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Executives

Antônio Carlos Vélez Braga

Luiz Fernando Rolla - Chief Officer of Finance, Investor Relations & Control of Holdings and Member of Executive Board

Djalma Bastos de Morais - Chairman of Executive Board, Vice Chairman, Chief Executive Officer and Executive Vice President

Ricardo José Charbel - Chief Energy Distribution & Commercialization Officer and Member of Executive Board

Luiz Henrique Michalick - Chief Institutional Relations & Communication Officer and Member of the Executive Board

Maria Celeste Morais Guimarães - Chief Counsel and Member of the Executive Board

Leonardo George De Magalhaes - General Manager and Controller

Analysts

Felipe Leal - BofA Merrill Lynch, Research Division

Marcelo Britto - Citigroup Inc, Research Division

Oswaldo Alcântara Telles Filho - Espirito Santo Investment Bank, Research Division

Lilyanna Yang - UBS Investment Bank, Research Division

Cia Energetica de Minas Gerais (CIG) Q4 2012 Earnings Call April 3, 2013 1:00 PM ET

Antônio Carlos Vélez Braga

Good afternoon, everyone. We now begin the video webcast of the results of the fourth quarter of 2012, Cemig, with the presence of Djalma Bastos de Morais, our CEO; Ricardo José Charbel, Distribution and Sales director; Luiz Henrique Michalick, Institutional Relations & Communication director; and Luiz Fernando Rolla, Director of Finance and Investor Relations. The webcast can be followed on the phone +55-1-146-88-6341 and also on our website, http://ri.cemig.com.br. We advise the use of the new player, whereby, you can visualize the presentation in a dynamic way.

Now we give the floor to our Director of Finance and Investor Relations, Dr. Luiz Fernando Rolla, to begin the presentation.

Luiz Fernando Rolla

A very good afternoon, everyone. It is with great pleasure that we are presenting the results relative to 2012. They've been publicized last week, and we're going to make a few comments on them. We're going to split the presentation into 2 parts. The first part on a more strategic mode with the participation of our directors, our president, directors, CEO and the other directors, and then, we're going to plunge into the results that were publicized so that you can have a very broad knowledge and complete knowledge and understanding of the results.

Our presentation today has been entitled, the Year of Delivery 2012 because of the results that we are publicizing. Our CEO, Djalma Bastos de Morais, he actually was the captain of the company -- has been the captain of the company for the last 12 years. And what we've been presenting this year is the result of the strategic management of the company used in those years. So the profit or the net income was BRL 4 billion, an extremely important one for the company. Mr. President?

Djalma Bastos de Morais

Good afternoon, my friends. To be sure, in our meetings, not only 2012, but all the other years have been years of delivery, but this one is a special one for us. 2012 was a special year because it is common knowledge now that we had a few stumbling blocks, but they practically did not influence our year of 2012, and we believe that we -- and we're convinced that we're going to continue on into 2013 as the year of delivery. We are in a relatively good situation.

We've been working -- and I hope that we, within what we have proposed to do last year, we are meeting all of our -- fulfilling all of our visions, whether through acquisitions. We made possible the acquisition of Taesa, total acquisition of Taesa. We are showing you a profit of point -- BRL 4.2 billion. We closed the CRC agreement, which was something pending between us and our controller. We captured BRL 7.2 billion exactly. And as we have forecast, and we promised you, Santo Antônio, the plant is in operation now and has had a very great situation, even anticipated. In this case, Mr. President, we are actually fulfilling all that had been promised, of anticipating the commissioning of Santo Antônio. You remember, it was a very controversial project, but we were able to meet everything that had been demanded and that we had promised.

Unknown Executive

Our net revenues was a decision, a strategic decision that we had, and certainly, we have a very positive reflection on our revenue and our EBITDA and especially, on our net income. The strategic decisions had a very positive impact upon all of our actions and our results. And in the spec, we have made -- taken some measures in order to guarantee that the foundations and the fundamentals of the company are preserved. The figures show exactly the growth of the performance of some of those indicators that we have posted. Independently, of the influence of the results -- upon the results of the CRC negotiation, we had a very positive result which guarantees substantial growth. And what can you tell us? What's most important, Dr. Rolla, is that in our net income, even if we did not have the CRC and we adjust with the state, which has given us this income, we would have a growth of approximately 22%. This is what is important, which reflects the fundamentals. And Dr. Celeste, please, our Legal Director.

Luiz Fernando Rolla

The strategy that we have adopted that are geared towards the long-term, they also aim at our operational improvements and operational improvements of the quality of the services that we provide, the investments that we have made, all of them, especially in our distributor, have been geared towards such improvements or results. What can you tell us about those improvement measures?

Unknown Executive

Dr. Rolla, we are -- we have been working, and evidently, we are going to continue maintaining, keeping the commitments of all of our management and all of our Board of Directors to make possible and feasible what we are committing ourselves at every year. And we have some major effects that will directly reflect upon our consumers. We have actually won the second -- second place in the Aneel consumer satisfaction index 2012. It's an external survey conducted by Aneel, and this is important to us. We have a commitment to our shareholder, we have a commitment, also, to our great tripod, which is our consumer. This is the commitment that we have, the commitment that we promised we would make true and the commitment to our investor and our shareholder and also our consumers. We have been rigorously within what we had envisioned, and we are actually fulfilling it to the letter. Dr. Ricardo Charbel is responsible for distribution and he has run all of those initiatives for the operational improvement. Dr. Charbel, could you give us any additional information about these improvements?

Ricardo José Charbel

Good afternoon, everyone. The results that we have and the accident -- outages due to accidents show a reduction in the last 5 years of those outages. In the last 5 years, we have 12% of reduction in the outages due to accidents. And if you look at the other chart where we show the program and accidental outages showing an increase exactly the investments that we have been making in the last years showing -- thus, showing comparatively to 20 -- 2008, twice as what had been programmed. This is what we call the good cholesterol and this reflects the performance of the company. So the more investments you make, the better results you show. So I would like to also say, Dr. Rolla, that your question about the results of the power outages relatively to gas, which we had. Second is that the ranking of Aneel and what has to do with the accident related, it's a simple average. The result of the performance that you had, vis-à-vis the goal that you have posted. However, if we take the 10 first places in the rank, Aneel rank, and one of them will have results, actually, they'd go beyond the goal of the other concession holders, but considering our -- so this is why. So we have the broadest network in Latin America -- distribution network in Latin America, and then 90% -- 99% is aerial cables. And this has had enormous influence on this performance in Cemig as compared to the other companies in similar size, had exceptional performance. Our distribution network, it's approximately 500,000 kilometers, which means more than 12, actually, laps around the equator. So in this rank, we have 7.5 million consumers and other utilities with 170,000 consumers.

Luiz Fernando Rolla

So moving forward in our presentation, if we were to focus our commitment sustainability in the 3 segments that we act: generation, transmission and distribution on electric power. In 2012, we also had deep recognition by the investor market. What can you tell us about our permanence for the 13th year in a row in the Dow Jones Index?

Djalma Bastos de Morais

This is our, again, commitment with the tripod. We talked about our investors, we talked about the efforts that we're making for our consumers and our third last commitment is to sustainability. So for the 13th time around, we're part of the Dow Jones Index and this is of major importance to our company, and also important for the investor -- the one who invest in our shares and uses our services. There is, in fact, a concern on our part with sustainability, with the social organism of our planet, and this is very important to us. This recognition and this award shows the international recognition of our efforts towards sustainability for those who invest and those who trust in our company. We are, for the eighth consecutive year, in the sustainability -- Corporate Sustainability Index of BOVESPA. And this also reflects the brand -- mother brand. The brand has had, also, a very strong growth in the last years. Periodically, annually, we value the brand and now we have the reputation index, evidently, the communication of Cemig is guided towards this direction in order to value the brand more and more and to maintain our -- the compatible reputation index. And evidently, the way that we have followed, especially in the communication area, is to potentialize those actions and sustainability, which give visibility to all of our stakeholders.

Luiz Fernando Rolla

Now moving forward, then, into our presentation, there is an extremely relevant topic for our company, which was an object of great discussion in the last 6 months, which was the approval of Law 12, 783, which naturally talked about the renewal of our concessions. We had previously announced our decisions about what to do and about the renewals of the concessions, but this is always a topic which is under focus all the time, of the interests and analysts. And naturally, we made our decisions and going back to -- that is baked in our concerns that turn towards the financial health of the company, and, of course, meeting the demands of our shareholders and our employees.

Djalma Bastos de Morais

Evidently, it was really an unusual fact, but we've been working for the -- towards the preservation of whatever is feasible for us, of course, that which we judge and which we have a right to -- we are entitled to make them feasible. We have the support of our largest shareholders, our government, which has supported us since the beginning of this journey, and we are certain that we're going to be victorious in this struggle. And we believe we can, actually, mitigate what was thought of as a delicate situation initially. Now we have this conviction that we can once again overcome this difficulty that has been posed before us.

Luiz Henrique Michalick

We are here to the concession, transmission concession and distribution contracts. And naturally, the concession of transmission, we had actually, a revenue of BRL 196 million, and we still have some to receive.

Djalma Bastos de Morais

Yes, we have been waiting for the regulation of that, and we expect to receive this amount from the federal government, and this is still being regulated because this amount is going to be paid to us in 30 years. And they give that in terms of how this is going to be updated. Do we have news about the concession distribution contract?

Luiz Fernando Rolla

The distributor contract, the government has not actually announced anything about that. But the government has focused its concerns around transmission and generation. Now as for generation, as our CEO has said, we are having the impact of 21 generation plants. They are about 2.4 gigawatts assured power. And out of these 2.4 gigawatts that we are generating, we are actually making -- focusing 3 assets, which we can get back. The 3 hydro plants: the Jaguara, Sao Simao and Miranda. Particularly, in the case of Jaguara, this concession expires in August, and we are actually making every effort -- we have asked for the renewal of this concession, and we are waiting for the Ministry of Mines and Energy and Aneel to state their position. Back to Maria Celeste, when it comes to the 3 plants, they are extremely relevant to us as Michalick has mentioned. What is the legal view of Cemig about the problem?

Maria Celeste Morais Guimarães

Dr. Rolla, everyone knows well that since last year, so that we could make a decision to adhere, not -- to the Provisional Measure 579. We did very detailed studies in order to, actually, to ground the decision. In a sense, we were fortunate to count on the best law office, law firms in this country and all the reports that have been made for us, I must emphasize, that former ministers of the Supreme Court actually gave their opinion because of the conviction that those jurists in Brazil have about this right that Cemig has to the renewal for the 3 companies in those 2007 contracts. We have to make it clear that out of the 21 plants, which Dr. Michalick has mentioned, we did not adhere to 18 who had 3 very clear hypotheses for the 2007 contract and the contract says that it will be guaranteed the renewal for another 20 years. The reports and the opinions that we received from the law firms show that the judiciary system is going to appreciate, with impartiality, the -- our thesis because it is grounded upon 3 very strong arguments. The first one is Article 21 of the federal Constitution, the so-called law -- the right to renewal with the articulation of the states having to do with energy resources. Article 21, Item 12b of the Federal Constitution says that the concession of hydro energy resources is going to be made by the union in articulation with the states. And this premise was not observed by the federal government. Our second argument. In 2007, when our contract was signed, all know that the fourth clause had a different phrasing from the several -- from the other cases in this country. So if there is an argument of the discretionary power of the federal government to concede with or not, the renewal. In our case, the conceding power, as they wrote the contract, use -- made -- used this constitutionality and guaranteed 20 more years in the contract. That is, it could have said, it could be renewed for another 20 years, but the government did not do that. The government chose -- guaranteed its renewal for 20 more years. So if there was discretion, it was exactly at the time when the government chose to guarantee this renewal to us. And the third and last argument is that this contract was written 16 years ago. So there is a unanimous understanding among jurists that there's a guarantee that the conceding power has become stable in 16 years. There was stability deriving from that and guaranteeing our right and the right -- that this and -- we are entitled by rights, then, to this renewal. If we are now waiting, at any time now, for the Ministry's answer to our administrative request, we are now, we have this -- we have a piece already ready to propose to the judicial system, making good this rights that we are entitled to, as it is recognized and consolidated and stabilized in the last 16 years. It is my conviction that your judiciary is going to recognize our plight. And just -- and in conclusion, in the pre-salt case, this was the position of the Minister Cármen Lúcia, who reported on this process, who gave the approval, recognizing that for those contracts that had already been signed and there was a recognition to the states of Rio, Espirito Santo and São Paulo that the rule could not be changed. There could be a change in the distribution of the royalties for the new contracts. This reinforces our own argument that for the contracts already signed, which is our -- clearly, our case, the rules cannot be changed because they have violated the principle of juridical security. So the judiciary system, of course, likes this thesis of the security, and so it's going to be observed in our case. Thank you very much.

Luiz Fernando Rolla

Just a few additional comments on payment of dividends prior to giving the final word to our President in order to clarify who's entitled to the dividends, which is going to be approved in the meeting of April 2013. We have declared a JCP and an IoE that is worth BRL 1.7 million. This IoE, we had a payment last March and at the end of June, we should be paying the second part. And the third installment in -- the end of the year. So extraordinary dividends of BRL 1.6 billion. We already had 1 payment in January and BRL 400 million in March. So this is paid for. Now -- we are now declaring for normal payments or ordinary dividends and additional dividends, which amount to BRL 1.2 billion which should be paid in 2 installments in June and December 2013. So that we now fulfill whatever -- what we promised to our shareholders.

Now as the final word, Mr. President, the year of 2013 is going to be a year of much challenge, and we'll have to seek new measures to improve our operations, so as to maintain these foundations that have resulted in the very good bottom line for our shareholders. Could you anticipate some of the measures first?

Djalma Bastos de Morais

At the beginning of last year, we had 1 concern. We were worried that we wanted to adjust our company to the tariff revision that was going to emerge. And we had to adjust to that. And that was a concern on the part of the company to reduce its costs referring to materials, personnel, services. And with the advent of this Provisional Measure 579, we had to adjust in a stronger manner, much stronger manner. We got the Board of Directors together, we made a decision to launch in this company here, a plan for the voluntary resignments. This plan was concluded last week, and we had an addition of more than 1,000 employees in the company. So I believe that to haul in the other companions here in the Board of Directors, that we are really going to adjust to make the adjustments to the new times, to the new challenges that present themselves to us. And we, up until June, to actually let go of these more than 1,000 employees and with more -- a few adjustments more in our area. We will be looking good beginning September, October this year. So it is very important to us and to you to know about this, that we are now letting go of more than 1,000 employees on this company and this is going to help us -- adjust the company to the new times. And we are certain that whatever we have promised in the year 2013, we hear -- as Dr. Rolla said, this is a year of delivery. This is also going to be a year of delivery. Thank you all very much, and I'm going to withdraw now. I asked Luiz to withdraw and we're going to be here. Thank you very much.

Luiz Fernando Rolla

Thank you, fellow directors, for the participation. The strategic view is very important for us. It's important for our stockholders and investors to know that the Board of Directors of this company is focused upon the creation of value with the search for return on investments that we have made in a very well disciplined way. I would like, at the second part now of our -- to call 2 superintendents to help us make this presentation, Leonardo George De Magalhaes, who is our Controller; and Paulo Eduardo Pereira Guimarães, who is the superintendent of Financial Management, and he's going to give us a hand here explaining some of the monies, some of the procurements that we have made. I'm going to go back to the topic of these results.

We had BRL 4.2 billion net income, which means a growth of 77%. As we mentioned in the beginning, the President had made it very clear, we had many events that we consider nonrecurrent. And these nonrecurrent events contributed to these results. Regardless of that, as our CEO has assured us, we had a result excluding those nonrecurrent items. The result was quite solid. The results of our -- the measures and emission strategic initiatives that Cemig has adopted in the last years and has resulted in continuous favorable results. And as you've seen at the closing -- the closing remarks by our CEO, the absolute trust that in spite of the challenges that we have been facing that we are going to deliver very competitive results and a very attractive result to our shareholders also in 2013. Now we have some results here that are highlights. The first one was the financial result. As already anticipated by our CEO, it results from the CRC agreement that we have made with the state of Minas Gerais, which naturally we had the financial gains with the very high gains, which resulted in a gain of BRL 1.252 million -- BRL 1.252 billion. And we also had gains, which were the results of operations in our controlled companies, and these results especially the sales of shares of Taesa at the IPO that we held in June, last June and resulted in a very positive gain for our stockholders.

The EBITDA, I prefer to talk about it on the next slide. In order to understand this figure, maybe we would need to open with it a little better detail. You see that these figures, all of them have a very positive result because of the several measures that we have adopted. I'm going to show to you the adjustments that we have made to the net income. Those adjustments were important ones. The largest one obviously, without a doubt, is the CRC adjustment, which stood for BRL 2,150,000,000 and we have adjustments due to the CVA and because of the adoption of IFRS. So if we made those adjustments, we would have a net income of BRL 2,696,000,000, which would represent, as shown on the first slide, a substantial growth vis-a-vis the 2011 results.

Now I would like to emphasize what this BRL 2.7 billion profit means. It means that the results was coherent with the initiatives and the strategies that we chose to implement. Those strategies of operational improvement and growth strategies with the adequate selection and a very rigid discipline in the selection of the investments and the assets we were going to invest in during 2012, which resulted in this greater growth that you saw. It is important then to make it clear that these numbers or these figures are, all of them, due -- had as a result of a very good value for our stockholders. I call attention to the adjusted EBITDA, which reaches BRL 6.2 billion. This is extremely adherent to our guidance, which we publicized last May, May 2012 that is, excluding all of those extraordinary amounts that affect our EBITDA. The performance was fantastic as compared to that, which we had promised. So naturally this has a very positive impact upon the results of 2012.

If we look now at the net revenue, consolidated net revenues, we had a growth of 17%, which is a very strong growth, which also consolidated value, and it actually helps us above all to build these results that we can show now. And what has to do with consolidated expenses, operational expenses, we see as a highlight, the value of the purchase of power. We had an additional expense of BRL 1,791,000,000 resulting in the purchase of power. Besides those 2011 results, we're going to show this picture of generation of thermal energy, which was adopted beginning last year and which affected last year, especially the fourth quarter, we had a large growth of these expenses. But we also had some provisions.

Leonardo, the provisions, which naturally reduced or increased the expenses.

Leonardo George De Magalhaes

Good morning, everyone. There were a few extraordinary provisions especially in the fourth quarter. And the main one is related to the agreement with a prior CRC suit and has to be analyzed. And all the process of negotiation of CRC, because of EBITDA calculation, all the CRC gains did not affect positively the company's EBITDA, but this provision affected it. But in a global analysis, considering all of the financial effect, this operation was very positive for the company. And by analyzing all of the costs of the company, we see that the manageable costs which show the efficiency of the company in managing its resources, we noticed that these costs have been rising. They rose less than inflation rate, which shows the commitment of the corporation to make an efficient cost management.

Now moving on, we have now the profile of the debt, consolidated debt profile. We had a growth rate forecast for almost BRL 6 billion. But I'd like to only call attention to this trend, towards the reduction of the cost of debt. We now have an average real cost of 5% in spite of this concentration on CDI of 47%. But the tendency that we have seen in the market is one of reduction of costs, of loans and financings. And with that -- some of the indicators that are extremely important to us as to the net debt over the EBITDA, which is part of our statutes. And so within the statute of limits of the bylaws, limits of 2 to 4x is extremely positive performance. It allows us to keep our rating of AA ratings for the national debt, and this to us is extremely important. And the total debt profile is limited to 52% of the total assets.

So are these 2 indicators are ones that we consider to be extremely important and which we follow in a very intense way in the short term. We have included for the calculation of the net debt the short term financial applications, which we consider to represent cash also for our company. So I would say that there isn't any additional concern until -- for us and what has to do with our debt. We are actually at a very comfortable level of debt. And with enough cash generation in order to pay off this debt very comfortably, which helps us and is a good standpoint to continue growing through the acquisition of new partners, for example. So this is naturally going to have a very positive reflection in the next years upon our cash generation. As you can see, on this slide, the contribution of each one of those large companies that we have I'll highlight the growth of Taesa, which has come up to 16% of the total of the cash generation of this company. It is an investment that is extremely important for Cemig, which is already -- has already reached a very significant level there. I call attention to Cemig GT, which also have fantastic performance -- 2.8 billion cash generation. The result as you can see of a sales policy that was extremely important.

With that, our portfolio is getting closer and closer to our guidelines for cash generation in the long run. That is a 50% generation, 24% transmission. And the remainder of the business reaching almost 22%.

So let us now talk about Cemig GT results, which were very important for us. This panel here of our generator gives us very clear demonstration of the rightfulness not only of this sales policy but also of the effort that we have been making to improve operationally, which was highlighted by our CEO. Today, we have in what has to do with the margins, the EBITDA margins around 65%, with an EBITDA, which we publicized of 3.6 billion adjusted EBITDA, BRL 3.4 billion, which shows the strength of our company. We had a profit, which was very good, and BRL 1,900,000,000. If we adjust this BRL 1.9 billion and we adjust it we get to BRL 1.5 billion, which places us among the best generations in the country. Now the other results have been going up not only because of the price of power and the impact of PLD especially in the last quarter but also of the contracts, the correction of the contracts that we have with the free consumers. Now the growth of the volume of energy is quite stable as a function directly of the contracts of generation that we have with our customers.

Now the GT debt profile has very good performance as well. The cost of GT is actually less than the average cost of the company, which goes to show that the quality of credit that the company enjoys, we have some concentration in 2013. But 2013, we're not going to finance -- we're not going to roll this debt are we?

Unknown Executive

Yes, just using the opportunity here, first of all, good afternoon to all participants. I would like to highlight one operation of Cemig GT that was actually done last year, which was the third issue of debentures of GT. And the first one occurred in environment of the new fixed income market, which was the initiative of BNDES and other agents to make the market of debentures a little more liquid, give it more liquidity. So we could have a longer-term operations and the increase of the Investor Days. This is a -- some practices adopted by [indiscernible] in the sense of promoting an optimization of assets and the existence of a market former shaper and the issuing of Cemig GT was the first one in this environment. It was extremely successful because it had a demand, which is more than 3x the value of issues, which allows us to place the debentures, at an interest rate lower than what was offered in the process of both building but allowed us to issue at a higher volume than we had initially forecast. It's allowing us to place additional batches. So we had a cost, which, on average, equivalent to our CA plus 5.84%, a very attractive cost for Cemig, which in fact, reflects the excellent quality of credit that the company enjoys as has been stressed in the previous slides.

In 2013, we'll have this volume of debt expiring. We will have no difficulty paying them off. And the idea is not to procure any more money unless there are new investments in the horizon, [indiscernible] horizon to acquire assets, for example, to give company assets in order to face its contracts to provide power, because the indicators of Cemig GT are on extremely favorable levels. The net debt over the EBITDA is around 1.7 with a debt of 52.6%. There's a consequence of the -- the new market debentures makes the participation of our PCAs increase. And today, we have more debts in PCA, longer-term debt and fewer CDI debts, which allowed us to elongate the expiration date of our debt to the long-term. As you can see in this chart. We have now expiring beginning 2012, BRL 22 billion. Now it is important to highlight also that up until 2015, we have been substantially reducing our debt exactly in order to -- in the case there is any problem with our plants, we -- in case in order to be able to maintain these indicators, especially net debt over EBITDA around 1.7 exactly.

Moving on into the results of our distributor now, we have here some indicators that are extremely important. We had our EBITDA margin reaching 20%. And our EBITDA -- adjusted EBITDA reaching almost BRL 2 billion. Of course, the reported EBITDA is much less somewhere around BRL 900 million. But it was effectively reduced as a function of the additional expenses that we had to incur purchasing energy in the fourth quarter. Isn't that...

Unknown Executive

Yes, Cemig, in the same way as other distributors had, their results were penalized because of the expenses by purchasing energy, making the distributor EBITDA more penalized than the total EBITDA was very low. But adjusted by this event, which is extraordinary of this higher cost that is going to be reimbursed in 2013 into the company, we noticed that the EBITDA has reached almost BRL 2 billion. And again, we have the importance of the diversification of the company's business, even with the trouble of distribution, our final result was very expressive because of transmission and generation as well.

Unknown Executive

You're telling us that our business portfolio is less risk to our shareholder. Quality indicators, we have already talked about in the first part of our presentation. I'd like to only show to you this panel here for our distributor, especially what has to do with the debt. You see a concentration here of BRL 2.68 million expiration in 2013, which apparently could be a reason for some concern. But however, Dr. Paolo Eduardo has already given the solution to this.

Like what we did with the Cemig Generation Transmission this year in the first quarter, we concluded in the third issuing of debentures of Cemig distribution also in the environmental -- the new fixed income market, which goes -- show the good receptivity on the part of investors. We had an issuance in the -- there was a demand over 2x of the value of the issuance, which allowed us also to issue supplementary batches. So we captured BRL 2,660,000,000 and a total 12-year time, with the payment beginning in the fifth year. So this long-term -- this has actually been rolled for long time beginning 2019 up until 2025, making this amortization schedule quite flexible, flat throughout the year, with payments that are not going to go above BRL 500 million per year, which is quite compatible with the gas generation of the company, showing the capacity to face this debt. This also means that the expiration 2013 is going to move on to 2020 beginning 2019 to 2025 and the chart would look very flat.

Now Dr. Paolo, you exercised the green shoes of the transaction of our distributor of the debentures, and naturally the exercise was to guarantee a buffer of liquidity for the distributor throughout the year a perfect

[Audio Gap]

And because of the high demand for the debentures in the book building process made a cost of the addition on average would be IPCA plus 4.77%. We understand that it was a good opportunity to offer this supplementary batch and to place in the cash of the company resources to face any pressure upon it, especially coming from the purchase of power, because at that time, we still did not have the government decree and which is going to allow us to reallocate those costs of energy purchase.

So you will say that the distributors' credit quality is still good. It is quite compatible with what the regulating agency actually prescribes and what has been said by the rating agencies testifying to the excellent quality of credit that the company enjoys, and it has still a very reasonable liquidity because of the cash generation. You imagine if we had that adjusted EBITDA, which was twice as the reported EBITDA, it would fall into the half. So naturally this would frame indicators within our one -- or even better credit quality that we have.

Another extremely important topic to us, which is Gasmig, our gas area is quite promising as we've been saying. Repeatedly, we had the strategy to invest in exploration and extraction of gas through the 4 blocks that we've been able to get. We have partners of other investors as well in order to guarantee a supply to our Gasmig. Gasmig has had very strong growth. We had a revenue in 2012 of 1 billion -- BRL 1.4 billion, representing 25% growth relative to 2011, which led us to a performance over 3 million cubic meters per day, 1,323,000,000 meter -- cubic meters per year. Gasmig is one of the main growth factors of Cemig for the upcoming years.

Now the following slide maybe is the one we could spend more time on. But Paolo -- because it does represent our cash position, which actually sustains our investments, our future investments. We had the performance in spite of all the nonrecurring items in 2012. We are -- the performance was quite positive. You can see that the figures are very impressive. We had a slight reduction in the cash generated by the operations because -- especially of the additional purchase energy that we had for the distributor. But even then, we reached the BRL 3 billion cash generation. This figure is very, very positive, which again shows the efficiency of our assets. We're able to generate resources, making our growth sustainable in the long term. We actually -- only in our fixed assets, we had a growth of BRL 2.2 billion. Besides, IFRS of BRL 1,300,000,000 investments in financial applications and IFRS, in this case, we had to explain this growth in a little more elaborate way exactly. Also because of a technical accountancy issue, our cash as presented in dollar sheet is a little less than our history because of the investments. Some investments had their expiration date elongated so they relocated as values under cash. But at any rate, they are resources available to the company which added to the cash resources of BRL 2.4 billion. With the application of financial application resources, we can say that the company today has 4 -- more than BRL 4 billion cash so that it can manage it and meet its strategic plan and enjoy an opportunity that may appear in the market.

What's impressive is the growth. We left BRL 3.2 billion to BRL 4 billion in a difficult year, in a year in which our distribution business was penalized because of the energy costs, which were much higher than in previous years. Even with those difficulties, we have been able to maintain our debt in a well-balanced way and to have an accretion of cash of almost 1 billion. It was extraordinary result for 2012, and still paying dividends. Naturally we had the recognition of the capital market, and we were elected -- the Harvard Business Review. Our CEO was classified as the 26th Best CEO in the World and fourth best in this country, and with the result of 2012, our CEO is not going to be defeated in 2013, which shows us a very, very strong performance in terms of market recognition as well.

And finally, in conclusion to our presentation, prior to moving on to the Q&A session, we have assets around BRL 40 billion with a net asset of BRL 12 billion. The market value is a little penalized by the news coming from the last months there, but we are absolutely sure that investors and shareholders are going to be very tranquil about the future of this company and go back to the pattern that we had prior to 11 -- 9/11.

And now we have some events, finally, in order to take place in the short term. The first one is the result of the third tariff review cycle. Thus, the third revision. Results should be for this coming Friday if approved by the directors of Aneel. So we had to just wait for Friday to receive the results. It was a reason for much speculation, has been. We had this -- the teleconference so as to tranquilize our investors vis-à-vis a possible result of this third tariff review. But we still have a certain nervousness even among us. We are still concerned with the results up until Friday. This does not mean that this -- we're not actually not sleeping, we don't -- we're not suffering from insomnia here, but our results are in line with the guidance that we publicized last year. We have been looking for in a negotiation with Aneel. We've been seeking some recomposition of some of the figures that we understood would be fair to the company, but we have to wait for Friday. It was publicized, the result of this third tariff review. Then we're going to call the teleconference and we're going to open up the figures and put the figures on the table. We're going to talk about how we're going to account on the presence of Dr. Marlowe Galupe [ph] which is going to tell us in detail the results of the third tariff review. But we have to be patient until then and wait for the result of this review. And the approval by Aneel. The renewal of Jaguara concession has already been talked about especially by our legal director, which clarified in a very effective manner our position vis-à-vis this renewal. We had to restructure our transmission assets because of the new concession contract, and this is also underway. And probably in a few weeks, we should also clarify the market about what we are going to do with those transmission assets, which were the object of concession renewals.

Dr. Paulo still has some rollover debt to do as we mentioned. Some already taken care of and others still upcoming. But finally, we had postretirement benefits, which have to be revised because of the reduction of remuneration of the pension fund beneficiaries. As for that, Leo, would you care to say something?

[Audio Gap]

Leonardo George De Magalhaes

Net assets that have to be recognized and the net assets that are explicitly. These values and other companies were represented but in the case of Cemig, our debt with the pension fund is already agreed-upon

[Audio Gap]

For the company BRL 500 million. It is a relevant figure but in comparison with other companies, we understand that it's perfectly adjustable because it is associated with the reduction of interest rates, and we understand that this is punctual. And we understand that it doesn't cause any imbalance in the company and its operations and its net assets because of the adoption we did in 2013 of this recognition of the postretirement benefits.

Luiz Fernando Rolla

Thank you, Leo. Now with that, we close the second half of our presentation. Naturally we have posted on our website our press releases there with additional information for our investors and stockholders, and naturally the IR team is 24 11 -- 24/7 available in order to clarify any doubts that may remain after our Q&A session. I think that we could now move on to the questions and answers. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] We have a question from Felipe Leal from Merrill Lynch.

Felipe Leal - BofA Merrill Lynch, Research Division

I have 2 questions, 1 related to the debt, the other one related to transmission. As for the debt, just to clarify, when it comes to Cemig GT, you said that parts of the -- up until 2015, you have BRL 3.8 billion of debts expiring. The idea is to amortize how much of that. And the second question has to do with transmission. I would like to know what kind of time do you expect to conclude to the restructuring of the assets in order to finish the transfer of the assets from TBE, Taesa and -- due to the restructuring that is taking place.

Luiz Fernando Rolla

As for the debt, the debt schedule, what we said was that we had up until 2015 and naturally if there is any investment to be made in this time that could make up for the reduction of the 600 megawatts of the 18 plants that we should deliver to the government in 2015, we should reduce this debt so as to maintain those indices that are indicators of net debt over EBITDA at the level that they are today show the purpose. The first objective is to invest. And as we invest, we're going to generate more cash flow, more EBITDA. And with that, we're going to have the preservation of our indicators. In case this is not possible, we're going to really reduce the debt in order to keep this indicator within the bylaw limits that Cemig has as a whole. So this is the main focus. And what has to do with transmission, the restructuring in order to adjust to the present revenues of the transmission assets, naturally they're going to imply many initiatives to reduce costs. Those figures that were announced by our CEO of personnel reduction are also part of such a restructuring, and it aims exactly at guaranteeing the transmission assets may continue -- contribute to the final results of Cemig. TBE and Taesa, we should obtain the approval by Aneel. Of the transaction, we had a deeper discussion of what we had previously imagined with the regulator about this transaction. But we understand that what we have at least a common ground with the regulating agency and very shortly, we should be announcing the inclusion of this transaction into the context of Taesa.

Operator

We have a question from Marcelo Britto, Citigroup.

Marcelo Britto - Citigroup Inc, Research Division

My question has to do with the retirement program. What was the investment for those 1,000 employees and what is the expected reduction cost or cost reduction out of that?

Luiz Fernando Rolla

Marcelo, thank you for your question. The practical result is not relevant because we're going to have substantial gains even in 2013 this year and employees are going to start leaving. Now from now until June and with that the expenses naturally in the first year are going to be greater than the gains. But the total impact, we don't expect it to be relevant for the company. If we make an estimate, maybe the personnel expense should go up significantly at the first moment, but then comparatively with last year, it's going to be even a little lower than it was last year.

Certainly. This has a high cost we're talking about -- we're talking about actually moneys that are going to be paid as a severance. Severance pay, much greater than -- and so this higher cost that we're going to have this year we understand that in a short -- in 1, 2 years, we can actually have a reduction on our payroll, which is going to make up for this temporary increase in our personnel expenses in 2013.

Marcelo Britto - Citigroup Inc, Research Division

Now the amount we're going to suspend there, what is the cost reduction that you expect to have or you expect to have none? Can you just give us an idea of the amount that you intend to invest at this first time because of this retirement program, voluntary retirement program? And what is the beneficial effect?

Luiz Fernando Rolla

This program, Marcelo, it's inserted in the cost reduction context, which we had announced last year. I don't know if you remember, we announced BRL 600 million reduction program in 3 years, and already in 2013, we're going to have a reduction around BRL 200 million in the context of the operational expenses of the company. Such a measure is part of many initiatives that we had already adopted of revising processes, operation initiatives, which are going to actually bring about a reduction of BRL 600 million in 3 years and this personnel reduction was already part of this context. So what the market is going to notice is the reduction, of course, as Leo has said, the first year, you're going to an increase in expenses, with the reduction of personnel and maybe in our next explanatory notes, we have to make or separate these additional expenses and then corresponding reduction of personnel, which are going to take place. In our financial statements, as we do not have the figures, the number of issues to the program. In our personnel note, we describe the basic characteristics of this program and the main centers because I think it serves us a subsidy to measure those impacts. But we're talking about the reduction of expense over BRL 100 million and even if there is some effect this year because of the difference between the severance pay and the avoided cost after the employees were relieved, this is not so big that -- so big as to cause any imbalance in the program or in the -- in our expenses.

Operator

We have another question from Oswaldo Telles Filho, Espírito Santo.

Oswaldo Alcântara Telles Filho - Espirito Santo Investment Bank, Research Division

Going back to the debt, on this discussion about the calculation of the net debt of the EBITDA, which was talked about during the presentation, what I'd like to know if you have some limit that you placed to yourselves for such an indicator. That's one question. And the other question is what is the investment that you forecast for 20 -- 2013?

Unknown Executive

Now, Oswaldo, you're talking about net debt over the EBITDA, is that the one you're talking about? Well, that is included in our bylaws. We had a limit, a lower limit, actually a floor that is -- which is 2x the EBITDA. And the ceiling is 2.5x the EBITDA. This is the range that we think is most adequate to preserve the credit quality of our company. I'm talking about the consolidation. In the operational expenses, we may have some variation. That is why we do not limit for the operational companies those indicators. But the consolidated -- we do that because of the consolidation, it shows the general trend of the risk perception that the company agrees and taking. And this indicator is going to fall between 2x and 2.5x the cash generation as measured by the EBITDA. This is in our bylaws and we have to respect that. Occasionally, as you said, in the Cemig GT, it fell below. And in Cemig Distributor is slightly above it. And one sort of makes up for the other so that within the consolidation, we fall within the bylaws range. We are really concerned about this financial performance, the financial health of the company is one of the pillars for sustaining our growth. And because of that, we are really very strict about those indicators. We therefore, whatever the decision is about growth, we're going to observe these limits. As for the CapEx, we're still revising it because of this adjustment to the new rules. There's still many doubts whether investments to be made both in transmission and the distributor -- and distribution are going to be recognized. And as soon as we have a definition by the regulating agency, we're going to announce the investments that we're going to make, not only for this year, but also for the next 5 years. So I ask you to be patient and wait for these figures are meeting with the investments and analysts on the 27th of May. And on the 27th of May, we expect to announce a new guidance, the investments that we're going to make in the next years. Of course, we always exclude acquisition investments. Those acquisition investments are occasional and therefore, we cannot even announce them because of confidentiality of such deals.

Operator

Now Marcelo Sa [ph] from Brasil Plural.

Unknown Analyst

I have one question about transmission. I remember there was a discussion as to how this value will be adjusted would be 4% RITC -- plus 4%, if you have a definitive position about that. And another point, what are you looking at in terms of auctions, and what is your position vis-à-vis those auctions? Do you have any hydric projects or some thermal projects that is relevant that you have?

Luiz Fernando Rolla

Could you clarify the 4%, Michalick [ph]?

Unknown Executive

Now about the 4%, the 4.5%, this is already settled. Now the government will -- should regulate, and there should be something above that around 5.6%, 5.4%, but this has not been regulated by the Ministry as yet.

Luiz Fernando Rolla

Now what has to do -- so would be the value plus inflation would be something somewhere inflation plus a certain percentage that we understand would vary from 4% to 5.6% or give or take a few decimal points. Now as for auctions, we're going to continue participating in those auctions through our colleague-ated companies or our affiliated companies. Taesa participated recently in an auction, unfortunately, it was not successful. Renova is going to participate in auctions as well. We expect it to be successful. We have a few other auctions to be scheduled for 2013 by the federal government, and if there are conditions, enough of it to participate, then we're going to try and be competitive in those auctions, not reducing return but reducing the cost of investments, which is -- which we would be making. So we have an interest in growing along this pathway. Also, it is an extremely important pathway for growth and in a certain way, it's going to accelerate the substitution of those 18 plants that we should give up in 2015. Thank you.

Operator

And we have another question from Lilyanna Yang from UBS.

Lilyanna Yang - UBS Investment Bank, Research Division

I have 2 questions. How is Cemig generation has in terms of purchased energy for this 3 years? And can you tell us what amount of energy are going to be purchased in terms of the strategy to contract to protect from not recognizing Sao Simao as belonging to Cemig? And the second question is how did you work around the seasonality during the energy during January, February and March, and how does it go throughout the year?

Luiz Fernando Rolla

Thank you, Lilyanna, for your question. It's a fairly important question because not only of the importance of our capacity that we manage but also because the amount of resources that it generates. As the purchased energy, we, in the end of 2012, in the perception that we will have, the expiration of the concession contract of Jaguara. We took a few steps towards establishing a contingency plan in the case of a worst-case scenario. Based upon this worst scenario, we took a few steps in order to ensure additional capacity in order to guarantee that if by any chance the unexpected happens, which is the renewal of our concession, we would have a way to replace Jaguara in our contract portfolio that we have already signed with the consumers. This would guarantee that we will not be subjected to PMD or the fine coming from the lack of basis for those contracts. So the strategy was actually outlined in the beginning of September 11. And with the perception also that we would have more use of thermals, the -- that sections that GSF would fall below 1 and we also had a hedge of this exposure and add in the hedge with the contingency. Today we are in a position that is very comfortable, which allowed us even to allocate energy in accordance with the convenience of the company itself. So now -- we now are very at ease now regardless of the re-seasonality. And we're going to have an extremely positive result. I'd say of this surplus capacity that we have today because the perspective of the PLD is to still be very -- at a very high level during the year of 2013. And now and what has to do with the first quarter, what we did was our proposition to the national operator of this system, CCEE, and now we are waiting for an answer by the regulating agency about this issue exactly.

Operator

We now close the question-and-answer session. I'd like to give the floor to Dr. Luiz Fernando Rolla for the final remarks, please.

Luiz Fernando Rolla

I would like to first of all, thank you, all, for your patience. We've been here for 1.5 hours. Our results are very complex and full of nonrecurring items. But our final message, our take-home message is very positive, that the foundations of the company are responsible for the results that we present. And the search for the solidity of such foundations is our challenge. And we've been working 365 days a year in order to guarantee that these foundations become even more and more solid and concrete and to give us the necessary sustainability and support to the growth of the company in the future. The year of 2013 is one of challenge. We're going to now have this week the distributor challenge, which is the third tariff review cycle. It is a result that we understand, allows us to continue investing in the distribution of electricity. We still consider distribution very attractive. And with the remuneration corresponding to the risk that this activity incurs. So we have this very positive view of distribution.

As for the other sectors, we are also looking for the best possible opportunities, and certainly we're going to maintain this growth trajectory of cash generation that you have been following every quarter and every results. Now in a very short time, maybe -- can I promise that the results will come out by May 15 of the first quarter? Already under new rules, we're going to have an extremely interesting quarter because of the accountancy point of view. We're going to have to explain a lot of what is about to occur. And this is going to -- may keep you for -- make us keep you longer in the next quarters. But I'd like to reiterate our trust in our stockholders, and our investors. The year of 2012 is 1 year of delivery. And as our President says, 2013 is also 1 year of delivery. And we are now dedicated to this mission. And we, in all certainty, are going to have to be successful as before. So we thank you, all, for your presence here and naturally our IR is at your service for any additional question, and we will be talking to you in, so far, as the third tariff review occurs. Thank you very much, and a good afternoon.

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