Holding Company
	Control	Sep. 30, 2018		Dec. 31, 2017		Sep. 30, 2018 (Restated)		Dec. 31, 2017
Cemig Geração e Transmissão	Subsidiary		—		—		4,799,070		4,793,832
Hidrelétrica Cachoeirão	Jointly-controlled		49,954		57,957		—		—
Guanhães Energia	Jointly-controlled		75,524		25,018		—		—
Hidrelétrica Pipoca	Jointly-controlled		29,368		26,023		—		—
Retiro Baixo	Jointly-controlled		168,253		157,773		—		—
Aliança Norte (Belo Monte Plant)	Jointly-controlled		651,980		576,704		—		—
Amazônia Energia (Belo Monte Plant)	Jointly-controlled		992,434		866,554		—		—
Madeira Energia (Santo Antônio Plant)	Affiliated		416,066		534,761		—		—
FIP Melbourne (Santo Antônio Plant)	Affiliated		481,470		582,504		—		—
Lightger	Jointly-controlled		41,143		40,832		—		—
Baguari Energia	Jointly-controlled		167,379		148,422		—		—
Renova	Jointly-controlled		106,100		282,524		—		—
Aliança Geração	Jointly-controlled		1,282,773		1,242,170		—		—
Central Eólica Praias de Parajuru	Jointly-controlled		44,825		60,101		—		—
Central Eólica Volta do Rio	Jointly-controlled		53,619		67,725		—		—
Central Eólica Praias de Morgado	Jointly-controlled		44,620		50,569		—		—
Usina Hidrelétrica Itaocara S.A.	Jointly-controlled		3,955		3,699		—		—
Cemig Distribuição	Subsidiary		—		—		5,084,333		3,737,310
Light	Jointly-controlled		1,474,056		1,534,294		1,039,247		1,083,140
Taesa	Jointly-controlled		1,132,594		1,101,462		1,132,594		1,101,462
Cemig Telecom (3)	Subsidiary		—		—		—		247,313
Ativas Data Center	Affiliated		18,891		17,450		18,891		—
Gasmig	Subsidiary		—		—		1,445,470		1,418,271
Rosal Energia	Subsidiary		—		—		117,053		106,897
Sá Carvalho	Subsidiary		—		—		86,974		102,536
Horizontes Energia	Subsidiary		—		—		46,406		53,165
Usina Térmica Ipatinga	Subsidiary		—		—		4,500		4,932
Cemig PCH	Subsidiary		—		—		89,810		96,944
Lepsa (1)	Subsidiary		—		—		439,898		455,861
RME	Jointly-controlled		367,537		383,233		367,537		383,233
UTE Barreiro	Subsidiary		—		—		18,260		17,982
Empresa de Comercialização de Energia Elétrica	Subsidiary		—		—		13,709		18,403
Efficientia	Subsidiary		—		—		17,040		7,084
UFV Janaúba Geração de Energia Elétrica Distribuída (4)	Affiliated		9,067		—		—		—
Cemig Comercializadora de Energia Incentivada	Subsidiary		—		—		2,579		2,004
Companhia de Transmissão Centroeste de Minas	Jointly-controlled		19,502		20,584		19,502		20,584
Cemig Trading	Subsidiary		—		—		14,566		29,206
Axxiom Soluções Tecnológicas	Jointly-controlled		5,985		11,866		5,985		11,866
Cemig Overseas (2)	Subsidiary		—		—		193		158

Total of investments			7,637,095		7,792,225		14,763,617		13,692,183

(1)

(2)	Company in Spain to evaluate opportunities for investments abroad. As of September 30, 2018, the company has no operations.

(3)	On March 31, 2018 Cemig Telecom was merged into the Company.

(4)	Special-Purpose Company (SPC) constituted by Efficientia and GD Energia (holding company of Mori Group) to develop the Janaúba 5MW photovoltaic generation plant in Janaúba, Minas Gerais, to be leased to consumers of Cemig Distribuição that qualify under Aneel Resolution 482/2012.

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a)	Right to exploitation of the regulated activity


Holding Company	Dec. 31, 2016		Amortization			Sep. 30, 2017		Dec. 31, 2017		Amortization			Sep. 30, 2018
Cemig Geração e Transmissão		303,937		(10,278	)		293,659		285,768		(10,001	)		275,767
Retiro Baixo		29,525		(888	)		28,637		28,344		(886	)		27,458
Central Eólica Praias de Parajuru		19,341		(1,146	)		18,195		16,503		(1,060	)		15,443
Central Eólica Volta do Rio		13,807		(756	)		13,051		11,035		(653	)		10,382
Central Eólica Praias de Morgado		27,406		(1,542	)		25,864		23,956		(1,457	)		22,499
Madeira Energia (Santo Antônio plant)		157,340		(4,467	)		152,873		151,384		(4,467	)		146,917
Aliança Norte (Belo Monte plant)		56,518		(1,479	)		55,039		54,546		(1,478	)		53,068
Taesa		288,146		(10,170	)		277,976		188,745		(6,990	)		181,755
Light		208,800		(16,772	)		192,028		186,437		(16,772	)		169,665
Gasmig		207,498		(5,934	)		201,564		199,586		(5,934	)		193,652
Lepsa		48,429		(3,798	)		44,631		—		—			—
RME		48,429		(3,798	)		44,631		43,365		(3,798	)		39,567

TOTAL		1,105,239		(50,750	)		1,054,489		903,901		(43,495	)		860,406


Consolidated	Dec. 31, 2016		Amortization			Sep. 30, 2017		Dec. 31, 2017		Amortization			Sep. 30, 2018
Taesa		288,146		(10,170	)		277,976		188,745		(6,990	)		181,755
Light		208,800		(16,772	)		192,028		186,437		(16,772	)		169,665
Gasmig		207,498		(5,934	)		201,564		199,586		(5,934	)		193,652
Lepsa		48,429		(3,798	)		44,631		—		—			—
RME		48,429		(3,798	)		44,631		43,365		(3,798	)		39,567

TOTAL		801,302		(40,472	)		760,830		618,133		(33,494	)		584,639

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b)	Changes of investments in the subsidiaries, jointly-controlled and affiliated entities are as follows:


Holding Company	Dec. 31, 2017		Gain (loss) by equity method (Income statement) (Restated)			Gain (loss) by equity method (Other comprehensive income)			Dividends			Injections / acquisitions		Others			Sep. 30, 2018 (Restated)
Cemig Geração e Transmissão		4,793,832		5,238			—			—			—		—			4,799,070
Cemig Distribuição (2)		3,737,310		346,099			—			—			1,100,000		(99,076	)		5,084,333
Cemig Telecom (1)		247,313		4,778			(416	)		—			—		(251,675	)		—
Ativas Data Center (1)		—		1,775			—			—			—		17,116			18,891
Rosal Energia		106,897		8,951			—			(16,342	)		—		17,547			117,053
Sá Carvalho		102,536		14,160			—			(29,722	)		—		—			86,974
Gasmig		1,418,271		108,507			—			(81,308	)		—		—			1,445,470
Horizontes Energia		53,165		12,270			—			(19,029	)		—		—			46,406
Usina Térmica Ipatinga		4,932		(118	)		—			(314	)		—		—			4,500
Cemig PCH		96,944		23,613			—			(30,747	)		—		—			89,810
Lepsa (2)		455,861		9,083			—			(2,963	)		—		(22,083	)		439,898
RME (2)		383,233		2,069			—			(1,200	)		—		(16,565	)		367,537
UTE Barreiro		17,982		278			—			—			—		—			18,260
Empresa de Comercialização de Energia Elétrica		18,403		39,357			—			(44,051	)		—		—			13,709
Efficientia		7,084		1,117			—			(231	)		9,070		—			17,040
Cemig Comercializadora de Energia Incentivada		2,004		795			—			(220	)		—		—			2,579
Companhia de Transmissão Centroeste de Minas		20,584		3,722			—			(4,804	)		—		—			19,502
Light (2)		1,083,140		7,942			—			(7,689	)		—		(44,146	)		1,039,247
Cemig Trading		29,206		39,948			—			(54,588	)		—		—			14,566
Axxiom Soluções Tecnológicas		11,866		(5,881	)		—			—			—		—			5,985
Taesa		1,101,462		156,333			—			(125,201	)		—		—			1,132,594
Cemig Overseas		158		(7	)		—			—			35		7			193

		13,692,183		780,029			(416	)		(418,409	)		1,109,105		(398,875	)		14,763,617

(1)	The changes included in the ‘Others’ column arise from the merger of Cemig Telecom in March, 2018. For more details, please see Note 1.

(2)

The changes included in the ‘Other’ column result from the effects arising from the first adoption of the new accounting pronouncements of CPC 47/IFRS 15 and CPC 48/IFRS 9 on January 1, 2018 recognized by the investees directly in Equity, without passing through the period’s result. For more details, please see Note 2.2.

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Advance for Future Capital Increase (‘AFAC’), in Cemig D

The Company’s Board of Directors authorized the transfer to its subsidiary Cemig Distribuição (Cemig D) the amount of up to R$ 2,750,000, as an Advance for Future Capital Increase (Adiantamento para Futuro Aumento de Capital, or AFAC) to be subsequently converted into a capital increase through approval by future Extraordinary General Meeting of Shareholders.

Until September 30, 2018 the total amount transferred as AFAC was R$ 2,600,000.


Consolidated	Dec. 31, 2017		Equity method gain (Statement of income)			Dividends			Injections / acquisitions		Other			Sep. 30, 2018
Companhia de Transmissão Centroeste de Minas		20,584		3,722			(4,804	)		—		—			19,502
Light (1)		1,534,294		17,514			(11,532	)		—		(66,220	)		1,474,056
Axxiom Soluções Tecnológicas		11,866		(5,881	)		—			—		—			5,985
RME (1)		383,233		2,069			(1,200	)		—		(16,565	)		367,537
Hidrelétrica Cachoeirão		57,957		8,347			(16,350	)		—		—			49,954
Guanhães Energia		25,018		(564	)		—			51,070		—			75,524
Hidrelétrica Pipoca		26,023		4,548			(1,203	)		—		—			29,368
Madeira Energia (Santo Antônio Plant)		534,761		(118,779	)		—			84		—			416,066
FIP Melbourne (Santo Antônio Plant)		582,504		(101,034	)		—			—		—			481,470
Lightger		40,832		2,090			(1,779	)		—		—			41,143
Baguari Energia		148,422		22,515			(3,558	)		—		—			167,379
Central Eólica Praias de Parajuru (2)		60,101		(7,483	)		(7,793	)		—		—			44,825
Central Eólica Volta do Rio		67,725		(14,106	)		—			—		—			53,619
Central Eólica Praias de Morgado		50,569		(5,949	)		—			—		—			44,620
Ativas Data Center		17,450		1,012			—			—		429			18,891
Taesa		1,101,462		156,333			(125,201	)		—		—			1,132,594
Renova		282,524		(176,424	)		—			—		—			106,100
Usina Hidrelétrica Itaocara S.A.		3,699		(3,805	)		—			4,061		—			3,955
Aliança Geração		1,242,170		40,603			—			—		—			1,282,773
Aliança Norte (Belo Monte Plant)		576,704		33,107			—			42,169		—			651,980
Amazônia Energia (Belo Monte Plant)		866,554		55,699			—			70,181		—			992,434
Retiro Baixo		157,773		10,480			—			—		—			168,253
UFV Janaúba Geração de Energia Elétrica Distribuída		—		—			—			9,067		—			9,067

Total of investments		7,792,225		(75,986	)		(173,420	)		176,632		(82,356	)		7,637,095

(1)	The changes included in the “Other” column derive from the impacts arising from the first adoption of the new accounting pronouncements on January 1, 2018 recognized by the investees directly in Equity, without passing through the result for the period. See Note 2.2.

(2)	Extraordinary dividends distribution with balance of profit reserve.

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Holding Company	Dec. 31, 2016		Equity method gain (Statement of income)			Equity method gain (Other comprehensive income)			Dividends			Injections / acquisitions		Others			Sep. 30, 2017
Cemig Geração e Transmissão		4,583,195		525,407			(33,852	)		—			100,000		—			5,174,750
Cemig Distribuição		2,499,867		(538,692	)		—			—			—		—			1,961,175
Cemig Telecom		191,515		(12	)		(680	)		—			—		—			190,823
Rosal Energia		141,038		(7,907	)		—			(30,968	)		—		—			102,163
Sá Carvalho		106,111		19,360			—			(18,631	)		—		—			106,840
Gasmig		1,419,492		88,634			—			(98,079	)		—		—			1,410,047
Horizontes Energia		52,396		11,136			—			(7,818	)		—		—			55,714
Usina Térmica Ipatinga		4,009		254			—			(335	)		—		—			3,928
Cemig PCH		91,969		13,804			—			(10,065	)		—		—			95,708
Lepsa		343,802		234			(1,876	)		—			—		(127	)		342,033
RME		340,063		128			(1,815	)		—			—		(127	)		338,249
Companhia Transleste de Transmissão		21,588		4,071			—			(1,265	)		—		—			24,394
UTE Barreiro		39,266		(2,400	)		—			924			—		—			37,790
Companhia Transudeste de Transmissão		20,505		3,095			—			—			—		—			23,600
Empresa de Comercialização de Energia Elétrica		20,154		26,679			—			(37,447	)		—		—			9,386
Companhia Transirapé de Transmissão		23,952		3,615			—			—			—		—			27,567
Efficientia		4,868		3,304			—			(1,171	)		—		—			7,001
Cemig Comercializadora de Energia Incentivada		1,867		559			—			(84	)		—		—			2,342
Companhia de Transmissão Centroeste de Minas		21,171		3,828			—			(5,644	)		—		—			19,355
Light		1,070,477		3,677			(5,442	)		—			—		—			1,068,712
Cemig Trading		28,635		41,873			—			(55,555	)		—		—			14,953
Axxiom Soluções Tecnológicas		19,264		(6,530	)		—			—			—		—			12,734
Taesa		1,582,633		126,862			—			(133,339	)		—		—			1,576,156
Cemig Overseas		20		—			—			—			121		—			141

		12,627,857		320,979			(43,665	)		(399,477	)		100,121		(254	)		12,605,561

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Consolidated	Dec. 31, 2016			Equity method gain (Statement of income)			Equity method gain (Other comprehensive income)			Dividends			Injections / acquisitions		Others			Sep. 30, 2017
Companhia Transleste de Transmissão		21,588			4,071			—			(1,265	)		—		—			24,394
Companhia Transudeste de Transmissão		20,505			3,095			—			—			—		—			23,600
Companhia Transirapé de Transmissão		23,952			3,615			—			—			—		—			27,567
Companhia de Transmissão Centroeste de Minas		21,171			3,828			—			(5,644	)		—		—			19,355
Light		1,070,477			3,677			(5,442	)		—			—		—			1,068,712
Axxiom Soluções Tecnológicas		19,264			(6,530	)		—			—			—		—			12,734
Lepsa		343,802			234			(1,876	)		—			—		(127	)		342,033
RME		340,063			128			(1,815	)		—			—		(127	)		338,249
Hidrelétrica Cachoeirão		50,411			8,950			—			(2,641	)		—		—			56,720
Guanhães Energia (1)		—			(2,037	)		—			—			86,280		(59,071	)		25,172
Hidrelétrica Pipoca		31,809			3,228			—			(1,284	)		—		—			33,753
Madeira Energia (Santo Antônio Plant)		643,890			(84,553	)		—			—			—		—			559,337
FIP Melbourne (Santo Antônio Plant)		677,182			(73,209	)		—			—			—		—			603,973
Lightger		41,543			2,280			—			(2,569	)		—		—			41,254
Baguari Energia		162,106			13,887			—			(30,274	)		—		—			145,719
Central Eólica Praias de Parajuru		63,307			(1,293	)		—			(406	)		—		—			61,608
Central Eólica Volta do Rio		81,228			(5,439	)		—			—			—		—			75,789
Central Eólica Praias de Morgado		59,586			(3,991	)		—			—			—		—			55,595
Aliança Norte (Belo Monte Plant)		527,498			(6,376	)		—			—			46,707		—			567,829
Amazônia Energia (Belo Monte Plant)		781,022			(6,965	)		—			—			76,686		—			850,743
Ativas Data Center (2)		17,741			(1,950	)		—			—			—		2,003			17,794
Taesa		1,582,633			126,862			—			(133,339	)		—		—			1,576,156
Renova		688,625			(50,048	)		(33,852	)		—			18,000		—			622,725
Usina Hidrelétrica Itaocara S.A.		2,782			(581	)		—			—			532		—			2,733
Aliança Geração		1,319,055			39,977			—			(51,576	)		—		—			1,307,456
Retiro Baixo		161,848			8,460			—			(11,182	)		—		—			159,126

Total of investments		8,753,088			(20,680	)		(42,985	)		(240,180	)		228,205		(57,322	)		8,620,126

Guanhães – uncovered liabilities of jointly-controlled entity (1)		(59,071	)		—			—			—			—		59,071			—

Total		8,694,017			(20,680	)		(42,985	)		(240,180	)		228,205		1,749			8,620,126

(1)	Transfer to uncovered liabilities.

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c)	Information from the subsidiaries, jointly-controlled and affiliated entities, not adjusted for the percentage represented by the Company’s ownership interest


Company	Number of shares		Sep. 30, 2018						Dec. 31, 2017
Company	Number of shares		Cemig interest %		Share capital		Equity		Cemig interest %		Share capital		Equity
Cemig Geração e Transmissão		2,896,785,358		100.00		2,600,000		4,799,070		100.00		1,837,710		4,793,832
Hidrelétrica Cachoeirão		35,000,000		49.00		35,000		101,946		49.00		35,000		118,280
Guanhães Energia		358,511,000		49.00		386,139		154,131		49.00		330,536		51,058
Hidrelétrica Pipoca		41,360,000		49.00		41,360		59,934		49.00		41,360		53,108
Retiro Baixo		222,850,000		49.90		222,850		282,155		49.90		222,850		257,880
Aliança Norte (Belo Monte Plant)		41,410,158,283		49.00		205,315		1,222,271		49.00		1,119,255		1,065,628
Amazônia Energia (1) (Belo Monte Plant)		1,281,030,446		74.50		1,323,660		1,332,127		74.50		1,229,600		1,163,160
Madeira Energia (Santo Antônio Plant)		11,343,088,100		18.13		10,310,341		4,139,327		18.13		9,546,672		5,327,114
Lightger		79,078,937		49.00		79,232		83,965		49.00		79,232		83,331
Baguari Energia (1)		26,157,300,278		69.39		186,573		241,223		69.39		186,573		213,895
Renova		417,197,244		36.23		2,919,019		292,852		36.23		2,919,019		779,808
Aliança Geração		1,291,582,500		45.00		1,291,488		1,990,320		45.00		1,291,488		1,857,905
Central Eólica Praias de Parajuru		70,560,000		49.00		70,560		70,560		49.00		70,560		88,976
Central Eólica Volta do Rio		117,230,000		49.00		117,230		88,238		49.00		117,230		115,694
Central Eólica Praias de Morgado		52,960,000		49.00		52,960		45,145		49.00		52,960		54,312
Usina Hidrelétrica Itaocara S.A.		19,390,114		49.00		19,390		8,071		49.00		11,102		7,549
Cemig Distribuição		2,359,113,452		100.00		2,771,998		5,084,333		100.00		2,771,998		3,737,310
Light		203,934,060		26.06		2,225,822		3,336,522		26.06		2,225,822		3,461,971
Cemig Telecom (2)		—		—		—		—		100.00		292,399		247,313
Ativas Data Center		456,540,718		19.60		182,063		96,386		—		—		—
Rosal Energia		46,944,467		100.00		46,944		117,053		100.00		46,944		106,897
Sá Carvalho		361,200,000		100.00		36,833		86,974		100.00		36,833		102,536
Gasmig		409,255,483		99.57		665,429		1,003,957		99.57		665,429		1,223,948
Horizontes Energia		39,257,563		100.00		39,258		46,406		100.00		39,258		53,165
Cemig Geração Distribuída (Usina Térmica Ipatinga)		174,281		100.00		174		4,500		100.00		174		4,932
Cemig PCH		35,952,000		100.00		35,952		89,810		100.00		35,952		96,944
Lepsa		1,379,839,905		100.00		406,341		439,898		100.00		406,341		455,861
RME		1,365,421,406		75.00		403,040		437,293		75.00		403,040		453,157
UTE Barreiro		16,902,000		100.00		16,902		18,260		100.00		16,902		17,982
Empresa de Comercialização de Energia Elétrica		486,000		100.00		486		13,709		100.00		486		18,403
Efficientia		6,051,994		100.00		6,052		17,040		100.00		6,052		7,084
Cemig Comercializadora de Energia Incentivada		1,000,000		100.00		1,000		2,579		100.00		1,000		2,004
Companhia de Transmissão Centroeste de Minas		28,000,000		51.00		28,000		38,240		51.00		28,000		40,361
Cemig Trading		1,000,000		100.00		1,000		14,566		100.00		1,000		29,206
Axxiom Soluções Tecnológicas		17,200,000		49.00		46,600		12,214		49.00		46,600		24,216
TAESA		1,033,496,721		21.68		3,042,034		4,514,276		21.68		3,042,034		4,346,746

(1)	Jointly-control under a Shareholders’ Agreement.

(2)	On March 31 ,2018 Cemig Telecom was merged into the Company.

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On September 30, 2018, the current liabilities of some jointly-controlled entities exceeded their current assets, as follows:

Madeira Energia S.A. (‘Mesa’): In the period ended September 30, 0218, Mesa reported a loss of R$ 1,187,787. The excess of current liabilities over current assets, equal to R$ 1,373,071, arises mainly from the balances of the accounts ‘Suppliers’ and ‘Loans and financings’. To resolve the situation of negative working capital, Mesa is renegotiating the flow of debt servicing payments with the BNDES and onlending banks, and the release of funds from the Reserve account, as a result of this renegotiation. The process of debt reprofiling is at an advanced stage of approval by the creditors and shareholders, and the remaining requirement for its conclusion is the definition of part of the corporate guarantees to be offered.

Renova Energia: In the period ended September 30, 2018, Renova Energia reported a loss of R$ 486,956, accumulated losses of R$ 2,681,546 and current liabilities in excess of current assets in the amount of R$ 172,078. Renova Energia is required to obtain capital to comply with the construction commitments of wind and solar generating plants.

The Management of Renova Energia believes that with the success of these measures, it will be possible to recover the economic and financial equilibrium, and liquidity.

The events or conditions described above indicate the existence of relevant uncertainty that may cast significant doubt on Renova Energia ability to continue as a going concern as of September 30, 2018.

The Company is committed to the plans of the investee’s management and has concluded that, at the present moment, there are no indicators of additional impairment need other than that already posted in the Quarterly Information of the Investee for the period ended September 30, 2018 – which has been recognized by the Company thru equity method. The Company will timely reflect any need for additional impairment of this investment.

Investment in the Santo Antônio hydroelectric plant, through Madeira Energia S.A. (‘Mesa’) and FIP Melbourne

The Company has an indirect investment, of 18.13%, in Madeira Energia S.A. (which holds an investment in Santo Antônio Energia S.A.), of R$ 897,536 on September 30, 2018 (R$ 1,117,265 on December 31, 2017).

Madeira Energia S.A. (‘Mesa’) and its subsidiary Santo Antônio Energia S.A. (‘Saesa’) are incurring construction costs related to the construction of the Santo Antônio hydroelectric plant. On September 30, 2018 the total PP&E and intangible assets constituted by these costs amounted to R$ 21,019,315 (Mesa, consolidated). According to financial projections prepared by its Management, these construction costs will be recovered through future revenues from operations as all the entity’s generation plants are currently under operation.

The effects of any changes to the current scenario will be reflected, appropriately, in the financial statements of the Company and its subsidiary Cemig GT.

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Capital increase in Madeira Energia S.A.

On August 28, 2018 an Extraordinary General Meeting (EGM) of Shareholders approved an increase in the capital of Mesa of up to R$ 972,512. Simultaneously the shareholders Furnas Centrais Elétricas S.A., Odebrecht Energia do Brasil S.A. and Caixa Fundo de Investimento em Participações Amazônia Energia subscribed and paid up in full the credits that they hold against Mesa, in a total of R$ 754,669, such that an amount of capital equal to R$ 217,843 remained, referring to the subscription right of the Company and of its indirect affiliate SAAG Investimento S.A.

On October 2, 2018, since Cemig GT and SAAG had not exercised their right to subscribe in the said capital increase, the shareholder Furnas Centrais Elétricas S.A. subscribed these remaining shares, paying them up in part in the amount of R$ 85,000. On the same date the Board of Directors of Mesa partially ratified the capital increase approved on August 28, 2018, in the amount of R$ 839,670. The total of funds subscribed will be allocated in full to subscription of shares in Santo Antônio Energia S.A. With the homologation of the increase, the share capital of Mesa was increased to R$ 10,386,341, and the Company then held: a direct equity interest of 8.44%; and an indirect equity interest of 6.86%.

In an EGM held on October 3, 2018, a further capital increase in Mesa of up to R$ 300,000 was approved. On that date Cemig GT, SAAG and Furnas Centrais Elétricas S.A. subscribed shares in the amount of R$ 25,320, R$ 26,068 and R$ 124,620, respectively, paid up in full on October 5, 2018. The other shareholders, thus did not exercise their right of first refusal in the capital increase that had been approved, the period for which expired on November 3, 2018. Thus, after homologation of this increase, the share capital of Mesa was R$ 10,562,350, and the Company’s direct and indirect equity interests in Mesa are now 8.63% and 7.05%, respectively.

The FID (Availability Factor)

Arbitration proceedings

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Investment in the Belo Monte Plant through Amazônia Energia S.A. and Aliança Norte

Amazônia Energia and Aliança Norte are Shareholders in Norte Energia S.A. (‘NESA’), which holds the concession to operate the Belo Monte Hydroelectric Plant, on the Xingu River, in the State of Pará. Through the jointly-controlled entities referred to above, Cemig GT owns an indirect equity interest in NESA of 11.74%.

NESA will still require significant funds for costs of organization, development and pre-operating costs, resulting in negative net working capital of R$ 2,791,888 as of September 30, 2018. The completion of the construction works for Belo Monte plant, and consequent generation of revenues, in turn, depend on the capacity of the investee to continue to comply with the schedule of works envisaged, as well as obtaining the necessary financial resources, either from its shareholders and / or from third parties.

On April 7, 2015, NESA was awarded a preliminary injunction ordering the regulator to “abstain, until hearing of the application for an injunction made in the original case, from applying to Appellant any penalties or sanctions in relation to the Belo Monte Hydroelectric Plant not starting operations on the date established in the original timetable for the project, including those specified in an Aneel Normative Resolution and in the Concession Contract for the Belo Monte Hydroelectric Plant” – ANEEL nº 595/2013 and its Concession contract 01/2010-MME. The legal advisers of NESA have classified the probability of loss as ‘possible’ and estimated the potential loss on September 30, 2018 to approximately R$ 632,000.

The effects of any changes in the current scenario will be reflected, appropriately, in the Company and its subsidiary Cemig GT’s financial statements.

Investment in Renova Energia S.A. (‘Renova’)

Negotiations relating to the Alto Sertão III wind farm complex

Risks related to compliance with laws and regulations

Non-binding proposal by Taesa for Centroeste

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Resolution of crossover assets of Cemig GT and Energimp

The transaction will result in 100% of the share capital of Parajuru and Volta do Rio being wholly owned by the subsidiary Cemig GT, and 100% of the shares in Morgado being wholly owned by Energimp.

This transaction to resolve crossover shareholding was approved by the competition authority, CADE, and is in the process of approval by the financing bank.

Internal procedures on risks related to compliance with law and regulations

Considering that the work is still preliminary, at present it is not possible to measure any effects of these analyses or any impacts on the Company’s Interim financial information for the period ended September 30, 2018.

16.

PROPERTY, PLANT AND EQUIPMENT


Consolidated	Sep. 30, 2018							Dec. 31, 2017
Consolidated	Historical cost		Accumulated depreciation			Net value		Historical cost		Accumulated depreciation			Net value
In service
Land		224,921		(15,525	)		209,396		224,924		(13,652	)		211,272
Reservoirs, dams and watercourses		3,282,064		(2,111,517	)		1,170,547		3,284,948		(2,051,372	)		1,233,576
Buildings, works and improvements		1,112,168		(794,331	)		317,837		1,116,990		(785,628	)		331,362
Machinery and equipment		2,246,233		(1,672,525	)		573,708		2,935,643		(2,062,092	)		873,551
Vehicles		31,636		(26,752	)		4,884		28,816		(25,711	)		3,105
Furniture and utensils		16,112		(12,488	)		3,624		16,109		(12,714	)		3,395

		6,913,134		(4,633,138	)		2,279,996		7,607,430		(4,951,169	)		2,656,261

In progress
Development Assets		129,604		—			129,604		106,049		—			106,049

Net property, plant and equipment		7,042,738		(4,633,138	)		2,409,600		7,713,479		(4,951,169	)		2,762,310


Holding Company	Sep. 30, 2018							Dec. 31, 2017
Holding Company	Historical cost		Accumulated depreciation			Net value		Historical cost		Accumulated depreciation			Net value
In service
Land		82		—			82		—		—			—
Buildings, works and improvements		408		(296	)		112		—		—			—
Machinery and equipment		5,840		(4,506	)		1,334		3,627		(2,289	)		1,338
Furniture and utensils		2,238		(1,860	)		378		657		(644	)		13

		8,568		(6,662	)		1,906		4,284		(2,933	)		1,351

In progress
Development Assets		459		—			459		459		—			459

Net property, plant and equipment		9,027		(6,662	)		2,365		4,743		(2,933	)		1,810

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The changes in PP&E are as follows:


Consolidated	Balance on Dec. 31, 2017		Addition		Disposals			Depreciation			Transfer to Held for sale			Transfers / capitalizations			Balance on Sep. 30, 2018
In service
Land		211,272		—		(3	)		(1,873	)		—						209,396
Reservoirs, dams and watercourses		1,233,576		—		(2,046	)		(61,129	)		—			146			1,170,547
Buildings, works and improvements		331,362		—		(237	)		(14,031	)		—			743			317,837
Machinery and equipment		873,551		—		(8,673	)		(55,119	)		(255,758	)		19,707			573,708
Vehicles		3,105		—		—			(1,050	)		—			2,829			4,884
Furniture and utensils		3,395		—		—			(268	)		—			497			3,624

		2,656,261		—		(10,959	)		(133,470	)		(255,758	)		23,922			2,279,996

In progress		106,049		58,292		(1,152	)		—			—			(33,585	)		129,604

Net property, plant and equipment		2,762,310		58,292		(12,111	)		(133,470	)		(255,758	)		(9,663	)		2,409,600


Consolidated	Balance on Dec. 31, 2016		Addition		Jaguara, Miranda and Volta Grande Plants (1)			Disposals			Depreciation			Transfers / capitalizations			Balance on Sep. 30, 2017
In service
Land		278,650		—		(61,287	)		—			(5,408	)		—			211,955
Reservoirs, dams, and watercourses		1,761,013		—		(440,923	)		300			(64,913	)		371			1,255,848
Buildings, works, and improvements		418,480		39		(68,971	)		—			(14,546	)		773			335,775
Machinery and equipment		1,171,189		253		(297,471	)		(5,343	)		(69,864	)		71,726			870,490
Vehicles		4,230		—		—			—			(845	)		—			3,385
Furniture and utensils		3,408		58		—			—			(305	)		—			3,161

		3,636,970		350		(868,652	)		(5,043	)		(155,881	)		72,870			2,680,614

In progress		138,106		53,533		(130	)		(2,062	)		—			(72,870	)		116,577

Net property, plant and equipment		3,775,076		53,883		(868,782	)		(7,105	)		(155,881	)		—			2,797,191


Holding Company	Balance on Dec. 31, 2017		Merger of Telecom (2)		Transfer to Held for sale			Transfers (2)			Depreciation			Write-off			Balance on Sep. 30, 2018
In service
Land		—		82		—			—			—			—			82
Buildings, works, improvements		—		116		—			—			(4	)		—			112
Machinery and equipment		1,338		262,137		(255,758	)		—			(5,916	)		(467	)		1,334
Furniture and utensils		13		406		—			—			(41	)		—			378

		1,351		262,741		(255,758	)		—			(5,961	)		(467	)		1,906

In progress		459		9,025		—			(9,025	)		—			—			459

Net property, plant and equipment		1,810		271,766		(255,758	)		(9,025	)		(5,961	)		(467	)		2,365

(1)	Transferred to Generation concession assets, in relation to the Jaguara, Miranda and Volta Grande Plants in the amount of R$ 799,117 and to Concession financial assets, in relation to the Volta Grande Plant, in the amount of R$ 70,252.

(2)	Related to the merged of its subsidiary Cemig Telecom. The amount of R$ 9,025 was transferred to Inventories. See Note 1.

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The average annual depreciation rate for the Company and its subsidiaries for the nine-month period ended September 30, 2018, is 3.22%. Depreciation rates, which take into consideration the expected useful life of the assets, are revised annually by Management.

Consortium


Holding Company and Consolidated	Interest in power output, %		Average annual depreciation rate %		Sep. 30, 2018			Dec. 31, 2017
In service
Queimado plant		82.50		4.03		217,210			217,109
Accumulated depreciation		—		—		(97,202	)		(90,649	)

Total in operation						120,008			126,460

In progress
Queimado plant		82.50		—		291			340

Total in construction						291			340

17.

INTANGIBLE ASSETS

Composition of the balance on September 30, 2018 and on December 31, 2017:


Consolidated	Sep. 30, 2018							Dec. 31, 2017
Consolidated	Historical cost		Accumulated amortization			Residual value		Historical cost		Accumulated amortization			Residual value
In service
Useful life defined
Temporary easements		11,749		(2,495	)		9,254		11,749		(1,990	)		9,759
Paid concession		19,169		(11,761	)		7,408		19,169		(11,251	)		7,918
Assets of concession		18,321,484		(7,835,802	)		10,485,682		17,837,687		(7,402,296	)		10,435,391
Others		76,009		(63,613	)		12,396		81,721		(64,533	)		17,188

		18,428,411		(7,913,671	)		10,514,740		17,950,326		(7,480,070	)		10,470,256
In progress		683,346		—			683,346		685,672		—			685,672

Net intangible assets		19,111,757		(7,913,671	)		11,198,086		18,635,998		(7,480,070	)		11,155,928

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Holding Company	Sep. 30, 2018							Dec. 31, 2017
Holding Company	Historical cost		Accumulated amortization			Residual value		Historical cost		Accumulated amortization			Residual value
In service
Useful life defined
Rights of software		12,405		(8,639	)		3,766		3,789		(3,748	)		41
Brands and patents		239		(8	)		231		9		(7	)		2
		12,644		(8,647	)		3,997		3,798		(3,755	)		43
In progress		2,496		—			2,496		2,415		—			2,415

Net intangible assets		15,140		(8,647	)		6,493		6,213		(3,755	)		2,458

Changes in Intangible assets:


Consolidated	Balance on Dec. 31, 2017		Addition		Disposals			Amortization			Transfers to Held for sale			Transfer (1)			Other Transfers		Balance on Sep. 30, 2018
In service
Useful life defined
Temporary easements		9,759		—		—			(505	)		—			—			—		9,254
Paid concession		7,918		—		—			(510	)		—			—			—		7,408
Assets of concession		10,435,391		—		(17,326	)		(495,152	)		—			562,422			347		10,485,682
Others		17,188		1,064		(114	)		(3,967	)		(6,947	)		5,172			—		12,396

		10,470,256		1,064		(17,440	)		(500,134	)		(6,947	)		567,594			347		10,514,740
In progress		685,672		585,914		(1,548	)		—			—			(586,692	)		—		683,346

Net intangible assets		11,155,928		586,978		(18,988	)		(500,134	)		(6,947	)		(19,098	)		347		11,198,086

(1)	The residual balance of the transfers refers to the balances transferred to financial assets.


Consolidated	Balance on Dec. 31, 2016		Addition		Special obligations – write- down (2)		Jaguara, Volta Grande and Miranda plants			Disposals			Amortization			Transfer (1)			Balance on Sep. 30, 2017
In service
Useful life defined
Temporary easements		10,434		—		—		—			—			(505	)		—			9,929
Paid concession		8,597		—		—		—			—			(510	)		—			8,087
Assets of concession		9,247,923		—		17,069		—			(5,878	)		(455,379	)		1,147,413			9,951,148
Others		17,430		—		—		(80	)		—			(4,508	)		2,497			15,339

		9,284,384		—		17,069		(80	)		(5,878	)		(460,902	)		1,149,910			9,984,503

In progress		1,535,296		747,868		—		—			(6,820	)		—			(1,203,162	)		1,073,182

Net intangible assets		10,819,680		747,868		17,069		(80	)		(12,698	)		(460,902	)		(53,252	)		11,057,685

(1)	The residual balance of the transfers refers to the balances transferred to financial assets.

(2)	The write-down of a Special Obligation arises for restitution of amounts calculated in the final settlement of Financing and Subsidy Contracts for the Luz Para Todos (‘Light for All’) program, with funds from the CDE account, and return of funds related to the Global Reversion Reserve (RGR).

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Holding Company	Balance on Dec. 31, 2017		Merger of Telecom (1)		Transfers to Held for sale			Transfers			Addition		Amortization			Balance on Sep. 30, 2018
In service
Useful life defined
Rights of software		41		11,716		(6,947	)		(130	)		—		(914	)		3,766
Brands and patents		2		—		—			231			—		(2	)		231

		43		11,716		(6,947	)		101					(916	)		3,997

In progress		2,415		—		—			(101	)		182		—			2,496

Net intangible assets		2,458		11,716		(6,947	)		—			182		(916	)		6,493

(1)	On March 31, Cemig Telecom was merged into the Company. For more details, please see Note 1.

The intangible asset easements, concessions payable, assets of concession, and others, are amortizable by the straight-line method, taking into account the consumption pattern of these rights. The Company and its subsidiaries have not identified any evidence of impairment of its intangible assets. The Company and its subsidiaries have no intangible assets with non-defined useful life. The amount of additions on September 30, 2018 includes R$ 23,508 (R$ 56,851 in the same period of 2017) of capitalized borrowing costs, as presented in Note 20.

The annual average amortization rate is 4.09% in the nine-month period ended September 30, 2018. The main annual amortization rate reflects the expected useful life of assets and pattern of their consumption by the Management.

18.

SUPPLIERS


	Consolidated
	Sep. 30, 2018		Dec. 31, 2017
Energy on spot market – CCEE		570,999		468,216
Charges for use of energy network		125,363		153,146
Energy purchased for resale		1,022,499		870,654
Itaipu Binational		295,951		240,220
Gas purchased for resale		120,638		186,401
Materials and services		309,255		424,120

		2,444,705		2,342,757

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19.

TAXES PAYABLE, INCOME TAX AND SOCIAL CONTRIBUTION TAX AND AMOUNTS TO BE REIMBURSED TO CUSTOMER S

a)	Taxes payable and amounts to be reimbursed to customers


	Consolidated				Holding Company
	Sep. 30, 2018 (Restated)		Dec. 31, 2017		Sep. 30, 2018		Dec. 31, 2017
Current
ICMS (VAT) (I)		206,581		496,916		3,875		—
Cofins		130,644		126,065		738		2,484
Pasep		28,442		27,154		141		484
Social security contributions		19,922		19,522		2,224		1,913
Others		21,338		34,915		1,377		960

		406,927		704,572		8,355		5,841
Non-current
Cofins		24,804		24,216		—		—
Pasep		4,037		3,983		—		—

		28,841		28,199		—		—

		435,768		732,771		8,355		5,841

Amounts to be reimbursed to customers
Non-current
Pasep and Cofins (II)		1,114,802		1,087,230		—		—

		1,114,802		1,087,230		—		—

(I)	The Tax Amnesty Program (PRCT).

(II)

On October 2017, the Federal Supreme Court (STF) published its Joint Judgment on the Extraordinary Appeal, on the basis of setting a global precedent, in favor of the argument of the subsidiaries. Based on the opinion of its legal advisers, the Company wrote down the liabilities relating to these contributions and recorded a potential liability related to the reimbursement to its customers. On September 30, 2018, the liability to its customers was R$ 1,114,802 (R$ 1,087,230 on December 31, 2017), which is equivalent to the updated amount of the escrow deposits already made which total R$ 1,139,292 (R$ 1,110,376 on December 31, 2017), net of the Pasep and Cofins incident on its revenue from updating, in the amount of R$ 24,490 (R$ 23,146 on December 31, 2017). This liability was recorded considering that the subsidiary passes to its Customers the tax effects incident upon its electricity bill, maintaining the neutrality of tariffs. The restitution to Customers will depend upon the court escrow deposit being lifted and a decision by Aneel on the mechanisms to be adopted. The net effect arising from the recognition of this matter on the net income for the year 2017 was null.

b)	Income tax and Social Contribution tax


	Consolidated
	Sep. 30, 2018		Dec. 31, 2017
Current
Income tax		70,609		88,152
Social Contribution tax		24,986		27,144

		95,595		115,296

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20.

LOANS, FINANCINGS AND DEBENTURES


							Consolidated
							Sep. 30, 2018									Dec. 31, 2017
Financing source	Principal maturity		Annual financial cost		Currency		Current			Non-current			Total			Total
FOREIGN CURRENCY
Banco do Brasil: Various Bonds (1) (5)		2024		Various		US$		4,196			28,435			32,631			22,933
Eurobonds (2)		2024		9.25%		USD		204,879			6,005,851			6,210,730			3,333,149
KfW (2)		2019		1.78%		EURO		2,702			—			2,702			4,383
(-) Transaction costs								(83	)		(21,877	)		(21,960	)		(15,400	)
(+/-) Funds advanced (3)								101			(35,341	)		(35,240	)		(47,690	)

Debt in foreign currency								211,795			5,977,068			6,188,863			3,297,375
BRAZILIAN CURRENCY
Banco do Brasil S.A. (2)		2018		140.00% of CDI Rate		R$		—			—			—			742,364
Banco do Brasil S.A. (5)		2022		146.50% of CDI		R$		19,402			483,125			502,527			500,193
Caixa Econômica Federal (5)		2018		119.00% of CDI		R$		—			—			—			8,346
Caixa Econômica Federal (5)		2022		146.50% of CDI		R$		22,239			604,394			626,633			626,667
Eletrobras (5)		2023		UFIR + 6.00 to 8.00%		R$		14,184			23,460			37,644			49,789
Large customers (5)		2024		IGP-DI + 6.00%		R$		2,476			2,380			4,856			4,304
FINEP (2)		2018		TJLP + 5.00% and TJLP + 8.00%		R$		—			—			—			2,359
Consórcio Pipoca (2)		2018		IPCA		R$		185			—			185			185
Banco da Amazônia S.A. (2)		2018		CDI + 1.90%		R$		129,115			—			129,115			121,470
Sonda (4)		2021		110.00% of CDI		R$		—			44,773			44,773			41,993
9^th Note issue—single series (5)		2019		151.00% of CDI		R$		15,876			400,000			415,876			—
(-) FIC Pampulha fund—securities of subsidiary companies (7)								—			(16,564	)		(16,564	)		—
(-) Transaction costs								(435	)		(14,837	)		(15,272	)		(26,435	)
Debt in Brazilian currency								203,042			1,526,731			1,729,773			2,071,235

Total of loans and financings								414,837			7,503,799			7,918,636			5,368,610

Debentures -3rd Issue -2nd Series (2)		2019		IPCA + 6.00%		R$		153,125			—			153,125			301,065
Debentures -3rd Issue -3rd Series (2)		2022		IPCA + 6.20%		R$		37,782			989,360			1,027,142			1,010,202
Debentures—5ª Issue—single series (2)		2018		CDI + 1.70%		R$		746,171			—			746,171			703,021
Debentures -6th Issue- 1st series (2)		2018		CDI + 1.60%		R$		—			—			—			507,692
Debentures -6th Issue—2nd series (2)		2020		IPCA + 8.07%		R$		16,502			15,976			32,478			32,093
Debentures -7th Issue—single series (2)		2021		140.00% of CDI		R$		313,688			842,668			1,156,356			1,683,557
Debentures—3rdIssue—1st series (5)		2018		CDI + 0.69%		R$		—			—			—			447,114
Debentures—3rd Issue—2nd series (5)		2021		IPCA + 4.70%		R$		547,124			1,021,015			1,568,139			1,537,147
Debentures—3rd Issue—3rd series (5)		2025		IPCA + 5.10%		R$		28,620			909,292			937,912			920,197
Debentures -4th Issue—single series (5)		2018		CDI + 4.05%		R$		21,602			—			21,602			20,008
Debentures -5th Issue—single series (5)		2022		146.50% of CDI		R$		58,269			1,521,846			1,580,115			1,576,220
Debentures (6)		2018		CDI + 1.60%		R$		—			—			—			100,328
Debentures (6)		2018		CDI + 0.74%		R$		—			—			—			33,350
Debentures (6)		2022		TJLP + 1.82% (75%), Selic + 1.82% (25%)		R$		33,037			99,341			132,378			155,377
Debentures (6)		2019		116.50% of CDI		R$		86			50,000			50,086			50,330
Debentures (6)		2023		CDI + 1.50%		R$		20,000			80,000			100,000			—
Debentures—2^nd Issue, single series (4)		2019		128.50% of CDI		R$		13,202			—			13,202			26,552
(-) FIC Pampulha: Securities of subsidiary companies (7)								(3,332	)		—			(3,332	)		(25,492	)
(-) Transaction costs								(8,558	)		(31,397	)		(39,955	)		(49,674	)

Total, debentures								1,977,318			5,498,101			7,475,419			9,029,087

Overall total								2,392,155			13,001,900			15,394,055			14,397,697

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Financing source						Holding Company
						Sep. 30, 2018									Dec. 31, 2017
	Principal maturity		Annual financial cost		Currency	Current			Non-current			Total			Total
BRAZILIAN CURRENCY
Sonda (3)		2021		110.00% of CDI	R$		—			44,773			44,773			—
(-) Transaction costs							—			(487	)		(487	)		-—

Total of loans and financings							—			44,286			44,286			—

Debentures – 2nd Issue, single series (3)		2019		128.50% of CDI	R$		13,202			—			13,202			—
(-) Transaction costs							(114	)		—			(114	)		—

Total, debentures							13,088			—			13,088			—

Overall total Holding Company							13,088			44,286			57,374			—

(1)	Net balance of the Restructured Debt comprising bonds at par and discounted, with balance of R$ 196,647, less the amounts given as Deposits in guarantee, with balance of R$ 136,469.Interest rates vary – from 2 to 8% p.a.; six-month Libor plus spread of 0.81% to 0.88% p.a.

(2)	Cemig Geração e Transmissão.

(3)	Funds advanced to reach the yield to maturity agreed in the Eurobonds contract.

(4)	Cemig holding company. Arising from merger of Cemig Telecom.

(5)	Cemig Distribuição.

(6)

Gasmig.

(7)	FIC Pampulha has financial investments in securities issued by subsidiaries of the Company. For more information on this fund, see Note 28.

The debentures issued by the subsidiaries are not convertible; there are no agreements for renegotiation, nor debentures held in treasury.

There is an early maturity clause for cross-default in the event of non-payment, by Company or Cemig GT, of any pecuniary obligation with individual or aggregate value greater than R$ 50 million (“cross default”).

Funding raised

Financing source

Date of
signature

Principal
maturity

Annual
financial cost

R$ ‘000

Foreign currency

Eurobonds (1)

July 2018

2024

9.25%

1,946,269

(-) Transaction costs

(7,876)

(+/-) Funds advanced (2)

9,625

Total funding raised in foreign currency

1,948,018

Brazilian currency

Promissory Notes – 9^th Issue – Single series (3)

May 2018

2019

151% of CDI

400,000

Debentures (4)

August 2018

2023

CDI + 1,50%

100,000

(-) Transaction costs

(4,140)

Total funding raised in Brazilian currency

495,860

Total funding raised

2,443,878

(1)	In July 2018 the company completed settlement of its second tranche of the Eurobond originally issued on December 5, 2017. This second tranche was for US$ 500 million, corresponding to R$ 1.946 billion, with 6-monthly coupon of 9.25% p.a., and principal maturity in December 2024.

(2)	Funds advanced to reach the yield to maturity agreed in the Eurobonds contract.

(3)	In May 2018 Cemig D made its 9th Issue of Notes, with maturity of 18 months, and remuneration of 151% of the CDI rate, for payment bullet on October 24, 2019. Net proceeds will be allocated to replenishment of cash position and working capital.

(4)	In August 2018 Gasmig completed its 7th debenture issue, with maturity at 5 years, remunerated at CDI + 1.50%, and annual amortization from August 2019. The funds will be used to replenish the cash position.

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Guarantees

The guarantees of the debtor balance on loans and financings, on September 30, 2018, were as follows:


	Jan to Sep 2018
Promissory notes and sureties		10,764,465
Receivables		2,902,058
Shares		1,567,802
Without guarantee		159,730

TOTAL		15,394,055

The composition of loans, financings and debentures, by currency and indexers, with the respective amortization, is as follows:


Consolidated	2018			2019			2020			2021			2022			2023			2024			2025			Total
Currency
Euros		2,462			240			—			—			—			—			—			—			2,702
US dollar		209,075			—			—			—			—			—			6,034,286			—			6,243,361

Total, currency-denominated		211,537			240			—			—			—			—			6,034,286			—			6,246,063
Indexers
IPCA (1)		116,808			666,530			845,353			844,616			563,705			227,323			227,323			227,323			3,718,981
UFIR/RGR (2)		4,474			12,910			11,209			3,407			3,265			2,379			—			—			37,644
CDI (3)		959,272			1,025,428			766,790			1,176,021			1,452,145			20,000			—			—			5,399,656
URTJ/TJLP (4)		7,552			22,967			23,111			22,777			22,875			—			—			—			99,282
IGP-DI (5)		2,079			437			437			517			554			554			278			—			4,856

Total, governed by Indexers		1,090,185			1,728,272			1,646,900			2,047,338			2,042,544			250,256			227,601			227,323			9,260,419
(-) Transaction costs		(959	)		(14,173	)		(12,564	)		(15,849	)		(11,228	)		(179	)		(22,056	)		(179	)		(77,187	)
(+/-) Funds advanced		101			—			—			—			—			—			(35,341	)		—			(35,240	)
Overall total		1,300,864			1,714,339			1,634,336			2,031,489			2,031,316			250,077			6,204,490			227,144			15,394,055


Holding Company	2018			2019			2020		2021			2022		2023		2024		2025		Total
Indexers
CDI (3)		5,669			7,533			—		44,773			—		—		—		—		57,975
Total, governed by Indexers		5,669			7,533			—		44,773			—		—		—		—		57,975

(-) Transaction costs		(49	)		(65	)		—		(487	)		—		—		—		—		(601	)

Overall total		5,620			7,468			—		44,286			—		—		—		—		57,374

(1)	Expanded National Customer Price (IPCA) Index.

(2)	Fiscal Reference Unit (Ufir / RGR).

(3)	CDI: Interbank Rate for Certificates of Deposit.

(4)	URTJ: Interest rate reference unit.

(5)	IGP-DI (‘General – Domestic Availability’) Price Index.

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The principal currencies and Indexers used for monetary updating of loans and financings had the following variations:


Currency	Accumulated change in 09/30/2018, %		Accumulated change in 09/30/2017, %			Indexer	Accumulated change in 09/30/2018, %			Accumulated change in 09/30/2017, %
US dollar		21.04		(2.80	)	IPCA		3.34			1.78
Euro		17.26		8.86		CDI		4.81			8.03
						TJLP		(6.29	)		(6.67	)

The changes in loans, financings and debentures were as follows:


	Consolidated			Holding Company
Balance on December 31, 2016		15,179,280			—
Loans and financings obtained		60,870			—
Transaction costs		(762	)		—

Financings obtained net of transaction costs		60,108			—
Monetary variation		74,656			—
Exchange rate variation		(823	)
Financial charges provisioned		1,217,735			—
Amortization of transaction costs		41,090			—
Financial charges paid		(998,967	)		—
Amortization of financings		(1,506,459	)		—

Subtotal		14,066,620			—

(–) FIC Pampulha: Securities of subsidiary companies		(11,045	)		—

Balance on September 30, 2017		14,055,575			—

Balance on December 31, 2017		14,397,697			—
Balance of loans arising from the merged of Cemig Telecom		—			65,032

Loans and financings obtained		2,446,269			—
Transaction costs		(12,016	)		—
Funds advanced		9,625			—

Financings obtained net of transaction costs		2,443,878			65,032
Monetary variation		110,031			—
Exchange rate variation		781,297			—
Financial charges provisioned		967,940			2,260
Amortization of transaction costs		26,323			285
Financial charges paid		(834,053	)		(787	)
Amortization of financings		(2,504,654	)		(9,416	)

Subtotal		15,388,459			57,374

(–) FIC Pampulha: Securities of subsidiary companies		5,596			—
Balance on September 30, 2018		15,394,055			57,374

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Borrowing costs, capitalized

The subsidiaries Cemig D and Gasmig transferred to Intangible assets the costs of loans and financings linked to working in progress, as follows:


	Jan to Sep 2018			Jan to Sep 2017
Costs of loans and financings		967,940			1,217,735
Financing costs on Intangible assets (1)		(23,508	)		(56,851	)

Net effect in Net income or loss		944,432			1,160,884

(1)	The average rate of capitalization was 9.60% p.a. in 2018 (15.03% p.a. in 2017).

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Restrictive covenants

The Company has contracts with covenants linked to financial index, as follows:


Title	Parameter	Ratio required – Issuer	Ratio required – Cemig (Guarantor)	Compliance required
7th Debenture Issue Cemig GT (1)	Net debt / (Ebitda + Dividends received)	The following, or less: 5.5 in 2017 5.0 in 2018 4.5 in 2019 3.0 in 2020 2.5 in 2021	The following, or less: 4.5 in 2017 4.25 in 2018 3.5 in 2019 3.0 in 2020 2.5 in 2021	Half-yearly
Eurobonds Cemig GT (2)	Net debt / Ebitda adjusted for the Covenant	The following, or less: 5.5 on December 31, 2017 5.5 on June 30, 2018 5.0 on December 31, 2018 5.0 on June 30, 2019 4.5 on December 31, 2019 4.5 on June 30, 2020 3.0 on December 31, 2020 3.0 on June 30, 2021 2.5 on / after Dec. 31, 2021	The following, or less: 5.0 on December 31, 2017 5.0 on June 30, 2018 4.25 on December 31, 2018 4.25 on June 30, 2019 3.5 on December 31, 2019 3.5 on June 30, 2020 3.0 on December 31, 2020 3.0 on June 30, 2021 3.0 on and after Dec. 31, 2021	Half-yearly
Bank Credit Notes of Banco do Brasil and Caixa Econômica Federal; and 5th Debenture Issue CEMIG D (3)	Net debt / (Ebitda + Dividends received)	The following, or less: 7.5 on December 31, 2017 7.5 on June 30, 2018 4.5 on December 31, 2018 3.8 on June 30, 2019 3.8 on December 31, 2019 3.3 on June 30, 2020 3.3 on December 31, 2020 3.3 on June 30, 2021 3.3 on /after Dec. 31, 2021	The following, or less: 4.5 on December 31, 2017 4.5 on June 30, 2018 4.25 on December 31, 2018 4.25 on June 30, 2019 3.5 on December 31, 2019 3.5 on June 30, 2020 3.0 on December 31, 2020 3.0 on June 30, 2021 2.5 on / after Dec. 31, 2021	Half-yearly
	Current liquidity	0.6x on/after Dec. 31, 2017	0.6x on/ after Dec. 31, 2027	Half-yearly
Gasmig – Debentures (4)	Overall indebtedness (Total liabilities/Total assets)	Less than 0.6	—	Annual
	Ebitda / Debt servicing	1.3 or more	—	Annual
	Ebitda / Net finance income (expenses)	2.5 or more	—	Annual
	Net debt / Ebitda	2.5 or less	—	Annual
9th Promissory Note Issue Cemig D	Net debt / (Ebitda + dividends received) Current liquidity	The following, or less: 7.5 on June 30, 2018 4.5 on December 31, 2018 3.8 on June 30, /2019 The following, or more: 0.6x on and after June 30, 2018	The following, or less: 4.5 on June 30, 2018 4.25 on December 31, 2018 3.25 on June 30, 2019 The following, or more: 0.6x on and after June 30, 2018	Half-yearly

(1)	7^th Issue of Debentures by Cemig GT, in December 2016, of R$ 2,240 million.

(2)

In the event that ‘maintenance financial covenants’ are exceeded at any time, the interest rate will automatically be increased by 2% p.a. as long as the excess continues. There is also an obligation to comply with a ‘maintenance’ covenant – which requires that the debt in Cemig Consolidated (as per financial statements), shall have asset guarantee for debt of 1.75x Ebitda (2.0 x in December 2017); and a ‘damage’ covenant, requiring real guarantee for debt in Cemig GT of 1.5x Ebitda.

(3)	The Bank Credit Notes of Banco do Brasil and Caixa Econômica Federal were amended in December 2017, to include requirement for 6-monthly compliance with covenants as described above. The 5^th Debenture Issue included demand ability of compliance with the Covenants.

(4)

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Eurobonds – Payment limit temporary exceeded

On October 10, 2018 Cemig’s wholly-owned subsidiary Cemig GT, in the scope of its Eurobond issuance, notified the issuer’s trustee that the permitted threshold level of investments by Cemig GT under the issue’s Limitation on Restricted Payments clause has, exceptionally, been momentarily exceeded, and that this excess would be reversed if requested within the cure period established in the Issue Deed.

The situation is due to a loan made by Cemig GT to Cemig D, on September 18, 2018, in the amount of R$ 630 million, to be repaid in two installments, in November and December 2018. The payment of the first installment (in November) will result in Cemig GT being compliant with the Limitation on Restricted Payments clause. As soon as the payment is made, Cemig GT will use the funds to pre-pay currently existing debt, accelerating the process of deleverage currently in progress.

To make the loan, Cemig GT used funds from the reimbursement, of R$ 1.14 billion, received on August 31, 2018, for the value of assets not previously reimbursed or depreciated relating to the Basic Projects of the São Simão and Miranda hydroelectric plants.

On September 30, 2018 the Company remains compliant with all the other covenants, especially in relation to the ratio Net debt / Ebitda.

21.

REGULATORY CHARGES


	Consolidated
	Sep. 30, 2018 (Restated)		Dec. 31, 2017
Liabilities
Global Reversion Reserve (RGR)		27,172		36,591
Energy Development Account (CDE)		123,023		206,022
Aneel inspection charge		2,329		2,154
Energy Efficiency		280,073		223,767
Research and development		209,792		233,398
Energy System Expansion Research		2,123		2,696
National Scientific and Technological Development Fund		3,918		5,066
Proinfa – Alternative Energy Program		7,004		6,612
Royalties for use of water resources		5,693		15,172
Emergency capacity charge		30,994		30,996
Others		5,855		16

		697,976		762,490

Current liabilities		418,594		512,673
Non-current liabilities		279,382		249,817

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22.

POST-RETIREMENT OBLIGATIONS

Changes in net liabilities were as follows:


Holding Company	Pension plans and retirement supplement plans			Health Plan			Dental Plan			Life insurance			Total
Net liabilities on December 31, 2016		257,933			95,655			2,452			41,424			397,464

Expense recognized in Statement of income		20,338			7,828			207			3,490			31,863
Contributions paid		(5,838	)		(4,898	)		(118	)		(278	)		(11,132	)

Net liabilities on September 30, 2017		272,433			98,585			2,541			44,636			418,195

Net liabilities on December 31, 2017		333,484			111,568			2,659			11,786			459,497

Expense recognized in Statement of income		23,750			8,080			193			961			32,984
Contributions paid		(6,505	)		(4,998	)		(116	)		(254	)		(11,873	)

Net liabilities on September 30, 2018		350,729			114,650			2,736			12,493			480,608

											Sep. 30, 2018			Dec. 31, 2017

Current liabilities											13,097			12,974
Non-current liabilities											467,511			446,523


Consolidated	Pension plans and retirement supplement plans			Health Plan			Dental Plan			Life insurance			Total
Net liabilities on December 31, 2016		1,679,154			1,710,787			37,549			813,921			4,241,411

Expense recognized in Statement of income		130,471			141,947			3,128			66,472			342,018
Contributions paid		(118,638	)		(76,868	)		(1,816	)		(5,768	)		(203,090	)

Net liabilities on September 30, 2017		1,690,987			1,775,866			38,861			874,625			4,380,339

Net liabilities on December 31, 2017		2,068,355			1,809,441			38,505			269,880			4,186,181

Expense recognized in Statement of income		143,951			136,741			2,859			20,281			303,832
Contributions paid		(132,218	)		(81,622	)		(1,849	)		(6,820	)		(222,509	)

Net liabilities on September 30, 2018		2,080,088			1,864,560			39,515			283,341			4,267,504


										Sep. 30, 2018			Dec. 31, 2017
Current liabilities											243,057			231,894
Non-current liabilities											4,024,447			3,954,287

The amounts recorded in current liabilities refer to the contributions to be made by Cemig and its subsidiaries in the next 12 months to amortize the post-retirement obligations.

The amounts reported as ‘Expense recognized in the statement of income refer to the costs of post-retirement obligations, totaling R$ 250,328 on September 30, 2018 (R$ 293,617 in the same period of 2017), plus the finance expenses and monetary updating on the debt with Forluz, in the amounts of R$ 53,504 on September 30, 2018 (R$ 48,401 on September 30, 2017).

Debt agreed with the pension fund (Forluz)

On September 30, 2018 the Company had an obligation recorded for past actuarial deficits relating to the pension fund in the amount of R$ 672,083 (R$ 720,498 on December 31, 2017). This amount has been recognized as an obligation payable by the Company, and is being amortized up to June 2024, through monthly installments calculated by the system of constant installments (known as the ‘Price’ table), and adjusted by the IPCA (Expanded National Customer Price) inflation index (published by the Brazilian Geography and Statistics Institute – IBGE) plus 6% per year. Because the Company is required to pay this debt even if Forluz has a surplus, the Company and its subsidiaries maintain the record of the debt in full, and the effects of monetary variation and interest are recorded in the statement of income as finance expense.

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Agreement to cover the deficit on Forluz Pension Plan ‘A’

Forluz and the sponsors Cemig, Cemig GT and Cemig D signed Debt Assumption Instruments to cover the Deficit of Plan A for the years 2015 and 2016. On September 30, 2018 the total amount payable by Cemig and its subsidiaries Cemig D and Cemig GT as a result of the deficit found in Plan A is R$ 380,022 (R$ 283,291 on December 31, 2017) with monthly amortizations up to 2031, calculated by the system of constant installments (known as the ‘Price Table’). Remuneratory interest applicable to the outstanding balance is 6% p.a., plus the effect of the IPCA (Expanded National Customer Price) index published by the IBGE. If the plan reaches actuarial surplus before the full period of amortization of the contracts, the Company and its subsidiaries will be exempted from payment of the remaining installments and the contracts will be extinguished.

23.

PROVISIONS

Actions in which the Company is defendant


	Consolidated
	Dec. 31, 2017		Additions		Reversals			Settled			Sep. 30, 2018
Labor		473,874		73,200		(39,590	)		(26,533	)		480,951
Civil
Consumer relations		18,632		14,227		(362	)		(12,821	)		19,676
Other civil actions		43,105		7,685		(12,765	)		(7,562	)		30,463

		61,737		21,912		(13,127	)		(20,383	)		50,139
Tax		57,048		524		(6,075	)		(328	)		51,169
Environmental		45		1,146		—			(27	)		1,164
Regulatory		39,812		14,048		—			(1,295	)		52,565
Other		45,597		6,436		(3,778	)		(790	)		47,465

Total		678,113		117,266		(62,570	)		(49,356	)		683,453


	Consolidated
	Dec. 31, 2016		Additions		Reversals			Settled			Sep. 30, 2017
Labor		349,273		191,670		(3,657	)		(47,727	)		489,559
Civil
Consumer relations		14,741		11,856		(1,320	)		(11,855	)		13,422
Other civil actions		40,443		7,844		(238	)		(4,274	)		43,775

		55,184		19,700		(1,558	)		(16,129	)		57,197
Tax		69,922		6,033		(3,632	)		(588	)		71,735
Environmental		39		4		—			—			43
Regulatory		43,100		2,833		(13,811	)		(766	)		31,356
Corporate		239,445		—		(239,445	)		—			—
Other		58,054		8,863		—			(2,834	)		64,083

Total		815,017		229,103		(262,103	)		(68,044	)		713,973

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	Holding Company
	Dec. 31, 2017		Merger of Telecom		Additions		Reversals			Settled			Sep. 30, 2018
Labor		38,603		22		4,101		(3,402	)		(4,101	)		35,223
Civil											—
Consumer relations		1,024		—		915		—			(598	)		1,341
Other civil actions		958		—		2,913		—			(2,790	)		1,081

		1,982		—		3,828		—			(3,388	)		2,422
Tax		7,473		—		139		(87	)		(17	)		7,508
Regulatory		13,959		—		5,336		—			(959	)		18,336
Other		1,177		—		129		(67	)		(17	)		1,222

Total		63,194		22		13,533		(3,556	)		(8,482	)		64,711


	Holding Company
	Dec. 31, 2016		Additions		Reversals			Settled			Sep. 30, 2017
Labor		34,928		15,569		(3,016	)		(6,039	)		41,442
Civil												—
Consumer relations		1,435		8		(26	)		(8	)		1,409
Other civil actions		3,238		771		(31	)		(44	)		3,934

		4,673		779		(57	)		(52	)		5,343
Tax		8,869		4,170		(2,817	)		(255	)		9,967
Regulatory		21,614		—		(4,241	)		—			17,373
Corporate		239,445		—		(239,445	)		—			—
Other		466		714		(1	)		(45	)		1,134

Total		309,995		21,232		(249,577	)		(6,391	)		75,259

The details on the main provisions and contingent liabilities are provided below, with the best estimation of expected future disbursements for these contingencies:

Labor claims

The aggregate amount of the contingency is approximately R$ 1,792,967 (R$ 1,854,257 on December 31, 2017), of which R$ 480,951 (R$ 473,874 on December 31, 2017) has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

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Customers claims

The Company and its subsidiaries are involved in various civil actions relating to indemnity for moral and material damages, arising, principally, from allegations of irregularity in measurement of consumption, and claims of undue charging, in the normal course of business, totaling R$ 65,672 (R$ 56,017 on December 31, 2017), of which R$ 19,676 (R$ 18,632 on December 31, 2017) has been provisioned – this being the probable estimate for funds needed to settle these disputes.

Other civil proceedings

The Company and its subsidiaries are involved in various civil actions claiming indemnity for moral and material damages, among others, arising from incidents occurred in the normal course of business, in the amount of R$ 239,962 (R$ 218,455 on December 31, 2017), of which R$ 30,463 (R$ 43,105 on December 31, 2017) has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

Tax

The Company and its subsidiaries are involved in numerous administrative and judicial claims actions relating to taxes, including, among other matters, subjects relating to the Rural Property Tax (ITR); the Tax on Donations and Legacies (ITCD); the Social Integration Program (Programa de Integração Social, or PIS); the Contribution to Finance Social Security (Contribuição para o Financiamento da Seguridade Social, or Cofins); Corporate Income Tax (Imposto de Renda Pessoa Jurídica, or IRPJ); the Social Contribution (Contribuição Social sobre o Lucro Líquido, or CSLL); and motions to stay tax enforcement. The aggregate amount of this contingency is approximately R$ 178,905 (R$ 159,109 on December 31, 2017), of which R$ 41,541 (R$ 43,970 on December 31, 2017) has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

In addition to the issues above, the Company and its subsidiaries are involved in various proceedings on the applicability of the IPTU Urban Land Tax to real estate properties that are in use for providing public services. The aggregate amount of the contingency is approximately R$ 131,880 (R$ 121,948 on December 31, 2017). Of this total, R$ 9,628 has been recognized (R$ 13,078 on December 31, 2017) – this being the amount estimated as probably necessary for settlement of these disputes.

Environmental

The Company and its subsidiaries are involved in environmental matters, in which the subjects include protected areas, environmental licenses, recovery of environmental damage, and other matters, in the approximate total amount of R$ 14,981 (R$ 68,097 on December 31, 2017) of which R$ 1,164 (R$ 45 on December 31, 2017) has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

Regulatory

The Company and its subsidiaries are involved in numerous administrative and judicial proceedings, challenging, mainly: (i) tariff charges in invoices for use of the distribution system by a self-producer; (ii) alleged violation of targets for continuity indicators in retail supply of electricity; and (iii) the tariff increase made during the Federal Government’s economic stabilization plan referred to as the ‘Cruzado Plan’, in 1986. The aggregate amount of the contingency is approximately R$ 242,157 (R$ 222,434 on December 31, 2017), of which R$ 52,565 (R$ 39,812 on December 31, 2017) has been recognized as provision – the amount estimated as probably necessary for settlement of these disputes.

Corporate

Difference of monetary updating on the Advance against Future Capital Increase (AFAC) made by the Minas Gerais State Government

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Other legal actions in the normal course of business

Breach of contract – Power line pathways and accesses cleaning services contract

The Company and its subsidiaries are involved in disputes alleging losses suffered as a result of supposed breaches of contract at the time of provision of services of cleaning of power line pathways and firebreaks. The amount recorded is R$ 35,332 (R$ 31,987 on December 31, 2017), this being estimated as the likely amount of funds necessary to settle this dispute.

Other legal proceedings

The Company and its subsidiaries are involved as plaintiff or defendant, in other less significant claims, including environmental claims, related to the normal course of their operations, with an estimated total amount of R$ 166,743 (R$ 170,158 on December 31, 2017), of which R$ 12,133 (R$ 13,655 on December 31, 2017) – the amount estimated as probably necessary for settlement of these disputes – has been provisioned. Management believes that it has appropriate defense for these proceedings, and does not expect these issues to give rise to significant losses that could have an adverse effect on the Company’s financial position or profit.

Contingent liabilities in which losses are assessed as ‘possible’, and the Company believes it has arguments of merit for legal defense

Taxes and contributions

The Company and its subsidiaries are involved in numerous administrative and judicial proceedings in relation to taxes. Below are details of the main claims:

Indemnity of employees’ future benefit (the ‘Anuênio’)

In 2006 The Company and its subsidiaries paid an indemnity to its employees, totaling R$ 177,686, in exchange for rights to future payments (referred to as the Anuênio) for time of service, which would otherwise be incorporated, in the future, into salaries. The Company and its subsidiaries did not pay income tax and Social Security contributions on this amount because it considered that those obligations are not applicable to amounts paid as an indemnity. However, to avoid the risk of a future fine, the Company and its subsidiaries obtained an injunction, which permitted to make an escrow deposit of R$ 121,834, which updated now represents the amount of R$ 273,270 (R$ 267,432 on December 31, 2017). The updated amount of the contingency is R$ 300,061 (R$ 311,138 on December 31, 2017) and, based on the arguments above, Management has classified the chance of loss as ‘possible’.

Social Security contributions

The Brazilian federal tax authority (Secretaria da Receita Federal) has filed administrative proceedings related to various matters: employee profit sharing; the Workers’ Food Program (Programa de Alimentação do Trabalhador, or PAT); education benefit; food benefit; Special Additional Retirement payment; overtime payments; hazardous occupation payments; matters related to Sest/Senat (transport workers’ support programs); and fines for non-compliance with accessory obligations. The Company and its subsidiaries have presented defenses and await judgment. The amount of the contingency is approximately R$ 1,379,747 (R$ 1,647,343 on December 31, 2017). Management has classified the chance of loss as ‘possible’, also taking into account assessment of the chance of loss in the judicial sphere, (the claims mentioned are in the administrative sphere), based on the evaluation of the claims and the related case law.

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Non-homologation of offsetting of tax credit

The federal tax authority did not ratify the Company’s declared offsetting, in Corporate income tax returns, of carry-forwards and undue or excess payment of federal taxes – IRPJ, CSLL, PIS and Cofins – identified by official tax deposit receipts (‘DARFs’ and ‘DCTFs’). The Company and its subsidiaries are contesting the non-homologation of the amounts offset. The amount of the contingency is R$ 139,038 (R$ 274,836 on December 31, 2017), and the chance of loss was classified as ‘possible’, since the relevant requirements of the National Tax Code (CTN) have been complied with.

Corporate tax returns – restitution and offsetting

Income tax withheld on capital gain in a shareholding transaction

The federal tax authority issued a tax assessment on Cemig as a jointly responsible party with its jointly-controlled entity Parati S.A. Participações em Ativos de Energia Elétrica (Parati), relating to withholding income tax (Imposto de Renda Retido na Fonte, or IRRF) allegedly applicable to returns paid by reason of a capital gain in a shareholding transaction relating to the purchase by Parati, and sale, by Enlighted, on July 7, 2011, of 100% of the equity interests in Luce LLC (a company with head office in Delaware, USA), holder of 75% of the shares in the Luce Brasil equity investment fund (FIP Luce), which was indirect holder, through Luce Empreendimentos e Participações S.A., of approximately 13.03% of the total and voting shares of Light S.A. (Light). The amount of the contingency is approximately R$ 219,256(R$ 212,393 on December 31, 2017), and the loss has been assessed as ‘possible’.

The Social Contribution tax on net income (CSLL)

The federal tax authority issued a tax assessment against the Company and its subsidiaries for the years of 2012 and 2013, alleging undue non-addition, or deduction, of amounts in calculating the Social Contribution tax on net income relating to the following items: (i) taxes with liability suspended; (ii) donations and sponsorship (Law 8,313/91); and (iii) fines for various alleged infringements. The amount of this contingency is R$ 340,517 (R$ 322,196 on December 31, 2017). The Company has classified the chances of loss as ‘possible’, in accordance with the analysis of the case law on the subject.

Regulatory matters

Public Lighting Contribution (CIP)

The Company believes it has arguments of merit for defense in these claims, since the charge at present made is grounded on Aneel Normative Resolution 456/2000. As a result it has not constituted a provision for this action, the amount of which is estimated at R$ 1,048,957 (R$ 1,224,274 on December 31, 2017). The Company has assessed the chances of loss in this action as ‘possible’, due to the Customer Defense Code (Código de Defesa do Consumidor, or CDC) not being applicable, because the matter is governed by the specific regulation of the electricity sector, and because Cemig complied with Aneel Resolutions 414 and 456, which deal with the subject.

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Accounting of electricity sale transactions in the Wholesale Electricity Trading Chamber (CCEE)

In a claim dating from August 2002, AES Sul Distribuidora challenged in the courts the criteria for accounting of electricity sale transactions in the wholesale electricity market (Mercado Atacadista de Energia, or MAE) (predecessor of the present Wholesale Electricity Trading Chamber – Câmara de Comercialização de Energia Elétrica, or CCEE), during the period of rationing. It obtained a favorable interim judgment in February 2006, which ordered Aneel, working with the CCEE, to comply with the claim by AES Sul and recalculate the settlement of the transactions during the rationing period, not considering Aneel’s Dispatch 288 of 2002.This should take effect in the CCEE as from November 2008, resulting in an additional disbursement for Cemig GT, related to the expense on purchase of energy in the spot market on the CCEE, in the approximate amount of R$ 310,268 (R$ 287,515 on December 31, 2017). On November 9, 2008 Cemig GT obtained an interim decision in the Regional Federal Appeal Court (Tribunal Regional Federal, or TRF) suspending the obligatory nature of the requirement to pay into court the amount that would have been owed under the Special Financial Settlement made by the CCEE.

System Service Charges (ESS) – Resolution of the National Energy Policy Council

The amount of the contingency is approximately R$ 220,050 (R$ 201,586 on December 31, 2017). In spite of the successful judgment at first instance, the Association’s legal advisers still considered the chances of loss of this contingency as ‘possible’. Cemig GT agrees with this, since there are not yet elements to make it possible to foresee the outcome of the Appeal filed by the federal government.

Tariff increases

Exclusion of customers classified as low-income

The Federal Public Attorneys’ Office filed a class action against the Company and Aneel, to avoid exclusion of customers from classification in the Low-income residential tariff sub-category, requesting an order for Cemig D to pay twice the amount paid in excess by customers. Judgment was given in favor of the plaintiffs, but the Company and Aneel have filed an interlocutory appeal and await judgment. The amount of the contingency is approximately R$ 296,500 (R$ 275,458 on December 31, 2017). Cemig D has classified the chances of loss as ‘possible’ due to other favorable decisions on this matter.

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Environmental claims

Impact arising from construction of power plants

Other contingent liabilities

Early settlement of the CRC (Earnings Compensation) Account

The Company is involved in an administrative proceeding at the Audit Court of the State of Minas Gerais which challenges: (i) a difference of amounts relating to the discount offered by Cemig for early repayment of the credit owed to Cemig by the State under the Receivables Assignment Contract in relation to the CRC Account (Conta de Resultados a Compensar, or Earnings Compensation Account) – this payment was completed in the first quarter of 2013; and also (ii) possible undue financial burden on the State after the signature of the Amendments that aimed to re-establish the economic and financial balance of the Contract. The amount of the contingency is approximately R$ 410,210 (R$ 397,897 on December 31, 2017), and, based on the Opinion of the Public Attorneys’ Office of the Audit Board of the State of Minas Gerais, the Company believes that it has met the legal requirements. Thus, it has assessed the chances of loss as ‘possible’, since it believes that the adjustment was made in faithful obedience to the legislation applicable to the case.

Contractual imbalance

Cemig D is a party in disputes alleging losses suffered by third parties as a result of supposed breach of contract at the time of implementation of part of the rural electrification program known as Luz Para Todos (‘Light for All’). The estimated amount is R$ 284,810 (R$ 261,281 on December 31, 2017), and no provision has been made. Cemig D has classified the chances of loss as ‘possible’ as a result of the analysis that has been made of the argument and documentation used by the contracted parties in attempting to make the Company liable for any losses that allegedly occurred.

The Cemig D is also a party in other disputes arising from alleged non-compliance with contracts in the normal course of business, for an estimated total of R$ 88,028 (R$ 79,985 on December 31, 2017). Cemig D has classified the chance of loss as ‘possible’, after analysis of the case law on this subject.

Irregularities in competitive tender proceedings

Cemig GT is a party in a dispute alleging irregularities in competitive tender proceedings, governed by an online invitation to bid. The estimated amount is R$ 26,958 (R$ 26,149 on December 31, 2017), and no provision has been made. Cemig GT has classified the chance of loss as ‘possible’, after analysis of the case law on this subject.

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24.

EQUITY AND REMUNERATION TO SHAREHOLDERS

The Company’s issued and outstanding share capital on September 30, 2018 is R$ 7,293,763, represented by 487,614,213 common shares and 971,138,388 preferred shares, all with nominal value of R$ 5.00 (five Reais). On December 31, 2017, the Company’s share capital was R$ 6,294,208, represented by 420,764,708 common shares and 838,076,946 preferred shares, all with nominal value of R$ 5.00 (five Reais).

(a)

Capital increase

On October 26, 2017, the Shareholders’ Extraordinary Meeting unanimously approved the proposal by the Board of Directors for a capital increase through issuance of up to 199,910,947 new shares, each with par value of R$ 5.00 with the same rights providing to those shares in the same class of shares that resulted in the capital increase.

Up to December 31, 2017, R$ 1,215,223 had been subscribed by Shareholders, corresponding to 184,965,518 shares at the price of R$ 6.57. The remaining shares not subscribed were 14,945,429, comprising 13,129,679 ON (common) shares and 1,815,750 PN (preferred) shares.

On March 21, 2018, Cemig sold the totality of the remaining shares not subscribed through a public offer of a single and indivisible lot of shares, which resulted in a financial volume of R$ 110,700. A total of 13,129,679 remaining common shares (ON) were sold for an average price of R$ 7.30, totaling R$ 95,773; and 1,815,750 remaining preferred shares (PN) were sold for an average price of R$ 8.22, for a total of R$ 14,927.

On April 23, 2018, the Shareholders’ Extraordinary General Meeting approved a Company capital increase in the amount of R$ 999,555, whose capital increased from R$ 6,294,208 to R$ 7,293,763, throughout the issue and subscription of 199,910,947 new shares, each with par value of R$ 5.00 (five Reais), comprising 66,849,505 common shares and 133,061,442 preferred shares.

The capital increase, considering the issuance price, represented proceeds of R$ 1,324,773. The difference, in the amount of R$ 325,218, has been allocated to the Capital reserve account.

(b)

Earnings per share

Considering the capital increase on April 23, 2018 described above, the calculation of basic and diluted earnings is presented as follows:


Number of shares	Jan to Sep 2018			Jan to Sep 2017			Jul to Sep 2018			Jul to Sep 2017
Common shares already paid up		487,614,213			420,764,708			487,614,213			420,764,708
Treasury shares		(69	)		(69	)		(69	)		(69	)

		487,614,144			420,764,639			487,614,144			420,764,639
Preferred shares already paid up		971,138,388			838,076,946			971,138,388			838,076,946
Treasury shares		(560,649	)		(560,649	)		(560,649	)		(560,649	)

		970,577,739			837,516,297			970,577,739			837,516,297

Total		1,458,191,883			1,258,280,936			1,458,191,883			1,258,280,936

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Basic and diluted earnings per share


	Jan to Sep 2018 (Restated)		Jan to Sep 2017		Jul to Sep 2018 (Restated)		Jul to Sep 2017
Net income for the period (A)		698,249		397,182		244,540		(83,666	)
Total of shares (B)		1,458,191,883		1,258,280,936		1,458,191,883		1,258,280,936

Basic and diluted earnings (loss) per share – going concern (R$)		0.46		0.32		0.16		(0.06	)

Basic and diluted earnings per share – discontinued operations (R$)		0.02		—		0.01		—

Basic and diluted earnings (loss) per share (R$)		0.48		0.32		0.17		(0.06	)

The shares that were subscribed in the capital increase of April 23, 2018, were considered in full in the calculation of basic and diluted net income for the nine-month period ended September 30, 2018, since the proposal for subscription of new shares was decided in an Extraordinary Shareholders’ Meeting of October 26, 2017, and these new shares already had potential for subscription since that date, as decided by the shareholders.

Considering that the subscribed and paid up shares have the right to dividends for the 2017 business year, if these shares had been considered in the calculation of the basic and diluted earnings (losses) per share for the nine-month and three-month period ended September 30, 2017, the result of the calculation would have been R$ 0.2724 and R$ -0.0574, respectively.

(c)

Equity valuation adjustments


Equity valuation adjustments	Consolidated
Equity valuation adjustments	Sep. 30, 2018			Dec. 31, 2017
Adjustments to actuarial obligations – Employee benefits		(234,519	)		(234,519	)
Subsidiary and jointly-controlled subsidiary
Variation in fair value of financial asset in jointly-controlled entity		—			139
Cumulative Translation adjustments		545			398
Adjustments to actuarial obligations – Employee benefits		(1,241,560	)		(1,241,144	)
Cash flow hedge financial instruments		87			87
		(1,475,447	)		(1,475,039	)
Deemed cost of PP&E (1)		613,585			638,517

Equity valuation adjustments		(861,862	)		(836,522	)

(1)

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25.

REVENUE

The revenue of the Company and its subsidiaries are as follows:


	Consolidated
	Jan to Sep 2018 (Restated)			Jan to Sep 2017
Revenue from supply of energy (a)		18,163,647			17,387,754
Revenue from use of the electricity distribution systems (TUSD) (b)		1,419,958			1,230,623
CVA, and Other financial components in tariff increases (c)		1,783,790			148,216
Transmission revenue
Transmission concession revenue (d)		310,293			221,422
Transmission construction revenue (e)		12,726			11,226
Transmission indemnity revenue (g)		208,164			295,749
Generation indemnity revenue (h)		82,331			259,516
Distribution construction revenue (e)		579,480			725,528
Adjustment to expectation of cash flow from indemnifiable Financial assets of the distribution concession (j)		3,875			2,277
Revenue from updating of the Concession Grant Fee (f)		245,730			240,420
Energy transactions on the CCEE (i)		189,123			536,507
Supply of gas		1,452,427			1,305,636
Fine for breach of standard continuity indicator (1)		(31,596	)		—
Other operating revenues (k)		1,191,275			1,097,001
Deductions on revenue (l)		(8,816,972	)		(8,308,094	)

Net operating revenue		16,794,251			15,153,781


	Consolidated
	Jul to Sep 2018 (Restated)			Jul to Sep 2017
Revenue from supply of energy (a)		6,927,638			5,815,621
Revenue from use of the electricity distribution systems (TUSD) (b)		605,618			330,147
CVA, and Other financial components in tariff increases (c)		633,118			480,112
Transmission revenue
Transmission concession revenue (d)		103,711			43,985
Transmission construction revenue (e)		7,994			4,201
Transmission indemnity revenue (g)		61,645			25,894
Generation indemnity revenue (h)		47,868			259,516
Distribution construction revenue (e)		200,569			291,519
Adjustment to expectation of cash flow from indemnifiable Financial assets of the distribution concession (j)		809			766
Revenue from updating of the Concession Grant Fee (f)		88,749			89,944
Energy transactions on the CCEE (i)		29,157			111,330
Supply of gas		553,448			484,491
Fine for breach of standard continuity indicator (1)		(5,915	)		—
Other operating revenues (k)		417,832			379,369
Deductions on revenue (l)		(3,419,959	)		(3,181,073	)

Net operating revenue		6,252,282			5,135,822

(1)	As mentioned in Note 2.2, as from January 1, 2018, these amounts are now recognized as a reduction of revenue rather than operating expenses, as amended by Pronouncement CPC 47 / IFRS 15.

For details on the revenue from discontinued operations, please see Note 30.

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a)	Revenue from energy supply

This table shows energy supply by type of customer:


	MWh (1)				R$
	Jan to Sep 2018		Jan to Sep 2017		Jan to Sep 2018			Jan to Sep 2017
Residential		7,648,175		7,489,980		6,268,428			5,797,313
Industrial		13,134,700		13,162,944		3,588,856			3,633,866
Commercial, Services and Others		6,195,337		5,581,213		3,381,247			3,218,839
Rural		2,777,694		2,769,082		1,325,571			1,203,749
Public authorities		641,551		644,621		409,581			389,945
Public lighting		1,038,236		1,030,199		424,413			397,147
Public services		977,151		977,757		463,169			430,943

Subtotal		32,412,844		31,655,796		15,861,265			15,071,802

Own consumption		33,083		26,946		—			—
Unbilled revenue		—		—		86,454			(44,741	)

		32,445,927		31,682,742		15,947,719			15,027,061

Wholesale supply to other concession holders (2)		8,768,341		9,167,876		2,251,991			1,289,188
Wholesale supply unbilled, net		—		—		(36,063	)		1,071,505

Total		41,214,268		40,850,618		18,163,647			17,387,754


	MWh (1)				R$
	Jul to Sep 2018		Jul to Sep 2017		Jul to Sep 2018		Jul to Sep 2017
Residential		2,497,296		2,456,908		2,402,379		1,878,293
Industrial		4,581,890		4,458,794		1,333,933		1,210,358
Commercial, Services and Others		1,996,913		1,776,377		1,236,950		982,345
Rural		1,057,426		1,016,897		577,424		424,366
Public authorities		207,162		207,967		157,262		120,600
Public lighting		349,429		354,299		172,248		132,691
Public services		323,919		338,415		186,888		144,190

Subtotal		11,014,035		10,609,657		6,067,084		4,892,843

Own consumption		9,602		8,896		—		—
Unbilled revenue		—		—		38,312		(10,305	)

		11,023,637		10,618,553		6,105,396		4,882,538

Wholesale supply to other concession holders (2)		3,160,972		3,427,498		783,975		401,091
Wholesale supply unbilled, net		—		—		38,267		531,992

Total		14,184,609		14,046,051		6,927,638		5,815,621

(1)	Data not reviewed by external auditors.

(2)	Includes a CCEAR (Regulated Market Sales Contract), ‘bilateral contracts’ with other agents, and the revenues from management of generation assets (GAG) for the 18 hydroelectric plants of Lot D of Auction no 12/2015.

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b)	Revenue from Use of the Distribution System (the TUSD charge)

c)	The CVA Account, and *Other financial components*

d)	Transmission concession revenue

e)	Construction revenue

f)	Gain on financial updating of the Concession Grant Fee

Represents the monetary variation using the IPCA inflation index, plus interest, on the Concession Grant Fee for the concession awarded as Lot D of Auction 12/2015. See Note 14.

g)	Transmission indemnity revenue

In the nine-month period ended September 30, 2018, the Company recognized revenue in the total amount of R$ 208,164 (R$ 295,749 in the same period of 2017), corresponded to updating, by the IPCA index, of the balance of indemnity receivable existing. See Note 14.

h)	Generation indemnity revenue

In the nine-month period ended September 30, 2018, the Company recognized revenue of R$ 82,331 (R$ 259,516 in the same period of 2017), for the adjustment to the balance of non-amortized indemnities for the concessions of the São Simão and Miranda Hydroelectric Plants, as per Ministerial Order 291/17, also taking into account the updating of the amounts. See Note 14.

i)	Revenue from energy transactions in the CCEE (Wholesale Electricity Trading Chamber)

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j)	Adjustment to expectation of cash flow from indemnifiable Financial assets of the distribution concession

k)	Other operating revenues


	Consolidated
	Jan to Sep 2018		Jan to Sep 2017
Charged service		9,543		7,723
Telecoms services (1)		1,424		111,342
Services rendered		136,620		116,167
Subsidies (2)		837,243		769,505
Rental and leasing		65,137		88,869
Unpaid energy reimbursement (3)		135,727		—
Other		5,581		3,395

		1,191,275		1,097,001


	Consolidated
	Jul to Sep 2018		Jul to Sep 2017
Charged service		3,743		3,124
Telecoms services (1)		1,424		38,520
Services rendered		46,180		40,635
Subsidies (2)		290,336		266,485
Rental and leasing		22,577		30,531
Unpaid energy reimbursement (3)		51,635		—
Other		1,937		74

		417,832		379,369

(1)	Due to the classification of certain telecommunications assets as held for sale, the revenues from the discontinued operations were segregated. For more information please see Note 30.

(2)	Revenue recognized for the tariff subsidies applied to users of distribution services, including low-income tariff subsidies – reimbursed by Eletrobras.

(3)

R$ 84,092 refers to reimbursement for de-contracted power supply, agreed between Santo Antônio Energia S.A., subsidiary of Madeira Energia, and Cemig Distribuição, due to alteration of the power supply sales agreements (CCEARs). This amount will be settled in 24 monthly installments, with monetary updating by the Selic rate. The amount of R$ 51,635 refers to reimbursement for power supply de-contracted as agreed between Renova and Cemig GT due to the suspension by Renova of the power supply contracted for the period July to December 2018. The advances made by Cemig GT related to this period will be settled in a single payment in January 2019, with monetary updating at 155% of the DI rate (published by Cetip).

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l)	Taxes and charges reported as deductions on revenue


	Consolidated
	Jan to Sep 2018 (Restated)		Jan to Sep 2017
Taxes on revenue
ICMS (VAT)		4,093,112		4,470,557
Cofins		1,882,429		1,654,269
PIS and Pasep		406,686		359,137
Others		5,497		5,942

		6,387,724		6,489,905
Charges to the customer
Global Reversion Reserve (RGR) (recovery of expense)		14,902		9,418
Energy Efficiency Program		48,328		37,422
Energy Development Account (CDE)		1,835,412		1,326,946
Research and Development (P&D)		28,716		26,914
National Scientific and Technological Development Fund (FNDCT)		28,716		26,914
Energy System Expansion Research (EPE of MME)		14,359		13,457
Customer charges – Proinfa alternative sources program		29,620		29,626
Energy Services Inspection Charge		19,415		22,983
Royalties for use of water resources		35,299		66,449
Customer charges – the‘Flag Tariff’ system		374,481		258,060

		2,429,248		1,818,189

		8,816,972		8,308,094


	Consolidated
	Jul to Sep 2018 (Restated)		Jul to Sep 2017
Taxes on revenue
ICMS (VAT)		1,575,191		1,819,209
Cofins		711,820		584,676
PIS and Pasep		154,537		126,932
Others		1,786		2,115

		2,443,334		2,532,932
Charges to the customer
Global Reversion Reserve (RGR) (recovery of expense)		4,490		9,468
Energy Efficiency Program		18,484		11,732
Energy Development Account (CDE)		654,452		467,576
Research and Development (P&D)		10,077		7,927
National Scientific and Technological Development Fund (FNDCT)		10,077		7,927
Energy System Expansion Research (EPE of MME)		5,039		3,963
Customer charges – Proinfa alternative sources program		10,177		10,049
Energy Services Inspection Charge		6,820		6,347
Royalties for use of water resources		7,587		21,527
Customer charges – the‘Flag Tariff’ system		249,422		101,625

		976,625		648,141

		3,419,959		3,181,073

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26.

OPERATING COSTS AND EXPENSES

Composition of costs and expenses of the Company and its subsidiaries:


	Consolidated				Holding Company
	Jan to Sep 2018		Jan to Sep 2017		Jan to Sep 2018		Jan to Sep 2017
Personnel (a)		988,381		1,275,667		29,168		38,796
Employees’ and managers’ profit sharing		22,821		25,777		5,926		1,195
Post-retirement obligations – Note 22		250,328		293,617		30,352		29,482
Materials		74,419		43,306		1,101		89
Outsourced services (b)		752,835		680,569		17,319		6,796
Energy purchased for resale (c)		8,576,061		7,685,392		—		—
Depreciation and amortization		619,104		616,783		761		351
Operating provisions (d)		402,118		558,793		71,952		104,037
Charges for use of the national grid		1,140,903		791,339		—		—
Gas purchased for resale		897,903		789,861		—		—
Construction costs (e)		592,206		736,754		—		—
Other operating expenses, net (f)		263,141		311,581		9,089		6,940

		14,580,220		13,809,439		165,668		187,686


	Consolidated				Holding Company
	Jul to Sep 2018		Jul to Sep 2017		Jul to Sep 2018			Jul to Sep 2017
Personnel (a)		308,141		358,505		9,201			17,730
Employees’ and managers’ profit sharing		94		886		—			233
Post-retirement obligations – Note 22		80,931		101,589		9,993			10,010
Materials		40,713		16,198		337			23
Outsourced services (b)		262,489		233,805		7,916			3,194
Energy purchased for resale (c)		3,493,463		2,942,974		—			—
Depreciation and amortization		207,804		205,983		545			115
Operating provisions (d)		134,799		188,875		(6,237	)		88,726
Charges for use of the national grid		332,323		387,078		—			—
Gas purchased for resale		341,445		304,698		—			—
Construction costs (e)		208,563		295,720		—			—
Other operating expenses, net (f)		111,533		124,127		1,741			(979	)

		5,522,298		5,160,438		23,496			119,052

For details on the costs and expenses from discontinued operations, please see note 30.

Personnel expenses

Programmed Voluntary Retirement Plan (PDVP)

In March 2018, the Company approved the 2018 Employee Voluntary Severance Program (‘the 2018 PDVP’). Those eligible to take part were any employees who have worked with Cemig for 25 years or more by December 31, 2018. The acceptance period was from April 2 to 30, 2018 and it will pay the standard legal severance payments – including: payment for the period of notice, an amount equal to the ‘penalty’ payment of 40% of the Base Value of the employee’s FGTS fund, as well as the other payments specified by the legislation and there is no provision for additional premium payment. In the nine-month period ended September 30, 2018, the amount appropriated as expense related to the 2018 PDVP, including severance payments, was R$ 25,666, corresponding to the acceptance by 151 employees.

In the nine-month period ended September 30, 2017, the amount appropriated as expense related to the 2017 PDVP, including severance payments, was R$ 197,326, corresponding to the acceptance by 1,151 employees.

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Outsourced services


	Consolidated				Holding Company
	Jan to Sep 2018		Jan to Sep 2017		Jan to Sep 2018			Jan to Sep 2017
Meter reading and bill printing and delivery of energy bills		99,260		106,647		—			—
Communication		59,324		49,163		8,456			239
Maintenance and conservation of electrical facilities and equipment		220,610		186,971		15			84
Building conservation and cleaning		82,299		78,739		555			496
Contracted labor		16,901		9,252		110			—
Freight and airfares		5,088		5,434		1,360			1,357
Accommodation and meals		8,612		9,842		144			151
Security services		15,475		16,358		—			—
Consultancy		5,198		11,792		1,422			737
Maintenance and conservation of furniture and utensils		2,376		2,448		14			1
Information technology		34,509		34,289		2,874			771
Maintenance and conservation of vehicles		1,554		1,381		1			—
Disconnection and reconnection		37,847		23,528		—			—
Environment		7,800		10,058		—			—
Legal services		17,777		13,122		2,191			535
Legal procedural costs		1,502		2,010		—			43
Tree pruning		17,137		14,727		—			—
Cleaning of power line pathways		27,561		10,176		—			—
Copying and legal publications		14,997		16,949		408			200
Inspection of customer units		6,690		118		—			—
Other expenses (recovery of expenses)		70,318		77,565		(231	)		2,182

		752,835		680,569		17,319			6,796


	Consolidated				Holding Company
	Jul to Sep 2018		Jul to Sep 2017		Jul to Sep 2018			Jul to Sep 2017
Meter reading and bill printing and delivery of energy bills		33,722		35,430		—			—
Communication		23,379		15,074		6,248			126
Maintenance and conservation of electrical facilities and equipment		68,562		60,119		3			63
Building conservation and cleaning		29,534		28,637		261			71
Contracted labor		6,072		4,146		8			—
Freight and airfares		1,874		2,066		644			418
Accommodation and meals		2,996		3,405		47			51
Security services		5,350		5,422		—			—
Consultancy		335		3,992		524			33
Maintenance and conservation of furniture and utensils		1,025		832		1			1
Information technology		12,011		10,137		1,549			143
Maintenance and conservation of vehicles		509		457		1			—
Disconnection and reconnection		15,122		11,196		—			—
Environment		3,141		1,848		—			—
Legal services		6,676		4,321		1,731			95
Legal procedural costs		516		780		—			8
Tree pruning		7,220		5,760		—			—
Cleaning of power line pathways		13,869		6,126		—			—
Copying and legal publications		6,377		7,098		74			141
Inspection of customer units		2,016		61		—			—
Other expenses		22,183		26,898		(3,175	)		2,044

		262,489		233,805		7,916			3,194

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Energy purchased for resale


	Consolidated
	Jan to Sep 2018			Jan to Sep 2017
Supply from Itaipu Binacional		1,007,675			933,603
Physical guarantee quota contracts		500,876			343,458
Quotas for Angra I and II nuclear plants		200,135			182,832
Spot market		1,662,386			1,180,780
Proinfa Program		239,543			225,965
‘Bilateral’ contracts		357,532			269,943
Energy acquired in Regulated Market auctions		2,558,096			2,201,909
Energy acquired in the Free Market		2,865,557			3,086,096
Pasep and Cofins credits		(815,739	)		(739,194	)

		8,576,061			7,685,392


	Consolidated
	Jul to Sep 2018			Jul to Sep 2017
Supply from Itaipu Binacional		374,255			316,786
Physical guarantee quota contracts		189,251			119,006
Quotas for Angra I and II nuclear plants		66,712			60,944
Spot market		733,160			408,859
Proinfa Program		79,847			75,321
‘Bilateral’ contracts		145,781			121,552
Energy acquired in Regulated Market auctions		1,077,340			824,699
Energy acquired in the Free Market		1,150,075			1,299,536
Pasep and Cofins credits		(322,958	)		(283,729	)

		3,493,463			2,942,974

Operating provisions (reversals)


	Consolidated						Holding Company
	Jan to Sep 2018			Jan to Sep 2017			Jan to Sep 2018		Jan to Sep 2017
Estimated losses on doubtful receivables		227,789			191,343			—		—
Estimated losses on other accounts receivables (1)		(4,934	)		—			—		—
Contingency provisions (reversals) (2)
Labor claims		33,610			188,013			699		12,553
Civil		8,785			18,142			3,828		722
Tax		(5,551	)		2,401			52		1,353
Environmental		1,146			4			—		—
Regulatory		14,048			(10,978	)		5,336		(4,241	)
Other		2,658			8,864			62		713

		54,696			206,446			9,977		11,100

		277,551			397,789			9,977		11,100

Adjustment for losses
Put/Call option – Ativas and Sonda (Note 29)		—			102			—		—
Put option – RME and LEPSA (Note 29)		61,975			92,937			61,975		92,937
Put option – SAAG (Note 29)		62,592			67,965			—		—

		124,567			161,004			61,975		92,937

		402,118			558,793			71,952		104,037

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	Consolidated						Holding Company
	Jul to Sep 2018			Jul to Sep 2017			Jul to Sep 2018			Jul to Sep 2017
Estimated losses on doubtful receivables		60,232			50,458			—			—
Contingency provisions (reversals) (2)
Labor claims		36,670			10,288			(10,185	)		532
Civil		(3,743	)		8,745			2,283			833
Tax		(2,345	)		5,565			65			3,961
Environmental		1,115			1			—			—
Regulatory		3,979			(143	)		1,627			(2,162	)
Other		984			2,230			52			256

		36,660			26,686			(6,158	)		3,420

		96,892			77,144			(6,158	)		3,420

Adjustment for losses
Put option – Sonda (Note 29)		—			61			—			—
Put option – RME and LEPSA (Note 29)		(79	)		85,306			(79	)		85,306
Put option – SAAG (Note 29)		37,986			26,364			—			—

		37,907			111,731			(79	)		85,306

		134,799			188,875			(6,237	)		88,726

(1)	The estimate for loss on Other accounts receivable is presented in the Statement of income as an operating expenses.

(2)	The contingency provisions of Holding Company are presented in the consolidated Statement of income as operating expenses.

Infrastructure construction cost


	Consolidated
	Jan to Sep 2018		Jan to Sep 2017
Personnel and managers		51,840		38,297
Materials		222,111		334,851
Outsourced services		255,383		300,244
Others		62,872		63,362

		592,206		736,754


	Consolidated
	Jul to Sep 2018		Jul to Sep 2017
Personnel and managers		17,780		14,143
Materials		72,497		151,691
Outsourced services		91,294		109,061
Others		26,992		20,825

		208,563		295,720

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Other operating expenses (revenues), net


	Consolidated				Holding Company
	Jan to Sep 2018		Jan to Sep 2017		Jan to Sep 2018			Jan to Sep 2017
Leasing and rentals		69,130		77,095		3,722			2,616
Advertising		4,476		14,331		209			276
Own consumption of energy		20,453		15,581		—			—
Subsidies and donations		13,333		9,457		2,296			—
Paid concession		2,068		2,264		—			—
Insurance		5,065		6,042		1,184			1,693
CCEE annual charge		5,460		6,017		1			1
Net loss (gain) on deactivation and disposal of assets		14,817		44,876		468			—
Forluz – Administrative running cost		21,291		19,607		929			970
Collection agents		56,558		52,664		—			—
Fine for violation of standard continuity indicator (1)		—		24,755		—			—
Taxes and charges		7,870		6,645		586			636
Supply completed (2)		26,999		—		—			—
Other expenses		15,621		32,247		(306	)		748

		263,141		311,581		9,089			6,940


	Consolidated				Holding Company
	Jul to Sep 2018		Jul to Sep 2017		Jul to Sep 2018			Jul to Sep 2017
Leasing and rentals		23,766		32,188		1,525			1,142
Advertising		1,383		6,017		51			100
Own consumption of energy		6,978		4,768		—			—
Subsidies and donations		6,764		2,933		985			—
Paid concession		622		735		—			—
Insurance		1,422		1,613		404			386
CCEE annual charge		1,709		1,972		—			—
Net loss (gain) on deactivation and disposal of assets		7,122		39,538		—
Forluz – Administrative running cost		6,709		6,574		325			325
Collection agents		21,160		17,377		—			—
Fine for violation of standard continuity indicator (1)		—		3,895		—			—
Taxes and charges		1,112		1,259		106			93
Supply completed (2)		26,999		—		—			—
Other expenses		5,787		5,258		(1,655	)		(3,025	)

		111,533		124,127		1,741			(979	)

(1)

As mentioned in Note 2.2, as from January 1, 2018 these amounts are now recognized as a reduction of revenue rather than operating expenses, as amended by Pronouncement CPC 47 / IFRS 15.

(2)

Write-off of deemed cost of the Miranda e São Simão Plants, due to reimbursement receipt related to basic projects of these power plants.

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27.

FINANCE INCOME AND EXPENSES


	Consolidated						Holding Company
	Jan to Sep 2018 (Restated)			Jan to Sep 2017			Jan to Sep 2018			Jan to Sep 2017
FINANCE INCOME
Income from cash investments		80,958			171,530			7,383			39,214
Arrears fees on sale of energy		259,680			193,057			71			—
Foreign exchange variations		—			20,207			—			—
Monetary variations		14,735			27,125			27			1,968
Monetary variations – CVA		35,180			—			—			—
Monetary updating on Court escrow deposits		32,308			86,464			19,337			44,696
Pasep and Cofins charged on finance income		(33,571	)		(35,529	)		(4,309	)		(8,704	)
Gain on Financial instruments—Swap (Note 29)		322,847			—			—			—
Other		139,325			87,211			6,453			7,719

		851,462			550,065			28,962			84,893
FINANCE EXPENSES
Costs of loans and financings		(944,432	)		(1,160,884	)		(2,260	)		—
Cost of debt – Amortization of transaction costs		(26,323	)		(41,090	)		(285	)		—
Foreign exchange – loans and financings		(781,297	)		(741	)		—			—
Foreign exchange—Itaipu		(44,283	)		(11,787	)		—			—
Monetary updating – loans and financings		(110,031	)		(74,655	)		—			—
Monetary updating – Concessions payable		(3,354	)		737			—			—
Charges and monetary updating on post-retirement obligation		(53,504	)		(48,401	)		(2,632	)		(2,381	)
Monetary updating – CVA		—			(40,086	)		—			—
Monetary updating—AFAC		—			239,445			—			239,445
Monetary updating – Advance sales of power supply		(9,184	)		(37,666	)		—			—
Other		(66,384	)		(96,823	)		(8,280	)		(511	)

		(2,038,792	)		(1,271,951	)		(13,457	)		236,553

NET FINANCE INCOME (EXPENSES)		(1,187,330	)		(721,886	)		15,505			321,446

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	Consolidated						Holding company
	Jul to Sep 2018 (Restated)			Jul to Sep 2017			Jul to Sep 2018			Jul to Sep 2017
FINANCE INCOME
Income from cash investments		39,108			46,037			2,452			10,505
Arrears fees on sale of energy		91,730			55,134			27			—
Foreign exchange variations		—			2,618			—			—
Monetary variations		3,239			13,132			19			400
Monetary variations – CVA		23,894			—			—			—
Monetary updating on Court escrow deposits		17,085			63,317			7,076			43,744
Pasep and Cofins charged on finance income		(13,527	)		(13,207	)		(2,008	)		(4,648	)
Gain on Financial instruments (Note 29)		142,767			—			267			—
Other		58,499			34,133			2,337			1,874

		362,795			201,164			10,170			51,875
FINANCE EXPENSES
Costs of loans and financings		(341,469	)		(333,034	)		(1,104	)		—
Cost of debt – Amortization of transaction costs		(10,775	)		(11,263	)		(131	)		—
Foreign exchange – loans and financings		(227,019	)		6,309			—			—
Foreign exchange—Itaipu		(20,555	)		(262	)		—			—
Monetary updating – loans and financings		(44,726	)		(5,682	)		—			—
Monetary updating – Concessions payable		(1,097	)		(5	)		—			—
Charges and monetary updating on post-retirement obligation		(20,345	)		(12,417	)		(1,001	)		(611	)
Monetary updating – CVA		—			(12,006	)		—			—
Monetary updating—AFAC		—			239,445			—			239,445
Monetary updating – Advance sales of power supply		(2,369	)		(12,986	)		—			—
Other		(27,138	)		(46,849	)		(8,136	)		(320	)

		(695,493	)		(188,750	)		(10,372	)		238,514

NET FINANCE INCOME (EXPENSES)		(332,698	)		12,414			(202	)		290,389

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28.

RELATED PARTY TRANSACTIONS

Cemig’s main balances and transactions with related parties and its jointly-controlled entities are as follows:


Company / Item	ASSETS				LIABILITIES				REVENUE				EXPENSES
Company / Item	Sep. 30, 2018		Dec. 31, 2017		Sep. 30, 2018		Dec. 31, 2017		Jan to Sep 2018		Jan to Sep 2017		Jan to Sep 2018			Jan to Sep 2017
Shareholder
Minas Gerais State Government
Current
Customers and traders (1)		203.866		54,926		—		—		120,505		101,085		—			—
Public Lighting Contribution (CIP) (1)		2.050		1,220		—		—		—		—		—			—
Accounts Receivable—AFAC (2)		—		235,018						—		38,278		—			—
ICMS – advance payment (3)		754.513				—				1,299		—		—			—
Non-current
Customers and traders (1)		10.836		50,349		—		—		—		—		—			—
Public Lighting Contribution (CIP) (1)		—		1,119		—		—		—		—		—			—
Accounts Receivable—AFAC (2)		254.930		—		—		—		19,965		—		—			—
Jointly-controlled entity
Aliança Geração
Current
Transactions with energy (4)		—		—		14.641		7,105		24,846		413		(125,879	)		(107,335	)
Provision of services (5)		1.515		1,657		—		—		8,846		9,767		—			—
Interest on Equity, and dividends		—		72,315		—		—		—		—		—			—
Baguari Energia
Current
Transactions with energy (4)		—		—		939		858		—		111		(5,603	)		(5,379	)
Services (5)		277		211		—		—		669		646		—			—
Interest on Equity, and dividends		3.558		—		—		—		—		—		—			—
Madeira Energia
Current
Transactions with energy (4)		2.073		—		22.625		56,531		54,180		18,213		(569,544	)		(508,741	)
Advance for future power supply (6)		26.197		66,185		—		—		8,020		—		—			—
Reimbursement for decontracted supply (7)		42.046		—		—		—		886		—		—			—
Non-current
Advance for future power supply (6)		—		6,870		—		—		—		—		—			—
Reimbursement for decontracted supply (7)		14.015		—		—		—		—		—		—			—
Norte Energia
Current
Transactions with energy (4)		130		130		6.144		3,640		12,078		5,680		(146,930	)		(89,256	)
Lightger
Current
Transactions with energy (4)		—		—		1.864		—		—		—		(16,592	)		(15,188	)
Hidrelétrica Pipoca
Current
Transactions with energy (4)		—		—		1.706		—		—		—		(14,385	)		(12,064	)
Interest on Equity, and dividends		—		584		—		—		—		—		—			—
Retiro Baixo
Current
Transactions with energy (4)		1.296		—		577		528		—		—		(4,785	)		(4,464	)
Interest on Equity, and dividends		2.581		2,581		—		—		—		—		—			—
Central Eólica Praia de Parajuru
Current
Interest on Equity, and dividends		7.793		—		—		—		—		—		—			—
Renova
Current
Transactions with energy (4)		—		—		3.083		1,744		—		—		(87,944	)		(140,771	)
Non-current
Advance for future delivery of power supply (8)		85.277		—		—		—		4,785		38,162		—			—
Accounts receivable (9)		434.938		350,200		—		—		27,183		—		—			—
Reimbursement through suspension of energy supply (10)		51.984				—				51,984		—		—			—
Empresa Amazonense de Transmissão de Energia (EATE)
Current
Transactions with energy (4)		—		—		1.545		2,882		—		—		(15,203	)		(19,674	)

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Company / item	ASSETS						LIABILITIES				REVENUE				EXPENSES
Company / item	Sep. 30, 2018			Dec. 31, 2017			Sep. 30, 2018		Dec. 31, 2017		Jan to Sep 2018		Jan to Sep 2017		Jan to Sep 2018			Jan to Sep 2017
Light
Current
Transactions with energy (4)		460			1,128			506		483		38,187		38,203		(825	)		(1,106	)
Interest on Equity, and dividends		1,200			—			—		—		—		—		—			—
Taesa
Current
Transactions with energy (4)		—			—			8,555		12,105		34		33		(85,921	)		(92,905	)
Services (5)		172			404			—		—		424		667		—			—
Interest on Equity, and dividends		18			—			—		—		—		—		—			—
Companhia Transirapé de Transmissão
Current
Transactions with energy (4)		—			—			976		964		—		—		(7,205	)		(7,310	)
Services (5)		90			90			—		—		956		953		—			—
Interest on Equity, and dividends		—			1,413			—		—		—		—		—			—
Axxiom
Current
Provision of services (11)		—			—			1,634		2,982		—		—		—			—
Transudeste
Current
Transactions with energy (4)		—			—			159		191		114		113		(1,151	)		(1,166	)
Services (5)		157			175			—		—		441		492		—			—
Transleste
Current
Transactions with energy (4)		—			—			258		308		137		135		(1,858	)		(1,878	)
Services (5)		123			120			—		—		839		819		—			—
Other related parties
FIC Pampulha
Current
Cash and cash equivalents		178,173			322,423			—		—		—		—		—			—
Securities		536,097			1,037,423			—		—		7,535		14,374		—			—
(-) Securities issued by subsidiary companies (note 20)		(3,332	)		(25,493	)		—		—		—		—		—			—
Non-current
Securities		95,294			30,124			—		—		—		—		—			—
(-) Securities issued by subsidiaries (note 20)		(16,564	)		—			—		—		—		—		—			—
Forluz
Current
Post-retirement obligations (12)		—			—			120,673		108,843		—		—		(143,951	)		(130,470	)
Supplementary pension contributions (13) - Defined contribution plan		—			—			—		—		—				(54,344	)		(61,133	)
Administrative running costs (14)		—			—			—		—		—		—		(21,290	)		(19,606	)
Operational leasing (15)		—			—			1,720		4,998		—		—		(33,983	)		(44,002	)
Non-current
Post-retirement obligations (12)		—			—			1,959,415		1,959,512		—		—		—			—
Cemig Saúde
Current
Health Plan and Dental Plan (16)		—			—			112,653		115,045		—		—		(139,600	)		(145,075	)
Non-current
Health Plan and Dental Plan (16)		—			—			1,791,422		1,633,291		—		—		—			—

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The main conditions and characteristics of interest with reference to the related party transactions are:

(1)

This refers to sale of energy supply to the Minas Gerais State government. The price of the supply is the one set by Aneel through a Resolution relating to the annual tariff adjustment of Cemig D. In 2017 the government of Minas Gerais State signed a debt recognition agreement with Cemig D for payment of debits relating to the supply of power due and unpaid, in the amount of R$ 113,032 , to be settled in 24 installments, updated monthly by the variation of the IGP-M. The first portion, in the amount of R$ 5,418, was settled in December 2017, and the others, of which six were past their due payment date at September 30, 2018, have due dates up to November 2019. These receivables have guarantee in the form of Cemig’s right to retain dividends and Interest on Equity otherwise payable to the State (in proportion to the State’s equity interest in the Company), for as long as any payments are overdue or in default.

(2)	This refers to the recalculation of the monetary updating of amounts relating to the Advance for Future Capital Increase (AFAC), which were returned to the State of Minas Gerais. Amount transferred to Accounts Receivable from Minas Gerais State, on September 30, 2017 (see Note 11).

(3)	Pre-payment of ICMS tax in accordance with Minas Gerais State Decree 47488 (see Note 8);

(4)

(5)	Refers to a contract to provide plant operation and maintenance services and transmission network.

(6)

(7)

(8)

This refers to advance payments under Agreements for Incentive-bearing Power Supply becoming due in January 2018 through October 2019, discounted at 155% of the rate for Interbank Certificates of Deposit published by Cetip. The pre-payments have guarantees, shared between Cemig and Light, related to the stockholding positions in and dividends from investees of Renova, and also the wind projects to be developed.

(9)

Cemig GT has an item of R$ 435 million receivable from Renova that will be paid in monthly installments over 2021 with adjustment at 150% to 155% of the CDI rate. The accounts receivable have guarantees, shared between Cemig and Light, stockholding positions in and dividends from investees of Renova, and also the wind projects to be developed.

(10)

On August 3, 2018 Cemig GT signed the 7^th amendment to the contract for sale of wind energy with Renova suspending supply of incentive-bearing wind energy contracted for the period July–December 2018, and setting the calculation of any financial compensations for the Company. The total amount will be settled in a single instalment in January 2019, updated by 155% of the CDI rate. On September 30, 2018 the amount to be reimbursed by Renova as indemnity for suspension of supply of power for the period July-September 2018 is R$ 51,984. The amount to be reimbursed by Renova has guarantees, shared between Cemig and Light, related to the stockholding positions in and dividends from investees of Renova, and also the wind projects to be developed.

(11)	This refers to a contract for development of management software between Cemig D and Axxiom Soluções Tecnológicas S.A., instituted in Aneel Dispatch 2,657/2017.

(12)

The contracts of Forluz are updated by the Expanded Customer Price Index (IPCA) calculated by the Brazilian Geography and Statistics Institute (Instituto Brasileiro de Geografia e Estatística, or IBGE), plus interest rate of 6% per year and will be amortized up to the business year of 2031 (See Note 22).

(13)	The Company’s contributions to the pension fund for the employees participating in the Mixed Plan, and calculated on the monthly remuneration, in accordance with the regulations of the Fund.

(14)	Funds for annual current administrative costs of the Pension Fund in accordance with the specific legislation of the sector. The amounts are estimated as a percentage of the Company’s payroll.

(15)	Rental of the Company’s administrative head offices, in effect to March 2019 and May 2034, adjusted annually by IPCA inflation index.

(16)	Post-retirement obligations relating to the employees’ health and dental plan (see Note 22).

Dividends receivable from subsidiaries

Dividends receivable

Consolidated

Holding Company

Sep. 30,
2018

Dec. 31,
2017

Sep. 30,
2018

Dec. 31,
2017

Cemig GT

—

364,230

564,230

Other

15,150

76,893

58,743

38,819

15,150

76,893

422,973

603,049

Loans with related parties

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Guarantees on loans, financings and debentures

Cemig has provided guarantees on loans, financings and debentures of the following related parties – not consolidated in the Interim Financial Information because they relate to jointly-controlled entities or affiliated companies:

Related party

Relationship

Type

Objective

Jan to Sep 2018

Maturity

Norte Energia (NESA)

Affiliated

Surety

Financing

2,566,235

2042

Light (1)

Jointly-controlled entity

Counter-guarantee

Financing

683,615

2042

Santo Antônio Energia (SAESA)

Jointly-controlled entity

Surety

Financing

1,864,348

2034

Santo Antônio Energia (SAESA)

Jointly-controlled entity

Surety

Debentures

840,696

2037

Centroeste

Jointly-controlled entity

Surety

Financing

7,281

2023

5,962,175

(1)	Related to execution of guarantees of the Norte Energia financing.

On September 30, 2018, Management believes that there is no need to recognize any provisions in the Company’s Interim Financial Information for the purpose of meeting any obligations arising under these sureties and/or guarantees.

Cash investments in FIC Pampulha – investment fund of Cemig, its subsidiaries and affiliates

Cemig and its subsidiaries and affiliates invest part of their financial resources in an investment fund which has the characteristics of fixed income and obeys the Company’s cash investment policy. The amounts invested by the fund on September 30, 2018 are reported in Securities in Current or Non-current assets, or presented after deduction of the account line Debentures in Current or Non-current liabilities.

The funds applied are allocated only in public and private fixed income securities, subject only to credit risk, with various maturity periods, obeying the unit holders’ cash flow needs.

The financial investments of the investment fund in securities of related parties are as follows:

Issuer of security

Type

Annual contractual
conditions

Maturity

Sep. 30, 2018

Cemig 1.01%

Cemig GT
19.60%

Cemig D
0.32%

Other
subsidiaries
10.94% (1)

Total
31.87%

ETAU

Debentures

108.00% of CDI

Dec. 01, 2019

103

2,006

1,120

3,262

LIGHT

Promissory Note

CDI + 3.50%

Jan. 22, 2019

1,376

768

2,237

173

3,382

1,888

5,499

Issuer of security

Type

Annual contractual
conditions

Maturity

Dec. 31, 2017

Cemig 4.17%

Cemig GT
26.85%

Cemig D
19.90%

Other
subsidiaries
21.36% (1)

Total
72.28%

ETAU

Debentures

108.00% of CDI

Dec. 01, 2019

420

2,706

2,005

2,152

7,283

LIGHT

Promissory Note

CDI + 3.50%

Jan. 22, 2019

834

5,375

3,983

4,276

14,468

1,254

8,081

5,988

6,428

21,751

(1)	Refers to the other companies consolidated by Cemig, which also have a stake in the investment funds.

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Remuneration of key Management personnel

The total costs of key personnel, comprising the Executive Board, the Fiscal Council, The Audit Committee and the Board of Directors, for the nine-month period ended September 30, 2018 and 2017, are as follows:


	Jan to Sep 2018		Jan to Sep 2017
Remuneration		23,626		23,171
Profit sharing		131		372
Assistance benefits		1,801		1,209

Total		25,558		24,752

29.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Classification of financial instruments and fair value

The principal financial instruments, classified according to the accounting practices adopted by the Company, are:


	Level		Sep. 30, 2018 (Restated)				Dec. 31, 2017
	Level		Book value		Fair value		Book value		Fair value
Assets
Amortized cost (1)
Cash equivalents – Investments		2		1,393,202		1,393,202		916,762		916,762
Securities – Investments		2		81,704		81,704		44,244		44,244
Customers and Traders; Concession holders (Transport of energy)		2		4,056,347		4,056,347		4,035,445		4,035,445
Restricted cash		2		113,041		113,041		106,227		106,227
Advances to suppliers		2		137,044		137,044		122,920		122,920
Customers – Accounts receivable from the State of Minas Gerais		2		214,702		214,702		105,275		105,275
Other Accounts receivable from the State of Minas Gerais (CIP)		2		2,050		2,050		1,220		1,220
Accounts receivable from the State of Minas Gerais (AFAC)		2		254,930		254,930		235,018		235,018
Concession financial assets: CVA (Portion ‘A’ Costs Variation Compensation) Account, and Other financial components, in tariff adjustments		3		1,246,131		1,246,131		369,010		369,010
Reimbursement of tariff subsidies		2		85,096		85,096		77,086		77,086
Low-income subsidy		2		28,237		28,237		26,660		26,660
Escrow deposits		2		2,427,726		2,427,726		2,335,632		2,335,632
Concession grant fee – Generation concessions		3		2,396,907		2,396,907		2,337,135		2,337,135
Accounts receivable – Renova		2		434,938		434,938		350,200		350,200
Reimbursement – Decontracting of supply		2		108,045		108,045		—		—

				12,980,100		12,980,100		11,062,834		11,062,834

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	Level		Sep. 30, 2018 (Restated)						Dec. 31, 2017
	Level		Book value			Fair value			Book value			Fair value
Fair value through profit or loss
Securities
Bank certificates of deposit		2		—			—			2,652			2,652
Treasury Financial Notes (LFTs)		1		315,136			315,136			739,945			739,945
Financial Notes – Banks		2		247,423			247,423			290,004			290,004
Debentures		2		5,816			5,816			11,292			11,292

				568,375			568,375			1,043,893			1,043,893
Concession financial assets – Transmission – Assets remunerated by tariff		3		557,960			557,960			547,800			547,800
Derivative financial instruments – Swaps		3		273,636			273,636			8,649			8,649
Derivative financial instruments (Ativas and Sonda put options) (2)		3		4,117			4,117			3,801			3,801
Concession financial assets – Distribution infrastructure		3		393,137			393,137			369,762			369,762
Indemnities receivable – Transmission		3		1,817,663			1,817,663			1,928,038			1,928,038
Indemnities receivable – Generation		3		816,734			816,734			1,900,757			1,900,757

				4,431,622			4,431,622			5,802,700			5,802,700

				17,411,722			17,411,722			16,865,534			16,865,534

Liabilities
Amortized cost (1)
Loans, financings and debentures		2		(15,394,055	)		(15,394,055	)		(14,397,697	)		(14,397,697	)
Debt agreed with pension fund (Forluz)		2		(672,083	)		(672,083	)		(720,498	)		(720,498	)
Settlement of deficit of pension fund (FORLUZ)		2		(380,022	)		(380,022	)		(283,291	)		(283,291	)
Concession financial assets: CVA (Portion ‘A’ Costs Variation Compensation) Account, and Other financial components, in tariff adjustments		3		(41,383	)		(41,383	)		(414,800	)		(414,800	)
Concessions payable		3		(18,979	)		(18,979	)		(21,227	)		(21,227	)
The Minas Gerais State Tax Amnesty Plan (PRCT)		2		—			—			(282,876	)		(282,876	)
Suppliers		2		(2,444,705	)		(2,444,705	)		(2,342,757	)		(2,342,757	)
Advances from clients		2		(89,896	)		(89,896	)		(232,762	)		(232,762	)

				(19,041,123	)		(19,041,123	)		(18,695,908	)		(18,695,908	)
Fair value through profit or loss
Derivative financial instruments – Swaps		3		—			—			(41,111	)		(41,111	)
Derivative financial instruments – RME put options		2		(569,207	)		(569,207	)		(507,232	)		(507,232	)
Derivative financial instruments (SAAG put options)		3		(374,185	)		(374,185	)		(311,593	)		(311,593	)

				(943,392	)		(943,392	)		(859,936	)		(859,936	)

				(19,984,515	)		(19,984,515	)		(19,555,844	)		(19,555,844	)

(1)	On September 30, 2018 and on December 31, 2017, the book values of financial instruments were similar to the fair values.

(2)	Options in shares of Sonda in the amount of R$ 4,117, posted in the Company’s Assets due to the merger of Cemig Telecom.

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◾

Fair value calculation of financial positions

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Derivative financial instruments:

Put options

The Company holds options to sell certain securities to it (put options) for which it has calculated the fair value based On the Black and Scholes Merton (BSM) model. This takes the following variables into account: exercise price of the option; closing price of the underlying asset on September 30, 2018; the risk-free interest rate; the volatility of the price of the underlying asset; and the time to maturity of the option.

On September 30, 2018 and on December 31, 2017, the existing options were as follows:


Consolidated	Balance on Sep. 30, 2018			Balance on Dec. 31, 2017
Put option – RME		569,207			507,232
Put option – SAAG		374,185			311,593
Put / call options – Ativas and Sonda		(4,117	)		(3,801	)

		939,275			815,024

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Put option – SAAG

For measurement of the fair value of SAAG put options Cemig GT uses the Black-Scholes-Merton (‘BSM’) model. The assumption was made that the future expenditures of FIP Malbec and FIP Melbourne are insignificant, so that the options are valued as if they were direct equity interests in Mesa. However, neither SAAG nor Mesa are traded on a securities exchange, so that some assumptions are necessary for calculation of the price of the asset and its volatility for application of the BSM model. The closing price of the share of Mesa on September 30, 2018 is ascertained on the basis of free cash flow to equity holders (FCFE), expressed by equivalence of the indirect interests held by the FIPs. Volatility, in turn, is measured as an average of historic volatility (based on the hypothesis that the series of the difference of continuously capitalized returns follows a normal distribution) of comparable companies in the electricity generation sector that are traded on the Bovespa.

Based on the studies made, a liability of R$ 374,185 (R$ 311,593 on December 31, 2017) is recorded in the Company’s Interim Financial Information, for the difference between the exercise price and the estimated fair value of the assets.

The changes in the value of the options are as follows:


	Consolidated
Balance at Dec. 31, 2016		196,173
Adjustment to fair value		73,299
Reversals		(5,334	)

Balance on September 30, 2017		264,138

Balance at Dec. 31, 2017		311,593
Adjustment to fair value		62,592

Balance on September 30, 2018		374,185

Cemig GT has made an analysis of the sensitivity of the exercise price of the option, varying the risk-free interest rate and the volatility, keeping the other variables of the model unchanged. In this context, scenarios for the risk-free interest rate at 5.20% p.a. to 9.20% p.a., and for volatility between 20% and 80% p.a., were used, resulting in estimates of minimum and maximum price for the put option of R$ 348,825 and R$ 415,096, respectively.

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Put options of RME

The exercise price is subject to monetary updating by the CDI (Interbank CD) Rate plus financial remuneration at 0.9% per year.

On September 21, 2018 Cemig received Cemig Notices of Intention to Exercise Put Option – in the Third Exercise Window, from RME – Rio Minas Energia Participações S.A. (‘RME’), BB-Banco de Investimento S.A., BV Financeira S.A. Crédito, Financiamento e Investimento, and Banco Santander (Brasil) S.A., (‘the Stockholder Banks’) giving irrevocable notice of exercise of the right to sell the totality of their respective holdings, representing a total of 50% of the voting stock and 25% of the total share capital of RME, to be acquired by Cemig or by a third party indicated by Cemig, until November 30, 2018.

Amount of the Company’s exposure

The change in the value of the options – the difference between the estimated fair value for the assets and the corresponding exercise price, for the nine-month periods ended September 30, 2018 and 2017, has been as follows:


	Consolidated
Balance at Dec. 31, 2016		1,149,881
Variation in fair value		100,957
Reversals		(8,020	)

Balance on Sep. 30, 2017		1,242,818

Balance at Dec. 31, 2017		507,232
Variation in fair value		62,054
Reversals		(79	)

Balance on Sep. 30, 2018		569,207

In the calculation of the fair value of the option based on the Black-Scholes-Merton analysis, the following variables are taken into account: exercise price of the option; closing price of the share of Light on September 30, 2018 (as a reference for the value of the indirect equity interest held by the direct Shareholders of RME in Light); the risk-free interest rate; the volatility of the price of the underlying asset; and the time to maturity of the option.

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The Company has made an analysis of the sensitivity of the exercise price of the option, varying the risk-free interest rate and the volatility, keeping the other variables of the model unchanged. In this context, scenarios for the risk-free interest rate at 1.76% to 9.76% p.a., and for volatility between 20.0% and 90.0% p.a., were used, resulting in estimates of minimum and maximum price for the put option of R$ 564,862 and R$ 573,582, respectively.

Sonda options

As part of the shareholding restructuring process, Cemig Telecom and Sonda signed a Purchase Option Agreement (issued by Cemig Telecom) and a Sale Option Agreement (issued by Sonda). Considering the merger of Cemig Telecom into Cemig, occurred on September 30, 2018, the option contract is now between Cemig and Sonda.

The put and call options in Ativas (‘the Ativas Options’) were measured at fair value and posted at their net value, i.e. the difference between the fair values of the two options on the reporting date of the interim financial information for September 30, 2018. Depending on the value of the options, the net value of the Ativas Options may be an asset or a liability of the Company.

The measurement has been made using the Black-Scholes-Merton (BSM) model. In the calculation of the fair value of the Ativas Options based on the BSM model, the following variables are taken into account: closing price of the underlying asset on September 30, 2018; the risk-free interest rate; the volatility of the price of the underlying asset; the time to maturity of the option; and the exercise prices on the exercise date.

The closing price of the underlying asset was based on the valuation prepared by the same specialized consulting firm responsible for calculating the options. The valuation base date is September 30, 2018, the same date of closing of the Company’s Interim financial information, and the methodology used to calculate the Company’s fair value is Discounted Cash Flow (DCF) based on the value of the transaction in shares of Ativas by Sonda, held on October 19, 2016. The calculation of the risk-free interest rate was based on yields of National Treasury Bills. The time to maturity was calculated assuming exercise date on September 30, 2021.

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Swap transactions

Considering that part of the loans and financings of the Company is denominated in foreign currency, the companies use derivative financial instruments (swap transactions) to protect the servicing associated with these debts (principal plus interest).

The derivative instruments contracted by the Company have the purpose of protecting the operations against the risks arising from foreign exchange variation and are not used for speculative purposes.

The amounts of the principal of derivative transactions are not presented in the balance sheet, since they refer to transactions that do not require cash principal payments to be made: only the gains or losses that actually occur are recorded. The net result of these transactions on September 30, 2018 was a positive adjustment of R$ 322,847, recorded in finance income (expenses).

The counterparties of the derivative transactions are the banks Bradesco, Itaú, Goldman Sachs and BTG Pactual and the Company is guarantor of the derivative instruments contracted by Cemig GT.

The table below shows the derivative instruments contracted by Cemig GT as of September 30, 2018 and December 31, 2017.

Cemig’s right (1)

Cemig’s
obligation (1)

Maturity
period

Trading market

Value of
principal
contracted (2)

Unrealized gain / loss

Amount
according to
contract –
Sep. 30, 2018

Fair value
– Sep. 30,
2018

Amount
according to
contract –
Dec. 31,
2017

Fair value –
Dec. 31,
2017

US$: FX variation + Rate (9.25% p.a.)

In R$:
150.49% of
CDI rate

From July
2018

to Dec. 2024

Over-the-counter

US$ 1,000,000

821,268

256,898

50,792

(32,462)

US$: FX variation + Rate (9.25% p.a.)

In R$:
125.52% of
CDI rate

From July
2018 to Dec.
2024

Over-the-counter

US$ 500,000

109,538

16,738

—

930,806

273,636

50.792

(32.462)

1)	For the original US$ 1 billion Eurobond issue of December 2017, was contracted a combination of a call spread on the principal, with floor at R$ 3.25/US$ and ceiling at R$ 5.00/US$ and for the interest, a swap for 9.25% p.a. coupon in Reais, and average of 150.49% of the CDI rate.

For the additional US$ 500 million Eurobond tranche, issued in July 2018, was contracted a combination of a call spread on the principal, with floor at US$ 3.85/US$ and ceiling at R$ 5.00/US$ and for the whole of the interest, a swap for 9.25% p.a. coupon in Reais, and average rate equivalent to 125.52% of the CDI.

2)	In thousands of US$.

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The fair value at September 30, 2018 was R$ 273,636 which would be a reference if the Company had settled the derivative instrument on September 30, 2018; however, the swap contracts protect the Company’s cash flow up to maturity of the bonds in 2024, and have a contractual value of R$ 930,806, at September 30, 2018, underlining the effectiveness of the hedge strategy adopted by the Company.

Risk management

The principal risks to which the Company and its subsidiaries are exposed are as follows:

Exchange rate risk

Cemig and its subsidiaries are exposed to the risk of increase in exchange rates, with effect on Loans and financings, Suppliers, and cash flow.

The net exposure to exchange rates is as follows:


Exposure to exchange rates	September 30, 2018				Dec. 31, 2017
Exposure to exchange rates	Foreign currency		R$		Foreign currency		R$
US dollar
Loans and financings (Note 20)		1,559,320		6,243,361		1,014,535		3,356,082
Suppliers (Itaipu Binacional)		73,916		295,951		73,698		240,220

		1,633,236		6,539,312		1,088,233		3,596,302
Euros
Loans and financings – Euros (Note 20)		581		2,702		1,105		4,383

Net liabilities exposed		1,633,817		6,542,014		1,089,338		3,600,685

Sensitivity analysis

Based on information from its financial consultants, the Company estimates that in a probable scenario the variation of the exchange rates of foreign currencies in relation to the Real on September 30, 2019 will an appreciation of the dollar by 6.19%, to R$ 3.7560/US$, and depreciation of the Euro by 7.20%, to R$ 4.3194/€. The Company has made a sensitivity analysis of the effects on the Company’s net income arising from depreciation of the Real exchange rate by 25%, and by 50%, in relation to this ‘probable’ scenario.

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Risk: foreign exchange rate exposure	Book value		‘Probable’ scenario US$1= R$ 3.7560 EUR1= R$ 4.3194			‘Possible’ scenario US$1= R$ 4.6950 EUR1= R$ 5.3993		‘Remote’ scenario US$1= R$ 5.6340 EUR1= R$ 6.4791
US dollar
Loans and financings		6,243,361		5,856,806			7,321,008		8,785,209
Suppliers (Itaipu Binacional)		295,951		277,627			347,034		416,441

		6,539,312		6,134,433			7,668,042		9,201,650

Euros
Loans and financings		2,702		2,507			3,134		3,761

Net liabilities exposed		6.542.014		6.136.940			7.671.176		9.205.411

Net effect of exchange rate variation				(405,074	)		1,129,162		2,663,397

Interest rate risk

On September 30, 2018 the Company is exposed to the risk of increase in Brazilian domestic interest rates. This exposure occurs as a result of net liabilities indexed to variation in interest rates, as follows:


Risk: Exposure to domestic interest rate changes	Consolidated
Risk: Exposure to domestic interest rate changes	Sep. 30, 2018 (Restated)			Dec. 31, 2017
Assets
Cash equivalents – investments (Note 5)		1,393,202			916,762
Securities (Note 6)		650,079			1,088,137
Accounts receivable – Renova (Note 28)		434,938			350,200
Advances to suppliers		137,044			122,920
Restricted cash		113,041			106,227
CVA and Other financial components in tariffs – Selic rate * (Note 14)		1,246,131			369,010
Receivable for residual value – Generation – SELIC (Note 14)		—			1,084,346
Reimbursement – Energy Depletion (Note 28)		108,045			—
Credits owed by Eletrobras		4,216			4,216

		4,086,696			4,041,818
Liabilities
Loans, financings and debentures – CDI rate (Note 20)		(5,399,656	)		(7,202,558	)
Loans, financings and debentures – TJLP (Note 20)		(99,282	)		(118,891	)
Advances from customers – CDI		(89,896	)		(188,344	)
CVA and Other financial components in tariffs – Selic rate (Note 14)		(41,383	)		(414,800	)
Adherence to the Tax Amnesty Program – PRCT (Note 19)		—			(282,876	)

		(5,630,217	)		(8,207,469	)

Net liabilities exposed		(1,543,521	)		(4,165,651	)

(*)	Amounts of CVA and Other financial components indexed by the Selic rate.

Sensitivity analysis

In relation to the most significant interest rate risk, the Company and its subsidiaries estimate that, in a probable scenario, on September 30, 2019 the Selic rate will be 7.00% and TJLP rate will be 7.3548%. The Company has made a sensitivity analysis of the effects on its net income arising from increases in rates of 25% and 50% in relation to the ‘probable’ scenario. Variation in the CDI rate accompanies the variation in the Selic rate.

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Estimation of scenarios for the path of interest rates considers the projections made by the Company and its subsidiaries, based on its financial consultants.


Risk: Increase in Brazilian interest rates (Restated)	Sep. 30, 2018			Sep. 30, 2019
	Book value			‘Probable’ Scenario Selic 7.00% TJLP 7.3548%			‘Possible’ Scenario Selic 8.75% TJLP 9.1935%			‘Remote’ Scenario Selic 10.50% TJLP 11.0322%
Assets
Cash equivalents – Short-term investments (Note 5)		1,393,202			1,490,726			1,515,107			1,539,488
Securities (Note 6)		650,079			695,585			706,961			718,337
Accounts receivable – Renova (Note 28)		434,938			465,384			472,995			480,606
Advances to suppliers		137,044			146,637			149,035			151,434
Restricted cash		113,041			120,954			122,932			124,910
CVA and Other financial components in tariffs – Selic rate * (Note 14)		1,246,131			1,333,360			1,355,167			1,376,975
Reimbursement – Energy Depletion (Note 28)		108,045			115,608			117,499			119,390
Credits owed by Eletrobras		4,216			4,511			4,585			4,659

		4,086,696			4,372,765			4,444,281			4,515,799
Liabilities
Loans, financings and debentures – CDI rate (Note 20)		(5,399,656	)		(5,777,632	)		(5,872,126	)		(5,966,620	)
Loans, financings and debentures – TJLP (Note 20)		(99,282	)		(106,584	)		(108,409	)		(110,235	)
Advances from customers – CDI		(89,896	)		(96,189	)		(97,762	)		(99,335	)
CVA and Other financial components in tariffs – Selic rate (Note 14)		(41,383	)		(44,280	)		(45,004	)		(45,728	)

		(5,630,217	)		(6,024,685	)		(6,123,301	)		(6,221,918	)

Net liabilities exposed		(1,543,521	)		(1,651,920	)		(1,679,020	)		(1,706,119	)

Net effect of variation in interest rates					(108,399	)		(135,499	)		(162,598	)

(*)	Amounts of CVA and Other financial components are indexed by the Selic rate.

Inflation risk

The Company and its subsidiaries are exposed to the risk of inflation fall due to having more assets than liabilities indexed to the variation of inflation indicators, as follows:


Exposure to decrease in inflation	Sep. 30, 2018			Dec. 31, 2017
Assets
Concession financial assets related to Distribution infrastructure – IPCA (*)		359,258			110,832
Amounts receivable from the Government of the State of Minas Gerais—IGP-M (TARD) (Note 28)		216,752			107,614
Amounts receivable from the Government of the State of Minas Gerais—IGP-M (AFAC) (Note 11)		254,930			235,018
Receivable for residual value – Transmission – IPCA (Note 14)		1,817,663			1,928,038
Assets remunerated by tariff – Transmission – IPCA (Note 14)		462,989			496,121
Concession Grant Fee – IPCA (Note 14)		2,396,907			2,337,135

		5,508,499			5,214,758
Liabilities
Loans, financings and debentures – IPCA (Note 20)		(3,718,981	)		(3,800,889	)
Debt agreed with pension fund (Forluz) – IPCA		(672,083	)		(720,498	)
Forluz deficit of pension plan – IPCA		(380,022	)		(283,291	)

		(4,771,086	)		(4,804,678	)

Net assets		737,413			410,080

(*)	Part of the Concession financial assets related to the Regulatory Remuneration Base approved by Aneel after the third tariff review cycle.

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Sensitivity analysis

In relation to the most significant risk of decrease in inflation, due to having more assets than liabilities indexed to the variation of inflation indicators, the Company and its subsidiaries estimate that, in a probable scenario, on September 30, 2019 the IPCA inflation index will be 4.0738% and IGPM index will be 4.2668%. The Company and its subsidiaries have made a sensitivity analysis of the effects on its net income arising from decreases in inflation of 25% and 50% in relation to the ‘probable’ scenario, naming these the ‘possible’ and ‘remote’ scenarios, respectively.


Risk: decrease in inflation	Sep. 30, 2018			September 30, 2019
Risk: decrease in inflation	Book value			‘Probable’ scenario IPCA 4.0738% IGP-M 4.2668%			‘Possible’ scenario (-25%) IPCA 3.0554% IGPM 3.2001%			‘Remote’ scenario (-50%) IPCA 2.0369% IGP-M 2.1334%
Assets
Concession financial assets related to Distribution infrastructure – IPCA (*)		359,258			373,893			370,235			366,576
Amounts receivable from the Government of the State of Minas Gerais—IGP-M (TARD) (Note 28)		216,752			226,000			223,688			221,376
Amounts receivable from the Government of the State of Minas Gerais—IGP-M (AFAC) (Note 11)		254,930			265,807			263,088			260,369
Receivable for residual value – Transmission – IPCA (Note 14)		1,817,663			1,891,711			1,873,200			1,854,687
Assets remunerated by tariff – Transmission – IPCA (Note 14)		462,989			481,850			477,135			472,420
Concession Grant Fee – IPCA (Note 14)		2,396,907			2,494,552			2,470,142			2,445,730

		5,508,499			5,733,813			5,677,488			5,621,158
Liabilities
Loans, financings and debentures – IPCA		(3,718,981	)		(3,870,485	)		(3,832,611	)		(3,794,733	)
Debt agreed with pension fund (Forluz) – IPCA		(672,083	)		(699,462	)		(692,618	)		(685,773	)
Forluz deficit of pension plan		(380,022	)		(395,503	)		(391,633	)		(387,763	)

		(4,771,086	)		(4,965,450	)		(4,916,862	)		(4,868,269	)

Net assets		737,413			768,363			760,626			752,889

Net effect of variation in IPCA and IGP-M indices					30,950			23,213			15,476

(*)	Portion of the Concession financial assets relating to the Regulatory Remuneration Base of Assets ratified by Aneel after the third tariff review cycle.

Liquidity risk

Cemig has sufficient cash flow to cover the cash needs related to its operating activities.

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Consolidated	Up to 1 month		1 to 3 months		3 months to 1 year		1 to 5 years		Over 5 years		Total
Financial instruments at (interest rates):
- Floating rates
Loans, financings and debentures		35,699		1,214,018		1,836,168		10,607,502		8,331,011		22,024,398
Concessions payable		203		401		1,828		8,304		14,637		25,373
Debt agreed with pension plan (Forluz) (Note 22)		11,487		23,063		105,810		628,609		132,342		901,311
Solution plan for deficit of the Pension Plan (Forluz) (Note 22)		3,521		7,075		32,436		192,597		509,531		745,160

		50,910		1,244,557		1,976,242		11,437,012		8,987,521		23,696,242
- Fixed rate
Suppliers		2,282,353		155,195		7,157		—		—		2,444,705

		2,333,263		1,399,752		1,983,399		11,437,012		8,987,521		26,140,947


Holding company	Up to 1 month		1 to 3 months		3 months to 1 year		1 to 5 years		Over 5 years		Total
Financial instruments at (interest rates):
- Floating rates
Loans, financings and debentures		1,963		3,910		7,655		55,018		—		68,546
Loans with related parties		—		—		—		445,245		—		445,245
Debt agreed with pension plan (Forluz) (Note 22)		565		1,135		5,206		30,928		6,511		44,345
Solution plan for deficit of the Pension Plan (Forluz) (Note 22)		173		348		1,596		9,476		25,069		36,662

		2,701		5,393		14,457		540,667		31,580		594,798
- Fixed rate
Suppliers		9,107		—		—		—		—		9,107

		11,808		5,393		14,457		540,667		31,580		603,905

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Credit risk

The allowance for doubtful debtors constituted on September 30, 2018, considered to be adequate in relation to the credits in arrears receivable by the Company and its subsidiaries, was R$ 763,152.

Cemig manages the counterparty risk of financial institutions based on an internal policy approved by its Financial Risks Management Committee.

This Policy assesses and scales the credit risks of the institutions, the liquidity risk, the market risk of the investment portfolio and the Treasury operational risk.

The minimum requirements for concession of credit to financial institutions are centered on three items:

Rating by three risk rating agencies.

Equity greater than R$ 400 million.

Basel ratio one percentage point above the minimum set by the Brazilian Central Bank.

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Banks that exceed these thresholds are classified in three groups, by the value of their equity. Within this classification, limits of concentration by group and by institution are set:


Group	Equity	Concentration	Limit per bank (% of shareholders’ equity)*
A1	Over R$ 3.5 billion	Minimum 80%	Between 6% and 9%
A2	R$ 1.0 billion to R$ 3.5 billion	Maximum 20%	Between 5% and 8%
B	R$ 400 million to R$ 1.0 billion	Maximum 20%	Between 5% and 7%

⁽*⁾	The percentage assigned to each bank depends on individual assessment of indicators, e.g. liquidity and quality of the credit portfolio.

Further to these points, Cemig also sets two concentration limits:

No bank may have more than 30% of the Group’s portfolio.

No bank may have more than 50% of the portfolio of any individual company.

Risk of over-contracting and under-contracting of energy supply

Any exposure that can be proved to have arisen from factors outside the distributor’s control (‘involuntary exposure’) may also be passed through in full to customers.

The Company’s Management is continually managing its contracts for purchase of power supply to mitigate the risk of exposure to the spot market.

Risk of continuity of the concession

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Hydrological risk

Risk of early maturity of debt

On September 30, 2018, the Company was compliant with all of its covenants linked to financial indices requiring compliance on a six-monthly basis. For more details please see Note 20.

Capital management

This table shows comparisons of the Company’s consolidated net liabilities and its Equity:


	Consolidated						Holding company
	Sep. 30, 2018 (Restated)			Dec. 31, 2017			Sep. 30, 2018 (Restated)			Dec. 31, 2017
Total liabilities		28,210,245			27,909,453			2,090,257			1,522,956
(–) Cash and cash equivalents		(1,493,383	)		(1,030,257	)		(39,974	)		(38,672	)
(–) Restricted cash		(113,041	)		(106,227	)		(93,112	)		(87,872	)

Net liabilities		26,603,821			26,772,969			1,957,171			1,396,412

Total equity		14,972,851			14,330,136			14,968,534			14,325,986

Net liabilities / equity		1.78			1.87			0.13			0.10

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30.

ASSETS CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS

On May 25, 2018 Cemig published Tender Announcement 500-Y12121 for disposal of certain telecom assets that were absorbed in the merger of Cemig Telecomunicações on March 31, 2018.

The assets that were the subject of the tender are a group of the Company’s infrastructure assets and contractual positions in relation to service contracts. They were separated into two lots, being sold according to the best economic proposal for each lot, with minimum auction prices set for each one of the lots, based on formal valuation of the assets – these prices were R$ 335,070 for Lot 1, and R$ 32,473 for Lot 2.

On August 24, 2018 Cemig signed Asset Sale Agreements with American Tower do Brasil – Comunicação Multimídia Ltda., winner of Lot 1, and with Algar Soluções em TIC S.A., winner of Lot 2.

On November 1, 2018, sale transactions were completed, after the prior conditions stated in the Tender – including approval by the monopolies authority, CADE – had been complied with.

Thus, for the preparation of the interim financial information in the nine-month period ended September 30, 2018, the Company understands that the telecom assets in the Tender comply with the classification requirements of Pronouncement CPC 31 – Non-current assets held for sale, and discontinued operations, and are thus presented separately in the balance sheet, with measurement based on book value, since in both cases book value is lower than fair value less the sales expenses.

The composition of the assets of the associated liabilities is as follows:


	Consolidated			Holding company
	Sep. 30, 2018			Sep. 30, 2018
ASSETS
Assets
Accounts receivable		1,339			1,339
Inventories		6,862			6,862
PP&E and Intangible		262,705			262,705
Other current assets – Non-current		10,291			10,291

Total assets		281,197			281,197

LIABILITIES
Liabilities directly related to assets held for sale
Other non-current liabilities		(5,142	)		(5,142	)
Deferred income tax and Social Contribution tax		(775	)		(775	)

Total liabilities		(5,917	)		(5,917	)

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This table shows the revenues, costs and expenses arising from the discontinued operations, related to the assets classified as held for sale, on September 30, 2018:


	Consolidated			Holding company
	Jan to Sep 2018			Jan to Sep 2018
Results of discontinued operations
Operating revenues
Other operating revenues
Telecoms services		137,049			92,276
Leasing and Rentals		5,387			3,688
Other operating revenues		525			24

		142,961			95,988

Deductions from operational revenue
PIS, Pasep and Cofins taxes		(5,308	)		(3,659	)
ICMS tax		(29,044	)		(19,254	)
Others		(1,556	)		(1,046	)

		(35,908	)		(23,959	)

		107,053			72,029

Operating expenses
Outsourced services		(22,159	)		(17,210	)
Depreciation and amortization		(14,500	)		(6,115	)
Other operating expenses, net		(17,145	)		(10,372	)

		(53,804	)		(33,697	)

Finance income		763			507
Income and Social Contribution tax
Current income tax and Social Contribution tax		(3,345	)		(2,258	)
Deferred income tax and Social Contribution tax		(15,019	)		(10,947	)

		(18,364	)		(13,205	)

Net income		35,648			25,634

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	Consolidated			Holding company
	Jul to Sep 2018			Jul to Sep 2018
Results of discontinued operations
Operating revenues
Other operating revenues
Telecoms services		46,950			46,950
Leasing and Rentals		1,998			1,998
Other operating revenues		17			17

		48,965			48,965

Deductions from operational revenue
PIS, Pasep and Cofins taxes		(1,884	)		(1,884	)
ICMS tax		(10,395	)		(10,395	)
Others		(525	)		(525	)

		(12,804	)		(12,804	)

		36,161			36,161

Operating expenses
Outsourced services		(9,358	)		(9,358	)
Other operating expenses, net		(5,425	)		(5,425	)

		(14,783	)		(14,783	)

Finance income		252			252
Income and Social Contribution tax
Current income tax and Social Contribution tax		(2,150	)		(2,150	)
Deferred income tax and Social Contribution tax		(5,204	)		(5,204	)

		(7,354	)		(7,354	)

Net income		14,276			14,276

The cash flows of the discontinued operations, related to the assets classified as held for sale, on September 30, 2018, are as follows:


	Consolidated			Holding company
	Jan to Sep 2018			Jan to Sep 2018
Cash flow from discontinued operations
Net cash flow from operations		51,271			43,310
Cash flow from investment activities		(7,631	)		—

Increase in cash and cash equivalents		43,640			43,310

The amounts of results and cash flows of the holding company are different from the consolidated amounts due to the merger of Cemig Telecom, on March, 31, 2018. For more details please see Note 1.

The assets classified as held for sale and the results of the discontinued operations are presented in Note 31 as Telecom segment.

31.

OPERATING SEGMENTS

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The information by segment relating to the period ending on September 30, 2018 and 2017 is shown below in a consolidated manner:


INFORMATION BY SEGMENT ON SEPTEMBER 30, 2018 (Restated)
	ELECTRICITY									GAS			TELECOMS (1)			OTHER			ELIMINATIONS			TOTAL (Restated)
	GENERATION			TRANSMISSION			DISTRIBUTION (Restated)			GAS			TELECOMS (1)			OTHER			ELIMINATIONS			TOTAL (Restated)
SEGMENT ASSETS		15,083,981			3,925,781			21,490,936			1,900,985			304,058			1,625,398			(1,148,043	)		43,183,096
INVESTMENT IN AFFILIATES AND JOINTLY-CONTROLLED ENTITIES		4,618,530			1,152,096			1,841,593			—			—			24,876			—			7,637,095
ADDITIONS TO THE SEGMENT		228,926			—			543,859			40,302			8,631			184			—			821,902
ADDITIONS TO FINANCIAL ASSETS		—			12,726			—			—			—			—			—			12,726
GOING CONCERN
NET REVENUE		4,795,883			478,258			10,443,959			1,186,796			—			97,316			(207,961	)		16,794,251
COST OF ENERGY AND GAS
Energy purchased for resale		(2,921,763	)		—			(5,696,990	)		—			—			(2	)		42,694			(8,576,061	)
Charges for use of the national grid		(171,357	)		—			(1,119,124	)		—			—			(1	)		149,579			(1,140,903	)
Gas purchased for resale		—			—			—			(897,903	)		—			—			—			(897,903	)

Operational costs, total		(3,093,120	)		—			(6,816,114	)		(897,903	)		—			(3	)		192,273			(10,614,867	)
OPERATING COSTS AND EXPENSES
Personnel		(166,779	)		(76,587	)		(669,637	)		(36,511	)		(14,807	)		(24,060	)		—			(988,381	)
Employees’ and managers’ Profit sharing		(2,994	)		(1,577	)		(12,674	)		—			351			(5,927	)		—			(22,821	)
Post-retirement obligation		(33,817	)		(19,886	)		(166,273	)		—			—			(30,352	)		—			(250,328	)
Materials		(30,493	)		(2,967	)		(38,542	)		(1,271	)		(973	)		(190	)		17			(74,419	)
Outsourced services		(80,966	)		(28,046	)		(619,133	)		(14,497	)		(4,819	)		(15,365	)		9,991			(752,835	)
Depreciation and amortization		(122,768	)		—			(440,055	)		(54,796	)		(1,166	)		(319	)		—			(619,104	)
Operating provisions (reversals)		(74,742	)		(4,097	)		(251,112	)		—			666			(72,833	)		—			(402,118	)
Construction costs		—			(12,726	)		(543,860	)		(35,620	)		—			—			—			(592,206	)
Other operating expenses, net		(61,537	)		(11,515	)		(177,001	)		(8,535	)		(2,866	)		(7,367	)		5,680			(263,141	)

Total cost of operation		(574,096	)		(157,401	)		(2,918,287	)		(151,230	)		(23,614	)		(156,413	)		15,688			(3,965,353	)

OPERATING COSTS AND EXPENSES		(3,667,216	)		(157,401	)		(9,734,401	)		(1,049,133	)		(23,614	)		(156,416	)		207,961			(14,580,220	)
Share of (loss) profit, net, of associates and joint ventures		(250,755	)		160,055			19,582			—			(763	)		(4,105	)		—			(75,986	)
OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES) AND TAXES		877,912			480,912			729,140			137,663			(24,377	)		(63,205	)		—			2,138,045
Finance income		443,594			24,314			301,822			50,876			1,104			31,998			(2,246	)		851,462
Finance expenses		(1,502,090	)		(3,694	)		(493,217	)		(27,028	)		(4,107	)		(10,902	)		2,246			(2,038,792	)

INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX		(180,584	)		501,532			537,745			161,511			(27,380	)		(42,109	)		—			950,715
Income and Social Contribution taxes		(12,242	)		(84,074	)		(172,064	)		(52,486	)		8,659			24,093			—			(288,114	)

RESULT OF GOING CONCERN OPERATIONS		(192,826	)		417,458			365,681			109,025			(18,721	)		(18,016	)		—			662,601
DISCONTINUED OPERATIONS
Income for the period from discontinued operations (Note 30).		—			—			—			—			35,648			—			—			35,648

NET INCOME (LOSS) FOR THE PERIOD		(192,826	)		417,458			365,681			109,025			16,927			(18,016	)		—			698,249

Equity holders of the parent		(192,826	)		417,458			365,681			108,507			16,927			(18,016	)		—			697,731
Non-controlling interests		—			—			—			518			—			—			—			518

		(192,826	)		417,458			365,681			109,025			16,927			(18,016	)		—			698,249

(1)	As stated in Note 30, certain telecommunications assets were classified as held for sale. The revenues and expenses of the telecommunications segment resulting from continued operations continue to be recognized in the statement of income of the telecoms segment.

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INFORMATION BY SEGMENT ON SEPTEMBER 30, 2017
	ELECTRICITY									GAS			TELECOMS (1)			OTHER			ELIMINATIONS			TOTAL
	GENERATION			TRANSMISSION			DISTRIBUTION			GAS			TELECOMS (1)			OTHER			ELIMINATIONS			TOTAL
SEGMENT ASSETS		13,868,749			4,147,643			18,430,584			2,049,736			334,918			3,369,322			(368,877	)		41,832,075
INVESTMENT IN AFFILIATES AND JOINTLY-CONTROLLED ENTITIES		4,565,559			1,671,072			1,748,994									634,501			—			8,620,126
ADDITIONS TO THE SEGMENT		249,826			—			705,295			40,097			34,738			—			—			1,029,956
ADDITIONS TO FINANCIAL ASSETS		—			11,226			—			—			—			—			—			11,226
NET REVENUE		5,307,670			547,179			8,281,712			1,061,564			88,389			83,160			(215,893	)		15,153,781
COST OF ENERGY AND GAS
Energy purchased for resale		(3,021,466	)		—			(4,717,386	)					—			(9	)		53,469			(7,685,392	)
Charges for use of the national grid		(261,295	)		(262	)		(661,101	)					—			—			131,319			(791,339	)
Gas purchased for resale		—			—			—			(789,861	)		—			—			—			(789,861	)

Operational costs, total		(3,282,761	)		(262	)		(5,378,487	)		(789,861	)		—			(9	)		184,788			(9,266,592	)
OPERATING COSTS AND EXPENSES
Personnel		(218,933	)		(84,022	)		(877,192	)		(36,286	)		(14,559	)		(44,675	)		—			(1,275,667	)
Employees’ and managers’ net income shares		(4,182	)		(1,871	)		(18,131	)		—			(380	)		(1,213	)		—			(25,777	)
Post-retirement obligation		(42,539	)		(19,850	)		(201,745	)		—			—			(29,483	)		—			(293,617	)
Materials		(7,468	)		(2,110	)		(32,089	)		(1,434	)		(107	)		(111	)		13			(43,306	)
Outsourced services		(97,890	)		(21,278	)		(550,614	)		(12,231	)		(20,624	)		(7,278	)		29,346			(680,569	)
Depreciation and amortization		(136,400	)		—			(400,754	)		(41,836	)		(25,974	)		(11,819	)		—			(616,783	)
Operating provisions (reversals)		(97,543	)		(9,148	)		(347,608	)		—			(456	)		(104,038	)		—			(558,793	)
Construction costs		—			(11,226	)		(705,296	)		(20,232	)		—			—			—			(736,754	)
Other operating expenses, net		(35,322	)		(6,550	)		(240,404	)		(7,506	)		(18,501	)		(5,044	)		1,746			(311,581	)

Total cost of operation		(640,277	)		(156,055	)		(3,373,833	)		(119,525	)		(80,601	)		(203,661	)		31,105			(4,542,847	)

OPERATING COSTS AND EXPENSES		(3,923,038	)		(156,317	)		(8,752,320	)		(909,386	)		(80,601	)		(203,670	)		215,893			(13,809,439	)
Share of (loss) profit, net, of associates and joint ventures		151,126			—			—			—			(1,951	)		(169,855	)		—			(20,680	)
OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES) AND TAXES		1,535,758			390,862			(470,608	)		152,178			5,837			(290,365	)		—			1,323,662
Finance income		126,202			5,013			302,727			24,240			2,149			89,734			—			550,065
Finance expenses		(847,998	)		(1,886	)		(616,487	)		(30,594	)		(11,450	)		236,464			—			(1,271,951	)

INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAX		813,962			393,989			(784,368	)		145,824			(3,464	)		35,833			—			601,776
Income and Social Contribution taxes		(215,688	)		(120,333	)		245,677			(45,316	)		307			(69,241	)		—			(204,594	)

NET INCOME (LOSS) FOR THE PERIOD		598,274			273,656			(538,691	)		100,508			(3,157	)		(33,408	)					397,182

Equity holders of the parent		598,274			273,656			(538,691	)		100,076			(3,157	)		(33,408	)		—			396,750
Non-controlling interests		—			—			—			432			—									432

		598,274			273,656			(538,691	)		100,508			(3,157	)		(33,408	)		—			397,182

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32.

THE ANNUAL TARIFF ADJUSTMENT AND TARIFF REVIEW OF CEMIG D

The increase is in effect from May 28, 2018 to May 27, 2019.

33.

NON-CASH TRANSACTIONS

In the nine-month period ended September 30, 2018 and 2017, the subsidiaries made the following transactions not involving cash, which are not reflected in the Cash flow statements:

◾

Capitalized borrowing costs of R$ 23,508 in the nine-month period ended September 30, 2018 (R$ 56,851 in the nine-month period ended September 30, 2017);

◾

Except for the balance of cash and equivalents received in the merged of Cemig Telecom, in the amount of R$ 428 on March 31, 2018, the remaining balances merged have no effect on the Company’s cash flow.

34.

SUBSEQUENT EVENTS

Debt prepayment

Cemig GT received first installment of the loan granted to Cemig D

On November 20, 2018 Cemig GT received payment of R$ 486 million, the first installment of principal and interest on its loan of R$ 630 million made on September 18, 2018 to Cemig Distribuição. Therefore, Cemig GT is once again compliant with the ‘Limitation on Restricted Payments’ clause in its Eurobond issue.

Cancellation of public offer of shares issued by Light and sale of shares owned by RME in that investee

On November 26, 2018 the shareholders of the controlling shareholding block of Light –composed by Company, Rio Minas Energia Participações S.A. (‘RME’) and Luce Empreendimentos e Participações S.A. (Lepsa) – considered that the terms and conditions proposed for the anchoring of the public offer to sell shares of Light do not meet the interests of Light and its stakeholders, taking into account, among other factors, the present conditions of the market.

Thus, on November 27, 2018, the Company and its jointly-controlled entity reported to the market the cancellation of public offer of shares issued by Light, and, on the same date, in the context of the exercise of the Put Option to sell shares issued by RME described in note 29, RME sold 4,350 thousand shares, representing 2.13% of the share capital of Light, for a total amount of R$ 64.5 million. With this sale, the aggregate of the equity holdings in Light of Cemig, RME and Luce Empreendimentos e Participações S.A. now totals 49.99%.

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CONSOLIDATED RESULTS

(Thousands of Brazilian Reais – R$ except where otherwise indicated)

Net income (loss) for the period

In the nine-month period ended September 30, 2018 (‘9M18’) Cemig reports net income of R$ 698,249, which compares with its net income of R$ 397,182 in the nine-month period ended September 30, 2017 (‘9M17’). The following notes describe the main variations between the two periods in revenues, costs, expenses and financial items.

A significant effect on the net income in 9M18 was an expense of R$ 773,700, from the effect of exchange rate variation on the debt raised in international market (Eurobonds) – partially offset by gains under the hedge operation related to this loan, in the amount of R$ 322,847.

Ebitda (earnings before interest, tax, depreciation and amortization)

Cemig’s consolidated Ebitda raised 43.93% in 9M18, compared to the same period of 2017. The most significant factors in this variation are set out below. In line with the higher Ebitda, Ebitda margin went from 12.80% (9M17) to 16.63% (9M18).


*Ebitda – R$ ‘000*	Jan to Sep 2018 (Restated)		Jan to Sep 2017		Change,% (Restated)
Net income for the period		698,249		397,182		75.80
+ Income tax and Social Contribution tax		288,114		204,594		40.82
+ Finance income (expenses)		1,187,330		721,886		64.48
+ Depreciation and amortization		619,104		616,783		0.38

= Ebitda		2,792,797		1,940,445		43.93

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Ebitda is a non-accounting measure prepared by the Company, reconciled with the consolidated Interim financial information in accordance with CVM Circular SNC/SEP 1/2007 and CVM Instruction 527 of October 4, 2012. It comprises Net income adjusted by the effects of net Finance income (expenses), Depreciation and amortization, and Income tax and Social Contribution tax. Ebitda is not a measure recognized by Brazilian GAAP nor by IFRS; it does not have a standard meaning; and it may be non-comparable with measures with similar titles provided by other companies. Cemig publishes Ebitda because it uses it to measure its own performance. Ebitda should not be considered in isolation or as a substitution for Net income or operating income, nor as an indicator of operational performance or cash flow, nor to measure liquidity nor the capacity for payment of debt.

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Revenue from supply of energy

Total revenue from supply of energy in 9M18 totaled R$ 18,163,647, compared to R$ 17,387,754 in 9M17, 4.46% higher period-on-period.

Final customers

Total revenue from supply of energy to final customers, excluding Cemig’s own consumption, was R$ 15,947,719 in 9M18 – this was 6.13% higher than the same period of 2017 (R$ 15,027,061).

The main factors for this reduction were:

◾

The annual tariff adjustment for Cemig D effective May 28, 2017 (full effect in 2018) with average downward effect on customer tariffs of 10.66%.

◾

The annual tariff adjustment for Cemig D effective May 28, 2018, with an average positive effect on customer tariffs of 23.19%.

◾

Volume of energy sold to final customers 2.41% higher.

Cemig’s electricity market

The total for sales at Cemig’s consolidated electricity market comprises sales to:

(i)

Captive customers in Cemig’s concession area in the State of Minas Gerais;

(ii)

Free customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ACL);

(iii)

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

(iv)

Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and

(v)

the Wholesale Power Exchange (Câmara de Comercialização de Energia Elétrica – CCEE), eliminating transactions between companies of the Cemig Group.

The table below describe Cemig’s market and the change in the sale of energy by category of customers, comparing 9M18 with 9M17:


	MWh
	Jan to Sep 2018		Jan to Sep 2017		Change, %
Residential		7,648,175		7,489,980		2.11
Industrial		13,134,700		13,162,944		(0.21	)
Commercial, Services and Others		6,195,337		5,581,213		11.00
Rural		2,777,694		2,769,082		0.31
Public authorities		641,551		644,621		(0.48	)
Public lighting		1,038,236		1,030,199		0.78
Public services		977,151		977,757		(0.06	)

Subtotal		32,412,844		31,655,796		2.39

Own consumption		33,083		26,946		22.78

		32,445,927		31,682,742		2.41

Wholesale supply to other concession holders (1)		8,768,341		9,167,876		(4.36	)

Total		41,214,268		40,850,618		0.89

(1)	Includes Regulated Market Electricity Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.

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We highlight the volume of energy sold to the industrial customer category, which was 11% higher in the commercial category and 2.11% higher in the residential customer category – basically due to addition of new customers units.

Revenue from Use of Distribution Systems (the TUSD charge)

This is revenue from charging Free Customers the Tariff for Use of the Distribution System (Tarifa de Uso do Sistema de Distribuição, or TUSD) on the volume of energy distributed. In 9M18 this revenue totaled R$ 1,419,958, compared to R$ 1,230,623 in 9M17 – a period-on-period reduction of 15.39%, mainly due to the following factors:

◾

Reduction of approximately 40% in the TUSD, which took place in the Cemig D’s 2017 annual tariff adjustment, applied as from May 28, 2017 (full effect in 2018).

◾

Increase of approximately 36% in the TUSD, which took place in the Cemig D’s 2018 annual tariff adjustment, applied as from May 28, 2018.

◾

Growth in the use of the network (MWh) and in billed demand (MW).

◾

Increase in the number of installations of CUSD (Contract for Use of the Distribution System) billed.

CVA and Other financial components in tariff adjustment

In its interim financial information Cemig recognizes the difference between actual non-controllable costs (in which the CDE, and energy purchased for resale, are significant components) and the costs that were used in calculating tariffs. The amount of this difference is passed through to the clients in Cemig D’s next tariff adjustment. In 9M18 this represented a gain in revenue of R$ 1,783,790, whereas in the same period of 2017 it produced a reduction of R$ 148,216. The difference in this case is mainly due to the increase in costs of energy in 2018, in relation to tariff coverage, generating a financial asset to be reimbursed to the Company through the next tariff adjustment.

For more details please see Note 14 of this interim financial information.

Transmission concession revenue

This revenue was R$ 310,293 in 9M18, compared to R$ 221,422 in the same period of 2017 – or 40.14% higher period-on-period. This variation arises basically from the monetary variation of the annual RAP, which was applied in July 2018, plus the new revenues related to the investments authorized to be included. It includes an additional adjustment for expectation of cash flow from financial assets, arising from change in the fair value of the Regulatory Remuneration Asset Base (BRR).

The percentages and the indices applied in this adjustment vary according to the concessions. In 2018 the adjustment was 2.86% (the IPCA index) for the concession of Cemig GT, and 4.27% (the IGP-M Index) for the concession of Cemig Itajubá.

Transmission indemnity revenue

The revenue from the transmission Indemnities in 9M18 was R$ 208,164, which was 29.61% less than in the same period of 2017 (R$ 295,749). We highlight the amount of R$ 149,255 recorded for 2017, relating to the backdated revenue of transmission concession assets the values of which had not been included in the calculation basis for revenues in the previous tariff reviews.

The Company reports the updating of the amount of indemnity receivable based on the average regulatory cost of capital, as specified in the sector regulations.

For more details please see Note 14 of these Interim Financial Information.

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Generation indemnity revenue

In 9M18 the Company recognized revenue of R$ 82,331 (R$ 259,516 in 9M17) for the adjustment to the balance not yet amortized relating to the basic plans of the concessions for the São Simão and Miranda hydroelectric plants, to be indemnified as per Ministerial Order 291/17.

For more details see Note 14 of these Interim Financial Information.

Revenue from transactions in the Wholesale Electricity Trading Chamber (CCEE)

Revenue from energy transactions at CCEE in 9M18 was R$ 189,123, compared to R$ 536,507 in 9M17 – a reduction of 64.75%. The lower revenue from this source reflects the lower quantity of energy available for settlement in the wholesale market in 2018, being that, in the first quarter of 2017, the Company recognized revenues concerning available energy of Jaguara and Miranda. On the other hand, the average Spot Price (PLD) increased by 10.99% (R$ 332.34/MWh in 9M18, vs. R$ 299.42/MWh in 9M17).

Revenue from supply of gas

Cemig reported revenue from supply of gas totaling R$ 1,452,427 in 9M18, compared to R$ 1,305,636 in 9M17– 11.24% higher than prior year. This basically is due to increase of gas costs, passed on to customers considering that the volume of gas sold was 12.47% lower than prior year (859,725 m³ in 9M18, compared to 982,235 m³ in 9M17). The gas cost was significantly affected by exchange rate variation in 2018. In 9M18 the US Dollar showed an increase of 21.04% against a reduction of 2.80% in the same period of 2017.

Construction revenue

Infrastructure construction revenue in 9M18 was R$ 592,206, which was 19.62% less than in the prior year (R$ 736,754). This revenue is fully offset by Construction costs, of the same amount, and corresponds to the Company’s investments in assets of the concession in the period.

Other operating revenues

The Company’s Other revenues in 9M18 were R$ 1,409,284, or 8.89% more than in the same period of 2017 (R$ 1,339,698). See Note 25 for the composition of operating revenues.

Sector / Regulatory charges reported as Deductions from revenue

The charges that are recorded as deductions from operational revenue totaled R$ 8,816,972 in 9M18 or 6.13% more than in the prior year (R$ 8,308,094).

The Energy Development Account – CDE

The amounts of payments to the Energy Development Account (CDE) are decided by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities, tariff subsidies, and the subsidy for balanced tariff reduction, the low-income customer subsidy, the coal consumption subsidy, and the Fuels Consumption Account. Charges for the CDE in 9M18 were R$ 1,835,412, compared to R$ 1,326,946 in 9M17.

This is a non-manageable cost: the difference between the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Customer charges – the ‘Flag’ Tariff system

The ‘Flag’ Tariff bands are activated as a result of low levels of water in the system’s reservoirs – tariffs are temporarily increased due to scarcity of rain. The ‘Red’ band has two levels – Level 1 and Level 2. Level 2 comes into effect when scarcity is more intense. Activation of the flag tariffs generates an upward effect on billing in the subsequent month.

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Consumer charges resulting from the ‘Flag’ tariff system were higher in 9M18 – at R$ 374,481, than in 9M17 (R$ 258,060) – or 45.11% higher year-on-year.

This reflects greater application of the Red band in 2018 than in 2017, due to (i) lower reservoir levels, and (ii) lower expectations of rain.

Other taxes and charges on revenue

Operating costs and expenses (excluding Finance income/expenses)

Operating costs and expenses in 9M18 totaled R$ 14,580,220, or 5.58% more than in the same period of 2017 (R$ 13,809,439). For more on the components of Operational costs and expenses see Note 26.

The following paragraphs outline the main variations in expenses:

Energy purchased for resale

This expense in 9M18 was 11.59% higher than prior year, at R$ 8,576,061, compared to R$ 7,685,392 in the same period of 2017. This is mainly due to the following:

◾

Average spot price (PLD) 10.99% higher, at R$ 332.34/MWh in 9M18, compared to R$ 299.42/MWh in 9M17, directly affecting the price paid for spot supply.

◾

The expense on supply acquired at auction in the Regulated Market was 16.18% higher, at R$ 2,558,096, in 9M18, compared to R$ 2,201,909 in the prior year. This is mainly due to recognition of supply originating in assignments of energy from the Surpluses and Deficits Compensation Mechanism (MCSD), representing an increase of R$ 410,498 in the expense in 9M18 partially offset by the reduction in volume of supply in the contracts for quantity and availability (13,128,621 MWh in 9M18, and 19,434,006 MWh in 9M17).

◾

Expenses on energy acquired through physical guarantee quota contracts at R$ 500,876 in 9M18, 45.83% higher than in the prior year (R$ 343,458). This is basically due to the increase of 48.14% in the average tariff of Cemig D’s quotas – it was R$ 89.18 MWh in 9M18 and R$ 60.20 MWh in 9M17.

Charges for use of the transmission network

Charges for use of the transmission network in 9M18 totaled R$ 1,140,903, an increase of 44.17% period-on-period, compared to R$ 791,339 in the prior year.

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Operating provisions

Operating costs and expenses in 9M18 totaled R$ 402,117, or 28.04% less than 9M17 (R$ 558,793). The main factors are:

◾

Reduction in fair value of the investment options related to Parati/RME and SAAG, totaling R$ 124,566 in 9M18, compared to a total provision of R$ 160,902 in the prior year. More details on the criteria for making of these provisions are in Note 29 (Put options).

◾

Reduction of 82.12% of expenses on labor contingencies, with R$ 33,610 in 9M18, compared to R$ 188,013 in the same period of 2017. This result is the consequence of judgments given in favor of the Company – against claims by plaintiffs. For more information see Note 23.

◾

On the other hand, estimated losses due to doubtful receivables were 19.05% higher year-on-year, at R$ 227,789 in 9M18, vs. R$ 191,343 in 9M17. This mainly comprised recognition by Cemig D of estimated losses in 2018 related to past due bills for power supply, owed by Public Authorities.

Personnel

The expense on personnel in 9M18 was R$ 988,381, or 22.52% lower than in the prior year (R$ 1,275,667). This arises mainly from the following factors:

◾

Expense of R$ 25,666 on the voluntary retirement program in 9M18, compared to R$ 197,326 in 9M17 – i.e. 86.99% lower;

◾

Salary increases, from November 2017 under the Collective Agreement (with full effect in 2018), of 1.83%.

◾

The average number of employees was reduced by 11.11%, from 6,631 in 9M17 to 5,894 in 9M18.

Construction cost

Infrastructure construction cost in 9M18 was R$ 592,206, or 19.62% less than in the prior year (R$ 736,754). This line records the Company’s investment in assets of the concession in the period, and is fully offset by the line Construction Revenue, in the same amount.

Gas purchased for resale (*)

In 9M18 the company recorded an expense of R$ 897,903 on acquisition of gas, 13.68% more than its comparable expense of R$ 789,861 in the prior year. This higher expense mainly reflects increases in the prices of gas purchased, since the volume of Gas purchased was 13.34% lower than the prior year (855,724 m³ in 9M18 vs. 987,442 m³ in 9M17). Gas price was significantly affected by the exchange rate variation in 2018. In 9M18 US Dollar showed an increase of 21.04% against a reduction of 2.80% in the same period of 2017.

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Share of profit (loss) in associates and joint ventures

The result of equity method valuation of interests in investees was an expense of R$ 75,986 in 9M18, compared to an expense of R$ 20,680 in 9M17. This basically reflects losses in 2018 on the interests in Renova and Santo Antônio Energia.

The breakdown of the results from the investees recognized under this line is given in detail in Note 15.

Net finance income (expenses)

Cemig reports net Finance expenses in 9M18 of R$ 1,187,330, compared to net Finance expenses of R$ 721,886 in the same period of 2017. The main factors are:

◾

Recognition, in 2018, of gains totaling R$ 322,847 on the hedge transaction related to the Eurobond issue. There had been a negative effect in the fair value adjustment of the hedge due to a higher variation in the future curve for the DI rate than in the curve for future expectation of the R$ /US$ exchange rate.

◾

Cash investment income 52.80% lower period-on-period, at R$ 80,958 in 9M18, compared to R$ 171,530 in the same period of 2017. This is mainly due to a lower volume of cash invested in 2018, and also to the lower CDI rate in the period: 4.81% in 9M18 vs. 8.03% in 9M17.

◾

Costs of loans and financings 18.65% lower, at R$ 944,432 in 9M18, compared to R$ 1,160,884 in the prior year. This is mainly due to the lower variation resulting from the CDI rate, the main indexer of the debt, which was 4.81% in 9M18, and 8.03% in 9M17.

◾

Revenue from late charges on client energy bills 34.51% higher, at R$ 259,680 in 9M18, compared to R$ 193,057 in the same period of 2017. A major component of this increase comes from the effects of renegotiation of amounts owed on energy bills by entities of the Minas Gerais State administration – as recognition of interest and monetary adjustments.

◾

Expenses on monetary updating of loans and financings 47.39% higher, at R$ 110,031 in 9M18, compared to R$ 74,655 in 9M17. This is mainly due to the variation of 87.64% in IPCA rate (3.34% in 9M18 and 1.78% in 9M17);

◾

Foreign exchange variation expense of R$ 773,700, in 9M18, on the amounts of the dollar-indexed Eurobond issues – made in December 2017 (US$ 1 billion, or R$ 3.2 billion) and July 2018 (US$ 500 million, or R$ 1.9 billion).

◾

Higher net result of monetary updating on the balances of CVA and Other financial components: net revenue of R$ 35,180 in 9M18, compared to a net expense of R$ 40,086 in the same period of 2017, basically reflecting the higher balance of net assets in 9M18 than in 9M17.

For a breakdown of Finance income and expenses please see Note 27 of these Interim financial information.

Income and Social Contribution taxes

In 9M18 the expense on income tax and the Social Contribution tax totaled R$ 288,114, on Income before income tax and social contribution tax of R$ 950,715, representing an effective rate of 30.30%. In the same period of 2017, the expense on income tax and the Social Contribution tax totaled R$ 204,594, on Income before income tax and social contribution tax of R$ 601,776, representing an effective rate of 34.00%. These effective rates are reconciled with the nominal tax rates in Note 9c.

Net income (loss) for the third quarter 2018

On the third quarter of 2018 (‘3Q18’) Cemig reports a net profit of R$ 244,540, which compares to a loss of R$ 83,666 on the third quarter of 2017 (‘3Q17’). The following notes describe the main variations between the two periods in revenues, costs, expenses and financial items.

This primarily reflected significant net non-operating expenses of R$ 225,900, arising from FX variation on the debt raised in international market (Eurobond issue); partially offset by the effects of gains under the hedge transaction made by the Company related to this loan in the amount of R$ 142,418.

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Ebitda (earnings before interest, tax, depreciation and amortization)

Cemig’s consolidated Ebitda in 3Q18 increased compared to 3Q17. The most significant factors in this variation are set out below. Ebitda margin in 3Q18 was 14.43%, compared to 1.97% in 3Q17.


*Ebitda – R$ ‘000*	Jul to Sep 2018 (Restated)		Jul to Sep 2017			Change,% (Restated)
Net income for the period		244,540		(83,666	)		—
+ Income tax and Social Contribution tax		117,269		(9,334	)		—
+ Finance income (expenses)		332,698		(12,414	)		—
+ Depreciation and amortization		207,804		205,983			0.88

= Ebitda		902,311		100,569			797.21

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Revenue from supply of energy

Total revenue from supply of energy was R$ 6,927,638 in 3Q18, compared to R$ 5,815,621 in 3Q17, 19.12% higher period-on-period.

Final Customers

Total revenue from supply of energy to final customers, excluding Cemig’s own consumption, in 3Q18 was R$ 6,105,396 or 25.05% higher than the figure for 3Q17, of R$ 4,882,538.

The main factors for this reduction were:

◾

The Annual Tariff Adjustment for Cemig D effective May 28, 2018, with an average positive effect on customer tariffs of 23.19%.

◾

Volume of energy sold to final customers 3.81% higher.

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Cemig’s electricity market

The total for sales at Cemig’s consolidated electricity market comprises sales to:

(i)

Captive customers in Cemig’s concession area in the State of Minas Gerais;

(ii)

Free customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ACL);

(iii)

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

(iv)

Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and

(v)

the Wholesale Electricity Trading Chamber (Câmara de Comercialização de Energia Elétrica—CCEE), eliminating transactions between companies of the Cemig Group.

The table below describe Cemig’s market and the change in the sale of energy by category of customers, comparing 3Q18 with 3Q17:


	MWh (1)
	Jul to Sep 2018		Jul to Sep 2017		Change, %
Residential		2,497,296		2,456,908		1.64
Industrial		4,581,890		4,458,794		2.76
Commercial, Services and Others		1,996,913		1,776,377		12.41
Rural		1,057,426		1,016,897		3.99
Public authorities		207,162		207,967		(0.39	)
Public lighting		349,429		354,299		(1.37	)
Public services		323,919		338,415		(4.28	)

Subtotal		11,014,035		10,609,657		3.81

Own consumption		9,602		8,896		7.94

		11,023,637		10,618,553		3.81

Wholesale supply to other concession holders (2)		3,160,972		3,427,498		(7.78	)

Total		14,184,609		14,046,051		0.99

(1)	Information in MWh has not been reviewed by external auditors.

(2)	Includes Regulated Market Electricity Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.

Some highlights of growth here are: a) volume of energy sold to the residential user category 1.64% higher; and volume sold to the commercial category 12.41% higher, due to connection of new customers; b) volume of energy sold to the industrial segment 2.76% higher due to addition of one high-voltage large-consumer client; and c) volume of energy sold to the rural category 3.99% higher, reflecting the strong retraction in consumption by this segment of the market in 2017 due to reduced activity in the farming sector in that year.

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Revenue from Use of Distribution Systems (the TUSD charge)

This is revenue from charging Free customers the Tariff for Use of the Distribution System (Tarifa de Uso do Sistema de Distribuição, or TUSD), for transport of energy sold. In 3Q18 this revenue was R$ 605,618, a period-on-period increase of 83.44% from R$ 330,147 in 3Q17, mainly due to the following factors:

◾

Increase of approximately 36% in the TUSD, which took place in the Cemig D’s 2018 annual tariff adjustment, applied as from May 28, 2018; and

◾

Growth in the use of the network (MWh) and in billed demand (MW).

◾

Increase in the number of installations of CUSD billed.

CVA and Other financial components in tariff adjustment

In its interim financial information Cemig recognizes the difference between actual non-controllable costs (in which the CDE, and energy purchased for resale, are significant components) and the costs that were used in calculating tariffs. The amount of this difference is passed through to the clients in Cemig D’s next tariff adjustment. In 3Q18 this represented a gain in revenue of R$ 633,118, whereas 3Q17 it produced a reduction of R$ 480,112. The difference in this case is mainly due to the increase in costs of energy, in relation to tariff coverage, and in comparison with periods of analysis, generating a financial asset to be reimbursed to the Company through the next tariff adjustment. For more details please see Note 14 of this interim financial information.

Revenue from transactions in the Wholesale Electricity Trading Chamber (CCEE)

Revenue from energy sales on the CCEE in 3Q18 was R$ 29,157, compared to R$ 111,330 in 3Q17 – a reduction of 73.81%. The difference is due to the lower quantity of energy available for settlement in the wholesale market in 3Q18, due to the Company’s seasonal profile. In counterpart to this, the average spot price (PLD) was 13.63% higher (R$ 494.61/MWh in 3Q18, vs. R$ 435.27/MWh in 3Q17.

Transmission indemnity revenue

In 3Q18 this revenue was R$ 61,644, compared to R$ 25,894 in 3Q17 – or 138.06% higher period-on-period. We highlight the amount of R$ 149,255 recorded in 2017, relating to the backdated difference of transmission concession assets the values of which were not included in the calculation basis for revenues in the previous tariff reviews.

Generation indemnity revenue

In 3Q18 the Company recognized a gain of R$ 47,868 (R$ 259,516 in 3Q17) for the adjustment, as specified by Ministerial Order 291/17, to the balance not yet amortized of the value of the basic plans of the concessions for the São Simão and Miranda Hydroelectric Plants. For more details see Note 14.

Revenue from supply of gas

The Company reported revenue from supply of gas 14,23% higher in 3Q18, at R$ 553,448, compared to R$ 484,491 in 3Q17. This basically reflects the increase in the cost of gas, which was passed through to consumers – since there was in fact a reduction of 36.17% in the volume of gas sold (from 461,796 m³ in 3Q17 to 294,785 m³ in 3Q18). The cost of gas suffered a significant effect from FX variation in 2018. The US dollar appreciated by 3.84% against the Real in 3Q18, while in 3Q17 it depreciated by 4.24%.

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Construction revenue

Construction and infrastructure revenues (transmission, distribution and gas) totaled R$ 208,563 in 3Q18, which was 29.47% less than their total of R$ 295,720 in 3Q17. This revenue is fully offset by Construction costs, of the same amount, and corresponds to the Company’s investments in assets of the concession in the period.

Other operating revenues

Other revenues were 15.58% lower in 3Q18 (R$ 653,055), than in 3Q17 (R$ 773,580).

Sector / Regulatory charges reported as Deductions from revenue

The total of these taxes and charges incident upon operational revenue in 3Q18 was R$ 3,419,959 – an increase of 7.51% in relation to their total of R$ 3,181,073 in 3Q17.

The Energy Development Account – CDE

The amounts of payments to the Energy Development Account (CDE) are decided by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities, tariff subsidies, the subsidy for balanced tariff reduction, the low-income customer subsidy, the coal consumption subsidy, and the Fuels Consumption Account (CCC). The charges for the CDE in 3Q18 were R$ 654,452, compared to R$ 467,576 in 3Q17.

This is a non-manageable cost: the difference between the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Customer charges – the ‘Flag’ Tariff system

Consumer charges arising from the ‘Flag’ Tariff band system were 145.43% higher in 3Q18, at R$ 249,422, than in 3Q17 (R$ 101,625).

In 3Q17, the ‘Yellow’ flag tariff was activated affecting billing in August, and the ‘Red’ flag was activated at Level 1 affecting billing in August and September. In 3Q18, the Red flag was activated at Level 2, affecting billing for the months of August and September.

Other taxes and charges on revenue

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Operating costs and expenses (excluding Finance income/expenses)

Operational costs and expenses were up 7.01%: R$ 5,522,298 in 3Q18, and R$ 5,160,438 in 3Q17. For more on the components of Operational costs and expenses see Note 26.

The following paragraphs outline on the main variations in expenses:

Energy purchased for resale

The expense on energy purchased for resale in 3Q18 was R$ 3,493,463, compared to R$ 2,942,974 in 3Q17 – or 18.71% higher than prior year. The main factors are:

◾

The expense on energy supply bought at auction was 30.63% higher, at R$ 1,077,340 in 3Q18, vs. R$ 824,699 in 3Q17. This in turn was mainly due to inclusion of the supply coming from MCSD (Excess/Deficit Compensation Mechanism) assignments for new-build projects, which resulted in Cemig D’s expense being R$ 151,473 higher than in 3Q17. Also, in 3Q18, there was some dispatching of thermal plants outside the usual merit order for activation, increasing total fuel costs, with a consequent increase in the price of electricity supply.

◾

Expenses on supply acquired through physical guarantee quota contracts 59.03% higher, at R$ 189,251 in third quarter of 2018, compared to R$ 119,006 in 3Q17. This was basically due to the increase of 63.61% in the average tariffs of Cemig D’s quotas – at R$ 94.52 in 3Q18, compared to R$ 57.78 in 3Q17.

◾

Expense on supply acquired in the Free Market 11.50% lower at R$ 1,150,075 in 3Q18, compared to R$ 1,299,536 in 3Q17. This reflects a volume of energy purchased 12.08% lower in 3Q18 – at 5,999,382 MWh, vs. 6,823,933 MWh in 3Q17; partially offset by the effect of average price per MWh in 3Q18 being 4.60% higher (at R$ 195.56 in 3Q18, vs. R$ 186.96 in 3Q17);

◾

The expense on purchase of supply in the spot market, at R$ 733,160 in 3Q18, was 79.32% higher, vs. R$ 408,859 in 3Q17, due to the higher cost of supply in the wholesale market in 2018.

Charges for use of the transmission network

Charges for use of the transmission network in 3Q18 totaled R$ 332,323, compared to R$ 387,078 in 3Q17, an increase of 14.15% period-on-period.

This expense is payable by electricity distribution and generation agents for use of the facilities that are components of the national grid. The amounts to be paid are set by an Aneel Resolution.

Operating provisions

Operating provisions were 28.63% lower in the quarter – an expense of R$ 134,799 in 3Q18, compared to R$ 188,875 in 3Q17. The main factors are:

(i)

Reversal of provisions of R$ 79 was made in 3Q18 for the investment options of RME and Lepsa, compared to R$85,306 in the same period of 2017. More details on the criteria for making of these provisions are in Note 29 (Put options).

(ii)

Reversal of tax and civil provisions was made in 3Q18, in the amount of R$ 3,743 and R$ 2,345, respectively, compared to the provisions formed in the prior year of R$ 8,745 and R$ 5,565, respectively.

Personnel

The expense on personnel in 3Q18 was R$ 308,141, or 14.05% less than in 3Q17 (R$ 358,505). This arises mainly from the following factors:

◾

Salary increase of 1.83% under the Collective Work Agreement, from November 2017.

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◾

Expense of R$ 31,904 on the voluntary retirement program in the same period of 2017 in 3Q17.

◾

Reduction of the average number of employees by 4.33%, from 6,618 in 3Q17 to 5,899 in 3Q18.

Construction cost

Infrastructure Construction Cost in 3Q17 was R$ 208,563, 29.47% less than in 3Q17 (R$ 295,720). This line records the Company’s investment in assets of the concession in the period, and is fully offset by the line Construction Revenue, in the same amount.

Gas purchased for resale

In 3Q18 the Company recorded an expense of R$ 341,445 on acquisition of gas, 12.06% higher than its comparable expense of R$ 304,698 in 3Q17. This is basically due to a higher volume of gas purchased, being that there was a reduction of 14.09% in the volume of gas purchased for sale (293,334 m³ in 3Q18, vs. 341,445 m³ in 3Q17). The price of gas purchased was significantly affected by exchange rate variation in 2018. In 3Q18 US Dollar increased by 3.84% against a reduction of 4.24% in 3Q17.

Share of profit (loss) in associates and joint ventures

In 3Q18 Cemig posted a net loss of R$ 49,753 by the equity method – compared to a net loss of R$ 80,798 in 3Q17. These losses mainly come from the gain of R$ 43,143 in 3Q18, related to interests in Belo Monte Plant through Amazônia Energia S.A. and Aliança Norte.

More details in Note 15.

Net finance income (expenses)

Cemig reported net Finance expenses in 3Q18 of R$ 332,698, which compares with net Finance revenue of R$ 12,414 in 3Q17. The main factors are:

◾

Revenue from late charges on customer electricity bills 66.38% higher, at R$ 91,730 in 3Q18, compared to R$ 55,134 in 3Q17. A major component of this increase comes from the effects of renegotiation of amounts owed on electricity bills by entities of the Minas Gerais State administration – as recognition of monetary adjustment.

◾

Recognition, in 2018, of gains totaling R$ 142,418 on the hedge transaction related to the Eurobond issue. There had been a negative effect in the fair value adjustment of the hedge due to a higher variation in the future curve for the DI rate than in the curve for future expectation of the R$ /US$ exchange rate.

◾	Foreign exchange variation expense of R$ 225,900, in 9M18, on the amounts of the dollar-indexed Eurobond issues – made in December 2017 (US$ 1 billion, or R$ 3.2 billion) and July 2018 (US$ 500 million, or R$ 1.9 billion).

◾

The result of monetary updating of the balances of CVA was a gain of R$ 23,894, but in 3Q17 it was an expense of R$ 12,006. The positive and negative balances of CVA are updated by the Selic rate. This variation arises from there being an asset balance of CVA in 3Q18, leading to recording of a financial gain for updating the balance. In the same period of 2017, the Company had a net negative balance of CVA, recorded as a financial liability from updating of the obligation. For more information, see Note 14.

For a breakdown of Finance income and expenses please see Note 27 of these Interim financial information.

Income and Social Contribution taxes

In 3Q18, the expense on income tax and the Social Contribution tax was R$ 117,269, on Income before income tax and social contribution tax of R$ 347,533.

In 3Q17, the expense on income tax and the Social Contribution tax was R$ 9,334, on Losses before income tax and social contribution tax of R$ 93,000. These effective rates are reconciled with the nominal tax rates in Note 9c.

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OTHER INFORMATION THAT THE COMPANY BELIEVES TO BE MATERIAL

The Board of Directors:

Meetings

Our Board of Directors met 22 times up to September 30, 2018, for matters of strategic planning, projects, acquisition of new assets, various investments, and other subjects.

Membership, election and period of office

The present period of office began with the AGM on June 11, 2018, with election by the multiple voting system.

The periods of office of the present members of the Board of Directors expire at the Annual General Meeting of shareholders to be held in 2020.

Principal responsibilities and duties:

Under the by-laws, the Board of Directors has the following responsibilities and duties, as well as those conferred on it by law:

◾	Decision on any sale of assets, loans or financings, charge on the company’s property, plant or equipment, guarantees to third parties, or other legal acts or transactions, with value equal to 1% or more of the Company’s total Shareholders’ equity.

◾	Authorization for issuance of securities in the domestic or external market to raise funds.

◾	Approval of the Long-term Strategic and the Multi-year Business Plan, and alterations and revisions of them, and the Annual Budget.

Qualification and remuneration

A list with the names of the members of the Board of Directors and their résumés is on our website at: http://ri.cemig.com.br.

The Audit Committee

Under the by-laws, the Audit Committee of Cemig has the following duties, among others:

◾

to supervise the activities of the independent auditors, evaluating their independence, the quality of the services provided and the appropriateness of such services to the Company’s needs;

◾

to supervise activities in the areas of internal control, internal audit and preparation of the financial statements;

◾

to evaluate and monitor, jointly with the Management and the Internal Audit Unit, the appropriateness of the transactions with related parties.

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The Executive Board

The members of the Executive Board and brief résumés are on our website: http://ri.cemig.com.br

The members of the Executive Board (the Company’s Chief Officers) have individual responsibilities established by the Board of Directors and the by-laws. These include:

◾

Current Management of the Company’s business, complying with the Long-term Strategy, the Multi-year Business Plan, and the Annual Budget, prepared and approved in accordance with the by-laws.

◾

The Audit Board

Meetings

◾

The Audit Board held eleven meetings in the nine months to September 30, 2018.

Membership, election and period of office

◾	We have a permanent Audit Board, made up of five sitting members and their respective substitute members. They are elected by the Annual General Meeting of shareholders, for periods of office of two years.

◾	Nominations to the Audit Board must obey the following:

The majority of the members must be elected by the Company’s controlling shareholder; at least one must be a public employee, with a permanent employment link to the Public Administration.

◾	The members of the Audit Board are listed on Cemig’s website: http://ri.cemig.com.br

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Qualification and remuneration

The global or individual compensation of the members of the Audit Board shall be set by the General Meeting of Shareholders which elects it, in accordance with the applicable legislation.

Résumé information on its members is on our website: http://ri.cemig.com.br.

The Sarbanes-Oxley Law

Corporate risk management

Statement of Ethical Principles and Code of Professional Conduct

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The Ethics Committee

The Ethics Channel

Cemig installed this means of communication, available on the internal corporate Intranet, on December 13, 2006.

SHAREHOLDING POSITION OF HOLDERS OF

MORE THAN 5% OF THE VOTING SHARE

ON SEPTEMBER 30, 2018


	COMMON SHARES		%		PREFERRED SHARES		%		TOTAL SHARES		%
State of Minas Gerais		248,480,146		50.96		—		—		248,480,146		17.03
FIA Dinâmica Energia S.A.		41,635,754		8.54		62,469,590		6.43		104,105,344		7.14
BNDESPar		54,342,992		11.14		26,220,938		2.70		80,563,930		5.52

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CONSOLIDATED SHAREHOLDING POSITION OF

THE EQUITY HOLDERS OF THE PARENT AND MANAGERS,

AND FREE FLOAT ON SEPTEMBER 30, 2018


	Jan to Sep 2018
	Common (ON) shares		Preferred (PN) shares
Equity holders of the parent		248,480,146
Board of Directors:		100,501		196,000
The Executive Board		1		160,400
Treasury Shares		69		560,649
Free float		239,033,496		970,221,339

TOTAL		487,614,213		971,138,388

Investor Relations

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Corporate governance

In June 2018 an Extraordinary Meeting of Shareholders approved alterations to the Company’s bylaws, to maintain adoption of best corporate governance practices, and adaptation to Law 13303/2016 (also known as the State Companies Law).

The improvements now formally incorporated in the by-laws include:

•

Creation of the Audit Committee (Comitê de Auditoria). The Audit Board (Conselho Fiscal) remains in existence.

•

The Policy on Eligibility and Evaluation for nomination of a member of the Board of Directors and/or the Executive Board in subsidiary and affiliated companies,

•

The Related Party Transactions Policy.

•

Formal designation for the Board of Directors to ensure implementation of and supervision of the Company’s systems of risks and internal controls.

•

Optional power for the Executive Board to expand the technical committees (on which members are career employees), with autonomy to make decisions in specific subjects.

•

The CEO now to be ‘responsible for directing compliance and corporate risk management activities.

•

Greater emphasis on the Company’s control functions: internal audit, compliance, and corporate risk management.

•

Adoption of an arbitration chamber for resolution of any disputes between the Company, its shareholders, managers, and/or members of the Audit Board.

* * * * * * * * * * * *

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(The original is signed by the following signatories:)


Bernardo Afonso Salomão de Alvarenga	Luiz Humberto Fernandes	Maurício Fernandes Leonardo Júnior
Chief Executive Officer	Deputy CEO	Chief Finance and Investor Relations Officer
Ronaldo Gomes de Abreu	Franklin Moreira Gonçalves	Maura Galuppo Botelho Martins
Chief Distribution and Sales Officer	Chief Generation and Transmission Officer	Chief Officer for Human Relations
José de Araújo Lins Neto	Thiago de Azevedo Camargo	Dimas Costa
Chief Corporate Management Officer	Chief Institutional Relations and Communication Officer	Chief Trading Officer
Daniel Faria Costa		Neila Maria Barreto Leal
Chief Officer for Management of Holdings		Chief Counsel
Leonardo George de Magalhães		Leonardo Felipe Mesquita
Controller CRC-MG 53.140		Accounting Manager Accountant – CRC-MG-85.260

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Edifĺcio Phelps Offices Towers

Rua Antônio de Albuquerque, 156

11º andar - Savassi

30112-010 - Belo Horizonte - MG - Brasil

Tel:+55 31 3232-2100

Fax:+55 31 3232-2106

ey.com.br

Report on the review of interim information—ITR

To the Shareholders and Management of

Companhia Energética de Minas Gerais—CEMIG

Belo Horizonte—MG

Introduction

We have reviewed the individual and consolidated interim financial information of Companhia Energética de Minas Gerais—CEMIG (“Company”), contained in the Quarterly Information Form (ITR) for the quarter ended September 30, 2018, which comprise the statement of financial position as at September 30, 2018 and the statements of profit or loss and comprehensive income for the three and nine-month periods then ended and the statements of changes in equity and cash flows for the nine-month period then ended, including notes to the interim financial information.

Scope of review

Conclusion on the individual and consolidated interim financial information

268

Emphasis of matter

Risks related to compliance with laws and regulations

Risk regarding the ability of non-controlled investee Renova Energia S.A. to continue as a going concern

As disclosed in Note 15 to the interim financial information, the non-controlled indirect investee Renova Energia S.A. has incurred recurring losses and, as at September 30, 2018, has negative net working capital. These events or conditions indicate the existence of relevant uncertainty that may raise significant doubt about its ability to continue as a going concern. Our conclusion is not modified in respect of this matter.

Restatement of the individual and consolidated interim financial information

On November 14, 2018, we issued an unqualified review report on the Company’s individual and consolidated interim financial information for the quarter ended September 30, 2018, which are now being restated. As mentioned in note 2.3, these interim financial information have been amended and are being restated to reflect the correction of error relating to the amortization of accounts balances related to CVA Account (Portion A) and other financial components. Our conclusion is not modified in respect of this matter.

Other matters

Statements of value added

We have also reviewed the individual and consolidated Statements of Value Added (SVA) for the nine-month period ended September 30, 2018, prepared under the responsibility of Company management, the presentation of which in the interim financial information is required by the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information (ITR), and as supplementary information under the IFRS, whereby no SVA presentation is required. These statements have been subject to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that they are not consistently prepared, in all material respects, in relation to the overall accompanying interim financial information.

November 27, 2018.

ERNST & YOUNG

Auditores Independentes S.S.

CRC-2SP015199/O-6

Shirley Nara S. Silva

Accountant CRC-1BA022650/O-0

269

4. MARKET ANNOUNCEMENT DATED DECEMBER 20, 2018: CROSS-HOLDING ELIMINATION BETWEEN CEMIG GT AND ENERGIMP IS COMPLETED

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Ceará windfarms: elimination of crossover holdings completed

Complementing its Material Announcement of May 17, 2018 and in accordance with CVM Instruction 358 of January 3, 2002 as amended, Cemig (Companhia Energética de Minas Gerais, listed in São Paulo, New York and Madrid) hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (B3) and the market as follows:

The conditions specified in the Transaction Agreement between Cemig Geração e Transmissão S.A. (‘Cemig GT’) and Energimp S.A. (‘Energimp’) (‘the Parties’) have now been complied with, and on today’s date the Parties signed the related Memorandum of Conclusion of Elimination of Cross-holdings (‘the Conclusion document’).

With the signature of this document:

Elimination is completed of the cross-holdings previously existing between the Parties in the following wind farm companies in the Brazilian state of Ceará:

Central Eólica Praias de Parajuru S.A. (‘Parajuru’),

Central Eólica Volta do Rio S.A. (‘Volta do Rio’) and

Central Eólica Praia de Morgado S.A. (‘Morgado’).

All stockholding partnership between the Parties no longer exists;

Cemig GT now owns 100% of the share capital of Parajuru and Volta do Rio; and

Energimp owns 100% of the share capital of Morgado.

Belo Horizonte, December 20, 2018.

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

271

5. SUMMARY OF MINUTES OF THE 750^TH MEETING OF THE BOARD OF DIRECTORS DATED DECEMBER 28, 2018

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

BOARD OF DIRECTORS

Meeting of December 28, 2018

SUMMARY OF PRINCIPAL DECISIONS

At its 750^th meeting, held on December 28, 2018, the Board of Directors of Cemig (Companhia Energética de Minas Gerais) decided the following:

Approval of orientation of vote, by the representatives of Cemig on the Board of Directors of Renova, on sale of assets and reprofiling of credits owed by Renova to Cemig GT.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

273

6. MARKET ANNOUNCEMENT DATED JANUARY 2, 2019: RENOVA’S BOARD OF DIRECTORS DOES NOT APPROVE AES’S OFFER FOR POWER GENERATION COMPLEX

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Renova Board: AES offer for Alto Sertão III not accepted

Cemig (Companhia Energética de Minas Gerais – listed in São Paulo, New York and Madrid), in compliance with CVM Instruction 358 of January 3, 2002 as amended, hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (B3) and the market as follows:

Today Cemig’s affiliated company Renova Energia S.A. (‘Renova’) has published the following Material Announcement:

“Renova Energia S.A. (RNEW11) (‘Renova’), in accordance with CVM Instruction 358/2002 as amended, hereby informs its stockholders and the market in general as follows:

At a meeting on December 28, 2018 the Board of Directors of Renova decided not to approve the offer made by AES Tietê Energia S.A. (‘AES’) for acquisition of the Alto Sertão III Wind Power Generation Complex and approximately 1.1 GW of wind projects in development.

The Management of Renova reserves the right to re-assess this offer together with others, with a view to operation continuity of the Company.

Renova reiterates its commitment to keep stockholders and the market in general duly and timely informed in accordance with the applicable legislation.”

Belo Horizonte, January 2, 2019.

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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7. MARKET ANNOUNCEMENT DATED JANUARY 3, 2019: TAESA’S EXTRAORDINARY GENERAL MEETING APPROVES ACQUISITION OF TRANSMISSION COMPANIES

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LOGO

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Cemig’s affiliated company Transmissora Aliança de Energia Elétrica S.A. (‘Taesa’) has today published the following Material Announcement:

“Transmissora Aliança de Energia Elétrica S.A. (“Company” or “Taesa”), pursuant to the Securities and Exchange Commission’s Instruction No. 358, from January 3, 2002, as amended, and for the purposes of Paragraph 4 of Article 157 of Law 6404, from December 15, 1976, as amended (“Brazilian Corporation Law”), hereby announces to its shareholders, the market in general and other interested parties, continuing the material fact disclosed on December 17, 2018, that, the Company’s Extraordinary General Meeting approved, on this date, the acquisition by the Company of (i) 100% of the shares representing the total and voting capital of São João Transmissora de Energia S.A. (“SJT”) and São Pedro Energia Transmissora de Energia S.A. (“SPT”), and (ii) 51% of the shares representing the total and voting capital of Triangulo Mineiro Transmissora de Energia S.A. (“TMT”) and Vale do São Bartolomeu Transmissora de Energia S.A. (“VSB”) (the “Acquisition”), in accordance with the Company’s Bylaws, pursuant to its article 12, first paragraph, subparagraph ‘o’, and with the provisions of Article 256 of the Brazilian Corporation Law, given that it constitutes a material investment, under the terms of article 247 of the said Law.

It is important to note that the closing and accomplishment of the Acquisition are subject to certain precedent conditions, including, among others, (a) regulatory authorizations of ANEEL and CADE; (b) the non-exercise of the preemptive right by Furnas Centrais Elétricas S.A. (“Furnas”) in relation to shares issued by TMT and the non-exercise of the preemptive right by Furnas and CELG Geração e Transmissão S.A. in relation to shares issued by VSB; (c) confirmation of fulfillment of the obligations set forth in the Leniency Agreement signed by J&F Investimentos S.A. and the Sellers, including the commitment that no indemnifying or sanctioning measures be proposed against the purchaser; and (d) non-occurrence of material adverse effect.

The Company will keep its shareholders and the market informed on a timely manner in accordance with current legislation on the development of the matters covered in this Material Fact.”

Belo Horizonte, January 03, 2019.

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

277

8. MARKET ANNOUNCEMENT DATED JANUARY 15, 2019: TAESA PLACES WINNING BID ON ELETROBRAS AUCTION

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LOGO

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Cemig’s affiliated company Transmissora Aliança de Energia Elétrica S.A. (‘Taesa’) has today published the following Material Announcement:

“Transmissora Aliança de Energia Elétrica S.A. (“Company” or “Taesa”), pursuant to CVM Instruction No. 358 from January 3, 2002, as amended, and to Article 157, paragraph 4, of Law No. 6404 from December 15, 1976, as amended, and in addition to the Material Facts disclosed on September 27, 2018, October 4, 2018 and November 26, 2018, hereby announces to its shareholders, the market in general, and other stakeholders that it has been informed, on this date, about the formal closing of the process of Eletrobras Auction No. 01/2018, regarding the lots L, N and P, for which the Company placed the minimum bid.

Through a notice, the Sale Committee of the Eletrobras Auction No. 01/2018 stated that, on January 14, 2019, Eletrobras’ Executive Board unanimously approved, without any reservations:

I. the ratification of Eletrobras Auction No. 01/2018, referring to lot L (Brasnorte), of the shareholding interest held by Eletrobras of 49.71% in Brasnorte Transmissora de Energia S.A. for the external shareholder and winning bidder Taesa, which opted to exercise its right of first refusal, in the form of Brasnorte shareholder agreement, over the integrality of the shareholding interest held by Eletrobras;

II. the ratification of Eletrobras Auction No. 01/2018, referring to lot N (ETAU), of the shareholding interest held by Eletrobras of 27.4162% in Empresa de Transmissão do Alto Uruguai S.A.—ETAU, for the external shareholders Taesa and DME Energética S.A.—DMEE, in the proportion of 23.0355% and 4.3807%, respectively, which opted to exercise their right of first refusal, in the form of ETAU shareholder agreement, over the integrality of the shareholding interest held by Eletrobras;

III. the ratification of Eletrobras Auction No. 01/2018, referring to lot P (Centroeste), of the shareholding held by Eletrobras of 49.00% in Centroeste for the external shareholder Companhia Energética de Minas Gerais—CEMIG, which opted to exercise its right of first refusal, in the form of Centroeste shareholder agreement, over the integrality of the shareholding interest held by Eletrobras.

The notice states that the auction process is formally closed regarding the lots mentioned above, and Eletrobras may proceed to the next step needed for the sale, which, for the Company, consists in the signing of the purchase and sale agreement regarding lots L (Brasnorte) and N (ETAU).

The Company will keep its shareholders and the market informed on a timely”

Belo Horizonte, January 15, 2019.

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

279

9. MARKET ANNOUNCEMENT DATED JANUARY 15, 2019: ELETROBRAS ACCEPTS CEMIG’S EXERCISE OF FIRST REFUSAL RIGHT ON AUCTION 01/2018

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LOGO

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MATERIAL ANNOUNCEMENT

Eletrobras confirms Cemig’s first refusal right

to acquire equity holding in Centroeste

Complementing information in the Material Announcement published December 20, 2018, Cemig (Companhia Energética de Minas Gerais, listed in São Paulo, New York and Madrid), in compliance with CVM Instruction 358 of January 3, 2002 as amended, hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (B3) and the market as follows:

Cemig has been informed of the acceptance and ratification by Centrais Elétricas Brasileiras S.A. – Eletrobras – of the exercise by Cemig of its first refusal right for acquisition of the equity interest in Companhia de Transmissão Centroeste de Minas Gerais S.A. (‘Centroeste’) that was the subject of Eletrobras Auction 01/2018.

Belo Horizonte, January 15, 2019

Mauricio Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

281

10. SUMMARY OF MINUTES OF THE 751^TH MEETING OF THE BOARD OF DIRECTORS DATED JANUARY 18, 2019

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LOGO

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

BOARD OF DIRECTORS

MEETING OF JANUARY 18, 2019

SUMMARY OF PRINCIPAL DECISIONS

At its 751^st meeting, held on January 18, 2019, the Board of Directors of Cemig (Companhia Energética de Minas Gerais) decided the following:

Nomination of member of management in Mesa/Saesa.

Communication and Spokesperson Policy.

Investees Governance, Management and Control Policy.

Information Disclosure Policy.

Policy on Director Remuneration;

Variable Remuneration Program.

Cemig GD.

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

283

11. MARKET ANNOUNCEMENT DATED JANUARY 29, 2019: CEMIG NAMED MOST SUSTAINABLE ELECTRICITY COMPANY IN THE AMERICAS

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LOGO

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64 – NIRE 31300040127

MARKET NOTICE

Cemig named most sustainable

electricity company in the Americas

In accordance with its commitment to best Corporate Governance practices, Cemig (Companhia Energética de Minas Gerais – listed with securities traded on the stock exchanges of São Paulo, New York and Madrid) hereby informs the public as follows:

Cemig has been rated the most sustainable electricity company in the Americas – and 19^th worldwide – in the ranking of the 2019 Global 100 Most Sustainable Corporations in the World survey by Corporate Knights magazine of Canada. The announcement was made at the World Economic Forum in Davos, Switzerland.

Cemig was one of four Brazilian companies included in the ranking of the world’s most sustainable companies, and was placed third in the list of the most sustainable companies in electricity worldwide. The survey assessed 7,536 listed companies in 21 countries, on indicators rating three factors: environmental and social action, and corporate governance.

The complete list of the companies recognized by the 100 Most Sustainable Corporations in the World survey is on the website of Corporate Knights, at: https://www.corporateknights.com

Belo Horizonte, January 29, 2019.

Maurício Fernandes Leonardo Júnior

Chief Finance and Investor Relations Officer

Av. Barbacena 1200

Santo Agostinho

30190-131 Belo Horizonte, MG

Brazil

Tel.: +55 31 3506-5024

Fax +55 31 3506-5025

This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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