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Companhia Energética de Minas Gerais S.A. (NYSE:CIG)

Q2 2014 Earnings Call

August 18, 2014 1:00 pm ET

Executives

Antônio Carlos Vélez Braga -

Luiz Fernando Rolla - Chief Officer for Finance and Investor Relations and Member of Executive Board

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

Marcus Vinicius de Castro Lobato -

Leonardo George De Magalhaes - General Manager and Controller

Paulo Eduardo Pereira Guimarães -

Analysts

Marcos M. Severine - JP Morgan Chase & Co, Research Division

Vinicius Canheu - Crédit Suisse AG, Research Division

Antônio Carlos Vélez Braga

Good afternoon to all of you. My name is Antônio Carlos Vélez Braga, Investor Relations Officer of Cemig. We'll now start our transmission of the video webcast, bringing the results of the second quarter of 2014 with the presences of Dr. Djalma Bastos de Morais, our CEO; Dr. Luiz Fernando Rolla, Chief Officer for Finance, Investor Relations; Dr. Leonardo George de Magalhaes, Controller; Dr. Paolo Eduardo Pereira Guimarães, Head of Corporate Finance; and Dr. Marcus Vinicius de Castro Lobato, Head of Power Trading Planning.

This transmission may be accompanied by -- or through the telephone numbers 55-11-2188-0155 or 55-11-2188-0188, also through our site, http://ri.cemig.com.br.

Now we hand over the floor to our Chief Officer for Finance and Investor Relations, Dr. Luiz Fernando Rolla.

Luiz Fernando Rolla

All right. Thank you. To begin with, for your attendance and participation in this teleconference, bringing the results of our second quarter. It will follow the same format. As usual, we'll deal with the more strategic part of it with the presence of our CEO, and then the other officers and myself will go through the figures, reflecting the results of the second quarter.

Mr. President, we had very a substantial profit as compared to last year that's a very substantial addition. What could you say to us about this figure?

Djalma Bastos de Morais

Good afternoon to all of you. Unfortunately, my time has been restricted by an appointment I have right after this. But I should inform you that we have strictly meeting -- been meeting all our commitments, our main levers, our investors and by offering to our state and other the states we serve our best services, which I believe has been very successful.

Our strategy has been participation in auction, acquiring assets to add value. And we've been very successful in all of that. Second quarter was a very good quarter, isn't it Dr. Rolla? 38% of net revenue gain; EBITDA, plus 26%; and net income, plus 20%.

Factors that boosted our good performance. Sales in spot market. You know what's been happening with the water situation here in Brazil. It has led to a very relatively high spot price. Sorry, I'm moved by these results. EBITDA reflects our efficiency. And of course, also boosting our net income directly, which reflects in our dividends in which we'll all share.

Luiz Fernando Rolla

Increase in operational efficiency are already demonstrated by the various operating indicators that was accompanied by a reduction in costs, lower costs, except for factors that are outside our scope of action. But of course, as you said, we have implemented our policy for growth. We have sought a series of alternatives for growth. In the second semester, we have already completed some of these initiatives.

Djalma Bastos de Morais

Yes. Recently, we acquired a 49.9% of total capital of Retiro Baixo. That means 240 [ph] megawatts. More recently, also, we've acquired a stake of stockholding that used to be in the hands of Petrobras in Gasmig, and we bought it up. It's nothing that we would have against Petrobras participating in Gasmig.

However, in face of the decision by the President of the Republic to build an ammonia factory in the so-called Minas Triangle, in Uberaba, we could not evade from supplying that venture with natural gas. That's exactly what we're about to do. We have this commitment to provide power to this ammonia factory in Uberaba. Then we approached our partner, Petrobras. They hold 40% of Gasmig. And Petrobras decided that, that was not a priority for them, investing in a pipeline to bring the gas all over to Uberaba.

Our proposal then was to make an offer. And we acquired those 40%, until then held by Petrobras. And these negotiations are now nearing completion in Gasmig. Now back fully in our hands, we can seek a new partner. We don't want to go solo in this because return is expected for some 2 years from now. That's why we are looking for a partner among companies with the right expertise. That's already a relevant part of our activities. And the fact that we bought back these 40% from Petrobras was very relevant. We also expanded our stake in Santo Antônio, acquiring 10% of what Andrade had in hand.

Also, negotiations are all but completed. And as you know pretty well, due to the 579, we are losing a little bit of our generation. So our main effort is to expand and to get to the level prior to 579 in terms of generation. We are looking for new ventures in the generation area. We have been trying to do that, and we've been doing that, expanding our interest in that area.

Luiz Fernando Rolla

And yes, in this agreement with Renova is -- it makes sense within this context.

Djalma Bastos de Morais

Yes, we are expanding by 25% our stake in Renova, this huge wind farm. And this allows us, this trade and investments adding value, the strategy we have been adopting enabled us to enjoy extraordinary dividends of BRL 1.7 billion this year. That's what we have been trying to do to show the vigor of our company, Cemig, working with a lot of synergy, offering very quality, high-quality services to our consumers, while at the same time, attending to the interest of our major stockholder, the State of Minas Gerais and all the shareholders in Brazil and abroad. So it's no surprise to have such a magnificent result.

Another fact that Dr. Rolla recalled in the -- you know that we are facing a suit. Ever since the 579 Act was imposed, we were, at no moment, in a position against 579 because that implied a tariff benefit to all consumers in Brazil, all the population. But there are some specific facts. For example, we have this concession contract. This contract was at that occasion expanded or extended to another 20 years by then President [indiscernible] Mr. Brito [ph] and other authorities attended that ceremony where we signed that.

And we want to stick to this. We want to make it feasible to have that extended 20-year period in those 3 hydro plants. We had another chapter of our fight with the Higher Appeal Court, but the decision was adjourned indefinitely in face of the grave disaster that took the life of the candidate of the presidency of Brazil, in that tragic accident. So São Simão, in the beginning of the year, was already solved. And the Jaguara hydroelectric plant is a project that we want to keep for a long time to come. We are very optimistic about our company, about our country. And we are sure that we'll make it to the best of all the expectations of all the stakeholders. Thank you, and have a good afternoon.

Luiz Fernando Rolla

Thank you. It's very important to have the strategic vision and view to be conveyed to all the listeners to this conference. And now, we will start going down into further details in our figures that have been disclosed recently, more precisely, last week. And we debate some other topics with our trade and finance sectors. Thank you for attending.

As our Chief Executive Officer stressed, our strategy for recomposition of our generation capacity has been growing strongly and gradually. You can see in Slide #6, we have already reached this number of 7,468 megawatts. This should be expanded even further with the construction of another 1,360 megawatts. And this will, as our CEO said, restructure our capacity to generate -- for generation. We are also acquiring another 10% of Santo Antônio. Belo Monte, we acquired 8% and another 3% in negotiations with Vale. And also, Renova, we are capitalizing. We are -- we now have some 300 -- we have very substantial amount of average megawatts and already under construction with Alto Sertão, 567.7 average megawatts, and contracted another 363.2 average megawatts. And this will add to our projections into the coming years.

The strategy was adopted within the scope of the impact of the Provisional Measure 579. This was all intended to ensure our sustainability. We have very solid decision-making. And the pillars are sustainability, value-adding innovation. And this has been repeatedly recognized by investors around the world and especially here inside Brazil.

This commitment we have towards sustainability is crucial to us, and this will ensure a very consistent result into the next years. Among the areas showing greatest rates of growth, we have natural gas growing very strongly in terms of sales in recent years. Gasmig has been setting records in supplying consumers, mostly industrial in the beginning, but then we started incorporating residential consumers. And they are now, perhaps, the highest potential for consumption of natural gas supplied by Gasmig.

Our supply volume is already very high through the existing pipelines. And we will move ahead, even now as we decided to acquire the stake of Petrobras and then decided to invest in the triangle of Minas Gerais to feed that ammonia factory belonging to Petrobras itself. And that will be a major factor for boosting our sales in the area. That's a vector of growth. That's very promising for Cemig. And we surely will acquire and achieve very good results, just like we did in other segments.

Now let's stick to the figures showing the results of the second quarter. As our CEO said, that was very positive. Net income by itself already justifies all our optimism with our 38% in net revenues, that's right, reflecting from 1 year to the other, from the second quarter last year to this second quarter of 2014. That shows higher volume of sales in the spot market, with the spot market prices at very high levels, which explains that gain in revenues.

Also, the number of clients has climbed substantially. Cemig GT, for example, 26%, capturing an even larger portion of the market. 269,000 new consumers connected, that's in Cemig D. That represents a growth of 3.5%. That was this shift in trend from industrial to residential consumers. And that involves redistribution of this energy to consumers, industrial consumers included, and that implies very good progress for our portfolio of clients. We have increased our share in the free market, reflecting that 26% growth in Cemig GT.

Marcus Vinicius de Castro Lobato

Yes, the highlight here is for the clients under incentives. With the conventional clients, we are already very strong. We are the leader in the market. In this other nonconventional, other incentive market, we have been growing at an important 20%. And that was the highlight of the period.

Luiz Fernando Rolla

The next slide shows operational expenses. We also had 27% in operational expenses. But immediately, you can see how bought energy is important here from the distributors that had this increase in bought energy. They had to face that involuntary exposure. And also, the spot market price factor comparatively to 2013, the average spot price was still very high, and that led to this increase in expenses. Of course, this was offset by a transfer of funds from CDE, BRL 1,470,000,000 from this fund. We have already received almost BRL 1.195 billion. And by the end of the year, we will have received the remainder.

All these amounts are very substantial, and they led to this very substantial increase in funding as compared to same period of 2013. Of course, the CDE is targeted for negotiations. One of the alternatives being proposed is the increase in that loan made by CCE. That was pretty much challenged and questioned from the accountancy point of view should it be recognized or not. How do we stand with regard to that question?

Leonardo George De Magalhaes

Okay. Good afternoon, everyone. The figures related to this involuntary exposure in this year are very representative. Even with this funding almost reaching BRL 1.5 billion in this 2014, we had to bear an additional BRL 500 million or more as compared to the previous quarter, as you can see in the slide. It's important to say that this BRL 6.5 billion reference, negotiations were coming from June and are almost completed. They were nearing completion, only requiring a formal signing. But we included in our balance sheet BRL 274 million, that was our involuntary exposure in May and June.

This would only be -- if not for that, this would only appear in the third quarter. Light values were lower because during wintertime, they have dropping figures anyway. But this BRL 6.5 billion loan from CCE to make up for this involuntary exposure of distributors, we can anticipate relief in cash for the distributors having viewed as a loan from CCE.

Luiz Fernando Rolla

Apart from this, all our other expenses are within that context of cost reduction, the commitment we have undertaken before our investors, increasing our capacity to operate our system with reduced resources. And we have really managed to gain that.

Leonardo George De Magalhaes

Yes, no doubt. We can see that the expenses that showed a significant growth in the semester was referring to that non-manageable expenses. We can see bought energy growing, also costs involved in the use of the network. It's worthwhile to consider the fact that most -- a good deal of that expenses -- of the expenses, that has to do with the buying of diesel to operate Igarapé. On the other hand, Igarapé also led to higher revenues. One thing somehow offsetting the other.

There are other spotty questions. But overall, our results in terms of expenses with personnel is better than last year. We have been strongly pursuing a program for disconnecting employees. And we can see a reduction, substantial reduction as compared to last year in terms of personnel, payroll. That also includes outsourced services expenses. This we consider as something inescapable, given the situation we have to face in the current times.

Luiz Fernando Rolla

So this was a source of concern, together with the other distributors. But within the context of today, how does this exposure stand at this moment?

Marcus Vinicius de Castro Lobato

We had a very important factor. From May this year, most of our exposure were due to deficits, and this has been covered. There is an exposure of 1% of our total load, but still much better than in the first semester. Many of our contracts had predicted deliveries as from March. But as of March, these contracts went into effect. After May, this was somehow reduced. Some remaining factor, but much lower than in the first quarter.

Luiz Fernando Rolla

We had rated growth of our EBITDA, very substantial, too, as you can see in this graph or this diagram. We are heading to achieving a very positive performance for the group as a whole. As you can see, BRL 1.8-plus billion for the second quarter of '14 adjusted. And this, you can see what the projected for the 2014 guidance.

We have already achieved 82.4% of the lower limit of the 2014 guidance. And EBITDA reflects also the stockholding, even in the companies where we don't have controlling interest. If you follow and adopt all of these criteria, we are at a level that makes us very comfortable to achieve the figures as predicted for 2014. That was a very positive response in face of that challenge put to us by the supervisory committee -- our Board of Directors rather, and we are very relaxed now to be able to say that we'll achieve the figures as agreed and as committed before our investors and investments that have been made are still strong and still boosting it ahead. 18% participation in the second quarter 2014, coming from equity interest, we are adding value to Cemig and to our investors and shareholders.

Consolidated net income, the same conditions. This, if adjusted, could lead to BRL 943 million. Meaning, 30% growth from the year before. You can see this 20% nominal value, which is already very good. 2013 had already excellent results. And in the first and second quarters of 2013, very good results. It involved operational gains that were capitalized in the second quarter last year. And the quality of the results we can see here are, therefore, very good, very solid. And it derives from our decisions, our strategic view, in our propensity to seek investments that add value. And this has been done and managed with a lot of efficiency. That's our consolidated debt profile. We have an expert in that area, Paulo Eduardo. Could you please describe this slide to us, please?

Paulo Eduardo Pereira Guimarães

Yes, good afternoon to all of you. It's important to stress in this debt profile the aspect of payments in the short term. This derives from the strategy that we adopted this year by going for short-term operations due to the uncertainties of the governmental policies, perhaps the perceptional risk on the part of investors could increase, and that could lead to high interest in the long term. So we decided to go for short-term loans. We'll roll this debt into next year. And we can do that with a lot of comfort because given our history, we also placed our bonds in the market. And always, the demand has exceeded the offer, the supply of bonds, and this makes us very comfortable about this. This cost has increased because 60% of our debt is indexed to the CDI. And of course, then, this is being the increase, but both generation and distribution, Cemig, we managed to have 105, 107 interest rates CDI. That's very adequate to our debt. Our debt indexes are very comfortable to us, 1.5 EBITDA. That's very comfortable. And also, 40% debt on equity. This points at the quality of credit of the company.

Luiz Fernando Rolla

That puts us in a very advantageous position, in the sense of being able to finance and fund our own growth. We have a substantial capacity of indebtedness. Given our statutory indicators, we can finance a significant part of our investments with debt.

Paulo Eduardo Pereira Guimarães

Yes. We should roll out debts by the end of the year and some other operations of that sort. In January, April and June are the maturity dates for our debt. But perhaps, well, we still have to decide throughout this year and having viewed the behavior of the market, how we'll decide about the longer or shorter-term loans.

Luiz Fernando Rolla

After elections, we will have a clearer view to allow us to take a more solid decision about how to deal with that debt. There's no concern, no worry about volume. We have been successful in those operations, even under very much tougher circumstances.

Paulo Eduardo Pereira Guimarães

Yes. In many times, the demand is overcoming the supply.

Luiz Fernando Rolla

Yes, an important part of our strategy is growth. We have been making very important investments, BRL 2.8 billion in investments by June this year. We are seeking those assets that can lead to an appropriate yield, given our investment policies, appropriate returns, as demanded by our Board of Directors, adding to our EBITDA. And these investments are the factor that explained the growth we have been getting recently with efforts we've made to improve the performance of each asset we have acquired. A lot of success following this investment policy we adopted. Very high levels of investment. I know of no other company in our sector that has invested anything near BRL 2.8 billion in 2014 that points at our vocation for growth, our pursuit of new opportunities for investment for growth, our discipline in investing with results and the appropriate returns so as to add value to our shareholders. We have been investing in all our segments. You can see, in generation, we have made already a very substantial investments. In transmission, as well, adjusting it to our new transmission contracts. Some investments are still to be made and remunerated by Aneel. Also, we are seeking to renew and refurbish our industrial park, renovating it and improving the quality of the services delivered to our consumers. And of course, from the point of view of the group as a whole, we select our -- the best investments given our vision of where the electrical or the power market is heading to. And this has been suiting our strategy in recent years in a very solid way.

Our financial situation allows us to absorb, not only the growth in generation, the growth of our industrial assets and industrial complex. Also, at the same time, catering for the shareholders. Very well balanced catering for the needs of our shareholders, the need for investments. We approved, as our CEO said, BRL 1.7 billion. A fantastic investment that really caters for the expectations of our shareholders and with a cash flow that can really bank. We can see BRL 2.8 billion made by June. And this, with a very reasonable cash balance, there are a few others in progress and they will be equally successfully accomplished. That's a display of our strength, our power. I'm sure that we have been distributing happiness around to our shareholders. I can see 61% of our -- well, 61% growth in the value of our share hold -- shares, rather.

Antônio Carlos Vélez Braga

Yes. If you decided to invest, you're going to be making good money. Yes, I can see that I have some regrets as opposed to 2012. Yes, we can see the fantastic increase in value of Cemig shares, 61% of preferred shares, 58% increase for the ordinary shares. This already includes the historical series that is adjusted according to dividends. That's already taken that into consideration.

Overall, except for Cemig that had this outstanding performance, due to our strategic -- strategy for sales and our operations in the spot market, the performance of our Light shares, to give an example, was a result derived mostly from distribution business, considering that in line with IBOVESPA is a very satisfactory level. And TAEE, a spectacular development with a very solid and constant cash flow, 22% increase in share value. If you consider that this is a very stable business, this increase is very substantial. And Renova, 2.8% increase. But you should remember that last year, the increase in value was very, very robust. Now there is an accommodation happening.

In the group, we know that this investment pays off. It brings return, yield from 16% of dividends declared by July 2014, including ordinary, extraordinary dividends paid 50% by June and 50% by December. Cemig decided to pay it all, 100% in June and already declaring BRL 1.7 billion in terms of extraordinary dividends and BRL 1.1 billion already paid by July or on July 8, 2014, another BRL 604 million to be paid on September 30, 2014. So that's a very -- another very strong indicator, the dividends.

Luiz Fernando Rolla

This is only possible by adopting the strategy we have adopted, our capacity to keep a strong portfolio, capture gains, capture synergies from the various areas where we are active. So this view of complementarity with the sector of natural gas, all of this, put together, accounts for the good results we can bring to our shareholders.

We have been recognized by our performance. We can list a list of prices, best investor relations already, the Transparency Trophy 2014. Leo is very much involved in that. He has been making an effort to increase the readability of our balance sheet. That has been recognized by the market. That makes us very happy, proves that the practice we have adopted are the ones bringing, really, results in a way that it pleases very much our investors.

These were the slides we wanted to show to you. And now we are available to you for the Q&A. And please, could you please coordinate that session for us.

Question-and-Answer Session

Operator

[Operator Instructions] Mr. Marcos Severine from JPMorgan would like to make a question.

Marcos M. Severine - JP Morgan Chase & Co, Research Division

I have 3 questions. First, if you could update us on exchange rates. Is there any possibility for any more postponement? Will the adjustment -- the postponement -- the adjournment of the judgment, however, can happen again? The second question. What's your expectation for this year in terms of any possible measures for next year? And what about long-term prices? Another question, perhaps, about dividends. You have already announced the anticipated payments of dividends. Is there any possibility that you may announce any additional dividends for this year?

Luiz Fernando Rolla

Thank you, Marcos, for your questions. I will distribute the questions among my friends here, our top executives. The first one I can answer myself. You asked about Jaguara and the court decision that's still pending. This suit or those proceedings are now -- well, it's now open-ended. I mean, there's no timing set. It was postponed [indiscernible] indefinitely. And the court, the Higher Court of Appeal decided to adjourn it indefinitely. We have no prospect of when this can be resumed. But we reiterate our confidence in the case we built before the judge. We are pretty sure the decision will be to our favor, to Cemig's favor. But we still are uncertain about the date when this final decision should come. Well, we still have this application for mandamus. And in so far as this still stands, we will keep on running the Jaguara project and dispatching according to the PLD. This will bring us some additional benefits. As for your other questions, perhaps Marcus could answer the next 2 questions.

Marcus Vinicius de Castro Lobato

With regard to GSF, we have a recent event in late June. They produced their view of how this factor could evolve at around 0.95, something around that. But our own view is a little below that, 0.9. A little better perhaps than what we had in July, August, but not too much better. Wind farms are performing better than expected. Load is also a factor. But we'll have lower results. GSF and PLD, we concentrate resources on that, and that was proper results went accordingly. But now we are at a more defensive position. As for liquidation of GSF, that will not be as positive, but reasonable. For next year, if conditions normalize as expected, if the rainy season is better or good enough, there may be variations. But we have a position of anticipating that evaluation. Whenever we started with this problem with the higher prices in 2012, we immediately prepared our positions for 2013. We did the same for 2014. And for 2015, we are building our position ever since the beginning of this year already. So we are ready for all the scenarios of 2015. In the long term, price is under pressure in the spot market, but this tends to come down to normal. Over the years, the conditions will tend to normalize. We expect by the end of the decade, that prices come down to BRL 110 to BRL 130.

Luiz Fernando Rolla

As for the dividend policy, that's an easier subject perhaps. What we may say, Marcos, is that we do have a dividend policy we may -- we have been followed -- following very strictly. That's not a very aggressive policy. It's rational policy. It has to do -- we have to meet the requirements of our strategies. We must seek value, increase value of our shares, and dividends play a role, important role in that, as you know. We want to show that aggregation of value is actually distributed through all our shareholders. Whatever gains we have, we always have in view sharing benefits with our shareholders. But this year, we consider the extraordinary level of dividends, BRL 1.7 billion. And we intend to expand the availability of resource and funds by the end of this year. But we have to balance that with our investments. We have already invested a substantial BRL 2.8 billion. We still have more investments to make by the end of the year. And if the scenarios prove really positive as we expect to, our board will proceed to another assessment for perhaps the imposition of -- paying or not more dividends. But from the viewpoint of this moment, we are seeking new investments and cash generation. That's very rational, very stable policy with a very low level of uncertainty. I think that 15% of yield dividend, just very few companies can offer that to their shareholders. Of course, if shares increased too much, perhaps this number can be brought down a little bit. It may bring some discomfort. But overall, our strategy and our policy for dividends is very rational. Have I answered all your questions, Mr. Marcos?

Marcos M. Severine - JP Morgan Chase & Co, Research Division

I have 2 doubts to solve. In terms of a long-term interest, perhaps a new application for mandamus, for example, another appeal perhaps. My doubt is how much do you have contracted for 2015, 2016?

Luiz Fernando Rolla

We do not understand exactly what your point is.

Marcos M. Severine - JP Morgan Chase & Co, Research Division

My point is this. The market is working with a concern about the final decision of the Higher Appeals Court. And perhaps it will lead to a deposit having to be made judicially, that is, and this has been contracted. And how much have you bought in terms of energy for 2016?

Luiz Fernando Rolla

So your concern is that perhaps our ballast of generation includes Jaguara, right?

Marcos M. Severine - JP Morgan Chase & Co, Research Division

Yes. And how much did GT, Cemig GT, bought energy from Jaguara in 2016?

Marcus Vinicius de Castro Lobato

Yes. It's hard to hear. I'm not sure I understood what he said.

Luiz Fernando Rolla

How much have we acquired for generation capacity to make up for Jaguara and others that we may have to return in 2015?

Marcus Vinicius de Castro Lobato

We realized pretty much right after the provisional measure came out, well, we decided to go for legal measures with a mandamus and so on. But we are also -- conservatively also counting on the possibility of losing the case. And then we are buying energy from other sources so as to make up for a possible loss. And even with an extra, even if we don't have Jaguara or São Simão, these problems have been preempted in view of previous contracts. For the next years, the problems will diminish. The bigger portions were bought in the previous years. Yes, 2015, we have bought everything we need to meet the contracts that could be affected by some deficit in the ballast. We did invest in your question. 1,500 megawatts would be the total deficit if we put together Jaguara and São Simão. But we went for conquering new markets with the expansion of our portfolio, we replaced those megawatts.

Luiz Fernando Rolla

Was it clear then?

Marcos M. Severine - JP Morgan Chase & Co, Research Division

Yes. Focusing on Jaguara a little bit. The most probable scenario is that a new injunction will come out?

Luiz Fernando Rolla

No, I can't understand what you're saying because we do have an injunction that's in force, and it will be in force until the final decision of the court. Only in the possibility of our losing the case, which we don't believe in, then we'll appeal again and we'll enter another injunction.

Operator

Our next question comes from [indiscernible] from Bradesco.

Unknown Analyst

My doubt has to do with the partnership with Fenosa, the PEC 68 that presses for the privatization of Gasmig.

Luiz Fernando Rolla

Fenosa, that's right, yes, it's in doubt. That would culminate with the privatization of Gasmig. Yes, effectively, what we have today is the acquisition of our 40% of Petrobras stake. This has been approved already by both Petrobras and Cemig. We are now nearing completion of the process of this acquisition. Everything that has to do with natural gas, Fenosa depends on a series of other factors that are naturally being taken into consideration in view of the state's constitution so that we can establish this association with Gás Natural Fenosa. We are going for shared management. We mean -- this means that we will have the same rights as our partner. We don't see that as a negative fact. Quite the contrary, this is very positive to us.

Operator

Our next question comes from Ms. Vinicius, Crédit Suisse.

Vinicius Canheu - Crédit Suisse AG, Research Division

In terms of distribution, we try to have an idea adjusting by the regulatory assets. I don't know if it was our mistake when we looked at the figures. What about this 36 in terms of regulatory assets? The figure, given the growth in volume, does sounds like a very high figure. Are we making any mistake in our calculations? Or perhaps you could define that better to us.

Luiz Fernando Rolla

You are making a reference to a slide number?

Vinicius Canheu - Crédit Suisse AG, Research Division

We're looking at distribution, results of distribution. You started giving it to us last year. But this quarter, we are looking at these 2 figures. I think they are very high. Is there any mistake there?

Luiz Fernando Rolla

Leonardo?

Leonardo George De Magalhaes

Well, yes. In our statements, we have figures that make a lot of sense to us. Yes, perhaps it's my mistake. No, that's okay. Our expense with energy was very high in the last month. And even if we recovered some of that involuntary exposure via CCE, the volume of regulatory assets that were transferred for the next adjustment, although the CCE is covering our involuntary exposure, the number that was recorded here off-balance, only for regulatory purposes with regard to CVA are very significant. If you want additional information, I think that we are in position to provide you with a few -- a little more detail than what you have in the statements. Yes, but you're right, it's a very high figure. Only -- perhaps we can break down the numbers a little bit in a little more in detail to demonstrate how we got to those figures.

Luiz Fernando Rolla

Okay. Thank you. Just adding to what Leo said, as an example, last auction, the price for energy was BRL 271 per megawatt hour. And our reference was BRL 160 some. So only this leads to a very high increase in the CVA. This justifies the figures that you can see in our statements. But as I said, we are at your disposal for any further clarification on these issues. We can provide those additional information upon request, as you wish.

Operator

We now close our Q&A session. Now the floor to professor -- to Dr. Luiz Fernando Rolla, for final considerations.

Luiz Fernando Rolla

Well, thank you all for your time. We've been having this teleconference for 1 hour and 20 minutes. I hope most of your doubts have been dismissed. If there is any lingering doubts, you can see on our screen the phone numbers, the email addresses, the website address. We have extra information put at your disposal to clarify in a final fashion about our results. But even if that's not good enough, then our international -- our internal Investor Relations department is available 24 hours to any query you may have.

I'd like to thank our shareholders, our investors. I'd like to reiterate the fact that our commitments have been strictly religiously met. You can see all the efforts we have been making to increase the quality and the operational capacity of the company to provide the best possible service to our clients. You can see it also through our operational figures. I restate that commitment, our corporate vision of transparency, focusing on innovation, growth of the company to create all the conditions to ensure sustainability to the company in the long term, in all the segments, all the sectors we operate. I thank you again for your attention. And we are available to any further question now through our Investors department.

Operator

This closes our webcast, video webcast. We thank you for your attention, and wish you a very nice afternoon.

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Source: Companhia Energética de Minas Gerais S.A.'s (CIG) CEO Djalma Bastos de Morais on Q2 2014 Results - Earnings Call Transcript
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