Robson Laranjo - Luiz Fernando Rolla - Chief Officer for Finance and Investor Relations and Member of Executive Board Marcus Vinicius de Castro Lobato -

Vinicius Canheu - Crédit Suisse AG, Research Division

Good afternoon all of you. My name is Robertson -- Robson Laranjo, I'm the Investor Marketing Manager of Cemig. At this moment, we'll launch our video webcast with Cemig Energy's Third Quarter Results for 2014. Attending this meeting are Dr. Luiz Fernando Rolla, Chief Officer for Finance, Investor Relations; Dr. Leonardo George de Magalhaes, Controller; and Dr. Marcus Vinicius de Castro Lobato, Head of Power, Trading and Planning. Those wanting to follow this broadcast can do so by means of 55-11-21-88-0155 or 55-11-21-88-0188, and also, on our site, http://ri.cemig.com.br. To begin our presentation, I will hand over the floor to our Chief Officer for Finance, Investor Relations, Dr. Luiz Fernando Rolla.

Thank you, Robson. Good afternoon to all of you. It's as ever a pleasure to introduce as our results every quarter presenting the results to the market of the Cemig Energy Group. But Djalma Bastos de Morais unfortunately could not attend today. He has this emergency trip to Sao Paolo, an unexpected trip. And he asked me to convey to you a message filled with trust and comfort with regard to the results that we are delivering to you today. I'm of course are not wearing a tie because of other reasons all of which I will [indiscernible] myself. But I have my colleagues, Robson Laranjo, Marcus Vinicius, to deliver the results from our third quarter. Very complex results, having in view of the context -- the present context of the electricity sector, so that requires our experts to explain to you our results. [indiscernible] are including some projections and you should consider all the aspects that's to consider in our waiver -- our disclaimer. Our financial results are organized in accordance with the principles of IFRS. And these principles [indiscernible]. And our 3 top indicators that we've usually given to you, we had some behavior that we are -- present to you. Net revenues had a very substantial 25% increase. EBITDA, as compared to the same period last year had a small 2% growth, and net income had a negative impact, minus 11%. Over our presentation, we will try to clarify each of these indicators and why we got to these figures. But as I said in the beginning, our context in the emerging markets in Brazil are rather complicated at the moment, and we had to allocate our capacity in the first quarters, and this means lower cash injections in the third quarter. There's a potential decrease in GSF, estimated 90%. And [indiscernible] to be at 83% -- 82%. That affected all companies of the group and with a relevant interest on some of our subsidiaries. For example, in Madeira Energia [indiscernible] during our explanation, we'll strive to explain to you what exactly happened. We had a substantial reduction in income higher than the accumulated decrease to have some progress due in the fourth quarter. But the highlights are rather positive in this quarter. First of all, BRL 1.5 billion investments in Renova is the main stake in the company, in this area of generation from renewable sources. That's a top-quality investment expected to generate great results in the future for Cemig having viewed that Renova has demonstrated competence, quality, not only in construction -- in constructing in farms back in Brazil but also cost investment much lower than the average. You have been following the factors that Renova has achieved its effective options for any long-term contracts. And it's very positive values bringing in very good remunerations for their investments. Renova is a factor for growth into the next years for Cemig, and [indiscernible] potential for growth, as you will see later on during this presentation, is rather relevant. As for Taesa. Taesa is [indiscernible] that we can consider to be very stable as for results. However, in this quarter, there was a change in its ownership structure and role of FIP Coliseau was extended for 720 days with a deadline for October according to our documents with SEC, but we -- move it for another 720 days. But we have been very positive partners in the -- in our management at Taesa. We have a provider with the conditions to have private expertise in financial administration of that company with very good fruits and dividend, but it slows down the strength of the [indiscernible] for cash generation and income very strong. And that points at the correction of our decisions to invest in these assets. Also for natural gas, we have a substantial movement in terms of our -- the growth of our participation or stake in Gasmig. We have announced to the market repeatedly that natural gas is another very relevant factor for growth in Cemig into the various -- years [ph]. And this increase in taking Gasmig are reflecting problems faced by Petrobrás as far as funding for investments. And they decided that they would not be able to support that growth, and they elected to sell that stake, and we acquired 40% interest that was held by Petrobrás for BRL 600 million. [indiscernible] stake, and now we are in a very strong position with Gasmig and in position to implement this expansion program as we shall see soon. That's for hydraulic areas. In our plan to restructure our generation portfolio, we acquired almost a 50% interest in Retiro Baixo Energética, that's a company that manages the Retiro Baixo hydro plant located in Gerais, and we have almost 50% interest in that plant. That's part of our strategy to grow in the segment of generation, which we also consider very promising for the upcoming years. As for sustainability, once again, Cemig was included in the Dow Jones Sustainability Index, and this is a certification of our sustainability practices implemented by Cemig over long years. This has brought a very good reputation to Cemig. Long investors are socially responsible with their investments. Also, I'll talk a little bit about the Santo Antônio hydroelectric plant. It has undergone difficulties. There was this strong [indiscernible] related to the Santo Antônio plant. There's heated debate in the session with Aneel and [indiscernible] agency, both in the electrical sector, trying to mitigate the problems that Santo Antônio has entered recently. More relevantly, the nonavailability factor, FID in Portuguese, referring to the availability of the machines during the construction phase, a contract that states that this availability should be 99.5%. We believe this is perfectly feasible, and as soon as we have 100% of the rotors in operation, we'll have 100%. But because it's under construction, we are in discussion with Aneel and IMS [ph]. [indiscernible] index during this period, trying to mitigate -- and this will certainly mitigate the costs in the tapping of this source of energy for their shareholders. That involves substantial costs, and as we understand, our understanding with the regulatory bodies will lead us to cover much of those costs. Another significant item should be associated to the illegal strikes that caused some delay in the startup of the rotors. We have applied with Aneel, the national agency, to postpone days of sales contracts with distributors by 63.61 days as derived from the force majeure fact that prevented Santo Antônio Energy to deliver the rotors by the predicted date. Another important factor is GSF. All of you have followed this issue related to the electrical sector that has to do with the hydro, the water forecast situation in this dry season recently affecting substantially the Santo Antônio Energy. This is, of course, a natural circumstance. There has to be with a context right now, that it affects the short term, but it brings no long-term concerns. We have decided to expand our interest -- participation in the plant because we understand generation is good business, potentially in the San Antônio plant. This performance as for energy is very stable. And over time, it will bring all the benefits we expect -- that we expected when we decided to go into he acquisition. And speaking of original sources, we are acquiring at a very substantial rate, we have a contract signed with Santo Antônio and [indiscernible]. The contingency clause exempts Cemig from disbursements, and that protects us from exposure to spot market. And so we believe we will have no consequence -- any viable consequences coming from this. Also, for Renova, we also capitalize for Renova. We increased our stake. That means, 36.6% in voting capital. The first movement was, in fact, an advance against capital increase of BRL 810 million and also BRL 700 million (sic) (BRL 740 million) of interest in Brazil PCH. Those brands in the short term bring [ph] stability to our cash so that the credit would be in better position. Although this is not exactly a startup, but it is restructuring most of it [indiscernible] to this energy, although they already have 2,000 megawatts under contract. It's under regulated environment or otherwise. As I said this should -- this holds a very promising future with a potential for growth that's very strong. We may reach as much as 7,000 megawatts with the gripping structures, shows that it may become a very relevant company in the context of the Cemig book. As for the Coliseu funds, as I said, this contributed very substantially for us to achieve the SEC pass as we did in acquiring Taesa. Corporate governance has implemented -- allowed us not only to substantially increase and improve Taesa's performance but also letting very properly the expansion plans and the opportunities that we have for further acquisitions in this land to Taesa. It's a financial structure, which [indiscernible] and that points to the correct decision we took. In the first semester, the profit it yielded was very substantial already reaching up to BRL 97 [ph] million in the quarter in income. So that demonstrates the quality of this asset. And by decision of stockholders in the Coliseu fund, some movement, especially by Santander. It's created a parallel structure [indiscernible] funds. Santander is the sole unitholder in that fund. That changed a little bit he proper governance structure without, however, impacting our strategy of shared management. With the number of shares and with voting rights already in place, we kept this characteristic, as I said in the beginning, that ensures the factor that Taesa has in acquiring FIP Coliseu for fewer common shares in Cemig. But according to the structure of shares management, this would be preserved, and this will keep on giving Taesa the characteristics of a private company. With regard to sustainability, we, as always, we have transferred a lot of recognition from the market. We selected a few of these tokens of recognition in demonstrating that our practices are widely recognized by our investors. Those in tune with the operation's sustainability principles in various opportunities, we had listed our main practices. But I would like to highlight our 3 points on this that show how committed we are to sustainability. Cemig GT has 98% of its generation capacity from renewable sources. Renova reached 100% recently in the latest auction. This included solar power generation and Cemig adds to its resources from renewable source. Also, as for the hydro expansion, which is also 100% renewable, as I said, we acquired 49.9% of Retiro Baixo hydro plant, and that replaced all our commitments. Our generation portfolio, as you see in Slide #9 you can see that today, in operations, [indiscernible] 7,600 almost megawatts; contracted, more than 1,300; all together, 8.9 -- 8,906 total megawatts capacity. This has to do with our expansion strategy and the return of some of the plants as some of the contracts -- concession contracts expired, especially those 17 plants that have to be resumed in July 2015, but it will not impact instantly our generation portfolio because we will replace them by these new acquisitions. This capacity, the contract and this transition can be made very smoothly so that the gas generation for the Cemig GT will not affect our commitment to our clients and especially [indiscernible] contracts, especially long-term contracts. In Santo Antônio and [indiscernible], it's really soft. With almost 100% of assured generation. Some other units and rotors will start operating. [indiscernible] are waiting on this operation. Within the next 12 months, we'll reach 100% operational level. Belo Monte, it's going to start 24 rotors in February 2016. That is substantially impacting long-term supply. [indiscernible] in São Paulo if you add more than if you had Cemig in the long term. Our stake is around 10% already, and as opportunities arise, we'll acquire even more capacity. And also as I said, already installed [indiscernible] in the wind power under construction is something in excess of 560 megawatt average of wind power. And we've already contracted another complex of wind farms of 500 megawatts on average, which concerns of [indiscernible] 3,000 megawatts of generation capacity. This shows, again, as I highlighted before, the promising future that should be brought by Renova just in there. Another point that we have insisted on with the markets is natural gas with a very positive growth in terms of natural gas volumes sold. In 2013, we exceeded 1.4 billion cubic meters. So particularly to industrial market, 83% of the total and the remaining 13%, 14%, went to thermal plants in general. And we started our process at the plants of our selling natural gas to industrial consumers, the huge investments in 2014 that's spend in supplies, in our network of gas pipelines includes like [indiscernible] in particular. And this is a plant that's also very promising and should increase the volume of natural gas. So we're earning [ph] very close to 4 million cubic meters per day. That will [indiscernible] Gasmig, a very robust economic dimension and will allow the timing of a future expansion that we plan eventually, especially when we have further supplies available. These were the aspects that we would like to discuss with you in terms of the results. And now, let's concentrate on the third quarter results accumulated. And as I said, 25% increase in net revenue. Three markets, [indiscernible] industrial construction increased by [indiscernible] 2,000 [indiscernible] -- sorry, megawatts per hour. This was [indiscernible] what we have -- sold to the market. This was the movement [indiscernible] that commenced all together, 4% increase in sales volumes. In January, February, a very strong increase in consumption due to the high temperatures in the especially hot next summer. This was one of the components in this corporate increase as you can see. Of course, we are now expanding our client base with regard to distribution, the medium. We have reached 8 million customers. I can remember no other utility which -- number of customers as those with the Cemig distributions. That's probably one of the top -- or the top supplier in Latin America in terms of number of customers or consumers. As for operational expenses. Also substantial 23% increase, very similar to the previous quarter's 22%. And the main component of this growth was excellent fees associated with the purchased electricity. This has brought some significant impact in recent [indiscernible] in the quarters and the subsidy of transferred to the final consumer by the government of almost BRL 2 billion. We'd like to extend those numbers if not for these subsidies. We have already accounted in our regulatory assets with SEC and this would be replenished next year with an increase in tariff. But unfortunately, we did have these increases in expenses associated to purchase electricity. As a consequence, EBITDA grows only 2%. These are average figures than what we have intended but yet as a function of this context we are describing to you. If we compare EBITDA in 2013 with 2014 without tax adjustments, it would have a substantial 20% growth in terms of the increase of revenues. But unfortunately, we had these impacts, and the volume of adjustment was very strong. Before we had a modest 2% increase in EBITDA, coming to almost BRL 4,200,000,000 in the end of the semester or the quarter reached BRL 513 million as against BRL 1.2 billion in March obtained in the same quarter 2013. These results are somehow [ph] part of our planning in the [indiscernible]. As a part of our trading policy, we should -- our priority to the first semester. And we'll -- investment in hydro generation, and now we feel the impact of [indiscernible] but value has been rather strong indeed. But we are reaching the lower limit of our guidance as disclosed in May last year. [indiscernible] to our investors [ph]. Sorry the net income, we had a reduction of 11%, especially explained by the impact of the equity income in Madeira Energy. It was a strong impact, you're right, from the same problems I described before. That's the impact of all this, which these are challenged several millions in costs saved in the third quarter. But reduced GSF has been affecting other operations like normal, but in the coming months, this will be much lower than what we recorded in this last quarter. Our process this year would be 10% above last year's if not for these interferences. But Taesa, for example, last year also, [indiscernible] very strong. But if we made all these adjustments, then we are -- we assume not to see this [indiscernible] headwind in the next quarters. Even so, we can see the accumulated results [indiscernible] and performance of the company that we are in. Of course, with GSF, you can say, so what's the billing? Is it necessary? The station was that we would have something like 1.93 [ph] and then we have just over 0.82 [ph] in the quarter. Yes, that was the worst -- the worst recently. [indiscernible] last year. Every 3-year [indiscernible] and perhaps drilling into by the end of the year, have [indiscernible] out from the reduction of industrial consumption. And we have predicted that the [indiscernible] very low point [indiscernible] true. So moving towards the end of the year with a decline in consumption. This is consumption. Should this change substantially or what happened 2014 should be taken as a reference for 2015? Well, with the level of uncertainty we face right now, it's actually with the range reaching for the figure this [indiscernible] change a lot upwards, downwards. But normally, our projection is that what we saw this year was -- is going to be repeated next year, 10% exposure, which is excellent. So we have, in the quarter, preference of our [indiscernible]. It's not unusual. I can't remember a quarter when we presented such modest figures. But this was mostly a result of the Madeira plus GSF combined impact. What we can promise to you is we will double our work phase to improve it for next quarter. This is the profile of our consolidated debt profile now. Total net debt, BRL 9.5 billion. on average, 10-year was reduced a little bit [indiscernible] too risky to use. In view of the new economic and the legal context 45 -- 6.45% is the average cost of this debt. Debt indicators are even so at a very comfortable level. At the close of the [indiscernible] third quarter, it has 1.8% [indiscernible] solidity -- financial solidity of the group as a whole, and as for gearing 2015, maturing for 2015, and there should be no problem in expanding that debt. So it's the [indiscernible] further periods and that we expect some more predictable scenarios for 2015. And we can extend the 10-year for that debt, which would be 2018, 2019. Originally, [indiscernible] depending on financial market in 2016, we may expect a reduction in this average cost of the debt. 2015 too bring uncertainties to market, [indiscernible] to those uncertainties. We probably had focus reports. There are concerns about the economic context of 2015. But in the [indiscernible] factor of distribution, the capital will have a much better performance than in 2014. If we think that all the regulatory assets accumulated this year, it will be alleviated by the tariff increase for 2015. Another aspect opportunities for execution and investment. It's important to stress the volume of investments for 2014. Perhaps the best performance for the last 10 years. BRL 6 billion by September is very substantial, much above -- BRL 6.45 billion rather we had a few years before. We reached BRL 4.3 billion for the year. The highlights for the generations sector with active distribution [ph] of interest at Renova, Retiro Baixo [ph] additional interest and sometimes longer. Investments program. It's growing strong and very effective. We should close the year with a favor [ph] that is very substantial, very close to what we have planned. For close, around BRL 4.5 billion in investments for the year but very positive industry results in new, in cash flow, cash card [ph] cash flow has new operations up and the dividend can be derived from the using the also the already [indiscernible] claims. Investments. You can see strong operations in, say, strategy that we have accumulated in the 3 quarters, much stronger than last year, far beyond what we had last year. Last year included some Cemig investments. You can see the figures for this year. For the results and enforcement of this cash position, very comfortable for the group as a whole. All our companies found in the group have a very similar performance. And there's been some [indiscernible] good provision in terms of its extensions or its business portfolio. Also, a very positive performance of our stock price, much above the market average. By the 12th of November, we have seen 17.3% of CMIG4 shares and 20.2% of CMIG3 shares. Taesa had a very good performance as compared to the previous year. Renova, because it is still under construction, they still have a lot to grow -- a lot to grow before them. But the Bovespa Cemig, have shown very good figures. They are adding a lot of value to our shareholders. Even more so because the dividend policy has been very strong with very attractive returns to our investors, which gives us all the conditions to roll on our efficacies [ph] as we said before but also seeking new opportunities for investment with the support of new pensions, new investors. This is the future of the media because of '14 our policy on dividends. Benefits deriving from this to our majority of stockholders, [indiscernible] from this. These were the -- these were the data, [indiscernible] of information we wanted to bring to you more uniquely. We have plenty of time rather for questions and answers [indiscernible]. Yes, let's move it back to the operator so that she can start off.

Now we'll start the Q&A session. [Operator Instructions] Our first question comes from Vinicius Canheu from Credit Suisse. Vinicius Canheu - Crédit Suisse AG, Research Division: Good afternoon. I would like to raise an issue that's facing Cemig [indiscernible] provisions in terms [indiscernible] BRL 7 million [ph] or 17.2% of the company. I would like to understand this. Can you break down these 3 components to us? [indiscernible] And I would like to know if these are already limited by the contingencies [indiscernible] the acquisition of branch. This is already included in the provision or not? Do you still have room for this ahead of you?

Yes, I'll just let Marcus answer this question more technically to you.

Yes. Good afternoon. About the negative equity account in Santo Antônio, 3 conditions affected that: GSF; FID, nonavailability factor; and the third item has to do with the limits of liability of the buyers in terms of the delay of the words. You can say that 1/3 of the value can be split into the 3. But each one of the [indiscernible] if we split those and divide that by 3, that's a good representation of the situation. But the provision we made and whether it's limited or if there's a limiting factor, including the amounts that we feel entitled to and we're claiming for. And also, the legal situation, well, we are discussing that theoretically. And so, there are some administrative issues involved. But this is integral. If we gain some favorable decision from the Aneel or in the traditional discussions or with -- in our discussion with [indiscernible], if there is a 7% additional, this would be reversed to our overall balance. So our management exposure is BRL 350 million. But depending on the evolution of these 3 items and events, that may be a positive impact for the company. We notified [indiscernible] about a contract that we found for acquiring the stake in the Santo Antônio [indiscernible] but nonetheless effective going into force of this. We will be tied to the affected condition of the funds that -- as we announced.

[Operator Instructions]

And there being no more questions, we will then close this teleconference. And again, I would like to thank the presence of all of you and to say of our confidence, our trust in the future prospects for Cemig. And as a function of this transition, of course, our governor-elect will change the face of the new -- of this new majority of stockholders. Future Governor Pimentel has already reiterated he's a fit for the company, and he feels he's willing to introduce new petitions according to his long-term view. And that overall, he restated his trust in the claims Cemig has been implementing in 17 [ph] years, especially regarding corporate governance in cash and profitability in the long term. That was rather -- that is a rather tranquilizing message to our investors. And of course you know Cemig relies on our investors to go ahead with our expansion plans. And we believe that the new administration will be perfectly aligned with us and also the [indiscernible] best conditions for investors to aid us in our expansion. I thank you again and, also, you have my confidence in the year's results. And this will be one of the best years ever of Cemig [indiscernible]. Thank you and have a nice afternoon

So this webcast has been closed. We thank you for your participation, and we wish you a very nice afternoon.