6-K 1 cig20201021_6k.htm FORM 6-K

FORM 6-K

securities and exchange commission
washington, d.c. 20549

report of foreign private issuer
pursuant to rule 13a-16 or 15d-16 of
the securities exchange act of 1934

For the month of October 2020

Commission File Number 1-15224

Energy Company of Minas Gerais

(Translation of Registrant’s Name Into English)

Avenida Barbacena, 1200

30190-131 Belo Horizonte, Minas Gerais, Brazil

(Address of Principal Executive Offices)

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

Form 20-F X Form 40-F ___

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ___ No X

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A

Index

| Item | Description of Items

| 1. | Presentation of 2Q 2020 Results.

| 2. | Earnings Release - 2Q 2020 Results.

| 3. | 2Q 2020 Financial Statements.

| 4. | Minutes of the Ordinary and Extraordinary General Meetings of Stockholders Held On July 31, 2020.

| 5. | Notice to Stockholders Dated July 31, 2020: (1) Dividends declared by AGM of July 31; (2) Capital increase with issue of 4.1% in new shares.

| 6. | Market Notice Dated August 5, 2020: Following success in court action, Cemig D files proposal for early return of ICMS tax to customers.

| 7. | Market Notice Dated September 1, 2020: Resignation of member of the Board of Directors.

| 8. | Market Announcement Dated September 8, 2020: BlackRock notifies significant holding in Cemig PN.

| 9. | Material Announcement Dated September 10, 2020: Gasmig completes R$ 850 million debenture issue.

| 10. | Market Notice Dated September 17, 2020: Moody’s upgrades Cemig’s ratings, maintains outlook positive.

| 11. | Convocation Dated September 18, 2020: Extraordinary General Meeting of Stockholders (EGM).

| 12. | Proposal by the Board of Directores to the Extraordinary General Meeting of Stockholders to be held on October 19, 2020, Dated September 18, 2020.

| 13. | Notice to Stockholders Dated September 22, 2020: Interest on Equity: R$ 120 million on account of 2020 dividend.

| 14. | Market Notice Dated September 25, 2020: Banco Clássico reports 16% holding of common shares.

| 15. | Convocation Dated October 9, 2020: Extraordinary General Meeting of Stockholders.

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Forward-Looking Statements

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

By: /s/ Leonardo George de Magalhães.

Name: Leonardo George de Magalhães

Title: Chief Finance and Investor Relations Officer

Date: October 22, 2020

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1. Presentation of 2Q 2020 Results.

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2. Earnings Release - 2Q 2020 Results.

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CEMIG REPORTS FOR 2Q20 2Q20 EBITDA: R$ 1,809 MILLION ADJUSTED 2Q20 EBITDA: R$ 941 MILLION
Highlights of 2Q20: § Revenue from supply of electricity lower due to the pandemic: down 8.5% YoY for Cemig GT; down 5.6% YoY for Cemig D. § Cemig D distributed 6% less energy in 2Q20 than in 2Q19 o Captive market: Down 8.0% YoY o Transport for clients: Down 3.5% YoY § PMSO: 8.3% lower than in 2Q19 (excluded Programmed Voluntary Retirement Plan) § Gain from Periodic Tariff Review of Transmission Revenue: R$ 430 million § Restatement of asset held for sale (Light): o Gain of R$ 475 million = R$ 314 million, net of taxes

Indicators (GWh) | 2Q20 | 2Q19 | %
Electricity sold (excluding CCEE) | 12,989 | 13,120 | -1.0%
Total energy carried | 4,739 | 4,910 | -3.5%
Indicators – R$ million | 2Q20 | 2Q19 | %
Sales on CCEE | 7.1 | 144.8 | -95.1%
Net debt | 12,157.2 | 12,449.9 | -2.4%
Net debt (excluding hedge) | 8,875.7 | 11,065.6 | -19.8%
Gross revenue | 8,621.8 | 9,973.2 | -13.6%
Net revenue | 5,934.4 | 7,016.8 | -15.4%
Ebitda (IFRS) | 1,809.0 | 1,811.8 | -0.2%
Adjusted Ebitda | 941.2 | 1,061.0 | -11.3%
Net profit | 1,044.0 | 2,115.0 | -50.6%
Adjusted Ebitda margin | 17.10% | 19.02% | -1,92p.p.
Ebitda of Cemig D and GT | 2Q20 | 2Q19 | %
Ebitda Cemig D | 530.7 | 1,237.1 | -57.1%
Ebitda Cemig GT | 741.9 | 299.1 | 148.0%

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Conference call

Publication of 2Q20 results

Webcast and Conference call

August 17 (Monday), at 2:00 p.m. (Brasília time)

The transmission of results will have simultaneous translation in English and can be seen by Webcast, at

https://vcasting.voitel.com.br/?transmissionId=8393 (English)

or by conference call on:

+ (55) 11 3127-4971

+ (1) 929-3783440

Playback of Video Webcast: http://ri.cemig.com.br Click on the banner and download. Available for 90 days. | Playback of Conference call: Tel: (+55-11) 3127-4999 Password: 70732138

Cemig Investor Relations

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

ri@cemig.com.br

Tel.: +55 (31) 3506 5024

Fax: +55 (31) 3506 5025

Cemig’s Executive Investor Relations Team

| § | Chief Finance and Investor Relations Officer

Leonardo George de Magalhães

| § | General Manager, Investor Relations

Antônio Carlos Vélez Braga

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CONTENTS

Conference call | 1
Cemig Investor Relations | 2
Cemig’s Executive Investor Relations Team | 2
CONTENTS | 3
Disclaimer | 4
Our shares | 5
Cemig’s long-term ratings | 6
INCOME STATEMENT | 7
2Q20 RESULTS | 8
Cemig’s consolidated electricity market | 10
The electricity market of Cemig D | 12
Sources and uses of electricity – MWh | 14
The electricity market of Cemig GT | 14
SUPPLY QUALITY INDICATORS – DECi and FECi | 15
Consolidated operating revenue | 16
Taxes and charges reported as Deductions from revenue | 20
Operating costs and expenses | 21
Share of profit (loss) in associates and joint ventures | 25
Financial revenue and expenses | 26
EBITDA | 27
DEBT | 28
Covenants – Eurobonds | 30
Results separated by business segment – 2Q20 | 31
Appendices | 32
Investments | 32
Sources and uses of power – billed market | 33
Losses | 34
Generation plants | 35
RAP (Permitted Annual Revenue – Transmission) – 2020-21 cycle | 36
EBITDA/NET PROFIT - Management adjustments | 37
Cemig D – Tables (R$ million) | 37
Cemig GT – Tables (R$ million) | 39
Cemig, consolidated – Tables (R$ million) | 40

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Disclaimer

Certain statements and estimates in this material may represent expectations about future events or results, which are subject to risks and uncertainties that may be known or unknown. There is no guarantee that the events or results will take place as referred to in these expectations.

These expectations are based on the present assumptions and analyses from the point of view of our management, in accordance with their experience and other factors such as the macroeconomic environment, market conditions in the electricity sector, and expected future results, many of which are not under Cemig’s control.

Important factors that could lead to significant differences between actual results and the projections about future events or results include Cemig’s business strategy, Brazilian and international economic conditions, technology, Cemig’s financial strategy, changes in the electricity sector, hydrological conditions, conditions in the financial and energy markets, uncertainty on our results from future operations, plans and objectives, and other factors. Due to these and other factors, Cemig’s results may differ significantly from those indicated in or implied by such statements.

The information and opinions herein should not be understood as a recommendation to potential investors, and no investment decision should be based on the veracity, currentness or completeness of this information or these opinions. The information and opinions herein should not be understood as a recommendation to potential investors, and no investment decision should be based on the veracity, currentness or completeness of this information or these opinions.

To evaluate the risks and uncertainties as they relate to Cemig, and to obtain additional information about factors that could give rise to different results from those estimated by Cemig, please consult the section on Risk Factors included in the Reference Form filed with the Brazilian Securities Commission (CVM) – and in the 20-F Form filed with the U.S. Securities and Exchange Commission (SEC).

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Our shares

Security | Ticker | Currency | Jun. 2020 | Dec. 2019 | Change in the period %
Cemig PN | CMIG4 | R$ | 11.02 | 13.79 | -20.09%
Cemig ON | CMIG3 | R$ | 11.89 | 15.59 | -23.73%
ADR PN | CIG | US$ | 2.05 | 3.34 | -38.62%
ADR ON | CIG.C | US$ | 2.21 | 3.90 | -43.33%
Ibovespa | IBOV | – | 95,056 | 115,645 | -17.80%
Power industry index | IEEX | – | 70,160 | 76,627 | -8.44%

Source: Economática – Adjusted for corporate action, including dividends.

Trading volume in Cemig’s preferred shares (CMIG4) in 2020 was R$ 17.2 billion, of which R$ 8.25 billion was traded in the second quarter, corresponding to a daily average of R$ 139.88 million – 8.66% higher than in 2Q19. Trading volume in Cemig’s common shares in 1H20 was R$ 2.91bn, with average daily trading volume of R$ 23.66mn in 1H20 and R$ 21.61mn in the second quarter. Cemig’s shares, by volume (aggregate of common (ON) and preferred (PN) shares), were the third most liquid in Brazil’s electricity sector in the period, and among the most traded in the whole Brazilian equity market.

On the New York Stock Exchange the volume traded in ADRs for Cemig’s preferred shares (CIG) in 1H20 was US$1.34 billion. We see this as reflecting recognition by the investor market of Cemig as a global investment option.

The Bovespa index, benchmark for the São Paulo stock exchange, fell strongly, by 17.80%, in 1H20, as a result of the Covid-19 pandemic, despite the 30.18% in 2Q20. Cemig’s preferred shares fell by a similar percentage, 20.09%; and the common shares fell 23.73%. In the 2Q20, CMIG4 rose 23.68% and CMIG3 31.68%. In New York the ADRs for Cemig’s preferred shares were down 38.62% in the half-year and up 20.59% in the 2Q20, and the ADRs for the common shares rose 22.78% in Q2, and were down 43.33% – these figures reflect the strong change in the USD/BRL exchange rate in the year.

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Cemig stock prices vs. indices

Cemig’s long-term ratings

This table shows long-term credit risk ratings and outlook for the Company as provided by the principal rating agencies:

Brazilian ratings:

Agency | Cemig | Cemig D | Cemig GT
| Rating | Outlook | Rating | Outlook | Rating | Outlook
Fitch | A+(bra) | Stable | A+(bra) | Stable | A+(bra) | Stable
S&P | brA+ | Positive | brA+ | Positive | brA+ | Positive
Moody’s | Baa1.br | Positive | Baa1.br | Positive | Baa1.br | Positive

Global ratings:

Agency | Cemig | Cemig D | Cemig GT
| Rating | Outlook | Rating | Outlook | Rating | Outlook
Fitch | BB– | Stable | BB– | Stable | BB– | Stable
S&P | B | Positive | B | Positive | B | Positive
Moody’s | B1 | Positive | B1 | Positive | B1 | Positive

Ratings of Eurobonds:

Agency | Cemig | Cemig GT
| Rating | Outlook | Rating | Outlook
Fitch | BB– | Stable | BB– | Stable
S&P | B | Stable | B | Stable

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Adoption of IFRS

The results presented below are prepared in accordance with Brazilian accounting rules, which now embody harmonization with IFRS (International Financial Reporting Standards). They are expressed in thousands of Reais (R$ ’000).

INCOME STATEMENT

Consolidated R$'000 | 2Q/20 | 2Q/19 | Change
NET REVENUE | 5.934.414 | 7.016.793 | -15,43%
OPERATING COSTS AND EXPENSES |  |  |
Personnel | 339.183 | 312.031 | 8,70%
Employees’ and managers’ profit shares | 7.440 | 108.478 | -93,14%
Post-retirement obligations | 118.322 | 97.790 | 21,00%
Materials | 16.141 | 19.766 | -18,34%
Outsourced services | 302.609 | 302.241 | 0,12%
Electricity bought for resale | 2.755.238 | 2.526.019 | 9,07%
Depreciation and amortization | 245.697 | 248.403 | -1,09%
Operating provisions / adjustments | 197.613 | 869.373 | -77,27%
Charges for use of the national grid | 257.441 | 367.375 | -29,92%
Gas bought for resale | 231.378 | 330.180 | -29,92%
Infrastructure construction costs | 373.405 | 266.107 | 40,32%
Other operational expenses, net | 84.321 | 41.922 | 101,14%
| 4.928.788 | 5.489.685 | -10,22%
Impairment of assets held for sale | 475.137 | 0 |
Share of profit (loss) in associates and joint ventures | 82.534 | 36.274 | 127,53%
Finance income | 670.078 | 2.272.470 | -70,51%
Finance expenses | -705.395 | -363.883 | 93,85%
Pre-tax profit | 1.527.980 | 3.471.969 | -55,99%
Current income tax and Social Contribution tax | -198.803 | -973.424 | -79,58%
Deferred income tax and Social Contribution tax | -285.183 | -383.559 | -25,65%
NET PROFIT FOR THE PERIOD | 1.043.994 | 2.114.986 | -50,64%

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2Q20 RESULTS

In thousands of Reais, unless otherwise stated

For second quarter 2020 (2Q20), Cemig reports net profit of R$ 1,043,994, which compares to net profit of R$ 2,113,986 in 2Q19.

Leading factors in the 2Q20 result:

| § | Gain on the Periodic Tariff Review of Cemig GT: R$ 429,840.

| § | Heavy impact of the Covid-19 epidemic on the volume of electricity distributed in 2Q20: down 6% YoY. This effect reached approximately –10.5% in April 2020, and has been showing signs of recovery: load in June and July has been close to that of 2019. Another effect of the pandemic was that the allowance for doubtful receivables in Cemig D was R$ 57,295 higher than in 2Q19. The amount provisioned in 2Q20 was R$ 102,504.

| § | The result of Cemig GT was affected by sale of energy at the lower limit of contractual flexibility ranges for a relevant part of the clients, due to the pandemic.

| § | Cemig GT posted a gain of R$ 70,770 in Financial revenues (expenses), related to the debt in Eurobonds and the related hedge instrument. In 2Q19, the combined effect of the debt and the hedge on Financial Revenue (expenses) was R$ 557,833 positive.

| § | Reversal of part of the impairment of Light posted in 1Q20, with recognition of the market value of the investment at June 30, generating a gain in 2Q20 of R$ 475,137, which net of taxes is R$ 313,590.

| § | Continuing reduction of costs of PMSO (Personnel, materials, services and other expenses), which were 8.3% lower YoY – after exclusion of the expenses of R$ 58,850 on the PDVP voluntary retirement plan, posted in 2Q20.

| § | Cemig D recorded a revenue from transactions under the Surplus Sales Mechanism (MVE) totaled R$ 41,514 in 2Q20.

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| § | In 2Q19, an impairment of R$ 688,031 was recognized of Accounts receivable from Renova; the amount of impairment posted in 2Q20 was R$ 37,361.

| § | In 2Q19, was recorded a revenue of R$1,438,563 from Tax credits in ICMS/PIS-Cofins case and financial revenue of R$1,553,112 for updating of these credits.

The ‘Covid Account’

On May 18, 2020, in response to the state of public calamity caused by the Covid 19 pandemic, Decree 10350/2020 authorized creation of the ‘Covid Account’, the purpose of which was to cover deficits, or anticipate revenue, of holders of concessions or permissions to distribute electricity – the basis of the financial flows of the electricity sector, especially related to: (i) overcontracting of supply; (ii) the CVA (‘Portion A’ Variation Compensation Account); (iii) neutrality of sector charges; (iv) postponement until June 30, 2020 of the results of tariff review processes for distributors ratified up to that date; and (v) bringing forward of the regulatory asset relating to Portion B, as per an Aneel regulation and timetable decided by the distributor.

On June 23, 2020 Aneel issued Normative Resolution 885/2020, setting the criteria and procedures for management of the Covid Account, and also regulating use of the CDE tariff charge. Under this Resolution, the amounts transferred to each distributor are reverted as negative financial components up to the tariff adjustment processes of 2022, duly updated by the Selic rate, with neutrality assured.

Cemig D accepted the financial offsetting mechanism of the Covid Account, with a view to strengthening its cash position, enabling compliance with its financial obligations even during the reduction of revenue caused by the severe economic downturn. On July 9, 2020, Aneel informed Cemig D of the amount from the Covid Account to be allocated to it – a total of R$ 1,404,175, to be passed through in stages. The first tranche, of R$ 1,186,390, was received on July 31, 2020, with the remaining total of R$ 217,785 to be received in six monthly payments in August 2020 through January 2021.

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Measures to preserve liquidity

In addition to accepting the terms of the Covid Account, to preserve liquidity and mitigate the effects of the impact on the macro economy, the Company took measures including the following:

| § | Revision of its program of investments and expenses.

| § | Payment of minimum dividends to stockholders, and postponement of the payments of dividends and Interest on Equity to the end of 2020.

| § | Negotiation of its contracts with Free Clients.

| § | Deferral of payment of employment-law taxes and charges, as authorized by legislation.

Cemig’s consolidated electricity market

The Cemig Group makes its sales of electricity through its distribution company, Cemig Distribuição (‘Cemig D’), its generation and transmission company, Cemig Geração e Transmissão (‘Cemig GT’), and other wholly-owned subsidiaries:

Horizontes Energia, Sá Carvalho, Cemig PCH, Rosal Energia, the wind power companies Praias de Parajuru and Volta do Rio, Cemig Geração Camargos, Cemig Geração Itutinga, Cemig Geração Salto Grande, Cemig Geração Três Marias, Cemig Geração Leste, Cemig Geração Oeste, and Cemig Geração Sul.

These companies sell electricity to:

| (i) | Captive consumers in Cemig’s concession area in the State of Minas Gerais;

| (ii) | Free Consumers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ACL);

| (iii) | other agents of the electricity sector – traders, generators and independent power producers, also in the ACL; and

| (iv) | Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR).

The Cemig group traded a total of 12,988,626 MWh on the CCEE in 2Q20, 1.0% less than in 2Q19. Sales of electricity to final consumers, plus Cemig’s own consumption,

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totaled 9,587,085 MWh, or 10.4% less than in 2Q19. Sales to distributors, traders, other generating companies and independent power producers in 2Q20 were 3,401,541 MWh – or 40.4% more than in 2Q19.

In June 2020 the Cemig Group invoiced 8,590,483 clients – this was 1.5% more than its number of consumers in June 2019. Of this total number of consumers, 8,590,104 are final consumers, and/or represent Cemig’s own consumption; and 379 are other agents in the Brazilian electricity sector.

This chart shows the percentage of the Cemig Group’s sales to final consumers:

Sales to final consumers as % of total

Total consumption of electricity (GWh) – Down 1.0% YoY

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The electricity market of Cemig D

Electricity billed to captive clients and electricity transported for Free Clients and distributors with access to Cemig D’s networks in 2Q20 totaled 10,526,441 MWh, or 6.0% less than in 2Q19. This result is a composition of: (i) lower use of the network by Free Clients – a YoY decrease of 3.5%; and (ii) consumption by the captive market 8.0% lower YoY.

Captive clients + Transmission service (MWh)

Captive clients + Transmission service (MWh) | 2Q20 | 2Q19 | %
Residential | 2,657,910 | 2,547,878 | 4.32
Industrial | 4,782,233 | 5,112,557 | -6.46
Commercial, Services and Others | 1,275,441 | 1,622,920 | -21.41
Rural | 900,984 | 917,775 | -1.83
Public authorities | 169,008 | 231,943 | -27.13
Public lighting | 325,162 | 333,969 | -2.64
Public services | 339,650 | 339,955 | -0.09
Concession holders (Distributors) | 68,082 | 84,060 | -19.01
Own consumption | 7,970 | 7,247 | 9.98
Total | 10,526,441 | 11,198,304 | -6.00

Residential

Residential consumption, which was 25.2% of the energy distributed by Cemig D in 2Q20, was 4.3% higher than in 2Q19. This increase reflects a total of 122,382 new consumer units being added to the network since the end of June 2019, and also average monthly consumption per consumer approximately 2.5% higher than in 2Q19.

Industrial

Consumption by the industrial consumer category was 45.4% of the total volume of electricity distributed by Cemig D, and totaled 4,782,233 MWh in 2Q20, or 6.5% less than in 2Q19. Consumption suffered a strong impact from the pandemic: the heaviest reductions were in the automotive, textiles and steel sectors.

Energy consumed by captive clients totaled 406,876 MWh in 2Q20, 34.5% less than in 2Q19. The volume of energy transported for industrial Free Clients was 41.6% of the total of energy distributed, and was 4,375,358 MWh in 2Q20, 2.6% less than in 2Q19.

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Commercial and Services

Distribution to this category of client was also strongly impacted by the pandemic, and by the restrictions on opening of stores, etc. – it was 21.4% less than in 2Q19. Volume was down 23.4% YoY in the captive market, and down 13.5% YoY in the Free Market. The total energy used by captive clients, plus energy transported for Free Clients, in the category was 12.1% of the total of energy distributed by Cemig D in 2Q20.

Rural

The rural consumer category suffered less from the Covid pandemic than other consumer categories. Its total consumption was 1.8% less in 2Q20 than 2Q19, even with a reduction of 13,023 consumer units in the category, due to re-registry of consumers to comply with Aneel Resolution 800.

Number of clients

A total of 8,589,721 consumers were billed in June 2020, or 123,507 more than in June 2019. Of this total, 1,584 were Free Consumers using the distribution network of Cemig D.

Cemig D | Number of clients | Change, %
2Q20 | 2Q19
Residential | 7,002,932 | 6,880,550 | 1.78%
Industrial | 29,745 | 29,712 | 0.11%
Commercial, Services and Others | 773,250 | 761,017 | 1.61%
Rural | 695,510 | 708,542 | -1.84%
Public authorities | 65,737 | 64,565 | 1.82%
Public lighting | 6,742 | 6,425 | 4.93%
Public services | 13,516 | 13,506 | 0.07%
Own consumption | 705 | 677 | 4.14%
| 8,588,137 | 8,464,994 | 1.45%
Total energy carried |  |  |
Industrial | 766 | 594 | 28.96%
Commercial | 801 | 618 | 29.61%
Rural | 14 | 5 | 180.00%
Concession holders | 3 | 3 | 0.00%
| 1,584 | 1,220 | 29.84%
Total | 8,589,721 | 8,466,214 | 1.46%

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Sources and uses of electricity – MWh

Metered market | MWh | Change,
2Q20 | 2Q19 | %
Total energy carried |  |  |
Transported for distributors (metered) | 72,404 | 86,200 | -16.00%
Transported for Free Clients (metered) | 4,517,041 | 4,945,263 | -8.66%
Own load + Distributed generation (1)(2) | 4,589,445 | 5,031,463 | -8.79%
Consumption by captive market – Billed supply | 5,787,773 | 6,288,496 | -7.96%
Losses in distribution network | 1,719,023 | 1,688,889 | 1.78%
Total volume carried | 12,096,241 | 13,008,849 | -7.02%

| (1) | Includes Distributed Micro-generation.

| (2) | Includes own consumption

The electricity market of Cemig GT

Cemig GT billed a total of 7,233,217 MWh in 2Q20, 5.4% more than in 2Q19. Consumption by industrial clients was 627,536 MWh lower than in 2Q19, while commercial consumption was 1.23% higher – reflecting an increase of approximately 29% in the number of clients.

Sales 51.7% higher in the Free Market mainly reflected the higher volume of sales in the spot market to traders especially in April, and less allocation of energy for settlement on the CCEE.

Cemig GT | (MWh) | Change, %
2Q20 | 2Q19
Free Clients |  |  |
Industrial | 2,698,768 | 3,326,304 | -18.87%
Commercial | 1,095,953 | 1,082,661 | 1.23%
Rural | 4,590 | 524 | 775.52%
Free Market – Free contracts | 2,870,210 | 1,892,134 | 51.69%
Regulated Market | 531,332 | 530,140 | 0.22%
ACR – Cemig D | 32,363 | 32,348 | 0.05%
Total | 7,233,217 | 6,864,111 | 5.38%

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SUPPLY QUALITY INDICATORS – DECi and FECi

Cemig is continuously taking action to improve operational management, organization of the logistics of its emergency services, and its permanent routine of preventive inspection and maintenance of substations, distribution lines and networks. It also invests in training of its staff for improved qualifications, state-of-the-art technologies, and standardization of work processes, aiming to maintain the quality of electricity supply, and as a result maintain satisfaction of clients and consumers.

The charts below show Cemig’s indicators for duration and frequency of outages – DECi (Average Outage Duration per Consumer, in hours), and FECi (Average Outage Frequency per Consumer, in number of outages), since January 2016. These quality indicators are linked to the current concession contract of Cemig D (distribution), signed in 2015.

| Note: | Figures for 2016 and 2017 are according to recalculation presented by the Company to Aneel.

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Consolidated operating revenue

Revenue from supply of electricity (a)

Total revenue from supply of electricity in 2Q20 was R$ 5,920,014, 6.4% less than in 2Q19 (R$ 6,327,737).

| MWh (1) | R$ ’000 | Average price billed (R$/MWh)
2Q20 | 2Q19 | Change % | 2Q20 | 2Q19 | Change % | 2Q20 | 2Q20
Residential | 2,657,910 | 2,547,878 | 4.32 | 2,307,578 | 2,206,790 | 4.57 | 868.19 | 866.13
Industrial | 3,105,644 | 3,947,233 | -21.32 | 934,197 | 1,154,786 | -19.10 | 300.81 | 292.56
Commercial, services and others | 2,085,089 | 2,374,683 | -12.20 | 1,136,848 | 1,280,841 | -11.24 | 545.23 | 539.37
Rural | 896,651 | 915,078 | -2.01 | 511,810 | 460,746 | 11.08 | 570.80 | 503.50
Public authorities | 169,009 | 231,943 | -27.13 | 121,381 | 158,145 | -23.25 | 718.19 | 681.83
Public lighting | 325,162 | 333,969 | -2.64 | 142,679 | 140,508 | 1.55 | 438.79 | 420.72
Public services | 339,650 | 339,954 | -0.09 | 177,860 | 165,901 | 7.21 | 523.66 | 488.01
Subtotal | 9,579,115 | 10,690,738 | -10.40 | 5,332,353 | 5,567,717 | -4.23 | 556.66 | 520.80
Wholesale supply to other concession holders | 3,401,541 | 2,422,273 | 40.43 | 726,004 | 641,532 | 13.17 | 213.43 | 264.85
Total billed | 12,980,656 | 13,113,011 | -1.01 | 6,058,357 | 6,209,249 | -2.43 | 466.72 | 473.52
Own consumption | 7,970 | 7247 | 9.98 | 0 | 0 | - | - | -
Retail supply not yet invoiced, net | 0 | 0 | - | -104,793 | 80,721 | -229.82 | - | -
Wholesale supply not yet invoiced, net | 0 | 0 | - | -33,550 | 37,767 | -188.83 | - | -
Total | 12,988,626 | 13,120,258 | -1.00 | 5,920,014 | 6,327,737 | -6.44 | - | -

Final consumers

Revenue from energy sold to final consumers totaled R$ 5,332,353 in 2Q20, or 4.23% less than in 2Q19 (R$ 5,567,717) – reflecting consumption of electricity 10.40% lower YoY due to the pandemic, partly offset by the effect of Cemig D’s annual tariff increase in force from May 28, 2019 (full effect in 2020), which had an average impact on consumers’ tariffs of 8.73%.

Revenue from Use of Distribution Systems (the TUSD charge)

In 2Q20 this revenue was R$ 674,737, or 6.14% more than in 2Q19 (R$ 635,675). This difference arises mainly from the Company’s annual tariff adjustment, in effect from May 28, 2019 (full effect in 2020), which had an average impact of approximately 15.47% for Free Clients; partially offset by volume of energy transported in 3.49% lower in 2Q20 than in 2Q19.

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CVA and Other financial components in tariff adjustments

In its financial statements Cemig recognizes the difference between actual non-controllable costs (in which the CDE, and electricity bought for resale, are significant components) and the costs that were used as the basis for decision on the rates charged to consumers. In 2Q20 this item comprised a reduction of revenue by R$ 136,254, compared with an addition to revenue of R$ 40,109 in 2Q19. This variation mainly reflects: (1) higher costs of energy from Itaipu, due to the rise in the dollar exchange rate; and (2) the effects of overcontracting resulting from lower consumption of electricity, which generated an increase in the net financial asset to be passed through to the Company by the next tariff adjustment. These effects were partially offset by the passthrough of surplus amounts under the Energy Reserve Account (CONER), established by Aneel Dispatch 986/2020. The Company’s CVA balance receivable is R$ 926,183.

Changes in balances of financial assets and liabilities:

| R$ ’000
Balance at March 31, 2019 | 1,147,415
Net constitution of financial assets | 87,700
Realized | -127,809
Advances from the Flag Tariff Centralizing Account (‘CCRBT’) | -8,581
Updating – Selic rate | 32,140
Balance at June 30, 2019 | 1,130,865
Balance at March 31, 2020 | 775,885
Net constitution of financial assets | 262,167
Realized | -125,913
Advances from the Flag Tariff Centralizing Account (‘CCRBT’) | -1
Updating – Selic rate | 14,045
Balance at June 30, 2020 | 926,183

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Transmission concession revenue

This revenue in 2Q20 was R$ 299,832, or 138.79% more than in 2Q19 (R$ 125,564). The higher figure is mainly due to the remeasurement of the Remuneration Base in the Periodic Tariff Review of Permitted Annual Revenue (RAP), ratified by Aneel on June 30, 2020, resulting in an adjustment of R$ 198,714. Additionally, these revenues were impacted by the increase in annual RAP, in July 2019 – this includes the effects of inflation and also new revenues resulting from investments authorized. The percentages and indices applied are different for different concessions: the IPCA inflation index is applied to the contract of Cemig GT, and the IGP–M index to the contract of Cemig Itajubá. They also include an adjustment to expectation of cash flow from financial assets, due to the change in the fair value of the Regulatory Remuneration Base of Assets (BRR).

Transmission reimbursement revenue

The Company records the updating of the balance receivable for the indemnity (reimbursement of asset value) based on the IPCA inflation index, and the average Regulatory cost of capital, as specified in the regulation for the sector.

The transmission indemnity revenue in 2Q20 was 348.33% higher than in 2Q19 – at R$ 259,680 compared to R$ 57,921 in 2Q19. This higher figure mainly reflects the upward adjustment to the economic portion of the indemnity base, as a result of the Periodic Review of RAP, which was recalculated in accordance with the applicable regulatory rules, resulting in an increase of R$ 231,126 in the Company’s profit at June 30, 2020.

Additionally, these revenues were influenced by the difference in the IPCA inflation index between the two periods. At the beginning of the tariff cycle, which takes place in July of each year, the amounts received for the adjustment set for the cycle, corresponding to the amortization of the debtor balance up to the end of the period, are excluded from the remuneration base for updating, reducing the remuneration. The indemnity (reimbursement) is being received through the RAP (Permitted Annual Revenue) since 2017, over a period of 8 years, for the financial portion, and for the remaining period of the useful life of the assets, for the economic portion.

Revenue from transactions on the Wholesale Trading Exchange (CCEE)

Revenue from transactions in electricity on the CCEE in 2Q20 was R$ 7,074, compared to R$ 144,821 in 2Q19 – a reduction of 95.1% year-on-year. This reduction is due to the lower availability of electricity for settlement on the CCEE; higher allocation of

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electricity to ‘bilateral’ sales on the spot market in 2Q20, and the lower value of the spot price than in the previous year.

Month | Spot Price | GSF
Sub-market | R$/MWh | 2020 | 2019
2020 | 2019
April | SE/CO | 39.68 | 180.41 | 1.023 | 1.189
May | SE/CO | 71.95 | 135.17 | 0.956 | 0.923
June | SE/CO | 114.79 | 78.52 | 0.765 | 0.669

Revenue from supply of gas

The Company reports revenue from gas 24.62% lower YoY in 2Q20, at R$ 403,227, compared to R$ 534,995 in 2Q19. This difference basically reflects volume of gas sold 17.55% lower, at 183,138m3 in 2Q20, compared to 222,106m3 in 2Q19, led by the industrial consumer category, which consumed 21.75% less volume year-on-year.

Market (’000 m3/day) | 2015 | 2016 | 2017 | 2018 | 2019 | 1H20 | 1H19 |
Residential | 1.04 | 3.38 | 11.44 | 17.73 | 21.28 | 23.91 | 19.23 |
Commercial | 22.42 | 24.68 | 32.67 | 39.37 | 47.7 | 47.11 | 41.87 |
Industrial | 2,422.78 | 2,173.76 | 2,453.22 | 2,400.41 | 2,085.32 | 1,902.09 | 2,219.07 |
Other | 119.87 | 120.19 | 126.15 | 155.14 | 148.44 | 115.39 | 154.33 |
Total, excluding thermal generation | 2,566.11 | 2,322.01 | 2,623.47 | 2,612.65 | 2,302.74 | 2,088.50 | 2,434.50 |
Thermoelectric power | 1,309.13 | 591.52 | 990.89 | 414.04 | 793.94 | 292.13 | 534.27 |
Total | 3,875.24 | 2,913.53 | 3,614.36 | 3,026.69 | 3,096.69 | 2,380.63 | 2,968.77 |

Supply of gas to the residential market began in 2013. In June 2020, a total of 54,552 households were supplied and billed.

Number of clients | 2015 | 2016 | 2017 | 2018 | 2019 | June 2020 |
Residential | 3,820 | 14,935 | 30,605 | 41,377 | 50,813 | 54,552 |
Commercial | 218 | 394 | 591 | 756 | 981 | 978 |
Industrial | 113 | 112 | 107 | 109 | 109 | 98 |
Other | 62 | 49 | 50 | 57 | 61 | 62 |
Thermoelectric power | 2 | 2 | 2 | 2 | 2 | 2 |
Total | 4,215 | 15,492 | 31,355 | 42,301 | 51,966 | 55,692 |

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Taxes and charges reported as Deductions from revenue

The total of these taxes and charges reported as deductions from revenue in 2Q20 was R$ 2,687,389, or 9.10% less than in 2Q19 (R$ 2,956,432).

The Energy Development Account – CDE

The amounts of payments to the Energy Development Account (CDE) are decided by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities (reimbursements of costs of assets), tariff subsidies, the subsidy for balanced tariff reduction, the low-income-consumer subsidy, the coal consumption subsidy, and the Fuels Consumption Account (CCC). The charges for contribution to the CDE were R$ 608,155 in 2Q20, compared to R$ 679,017 in 2Q19, or 10.44% lower, mainly due to the termination of the Regulated Market Account (‘the ACR Account’), in August 2019.

This is a non-manageable cost: the difference between the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Consumer charges – the ‘Flag’ Tariff system

The ‘Flag’ Tariff bands are activated as a result of low levels of water in the system’s reservoirs – tariffs are temporarily increased due to scarcity of rain.

Charges to the consumer arising from the ‘Flag Tariff’ system in 2Q20 were 99.16% lower year-on-year – at R$ 73 in 2Q20, vs. R$ 8,712 in 2Q19. This reflects the flag being ‘green’ during the whole of 2Q20. For comparison, in 2Q19 the yellow flag was activated in May (with effect on the billing for June 2019).

The ‘Flag’ Tariff component – history
Mar. 2020 | Green | Mar. 2019 | Green
Apr. 2020 | Green | Apr. 2019 | Green
May 2020 | Green | May 2019 | Yellow
Jun. 2020 | Green | Jun. 2019 | Green

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Operating costs and expenses

Operational costs and expenses in 2Q20 were R$ 4,928,788, or 10.22% less than in 2Q19 (R$ 5,489,685).

The following paragraphs comment on the main variations in expenses:

Personnel

The expense on personnel in 2Q20 was R$ 339,183, or 8.70% more than in 2Q19 (R$ 312,031). The difference mainly reflects recognition in 2Q20 of R$ 58,850, the cost of voluntary severance programs; and also the effect of the salary increase of 2.55% agreed in November 2019 under the Collective Work Agreement. Excluding the effects of the voluntary severance program, spending on personnel would have been 10.16% lower than in 2Q19.

PDVP | Cost, R$ ’000 | Number of employees accepting
Consolidated | 58,850 | 396
GT | 11,348 | 61
D | 45,584 | 329

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Number of employees – by company

Employees’ and managers’ profit shares

The expense on employees’ and managers’ profit shares in 2Q20 was R$ 7,440, compared to R$ 108,478 in 2Q19, reflecting the lower profit in the period and the change in the criteria for shared profit sharing.

Electricity purchased for resale

The expense on electricity bought for resale in 2Q20 was R$ 2,755,238, or 9.07% more than in 2Q19 (R$ 2,526,019). This arises mainly from the following factors:

| § | Expenses on supply from Itaipu 45.31% higher, at R$ 524,601 in 2Q20, than in 2Q19 (R$ 361,021). The difference mainly reflects the higher average US dollar exchange rate – R$ 5.40 in 2Q20, compared to R$ 3.92 in 2Q19; and the higher price of energy in US dollars, at R$ 28.41/kW for the whole of 2020, compared with US$ 27.71/kW for 2019.

| § | Expenses on supply acquired at auction were 9.31% higher YoY in 2Q20, at R$ 748,514, compared to R$ 684,774 in 2Q19. This increase reflects: (i) volume of energy acquired approximately 10% higher year-on-year; and (ii) the upward adjustment in power purchasing agreements on the regulated market (CCEARs) taking place at the moment of Cemig D’s tariff adjustment.

| § | Higher expenses on distributed generation: R$ 154,315 in 2Q20, compared to R$ 44,892 in 2Q19. This higher figure reflects the increase in the number of

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generating facilities installed, and the higher quantity of energy injected into the network (232,076 MWh in 2Q20, compare to 95,965 MWh in 2Q19).

For Cemig D, purchased energy is a non-manageable cost: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Consolidated | 2Q20 | 2Q19 | Change
Supply from Itaipu Binacional | 524,601 | 361,021 | 45.31%
Physical guarantee quota contracts | 189,617 | 185,427 | 2.26%
Quotas for Angra I and II nuclear plants | 75,742 | 67,293 | 12.56%
Spot market | 251,066 | 278,055 | -9.71%
Proinfa | 77,933 | 95,309 | -18.23%
Individual (‘bilateral’) contracts | 84,216 | 78,883 | 6.76%
Electricity acquired in Regulated Market auctions | 748,514 | 684,774 | 9.31%
Acquired in Free Market | 900,703 | 973,506 | -7.48%
Distributed generation | 154,315 | 44,892 | 243.75%
Credits of PIS, Pasep and Cofins taxes | -251,469 | -243,141 | 3.43%
| 2,755,238 | 2,526,019 | 9.07%

Cemig D | 2Q20 | 2Q19 | Change
Supply from Itaipu Binacional | 524,601 | 361,021 | 45.31%
Physical guarantee quota contracts | 199,970 | 185,427 | 7.84%
Quotas for Angra I and II nuclear plants | 75,742 | 67,293 | 12.56%
Spot market – CCEE | 195,334 | 246,418 | -20.73%
Individual (‘bilateral’) contracts | 84,216 | 78,883 | 6.76%
Acquired in Regulated Market auctions | 757,419 | 702,423 | 7.83%
Proinfa | 77,933 | 95,308 | -18.23%
Distributed generation | 154,314 | 44,892 | 243.74%
Credits of PIS, Pasep and Cofins taxes | -166,429 | -154,239 | 7.90%
| 1,903,100 | 1,627,426 | 16.94%

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Gas bought for resale

The expense on acquisition of gas was 29.92% lower in 2Q20, at R$ 231,378, compared to R$ 330,180 in 2Q19. This basically reflects volume of gas purchased 14.61% lower, at 185,852m3 in 2Q20, compared to 217,646m3 in 2Q19.

Post-retirement obligations

The impact on operational profit of the Company’s post-retirement obligation was an expense of R$ 118,322 in 2Q20, compared to an expense of R$ 97,790 in 2Q19. This is mainly the result of reduction in the discount rate used in the actuarial calculation – which increased the amount of the actuarial liabilities, and consequently the scale of the expense reported.

Charges for use of the transmission network

Charges for use of the national grid in 2Q20 were R$ 257,441, or 29.92% less than in 2Q19 (R$ 367,375).

This is a non-manageable cost in the distribution activity: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Operating provisions

Operational provisions in 2Q20 totaled R$ 197,613, or 77.27% less than in 2Q19 (R$ 869,373). This arises mainly from the following factors:

| § | Recognition in 2Q19 of a higher provision for impairment of Accounts receivable from Renova: R$ 688,031, compared to R$ 37,361 in 2Q20.

| § | Losses expected on doubtful receivables from clients 142.22% higher, at R$ 115,360 in 2Q20, compared to R$ 47,627 in 2Q19. This difference mainly reflects higher default by clients in the public authorities category, and, especially, worsening of performance in the residential and industrial consumer categories, due to the pandemic.

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| § | Lower provisions made for employment-law contingencies: R$ 23,375 in 2Q20, compared to R$ 105,122 in 2Q19. This mainly reflects recognition, in 2Q19, of a change in the indexor used for monetary updating of employment-law actions, from the TR reference rate to the IPCA-E inflation rate, for claims between March 25, 2015 and November 10, 2017 – which are at an advanced phase of execution. The chances of loss have been assessed as ‘probable’.

Share of profit (loss) in associates and joint ventures

The Company reported a gain of R$ 82,534 as share of net profit in associates and joint ventures, which was 127.5% more than in 2Q19. This mainly reflects improvement in the result of Taesa and a less negative result from the stake in Santo Antôniot that was negative R$ 18,528 in 2Q20 and negative R$ 58,154 in 2Q19.

Note: The result of Companhia de Transmissão Centroeste de Minas is no longer included in this account (equity income), since the conclusion of purchase by the Company of the remaining stake in Centroeste in January 2020.

Share of profit (loss) in affiliates and joint ventures | 2Q20 | 2Q19
Taesa | 90,404 | 64,858
Aliança Geração | 24,939 | 23,276
Baguari Energia | 5,539 | 5,138
Retiro Baixo | 2,609 | 1,267
Hidrelétrica Pipoca | 2,430 | 858
Hidrelétrica Cachoeirão | 2,204 | 2,730
LightGer | 1,339 | 0
Janaúba photovoltaic plant – distributed generation | 480 | -78
Ativas Data Center | 200 | -249
Guanhães Energia | 5 | 0
Companhia de Transmissão Centroeste de Minas | 0 | 1,398
Axxiom Soluções Tecnológicas | -73 | 0
Itaocara | -151 | 0
Aliança Norte (Belo Monte Plant) | -11,271 | -2,213
Amazônia Energia (Belo Monte Plant) | -17,592 | -2,557
FIP Melbourne (Santo Antônio Plant) | -8,244 | -26,241
Madeira Energia (Santo Antônio Plant) | -10,284 | -31,913
Total | 82,534 | 36,274

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Financial revenue and expenses

For 2Q20, Cemig reports net financial expenses of R$ 35,317, which compares to net financial revenue in 2Q19 of R$ 1,908,587. This reflects two main factors:

| § | Appreciation of the dollar in 2Q20 by 5.33%, compared to a depreciation of 1.66% in 2Q19, resulting in FX variation expenses on the principal debt in Eurobonds of R$ 415,950 in 2020, compared to revenues in 2Q19, of R$ 96,750.

| § | In 2Q20 the fair value of the hedge instrument increased by R$ 486,720, offsetting the effect of FX variation on the principal of the debt in Eurobonds – with a combined positive result of R$ 70,770. In 2Q19 the variation in the fair value of the hedge instrument was R$ 461,083 which added to the positive effect of FX variation, of R$ 96,750, generated a combined gain of R$ 557,833. The increase in the fair value of the hedge instrument in 2Q20 arises, especially, from lowering of the DI curve (short leg), which reduced the expectation of the obligation to pay interest; and appreciation of dollar futures, which resulted in an increase in the value of the call spread options.

Period | 2Q20 | 2Q19
Effect on the hedge | 486,720 | 461,083
Effect on the principal of the Eurobond debt | –415,950 | 96,750
Total effect on Financial revenue (expenses) | 70,770 | 557,833

| § | Recognition of financial revenue in 2Q19 from monetary updating of the R$ 1,553,112 credits for PIS, Pasep and Cofins taxes.

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EBITDA

Cemig’s consolidated Ebitda in 2Q20 was 0.2% lower than in 2Q19; adjusted Ebitda was 11.3% lower. Ebitda margin in 2Q20 was 32.86% – compared to 25.82% in 2Q19 – but adjusted 2Q20 Ebitda margin was 17.10% compared to 19.02% in 2Q19.

EBITDA – R$ ’000 | 2Q20 | 2Q19 | Change, %
Net profit for the period | 1,043,994 | 2,114,986 | -50.6%
+ Income and Social Contribution taxes | 483,986 | 1,356,983 | -64.3%
+ Net financial revenue (expenses) | 35,317 | -1,908,587 | -101.9%
+ Amortization and Depreciation | 245,697 | 248,403 | -1.1%
EBITDA | 1,808,994 | 1,811,785 | -0.2%
Non-recurring and non-cash effects |  |  |
+ Net profit attributed to non-controlling stockholders | -188 | -212 | -11.3%
+ Pis/Pasep e Cofins sobre ICMS | - | -1,438,563 | -
+ Write-down for Renova credit risk | 37,361 | 688,031 | -94.6%
+ Reversal of Impairment of assets held for sale (Light) | -475,137 | - |
+ Gain from Periodic Tariff Review of Transmission | -429,840 | - |
Adjusted EBITDA | 941,190 | 1,061,041 | -11.3%

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DEBT

The Company’s total consolidated debt on June 30, 2020 was R$ 15,862,429, or R$ 1,086,398 higher than at the end of 2019 (R$ 14,776,031). It is important to note that the Company also records a net positive balance on hedge transactions for the Eurobond issue, in the total amount of R$ 3,281,491: R$ 1,583,727 for the principal of the debt, and R$ 1,697,764 for the interest. The total net asset value of the hedge is R$ 1,590,547 greater than at the end of 2019.

In the first half of 2020, debt totaling R$ 1,042,496 was amortized: R$ 488,920 in Cemig GT, and R$ 536,867 in Cemig D. No new loans were raised in the period. The rise in gross debt was due to appreciation of the dollar in the half-year, which increased the principal of the Eurobonds debt by R$ 2.17 billion.

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Covenants – Eurobonds

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Results separated by business segment – 2Q20

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Appendices

Investments

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Sources and uses of power – billed market

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Losses

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Generation plants

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RAP (Permitted Annual Revenue – Transmission) – 2020-21 cycle

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EBITDA/NET PROFIT - Management adjustments

Cemig D – Tables (R$ million)

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Cemig GT – Tables (R$ million)

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Cemig, consolidated – Tables (R$ million)

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3. 2Q 2020 Financial Statements.

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CONTENTS

STATEMENTS OF FINANCIAL POSITION | 2
STATEMENTS OF INCOME | 5
STATEMENTS OF COMPREHENSIVE INCOME | 6
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY | 7
STATEMENTS OF CASH FLOWS | 8
STATEMENTS OF ADDED VALUE | 10
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION | 11
1. OPERATING CONTEXT | 11
2. BASIS OF PREPARATION | 17
3. PRINCIPLES OF CONSOLIDATION | 18
4. CONCESSIONS AND AUTHORIZATIONS | 20
5. CASH AND CASH EQUIVALENTS | 21
6. MARKETABLE SECURITIES | 21
7. CUSTOMERS, TRADERS AND POWER TRANSPORT CONCESSION HOLDERS | 22
8. RECOVERABLE TAXES | 23
9. INCOME AND SOCIAL CONTRIBUTION TAXES | 24
10. ACCOUNTS RECEIVABLE FROM THE STATE OF MINAS GERAIS | 28
11. ESCROW DEPOSITS | 29
12. REIMBURSEMENT OF TARIFF SUBSIDIES | 29
13. CONCESSION FINANCIAL AND SECTOR ASSETS AND LIABILITIES | 30
14. CONCESSION CONTRACT ASSETS | 37
15. INVESTMENTS | 40
16. PROPERTY, PLANT AND EQUIPMENT | 54
17. INTANGIBLE ASSETS | 57
18. LEASING TRANSACTIONS | 59
19. SUPPLIERS | 62
20. TAXES PAYABLE AND AMOUNTS TO BE RESTITUTED TO CUSTOMERS | 62
21. LOANS, FINANCING AND DEBENTURES | 63
22. REGULATORY CHARGES | 68
23. POST-EMPLOYMENT OBLIGATIONS | 68
24. PROVISIONS | 70
25. EQUITY AND REMUNERATION TO SHAREHOLDERS | 79
26. REVENUE | 80
27. OPERATING COSTS AND EXPENSES | 86
28. FINANCE INCOME AND EXPENSES | 90
29. RELATED PARTY TRANSACTIONS | 91
30. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT | 95
31. OPERATING SEGMENTS | 108
32. ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS | 112
33. NON-CASH TRANSACTIONS | 114
34. SUBSEQUENT EVENTS | 114
CONSOLIDATED RESULTS | 115
OTHER INFORMATION THAT THE COMPANY BELIEVES TO BE MATERIAL | 136
Independent Auditor’s Review Report on Quarterly Information - ITR | 145

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2020 AND DECEMBER 31, 2019

ASSETS

(Thousands of Brazilian Reais)

| Note | Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
CURRENT |  |  |  |  |
Cash and cash equivalents | 5 | 971,314 | 535,757 | 32,278 | 64,356
Marketable securities | 6 | 2,529,359 | 740,339 | 106,679 | 185,211
Customers, traders, concession holders and Transport of energy | 7 | 4,173,334 | 4,523,540 | - | 194
Concession financial assets | 13 | 1,268,509 | 1,079,743 | - | -
Concession contract assets | 14 | 176,299 | 171,849 | - | -
Recoverable taxes | 8 | 2,117,663 | 98,804 | 249 | 248
Income tax and social contribution tax credits | 9a | 496,822 | 621,302 | - | -
Dividends receivables | 15 | 97,398 | 185,998 | 1,320,563 | 1,726,895
Public Lighting Contribution |  | 175,521 | 164,971 | - | -
Reimbursement of tariff subsidies payments | 12 | 89,048 | 96,776 | - | -
Derivative financial instruments | 30b | 589,555 | 234,766 | - | -
Others |  | 352,706 | 425,452 | 8,253 | 15,876
|  | 13,037,528 | 8,879,297 | 1,468,022 | 1,992,780
Assets classified as held for sale | 32 | 1,124,088 | 1,258,111 | 1,124,088 | 1,258,111
TOTAL CURRENT |  | 14,161,616 | 10,137,408 | 2,592,110 | 3,250,891
NON-CURRENT |  |  |  |  |
Marketable securities | 6 | 204,561 | 13,342 | 8,144 | 454
Customers and traders and concession holders – Transport of energy | 7 | 74,151 | 77,065 | - | -
Recoverable taxes | 8 | 4,237,507 | 6,349,352 | 494,975 | 491,487
Income tax and social contribution tax recoverable | 9a | 195,622 | 227,913 | 192,555 | 224,846
Deferred income tax and social contribution tax | 9c | 2,537,820 | 2,429,789 | 743,296 | 680,731
Escrow deposits | 11 | 1,170,254 | 2,540,239 | 304,604 | 310,065
Derivative financial instruments | 30b | 2,691,936 | 1,456,178 | - | -
Accounts receivable from the State of Minas Gerais | 10 | 120,258 | 115,202 | 120,258 | 115,202
Concession financial assets | 13 | 4,728,409 | 4,850,315 | - | -
Concession contract assets | 14 | 2,429,995 | 1,832,380 | - | -
Investments – Equity method | 15 | 5,455,180 | 5,399,391 | 14,181,637 | 12,631,091
Property, plant and equipment | 16 | 2,422,073 | 2,450,125 | 1,368 | 1,546
Intangible assets | 17 | 11,741,863 | 11,624,471 | 3,332 | 4,175
Leasing – rights of use | 18a | 242,458 | 276,824 | 2,573 | 3,330
Others |  | 121,437 | 147,058 | 22,501 | 38,407
TOTAL NON-CURRENT |  | 38,373,524 | 39,789,644 | 16,075,243 | 14,501,334
TOTAL ASSETS |  | 52,535,140 | 49,927,052 | 18,667,353 | 17,752,225

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

83

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

Table of Contents

STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2020 AND DECEMBER 31, 2019

LIABILITIES

(Thousands of Brazilian Reais)

| Note | Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
CURRENT |  |  |  |  |
Suppliers | 19 | 1,945,496 | 2,079,891 | 1,786 | 2,705
Regulatory charges | 22 | 377,372 | 456,771 | 4,624 | 4,624
Profit sharing |  | 200,715 | 212,220 | 14,426 | 10,235
Taxes payable | 20 | 622,514 | 358,847 | 6,473 | 92,640
Income tax and social contribution tax | 9b | 65,605 | 133,868 | - | -
Interest on equity and dividends payable |  | 745,864 | 744,591 | 742,372 | 742,519
Loans, financing and debentures | 21 | 3,001,664 | 2,746,249 | 49,298 | -
Payroll and related charges |  | 234,073 | 200,044 | 10,968 | 10,662
Public Lighting Contribution |  | 238,295 | 251,809 | - | -
Post-employment obligations | 23 | 311,265 | 287,538 | 25,418 | 23,747
PIS/Pasep and Cofins taxes to be reimbursed to customers | 20 | 714,339 | - | - | -
Leasing | 18b | 76,251 | 85,000 | 914 | 1,646
Others |  | 519,698 | 355,623 | 4,825 | 11,496
TOTAL CURRENT |  | 9,053,151 | 7,912,451 | 861,104 | 900,274
NON-CURRENT |  |  |  |  |
Regulatory charges | 22 | 286,900 | 147,266 | - | -
Loans, financing and debentures | 21 | 12,860,765 | 12,029,782 | - | 48,252
Taxes payable | 20 | 671 | 883 | 91 | 91
Deferred income tax and social contribution tax | 9c | 753,718 | 661,057 | - | -
Provisions | 24 | 1,864,956 | 1,888,064 | 224,099 | 223,427
Post-employment obligations | 23 | 6,513,321 | 6,421,156 | 705,676 | 689,761
PIS/Pasep and Cofins taxes to be reimbursed to customers | 20 | 3,522,442 | 4,193,329 | - | -
Derivative financial Instruments | 30b | 505,641 | 482,841 | - | -
Leasing | 18b | 180,000 | 202,747 | 1,808 | 1,833
Other obligations |  | 116,513 | 96,611 | 1,971 | 1,972
TOTAL NON-CURRENT |  | 26,604,927 | 26,123,736 | 933,645 | 965,336
TOTAL LIABILITIES |  | 35,658,078 | 34,036,187 | 1,794,749 | 1,865,610
EQUITY | 25 |  |  |  |
Share capital |  | 7,293,763 | 7,293,763 | 7,293,763 | 7,293,763
Capital reserves |  | 2,249,721 | 2,249,721 | 2,249,721 | 2,249,721
Profit reserves |  | 8,750,928 | 8,750,051 | 8,750,928 | 8,750,051
Equity valuation adjustments |  | (2,415,245) | (2,406,920) | (2,415,245) | (2,406,920)
Retained earnings |  | 993,437 | - | 993,437 | -
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT |  | 16,872,604 | 15,886,615 | 16,872,604 | 15,886,615
NON-CONTROLLING INTERESTS | 25 | 4,458 | 4,250 | - | -
TOTAL EQUITY |  | 16,877,062 | 15,890,865 | 16,872,604 | 15,886,615
TOTAL LIABILITIES AND EQUITY |  | 52,535,140 | 49,927,052 | 18,667,353 | 17,752,225

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

84

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

Table of Contents

STATEMENTS OF INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019

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

| Note | Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
CONTINUING OPERATIONS |  |  |  |  |
NET REVENUE | 26 | 11,993,629 | 12,929,971 | 6 | 186,932
OPERATING COSTS |  |  |  |  |
COST OF ENERGY AND GAS | 27 |  |  |  |
Energy purchased for resale |  | (5,569,733) | (5,120,200) | - | -
Charges for use of the national grid |  | (622,453) | (701,171) | - | -
Gas purchased for resale |  | (543,303) | (725,162) | - | -
|  | (6,735,489) | (6,546,533) | - | -
OTHER COSTS | 27 |  |  |  |
Personnel |  | (520,779) | (534,273) | - | -
Materials |  | (27,613) | (34,076) | - | -
Outsourced services |  | (534,815) | (512,676) | - | -
Depreciation and amortization |  | (425,481) | (407,737) | - | -
Operating provisions |  | (69,843) | (100,827) | - | -
Infrastructure construction cost |  | (683,676) | (465,225) | - | -
Others |  | (45,542) | (31,795) | - | -
|  | (2,307,749) | (2,086,609) | - | -
TOTAL COST |  | (9,043,238) | (8,633,142) | - | -
GROSS PROFIT |  | 2,950,391 | 4,296,829 | 6 | 186,932
OPERATING EXPENSES | 27 |  |  |  |
Selling expenses |  | (215,100) | (126,978) | - | -
General and administrative expenses |  | (263,090) | (286,038) | (28,556) | (36,886)
Operating provisions |  | (71,786) | (692,966) | (48,986) | (35,845)
Other operating (expenses) income, net |  | (353,837) | (500,677) | (35,560) | (32,794)
|  | (903,813) | (1,606,659) | (113,102) | (105,525)
Result of business combinations | 15d | 51,736 | - | 51,736 | -
Impairment (reversals) of assets held for sale | 32 | (134,023) | - | (134,023) | -
Share of loss, net, of subsidiaries and joint ventures | 15 | 164,476 | 103,500 | 1,106,407 | 2,672,831
Finance income | 28 | 2,152,813 | 2,622,988 | 15,393 | 305,114
Finance expenses | 28 | (2,914,876) | (815,961) | (2,272) | (18,451)
Income before income tax and social contribution tax |  | 1,366,704 | 4,600,697 | 924,145 | 3,040,901
Current income tax and social contribution tax | 9d | (394,319) | (1,278,146) | (19) | (97,959)
Deferred income tax and social contribution tax | 9d | 14,763 | (410,326) | 62,565 | (31,092)
NET INCOME FOR THE PERIOD |  | 987,148 | 2,912,225 | 986,691 | 2,911,850
Total of net income for the period attributed to: |  |  |  |  |
Equity holders of the parent |  | 986,691 | 2,911,850 | 986,691 | 2,911,850
Non-controlling interests | 25 | 457 | 375 | - | -
|  | 987,148 | 2,912,225 | 986,691 | 2,911,850
Earnings per preferred share – R$ | 25 | 0.68 | 2.00 | 0.68 | 2.00
Earnings per common share – R$ | 25 | 0.68 | 2.00 | 0.68 | 2.00

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

85

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

Table of Contents

STATEMENTS OF INCOME

FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019

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

| Note | Consolidated | Parent Company
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
CONTINUING OPERATIONS |  |  |  |  |
NET REVENUE | 26 | 5,934,414 | 7,016,793 | 1 | 184,195
OPERATING COSTS |  |  |  |  |
COST OF ENERGY AND GAS | 27 |  |  |  |
Energy purchased for resale |  | (2,755,238) | (2,526,019) | - | -
Charges for use of the national grid |  | (257,441) | (367,375) | - | -
Gas purchased for resale |  | (231,378) | (330,180) | - | -
|  | (3,244,057) | (3,223,574) | - | -
OTHER COSTS | 27 |  |  |  |
Personnel |  | (288,140) | (271,186) | - | -
Materials |  | (17,237) | (21,604) | - | -
Outsourced services |  | (303,285) | (292,920) | - | -
Depreciation and amortization |  | (214,589) | (212,827) | - | -
Operating provisions |  | (33,121) | (100,193) | - | -
Infrastructure construction cost |  | (373,405) | (266,107) | - | -
Others |  | (42,516) | (29,635) | - | -
|  | (1,272,293) | (1,194,472) | - | -
TOTAL COST |  | (4,516,350) | (4,418,046) | - | -
GROSS PROFIT |  | 1,418,064 | 2,598,747 | 1 | 184,195
OPERATING EXPENSES | 27 |  |  |  |
Selling expenses |  | (115,360) | (47,627) | - | -
General and administrative expenses |  | (71,110) | (63,328) | (14,254) | (15,019)
Operating provisions |  | (49,132) | (663,945) | (47,144) | (17,832)
Other operating (expenses) income, net |  | (176,836) | (296,739) | (16,743) | (16,438)
|  | (412,438) | (1,071,639) | (78,141) | (49,289)
Impairment (reversals) of assets held for sale | 32 | 475,137 | - | 475,137 | -
Share of loss, net, of subsidiaries and joint ventures | 15 | 82,534 | 36,274 | 777,614 | 1,837,876
Finance income | 28 | 670,078 | 2,272,470 | 6,093 | 302,108
Finance expenses | 28 | (705,395) | (363,883) | (744) | (8,786)
Income before income tax and social contribution tax |  | 1,527,980 | 3,471,969 | 1,179,960 | 2,266,104
Current income tax and social contribution tax | 9d | (198,803) | (973,424) | - | (97,959)
Deferred income tax and social contribution tax | 9d | (285,183) | (383,559) | (136,154) | (53,371)
NET INCOME FOR THE PERIOD |  | 1,043,994 | 2,114,986 | 1,043,806 | 2,114,774
Total of net income for the period attributed to: |  |  |  |  |
Equity holders of the parent |  | 1,043,806 | 2,114,774 | 1,043,806 | 2,114,774
Non-controlling interests | 25 | 188 | 212 | - | -
|  | 1,043,994 | 2,114,986 | 1,043,806 | 2,114,774
Basic earnings per preferred share – R$ | 25 | 0.72 | 1.45 | 0.72 | 1.45
Basic earnings per common share – R$ | 25 | 0.72 | 1.45 | 0.72 | 1.45

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

86

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

Table of Contents

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019

(In thousands of Brazilian Reais)

| Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
NET INCOME FOR THE PERIOD | 987,148 | 2,912,225 | 986,691 | 2,911,850
OTHER COMPREHENSIVE INCOME |  |  |  |
Items not to be reclassified to profit or loss in subsequent periods |  |  |  |
Post retirement liabilities – remesurement of obligations of the defined benefit plans | - | (1,316) | - | -
Income tax and social contribution tax on restatement of defined benefit plans | - | 448 | - | -
Equity gain (loss) on other comprehensive income in subsidiary and jointly-controlled entity | - | - | - | (864)
Others | (702) | - | (702) | -
| (702) | (868) | (702) | (864)
COMPREHENSIVE INCOME FOR THE PERIOD | 986,446 | 2,911,357 | 985,989 | 2,910,986
Total of comprehensive income for the period attributed to: |  |  |  |
Equity holders of the parent | 985,989 | 2,910,986 | 985,989 | 2,910,986
Non-controlling interests | 457 | 371 | - | -
| 986,446 | 2,911,357 | 985,989 | 2,910,986

STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019

(In thousands of Brazilian Reais)

| Consolidated | Parent Company
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
NET INCOME FOR THE PERIOD | 1,043,994 | 2,114,986 | 1,043,806 | 2,114,774
COMPREHENSIVE INCOME FOR THE PERIOD | 1,043,994 | 2,114,986 | 1,043,806 | 2,114,774
Total of comprehensive income for the period attributed to: |  |  |  |
Equity holders of the parent | 1,043,806 | 2,114,774 | 1,043,806 | 2,114,774
Non-controlling interests | 188 | 212 | - | -
| 1,043,994 | 2,114,986 | 1,043,806 | 2,114,774

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

87

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

Table of Contents

STATEMENT OF CHANGES IN CONSOLIDATED EQUITY

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019

(In thousands of Brazilian Reais– except where otherwise stated)

| Share capital | Capital reserves | Profit reserves | Equity valuation adjustments | Retained earnings | Total | Non-controlling interests | Total Equity
AS OF DECEMBER 31, 2019 | 7,293,763 | 2,249,721 | 8,750,051 | (2,406,920) | - | 15,886,615 | 4,250 | 15,890,865
Net income for the period | - | - | - | - | 986,691 | 986,691 | 457 | 987,148
Other Comprehensive Income | - | - | - | (702) | - | (702) | - | (702)
Realization of PP&E deemed cost | - | - | - | (7,623) | 7,623 | - | - | -
Tax incentives reserve (1) | - | - | 877 | - | (877) | - | - | -
Interest on equity and dividends payable | - | - | - | - | - | - | (249) | (249)
AS OF JUNE 30, 2020 | 7,293,763 | 2,249,721 | 8,750,928 | (2,415,245) | 993,437 | 16,872,604 | 4,458 | 16,877,062

| (1) | To be determined in the Annual General Meeting that decide on the allocation of net income for 2020.

| Share capital | Capital reserves | Profit reserves | Equity valuation adjustments | Retained earnings | Total | Non-controlling interests | Total Equity
AS OF DECEMBER 31, 2018 | 7,293,763 | 2,249,721 | 6,362,022 | (1,326,787) | - | 14,578,719 | 1,360,608 | 15,939,327
Proposed dividends from prior years | - | - | - | - | - | - | (489) | (489)
Prior period adjustments in jointly-controlled subsidiaries | - | - | - | - | (193) | (193) | - | (193)
Capital Increase | - | - | - | - | - | - | 10,290 | 10,290
Reversal of reserve for tax incentives, prior periods | - | - | (1,166) | - | 1,166 | - | - | -
Net income for the period | - | - | - | - | 2,911,850 | 2,911,850 | 375 | 2,912,225
Other Comprehensive Income | - | - | - | (864) | - | (864) | (4) | (868)
Realization of PP&E deemed cost | - | - | - | (11,583) | 11,583 | - | - | -
AS OF JUNE 30, 2019 | 7,293,763 | 2,249,721 | 6,360,856 | (1,339,234) | 2,924,406 | 17,489,512 | 1,370,780 | 18,860,292

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

88

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

Table of Contents

STATEMENTS OF CASH FLOWS

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019

(In thousands of Brazilian Reais)

|  | Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
CASH FLOW FROM OPERATIONS |  |  |  |  |
Net income for the period |  | 987,148 | 2,912,225 | 986,691 | 2,911,850
Expenses (revenues) not affecting cash and cash equivalents: |  |  |  |  |
Deferred income tax and social contribution tax | 9d | (14,763) | 410,326 | (62,565) | 31,092
Depreciation and amortization | 27 | 488,449 | 479,299 | 1,552 | 2,398
Loss on write-off of net residual value of unrecoverable concession financial assets, concessional contract asset, PP&E and Intangible assets | 13, 14,16 and 17 | 17,422 | 8,638 | 157 | -
Result of business combinations | 15d | (51,736) | - | (51,736) | -
Impairment (reversals) of assets held for sale | 32 | 134,023 | - | 134,023 | -
Impairment (reversals) for contract assets | 14 | 3,233 | (26,016) | - | -
Share of loss, net, of subsidiaries and joint ventures | 15 | (164,476) | (103,500) | (1,106,407) | (2,672,831)
Adjustment to expectation of contractual and financial cash flow from the concession | 13 and 14 | (227,404) | (283,372) | - | -
Interest and monetary variation |  | 516,348 | 590,478 | (18,491) | (15,400)
Recovery of PIS/Pasep and Cofins taxes credits over ICMS |  | - | (2,962,564) | - | (481,069)
Exchange variation on loans | 21 | 2,162,364 | (70,470) | - | -
Periodic Tariff Reset adjustments | 13 and 14 | (429,840) | - | - | -
Appropriation of transaction costs | 21 | 7,101 | 13,948 | 104 | 81
Provisions for operating losses | 27c | 356,729 | 978,379 | 48,986 | 35,845
Provision for reimbursement for suspension of energy supply –Renova |  | - | (62,575) | - | -
Variation in fair value of derivative financial instruments – Swaps | 30 | (1,800,960) | (613,394) | - | -
CVA (Parcel A items Compensation) Account and Other financial components in tariff adjustments |  | (81,652) | (80,241) | - | -
13
Post-employment obligations | 23 | 245,476 | 232,277 | 25,055 | 23,398
Other |  | 1,531 | - | 1,531 | -
|  | 2,148,993 | 1,423,438 | (41,100) | (164,636)
(Increase) decrease in assets |  |  |  |  |
Customers and traders and Concession holders – Transport of energy |  | 139,744 | (537,832) | 194 | 3,100
CVA and Other financial components in tariff adjustments |  | 62,771 | 83,115 | - | -
13
Recoverable taxes |  | 18,144 | 15,276 | - | (3,357)
Income tax and social contribution tax credits |  | 84,987 | 8,953 | 34,265 | 15,901
Escrow deposits |  | 1,424,416 | 33,518 | 15,633 | 28,525
Dividends received from investees | 15 | 169,064 | 126,791 | 63,788 | 160,864
Contract assets and concession financial assets | 13 and 14 | 250,114 | 195,952 | - | -
Advances to suppliers |  | 19,931 | 43,722 | - | -
Other |  | 65,266 | 18,081 | 6,987 | 14,053
|  | 2,234,437 | (12,424) | 120,867 | 219,086
Increase (decrease) in liabilities |  |  |  |  |
Suppliers |  | (134,442) | 39,542 | (919) | (1,723)
Taxes payable |  | 268,294 | (123,566) | (86,002) | (37,784)
Income tax and social contribution tax payable |  | 325,781 | 1,273,327 | 19 | 97,959
Payroll and related charges |  | 34,029 | (27,420) | 306 | (4,588)
Regulatory charges |  | 59,626 | (17,784) | - | (11)
Advances from customers |  | - | (80,862) | - | -
Post-employment obligations | 23 | (129,584) | (163,037) | (7,469) | (9,268)
Other |  | 49,995 | (77,801) | (7,016) | (18,693)
|  | 473,699 | 822,399 | (101,081) | 25,892
Cash generated by operating activities |  | 4,857,129 | 2,233,413 | (21,314) | 80,342
Interest paid on loans and financing | 21 | (616,033) | (706,605) | - | -
Interest in leasing contracts | 18 | (1,049) | (18,332) | (20) | (286)
Income tax and social contribution tax paid |  | (210,325) | (459,345) | - | (8,495)
Cash inflows from settlement of derivatives instruments |  | 177,086 | 34,138 | - | -
NET CASH FROM OPERATING ACTIVITIES |  | 4,206,808 | 1,083,269 | (21,334) | 71,561
INVESTING ACTIVITIES |  |  |  |  |
Marketable securities |  | (1,985,217) | 140,292 | 70,842 | 29,248
Restricted cash |  | (3,413) | (9,943) | 50 | -
Investments |  |  |  |  |
Acquisition of equity investees | 15 | (44,850) | (1,028) | (54,085) | (16,102)
Cash arising from business combination |  | 27,110 | - | - | -
Settlement received through merger |  | - | - | - | 22,444
Loans from related parties |  | (26,500) | - | (26,500) | -
Property, plant and equipment | 16 | (63,225) | (34,414) | - | -
Intangible assets | 17 | (13,514) | (14,677) | (2) | -

89

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

Table of Contents

Contract assets – gas and distribution of energy infrastructure | 14 | (574,678) | (345,997) | - | -
NET CASH USED IN INVESTING ACTIVITIES |  | (2,684,287) | (265,767) | (9,695) | 35,590
FINANCING ACTIVITIES |  |  |  |  |
Interest on capital and dividends paid |  | (147) | (78,707) | (147) | (78,262)
Payment of loans with related parties |  | - | - | - | (46,599)
Payment of loans, financing and debentures | 21 | (1,042,496) | (849,821) | - | -
Leasing liabilities paid | 18 | (44,321) | (31,238) | (902) | (1,474)
NET CASH USED IN FINANCING ACTIVITIES |  | (1,086,964) | (959,766) | (1,049) | (126,335)
Net (decrease) increase in cash and cash equivalents for the period |  | 435,557 | (142,264) | (32,078) | (19,184)
Cash and cash equivalents at the beginning of the period | 5 | 535,757 | 890,804 | 64,356 | 54,330
Cash and cash equivalents at the end of the period | 5 | 971,314 | 748,540 | 32,278 | 35,146

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

90

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

Table of Contents

STATEMENTS OF ADDED VALUE

FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2020 AND 2019

(In thousands of Brazilian Reais)

| Consolidated | Parent Company
Jan to Jun 2020 |  | Jan to Jun 2019 |  | Jan to Jun 2020 |  | Jan to Jun 2019 |
REVENUES |  |  |  |  |  |  |  |
Sales of energy, gas and services | 16,548,107 |  | 16,848,601 |  | 9 |  | 4,338 |
Distribution construction revenue | 609,632 |  | 382,236 |  | - |  | - |
Transmission construction revenue | 74,044 |  | 82,989 |  | - |  | - |
Gain on financial updating of the Concession Grant Free | 146,412 |  | 176,151 |  | - |  | - |
Adjustment to expectation of cash flow from reimbursement of distribution concession financial assets | (955) |  | 8,967 |  | - |  | - |
Transmission assets – reimbursement revenue | 316,218 |  | 90,420 |  | - |  | - |
PIS/Pasep and Cofins taxes credits | - |  | 1,438,563 |  | - |  | 183,595 |
Investment in PP&E | 29,645 |  | 17,763 |  | - |  | - |
Other revenues | - |  | 9,329 |  | - |  | - |
Allowance for doubtful receivables | (215,100) |  | (126,978) |  | - |  | - |
| 17,508,003 |  | 18,928,041 |  | 9 |  | 187,933 |
INPUTS ACQUIRED FROM THIRD PARTIES |  |  |  |  |  |  |  |
Energy bought for resale | (6,075,166) |  | (5,614,077) |  | - |  | - |
Charges for use of national grid | (696,504) |  | (782,254) |  | - |  | - |
Outsourced services | (866,067) |  | (754,119) |  | (15,793) |  | (11,376) |
Gas bought for resale | (689,909) |  | (920,841) |  | - |  | - |
Materials | (376,456) |  | (268,691) |  | (100) |  | (94) |
Other operating costs | (445,201) |  | (972,135) |  | (187,243) |  | (38,192) |
| (9,149,303) |  | (9,312,117) |  | (203,136) |  | (49,662) |
GROSS VALUE ADDED | 8,358,700 |  | 9,615,924 |  | (203,127) |  | 138,271 |
RETENTIONS |  |  |  |  |  |  |  |
Depreciation and amortization | (488,449) |  | (479,299) |  | (1,552) |  | (2,398) |
NET ADDED VALUE PRODUCED | 7,870,251 |  | 9,136,625 |  | (204,679) |  | 135,873 |
ADDED VALUE RECEIVED BY TRANSFER |  |  |  |  |  |  |  |
Share of (loss) profit, net, of associates and joint ventures | 164,476 |  | 103,500 |  | 1,106,407 |  | 2,672,831 |
Result of business combinations | 51,736 |  | - |  | 51,736 |  | - |
Financial revenues | 2,152,813 |  | 2,622,988 |  | 15,393 |  | 305,114 |
ADDED VALUE TO BE DISTRIBUTED | 10,239,276 |  | 11,863,113 |  | 968,857 |  | 3,113,818 |
DISTRIBUTION OF ADDED VALUE |  |  |  |  |  |  |  |
|  | % |  | % |  | % |  | %
Employees | 868,004 | 8.48 | 993,796 | 8.37 | 38,942 | 4.02 | 48,074 | 1.54
Direct remuneration | 484,927 | 4.74 | 660,041 | 5.56 | 10,713 | 1.11 | 21,692 | 0.70
Post-employment obligations and other benefits | 294,249 | 2.87 | 280,142 | 2.35 | 25,499 | 2.63 | 24,433 | 0.78
FGTS fund | 29,978 | 0.30 | 32,122 | 0.27 | 813 | 0.08 | 1,041 | 0.03
Voluntary retirement program | 58,850 | 0.57 | 21,491 | 0.19 | 1,917 | 0.20 | 908 | 0.03
Taxes | 5,440,041 | 53.13 | 7,114,055 | 59.97 | (59,498) | (6.14) | 134,003 | 4.31
Federal | 2,502,582 | 24.44 | 4,160,162 | 35.07 | (60,227) | (6.22) | 132,831 | 4.27
State | 2,929,098 | 28.61 | 2,944,512 | 24.82 | 364 | 0.04 | 615 | 0.02
Municipal | 8,361 | 0.08 | 9,381 | 0.08 | 365 | 0.04 | 557 | 0.02
Remuneration of external capital | 2,944,083 | 28.75 | 843,037 | 7.11 | 2,722 | 0.28 | 19,891 | 0.64
Interest | 2,936,259 | 28.67 | 837,916 | 7.06 | 2,272 | 0.23 | 18,451 | 0.59
Rentals | 7,824 | 0.08 | 5,121 | 0.05 | 450 | 0.05 | 1,440 | 0.05
Remuneration of own capital | 987,148 | 9.64 | 2,912,225 | 24.55 | 986,691 | 101.84 | 2,911,850 | 93.51
Retained earnings | 986,691 | 9.64 | 2,911,850 | 24.55 | 986,691 | 101.84 | 2,911,850 | 93.51
Non-controlling interest in retained earnings | 457 | - | 375 | - | - | - | - | -
| 10,239,276 | 100.00 | 11,863,113 | 100.00 | 968,857 | 100.00 | 3,113,818 | 100.00

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

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NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION

FOR THE SIX-MONTH PERIOD ENDED AS OF JUNE 30, 2020

(In thousands of Brazilian Reais, except where otherwise indicated)

| 1. | OPERATING CONTEXT

| a) | The Company

Companhia Energética de Minas Gerais (‘Cemig’, ‘Parent company’, or ‘the Company’) is a listed corporation registered in the Brazilian Registry of Corporate Taxpayers (CNPJ) under number 17.155.730/0001-64, with shares traded on the São Paulo stock exchange (‘B3’) at Corporate Governance Level 1; on the New York Stock Exchange (‘NYSE’); and on the stock exchange of Madrid (‘Latibex’). Domiciled in Brazil, with head office in Belo Horizonte, Minas Gerais State, it operates exclusively as a holding company, with interests in subsidiaries or jointly controlled entities, whose objects are: construction and operation of systems for generation, transformation, transmission, distribution and sale of energy, and also activities in the various fields of energy, for the purpose of commercial operation.

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

| b) | Centroeste control acquisition

On January 13, 2020, the Company concluded acquisition of the equity interest of 49% of the share capital held by Eletrobras in Centroeste, resulting in its now holding 100% of that investee. The acquisition, which resulted in the Company obtaining control, based on the provisions of accounting standard IFRS 10/CPC 36 – Consolidated Financial Standard, is the result of exercise of the right of first refusal for acquisition of the shareholding offered in Eletrobras Auction 01/2018, Lot P, held on September 27, 2018, and confirmed on January 15, 2019.

The effects of business combination in this interim financial information are present in Note 15.

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c) COVID-19

General Context

On March 11, 2020, the World Health Organization characterized Covid-19 as a pandemic, reinforcing the restrictive measures recommendations to prevent the virus dissemination worldwide. These measures are based, mainly, on social distancing, which have been causing major negative impact on entities, affecting their production process, interrupting their supply chains, causing workforce shortages and closing of stores and facilities. The economies around the world are developing measures to handle the economic crisis, especially by their central banks and fiscal authorities, but the economic downturn and its effects are not yet accurately measurable.

Government measures aimed at Brazilian energy sector

Several measures were implemented by the Brazilian government, specifically aimed at energy sector, which include:

| § | The provisional normative act. 950/2020 issued in April 8, 2020, which provides for 100% discount in the calculation of social energy tariff (‘Tarifa Social de Energia Elétrica’), from April 1, 2020 to June 30, 2020, applicable to customers included in low-income residential subclass, with energy consumption less than or equal to 220 kWh/month. The act also authorizes the Federal Government to allocate resources to Energy Development Account (CDE), limited to R$900 million, to cover the tariff discounts established.

| § | Expansion on the limit of total amount of energy that can be declared by energy distributors in the process of the mechanism for the sale of surplus (‘Mecanismo de Venda de Excedentes’ - MVE), during 2020, from 15% to 30%, for the purpose of facilitating contractual reductions.

| § | Provision of financial resources available in the reserve fund in April 2020, by CCEE, in accordance with Aneel Dispatch 986/2020, dedicated to reduce future regulatory fees. Cemig D was granted with R$122 million.

| § | Under Resolution 878/2020, issued on March 24, 2020, the regulator has implemented some measures in an attempt to maintain the public service of energy supply, which include: prohibiting energy supply suspension due to default of certain categories of customers (residential), for 90 days, extended to July 31, 2020, prioritizing emergency assistance and energy supply to services and activities regarded as essential, drawing up specific contingency plans to assist health care units and hospital services, among others. Under Resolution 879/2020, issued in July 21, 2020, the regulator changed the Resolution 878/2020, as of august, 2020, maintaining the prohibition of energy supply suspension only to low income residential subclass, revoking the provisions applied to the other residential subclasses and related to services and activities regarded as essential.

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| § | Authorization to create the “Covid-account”, under the Decree 10,350/2020, issued on May 18, 2020, as detailed in the following topic.

“Covid-account” (‘Conta-covid’)

On May 18, 2020, in order to cope with the public calamity caused by the Covid-19 pandemic, the Decree n. 10,350/20 authorized the creation of “Covid account, to support the energy distribution sector, which is the basis of the energy sector financial flow, aimed to either cover the distribution agents revenue/cash flow deficit or to anticipate their revenues, related to (i) over-contracted purchases due to market retraction, (ii) “CVA” sector assets (iii) maintaining the neutrality of regulatory charges, (iv) compensation for the delay in applying tariff adjustments until June 30, 2020 and (v) anticipation of “parcel B” revenues as determined by Aneel regulation.

On June 23, 2020, the regulator issued the Normative Resolution n. 885/2020, which set out the criteria and procedures to manage the “Covid-account”, as well as regulated the use of the CDE regulatory charge. Under this Resolution, the amount transferred to each distribution agent will be converted as a tariff negative financial component until the tariff processes of 2020, updated by Selic rate, ensuring the neutrality.

Cemig D joined the financial compensation mechanism under the Covid-account (‘Conta-Covid’), in order to boost its cash flow enabling it to meet its financial obligations, in spite of the collection reduction resulting of the economic crises. On July 9, 2020, the regulator informed the total amount from the “Covid-account” to be received by Cemig D, in installments, which is $1,404,175. The first installment was received on July 31, 2020 and the remaining, in the amount of R$217,785, will be received in 6 installments, from August of 2020 to January, 2021.

There are some rules applied to distribution agents entitled to the Covid-account resources, such as (i) relinquishing any intention to reduce or end the purchase of energy from generators because of a reduction in the sales caused by the pandemic crises, until December 2020; (ii) in the event of default on payments, limiting their dividend payments to the legal minimum of 25% of net income and (iii) renounce the right to complain in court or arbitral tribunals on the conditions, procedures or obligations determined in legal and regulatory provisions on Covid-account. Notwithstanding, the right to request an extraordinary tariff review is fully preserved.

Due to the statements of renunciations established in the Acceptance Document under the Normative Resolution 885/2020, on July 3, 2020 Cemig D’s Shareholders Extraordinary General Meeting approved alteration to its by-laws, to include §4 on Clause 33 limiting the distribution of mandatory dividend or interest on equity to the legal minimum, exceptionally for the cases and conditions that the regulator may demand, by rule or by contract, in order to mitigate a situation of financial imbalance caused by any fact or event attributable to a third party, or overriding government rulings, or expressly recognized force majeure.

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Company’s initiatives

On March 23, 2020, the Company established the Coronavirus Crisis Management Committee (‘Comitê Diretor de Gestão da Crise do Coronavírus’) to ensure its readiness to making decisions because of the fast-changing situation, which became more widespread, complex and systemic.

Also, in line with recommendations to maintain social-distancing measures, the Company has implemented an operational contingency plan and several precautionary measures to keep its employees healthy and safe, including: security and health technicians contacting operational staff on a daily basis; interacting daily with subcontractors Social Service department to monitor the evolution of suspicious cases; changing the schedule to prevent gatherings; restricting national and international travel; suspending technical visits and events at Company’s facilities; using remote means of communication; adopting work-from-home policies for a substantial number of employees, providing face masks for employees in external service or in service into its facilities, and requiring outsourcings providers to put the same procedures in place. In addition, the Company has suspended in-store assistance to the general public temporarily.

The Company maintain the communication with its customers on virtual channels and essential assistance in customers’ facilities, ensuring the appropriate energy supply.

The Company also adopted the follow measures in order to contribute with society, which are assessed continuously:

| § | Providing payment flexibility to low-income residential subclass customers, registered as social tariff, who will be able to pay their debts in up to six installments, without interests or penalties.

| § | Providing payment flexibility to public and philanthropic hospitals as well as to emergency rooms units, without interests or penalties;

| § | Offering the entities regarded as small business by Brazilian law the option for payment in up to six installments, without interests or penalties.

The Company is working diligently to mitigate the crisis impacts on its liquidity, implementing the following measures, among others:

| § | reviewing its program of investments and expenses;

| § | payment of minimum mandatory dividends to shareholders, and deferral dividends and interest on equity payments to the end of 2020;

| § | negotiating with its customers on the free market their contracts;

| § | deferral payment of taxes and social charges, as authorized by legislation.

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Impact of Covid-19 on Financial Statements

Considering the significant restrictions on business and social interaction during the Covid-19 pandemic in combination with the latest movements in exchange and interest rates, the Company estimates that the resulting economic contraction might have a negative effect on its liquidity, but the overall impact of the Covid-19 outbreak on its financial position and performance is still difficult to be accurately measured at this point.

In such a scenario, the significant intervention in the local market policies and the initiatives to reduce the transmission of Covid-19 are likely to cause a reduction in energy consumption and consequently in revenue from sale of energy, as well as an increase in expected credit losses.

As of June 30, 2020, from the observation of the pandemic’s immediate economic effects, the Company assessed the assumptions used for calculating fair value and recoverable amount of certain financial and non-financial assets, as follows:

| § | The subsidiary Cemig GT assessed whether the greater pressure on the exchange rate, combined with a lack of financial market liquidity, will have a negative impact on derivative financial instruments hired to protect its operations against the risks arising from foreign exchange rate changes. At this point, given the current market conditions, the change in derivative instrument’s fair value, based on the forecasts of future interest and exchanges rates, cannot offset the Company’s total exposure to foreign exchange rate variability, resulting in a net loss of R$367 million in the first semester of 2020. The long-term projections carried out for the foreign exchange rate are lower than the current dollar quotation, which may represent a decrease in Company’s foreign exchange variation expense, if the projected scenario occurs.

| § | As a result of Covid-19 situation, the market conditions have deteriorated, and, under the current circumstances, the fair value of the Company’s interest in Light has decreased significantly. The estimated negative impact arising from the remeasurement of the asset at fair value less cost to sell is R$134 million on June 30, 2020, as presented in Note 32.

| § | The Company is assessing the circumstances arising from Covid-19 pandemic and associated measures aimed at reducing the impact of the economic contraction on customer delinquency when measuring expected credit losses. The Company has intensified measures to mitigate the risks of delinquency, such as a campaign of negotiation with clients in arrears whose energy supply the Company is currently temporarily prohibited from suspending as well as intensifying the usual collection measures.

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| § | The Company estimates that the assumptions applied to determine the recoverable amount of the relevant investments in subsidiaries, joint-controlled entities and associates were not influenced significantly by the Covid-19 situation, since these investees’ cash flows are mainly related to long-term rights to commercial operation of the regulated activity. Therefore, except for the effects related to the negative impact arising from the remeasurement of Company’s interest in Light, classified as asset held for sale, no additional impairment losses was recognize to its investments in subsidiaries, joint-controlled entities and associates due to the economic crisis.

| § | The Company has also made an assessment attempting to identify the behavior of the interest rates and discount rates that are the basis for the calculation of post-employment obligations, and believes that at this moment, due to the high volatility of the market, it is not possible to conclude whether the present rates reflect an alteration in the macroeconomic fundamentals that would indicate a need for recalculation of the actuarial liabilities.

| § | Despite the uncertainties related to the crisis unfolding and its potential long-term effects, the Company does not expect that the negative impact on its projections of likely future taxable profits might compromise the recoverability of its deferred tax assets.

The impacts of the Covid-19 pandemic published in this interim financial information are based on the Company’s best estimates. The Company estimates that the effects of the pandemic may temporarily affect its liquidity in 2020, however, significant long-term effects are not expected. Based on the market projections and on the crisis measurable effects, the Company has observed the following effects in 2020:

| § | The Company expects that the return of economic activities after the peak of the coronavirus outbreak, as well as the authorization of the energy supply suspension, except for customers classified as low income residential subclass, as of August, 2020, provided for Normative Resolution n. 891/2020, will reestablish the collection behavior, which reduced in April 2020. In addition, the negotiations to enable the recovery of past due receivables and the possible regulator’s measures to reestablish economic balance, which are currently being discussed in the sector, may mitigate the negative effects of the economic crisis on collection.

| § | The energy demand (load) measured by the Brazilian Interconnected Power Grid (SIN) has decreased in March and April 2020. Measured up to the initial days of May 2020 at June 30, 2020, the reduction in the market of Cemig D’s captive customers was approximately 6.1%. Further, the Company expects that the market will recover as the requirements for social distancing are made more flexible.

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| § | The Company is starting negotiations and deferrals with its customers and energy and gas suppliers, in order to maintain Cemig GT and Gasmig liquidity during the economic crisis.

| § | The Company also reviewed the financial assets and liabilities measured at fair value to reflect the conditions and current rates projected, which impacts are presented in Note 30.

| 2. | BASIS OF PREPARATION

| 2.1 | Statement of compliance

The interim financial information has been prepared in accordance with IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), Technical Pronouncement 21 (R1) (‘CPC21’), which applies to interim financial information, and the rules issued by the Brazilian Securities Commission (Comissão de Valores Mobiliários, or CVM), applicable to preparation of Quarterly Information (Informações Trimestrais, or ITR).

This interim financial information has been prepared according to principles, practices and criteria consistent with those adopted in the preparation of the financial statements on December 31, 2019.

Thus, this interim financial information should be read in conjunction with the said financial statements, approved by the Company’s management on March 19, 2020.

Management certifies that all the material information in the interim financial information is being disclosed herein, and is the same information used by management in its administration of the Company.

The Company's Board of Directors authorized the issuance of this Interim financial information on August 14, 2020.

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| 2.2 | Correlation between the Explanatory Notes published in the Financial Statements and those in the Interim Financial Information

Number of the Note | Title of the Note
Dec. 31, 2019 | Jun. 30, 2020
1 | 1 | Operational context
2 | 2 | Basis of preparation
3 | 3 | Consolidation principles
4 | 4 | Concessions and authorizations
5 | 31 | Operational segments
| 5 | Cash and cash equivalents
| 6 | Marketable Securities
| 7 | Customers and traders; Concession holders (power transport)
| 8 | Recoverable taxes
| - | PIS/Pasep and Cofins taxes credits over ICMS – Final Court Judgment
| 9 | Income tax and social contribution tax
| - | Restricted cash
| 10 | Accounts receivable from the State of Minas Gerais
| 11 | Escrow deposits
15 | 12 | Reimbursement of tariff subsidies
16 | 13 | Concession financial assets and liabilities
17 | 14 | Contract assets
18 | 15 | Investments
| 16 | Property, plant and equipment
| 17 | Intangible assets
| 18 | Leasing – Right of Use
| 19 | Suppliers
| 20 | Taxes and social security
| 21 | Loans, financings and debentures
| 22 | Regulatory charges
| 23 | Post-employment obligations
| 24 | Provisions
| 25 | Equity and remuneration to shareholders
| 26 | Revenue
| 27 | Operating costs and expenses
| 28 | Financial revenue and expenses
| 29 | Related party transactions
| 30 | Financial instruments and risk management
34 | 32 | Assets and liabilities classified as held for sale; profit (loss) from discontinued operations
37 | 13.5 | The Annual Tariff Adjustment of Cemig D
38 | 33 | Transactions not involving cash
| 34 | Subsequent events

The Notes to the 2019 financial statements that have not been included in this consolidated interim financial information because they had no material changes, and/or were not applicable to the interim financial information, are as follows:

Number | Title of the Note
35 | Insurance
36 | Commitments

| 3. | PRINCIPLES OF CONSOLIDATION

The dates of Interim financial information of the subsidiaries, used for consolidation, and of the jointly-controlled entities and affiliates, used for calculation of their equity method contribution, coincide with those of the Company. Accounting practices are applied uniformly and are the same as those used by the parent company.

The Company uses the criteria of full consolidation. The direct equity investments of Cemig, included in the consolidation, are the following:

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Subsidiary | Jun. 30, 2020 | Jun. 30, 2019
Form of valuation | Direct interest, % | Indirect interest, % | Form of valuation | Direct interest, % | Indirect interest, %
Cemig Geração e Transmissão | Consolidation | 100.00 | - | Consolidation | 100.00 | -
Cemig Distribuição | Consolidation | 100.00 | - | Consolidation | 100.00 | -
Gasmig | Consolidation | 99.57 | - | Consolidation | 99.57 | -
Cemig Geração Distribuída (Ipatinga Power Plant) | Consolidation | 100.00 | - | Consolidation | 100.00 | -
Cemig SIM (Efficientia) (1) | Consolidation | 100.00 | - | Consolidation | 100.00 | -
Centroeste (2) | Consolidation | 100.00 | - | Equity method | 51.00 | -

| (1) | On April 14, 2020, the minute of the Annual General Meeting that decided about changes in this subsidiary’s By-laws was registered in the commercial registry authority, changing the name of this subsidiary to Cemig Soluções Inteligentes em Energia S.A.-CEMIG SIM.

| (2) | On January 13, 2020, the Company concluded acquisition of the equity interest of 49% of the share capital held by Eletrobras in Centroeste, resulting in its now holding 100% of that investee. More details see notes 1 and 15.

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| 4. | CONCESSIONS AND AUTHORIZATIONS

Cemig and its subsidiaries hold the following concessions or authorizations:

| Company holding concession or authorization | Concession or authorization contract* | Expiration date
POWER GENERATION |  |  |
Hydroelectric plants |  |  |
Emborcação (1) (2) | Cemig GT | 07/1997 | 07/2025
Nova Ponte (1) (2) | Cemig GT | 07/1997 | 07/2025
Santa Luzia (1) | Cemig GT | 07/1997 | 02/2026
Sá Carvalho (1) | Sá Carvalho | 01/2004 | 12/2024
Rosal (1) | Rosal Energia | 01/1997 | 05/2032
Machado Mineiro (1) Salto Voltão (1) Salto Paraopeba (1) Salto do Passo Velho (1) | Horizontes Energia | Resolution 331/2002 | 07/2025 10/2030 10/2030 10/2030
PCH Pai Joaquim (1) | Cemig PCH | Authorizing Resolution 377/2005 | 04/2032
Irapé (1) | Cemig GT | 14/2000 | 02/2035
Queimado (consortium) (1) | Cemig GT | 06/1997 | 01/2033
Salto Morais (1) | Cemig GT | 02/2013 | 07/2020
Rio de Pedras (1) | Cemig GT | 02/2013 | 09/2024
Luiz Dias (1) | Cemig GT | 02/2013 | 08/2025
Poço Fundo (1) | Cemig GT | 02/2013 | 08/2025
São Bernardo (1) | Cemig GT | 02/2013 | 08/2025
Xicão (1) | Cemig GT | 02/2013 | 08/2025
Três Marias (3) | Cemig Geração Três Marias | 08/2016 | 01/2046
Salto Grande (3) | Cemig Geração Salto Grande | 09/2016 | 01/2046
Itutinga (3) | Cemig Geração Itutinga | 10/2016 | 01/2046
Camargos (3) | Cemig Geração Camargos | 11/2016 | 01/2046
Coronel Domiciano, Joasal, Marmelos, Paciência and Piau (3) | Cemig Geração Sul | 12/2016 and 13/2016 | 01/2046
Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras (3) | Cemig Geração Leste | 14/2016 and 15/2016 | 01/2046
Cajurú, Gafanhoto and Martins (3) | Cemig Geração Oeste | 16/2016 | 01/2046
Thermal plants |  |  |
Igarapé (1) (6) | Cemig GT | 07/1997 | 08/2024
Wind power plants |  |  |
Central Geradora Eólica Praias de Parajuru (4) | Parajuru | Resolution 526/2002 | 09/2032
Central Geradora Eólica Volta do Rio (4) | Volta do Rio | Resolution 660/2001 | 01/2031
POWER TRANSMISSION |  |  |
National grid (5) | Cemig GT | 006/1997 | 01/2043
Itajubá Substation (5) | Cemig GT | 79/2000 | 10/2030
Furnas – Pimenta - Transmission line (5) | Centroeste | 004/2005 | 03/2035
ENERGY DISTRIBUTION (7) | Cemig D | 002/1997 003/1997 004/1997 005/1997 | 12/2045
GAS DISTRIBUTION (7) | Gasmig | State Law 11,021/1993 | 01/2053

*Cemig generate energy from hydroelectric plants that have the capacity of 5MW or less, and thus under Law 9074/95, these are dispensed from concession, permission or authorization, and do not have a final concession date.

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

| (2) | On July 17, 2020, Cemig GT filed a statement of its interest in extending these plants concession, under the independent producer regime, outside the regime of quotas, to ensure its right of option under the legislative changes currently under discussion, relating to the group of measures to modernize the electricity sector. Any actual decision will only be made after publication by the Brazilian Mining and Energy Ministry and by the regulator, Aneel, of the conditions for extension, which will be submitted to decision by Cemig’s governance bodies at the due time.

| (3) | Generation concession contracts within the scope of IFRIC 12, under which Cemig has the right to receive cash and therefore, recognizes a concession financial asset.

| (4) | This refers to concessions, given by the process of authorization, for generation, as an independent power producer, of wind power, sold under the Proinfa program. The assets tied to the right of commercial operation are recorded in PP&E. The rights of authorization of commercial operation that are classified as an Intangible.

| (5) | Concession contracts that are within the scope of IFRIC 12 and under which the concession infrastructure assets are recorded under the intangible and financial assets bifurcation model, and in compliance with IFRS 15, the infrastructure under construction has been classified as a contract asset.

| (6) | On December 6, 2019, Aneel suspended Igarapé Plant commercial operation upon Cemig GT’s claim for early termination of its concession contract.

| (7) | Concession contracts that are within the scope of IFRIC 12 and under which the concession infrastructure assets are recorded under the intangible and financial assets bifurcation model, and in compliance with IFRS 15, the infrastructure under construction has been classified as a contract asset.

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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| 5. | CASH AND CASH EQUIVALENTS

| Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Bank accounts | 112,574 | 209,405 | 4,366 | 4,437
Cash equivalents |  |  |  |
Bank certificates of deposit (CDBs) (1) | 358,244 | 289,924 | 6,945 | 50,854
Overnight (2) | 500,496 | 36,428 | 20,967 | 9,065
| 858,740 | 326,352 | 27,912 | 59,919
| 971,314 | 535,757 | 32,278 | 64,356

| (1) | Bank Certificates of Deposit (Certificados de Depósito Bancário, or CBDs), accrued interest at 55% to 105.05%, of the CDI Rate (Interbank Rate for Interbank Certificates of Deposit or Certificados de Depósito Inter-bancário – CDIs) published by the Custody and Settlement Chamber (Câmara de Custódia e Liquidação, or Cetip) on June 30, 2020 (80% to 106% on December 31, 2019). For these CDBs, the Company and its subisidiaries have repo transactions which state, on their trading notes, the bank’s commitment to repurchase the security, on demand, on the maturity date of the transaction, or earlier.

| (2) | Overnight transactions are repos available for redemption on the following day. They are usually backed by Treasury Bills, Notes or Bonds and referenced to a pre-fixed rate of 2.15% on June 30, 2020 (4.39%, on December 31, 2019). Their purpose is to settle the short-term obligations of the Company, or to be used in the acquisition of other assets with better return to replenish the portfolio.

Note 30 gives the exposure of the Company and its subsidiaries to interest rate risks and a sensitivity analysis of their effects on financial assets and liabilities.

| 6. | MARKETABLE SECURITIES

| Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Investments |  |  |  |
Current |  |  |  |
Financial Notes (LFs) – Banks (1) | 1,890,314 | 645,119 | 79,191 | 160,531
Treasury Financial Notes (LFTs) (2) | 638,350 | 94,184 | 26,742 | 23,437
Debentures (3) | - | 103 | - | 780
Others | 695 | 933 | 746 | 463
| 2,529,359 | 740,339 | 106,679 | 185,211
Non-current |  |  |  |
Financial Notes (LFs) – Banks (1) | 173,342 | 11,481 | 7,262 | -
Debentures (3) | 21,063 | 1,825 | 882 | 454
Others | 10,156 | 36 | - | -
| 204,561 | 13,342 | 8,144 | 454
| 2,733,920 | 753,681 | 114,823 | 185,665

| (1) | Bank Financial Notes (Letras Financeiras, or LFs) are fixed-rate fixed-income securities, issued by banks and that accrued interest a percentage of the CDI rate published by Cetip. The LFs had remuneration rates varying between 102% and 127% of the CDI rate on June 30, 2020 (101.95% to 113% on December 31, 2019).

| (2) | Treasury Financial Notes (LFTs) are fixed-rate securities, their yield follows the daily changes in the Selic rate between the date of purchase and the date of maturity.

| (3) | Debentures are medium and long term debt securities, which give their holders a right of credit against the issuing company. The debentures have remuneration varying from 106.75% to 109% of the CDI Rate on June 30, 2020 (108.25% to 113% of CDI on December 31, 2019).

Note 29 and 30 shows the classification of these securities and cash investments in securities of related parties.

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| 7. | CUSTOMERS, TRADERS AND POWER TRANSPORT CONCESSION HOLDERS

| CONSOLIDATED
Balances not yet due | Up to 90 days past due | More than 91 up to 360 days past due | More than 360 days past due | Jun. 30, 2020 | Dec. 31, 2019
Billed supply | 1,300,684 | 869,227 | 478,047 | 684,871 | 3,332,829 | 3,130,206
Unbilled supply | 888,451 | - | - | - | 888,451 | 1,203,823
Other concession holders – wholesale supply | 352 | 22,871 | 6,176 | 8,871 | 38,270 | 47,296
Other concession holders – wholesale supply, unbilled | 230,373 | - | - | - | 230,373 | 203,386
CCEE (Power Trading Exchange) | 37,536 | - | 166,710 | - | 204,246 | 385,558
Concession Holders – power transport | 85,598 | 31,195 | 11,575 | 82,163 | 210,531 | 186,910
Concession Holders – power transport, unbilled | 230,809 | - | - | - | 230,809 | 253,151
(–) Provision for doubtful receivables | (152,225) | (16,792) | (35,838) | (683,169) | (888,024) | (809,725)
| 2,621,578 | 906,501 | 626,670 | 92,736 | 4,247,485 | 4,600,605
Current assets |  |  |  |  | 4,173,334 | 4,523,540
Non-current assets |  |  |  |  | 74,151 | 77,065

| PARENT COMPANY
Balances not yet due | Up to 90 days past due | More than 91 up to 360 days past due | More than 360 days past due | Jun. 30, 2020 | Dec. 31, 2019
Billed supply | - | - | - | 22,284 | 22,284 | 22,478
(–) Provision for doubtful receivables | - | - | - | (22,284) | (22,284) | (22,284)
| - | - | - | - | - | 194
Current assets |  |  |  |  | - | 194

The exposure of the Company and its subsidiaries to credit risk related to Customers and traders is given in Note 30.

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

Consolidated | Jun. 30, 2020 | Dec. 31, 2019
Residential | 114,791 | 131,011
Industrial | 220,378 | 197,229
Commercial, services and others | 176,031 | 161,141
Rural | 30,025 | 31,919
Public authorities | 256,946 | 200,530
Public lighting | 2,161 | 2,045
Public services | 32,905 | 31,063
Charges for use of the network (TUSD) | 54,787 | 54,787
| 888,024 | 809,725

The changes in the provision for doubtful receivables in the period is as follows:

Consolidated | Jun. 30, 2020 | Jun. 30, 2019
Initial balances | 809,725 | 751,168
Additions, net (note 27 d) | 215,100 | 126,978
Disposals | (136,801) | (90,886)
Final balances | 888,024 | 787,260

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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| 8. | RECOVERABLE TAXES

| Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Current |  |  |  |
ICMS (VAT) | 83,623 | 65,139 | - | -
PIS/Pasep (a) (b) | 361,054 | 2,937 | 24 | 24
Cofins (a) (b) | 1,656,777 | 7,359 | 121 | 120
Others | 16,209 | 23,369 | 104 | 104
| 2,117,663 | 98,804 | 249 | 248
Non-current |  |  |  |
ICMS (VAT) (b) | 240,978 | 276,851 | - | -
PIS/Pasep (a) | 732,956 | 1,102,460 | 108,372 | 106,946
Cofins (a) | 3,261,347 | 4,967,814 | 384,808 | 382,745
Others | 2,226 | 2,227 | 1,795 | 1,796
| 4,237,507 | 6,349,352 | 494,975 | 491,487
| 6,355,170 | 6,448,156 | 495,224 | 491,735

| a) | Pis/Pasep and Cofins taxes credits over ICMS

On May 8, 2019 the Regional Federal Appeal Court of the First Region gave final judgment – against which there is no appeal – on the Ordinary Action, deciding in favor of Cemig, Cemig D and Cemig GT, and recognizing their right to exclude the ICMS amounts from the calculation basis of PIS/Pasep and Cofins taxes, backdated as from five years prior to the action initial filing– that is, from July 2003.

Thus, the PIS/Pasep and Cofins credits recorded correspondthe amount of these taxes over ICMS paid in the period of July 2003 to May 2019.

Final court judgment has also been given, against which there is no further appeal, in favor of the similar actions filed by Cemig’s wholly-owned subsidiaries Sá Carvalho, Cemig Geração Distribuída (former UTE Ipatinga S.A.), Cemig Geração Poço Fundo S.A. (previously denominated UTE Barreiro S.A.) and Horizontes Energia S.A..

The Company has two ways to recover the tax credit: (i) offsetting of the amount receivable against amounts payable of PIS/Pasep and Cofins taxes, monthly, within the five-year period specified by the relevant law of limitation; or (ii) receipt of specific credit instruments ‘precatórios’ from the federal government.

In Cemig D and Cemig GT, the credits will be offset, to accelerate recovery. For the Company itself, priority will be given to receipt of the credits through precatório letters of credit, since the Company does not make enough monthly payments of PIS/Pasep and Cofins taxes to enable offsetting.

On May 12, 2020, the Brazilian tax authority (Receita Federal) granted the Company’s request for ratification of the credits of PIS/Pasep and Cofins taxes arising from the legal action on which final judgment, subject to no further appeal, was given in favor of Cemig D and Cemig GT in 2019.

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The Company is recovering Cemig GT and Cemig D tax credits by offsetting the amount receivable against amounts of federal taxes payable on a monthly basis, starting in May, 2020, within the five-year period specified by the relevant law of limitation.

In this context, the Company transferred to current assets the credits for which the expectation of offsetting does not exceed a period of 12 months: R$ 357,334 for the PIS/Pasep taxes, and R$ 1,645,903 for the Cofins tax.

Based on the opinion of its legal advisers, the Company believes that a portion of the credits to be received by Cemig D should be reimbursed to its customers, considering a maximum period for calculation of the reimbursement of 10 years. Thus, Cemig D has constituted a liability corresponding to the total amount of the tax credits comprising the period of the last 10 years, from June 2009 to May 2019, net of PIS/Pasep and Cofins taxes over monetary updating, presented in Note 20. Cemig D awaits the regulator’a conclusion about the mechanisms and criteria for the reimbursement to its customers.

The accounting effects relating to the recognition of the PIS/Pasep and Cofins taxes credits, including their monetary updating by the Selic rate, were recognized in the income statement in 2019, at net amount, updated to December 31, 2019, of R$1,965,116. Of this amount, R$1,427,786 and R$1,549,663 were recognized as operational revenue and financial revenue (net of PIS/Pasep and Cofins taxes), respectively. In addition, the amount of R$1,012,333 was recorded as IRPJ and CSLL.

These credits and the reimbursement to customers are updated by the Selic rate until offsetting of the amount receivable against amounts payable or until reimbursement to customers. On June 30, 2020, the net effect in the consolidated and individual finance income is R$27,092 and R$3,489, respectively, more details see note 28.

| b) | Other recoverable taxes

The ICMS (VAT) credits that are reported in non-current assets arise mainly from acquisitions of property, plant and equipment, and intangible assets, and can be offset against taxes payable in the next 48 months. The transfer to non-current is made in accordance with management's best estimate of the amounts which will likely be realized after December 2020.

Credits of PIS/Pasep and Cofins generated by the acquisition of machinery and equipment can be offset immediately.

| 9. | INCOME AND SOCIAL CONTRIBUTION TAXES

a) Income tax and social contribution tax recoverable

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

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| Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Income tax | 502,183 | 607,719 | 159,550 | 191,838
Social contribution tax | 190,261 | 241,496 | 33,005 | 33,008
| 692,444 | 849,215 | 192,555 | 224,846
Current | 496,822 | 621,302 | - | -
Non-current | 195,622 | 227,913 | 192,555 | 224,846

The balances of income tax and social contribution tax posted in non-current assets arise from advanced payments required by tax law and withholding taxes, which the expectation of offsetting is greater than 12 months.

| b) | Income tax and social contribution tax payable

The balances of income tax and Social Contribution tax recorded in current liabilities refer mainly to the taxes owed by the subsidiaries which report by the Real Profit method and have opted to make monthly payments based on estimated revenue, and also by the subsidiaries that have opted for the Presumed Profit method, in which payments are made quarterly.

| Consolidated
Jun. 30, 2020 | Dec. 31, 2019
Current |  |
Income tax | 48,749 | 98,712
Social contribution tax | 16,856 | 35,156
| 65,605 | 133,868

| c) | Deferred income tax and social contribution tax

The Company and its subsidiaries have deferred taxed assets and liabilities from unused tax loss carryforwards, negative base for the Social Contribution tax, and deductible temporary differences, at the statutory rates applicable to each legal entity in Brazil of 25% (for Income tax) and 9% (for the Social Contribution tax), as follows:

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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| Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Deferred tax assets |  |  |  |
Tax loss carryforwards | 681,597 | 116,266 | 124,654 | 116,266
Provisions for contingencies | 531,933 | 544,015 | 67,403 | 67,454
Provisions for losses on investments | 701,377 | 660,204 | 428,472 | 382,904
Provision PUT SAAG | 171,918 | 164,166 | - | -
Post-employment obligations | 2,134,256 | 2,089,695 | 239,342 | 233,090
Estimated provision for doubtful receivables | 319,484 | 283,023 | 8,532 | 8,532
Others | 155,769 | 170,247 | 4,411 | 3,655
Total | 4,696,334 | 4,027,616 | 872,814 | 811,901
Deferred tax liabilities |  |  |  |
Funding cost | (13,595) | (15,985) | - | -
Deemed cost | (228,293) | (231,833) | - | -
Acquisition costs of equity interests | (493,120) | (502,503) | (128,608) | (130,282)
Borrowing costs capitalized | (169,644) | (166,478) | - | -
Adjustment to expectation of cash flow – Concession assets | (876,730) | (761,470) | - | -
Adjustment to fair value: Swap/Gains | (1,115,707) | (574,921) | - | -
Others | (15,143) | (5,694) | (910) | (888)
Total | (2,912,232) | (2,258,884) | (129,518) | (131,170)
Total, net | 1,784,102 | 1,768,732 | 743,296 | 680,731
Total assets | 2,537,820 | 2,429,789 | 743,296 | 680,731
Total liabilities | (753,718) | (661,057) | - | -

The changes in deferred income tax and social contribution tax were as follows:

| Consolidated | Parent Company
Balance at December 31, 2018 | 1,418,444 | 809,270
Effects allocated to Statement of comprehensive income | (410,326) | (31,092)
Others | (177) | -
Balance at June 30, 2019 | 1,007,941 | 778,178
Balance at December 31, 2019 | 1,768,732 | 680,731
Effects allocated to net profit | 14,763 | 62,565
Others | 607 | -
Balance at June 30, 2020 | 1,784,102 | 743,296

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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| d) | Reconciliation of income tax and Social Contribution tax effective rate

This table reconciles the statutory income tax (rate 25%) and social contribution tax (rate 9%) with the current income tax expense in the Statement of income:

| Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
Profit before income tax and social contribution tax | 1,366,704 | 4,600,697 | 924,145 | 3,040,901
Income tax and Social Contribution tax – nominal expense (34%) | (464,679) | (1,564,237) | (314,209) | (1,033,906)
Tax effects applicable to: |  |  |  |
Gain (loss) in subsidiaries by equity method (net of effects of Interest on Equity) | 48,863 | 28,326 | 390,927 | 906,096
Tax incentives | 17,754 | 46,184 | - | 84
Difference between Presumed Profit and Real Profit | 45,484 | 45,709 | - | -
Non-deductible penalties | (12,145) | (12,487) | (282) | (14)
Estimated losses on doubtful accounts receivable from related parties | (12,703) | (233,931) | (12,703) | -
Others | (2,130) | 1,964 | (1,187) | (1,311)
Income tax and Social Contribution – effective gain (expense) | (379,556) | (1,688,472) | 62,546 | (129,051)
Current tax | (394,319) | (1,278,146) | (19) | (97,959)
Deferred tax | 14,763 | (410,326) | 62,565 | (31,092)
| (379,556) | (1,688,472) | 62,546 | (129,051)
Effective rate | (27.77)% | (36.70)% | 6.77% | (4.24)%

| Consolidated | Parent Company
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
Profit before income tax and social contribution tax | 1,527,980 | 3,471,969 | 1,179,960 | 2,266,104
Income tax and Social Contribution tax – nominal expense (34%) | (519,513) | (1,180,469) | (401,186) | (770,475)
Tax effects applicable to: |  |  |  |
Gain (loss) in subsidiaries by equity method (net of effects of Interest on Equity) | 22,449 | 6,392 | 278,010 | 620,086
Tax incentives | 8,896 | 33,621 | - | 84
Difference between Presumed Profit and Real Profit | 23,934 | 18,456 | - | -
Non-deductible penalties | (5,151) | (4,548) | (13) | (10)
Estimated losses on doubtful accounts receivable from related parties | (12,703) | (233,931) | (12,703) | -
Others | (1,898) | 3,496 | (262) | (1,015)
Income tax and Social Contribution – effective gain (expense) | (483,986) | (1,356,983) | (136,154) | (151,330)
Current tax | (198,803) | (973,424) | - | (97,959)
Deferred tax | (285,183) | (383,559) | (136,154) | (53,371)
| (483,986) | (1,356,983) | (136,154) | (151,330)
Effective rate | (31.67)% | (39.08)% | (11.54)% | (6.68)%

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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| 10. | ACCOUNTS RECEIVABLE FROM THE STATE OF MINAS GERAIS

The Company has accounts receivable from the State of Minas Gerais, arising from return of an administrative deposit made for a dispute on the rate of inflation and other adjustment to be applied to an advance for future capital increase (‘AFAC’), made in prior years, which was the subject of a debt recognition agreement. The agreement provided for payment by the Minas Gerais State in 12 consecutive monthly installments, each updated by the IGP–M index up to the date of actual payment, the first to become due on November 10, 2017. The agreement states that, in the event of arrears or default by the State in payment of the agreed consecutive monthly installments, Cemig is authorized to retain dividends or Interest on Equity distributable to the State in proportion to the State’s equity interest, for as long as the arrears and/or default continues.

Considering the provision referred to in the previous paragraph, the Company withheld an amount of R$147,798 in 2019, corresponding to the dividends that would have been payable to Minas Gerais State on that year. The balance receivable on June 30, 2020, R$120,258 (R$115,202 on December, 31, 2019), was classified as Non-current asset, as a result of the delays in installments past due since January 2018.

Due to the garantees mentioned above, which the Company intends to remain executing in the event of non-receipt of the amount agreed in the debt recognition agreement, there is no expectation of losses in the realization of these receivables.

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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| 11. | ESCROW DEPOSITS

| Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Labor claims | 327,703 | 354,859 | 34,445 | 41,597
Tax contingencies |  |  |  |
Income tax on Interest on Equity | 28,878 | 28,612 | 286 | 281
PIS/Pasep and Cofins taxes (1) | 66,988 | 1,447,839 | - | -
Donations and legacy tax (ITCD) | 53,679 | 53,045 | 53,239 | 52,606
Urban property tax (IPTU) | 81,029 | 79,055 | 59,690 | 58,705
Finsocial tax | 40,106 | 39,718 | 40,106 | 39,718
Income tax and Social Contr. Tax on indemnity for employees’ ‘Anuênio’ benefit (2) | 284,386 | 282,071 | 13,657 | 13,546
Income tax withheld at source on inflationary profit | 8,622 | 8,574 | 8,622 | 8,574
Contribution tax effective rate (3) | 19,839 | 18,062 | - | -
ICMS credits on PP&E | 66,947 | 38,740 | - | -
Others (4) | 93,595 | 93,144 | 66,266 | 65,887
| 744,069 | 2,088,860 | 241,866 | 239,317
Others |  |  |  |
Regulatory | 42,986 | 43,180 | 19,416 | 19,760
Third party | 10,646 | 10,515 | 3,481 | 3,703
Customer relations | 7,253 | 6,874 | 1,299 | 1,466
Court embargo | 13,976 | 12,180 | 2,719 | 2,868
Others | 23,621 | 23,771 | 1,378 | 1,354
| 98,482 | 96,520 | 28,293 | 29,151
| 1,170,254 | 2,540,239 | 304,604 | 310,065

| (1) | This refers to escrow deposits in the action challenging the constitutionality of inclusion of ICMS tax within the amount to which PIS/Pasep and Cofins taxes are applied. More details below.

| (2) | See more details in Note 24 – Provisions under the section relating to the ‘Anuênio indemnity’.

| (3) | Escrow deposit in the legal action challenging an infringement claim relating to application of Social Contribution tax to amounts of cultural and artistic donations and sponsorship, expenses on punitive fines, and taxes with liability suspended.

| (4) | Includes escrow deposits from legal actions related to INSS and PIS/Pasep and Cofins taxes.

Release of escrow deposits

On February 13, 2020, the escrow deposits in the action challenging the constitutionality of inclusion of ICMS value added tax within the taxable amount for calculation of PIS/Pasep and Cofins taxes were released for an amount of R$1,382,571, of which R$1,186,402 and R$196,169 were released to Cemig D and Cemig GT, respectively. The escrow deposits from the others wholly-owned subsidiaries will be claimed in their judicial action challenging the matter as they reach the final judgement.

| 12. | REIMBURSEMENT OF TARIFF SUBSIDIES

Subsidies on tariffs charged to users of distribution services – TUSD and EUST (Charges for Use of the Transmission System) are reimbursed to distributors through the funds from the Energy Development Account (CDE).

On June 30, 2020, the amount recognized as subsidies revenues was R$570,607 (R$251,647 on December 31, 2019). Of such amounts, the Company has a receivable of R$89,048 (R$96,776 on December 31, 2019) in current assets, being R$85,543 (R$93,673 on December 31, 2019) held by Cemig D and R$3,505 (R$3,103 on December 31, 2019) held by Cemig GT.

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| 13. | CONCESSION FINANCIAL AND SECTOR ASSETS AND LIABILITIES

Consolidated | Jun. 30, 2020 | Dec. 31, 2019
Concession financial assets |  |
Distribution concessions (13.1) | 481,371 | 459,711
Gas concessions (13.1) | 24,723 | 23,663
Indemnifiable receivable – Transmission (13.2) | 1,265,445 | 1,280,652
Indemnifiable receivable – Generation (13.3) | 816,202 | 816,202
Concession grant fee – Generation concessions (13.4) | 2,482,994 | 2,468,216
| 5,070,735 | 5,048,444
Sector financial assets |  |
Amounts receivable from Parcel A (CVA) and Other Financial Components (13.5) | 926,183 | 881,614
Total | 5,996,918 | 5,930,058
Current assets | 1,268,509 | 1,079,743
Non-current assets | 4,728,409 | 4,850,315

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

| Transmission | Generation | Distribution | Gas | Consolidated
Balances at December 31, 2018 | 1,296,314 | 3,225,132 | 395,743 | - | 4,917,189
Amounts received | (88,518) | (127,348) | - | - | (215,866)
Transfers of contract assets | 44,082 | - | 17,260 | - | 61,342
Transfers to intangible assets | - | - | 102 | - | 102
Monetary updating | 71,164 | 176,151 | 8,967 | - | 256,282
Disposals | - | - | (168) | - | (168)
Balances at June 30, 2019 | 1,323,042 | 3,273,935 | 421,904 | - | 5,018,881
Balances at December 31, 2019 | 1,280,652 | 3,284,418 | 459,711 | 23,663 | 5,048,444
Amounts received | (92,642) | (131,634) | - | - | (224,276)
Transfers of contract assets |  |  | 23,252 |  | 23,252
Transfers to intangible assets | - | - | (524) | 21 | (503)
Financial updating | 67,252 | 146,412 | (955) | 1,039 | 213,748
Periodic Tariff Reset adjustments | 10,183 | - | - | - | 10,183
Disposals | - | - | (113) | - | (113)
Balances at June 30, 2020 | 1,265,445 | 3,299,196 | 481,371 | 24,723 | 5,070,735

| 13.1 | Distribution - Financial assets

The energy and gas distribution concession contracts are within the scope of IFRIC 12 / ICPC 01. The financial assets under these contracts refer to the investments made in infrastructure that will paid by grantor at the end of the concession period and they are measured at fair value through profit or loss, in accordance with regulation of the energy segment and concession contracts executed by Cemig and its subsidiaries and the granting authorities.

| 13.2 | Transmission – Indemnifiable receivable

On April 20, 2016, the Mining and Energy Ministry (MME) issued its Ministerial Order 120, which set the amounts ratified by Aneel through its Dispatches, relating to the facilities of the National Grid not yet amortized nor depreciated nor yet reimbursed by the concession-granting power, related to the concession contracts renewed under Law 12,783/2013. These became a component of the Regulatory Remuneration Base of the energy transmission concession holders, as from the 2017 tariff-setting process. These regulations determined the amounts receivable as Permitted Annual Revenue (Receita Anual Permitida - RAP) of the amounts relating to the National Grid.

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Based on the regulations of Aneel and the Mining and Energy Ministry, in particular MME Ministerial Order 120/2016 and Aneel Resolution 762/2017, the portion of the Company’s receivable rights for which only the passage of time is required before their payment is governed by IFRS 09 / CPC 48 (financial asset).

Thus, the portion not yet paid, since the extension of the concessions, for the period January 1, 2013 to June 30, 2017, to be received over a period of eight years, considered as a Financial Component, is classified as a Financial asset, since it no longer involves the construction of infrastructure assets, and represents exclusively the portions not paid in the period 2013 to 2017, updated by the regulatory cost of capital of the transmission sector.

The classification of this portion as a financial asset is based on the non-existence of assets linked to the financial component of the National Grid, for which a performance obligation is required for its receipt. In this context, the Company has the unconditional right to the receivable, specified in Article 15 of Law 12,783/2013 and also in the regulations of Aneel, requiring, basically, only the passage of time for receipt of the amounts payable. The financial asset recognized is classified as measured at amortized cost, in the terms of IFRS 09 / CPC 48, since its remuneration is based on the regulatory cost of capital, previously set by Aneel through its Resolution 762/2017 and is maintained in a business model whose objective is the receipt of contractual cash flows, constituting payment of principal and interest on the principal yet unpaid.

In relation to the facilities of the National Grid linked to the Company’s concession contract, Aneel ratified, through its Dispatch 2,181, on august, 16, 2016, homologated the amount of R$892,050, in December, 2012, for the portion of the residual value of assets to be paid to the Company. This amount was recorded as a financial asset, with specific maturity and interest rate, in accordance with its characteristics.

The amount of the indemnity receivable, updated to June 30, 2020, of R$1,265,445 (R$1,280,652 on December 31, 2019) is classified as a financial asset, at amortized cost, in accordance with IFRS 9, as follows:

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

An amount of R$785,488 (R$832,915 on December 31, 2019), corresponding to remuneration and depreciation not paid since the extension of the concessions, until the tariff adjustment of 2017, which will be inflation adjusted using the IPCA (Expanded National Customer Price) index and remunerated at the weighted average cost of capital of the transmission segment as defined by the regulator for the periodic tariff review, to be paid over a period of eight years through the RAP, since July of 2017.

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On June 30, 2020 Aneel approved the periodic reset of Annual Revenue Permitted (ARAP) by Ratification Resolution n. 2,712/2020, resulting in an adjustment of R$ 10,183 in the financial component of RAP, mainly arising from the retrospective alteration as from July 1, 2018, of the transmission sector Weighted Average Cost of Capital. For more information on the RAP periodic reset , please see Note 14 to the financial statements.

Residual Value of transmission assets – the regulatory cost of capital updating

On April 10, 2017, a preliminary injunction was granted to the Brazilian Large Free Customers’ Association (Associação Brasileira de Grandes Consumidores Livres), the Brazilian Auto Glass Industry Technical Association (Associação Técnica Brasileira das Indústrias Automáticas de Vidro) and the Brazilian Ferro-alloys and Silicon Metal Producers’ Association (Associação Brasileira dos Produtores de Ferroligas e de Silicio Metálico) in their legal action against the regulator and the Federal Government requesting suspension of the effects on their tariffs of remuneration at cost of equity of portions of “National Grid” assets not yet paid from 2013 to 2017 owned to the agents that accepted the terms of Law 12,783/13.

The preliminary injunction was partial, with effects related to suspension of the inclusion in the customer tariffs paid by these associations of the portion of the indemnity corresponding to the remuneration at cost of equity included since the date of extension of the concessions – amounting to R$470,797 at June 30, 2020 (R$447,737 at December 31, 2019), adjusted by the IPCA index and by the regulatory weighted average cost of capital (regulatory wacc).

In June 2020, due to revocation of the majority of the injunctions, and in compliance with the Execution Opinions issued by the Federal Public Attorneys’ Office to Aneel, the effects caused by the reversal of these injunctions were calculated, for inclusion of the cost of equity in the transmission revenue starting with the 2020-21 cycle, considering all retrospective effects, including those arising from the assumptions adopted in the 2018 RAP periodic reset. At this moment Aneel provisionally ratified only the inclusion of the cost of equity updated by IPCA index of the period between the 2017-18 and 2019-20 tariff cycles, considering the need for deeper examination of the legal conditions for analysis of the Company’s appeal, which require the inclusion of the wacc remuneration for the periods in which it was suspended, in the average amount of R$86,042.

Cemig GT believes that the treatment given to this component, which includes updating by the IPCA inflation index, plus the regulatory weighted average cost of capital, of the period from June 2017 to June 2020, appropriately reflects the regulations issued by the grantor authority. Company has no expectation of loss in relation to realization of these amounts.

The difference due the incorporation of the cost of equity remuneration, arising from the amounts actually paid and the amounts due between the 2017-18 and 2019-20 cycles, will be incorporated into the RAP through Adjustment Parcels, over three cycles. The total value for this parameter to be received in the 2020-21 cycle, which includes accrual in the current cycle, in the amount of R$ 65,945, totals approximately R$131,075.

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| 13.3 | Generation – Indemnity receivable

As from August 2013, with the extinction of the concession for various plants operated by Cemig GT under Concession Contract 007/1997, the subsidiary has a right to receive an amount corresponding to the residual value of the infrastructure assets, as specified in the concession contract. These balances are recognized in financial assets, at fair value through profit or loss, and totaled R$816,202 on June 30, 2020 and December 31, 2019.

Generation plant | Concession expiration date | Installed capacity (MW) | Net balance of assets based on historical cost | Net balance of assets based on fair value (replacement cost) |
Lot D |  |  |  |  |
UHE Três Marias | July 2015 | 396 | 71,694 | 413,450 |
UHE Salto Grande | July 2015 | 102 | 10,835 | 39,379 |
UHE Itutinga | July 2015 | 52 | 3,671 | 6,589 |
UHE Camargos | July 2015 | 46 | 7,818 | 23,095 |
PCH Piau | July 2015 | 18.01 | 1,531 | 9,005 |
PCH Gafanhoto | July 2015 | 14 | 1,232 | 10,262 |
PCH Peti | July 2015 | 9.4 | 1,346 | 7,871 |
PCH Dona Rita | Sep. 2013 | 2.41 | 534 | 534 |
PCH Tronqueiras | July 2015 | 8.5 | 1,908 | 12,323 |
PCH Joasal | July 2015 | 8.4 | 1,379 | 7,622 |
PCH Martins | July 2015 | 7.7 | 2,132 | 4,041 |
PCH Cajuru | July 2015 | 7.2 | 3,576 | 4,252 |
PCH Paciência | July 2015 | 4.08 | 728 | 3,936 |
PCH Marmelos | July 2015 | 4 | 616 | 4,265 |
Others |  |  |  |  |
UHE Volta Grande | Feb. 2017 | 380 | 25,621 | 70,118 |
UHE Miranda | Dec. 2016 | 408 | 26,710 | 22,546 |
UHE Jaguara | Aug. 2013 | 424 | 40,452 | 174,203 |
UHE São Simão | Jan. 2015 | 1,710 | 1,762 | 2,711 |
|  | 3,601.70 | 203,545 | 816,202 |

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

On June, 30 2020, investments made after the Jaguara, São Simão and Miranda plants came into operation, in the amounts of R$174,203, R$2,711 and R$22,546, respectively, are recorded as concession financial assets, and the determination of the final amounts to be paid to the Company is in a process of discussion with Aneel (the regulator). Management of the subsidiary Cemig GT does not expect losses in realization of these amounts.

In 2019, Plubic Hearing 003/2019 was opened to obtain inputs on improvement of the regulation of criteria and procedures for calculation of investments in revertible assets, not yet amortized or not depreciated, of generation concessions (whether extended or not), under Law 12,783/2013. Technical Note 096/2019 was published on September 30, 2019. However the Normative Resolution has not yet been voted on by the Council of Aneel.

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| 13.4 | Concession grant fee – Generation concessions

The concession grant fee paid for a 30-year concession contracts Nº. 08 to 16/2016, related to 18 hydroelectric plants of Auction 12/2015, won by Cemig GT, was an amount of R$2,216,353. The amount of the concession fee was recognized as a financial asset measured at amortized cost, as Cemig GT has an unconditional right to receive the amount paid, updated by the IPCA Index and remuneratory interest (the total amount of which is equal to the internal rate of return on the project), during the period of the concession.

The changes in concession financial assets are as follows:

SPE | Plants | Dec. 31, 2019 | Monetary updating | Amounts received | Jun. 30, 2020
Cemig Geração Três Marias S.A. | Três Marias | 1,402,425 | 78,463 | (70,727) | 1,410,161
Cemig Geração Salto Grande S.A. | Salto Grande | 440,158 | 24,755 | (22,305) | 442,608
Cemig Geração Itutinga S.A. | Itutinga | 164,799 | 10,604 | (9,483) | 165,920
Cemig Geração Camargos S.A. | Camargos | 123,585 | 7,892 | (7,059) | 124,418
Cemig Geração Sul S.A. | Coronel Domiciano, Joasal, Marmelos, Paciência and Piau | 161,490 | 11,123 | (9,933) | 162,680
Cemig Geração Leste S.A. | Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras | 109,757 | 8,443 | (7,542) | 110,658
Cemig Geração Oeste S.A. | Cajurú, Gafanhoto and Martins | 66,002 | 5,132 | (4,585) | 66,549
Total |  | 2,468,216 | 146,412 | (131,634) | 2,482,994

SPE | Plants | Dec. 31, 2018 | Monetary updating | Amounts received | Jun. 30, 2019
Cemig Geração Três Marias S.A. | Três Marias | 1,369,900 | 95,560 | (68,423) | 1,397,037
Cemig Geração Salto Grande S.A. | Salto Grande | 429,910 | 30,116 | (21,578) | 438,448
Cemig Geração Itutinga S.A. | Itutinga | 160,601 | 12,554 | (9,174) | 163,981
Cemig Geração Camargos S.A. | Camargos | 120,452 | 9,357 | (6,830) | 122,979
Cemig Geração Sul S.A. | Coronel Domiciano, Joasal, Marmelos, Paciência and Piau | 157,217 | 13,003 | (9,609) | 160,611
Cemig Geração Leste S.A. | Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras | 106,697 | 9,685 | (7,297) | 109,085
Cemig Geração Oeste S.A. | Cajurú, Gafanhoto and Martins | 64,153 | 5,876 | (4,437) | 65,592
Total |  | 2,408,930 | 176,151 | (127,348) | 2,457,733

Of the energy produced by these plants, 70% is sold in the Regulated Market (ACR) and 30% in the Free Market (ACL).

Sector assets and liabilities

| 13.5 | Account for compensation of variation of parcel A items (CVA) and Other financial components

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

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The balance of these sector financial assets and liabilities, which are presented at net value, in assets or liabilities, in accordance with the tariff adjustments that have been authorized or are to be ratified, are as follows:

Balance sheet | Jun. 30, 2020 | Dec. 31, 2019
Amounts ratified by Aneel in the last tariff adjustment | Amounts to be ratified by Aneel in the next tariff adjustments | Total | Amounts ratified by Aneel in the last tariff adjustment | Amounts to be ratified by Aneel in the next tariff adjustments | Total
Assets | 2,584,672 | 1,274,326 | 3,858,998 | 1,286,413 | 2,144,280 | 3,430,693
Current assets | 2,584,672 | 424,819 | 3,009,491 | 1,286,413 | 1,269,049 | 2,555,462
Non-current assets | - | 849,507 | 849,507 | - | 875,231 | 875,231
Liabilities | (2,194,477) | (738,338) | (2,932,815) | (882,425) | (1,666,654) | (2,549,079)
Current liabilities | (2,194,477) | (128,572) | (2,323,049) | (882,425) | (1,032,876) | (1,915,301)
Non-current liabilities | - | (609,766) | (609,766) | - | (633,778) | (633,778)
Total current, net | 390,195 | 296,247 | 686,442 | 403,988 | 236,173 | 640,161
Total non-current, net | - | 239,741 | 239,741 | - | 241,453 | 241,453
Total, net | 390,195 | 535,988 | 926,183 | 403,988 | 477,626 | 881,614

Financial components | Jun. 30, 2020 | Dec. 31, 2019
Amounts ratified by Aneel in the last tariff adjustment | Amounts to be ratified by Aneel in the next tariff adjustments | Total | Amounts ratified by Aneel in the last tariff adjustment | Amounts to be ratified by Aneel in the next tariff adjustments | Total
Items of ‘Parcel A’ |  |  |  |  |  |
Energy Development Account (CDE) quota | 165,747 | (3,138) | 162,609 | 118,775 | 29,398 | 148,173
Tariff for use of transmission facilities of grid participants | 179,527 | 2,001 | 181,528 | (18,157) | 113,801 | 95,644
Tariff for transport of Itaipu supply | 21,151 | 5,397 | 26,548 | 8,691 | 16,069 | 24,760
Alternative power source program (Proinfa) | (28,891) | - | (28,891) | 10,542 | (5,859) | 4,683
ESS/EER System Service/Energy Charges | (314,817) | (39,835) | (354,652) | (161,253) | (135,703) | (296,956)
Energy bought for resale | 846,509 | 38,412 | 884,921 | 661,108 | 631,920 | 1,293,028
Other financial components |  |  |  |  |  |
Over contracting of supply (1) | (122,822) | 439,564 | 316,742 | (83,718) | 215,508 | 131,790
Neutrality of Parcel A | (5,952) | 126,415 | 120,463 | (29,697) | (11,915) | (41,612)
Other financial items | (267,248) | (18,064) | (285,312) | (70,219) | (206,481) | (276,700)
Tariff Flag balances | - | - | - | - | (102,976) | (102,976)
Excess demand and reactive power | (83,009) | (14,764) | (97,773) | (32,084) | (66,136) | (98,220)
TOTAL | 390,195 | 535,988 | 926,183 | 403,988 | 477,626 | 881,614

| (1) | In 2017 and 2018 Cemig D over contracted and the gain arising from the sale of the excess of energy in the spot market was provisionally passed through to customers by Aneel in the tariff adjustments of 2018 and 2019, including the portion in excess of the limit of 105% of the regulatory load – thus reducing the tariff that was determined. To establish whether this is a voluntary over contracting, the Company considers that the portion above the regulatory limit will be recovered in the subsequent tariff adjustment, when Aneel publishes the Dispatch that makes the numbers in question official. The Company has no expectation of loss in relation to realization of these amounts. The Company recognizes this receivable asset, in the amount of R$220,657, as ‘Other financial components’, to be approved by Aneel in the next forthcoming tariff adjustments.

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Changes in balances of financial assets and liabilities:

Balance at December 31, 2018 | 1,080,693
Additions | 254,930
Amortization | (174,689)
Payments from the Flag Tariff Centralizing Account | (83,115)
Updating – Selic rate (Note 28) | 53,046
Balance at June 30, 2019 | 1,130,865
Balance at December 31, 2019 | 881,614
Additions | 444,532
Amortization | (362,880)
Payments from the Flag Tariff Centralizing Account | (62,771)
Updating – Selic rate (Note 28) | 25,688
Balance at June 30, 2020 | 926,183

Payments from the Flag Tariff Centralizing Account

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

From January to June 2020, funds passed through by the Flag Account totaled R$62,771 (R$83,115 from January to June 2019), and were recognized as a partial realization of CVA receivables constituted.

Cemig D tariff adjustment

On June 25, 2020, the regulator (Aneel) approved the Annual Adjustment for Cemig D, effective as of May 28, 2020, providing an average increase for customers of 4.27%, whereas 0.84% corresponded to Cemig D’s manageable costs (Portion B) and the remaining portion, of 3.43%, has zero economic effect, not affecting profitability, since it represents direct pass-through, within the tariff, relating to the following itens: (i) increase of 5.30% in non-manageable (‘Parcel A’) costs – mainly purchase of energy supply, regulatory charges and transmission charges; (ii) ) increase of 6.71% in the financial components of the current process, led by the CVA currently being processed, which had an effect of 5.47%; and (iii) 8.58% was withdrawn from the financial components of the prior process.

Although the adjustment is effective from May 28, 2020 to May 27 2021, its application was suspended until June 30, 2020, maintaining the previous tariffs during the suspension period. Additionally, the Cemig D’s right to receive R$ 63,147, for non-collection of additional tariff revenue in the period, was recognized. This amount was part of the total limit set for the Covid-account funding established for Cemig D under Normative Resolution 885/2020. For more information on the Covid-account, see Note 1(c) to this interim financial statements.

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Administrative appeals were filed with Aneel, contesting the ratification of the annual tariff increase of 4.27% to Cemig D, and requesting its annulment, with the restitution to Cemig D’s customers of the amounts of the escrow deposits released as a result of the Supreme Court judgment, in the form that creates overall precedent, which determined the exclusion of ICMS tax amounts from the basis for calculation of PIS/ Pasep and Cofins taxes payable.. The current administrative appeals request a creation of a negative financial component in the calculation of Cemig D’s annual tariff adjustment.

Aneel has given Cemig D the right of reply, and, based on internal assessments and those of its legal advisers, as well as the exceptional economic scenario caused by the Covid-19 pandemic, Cemig D, on August 5, 2020, has submitted to Aneel a proposal for a the restitution to its customers of a total amount of R$ 714 million – corresponding to part of the escrow deposits released by the court due to Cemig’s success in the Claim.

Cemig’s decision represents an anticipation of the effects, and treatment in terms of regulations of the Supreme Court’s decision that determined the exclusion of ICMS tax amounts from the basis for calculation of PIS/ Pasep and Cofins taxes. These regulations will be applied equally to all energy distribution concessions through an Aneel normative ruling, which will be issued after conclusion of Public Consultation 005/2020 – during which there will be discussion on the merits, and in which Cemig will be able to take part in a wide-ranging discussion on the subject. The portion of the credits that Cemig D proposes to refund to its customers are recorded as a liability, as presented in note 20.

Cemig D’s proposal will also be subjected to ANEEL’s analysis and deliberation.

| 14. | CONCESSION CONTRACT ASSETS

Under IFRS 15 / CPC 47 – Revenue from contracts with customers, the infrastructure construction revenue for which the right to consideration depends on satisfaction of performance obligations related to the completion of its construction, or its future operation and maintenance are classified as contract assets as follows:

| Consolidated
Jun. 30, 2020 | Dec. 31, 2019
Distribution – Infrastructure assets under construction | 819,767 | 740,044
Gas – Infrastructure assets under construction | 85,624 | 67,951
Transmission – Indemnity assets incorporated into the Assets Remuneration Base | 505,564 | 347,691
Transmission – Assets remunerated by tariff | 1,195,339 | 848,543
| 2,606,294 | 2,004,229
Current | 176,299 | 171,849
Non-current | 2,429,995 | 1,832,380

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Changes in concession contract assets are as follows:

| Transmission | Distribution | Gas | Total
Balance at December 31, 2018 | 1,129,310 | 518,162 | 81,475 | 1,728,947
Additions | 82,989 | 347,052 | 19,069 | 449,110
Inflation adjustment | 19,256 | - | - | 19,256
Amounts received | (63,075) | - | - | (63,075)
Adjustment to expected contract cash flow from the concession | 7,834 | - | - | 7,834
Disposals | (1,824) | - | (145) | (1,969)
Transfers to financial assets | (44,082) | (17,260) | - | (61,342)
Transfers to intangible assets | - | (270,000) | (10,653) | (280,653)
Transfers to PP&E | (22) | - | - | (22)
Reversals of impairment losses (1) | - | 26,016 | - | 26,016
Balance at June 30, 2019 | 1,130,386 | 603,970 | 89,746 | 1,824,102
Balance at December 31, 2019 | 1,196,234 | 740,044 | 67,951 | 2,004,229
Additions | 74,044 | 569,417 | 27,887 | 671,348
Adjustment to expected contract cash flow from the concession | 14,695 | - | - | 14,695
Adjustment to expected contract cash flow from the concession – Periodic Tariff Reset adjustments | 419,657 | - | - | 419,657
Amounts received | (99,882) | - | - | (99,882)
Disposals | (602) | - | (2,686) | (3,288)
Impairment (1) | (11,175) | 7,942 | - | (3,233)
Contract assets of business combination | 107,932 | - | - | 107,932
Transfers to financial assets | - | (23,252) | - | (23,252)
Transfers to intangible assets | - | (474,384) | (7,528) | (481,912)
Balance at June 30, 2020 | 1,700,903 | 819,767 | 85,624 | 2,606,294

| (1) | As of December, 31, 2018, the subsidiary Cemig D recognized a provision of R$42,029 for impairment of certain long-term assets in progress. The amount of R$26,016 was reversed in the second quarter of 2019. In the second semester of 2020, Cemig D recorded a reversal of impairment amounting to R$7,942. The impairment of transmission contract asset, recorded in others expenses, refers to costs of assets not incorporated into the remuneration base and that are not expected to be recovered, in the amount of R$11,175.

The amount of additions in the period ended June 30, 2020 includes R$22,626 under the heading Capitalized borrowing costs, as presented in Note 22.

The Company has not identified any evidence of impairment of the others contract assets, with definite expected useful life. The Company doesn’t have any contract asset with indefinite useful life.

Energy and gas distribution activities

The concession infrastructure assets still under construction are recognized initially as contract assets, measured at amortized cost, including borrowing costs. When the asset start operations, the construction performance obligation is concluded, and the assets are split into financial assets and intangible assets.

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The transmission activity

Periodic Reset of Permitted Annual Revenue - RAP

On June 30, 2020, Aneel ratified the results of the Periodic Tariff Reset through Ratifying Resolution 2,712/2020, setting the revaluation of the Permitted Annual Revenue (RAP) to be applied from July 1, 2018. The result of the RAP Periodic Reset was a net increase of 9.13%, comprising: (i) –10.25%, arising from revaluation of the assets created by reinforcements and improvements (incremental basis); (ii) 0.51% for the assets reincorporated into the Remuneration Base; and (iii) 37.89% for the review of the financial component of RAP and change of the weighted average Regulatory Cost of Capital (WACC).

The assets posted in this line are:

Remaining National Grid balance to be received through RAP - The portion of the RAP relating to the facilities of the National Grid arising from the regulatory reintegration quota incorporated into the Remuneration Base, under Mining and Energy Ministry Order 120/2016 and Aneel Resolution 762/2017, is classified as a contractual asset, since satisfaction of the performance obligation linked to their construction occurs during their useful life (availability of the network).

The right to the consideration linked to these assets depends on the availability of the network, since they were reincorporated into the Remuneration Base by the renewal of the concession contract, under Law 12,783/2013, and will be received for the remaining period of their useful life, whilst the services of operation and maintenance are rendered.

Thus, the asset is recognized, under IFRS 15 / CPC 47, as a contract asset, representing the performance concluded prior to the right to receipt of the consideration, which will take place during the utilization of the infrastructure built, for the period of its useful life, in accordance with Aneel Resolution 762/2017, concomitantly with the provision of services of operation and maintenance, which are necessary for availability of the network.

As a result of the Tariff PeriodicReset, the economic portion of RAP was remeasured in accordance with the applicable regulatory rules, resulting in an addition of R$220,943 to the Cemig GT’s income for the period ended June 30, 2020.

The remaining balance of the indemnity for transmission, due to acceptance of the terms of Law 12,783/13, and the adjustments arising from periodic reset of RAP (RTP), of R$505,564 at June 30, 2020 (R$347,691 at December 31, 2019) was incorporated into the Assets Remuneration Base and is being recovered through the Annual Permitted Revenue (RAP).

Transmission – Assets remunerated by tariff - For new assets related to improvements and upgrades of facilities constructed by transmission concession holders, the regulator (ANEEL) calculates an additional portion of Permitted Annual Revenue (RAP) from the date that the new facilities enter commercial operation.

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Under the Proret, the revenue established in the Resolutions is payable to the transmission concession holders as from the date of start of commercial operation of the facilities. In the periods between tariff reviews, the revenues associated with the improvements and upgrades of facilities are provisional. They are then finally determined in the review immediately subsequent to the start of commercial operation of the facilities; this review then has effect starting on the date when commercial operations begin. At June 30, 2020, the receivable amounts to R$1,125,003 (R$848,543 on December, 31, 2019), which includes the Centroeste contract asset, related to the Furnas – Pimenta transmission line, acquired in business combination detailed in Note 15(c).

The assets arising from reinforcements and improvements related to the period from January 2013 to January 2018 were remeasured using the Aneel Reference Price Bank, in accordance with the regulatory requirement due to the Periodic Reset of RAP ratified by Aneel on June 30, 2020. The remeasurement of this Remuneration Base resulted in an increase of R$ 198,714 in the Company’s income.

The construction of infrastructure grants to the operator a right to receive consideration due to performance obligations represented by the construction, which is not unconditional until the satisfaction of performance obligations related to the operation and maintenance of the transmission lines. The revenue and costs related to construction of these assets are recognized in the statement of income as expenditures incurred.

| 15. | INVESTMENTS

Investee | Control | Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Cemig Geração e Transmissão | Subsidiary | - | - | 5,581,416 | 5,217,692
Hidrelétrica Cachoeirão | Jointly-controlled | 52,665 | 53,728 | - | -
Guanhães Energia | Jointly-controlled | 130,723 | 131,076 | - | -
Hidrelétrica Pipoca | Jointly-controlled | 32,771 | 30,730 | - | -
Retiro Baixo | Jointly-controlled | 188,352 | 180,043 | - | -
Aliança Norte (Belo Monte Plant) | Jointly-controlled | 655,246 | 671,166 | - | -
Amazônia Energia (Belo Monte Plant) | Jointly-controlled | 1,003,569 | 1,027,860 | - | -
Madeira Energia (Santo Antônio Plant) | Affiliated | 141,675 | 166,617 | - | -
FIP Melbourne (Santo Antônio Plant) | Affiliated | 364,679 | 384,809 | - | -
Lightger | Jointly-controlled | 128,820 | 127,976 | - | -
Baguari Energia | Jointly-controlled | 158,341 | 157,499 | - | -
Aliança Geração | Jointly-controlled | 1,244,066 | 1,191,550 | - | -
Cemig Distribuição | Subsidiary | - | - | 5,657,494 | 4,708,208
TAESA | Jointly-controlled | 1,314,968 | 1,213,193 | 1,314,968 | 1,213,193
Ativas Data Center | Affiliated | 16,535 | 16,114 | 16,535 | 16,114
Gasmig | Subsidiary | - | - | 1,451,496 | 1,410,950
Cemig Geração Distribuída | Subsidiary | - | - | 11,499 | 10,798
Cemig Sim (Efficientia) (1) | Subsidiary | - | - | 25,979 | 17,156
UFV Janaúba Geração de Energia Elétrica Distribuída | Affiliated | 10,029 | 10,050 | - | -
Companhia de Transmissão Centroeste de Minas | Subsidiary | - | 23,984 | 109,509 | 23,984
Axxiom Soluções Tecnológicas | Jointly-controlled | 12,741 | 12,996 | 12,741 | 12,996
Total of investments |  | 5,455,180 | 5,399,391 | 14,181,637 | 12,631,091
Itaocara – equity deficit | Jointly-controlled | (22,153) | (21,810) | - | -
Total |  | 5,433,027 | 5,377,581 | 14,181,637 | 12,631,091

| (1) | On April 14, 2020, the minute of the Annual General Meeting that decided about changes in this subsidiary’s By-laws was registered in the commercial registry authority, changing the name of this subsidiary to Cemig Soluções Inteligentes em Energia S.A.-CEMIG SIM.

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The Company’s investees that are not consolidated are jointly-controlled entities, with the exception of the interests in the Light, classified as assets held for sale, Madeira Energia (‘Santo Antônio’ power plant), UFV Janaúba Geração de Energia Elétrica Distribuída and Ativas Data Center.

On December 31, 2019, the investee Usina Hidrelétrica Itaocara had negative shareholders’ equity. Thus, after reducing the accounting value of its interest to zero, the Company recognized the loss to the extent that it assumed contractual obligations with the subsidiary and the other shareholders, which on June 30, 2020 is R$22,153 (R$21,810 on December 31, 2019).

For the second quarter of 2020, management considered that there was some indication, due to the economic shock of the Covid-19 pandemic (Note 1C), of potential decline in value of assets, as referred to in IAS 36 / CPC 01 – Impairments. Considering, however, the pandemic’s effects on the economic context, and the fact that the long-term expectation of realization of the assets underwent no change, management of the Company and its subsidiaries concluded that the reported assets net carrying amount is recoverable, and thus that there was no need to recognize any impairment loss in the Company nor its subsidiaries as a result of the current economic scenario.

Additionally, in relation to the above, the Company’s management has assessed the risk threatening all its investments ability to continue as a going concern, taking substantially into consideration: the economic-financial clauses of Cemig D; the guarantee of revenues of the transmission companies; the protection against force majeure reduction in regulated generation contracts; and all the legal measures that have been applied by the federal government and by Aneel – and has concluded that the Company and its subsidiaries’ ability to continue as going concern is secure.

| a) | Right to exploitation of the regulated activity

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

The rights of authorization to generate wind energy granted to Parajuru and Volta do Rio, valued at R$56,965 (R$60,072 on December 31, 2019) and R$55,050 (R$66,606 on December 31, 2019), respectively, are included in the financial statements of the subsidiary Cemig GT and of the Company, respectively, and in accordance with Technical Interpretation ICPC 09, the investments and are classified in the consolidated balance sheet under Intangibles. These concession assets are amortized by the straight-line method, during the period of the concession. For further information see note 17.

Changes in these assets are as follows:

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PARENT COMPANY
Investees | Dec. 31, 2018 | Amortization | Jun. 30, 2019 | Dec. 31, 2019 | Amortization | Jun. 30, 2020
Lightger | 83,990 | - | 83,990 | 81,489 | (1,249) | 80,240
TAESA | 179,424 | (4,660) | 174,764 | 170,103 | (4,660) | 165,443
Gasmig | 442,016 | (7,628) | 434,388 | 426,760 | (7,629) | 419,131
TOTAL | 705,430 | (12,288) | 693,142 | 678,352 | (13,538) | 664,814

CONSOLIDATED
Investees | Dec. 31, 2018 | Amortization | Jun. 30, 2019 | Dec. 31, 2019 | Amortization | Jun. 30, 2020
Cemig Geração e Transmissão |  |  |  |  |  |
Retiro Baixo | 31,966 | (695) | 31,271 | 30,576 | (694) | 29,882
Madeira Energia (Santo Antônio Plant) | 18,000 | (369) | 17,631 | 17,263 | (368) | 16,895
Lightger | 83,990 | - | 83,990 | 81,489 | (1,249) | 80,240
Aliança Geração | 377,534 | (12,655) | 364,879 | 352,225 | (12,655) | 339,570
Aliança Norte (Belo Monte Plant) | 52,575 | (986) | 51,589 | 50,603 | (986) | 49,617
TAESA | 179,424 | (4,660) | 174,764 | 170,103 | (4,660) | 165,443
TOTAL | 743,489 | (19,365) | 724,124 | 702,259 | (20,612) | 681,647

| b) | Changes in investments in subsidiaries, jointly-controlled entities and affiliates:

PARENT COMPANY
Investees | Dec. 31, 2019 | Gain (loss) by equity method (Income statement) | Remeasurement of previously held equity interest in subsidiaries acquired | Additions / acquisitions | Dividends | Others (1) | Jun. 30, 2020
Cemig Geração e Transmissão | 5,217,692 | 363,724 | - | - | - | - | 5,581,416
Cemig Distribuição (2) | 4,708,208 | 479,390 | - | - | 469,896 | - | 5,657,494
Ativas Data Center | 16,114 | 421 | - | - | - | - | 16,535
Gasmig | 1,410,950 | 98,816 | - | - | (57,568) | (702) | 1,451,496
Cemig Geração Distribuída | 10,798 | 701 | - | - | - | - | 11,499
Cemig Sim (Efficientia) (3) | 17,156 | (487) | - | 9,310 | - | - | 25,979
Companhia de Transmissão Centroeste de Minas | 23,984 | (3,459) | 37,469 | 44,775 | (7,527) | 14,267 | 109,509
Axxiom Soluções Tecnológicas | 12,996 | (255) | - | - | - | - | 12,741
Taesa | 1,213,193 | 167,556 | - | - | (65,781) | - | 1,314,968
| 12,631,091 | 1,106,407 | 37,469 | 54,085 | 339,020 | 13,565 | 14,181,637

| (2) | The amount of R$14,267 refers to the bargain purchase arising from the business combination in which the Company obtained control of Centroeste. For further information, see item c from this Note.

| (3) | On July 18, 2020, the Board of Directors of Cemig D submitted a new proposal to the Annual General Meeting held on July 31, 2020, for allocation of the net income for 2019, which included payment of dividends and interest on Equity (calculated as part of mandatory minimum dividend), totaling R$390,537, reducing in R$469,896 the amount originally proposed as shown in this subsidiary financial statements for 2019. The dividends declared corresponds to 25% of the net income adjusted by legal reserve constitution and are in accordance with regulations from Aneel, which limit dividends declaration by energy distribution concession holders in certain circumstances of non-compliance with effiency criteria. For more information, please see Note 29.

| (4) | On April 14, 2020, the minute of the Annual General Meeting that decided about changes in this subsidiary’s By-laws was registered in the commercial registry authority, changing the name of this subsidiary to Cemig Soluções Inteligentes em Energia S.A.-CEMIG SIM.

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PARENT COMPANY
Investees | Dec. 31, 2018 | Gain (loss) by equity method (Income statement) | Dividends | Additions / acquisitions | Others | Jun. 30, 2019
Cemig Geração e Transmissão | 5,064,127 | 920,347 | - | - | - | 5,984,474
Cemig Distribuição | 4,642,358 | 1,567,167 | - | - | - | 6,209,525
Ativas Data Center | 16,509 | (414) | - | - | - | 16,095
Gasmig | 1,439,005 | 79,522 | (113,687) | - | (864) | 1,403,976
Cemig Geração Distribuída | 2,741 | (1,353) | (944) | 10,337 | - | 10,781
LEPSA | 5,099 | 9 | - | - | (5,108) | -
RME | 47,155 | 6,652 | - | - | (53,807) | -
Cemig Sim (Efficientia) | 17,532 | 334 | (1,456) | - | - | 16,410
Companhia de Transmissão Centroeste de Minas | 19,690 | 2,848 | - | - | - | 22,538
Axxiom Soluções Tecnológicas | 8,301 | - | - | 5,765 | - | 14,066
Taesa | 1,143,189 | 97,719 | (33,363) | - | (193) | 1,207,352
Cemig Overseas | - | - | - | - | 37 | 37
| 12,405,706 | 2,672,831 | (149,450) | 16,102 | (59,935) | 14,885,254

CONSOLIDATED
Investees | Dec. 31, 2019 | Gain (loss) by equity method (Income statement) | Remeasurement of previously held equity interest in subsidiaries acquired | Dividends | Additions / acquisitions | Others (1) | Disposals | Jun. 30, 2020
Companhia de Transmissão Centroeste de Minas (1) | 23,984 | - | 37,469 | - | 44,775 | 14,267 | (120,495) | -
Hidrelétrica Cachoeirão | 53,728 | 3,750 | - | (4,813) | - | - | - | 52,665
Guanhães Energia | 131,076 | (353) | - | - | - | - | - | 130,723
Hidrelétrica Pipoca | 30,730 | 3,864 | - | (1,823) | - | - | - | 32,771
Madeira Energia (Santo Antônio Plant) | 166,617 | (25,026) | - | - | - | 84 | - | 141,675
FIP Melbourne (Santo Antônio Plant) | 384,809 | (20,130) | - | - | - | - | - | 364,679
Lightger | 127,976 | 2,573 | - | (1,729) | - | - | - | 128,820
Baguari Energia | 157,499 | 11,482 | - | (10,640) | - | - | - | 158,341
Amazônia Energia (Belo Monte Plant) | 1,027,860 | (24,366) | - | - | 75 | - | - | 1,003,569
Aliança Norte (Belo Monte Plant) | 671,166 | (15,920) | - | - | - | - | - | 655,246
Ativas Data Center | 16,114 | 421 | - | - | - | - | - | 16,535
Taesa | 1,213,193 | 167,556 | - | (65,781) | - | - | - | 1,314,968
Aliança Geração | 1,191,550 | 52,516 | - | - | - | - | - | 1,244,066
Retiro Baixo | 180,043 | 8,309 | - | - | - | - | - | 188,352
UFV Janaúba Geração de Energia Elétrica Distribuída | 10,050 | 398 | - | (419) | - | - | - | 10,029
Axxiom Soluções Tecnológicas | 12,996 | (255) | - | - | - | - | - | 12,741
Total of investments | 5,399,391 | 164,819 | 37,469 | (85,205) | 44,850 | 14,351 | (120,495) | 5,455,180
Itaocara – equity deficit | (21,810) | (343) | - | - | - | - | - | (22,153)
Total | 5,377,581 | 164,476 | 37,469 | (85,205) | 44,850 | 14,351 | (120,495) | 5,433,027

| (1) | The amount of R$14,267 refers to the bargain purchase arising from the business combination in which the Company obtained control of Centroeste. For further information, see item c from this Note.

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CONSOLIDATED
Investees | Dec. 31, 2018 | Gain (loss) by equity method (Income statement) | Dividends | Additions / acquisitions | Others | Jun. 30, 2019
Companhia de Transmissão Centroeste de Minas | 19,690 | 2,848 | - | - | - | 22,538
Hidrelétrica Cachoeirão | 49,213 | 5,310 | (3,421) | - | - | 51,102
Hidrelétrica Pipoca | 30,629 | 818 | (2,220) | - | - | 29,227
Madeira Energia (Santo Antônio Plant) | 270,090 | (38,820) | - | - | - | 231,270
FIP Melbourne (Santo Antônio Plant) | 470,022 | (32,062) | - | - | - | 437,960
Baguari Energia | 162,224 | 9,953 | (13,563) | - | - | 158,614
Amazônia Energia (Belo Monte Plant) | 1,012,635 | (3,797) | - | 75 | - | 1,008,913
Ativas Data Center | 16,509 | (414) | - | - | - | 16,095
Taesa | 1,143,189 | 97,719 | (33,363) | - | (193) | 1,207,352
Aliança Geração | 1,216,860 | 60,904 | - | - | - | 1,277,764
Aliança Norte (Belo Monte Plant) | 663,755 | (3,587) | - | 953 | - | 661,121
Retiro Baixo | 170,720 | 4,666 | - | - | - | 175,386
UFV Janaúba Geração de Energia Elétrica Distribuída | 9,042 | (38) | - | - | - | 9,004
Total | 5,234,578 | 103,500 | (52,567) | 1,028 | (193) | 5,286,346

Changes in dividends receivable are as follows:

| Consolidated | Parent Company
Balance at December 31, 2018 | 119,743 | 945,584
Investees’ dividends proposed | 52,567 | 149,450
Amounts received | (126,791) | (160,864)
Adjustments arising from merger of subsidiaries RME and LUCE | - | 2,385
Balance at June 30, 2019 | 45,519 | 936,555
Balance at December 31, 2019 | 185,998 | 1,726,895
Investees’ dividends proposed (reversion) | 85,205 | (339,020)
Elimination of dividends due to business combination | (1,217) | -
Adjustment of dividends proposed by investee classified as held for sale | (1,531) | (1,531)
Amounts received | (169,064) | (63,788)
Withholding income tax on Interest on equity | (1,993) | (1,993)
Balance at June 30, 2020 | 97,398 | 1,320,563

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| c) | Information This table gives the main information on the subsidiaries and affiliates, not adjusted for the percentage represented by the Company’s ownership interest:

Investees | Number of shares | Jun. 30, 2020 | Dec. 31, 2019
Cemig Stake % | Share capital, R$’000 | Equity R$’000 | Cemig Stake % | Share capital, R$’000 | Equity R$’000
Cemig Geração e Transmissão | 2,896,785,358 | 100.00 | 2,600,000 | 5,501,175 | 100.00 | 2,600,000 | 5,136,201
Madeira Energia (Santo Antônio plant) | 12,034,025,147 | 15.51 | 10,619,786 | 3,156,678 | 15.51 | 10,619,786 | 3,704,760
Hidrelétrica Cachoeirão | 35,000,000 | 49.00 | 35,000 | 266,782 | 49.00 | 35,000 | 109,649
Guanhães Energia | 548,626,000 | 49.00 | 548,626 | 66,880 | 49.00 | 548,626 | 267,503
Hidrelétrica Pipoca | 41,360,000 | 49.00 | 41,360 | 228,197 | 49.00 | 41,360 | 62,715
Baguari Energia (1) | 26,157,300,278 | 69.39 | 186,573 | 99,143 | 69.39 | 186,573 | 226,984
Central Eólica Praias de Parajuru | 70,560,000 | 100.00 | 70,560 | 87,357 | 100.00 | 71,835 | 89,188
Central Eólica Volta do Rio | 117,230,000 | 100.00 | 117,230 | 33,637 | 100.00 | 138,867 | 57,901
Lightger | 79,078,937 | 49.00 | 79,232 | 107,480 | 49.00 | 79,232 | 94,871
Aliança Norte (Belo Monte plant) | 41,893,675,837 | 49.00 | 1,208,071 | 1,235,977 | 49.00 | 1,208,071 | 1,266,453
Amazônia Energia (Belo Monte plant) (1) | 1,322,697,723 | 74.50 | 1,322,698 | 1,347,072 | 74.50 | 1,322,598 | 1,379,678
Aliança Geração | 1,291,582 | 45.00 | 1,291,488 | 2,002,729 | 45.00 | 1,291,488 | 1,857,905
Retiro Baixo | 225,350,000 | 49.90 | 225,350 | 317,576 | 49.90 | 225,350 | 299,532
Renova (1) (2) | 41,719,724 | 36.23 | N/D | N/D | 36.23 | 2,960,776 | (1,090,547)
Usina Hidrelétrica Itaocara S.A. | 69,282,514 | 49.00 | 69,283 | (45,211) | 49.00 | 69,283 | (44,510)
Cemig Baguari | 306,000 | 100.00 | 306 | 17 | 100.00 | 306 | 19
Cemig Ger. Três Marias S.A. | 1,291,423,369 | 100.00 | 1,291,423 | 1,484,512 | 100.00 | 1,291,423 | 1,407,996
Cemig Ger. Salto Grande S.A. | 405,267,607 | 100.00 | 405,268 | 472,415 | 100.00 | 405,268 | 446,318
Cemig Ger. Itutinga S.A. | 151,309,332 | 100.00 | 151,309 | 186,968 | 100.00 | 151,309 | 183,617
Cemig Geração Camargos S.A. | 113,499,102 | 100.00 | 113,499 | 148,760 | 100.00 | 113,499 | 136,140
Cemig Geração Sul S.A. | 148,146,505 | 100.00 | 148,147 | 182,623 | 100.00 | 148,147 | 179,275
Cemig Geração Leste S.A. | 100,568,929 | 100.00 | 100,569 | 134,918 | 100.00 | 100,569 | 126,802
Cemig Geração Oeste S.A. | 60,595,484 | 100.00 | 60,595 | 80,902 | 100.00 | 60,595 | 72,648
Rosal Energia S.A. | 46,944,467 | 100.00 | 46,944 | 130,463 | 100.00 | 46,944 | 127,994
Sá Carvalho S.A. | 361,200,000 | 100.00 | 36,833 | 126,535 | 100.00 | 36,833 | 123,929
Horizontes Energia S.A. | 39,257,563 | 100.00 | 39,258 | 63,750 | 100.00 | 39,258 | 57,397
Cemig PCH S.A. | 45,952,000 | 100.00 | 45,952 | 103,095 | 100.00 | 45,952 | 97,731
Cemig Geração Poço Fundo S.A. | 1,402,000 | 100.00 | 1,402 | 3,869 | 100.00 | 1,402 | 3,638
Empresa de Serviços de Comercialização de Energia Elétrica S.A. | 486,000 | 100.00 | 486 | 56,091 | 100.00 | 486 | 28,263
Cemig Comercializadora de Energia Incentivada S.A. | 1,000,000 | 100.00 | 1,000 | 3,326 | 100.00 | 1,000 | 3,359
Cemig Trading S.A. | 1,000,000 | 100.00 | 1,000 | 45,370 | 100.00 | 1,000 | 31,027
Cemig Distribuição | 2,359,113,452 | 100.00 | 5,371,998 | 5,657,494 | 100.00 | 5,371,998 | 4,708,208
TAESA | 1,033,496,721 | 21.68 | 3,042,034 | 5,412,415 | 21.68 | 3,042,035 | 4,926,923
Ativas Data Center | 456,540,718 | 19.60 | 182,063 | 84,361 | 19.60 | 182,063 | 82,212
Gasmig | 409,255,483 | 99.57 | 665,429 | 1,036,823 | 99.57 | 665,429 | 988,441
Cemig Geração Distribuída | 174,281 | 100.00 | 174 | 11,499 | 100.00 | 174 | 10,798
Cemig Sim (Efficientia) (3) | 24,431,845 | 100.00 | 24,432 | 25,979 | 100.00 | 15,122 | 17,156
Companhia de Transmissão Centroeste de Minas (4) | 28,000,000 | 100.00 | 28,000 | 109,509 | 51.00 | 28,000 | 47,026
Axxiom Soluções Tecnológicas | 65,165,000 | 49.00 | 65,165 | 25,677 | 49.00 | 58,365 | 26,522

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

| (2) | In view of Renova’s negative net equity, the Company reduced to zero the carrying value of its equity interests in this investee, at December 31, 2018. In addition, due to the issues described further in this note, relating to Renova, this investee has not conclued its interim financial information for the period ended on June 30, 2020, and thus their account information is not disclosed.

| (3) | On April 14, 2020, the minute of the Annual General Meeting that decided about changes in this subsidiary’s By-laws was registered in the commercial registry authority, changing the name of this subsidiary to Cemig Soluções Inteligentes em Energia S.A.-CEMIG SIM.

| (4) | On January 13, 2020, the Company concluded acquisition of the equity interest of 49% of the share capital held by Eletrobras in Centroeste.

The Company has direct and indirect equity interests in the following investees:

Consolidated | Jun. 30, 2020 | Dec. 31, 2019
Direct stake, % | Indirect stake, % | Direct stake, % | Indirect stake, %
Amazônia | 74.50% | 5.76% | 74.50% | 5.76%
LightGer | 49.00% | 11.52% | 49.00% | 11.52%
Guanhães | 49.00% | 11.52% | 49.00% | 11.52%
Axxion | 49.00% | 11.52% | 49.00% | 11.52%
UHE Itaocara | 49.00% | 11.52% | 49.00% | 11.52%

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Madeira Energia S.A. (“MESA”) and FIP Melbourne

MESA is the parent company of Santo Antônio Energia S.A (‘SAESA’), whose objects are operation and maintenance of the Santo Antônio Hydroelectric Plant and its transmission system, on the Madeira River, and all activities necessary for operation of the plant and its transmission system. Between the shareholders include Furnas, Odebrecht Energia, SAAG and the Company.

On June 30, 2020 the investee MESA reported a loss of R$548,082 (R$454,708 on June 30, 2019) and current liabilities in excess of current assets by R$187,926 (R$427,060 on December 31, 2019). Hydroelectric plants project finances structurally present negative net working capital in the first years of operation, because they are built using high levels of financial leverage. On the other hand, they have firm long-term contracts for energy supply as support and guarantee of payment of their debts. To balance the situation of negative working capital, in addition to its long-term sale contracts that ensure regularity in its operational cash flow, MESA benefits from its debt reprofiling, which adjusted its debt repayments flow to its cash generation capacity, so that the investee does not depend on additional investment from the shareholders.

Arbitration proceedings

In 2014, Cemig GT and SAAG Investimentos S.A. (SAAG), a vehicle through which Cemig GT holds an indirect equity interest in MESA, opened arbitration proceedings, in the Market Arbitration Chamber, challenging the following: (a) the adjustment for impairment carried out by the Executive Board of MESA, in the amount of R$678 million, relating to certain credits owed to Mesa by CCSA, based on absence of quantification of the amounts supposedly owed, and absence of prior approval by the Board of Directors, as required by the by laws and Shareholders’ Agreement of MESA; and also on the existence of credits owed to MESA by CCSA, for an amount greater than the claims; and (b) against the adjustment for impairment carried out by the Executive Board of MESA, in the amount of R$678,551, relating to certain credits owed to Mesa by CCSA, on the grounds that those credits are owed in their totality by express provision of contract.

The arbitration judgment recognized the right of Cemig GT and SAAG in full and ordered the annulment of the acts being impugned. As a consequence of this decision, MESA reversed the impairment, and posted a provision for receivables in the amount of R$ 678,551 in its financial statements as of December 31, 2017. On June 30, 2020, the investee confirmed its assets recoverability expectation and maintained the provision for receivables in the amount of R$678,551.

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

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Cemig GT and SAAG Investimentos S.A. applied to the judiciary for provisional remedy prior to the arbitration proceeding, to suspend the effects of the capital increase approved by an Extraordinary General Meeting of Shareholders of Mesa held on August 28, 2018. This process is confidential under the Arbitration Regulations of the Market Arbitration Chamber.

Renova Energia S.A. – court-supervised reorganization (‘Renova’)

The investee Renova, currently in court-supervised reorganization, has been reporting recurring losses and presenting negative net working capital, net equity (uncovered liabilities), and negative gross margin throughout the year ended June 30, 2020.

However, in view of the investee’s equity deficit, Cemig GT reduced the carrying value of its equity interests in Renova, at December 31, 2018, to zero and no further losses have been recognized, considering the non-existence of any legal or constructive obligations to the investee.

Additionally, the Cemig GT recorded, in June 30, 2019, an impairment of the receivables with the jointly-controlled entity related to energy purchase and sale agreements and terms of debt recognition for total outstanding balance, in the amount of R$688 million.

Application to the court by Renova for court-supervised reorganization

On October 16, 2019, the second State of São Paulo Bankruptcy and Court-Supervised Reorganization Court granted court-supervised reorganization petition applied by Renova, and by the other companies of the group (‘the Renova Group’), and determined, among other measures, the following: (i) Appointment of an independent company to act as judicial administrator.; (ii) Suspension of actions and executions against the companies of the Renova Group for 180 days, under Article 6 of Law 11,101/2005; (iii) Presentation of accounts by the 30th of each month, while the court-supervised reorganization proceedings continue, on penalty of the controlling shareholders of the companies of the Renova Group being removed, and replaced by administrator, under Article 52, IV, of Law 11,101/2005; (iv) Dispensation of presentation of certificates of absence of debt so that the companies of the Renova Group can exercise their activities; and (v) Order to publish a tender, in the terms of §1 of Article 52 of Law 11,101/2005, with 15 days for presentation of qualifications and/or divergences of credits in relation to the court-supervised reorganization.

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On December 17, 2019, Renova filed its court-supervised reorganization plan and on July 7, 2020, in order to set a court-supervised reorganization structure that best meets the interests of creditors and companies in reorganization, Renova filed two new court supervised reorganization plans. The first plan relates exclusively to the companies of Phase A of the Alto Sertão III Project, bound to the loan originally obtained from the BNDES, and the second plan relates to the investee and the other companies in court-supervised reorganization of the Renova Group, both of them are in progress in the second Bankruptcy and Court-supervised reorganization Court of the legal district of São Paulo State. The court-supervised reorganization plan is in discussion, which is subjected to enhancements and changes until the General Meeting of Creditors, scheduled to be held in September 2020. Up to the date, the possible effects of this jointly controlled subsidiary court-supervised reorganization plan on its accounting balances have not been measured.

In this context, Renova signed with the Company Debtor in Possession (DIP) loan agreements in the total amount of R$36,500. The funds of these loans were authorized by the second State of São Paulo Bankruptcy and Court-supervised Reorganization Court. They are guaranteed by a fiduciary assignment of shares in a company owning assets of a wind power project owned by Renova, and they also have priority of receipt in the court-supervised reorganization process. Additionally, Cemig GT made an Advance for Future Capital Increase to Renova, of R$5,000, on October 25, 2019.

On May 2, 2020, the Bankruptcy and Court-supervised Reorganization Court issued a decision ordering that the DIP loan, in the total amount of R$ 36,500 million, with asset guarantee, already constituted and registered, would be subscribed as a capital increase in Renova. Company has filed a Motion for Clarification, which was denied by the judge. A procedural appeal is now in progress against the first instance judge’s decision, which was suspended by the Appeal Court on receiving this appeal. The Company’s legal advisors have classified the chances of loss as ‘possible’. Due to the uncertainties on the financial situation of the investee, the Company recognized impairment loss for the total of its credits against Renova, of R$ 37,361, in the second semester of 2020.

On March 20, 2020, the Board of Directors of Renova approved acceptance of a binding offer made by ARC Capital Ltda. (‘ARC’), jointly with G5 Administradora de Recursos Ltda (‘G5’), and XP Vista Asset Management Ltda. (‘XP’) for financing to conclude the works of Phase A of the Alto Sertão III Wind Farm Complex, and to fund the current operational expenses of Renova. The offer final conditions for agreement are still under negotiation.

Considering the non-existence of any legal or constructive obligations to the investee, the Company has concluded that the granted of court-supervised reorganization filed by Renova does not have any additional impact in its interim financial information.

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Amazônia Energia S.A. and Aliança Norte Energia S.A.

Amazônia Energia and Aliança Norte are shareholders of Norte Energia S.A. (‘NESA’), which holds the concession to operate the Belo Monte Hydroelectric Plant. Through the jointly-controlled entities referred to above, Cemig GT owns an indirect equity interest in NESA of 11.69%.

On June 30, 2020 NESA had negative net working capital of R$1,763,409 and will spend further amounts on projects specified in its concession contract, even after conclusion of the construction and full operation of the Belo Monte Hydroelectric Plant. According to the estimates and projections, the situation of negative net working capital, and the future demands for investments in the hydroelectric plant, will be supported by revenues from future operations and/or raising of bank financings.

On September 21, 2015, NESA was awarded a preliminary injunction ordering the regulator to ‘abstain, until hearing of the application for an injunction made in the original case, from applying to Appellant any penalties or sanctions in relation to the Belo Monte Hydroelectric Plant not starting operations on the date established in the original timetable for the project, including those specified in an the regulator (Aneel) Normative Resolution 595/2013 and in the Concession Contract for the Belo Monte Hydroelectric Plant’. The legal advisers of NESA have classified the probability of loss as ‘possible’ and estimated the potential loss on June 30, 2020 to approximately R$2,047,000 (R$1,962,000 on December 31, 2019).

c) Business combination - Centroeste

On January 13, 2020, Centroeste became a wholly own subsidiary of the Company through the acquisition of the remaining equity interest of 49% held by Eletrobras. The acquisition, which resulted in the Company obtaining control, is the result of exercise of the right of first refusal for acquisition of the shareholding offered in Eletrobras Auction 01/2018, Lot P, held on September 27, 2018, and confirmed on January 15, 2019.

Centroeste operates in construction, operation and maintenance of the transmission facilities of the Furnas-Pimenta transmission line – part of the national grid.

The consideration paid for the acquisition is R$44,775, resulting from the price in the Tender Announcement, adjusted by the accumulated variation of the Selic rate up to the date of conclusion of the transaction, less all dividends and/or Interest on Equity paid or declared by Centroeste in favor of Eletrobras in the period.

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The Company applied the acquisition method to account for the business combination and measured provisional the identifiable assets and liabilities assumed at their acquisition-date fair value, in accordance with IFRS 3/CPC 15. During the measurement period, the Company

might retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and, if known, would have affected the measurement of the amounts recognized as of that date. The measurement period is the one that follows the acquisition date, in which the provisional amounts recognized in a business combination can be adjusted and shall not exceed one year from the acquisition date.

Assets acquired – Fair value calculation

The preliminary fair value of the net assets acquired and the remeasurement of the previously held interest, which impacts were recognized in 2020, are as follows:

| Centroeste
Fair value on the acquisition date (1) | 120,495
Equity interest held by the Company before the acquisition of control | 51%
Previously held interest at fair value on the date control was obtained | 61,453
Carrying value of the investment | (23,984)
Gain on remeasurement of previously held equity interest in subsidiaries acquired to be recognized in 2020 | 37,469

| (1) | During the measurement period, that shall not exceed one year from the acquisition date, the provisional amounts recognized can be adjusted.

The fair value of interest acquired in relation to cash consideration is as follows:

| Centroeste
Cash consideration paid for 49% of the equity of Centroeste | 44,775
Previously held interest, valued at fair value on the acquisition date – 51% | 61,453
Bargain purchase | 14,267
Total | 120,495

The preliminary fair value of the assets and liabilities acquired at the acquisition date, is as follows:

Assets | Fair value | Liabilities | Fair value
Current | 28,867 | Current | 6,479
Cash and cash equivalents | 27,110 | Loans and financings | 3,095
Other current assets | 1,757 | Interest on equity and dividends payable | 2,388
Non-current | 108,590 | Other current liabilities | 996
Contract assets | 107,932 | Non-current | 10,483
Escrow deposits | 389 | Loans and financings | 7,352
Other non-current assets | 269 | Provisions | 3,131
|  | Fair value of net identifiable assets | 120,495

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Effect upon profit or loss in 2020

Regarding the adjustments mentioned above, the total amounts recognized in profit or loss in 2020 arising from the acquisition of Centroeste’s equity interest of 49% is as follows:

| Centroeste
Gain on remeasurement of previously held equity interest in the subsidiaries acquired (51%) | 37,469
Bargain purchase – gain arising from the acquisition of the additional equity interest of 49% | 14,267
Total | 51,736

The above mentioned effects are presented in the operating segment of transmission.

| d) | Risks related to compliance with law and regulations

Jointly controlled entities and affiliates:

Norte Energia S.A. (‘NESA’) - through Amazônia Energia and Aliança Norte

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

On March 9, 2018 ‘Operação Fortuna’ started, as a 49th phase of ‘Operation Lava Jato’ (‘Operation Carwash’). According to what has been disclosed by the media this operation investigates payment of bribes by the construction consortium of the Belo Monte power plant, comprising the companies Camargo Corrêa, Andrade Gutierrez, Odebrecht, OAS and J. Malucelli. Management of NESA believes that so far there are no new facts that have been disclosed by the 49th phase of ‘Operation Carwash’ that require additional procedures and internal independent investigation in addition to those already carried out.

The company’s management, based on its knowledge of the matters described above and on the independent procedure carried out, believes that the conclusions presented in the report of the independent investigation are adequate and appropriate; as a result no adjustment has been made in the interim financial information. The effects of any future alterations in the existing scenario will be reflected appropriately in the Company’s interim financial information.

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Madeira Energia S.A (“MESA”)

Investigations and other legal measures are in progress, conducted by the Federal Public Attorneys’ Office, which involve other indirect shareholders of MESA and certain executives of those other indirect shareholders. In this context, the Federal Public Attorneys have started investigations searching for irregularities involving contractors and suppliers of MESA and of its other shareholders. In response to allegations of possible illegal activities, the investee and its other shareholders started an independent internal investigation.

The independent internal investigation, concluded in February 2019, in the absence of any future developments such as any leniency agreements by third parties that may come to be signed or collaboration undertakings that may be signed by third parties with the Brazilian authorities, found no objective evidence enabling it to be affirmed that there were any supposed undue payments by MESA (SAESA) that should be considered for possible accounting write-off, pass-through or increase of costs to compensate undue advantages and/or linking of MESA with the acts of its suppliers, in the terms of the witness accusations and/or cooperation statements that have been made public.

The company’s management, based on its knowledge of the matters described above and on the independent procedures carried out, believes that the conclusions presented in the report of the independent investigation are adequate and appropriate; as a result no adjustment has been made in the interim financial information. The effects of any future alterations in the existing scenario will be reflected appropriately in the Company’s interim financial information.

Renova Energia S.A. (“Renova”)

Since 2017 Renova is part of a formal investigation by the Civil Police of Minas Gerais State and other public authorities related to certain capital injections made by some of its controlling shareholders, including Cemig GT and capital injections made by Renova in certain projects under development in previous years.

On April 11, 2019, within the ‘Operação Descarte’ scope, the Brazilian Federal Police commenced the ‘Operation E o Vento Levou’ as part of the ‘Lava Jato’ Investigation, and executed a search and seizure warrant issued by a Federal Court of São Paulo at Renova’s head office in São Paulo, based on allegations and indications of misappropriation of funds harmful to the interests of Cemig. Based on the allegations being investigated, these events are alleged to have taken place before 2015. On July 25, 2019, the second phase of the operation occurred.

The ‘Operation E o Vento Levou’ and the police investigation of the Minas Gerais State Civil Police have not yet been concluded. Thus, there is a possibility that material information may be revealed in the future. If a criminal action is filed against agents who could have

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damaged Renova, Renova intends to act as auxiliary to the prosecution in any criminal proceedings, and subsequently sue for civil reparation of the damages suffered.

Due to these third party investigations, the governance bodies of Renova have requested opening of an internal investigation, conducted by an independent company with the support of an external law firm, the scope of which comprises assessment of the existence of irregularities, including noncompliance with: the Brazilian legislation related to acts of corruption and money laundering; Renova’s Code of Ethics; and its integrity policies. Additionally, a Monitoring Committee was established in Renova which, jointly with the Audit Committee, accompanied this investigation. The internal investigation was concluded on February 20, 2020, and no concrete evidences of acts of corruption or diversion of funds to political campaigns were identified.

However, the independent investigators identified irregularities in the conducting of business and agreement of contracts by Renova, including: (i) payments without evidence of the consideration of services, in the total amount of approximately R$40 million; (ii) payments not in accordance with the company’s internal policies and best governance practices, in the total amount of approximately R$137 million; and (iii) deficiencies in the internal controls of the investee.

As a result of the analysis of the above mentioned values, Renova concluded that R$35 million relates to effective assets and therefore no impairment is necessary. The remaining amount of R$142 million was already impaired in previous years, producing no impact on the financial statements for the year ended December 31, 2019 and on the interim financial information for the period ended June 30, 2020.

In response to the irregularities found, and based on the recommendations of the Monitoring Committee and legal advisers, the Board of Directors of Renova decided to take all the steps necessary to preserve the rights of the investee, continue with the measures to obtain reimbursement of the losses caused, and strengthen the company’s internal controls.

Since the investment at Renova is fully impaired at June 30, 2020, and since no contractual or constructive obligations in relation to the investee have been assumed by the Company, it is not expected that effects resulting from the court-supervised reorganization process, or the investigations, or the operational activities of this investee can significantly impact the Company’s interim financial information, even if eventually not yet recorded by Renova.

Other investigations

In addition to the cases above, there are investigations being conducted by the Public Attorneys’ Office of the State of Minas Gerais (‘MPMG’) and by the Civil Police of the State of Minas Gerais (‘PCMG’), which aim to investigate possible irregularities in the investments made by Cemig GT in Guanhães Energia and also in MESA. Additionally, on April 11, 2019 agents of the Brazilian Federal Police were in the Company’s head office in

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Belo Horizonte to execute a search and seizure warrant issued by a São Paulo Federal Court in connection with the ‘Operation E o Vento Levou’, as described above.

These proceedings are being investigated through the analysis of documents demanded by the respective authorities, and by hearing of witnesses.

Internal procedures for risks related to compliance with law and regulations

Taking into account the investigations that are being conducted at the Company and at certain investees, as described above, the governance bodies of the Company have authorized contracting a specialized company to analyze the internal procedures related to these investments, as well as the factors that led the Company to be assessed by federal tax authority for not paying withholding income tax in the acquisition of Light’s interest from Enlighted (see Note 24). This independent investigation was subject to oversight of an independent investigation committee whose creation was approved by our Board of Directors.

On July 29, 2019, Company signed a tooling agreement with the Securities and Exchange Commission (SEC) and US Department of Justice (DOJ). Cemig has complied with the requests and intends to continue contributing to the SEC and the DOJ.

The Company’s internal investigation was completed and the corresponding report was issued on May 8, 2020. Considering the results of the internal investigations, no objective evidence was identified to affirm that there were illegal acts on the investments made by Company that were subject to the investigation, therefore, there was no impact in the interim financial information ended June 30, 2020 nor in its prior years financial statements.

Due to the completion of the investigations for which the Special Investigating Committee was constituted, from the delivery of the final report by the specialized company, the governance bodies of the Company decided to extinguish that Committee. If there are any future needs resulting from developments in this matter, the Committee can be reinstated.

The Company will evaluate any changes in the future scenario and eventual impacts that could affect the Financial Statements, when applicable. The Company will collaborate with the relevant authorities and their analysis related to the investigations in progress.

| 16. | PROPERTY, PLANT AND EQUIPMENT

Consolidated | Jun. 30, 2020 | Dec. 31, 2019
Historical cost | Accumulated depreciation | Net value | Historical cost | Accumulated depreciation | Net value
In service |  |  |  |  |  |
Land | 247,535 | (21,085) | 226,450 | 247,535 | (19,178) | 228,357
Reservoirs, dams and watercourses | 3,294,978 | (2,239,375) | 1,055,603 | 3,279,784 | (2,199,659) | 1,080,125
Buildings, works and improvements | 1,091,541 | (826,914) | 264,627 | 1,091,660 | (818,141) | 273,519
Machinery and equipment | 2,613,262 | (1,895,609) | 717,653 | 2,597,685 | (1,869,186) | 728,499

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Vehicles | 20,616 | (18,442) | 2,174 | 20,616 | (17,687) | 2,929
Furniture and utensils | 13,816 | (10,847) | 2,969 | 14,073 | (10,939) | 3,134
| 7,281,748 | (5,012,272) | 2,269,476 | 7,251,353 | (4,934,790) | 2,316,563
In progress | 152,597 | - | 152,597 | 133,562 | - | 133,562
Net property, plant and equipment | 7,434,345 | (5,012,272) | 2,422,073 | 7,384,915 | (4,934,790) | 2,450,125

Parent Company | Jun. 30, 2020 | Dec. 31, 2019
Historical cost | Accumulated depreciation | Net value | Historical cost | Accumulated depreciation | Net value
In service |  |  |  |  |  |
Land | 82 | - | 82 | 82 | - | 82
Buildings, works and improvements | 55 | (21) | 34 | 55 | (21) | 34
Machinery and equipment | 5,298 | (4,552) | 746 | 5,298 | (4,379) | 919
Furniture and utensils | 748 | (702) | 46 | 749 | (698) | 51
| 6,183 | (5,275) | 908 | 6,184 | (5,098) | 1,086
In progress | 460 | - | 460 | 460 | - | 460
Net property, plant and equipment | 6,643 | (5,275) | 1,368 | 6,644 | (5,098) | 1,546

Changes in PP&E are as follows:

Consolidated | Dec. 31, 2019 | Additions | Disposals | Depreciation | Business combination | Transfers / capitalizations (2) | Jun. 30, 2020
In service |  |  |  |  |  |  |
Land (1) | 228,357 | - | - | (1,907) | - | - | 226,450
Reservoirs, dams and watercourses | 1,080,125 | - | - | (39,716) | - | 15,194 | 1,055,603
Buildings, works and improvements | 273,519 | - | (56) | (9,029) | - | 193 | 264,627
Machinery and equipment | 728,499 | 13,381 | (679) | (38,192) | - | 14,644 | 717,653
Vehicles | 2,929 | - | - | (755) | - | - | 2,174
Furniture and utensils | 3,134 | - | (5) | (161) | - | 1 | 2,969
| 2,316,563 | 13,381 | (740) | (89,760) | - | 30,032 | 2,269,476
In progress | 133,562 | 49,844 | (975) | - | 198 | (30,032) | 152,597
Net property, plant and equipment | 2,450,125 | 63,225 | (1,715) | (89,760) | 198 | - | 2,422,073

| (1) | Certain land sites linked to concession contracts and without provision for reimbursement are amortized in accordance with the period of the concession.

Consolidated | Dec. 31, 2018 | Additions | Disposals | Depreciation | Transfers / capitalizations (2) | Jun. 30, 2019
In service |  |  |  |  |  |
Land (1) | 215,049 | - | - | (1,388) | 16,939 | 230,600
Reservoirs, dams and watercourses | 1,150,495 | - | - | (40,479) | 8,450 | 1,118,466
Buildings, works and improvements | 313,799 | - | - | (9,342) | (16,379) | 288,078
Machinery and equipment | 854,296 | - | (600) | (44,489) | 19,633 | 828,840
Vehicles | 4,525 | - | - | (773) | (59) | 3,693
Furniture and utensils | 3,667 | - | (3) | (152) | 79 | 3,591
| 2,541,831 | - | (603) | (96,623) | 28,663 | 2,473,268
In progress | 119,754 | 34,414 | - | - | (24,316) | 129,852
Net property, plant and equipment | 2,661,585 | 34,414 | (603) | (96,623) | 4,347 | 2,603,120

| (1) | Certain land sites linked to concession contracts and without provision for reimbursement are amortized in accordance with the period of the concession.

| (2) | Balances, of R$ 4,325 and R$ 22, respectively, were transferred from Intangible assets and concession contract assets to PP&E.

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Parent Company | Dec. 31, 2019 | Depreciation | Jun. 30, 2020
In service |  |  |
Land | 82 | - | 82
Buildings, works and improvements | 34 | - | 34
Machinery and equipment | 919 | (173) | 746
Furniture and utensils | 51 | (5) | 46
| 1,086 | (178) | 908
In progress | 460 | - | 460
Net property, plant and equipment | 1,546 | (178) | 1,368

Parent Company | Dec. 31, 2018 | Transfers | Depreciation | Jun. 30, 2019
In service |  |  |  |
Land | 82 | - | - | 82
Buildings, works and improvements | 111 | - | (1) | 110
Machinery and equipment | 1,213 | 25 | (190) | 1,048
Furniture and utensils | 360 | - | (4) | 356
| 1,766 | 25 | (195) | 1,596
In progress | 484 | (25) | - | 459
Net property, plant and equipment | 2,250 | - | (195) | 2,055

The average annual depreciation rate for the year is 3.33%:

Hydroelectric Generation | Thermoelectric Generation | Wind Power Generation | Administration
3.13 | 2.78 | 4.96 | 7.92

The Company and its subsidiaries have not identified any evidence of impairment of its Property, plant and equipment assets. The generation concession contracts provide that at the end of each concession the grantor must determine the amount to be reimbursed to the Company – with the exception of the concession contracts related to Lot D of Auction 12/2015 and those from the independent energy producers supported by the Decree 1,996/2003. Management believes that the indemnity of these assets will be greater than the amount of their historic cost, after depreciation over their useful lives.

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

Consortium

The Company is a partner in an energy generation consortium for the Queimado plant, for which no separate company with independent legal existence was formed to manage the object of the concession. The Company’s portion in the consortium is recorded and controlled individually in the respective categories of PP&E and Intangible assets.

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Parent company and Consolidated | Stake in power output (%) | Average annual depreciation rate (%) | Jun. 30, 2020 | Dec. 31, 2019
In service |  |  |  |
Queimado Power Plant | 82.50 | 3.73 | 217,210 | 217,210
Depreciation |  |  | (111,569) | (109,012)
Total |  |  | 105,641 | 108,198
In progress |  |  |  |
Queimado Power Plant | 82.50 | - | 1,396 | 980
Total |  |  | 1,396 | 980

| 17. | INTANGIBLE ASSETS

Consolidated | Jun. 30, 2020 | Dec. 31, 2019
Historical cost | Accumulated amortization | Residual value | Historical cost | Accumulated amortization | Residual value
In service |  |  |  |  |  |
Useful life defined |  |  |  |  |  |
Temporary easements | 11,749 | (3,608) | 8,141 | 11,749 | (3,292) | 8,457
Onerous concession | 19,169 | (12,949) | 6,220 | 19,169 | (12,609) | 6,560
Assets of concession (1) | 20,510,623 | (8,878,958) | 11,631,665 | 20,039,489 | (8,522,488) | 11,517,001
Others | 77,754 | (67,680) | 10,074 | 77,159 | (66,507) | 10,652
| 20,619,295 | (8,963,195) | 11,656,100 | 20,147,566 | (8,604,896) | 11,542,670
In progress | 85,763 | - | 85,763 | 81,801 | - | 81,801
Net intangible assets | 20,705,058 | (8,963,195) | 11,741,863 | 20,229,367 | (8,604,896) | 11,624,471

| (1) | The rights of authorization to generate wind energy granted to Parajuru and Volta do Rio, valued at R$112,015, and of the gas distribution concession, granted to Gasmig, valued at R$419,131, are included in the interim financial information of the subsidiary Cemig GT and of the Company, respectively, and in accordance with Technical Interpretation ICPC 09, the investments and are classified in the consolidated balance sheet under Intangibles. These concession assets are amortized by the straight-line method, during the period of the concession.

Parent Company | Jun. 30, 2020 | Dec. 31, 2019
Historical cost | Accumulated amortization | Residual value | Historical cost | Accumulated amortization | Residual value
In service |  |  |  |  |  |
Useful life defined |  |  |  |  |  |
Software use rights | 13,564 | (10,281) | 3,283 | 13,564 | (9,593) | 3,971
Brands and patents | 8 | (8) | - | 8 | (8) | -
Others | 9 | (8) | 1 | 231 | (73) | 158
| 13,581 | (10,297) | 3,284 | 13,803 | (9,674) | 4,129
In progress | 48 | - | 48 | 46 | - | 46
Net intangible assets | 13,629 | (10,297) | 3,332 | 13,849 | (9,674) | 4,175

Changes in intangible assets are as follow:

Consolidated | Dec. 31, 2019 | Additions | Disposals (1) | Amortization | Transfers (2) | Jun. 30, 2020
In service |  |  |  |  |  |
Useful life defined |  |  |  |  |  |
Temporary easements | 8,457 | - | - | (316) | - | 8,141
Onerous concession | 6,560 | - | - | (340) | - | 6,220
Assets of concession | 11,517,001 | - | (12,149) | (363,350) | 490,163 | 11,631,665
Others | 10,652 | - | (157) | (2,114) | 1,693 | 10,074
| 11,542,670 | - | (12,306) | (366,120) | 491,856 | 11,656,100
In progress | 81,801 | 13,403 | - | - | (9,441) | 85,763
Net intangible assets | 11,624,471 | 13,403 | (12,306) | (366,120) | 482,415 | 11,741,863

| (1) | This includes the impairment, in the amount of R$8,459 recognized in the Income Statement under “Other expenses”, as a result of the test of impairment of intangible assets, relating to the authorization for wind power generation granted to Volta do Rio, on June 30, 2020. There is more information below in this note.

| (2) | The transfers were made between Intangible assets, concession contract assets and property, plant and equipment as follows: (1) R$481,912 from concession contract assets to intangible assets; (2) R$503 from financial assets to intangible assets.

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Consolidated | Dec. 31, 2018 | Additions | Disposals | Amortization | Transfers (1) | Jun. 30, 2019
In service |  |  |  |  |  |
Useful life defined |  |  |  |  |  |
Temporary easements | 9,085 | - | - | (337) | - | 8,748
Onerous concession | 7,239 | - | - | (340) | - | 6,899
Assets of concession | 10,679,488 | - | (5,898) | (343,275) | 294,119 | 10,624,434
Others | 18,797 | - | - | (2,326) | (3,800) | 12,671
| 10,714,609 | - | (5,898) | (346,278) | 290,319 | 10,652,752
In progress | 62,582 | 17,375 | - | - | (14,093) | 65,864
Net intangible assets | 10,777,191 | 17,375 | (5,898) | (346,278) | 276,226 | 10,718,616

| (1) | The transfers were made between Intangible assets, concession contract assets and property, plant and equipment as follows: (1) R$280,653 from concession contract assets to intangible assets; (2) (R$4,325) from intangible assets to property, plant and equipment and; and (3) (R$102) from intangible assets to concession financial assets.

Parent Company | Dec. 31, 2019 | Additions | Disposals | Amortization | Jun. 30, 2020
In service |  |  |  |  |
Useful life defined |  |  |  |  |
Software use rights | 3,971 | - | - | (688) | 3,283
Others | 158 | - | (157) | - | 1
| 4,129 | - | (157) | (688) | 3,284
In progress | 46 | 2 | - | - | 48
Net intangible assets | 4,175 | 2 | (157) | (688) | 3,332

Parent Company | Dec. 31, 2018 | Amortization | Jun. 30, 2019
In service |  |  |
Useful life defined |  |  |
Software use rights | 6,886 | (832) | 6,054
Brands and patents | (794) | - | (794)
| 6,092 | (832) | 5,260
In progress | 33 | - | 33
Net intangible assets | 6,125 | (832) | 5,293

Concession assets

The portion of the distribution infrastructure that will be fully used up during the concession is recorded in Intangible assets. Assets linked to the infrastructure of the concession that are still under construction are posted initially as contract assets, as detailed in Note 14.

The intangible asset easements, onerous concessions, assets of concession, and others, are amortized by the straight-line method taking into account the consumption pattern of these rights. The amount of additions on June 30, 2020 includes capitalized borrowing costs, which represents a reversal of R$111, as presented in Note 22.

The main amortization rates, which take into account the useful life that management expects for the asset, reflect the expected pattern of their consumption and are revised annually by Management.

The annual average amortization rate is 4.09%:

Hydroelectric Generation | Wind Power Generation | Gas | Distribution | Administration
9.37 | 5.12 | 3.59 | 3.89 | 15.95

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Under the regulations of the energy segment, property, plant and equipment used in the distribution concession are linked to these services, and cannot be withdrawn, disposed of, assigned or provided in guarantee without the prior express authorization of the Regulator.

The rights of authorization to generate wind power granted to Parajuru and Volta do Rio, valued at R$56,965 (R$60,072 on December 31, 2019) and R$55,050 (R$66,606 on December 31, 2019), respectively, are included in the individual balance sheet of the subsidiary Cemig GT as investment and are classified as intangibles in the consolidated balance sheet of the Company, in accordance with Technical Interpretation ICPC 09. In addition, the rights of authorization of gas distribution granted to Gasmig, in the amount of R$419,131 (R$426,760 on December 31, 2019), are classified as intangible assets in the Company’s consolidated balance sheet and are recognized as investments in its individual balance sheet, as Note 15, in accordance with Technical Interpretation ICPC 09. These rights of authorization of wind power generation and gas distribution are amortized by the straight-line method, during the period of the concession.

On December 31, 2019, the Company recognized an impairment loss for the intangible asset related to the right of authorization for wind power generation granted to the subsidiary Volta do Rio, in the amount of R$21,684, recorded in “Other expenses” in the income statement. The test of impairment of intangible assets, relating to the authorization for wind power generation granted to Volta do Rio, arises from non-achievement of the operational performance expected in 2019 for the wind generation assets of the subsidiary.

On June 30, 2020, due to continuing operational performance lower than expectations, an impairment test was carried out on the intangible assets related to the authorization for wind generation of the Volta do Rio plant, resulting in the recognition of an impairment of R$ 8,459, recognized in ‘Other expenses’ in the statement of income.

The Value in Use of the assets was calculated based on the projection of future expected cash flows for the operation of the assets of the subsidiary, brought to present value by the weighted average cost of capital defined for the company’s activity, using the Firm Cash Flow (FCFF) methodology.

| 18. | LEASING TRANSACTIONS

The Company and its subsidiaries recognized a right of use and a lease liability, according the IFRS 16 / CPC 06 (R2) – Leases, for the following contracts which contain a lease:

§ Leasing of commercial real estate used for serving customers;

§ Leasing of buildings used as administrative headquarters;

§ Leasing of commercial vehicles used in operations.

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The Company and its subsidiaries have elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (short-term leases), and lease contracts for which the underlying asset is of low value (low-value assets). Thus, these leasing agreements are recognized as an expense in the income statement on the straight-line basis, over the period of the leasing. Their effects on net income from January to June 2020 were immaterial.

The discount rates were obtained by reference to the Company’s incremental borrowing rate, based on the debts contracted by the Company and through quotations with potential financial institutions.

| a) | Right-of-use assets

The right-of-use assets were valued at cost, corresponding to the amount of the initial measurement of the lease liabilities, and amortized on the straight-line basis over the shorter of the lease term and the estimated useful lives of the assets.

Changes in the Right-of-use assets are as follows:

Consolidated | Real estate property | Vehicles | Other | Total
Balances on December 31, 2018 | - | - | - | -
Initial adoption on January 1, 2019 | 238,482 | 103,557 | 411 | 342,450
Amortization | (17,320) | (18,924) | (154) | (36,398)
Balances on June 30, 2019 | 221,162 | 84,633 | 257 | 306,052
Balances on December 31, 2019 | 206,045 | 70,676 | 103 | 276,824
Settled (closed contracts) | (717) | - | - | (717)
Amortization (1) | (13,504) | (20,042) | (103) | (33,649)
Balances on June 30, 2020 | 191,824 | 50,634 | - | 242,458

| (1) | Amortization of the Right of Use recognized in the Income Statement is net of use of the credits of PIS/Pasep and Cofins taxes on payments of rentals, a total R$1,080.

Parent company | Real estate property
Balances on December 31, 2018 | -
Initial adoption on January 1, 2019 | 19,844
Settled | (13,170)
Amortization | (1,371)
Balances on June 30, 2019 | 5,303
Balances on December 31, 2019 | 3,330
Amortization (1) | (757)
Balances on June 30, 2020 | 2,573

| (1) | Amortization of the Right-of-Use assets recognized in the Income Statement is net of use of the credits of PIS/Pasep and Cofins taxes on payments of rentals, a total R$71.

| b) | Lease liabilities

The liability for leasing agreements is measured at the present value of lease payments to be made over the lease term, discounted at the Company’s and its subsidiaries marginal borrowing interest rate. The carrying amount of lease liabilities is remeasured if there are modifications that shall be accounted for as a remeasurement of the lease liability in accordance with CPC 06 (R2)/IFRS 16.

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The changes in the lease liabilities are as follows:

| Consolidated | Parent Company
Balances at December 31, 2018 | - | -
First adoption on January 1, 2019 (1) | 342,450 | 19,844
Settled | - | (13,170)
Accrued interest | 18,332 | 286
Payment of lease liability | (49,570) | (1,760)
Balances at June 30, 2019 | 311,212 | 5,200
Balances at December 31, 2019 | 287,747 | 3,479
Settled (closed contracts) | (724) | -
Accrued interest (2) | 14,598 | 165
Payment of principal portion of lease liability | (44,321) | (902)
Payment of interest | (1,049) | (20)
Balances at June 30, 2020 | 256,251 | 2,722
Current liabilities | 76,251 | 914
Non-current liabilities | 180,000 | 1,808

| (1) | The Company’s marginal borrowing rate applied to lease liability recognized in the statement of financial position on the date of the initial application varied between 7.96% p.a. and 10.64% p.a., depending on the leasing contract period, and 13.17% p.a., respectively, for contracts with maturities of up to two years, two to five years and longer than five years. The rates applied to the contracts entered into during 2019 were 6.87% p.a., 7.33% p.a. and 8.08% p.a., for contracts with maturities, respectively, of up to three years, three to four years, and over four years. To determine the marginal borrowing rate, the Company used as a reference quotation obtained from financial institutions, these being a function of the Company’s credit risk, and market conditions on the date of contracting.

| (2) | Financial revenues recognized in the Income Statement are net of incorporation of the credits for PIS/Pasep and Cofins taxes on payments of rentals, in the amounts of R$861 and R$12, for the consolidated and individual financial statements, respectively.

The potential right to recovery of PIS/Pasep and Cofins taxes embedded in the leasing consideration, according to the periods specified for payment, is as follows:

Cash flow | Consolidated | Parent company
Nominal | Adjusted to present value | Nominal | Adjusted to present value
Consideration for the leasing | 666,240 | 256,251 | 7,444 | 2,723
Potential PIS/Pasep and Cofins (9.25%) | 54,798 | 17,840 | 683 | 247

The Company, in full compliance with CPC 06 (R2) in statement and restatement of its lease liability and for Right of Use, used the technique of discounted cash flow, without considering projected future inflation in the flows to be discounted, as per the prohibition imposed by CPC 06 (R2). This prohibition could generate material distortions in the information to be provided, given the present reality of long-term interest rates in the Brazilian economic environment. The Company has evaluated these effects and concluded that they are immaterial for its interim financial information.

The cash flows of the contracts containing a lease are, in their majority, updated by the IPCA inflation index on an annual basis. Below is an analysis of maturity of lease contracts:

| Consolidated (nominal) | Parent Company (nominal)
2020 | 43,638 | 788
2021 | 61,082 | 305
2022 | 28,658 | 272
2023 | 25,554 | 264
2024 | 25,462 | 264
2025 a 2045 | 481,846 | 5,550
Undiscounted values | 666,240 | 7,443
Embedded interest | (409,989) | (4,721)
Lease liabilities | 256,251 | 2,722

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19. SUPPLIERS

| Consolidated
Jun. 30, 2020 | Dec. 31, 2019
Energy on spot market - CCEE | 181,988 | 401,482
Charges for use of energy network | 129,727 | 144,975
Energy purchased for resale | 958,863 | 763,652
Itaipu binacional | 173,973 | 242,766
Gas purchased for resale | 184,491 | 143,358
Materials and services | 316,454 | 383,658
| 1,945,496 | 2,079,891

20. TAXES PAYABLE AND AMOUNTS TO BE RESTITUTED TO CUSTOMERS

| Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Current |  |  |  |
ICMS | 159,468 | 111,608 | - | -
Cofins | 299,488 | 134,580 | 1,339 | 45,364
PIS/Pasep | 64,767 | 29,298 | 269 | 9,827
INSS | 63,826 | 24,819 | 3,704 | 1,684
Others (1) | 34,965 | 58,542 | 1,161 | 35,765
| 622,514 | 358,847 | 6,473 | 92,640
Non-current |  |  |  |
Cofins | 575 | 757 | 79 | 79
PIS/Pasep | 96 | 126 | 12 | 12
| 671 | 883 | 91 | 91
| 623,185 | 359,730 | 6,564 | 92,731
Amounts to be restituted to customers |  |  |  |
Current |  |  |  |
PASEP/COFINS | 714,339 | - | - | -
Non-current |  |  |  |
PASEP/COFINS | 3,522,442 | 4,193,329 | - | -
| 4,236,781 | 4,193,329 | - | -

| (1) | This includes the withholding income tax on Interest on equity. This payment, and the deduction, were made in the first month of 2020, in accordance with the tax legislation.

Due to Covid-19 pandemic, the Company joined the government programs that granted deferral of taxes payments, substantially related to the last quarter, which will be made by the end of the year.

The amounts of PIS/Pasep and Cofins taxes to be reimbursed to customers refer to the credits to be received by Cemig D following the inclusion of the ICMS value added tax within the taxable amount for calculation of those taxes. According note 8 (a), the Company recognized, in 2019, its right to offsetting of amounts unduly paid for the 10 years prior to the action being filed, with monetary updating by the Selic rate, due to the final judgment – against which there is no appeal – on the Ordinary Action, in favor of the Company.

Cemig D has constituted a liability corresponding to the credits to be reimbursed to its customers, which comprises the period of the last 10 years, from June 2009 to May 2019, net of PIS/Pasep and Cofins taxes over monetary updating.

The amounts will be reimbursed to customers as from the date when the tax credits are in fact offset and the mechanisms and criteria for the reimbursement will be discussed with Aneel.

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As stated in Note 13.5, on August 5, 2020, Cemig D has submitted to Aneel a proposal for bringing forward Cemig D’s already-planned restitution to its customers of a total amount of R$714,339 million – corresponding to part of the funds released by the courts due to Cemig’s success in the claim. Cemig D’s decision represents an anticipation of the effects, and treatment in terms of regulations of the Supreme Court’s decision that determined the exclusion of ICMS tax amounts from the basis for calculation of PIS/ Pasep and Cofins taxes. These regulations will be applied equally to all energy distribution concessions through an Aneel normative ruling, which will be issued after conclusion of Public Consultation 005/2020 – during which there will be discussion on the merits, and in which Cemig will be able to take part in a wide-ranging discussion on the subject.

21. LOANS, FINANCING AND DEBENTURES

Financing source | Principal maturity | Annual financial cost | Currency | Consolidated
Jun. 30, 2020 | Dec. 31, 2019
Current | Non-current | Total | Total
FOREIGN CURRENCY |  |  |  |  |  |  |
Banco do Brasil: Various Bonds (1) (4) | 2024 | Diverse | U$$ | 2,312 | 10,622 | 12,934 | 18,051
Eurobonds (2) | 2024 | 9.25% | U$$ | 62,075 | 8,214,000 | 8,276,075 | 6,091,742
(-) Transaction costs |  |  |  | - | (17,201) | (17,201) | (18,656)
(±) Interest paid in advance (3) |  |  |  | - | (27,742) | (27,742) | (30,040)
Debt in foreign currency |  |  |  | 64,387 | 8,179,679 | 8,244,066 | 6,061,097
BRAZILIAN CURRENCY |  |  |  |  |  |  |
Caixa Econômica Federal (5) | 2021 | TJLP + 2.50% | R$ | 62,785 | - | 62,785 | 60,516
Caixa Econômica Federal (6) | 2022 | TJLP + 2.50% | R$ | 122,125 | - | 122,125 | 117,710
Eletrobrás (4) | 2023 | UFIR + 6.00% a 8.00% | R$ | 6,573 | 7,326 | 13,899 | 20,268
Large customers (4) (12) | 2024 | IGP-DI + 6.00% | R$ | - | - | - | 5,582
Pipoca Consortium (2) | 2020 | IPCA | R$ | - | - | - | 185
Sonda (7) | 2021 | 110.00% of CDI | R$ | 49,471 | - | 49,471 | 48,529
Promissory Notes – 1st Issue - Single series (8) | 2020 | 107.00% of CDI | R$ | 877,964 | - | 877,964 | 875,247
BNDES (13) | 2023 | TJLP + 3.00% | R$ | 3,559 | 6,468 | 10,027 | -
(-) FIC Pampulha - Marketable securities of subsidiary companies (9) |  |  |  | (8,009) | - | (8,009) | (3,031)
(-) Transaction costs |  |  |  | (173) | - | (173) | (277)
Debt in Brazilian currency |  |  |  | 1,114,295 | 13,794 | 1,128,089 | 1,124,729
Total of loans and financings |  |  |  | 1,178,682 | 8,193,473 | 9,372,155 | 7,185,826
Debentures - 3th Issue – 3rd Series (2) | 2022 | IPCA + 6.20% | R$ | 357,560 | 352,839 | 710,399 | 1,087,989
Debentures - 6th Issue – 2nd Series (2) | 2020 | IPCA + 8.07% | R$ | 18,054 | - | 18,054 | 17,292
Debentures - 7th Issue – Single series (2) (11) | 2021 | 140.00% of CDI | R$ | 288,947 | 144,342 | 433,289 | 578,067
Debentures - 3th Issue – 2nd Series (4) | 2021 | IPCA + 4.70% | R$ | 552,463 | - | 552,463 | 1,108,945
Debentures - 3th Issue – 3rd Series (4) | 2025 | IPCA + 5.10% | R$ | 17,095 | 953,777 | 970,872 | 990,893
Debentures - 7th Issue – 1st Series (4) | 2024 | CDI + 0.45% | R$ | 542,623 | 1,620,000 | 2,162,623 | 2,164,083

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Debentures - 7th Issue – 2nd Series (4) | 2026 | IPCA + 4.10% | R$ | 2,676 | 1,524,604 | 1,527,280 | 1,519,042
Debentures – 4th Issue – 1st Series (8) | 2022 | TJLP+1.82% | R$ | 10,110 | 14,551 | 24,661 | 30,323
Debentures – 4th Issue – 2nd Series (8) | 2022 | Selic + 1.82% | R$ | 5,145 | 6,517 | 11,662 | 13,072
Debentures – 4th Issue – 3th Series (8) | 2022 | TJLP + 1.82% | R$ | 11,828 | 15,868 | 27,696 | 34,431
Debentures – 4th Issue – 4th Series (8) | 2022 | Selic + 1.82% | R$ | 5,958 | 7,752 | 13,710 | 15,564
Debentures – 4th Issue – 7th Series (8) | 2020 | TJLP + 1.82% | R$ | 334 | - | 334 | 450
Debentures – 7th Issue – Single series (8) | 2023 | CDI + 1.50% | R$ | 20,011 | 60,000 | 80,011 | 80,018
(-) Discount on the issuance of debentures (10) |  |  |  | - | (19,962) | (19,962) | (21,606)
(-) Transaction costs |  |  |  | (9,822) | (12,996) | (22,818) | (28,358)
Total, debentures |  |  |  | 1,822,982 | 4,667,292 | 6,490,274 | 7,590,205
Total |  |  |  | 3,001,664 | 12,860,765 | 15,862,429 | 14,776,031

Financing source | Principal maturity | Annual financial cost | Currency | Consolidated
Jun. 30, 2020 | Dec. 31, 2019
Current | Non-current | Total | Total
BRAZILIAN CURRENCY |  |  |  |  |  |  |
Sonda (7) | 2021 | 110.00% of CDI | R$ | 49,471 | - | 49,471 | 48,529
(-) Transaction costs |  |  |  | (173) | - | (173) | (277)
Total of loans and financings |  |  |  | 49,298 | - | 49,298 | 48,252

| (1) | Net balance of the Restructured Debt comprising bonds at par and discounted, with balance of R$246,683, less the amounts given as Deposits in guarantee, with balance of R$233,749. Interest rates vary – from 2% to 8% p.a.; six-month Libor plus spread of 0.81% to 0.88% p.a.

| (2) | Cemig Geração e Transmissão.

| (3) | Advance of funds to achieve the yield to maturity agreed in the Eurobonds contract.

| (4) | Cemig Distribuição.

| (5) | Central Eólica Praias de Parajuru.

| (6) | Central Eólica Volta do Rio.

| (7) | Parent Company. Arising from merger of Cemig Telecom.

| (8) | Gasmig. The Commercial Promissory Notes issued in September 26, 2019 have the maturity at 12, without guarantee or surety. The proceeds from this issue were used in their entirety for payment of the concession grant fee for the gas distribution concession contract.

| (9) | FIC Pampulha has financial investments in marketable securities issued by subsidiaries of the Company. For more information on this fund, see Note 30.

| (10) | Discount on the sale price of the 2nd series of the Seventh issue of Cemig Distribuição.

| (11) | On July 24, 2019 Cemig GT made extraordinary amortization of its Seventh Issue of Non-convertible ventures, in the amount of R$125 million, with final maturity in December 2021.

| (12) | Financings under the heading of reimbursable injections of funds for execution of works at two companies: CMM (IGP-DI Index + 6%); and Mineradora Serra da Fortaleza (IGP-DI + 6%). In 2020, this funds balance was reclassified to “others credits”.

| (13) | Companhia Centroeste de Minas.

The debentures issued by the subsidiaries are non-convertible; there are no agreements for renegotiation, nor debentures held in treasury.

There are early maturity clauses for cross-default in the event of non-payment by Cemig GT or by the Company, of any pecuniary obligation with individual or aggregate value greater than R$50 million.

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Guarantees

The guarantees of the debt balance on loans and financing, on June 30, 2020, were as follows:

| Jun. 30, 2020
Promissory notes and Sureties | 10,492,193
Guarantee and Receivables | 3,661,317
Receivables | 288,898
Shares | 469,147
Unsecured | 950,874
TOTAL | 15,862,429

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

Consolidated | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Total
Currency |  |  |  |  |  |  |  |
US dollar | 64,387 | - | - | - | 8,224,622 | - | - | 8,289,009
Total, currency denominated | 64,387 | - | - | - | 8,224,622 | - | - | 8,289,009
Index |  |  |  |  |  |  |  |
IPCA (1) | 61,912 | 885,936 | 591,283 | 238,444 | 238,444 | 1,000,747 | 762,302 | 3,779,068
UFIR/RGR (2) | 4,847 | 3,410 | 3,265 | 2,377 | - | - | - | 13,899
CDI (3) | 1,325,791 | 895,395 | 569,535 | 560,000 | 270,000 | - | - | 3,620,721
URTJ/TJLP (4) | 198,349 | 24,607 | 23,496 | 1,176 | - | - | - | 247,628
Total by index | 1,590,899 | 1,809,348 | 1,187,579 | 801,997 | 508,444 | 1,000,747 | 762,302 | 7,661,316
(-) Transaction costs | (9,617) | (6,826) | (158) | (130) | (17,331) | (3,131) | (2,999) | (40,192)
(±)Interest paid in advance | - | - | - | - | (27,742) | - | - | (27,742)
(-) Discount | - | - | - | - | - | (9,981) | (9,981) | (19,962)
Overall total | 1,645,669 | 1,802,522 | 1,187,421 | 801,867 | 8,687,993 | 987,635 | 749,322 | 15,862,429

Parent Company | 2020 | 2021 | Total
Indexers |  |  |
CDI (3) | 12,231 | 37,240 | 49,471
Total, governed by indexers | 12,231 | 37,240 | 49,471
(-) Transaction costs | - | (173) | (173)
Overall total | 12,231 | 37,067 | 49,298

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

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

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

(4) Interest rate reference unit (URTJ) / Long-Term Interest Rate (TJLP)

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

Currency | Accumulated change in Jun. 30, 2020, % | Accumulated change in Jun. 30, 2019, % | Indexer | Accumulated change in Jun. 30, 2020, % | Accumulated change in Jun. 30, 2019, %
US dollar | 35.86 | (1.10) | IPCA | 0.10 | 2.22
|  |  | CDI | 1.76 | 3.10
|  |  | TJLP | (11.31) | (10.32)

Currency | Accumulated change in Apr. to Jun. 30, 2020, % | Accumulated change in Apr. to Jun. 30, 2019, % | Indexer | Accumulated change in Apr. to Jun. 30, 2020, % | Accumulated change in Apr. to Jun. 30, 2019, %
US dollar | 5.33 | (1.66) | IPCA | (0.43) | 1.46
|  |  | CDI | 0.74 | 1.54
|  |  | TJLP | (2.95) | (10.95)

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The changes in loans, financing and debentures are as follows:

| Consolidated | Parent Company
Balances at December 31, 2018 | 14,771,828 | 45,081
Monetary variation | 82,711 | -
Exchange rate variation | (70,470) | -
Financial charges provisioned | 628,774 | 1,542
Amortization of transaction cost | 13,948 | 81
Financial charges paid | (706,605) | -
Amortization of financing | (849,821) | -
Subtotal | 13,870,365 | 46,704
(-) FIC Pampulha - Marketable securities of subsidiary companies | 6,024 | -
Balances at June 30, 2019 | 13,876,389 | 46,704
Balances at December 31, 2019 | 14,776,031 | 48,252
Loans arising from business combination (1) | 10,447 | -
Initial balance for consolidation purposes | 14,786,478 | 48,252
Monetary variation | 35,978 | -
Exchange rate variation | 2,162,364 | -
Financial charges provisioned | 605,621 | 942
Amortization of transaction cost | 7,101 | 104
Financial charges paid (2) | (681,701) | -
Amortization of financing | (1,042,496) | -
Reclassification to “Other obligations” (3) | (5,938) | -
Subtotal | 15,867,407 | 49,298
(-) FIC Pampulha - Marketable securities of subsidiary companies | (4,978) | -
Balances at June 30, 2020 | 15,862,429 | 49,298

| (1) | Loans arising from business combinations due to the acquisition of the remaining equity interest in Companhia Centroeste de Minas.

| (2) | Withholding income tax on remittance of interest on Eurobonds, in the amount of R$65,668, was offset against PIS/Pasep and Cofins credits.

| (3) | Reclassification to Cemig D’s customers (CMM and Serra da Fortaleza).

Borrowing costs, capitalized

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

The subsidiaries Cemig D and Gasmig transferred to intangible assets and to concession contract assets the costs of loans and financing linked to construction in progress, as follows:

| Jun. 30, 2020 | Jun. 30, 2019
Costs of loans and financing | 605,621 | 628,774
Financing costs on intangible assets and contract assets (1) | (22,515) | (22,822)
Net effect in Profit or loss | 583,106 | 605,952

| (1) | The average capitalization rate p.a. in 2020 was 4.28% (6.79% in 2019).

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

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Restrictive covenants

The Company has contracts with financial covenants as follows:

Title - Security | Covenant | Ratio required – Issuer | Ratio required Cemig (guarantor) | Compliance required
7th Debentures Issue Cemig GT (1) | Net debt / (Ebitda + Dividends received) | The following or less: 3.0 in 2020 2.5 in 2021 | The following or less: 3.0 in 2020 2.5 in 2021 | Half-yearly and annual
Eurobonds Cemig GT (2) | Net debt / Ebitda adjusted for the Covenant | The following or less: 4.5 on June 30, 2020 3.0 on Dec. 31, 2020 3.0 on June 30, 2021 2.5 on/after Dec. 31, 2021 | The following or less: 3.5 on June 30, 2020 3.0 on Dec. 31, 2020 3.0 on June 30, 2021 3.0 on/after Dec. 31, 2021 | Half-yearly and annual
7th Debentures Issue Cemig D | Net debt / Ebitda adjusted | The following or less: 3.5 on June 30, 2020 | The following or less: 3.5 on June 30, 2020 3.0 on December 31, 2020 | Half-yearly and annual
Debentures GASMIG (3) | Overall indebtedness (Total liabilities/Total assets) | Less than 0.6 | - | Annual
Ebitda / Debt servicing | 1.3 or more | - | Annual
Ebitda / Net finance income (expenses) | 2.5 or more | - | Annual
Net debt / Ebitda | The following or less than 4.0 on Dec, 31.2019 The following or less than 2.5 on Dec, 31.2020 | - | Annual
Financing Caixa Econômica Federal Parajuru and Volta do Rio (4) | Debt servicing coverage index Equity / Total liabilities Share capital subscribed in investee / Total investments made in the project financed | 1.20 or more 20.61% or more (Parajuru) 20.63% or more (Volta do Rio) 20.61% or more (Parajuru) 20.63% or more (Volta do Rio) | - - - | Annual (during amortization) Always Always
Financing BNDES Centroeste (5) | Fund-raising index Equity / Total liabilities | - | 0.3 or more | Annual

| (1) | 7th Issue of Debentures by Cemig GT, as of December 31, 2016, of R$2,240 million.

| (2) | In the event of a possible breach of the financial covenants, interest will automatically be increased by 2% p.a. during the period in which they remain exceeded. There is also an obligation to comply with a ‘maintenance’ covenants – that the consolidated debt, shall have a guarantee for debt of 1.75x Ebitda (2.0 as of December 31, 2017); and a ‘damage’ covenant, requiring real guarantee for debt at Cemig GT of 1.5x Ebitda.

| (3) | If Gasmig does not achieve the required covenants, it must, within 120 days from the date of notice in writing from BNDES or BNDESPar, constitute guarantees acceptable by the debenture holders for the total amount of the debt, subject to the rules of the National Monetary Council (CMN), unless the required ratios are restored within that period. Certain contractually specified situations can cause early maturity of other debts (cross-default).

| (4) | The financing contracts with Caixa Econômica Federal for the Praias de Parajuru and Volta do Rio wind power plants have financial covenants with compliance relating to early maturity of the debt remaining balance. Compliance with the debt servicing coverage index is considered to be demandable only annually and during the period of amortization, which begins in July 2020.

| (5) | The financial covenant at the BNDES loan contract of the subsidiary Centroeste includes the former shareholder, Centrais Elétricas Brasileiras S.A. – Eletrobrás. The event of a breach of the financial covenant, demands the constitution of real guarantees, which must be accepted by BNDES, in the amount of 130% of the loans or debt.

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The covenants remain in compliance as of June 30, 2020, with the exception non-compliance with the non-financial covenant of the loan contracts with the CEF of the subsidiaries Central Eólica Praias de Parajuru and Central Eólica Volta do Rio. Thus, exclusively to comply with the requirement of item 69 of CPC 26 (R1), the Company reclassified R$57,550 to current liabilities, referring to the loans of those subsidiaries, which were originally classified in non-current liabilities. Additionally, the Company assessed the possible consequences arising from this matter in their other contracts for loans, financings and debentures, and concluded that no further adjustments were necessary.

The information on the derivative financial instruments (swaps) contracted to hedge the debt servicing of the Eurobonds (principal, in foreign currency, plus interest), and the Company’s exposure to interest rate risks, are disclosed in Note 30.

22. REGULATORY CHARGES

| Consolidated
Jun. 30, 2020 | Dec. 31, 2019
Liabilities |  |
Global Reversion Reserve (RGR) | 36,638 | 30,494
Energy Development Account (CDE) | 86,721 | 58,327
Regulator inspection fee – ANEEL | 2,631 | 2,620
Energy Efficiency Program | 272,926 | 254,595
Research and development (R&D) | 212,324 | 199,385
Energy System Expansion Research | 2,749 | 3,206
National Scientific and Technological Development Fund | 5,445 | 6,325
Proinfa – Alternative Energy Program | 6,434 | 8,353
Royalties for use of water resources | 7,394 | 9,767
Emergency capacity charge | 26,325 | 26,325
Others | 4,685 | 4,640
| 664,272 | 604,037
Current liabilities | 377,372 | 456,771
Non-current liabilities | 286,900 | 147,266

23. POST-EMPLOYMENT OBLIGATIONS

Changes in net liabilities were as follows:

Consolidated | Pension plans and retirement supplement plans | Health plan | Dental plan | Life insurance | Total
Net liabilities at December 31, 2018 | 2,169,610 | 2,343,799 | 47,552 | 427,383 | 4,988,344
Expense recognized in Statement of income | 98,345 | 111,173 | 2,278 | 20,481 | 232,277
Contributions paid | (96,622) | (59,788) | (1,313) | (5,314) | (163,037)
Net liabilities at June 30, 2019 | 2,171,333 | 2,395,184 | 48,517 | 442,550 | 5,057,584
Net liabilities at December 31, 2019 | 2,972,136 | 3,102,178 | 60,504 | 573,876 | 6,708,694
Expense recognized in Statement of income | 102,892 | 118,030 | 2,362 | 22,192 | 245,476
Contributions paid | (57,739) | (65,616) | (3,908) | (2,321) | (129,584)
Net liabilities at June 30, 2020 | 3,017,289 | 3,154,592 | 58,958 | 593,747 | 6,824,586
|  |  |  | Jun. 30, 2020 | Dec. 31, 2019
Current liabilities |  |  |  | 311,265 | 287,538
Non-current liabilities |  |  |  | 6,513,321 | 6,421,156

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Parent Company | Pension plans and retirement supplement plans | Health plan | Dental plan | Life insurance | Total
Net liabilities at December 31, 2018 | 357,354 | 132,188 | 3,198 | 16,711 | 509,451
Expense recognized in Statement of income | 16,293 | 6,128 | 152 | 825 | 23,398
Contributions paid | (4,752) | (4,220) | (84) | (212) | (9,268)
Net liabilities at June 30, 2019 | 368,895 | 134,096 | 3,266 | 17,324 | 523,581
Net liabilities at December 31, 2019 | 503,792 | 183,781 | 4,837 | 21,098 | 713,508
Expense recognized in Statement of income | 17,397 | 6,688 | 180 | 790 | 25,055
Contributions paid | (2,841) | (4,382) | (89) | (157) | (7,469)
Net liabilities at June 30, 2020 | 518,348 | 186,087 | 4,928 | 21,731 | 731,094
|  |  |  | Jun. 30, 2020 | Dec. 31, 2019
Current liabilities |  |  |  | 25,418 | 23,747
Non-current liabilities |  |  |  | 705,676 | 689,761

Amounts recorded as current liabilities refer to contributions to be made by Cemig and its subsidiaries in the next 12 months for the amortization of the actuarial liabilities.

The amounts reported as ‘Expense recognized in the Statement of income’ refer to the costs of post-employment obligations, totaling R$223,727 (R$198,699 on June 30, 2019), plus the finance expenses and monetary updating on the debt with Forluz, in the amounts of R$21,749 (R$33,578 on June 30, 2019).

Debt with the pension fund (Forluz)

The Company has recognized an obligation for past actuarial deficits relating to the pension fund in the amount of R$551,778 on June 30, 2020 (R$566,381 on December 31, 2018). This amount has been recognized as an obligation payable by Cemig and its subsidiaries, and will be amortized until June of 2024, through monthly installments calculated by the system of constant installments (known as the ‘Price’ table), and adjusted by the IPCA (Expanded National Customer Price) inflation index (published by the Brazilian Geography and Statistics Institute – IBGE) plus 6% per year. The Company is required to pay this debt even if Forluz has a surplus, thus, the Company maintain recorded the debt in full, and record the effects of monetary updating and interest in finance income (expenses) in the Statement of income.

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

Forluz and the sponsors Cemig, Cemig GT and Cemig D have signed a Debt Assumption Instrument to cover the deficit of Plan A for the years of 2015, 2016 and 2017. On June 30, 2020 the total amount payable by Cemig as a result of the Plan A deficit is R$536,853 (R$550,151 on December, 31, 2019, as a result of the Plan A deficits of 2015, 2016 and 2017). The contracts were entered into in May 2017, March 2018 and April 2019, for the deficits, respectively, of 2015, 2016 and 2017. The monthly amortizations, calculated by the constant installments system (Price Table), will be paid up to 2031 for the 2015 and 2016 deficits, in the amount R$ R$360,239, and up to 2033 for the 2017 deficit, in the amount R$ R$176,614. Remuneratory interest applicable to the outstanding balance is 6% p.a., plus the effect of the IPCA. If the plan reaches actuarial surplus before the full period

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of amortization of the debt, also Company will not be required to pay the remaining installments and the contract will be extinguished.

24. PROVISIONS

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

Actions in which the Company and its subsidiaries are defendant

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

| Consolidated
Dec. 31, 2019 | Additions | Reversals | Settled/ Reversal (1) | Provisions arising from business combination (2) | Jun. 30, 2020
Labor | 497,320 | 59,009 | (28,321) | (55,162) | - | 472,846
Civil |  |  |  |  |  |
Customer relations | 18,314 | 9,573 | (861) | (9,124) | - | 17,902
Other civil actions | 17,767 | 13,978 | - | (3,050) | - | 28,695
| 36,081 | 23,551 | (861) | (12,174) | - | 46,597
Tax | 1,260,441 | 24,439 | - | (39,220) | - | 1,245,660
Regulatory | 36,789 | 345 | (481) | (11) | - | 36,642
Others | 57,433 | 4,884 | (1,097) | (1,140) | 3,131 | 63,211
Total | 1,888,064 | 112,228 | (30,760) | (107,707) | 3,131 | 1,864,956

| (1) | This includes the amount of R$ 38,740, corresponding to the reversal of the contingency provisions relating to ICMS credits, recognized as recoverable taxes, due to a final judgment, against which there is no further appeal, in favor of the subsidiary Gasmig, on June 9, 2020.

| (2) | On January 13, 2020, the Company obtained the Centroeste control, which is consolidated as of this interim financial information. More details see note 15.

| Consolidated
Dec. 31, 2018 | Additions | Reversals | Settled | Jun. 30, 2019
Labor | 456,889 | 142,730 | (36,172) | (49,740) | 513,707
Civil |  |  |  |  |
Customer relations | 18,876 | 7,558 | (2,394) | (7,483) | 16,557
Other civil actions | 29,011 | 8,964 | (13,052) | (8,955) | 15,968
| 47,887 | 16,522 | (15,446) | (16,438) | 32,525
Tax | 51,894 | 21,524 | (2,214) | (21,520) | 49,684
Regulatory | 36,691 | 1,941 | (989) | (1,029) | 36,614
Others | 47,310 | 9,895 | (1,302) | (632) | 55,271
Total | 640,671 | 192,612 | (56,123) | (89,359) | 687,801

| Parent Company
Dec. 31, 2019 | Additions | Reversals | Settled | Jun. 30, 2020
Labor | 42,178 | 10,357 | (4,217) | (10,350) | 37,968
Civil |  |  |  |  |
Customer relations | 547 | 407 | - | (201) | 753
Other civil actions | 1,256 | 1,595 | - | (212) | 2,639
| 1,803 | 2,002 | - | (413) | 3,392
Tax | 161,413 | 3,510 | - | (169) | 164,754
Regulatory | 17,211 | 3 | (84) | (3) | 17,127
Others | 822 | 54 | - | (18) | 858
Total | 223,427 | 15,926 | (4,301) | (10,953) | 224,099

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| Parent Company
Dec. 31, 2018 | Additions | Reversals | Settled | Jun. 30, 2019
Labor | 32,807 | 15,853 | - | (4,213) | 44,447
Civil |  |  |  |  |
Customer relations | 931 | 149 | (405) | (149) | 526
Other civil actions | 759 | 1 | (255) | (1) | 504
| 1,690 | 150 | (660) | (150) | 1,030
Tax | 11,269 | 21,486 | (1,218) | (21,486) | 10,051
Regulatory | 17,180 | 607 | - | - | 17,787
Others | 1,258 | 49 | (605) | - | 702
Total | 64,204 | 38,145 | (2,483) | (25,849) | 74,017

The Company and its subsiadiaries’ management, in view of the extended period and the Brazilian judiciary, tax and regulatory systems, believes that it is not practical to provide information that would be useful to the users of these interim financial information in relation to the timing of any cash outflows, or any possibility of reimbursements.

The Company and its subsidiaries’ believes that any disbursements in excess of the amounts provisioned, when the respective claims are completed, will not significantly affect the Company and its subsidiaries’ result of operations or financial position.

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

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

Labor claims

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

The aggregate amount of the contingency is approximately R$1,676,250 (R$1,668,684 at December 31, 2019), of which R$462,432 (R$487,101 at December 31, 2019) has been recorded – the amount estimated as probably necessary for settlement of these disputes.

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Alteration of the monetary updating index of employment-law cases

The Higher Employment-Law Appeal Court (Tribunal Superior do Trabalho, or TST), considering a position adopted by the Federal Supreme Court (Supremo Tribunal Federal, STF) in two actions on constitutionality that dealt with the index for monetary updating of federal debts, decided on August 4, 2015 that employment-law debts in actions not yet decided that discuss debts subsequent to June 30, 2009 should be updated based on the variation of the IPCA-E (Expanded National Customer Price Index), rather than of the TR reference interest rate. On October 16, 2015 the STF gave an interim injunction suspending the effects of the TST decision, on the grounds that general repercussion of constitutional matters should be adjudicated exclusively by the STF.

In a joint judgment published on November 1, 2018, the TST decided that the IPCA-E should be adopted as the index for inflation adjustment of employment-law debts for cases filed from March 25, 2015 to November 10, 2017, and the TR would continue to be used for the other periods. The estimated amount of the contingency is R$107,120 (R$106,484 at December 31, 2019), of which R$10,414 (R$10,219 at December 31, 2019) has been provisioned upon assessment by the Company of the effects of the decision of the Regional Employment-Law Appeal Court of the third region (TRT3) in May 2019, on the subject of the joint judgment published by the TST, in the cases for which the chances of loss have been classified as ‘probable’ and which are at execution phase. No additional provision has been made, since the Company, based on the assessment by its legal advisers, has assessed the chances of loss in the action as ‘possible’, as a result of the decision by the Federal Supreme Court, and of there being no established case law, nor analysis by legal writers, on the subject, after the injunction given by the Federal Supreme Court.

Customers claims

Company and its subsidiaries are involved in various civil actions relating to indemnity for moral injury and for material damages, arising, principally, from allegations of irregularity in measurement of consumption, and claims of undue charging, in the normal course of business, totaling R$116,244 (R$67,771 at December 31, 2019), of which R$17,902 (R$18,314 at December 31, 2019) has been recorded – this being the probable estimate for funds needed to settle these disputes.

Other civil proceedings

Company and its subsidiaries are involved in various civil actions claiming indemnity for moral and material damages, among others, arising from incidents occurred in the normal course of business, in the amount of R$314,904 (R$299,921 at December 31, 2019), of which R$28,695 (R$17,767 at December 31, 2019) has been recorded – the amount estimated as probably necessary for settlement of these disputes.

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Tax

Company and its subsidiaries are involved in numerous administrative and judicial claims actions relating to taxes, including, among other matters, subjects relating to the Urban Property Tax (Imposto sobre a Propriedade Territorial Urbana, or IPTU); the Rural Property Tax (ITR); the Tax on Donations and Legacies (ITCD); the Social Integration Program (Programa de Integração Social, or PIS); the Contribution to Finance Social Security (Contribuição para o Financiamento da Seguridade Social, or Cofins); Corporate Income tax (Imposto de Renda Pessoa Jurídica, or IRPJ); the Social Contribution (Contribuição Social sobre o Lucro Líquido, or CSLL); and motions to tax enforcement. The aggregate amount of this contingency is approximately R$155,539 (R$203,872 at December 31, 2019), of which R$6,589 (R$42,999 at December 31, 2019) has been recorded – the amount estimated as probably necessary for settlement of these disputes.

In addition to the issues above the Company and its subsidiaries are involved in various proceedings on the applicability of the IPTU Urban Land Tax to real estate properties that are in use for providing public services. The aggregate amount of the contingency is approximately R$79,388 (R$78,883 on December 31, 2019). Of this total, R$3,824 has been recognized (R$4,002 on December 31, 2019) – this being the amount estimated as probably necessary for settlement of these disputes. The company has been successful in its efforts to have its IPTU tax liability suspended, winning judgments in favor in some cases – this being the principal factor in the reduction of the total value of the contingency.

Social Security contributions on profit sharing payments

The Brazilian tax authority (Receita Federal) has filed administrative and court proceedings against the Company, relating to social security contributions on the payment of profit shares to its employees over the period 1999 to 2016, alleging that the Company did not comply with the requirements of Law 10,101/2000 on the argument that it did not previously establish clear and objective rules for the distribution of these amounts. In August 2019, the Regional Federal Court of the First Region published a decision against the Company on this issue. As a result the Company, based on the opinion of its legal advisers, reassessed the chances of loss from ‘possible’ to ‘probable’ for some portions paid as profit-sharing amounts, maintaining the classification of the chance of loss as 'possible' for the other portions, since it believes that it has arguments on the merit for defense and/or because it believes that the amounts questioned are already within the period of limitation.

The amount of the contingencies is approximately R$1,477,080 (R$1,450,963 on December 31, 2019), of which R$1,235,247 (R$1,213,440 on December 31, 2019) has been provisioned, this being the estimate, on June 30, 2020, of the probable amount of funds to settle these disputes.

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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Regulatory

Company and its subsidiaries are involved in numerous administrative and judicial proceedings, challenging, principally: (i) tariff charges in invoices for use of the distribution system by a self-producer; (ii) alleged violation of targets for continuity indicators in retail supply of energy; and (iii) the tariff increase made during the federal government’s economic stabilization plan referred to as the ‘Cruzado Plan’, in 1986. The aggregate amount of the contingency is approximately R$297,380 (R$280,293 at December 31, 2019), of which R$36,642 (R$36,789 at December 31, 2019) has been recorded as provision – the amount estimated as probably necessary for settlement of these disputes.

Other legal actions in the normal course of business

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

Company and its subsidiaries are involved in disputes alleging losses suffered as a result of supposed breaches of contract at the time of provision of services of cleaning of power line pathways and firebreaks. The amount recorded is R$42,935 (R$40,762 on December 31, 2019), this being estimated as the likely amount of funds necessary to settle this dispute.

‘Luz Para Todos’ Program

The Company is a party in disputes alleging losses suffered by third parties as a result of supposed breach of contract at the time of implementation of part of the rural electrification program known as the ‘Luz Para Todos’. The estimated amount of the contingency is approximately R$336,482 (R$321,567 on December 31, 2019). Of this total, R$4,184 has been provisioned – the amount estimated as probably necessary for settlement of these disputes.

Other legal proceedings

Company and its subsidiaries are involved as plaintiff or defendant, in other less significant claims, related to the normal course of their operations including: environmental matters; provision of cleaning service in power line pathways and firebreaks, removal of residents from risk areas; and indemnities for rescission of contracts, on a lesser scale, related to the normal course of its operations, with an estimated total amount of R$498,685 (R$498,852 at December, 31, 2019), of which R$16,092 (R$12,669 at December, 31, 2019), the amount estimated as probably necessary for settlement of these disputes.

Contingent liabilities – whose loss are assessed as ‘possible’

Taxes and contributions

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

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

In 2006 the Company and its subsidiaries paid an indemnity to its employees, totaling R$177,686, in exchange for rights to future payments (referred to as the Anuênio) for time of service, which would otherwise be incorporated, in the future, into salaries. The Company and its subsidiaries did not pay income tax and Social Security contributions on this amount because it considered that those obligations are not applicable to amounts paid as an indemnity. However, to avoid the risk of a future fine, the Company obtained an injection, which permitted to make an escrow deposit of R$121,834, which updated now represents the amount of R$284,386 (R$282,071 at December 31, 2019). The updated amount of the contingency is R$292,673 (R$289,086 on December 31, 2019) and, based on the arguments above, management has classified the chance of loss as ‘possible’.

Social Security contributions

The Brazilian federal tax authority (Secretaria da Receita Federal) has filed administrative proceedings related to various matters: employee profit sharing; the Workers’ Food Program (Programa de Alimentação do Trabalhador, or PAT); education benefit; food benefit; Special Additional Retirement payment; overtime payments; hazardous occupation payments; matters related to Sest/Senat (transport workers’ support programs); and fines for non-compliance with accessory obligations. The Company have presented defenses and await judgment. The amount of the contingency is approximately R$114,072 (R$112,311 on December 31, 2019). Management has classified the chance of loss as ‘possible’, also taking into account assessment of the chance of loss in the judicial sphere, (the claims mentioned are in the administrative sphere), based on the evaluation of the claims and the related case law.

Non-homologation of offsetting of tax credit

The federal tax authority did not ratify the Company and its subsidiaries’ declared offsetting, in Corporate income tax returns, of carry-forwards and undue or excess payment of federal taxes – IRPJ, CSLL, PIS/Pasep and Cofins – identified by official tax deposit receipts (‘DARFs’ and ‘DCTFs’). The Company and its subsidiaries’ are contesting the non-homologation of the amounts offset. The amount of the contingency is R$159,909 (R$160,277 on December 31, 2019), and the chance of loss was classified as ‘possible’, since the relevant requirements of the National Tax Code (CTN) have been complied with.

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Income tax withheld on capital gain in a shareholding transaction

The federal tax authority issued a tax assessment against Cemig as a jointly responsible party with its jointly-controlled entity Parati S.A. Participações em Ativos de Energia Elétrica (Parati), relating to withholding income tax (Imposto de Renda Retido na Fonte, or IRRF) allegedly applicable to returns paid by reason of a capital gain in a shareholding transaction relating to the purchase by Parati, and sale, by Enlighted, at July 7, 2011, of 100.00% of the equity interests in Luce LLC (a company with head office in Delaware, USA), holder of 75.00% of the shares in the Luce Brasil equity investment fund (FIP Luce), which was indirect holder, through Luce Empreendimentos e Participações S.A., of approximately 13.03% of the total and voting shares of Light S.A. (Light). The amount of the contingency is approximately R$232,636 (R$229,906 on December 31, 2019), and the loss has been assessed as ‘possible’.

The Social Contribution tax on net income (CSLL)

The federal tax authority issued a tax assessment against the Company for the years of 2012 and 2013, alleging undue non-addition, or deduction, of amounts relating to the following items in calculating the Social Contribution tax on net income: (i) taxes with liability suspended; (ii) donations and sponsorship (Law 8,313/91); and (iii) fines for various alleged infringements. The amount of this contingency is R$414,113 (R$400,075 on December 31, 2019). The Company has classified the chances of loss as ‘possible’, in accordance with the analysis of the case law on the subject.

ICMS (local state value added tax)

From December 2019 at March 2020, the Tax Authority of Minas Gerais State issued an infringement notice against the subsidiary Gasmig, in the amount of R$55,204, relating to reduction of the calculation base of ICMS tax in the sale of natural gas to its customers over the full month of December 2014, alleging a divergence between the form of calculation used by Gasmig and the opinion of that tax authority.

The claim comprises: principal of R$17,047; penalty payments of R$27,465; and interest of R$10,692. Considering that the State of Minas Gerais, over a period of more than 25 years, has never made any allegations against the methodology of calculation by the Company, the managers, together with their legal advisers, believe that there is a defense under Article 100, III of the National Tax Code, which removes claims for penalties and interest; and that the contingency for loss related to these amounts is ‘remote’. In relation to the argument on the difference between the amount of ICMS tax calculated by Gasmig and the new interpretation by the state tax authority, the probability of loss was considered ‘possible’. On June 30, 2020 the amount of the contingency for the period relating to the rules on expiry by limitation of time is R$98,763.

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Regulatory matters

Public Lighting Contribution (CIP)

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

The Company and its subsidiary believe there are arguments of merit for defense in these claims, since the charge at present made is grounded on Aneel Normative Resolution 456/2000. As a result it has not constituted a provision for this action, the amount of which is estimated at R$993,543 (R$959,269 at December 31, 2019). The Company has assessed the chances of loss in this action as ‘possible’, due to the Customer Defense Code (Código de Defesa do Consumidor, or CDC) not being applicable, because the matter is governed by the specific regulation of the energy sector, and because Cemig complied with Aneel Resolutions 414 and 456, which deal with the subject.

Accounting of energy sale transactions in the Power Trading Chamber (CCEE)

In a claim dating from August 2002, AES Sul Distribuidora challenged in the court the criteria for accounting of energy sale transactions in the wholesale energy market (Mercado Atacadista de Energia, or MAE) (predecessor of the present Power Exchange Chamber – Câmara de Comercialização de Energia Elétrica, or CCEE), during the period of rationing. It obtained a favorable interim judgment on February 2006, which ordered the regulator (Aneel), working with the CCEE, to comply with the claim by AES Sul and recalculate the settlement of the transactions during the rationing period, not considering the regulator (Aneel) Dispatch 288 of 2002.

This should take effect in the CCEE as from November 2008, resulting in an additional disbursement for Cemig GT, related to the expense on purchase of energy in the spot market on the CCEE, in the approximate amount of R$357,167 (R$343,469 at December 31, 2019). On November 9, 2008 Cemig GT obtained an interim decision in the Regional Federal Appeal Court (Tribunal Regional Federal, or TRF) suspending the obligatory nature of the requirement to pay into court the amount that would have been owed under the Special Financial Settlement made by the CCEE. Cemig GT has classified the chance of loss as ‘possible’, since this action deals with the General Agreement for the Energy Sector, in which the Company has the full documentation to support its arguments.

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Tariff increases

Exclusion of customers classified as low-income

The Federal Public Attorneys’ Office filed a class action against the Company and the regulator (Aneel), to avoid exclusion of customers from classification in the Low-income residential tariff sub-category, requesting an order for Cemig D to pay twice the amount paid in excess by customers. A decision was given in favor of the plaintiffs, but the Company and the regulator (Aneel) have filed an interlocutory appeal and await judgment. The amount of the contingency is approximately R$339,275 (R$326,719 on December 31, 2019). Cemig D has classified the chances of loss as ‘possible’ due to other favorable decisions on this matter.

Environmental claims

Impact arising from construction of power plants

The Public Attorneys of Minas Gerais State, together with an association and individuals, have brought class actions requiring Cemig GT to invest, since 1997, at least 0.5% of the annual gross operating revenue of the Emborcação, Pissarrão, Funil, Volta Grande, Poquim, Paraúna, Miranda, Nova Ponte, Rio de Pedras and Peti plants in environmental protection and preservation of the water tables of the counties where these power plants are located, and proportional indemnity for allegedly irrecoverable environmental damage caused, arising from omission to comply with Minas Gerais State Law 12,503/1997. Cemig GT has filed appeals to the Higher Appeal Court (STJ) and the Federal Supreme Court (STF). Based on the opinions of its legal advisers, Cemig GT believes that this is a matter involving legislation at infra-constitutional level (there is a Federal Law with an analogous object) and thus a constitutional matter, on the issue of whether the state law is constitutional or not, so that the final decision is one for the national Higher Appeal Court (STJ) and the Federal Supreme Court (STF). No provision has been made, since based on the opinion of its legal advisers management has classified the chance of loss as ‘possible’. The amount of the contingency is R$173,020 (R$165,299 at December 31, 2019).

The Public Attorneys’ Office of Minas Gerais State has filed class actions requiring the formation of a Permanent Preservation Area (APP) around the reservoir of the Capim Branco hydroelectric plant, suspension of the effects of the environmental licenses, and recovery of alleged environmental damage. Based on the opinion of its legal advisers in relation to the changes that have been made in the new Forest Code and in the case law on this subject, Cemig GT has classified the chance of loss in this dispute as ‘possible’. The estimated value of the contingency is R$99,027 (R$95,215 on December 31, 2019).

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Other contingent liabilities

Early settlement of the CRC (Earnings Compensation) Account

The Company is involved in an administrative proceeding at the Audit Court of the State of Minas Gerais which challenges: (i) a difference of amounts relating to the discount offered by Cemig for early repayment of the credit owed to Cemig by the State under the Receivables Assignment Contract in relation to the CRC Account (Conta de Resultados a Compensar, or Earnings Compensation Account) – this payment was completed in the first quarter of 2013; and also (ii) possible undue financial burden on the State after the signature of the Amendments that aimed to re-establish the economic and financial balance of the Contract. The amount of the contingency is approximately R$431,377 (R$425,927 at December 31, 2019), and, based on the Opinion of the Public Attorneys’ Office of the Audit Board of the State of Minas Gerais (Tribunal de Contas), the Company believes that it has met the legal requirements. Thus, it has assessed the chances of loss as ‘possible’, since it believes that the adjustment was made in faithful obedience to the legislation applicable to the case.

Contractual imbalance

Cemig D is party in other disputes arising from alleged non-compliance with contracts in the normal course of business, for an estimated total of R$155,451 (R$148,904 on December 31, 2019). Cemig D has classified the chance of loss as ‘possible’, after analysis of the case law on this subject.

25. EQUITY AND REMUNERATION TO SHAREHOLDERS

| a) | Share capital

As of June 30, 2020 and December 31, 2019, the Company’s issued and share capital is R$7,293,763, represented by 487,614,213 common shares and 971,138,388 preferred shares, both of them with nominal value of R$5.00 (five Reais).

| b) | Earnings per share

| Number of shares
| Jun. 30, 2020 | Jun. 30, 2019
Common shares already paid up | 487,614,213 | 487,614,213
Shares in treasury | (69) | (69)
| 487,614,144 | 487,614,144
Preferred shares already paid up | 971,138,388 | 971,138,388
Shares in treasury | (560,649) | (560,649)
| 970,577,739 | 970,577,739
Total | 1,458,191,883 | 1,458,191,883

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Basic and diluted earnings per share

| Jan to Jun 2020 | Jan to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
Net income for the period (A) | 986,691 | 2,911,850 | 1,043,806 | 2,114,774
Total number of shares (B) | 1,458,191,883 | 1,458,191,883 | 1,458,191,883 | 1,458,191,883
Basic and diluted earnings (loss) per share (A/B) (R$) | 0.68 | 2.00 | 0.72 | 1.45

The purchase and sale options of investments described in Note 30 could potentially dilute basic profit (loss) per share in the future; however, they have not caused dilution of earnings per share in the periods presented here.

Annual General Meeting (AGM)

The Annual General Meeting, held on July 31, 2020 approved the Board of Directors’ proposal for allocation of net income for 2019 as presented in the Company’s financial statements for 2019, which included a proposal for increase of the registered share capital from R$7,293,763 to R$7,593,763, as per Article 199 of the Brazilian Corporate Law, as the profit reserves, with the exclusion of the Tax Incentive reserves, exceed the registered share capital by R$536,646.

The increase in the share capital by issuance of 60,000,000 new shares, comprises 20,056,076 common shares and 39,943,924 preferred shares, by capitalization of R$300,000 from Earnings Reserve, with distribution to shareholders, as a result, of new shares totaling 4.11%, of the number of shares held, of the same type, each with nominal value of R$5.00. The beneficiaries of the stock bonus will be those shareholders who held shares on July 31, 2020 for shares traded on the São Paulo stock Exchange (‘B3’).

On June 18, 2020, in the view of the uncertainty and volatility caused by the Covid-19 pandemic, the Board of Directors approved the postponement of payment to shareholders of the first installment of interest on equity, which were approved on December 18, 2019, in the amount of R$200,000, from until June 30, 2020 to until December 30, 2020, maintaining unchanged all other conditions of this distribution of interest on equity. The Management has concluded that it would be prudent to postpone the date of this payment, as a preventive measure, to provide the Company with an additional reserve of cash to meet any needs that might arise in this period.

| 26. | REVENUE

Revenues are measured at the fair value of the consideration received or to be received and are recognized on a monthly basis as and when: (i) Rights and obligations of the contract with the customer are identified; (ii) the performance obligation of the contract is identified; (iii) the price for each transaction has been determined; (iv) the transaction

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price has been allocated to the performance obligations defined in the contract; and (v) the performance obligations have been complied.

| Consolidated
Jan to Jun 2020 | Jan to Jun 2019
Revenue from supply of energy(a) | 12,687,452 | 12,929,154
Revenue from use of the electricity distribution systems (TUSD) (b) | 1,399,108 | 1,265,719
CVA, and Other financial components (c) | 81,652 | 80,241
Transmission revenue |  |
Transmission concession revenue (d) | 423,101 | 242,743
Transmission construction revenue (e) | 74,044 | 82,989
Transmission indemnity revenue (f) | 316,218 | 90,420
Distribution construction revenue (e) | 609,632 | 382,236
Adjustment to expectation of cash flow from indemnifiable financial assets of distribution concession (g) | (955) | 8,967
Revenue on financial updating of the Concession Grant Fee (h) | 146,412 | 176,151
Sale transaction in CCEE (i) | 31,598 | 397,437
Mechanism for the sale of surplus | 104,814 | -
Supply of gas | 962,887 | 1,131,233
Fine for violation of service continuity indicator | (29,117) | (35,510)
Recovery of PIS/Pasep and Cofins taxes credits over ICMS (note 8) | - | 1,438,563
Other operating revenues (j) | 886,612 | 837,584
Deductions on revenue (k) | (5,699,829) | (6,097,956)
Net operating revenue | 11,993,629 | 12,929,971

| Consolidated
Apr to Jun 2020 | Apr to Jun 2019
Revenue from supply of energy(a) | 5,920,014 | 6,327,737
Revenue from use of the electricity distribution systems (TUSD) (b) | 674,737 | 635,675
CVA, and Other financial components (c) | 136,254 | (40,109)
Transmission revenue |  |
Transmission concession revenue (d) | 299,832 | 125,564
Transmission construction revenue (e) | 26,846 | 54,902
Transmission indemnity revenue (f) | 259,680 | 57,921
Distribution construction revenue (e) | 346,559 | 211,205
Adjustment to expectation of cash flow from indemnifiable financial assets of distribution concession (g) | (1,679) | 2,927
Revenue on financial updating of the Concession Grant Fee (h) | 46,520 | 95,363
Sale transaction in CCEE (i) | 7,074 | 144,821
Mechanism for the sale of surplus | 41,514 | -
Supply of gas | 403,227 | 534,955
Fine for violation of service continuity indicator | (11,918) | (12,685)
Recovery of PIS/Pasep and Cofins taxes credits over ICMS (note 8) | - | 1,438,563
Other operating revenues (j) | 473,143 | 396,386
Deductions on revenue (k) | (2,687,389) | (2,956,432)
Net operating revenue | 5,934,414 | 7,016,793

| a) | Revenue from energy supply

These items are recognized upon delivery of supply, and the revenue is recorded as and when billed, based on the tariff approved by the regulator for each class of customer or in effect in the market. Unbilled supply of energy, from the period between the last billing and the end of each month, is estimated based on the supply contracted. For the distribution concession contract, the unbilled supply is estimated based on the volume of energy delivered but not yet billed.

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This table shows energy supply by type of customer:

| MWh (1) | R$
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
Residential | 5,442,910 | 5,291,676 | 4,866,632 | 4,665,228
Industrial | 6,583,436 | 7,819,238 | 1,981,349 | 2,295,328
Commercial, services and others | 4,594,310 | 4,654,040 | 2,577,247 | 2,619,879
Rural | 1,671,865 | 1,775,702 | 984,629 | 917,625
Public authorities | 386,015 | 455,643 | 279,249 | 311,737
Public lighting | 664,656 | 685,933 | 295,455 | 291,353
Public services | 675,124 | 679,065 | 356,523 | 333,397
Subtotal | 20,018,316 | 21,361,297 | 11,341,084 | 11,434,547
Own consumption | 17,376 | 17,230 | - | -
Unbilled revenue | - | - | (257,626) | 54,907
| 20,035,692 | 21,378,527 | 11,083,458 | 11,489,454
Wholesale supply to other concession holders (2) | 6,626,096 | 5,499,766 | 1,588,364 | 1,458,670
Wholesale supply unbilled, net | - | - | 15,630 | (18,970)
Total | 26,661,788 | 26,878,293 | 12,687,452 | 12,929,154

| MWh (1) | R$
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
Residential | 2,657,910 | 2,547,878 | 2,307,578 | 2,206,790
Industrial | 3,105,644 | 3,947,233 | 934,197 | 1,154,786
Commercial, services and others | 2,085,089 | 2,374,683 | 1,136,848 | 1,280,841
Rural | 896,651 | 915,078 | 511,810 | 460,746
Public authorities | 169,009 | 231,943 | 121,381 | 158,145
Public lighting | 325,162 | 333,969 | 142,679 | 140,508
Public services | 339,650 | 339,954 | 177,860 | 165,901
Subtotal | 9,579,115 | 10,690,738 | 5,332,353 | 5,567,717
Own consumption | 7,970 | 7,247 | - | -
Unbilled revenue | - | - | (104,793) | 80,721
| 9,587,085 | 10,697,985 | 5,227,560 | 5,648,438
Wholesale supply to other concession holders (2) | 3,401,541 | 2,422,273 | 726,004 | 641,532
Wholesale supply unbilled, net | - | - | (33,550) | 37,767
Total | 12,988,626 | 13,120,258 | 5,920,014 | 6,327,737

| (1) | Data not reviewed by external auditors.

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

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

These are recognized upon the distribution infrastructure become available to customers, and the fair value of the consideration is calculated according to the TUSD tariff of those customers, set by the regulator. The total amount of energy transported, in MWh, is as follows:

| MWh (1)
| Jan to Jun 2020 | Jan to Jun 2019
Industrial | 8,750,291 | 8,844,838
Commercial | 608,096 | 646,291
Rural | 14,274 | 5,682
Concessionaires | 144,465 | 165,230
Total | 9,517,126 | 9,662,041

| (1) | Data not reviewed by external auditors

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| MWh (1)
| Apr to Jun 2020 | Apr to Jun 2019
Industrial | 4,247,588 | 4,455,679
Commercial | 259,661 | 315,065
Rural | 7,045 | 2,670
Concessionaires | 72,652 | 86,206
Total | 4,586,946 | 4,859,620

| (1) | Data not reviewed by external auditors.

| c) | The CVA account and Other financial components

The results from variations in (i) the CVA account (Parcel A Costs Variation Compensation Account), and in (ii) Other financial components in calculation of tariffs, refer to the positive and negative differences between the estimated non-manageable costs of the subsidiary Cemig D and the cost actually incurred. The amounts recognized arise from balances recorded in the current year, homologated or to be homologated in tariff adjustment processes. For more information please see Note 13.

| d) | Transmission concession revenue

Transmission revenue comprises the amount received from agents of the energy sector for operation and maintenance of transmission lines of the national grid, in the form of the Permitted Annual Revenue (Receita Anual Permitida, or RAP), plus an adjustment for expectation of cash flow arising from the variation in the fair value of the Remuneration Assets Base, in the amout of R$3,145 in the period of January at June 2020 (R$7,834 in the period of January at June 2019).

In addition, as a consequence of the Tariff Periodic Reset, the Remuneration Base was remeasured resulting in an increase of R$198,714 in the Company’s income. For more information, see note 14.

The Company is subject to the pecuniary penalty named Variable Portion (Parcela Variável, or PV) which is applied by the Concession-granting Power as a result of any unavailabilities or operational restrictions on facilities that are part of the National Grid. This penalty is recognized as a reduction of revenue from operation and maintenance of the transmission network in the period in which it occurs. The effects of the Variable Portion in transmission revenue were R$5,537 on June 30, 2020 (R$5,254 on June 30, 2019).

| e) | Construction revenue

Construction revenue corresponds to the performance obligation to build the transmission and distribution infrastructure during the construction phase. Considering that constructions and improvements are substantially executed through outsourced parties; and that all construction revenues is related to the construction of the infrastructure of the energy distribution and transmission services, Company’s management concluded that construction contract revenue has zero profit margin.

| f) | Transmission indemnity revenue

Corresponded to updating, by the IPCA index, of the balance of transmission indemnity receivable. For further information, please see Note 13 and 14.

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As a result of the Tariff Periodic Reset, the Company recognized a positive adjustment of R$231,126 in its income statemtent, of which R$10,183 corresponds to the portion classified as a financial asset, and R$220,943 corresponds to the assets reincorporated into the assets remuneration base. For further information, please see Note 13 and 14.

| g) | Adjustment to expected cash flow from financial assets on residual value of infrastructure asses of distribution concessions

Income from the Regulatory Remuneration Asset Base.

| h) | Revenue on financial updating of the Concession Grant Fee

Represents the inflation adjustment using the IPCA inflation index, plus interest, on the Concession Grant Fee for the concession awarded as Lot D of Auction 12/2015. See Note 13.

| i) | Energy transactions on the CCEE (Power Trading Chamber)

The revenue from transactions made through the Power Trading Chamber (Câmara de Comercialização de Energia Elétrica, or CCEE) is the monthly positive net balance of settlements of transactions for purchase and sale of energy in the Spot Market, through the CCEE, for which the consideration corresponds to the product of energy sold at the Spot Price.

The revenue from the mechanism for the sale of energy surplus refers to the sale of power surpluses by distributor agents. In the case of sale of the amount of energy related to the regulatory limit or involuntary exposure, a portion of the gain may be passed through to the customer tariffs in the tariff adjustments.

| j) | Other operating revenues

| Consolidated
Jan to Jun 2020 | Jan to Jun 2019
Charged service | 5,221 | 8,382
Services rendered | 70,117 | 89,826
Subsidies (1) | 730,649 | 606,920
Rental and leasing | 80,563 | 65,196
Reimbursement for decontracted supply | - | 64,640
Other | 62 | 2,620
| 886,612 | 837,584

| Consolidated
Apr to Jun 2020 | Apr to Jun 2019
Charged service | 1,466 | 4,026
Services rendered | 35,669 | 38,263
Subsidies (1) | 395,305 | 315,406
Rental and leasing | 40,808 | 35,729
Reimbursement for decontracted supply | - | 2,064
Other | (105) | 898
| 473,143 | 396,386

| (1) | Revenue recognized for the tariff subsidies applied to users of transmission and distribution services, including Low-income subsidy, reimbursed by Eletrobras.

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| k) | Deductions on revenue

| Consolidated
Jan to Jun 2020 | Jan to Jun 2019
Taxes on revenue |  |
ICMS | 3,010,684 | 3,052,745
COFINS | 1,035,447 | 1,264,259
PIS/Pasep | 225,026 | 275,635
Others | 3,363 | 4,131
| 4,274,520 | 4,596,770
Charges to the customer |  |
Global Reversion Reserve (RGR) | 7,951 | 8,737
Energy Efficiency Program (PEE) | 33,444 | 32,590
Energy Development Account (CDE) | 1,217,865 | 1,331,366
Research and Development (R&D) | 20,276 | 20,639
National Scientific and Technological Development Fund (FNDCT) | 20,276 | 20,639
Energy System Expansion Research (EPE of MME) | 10,138 | 10,319
Customer charges – Proinfa alternative sources program | 17,739 | 26,329
Energy services inspection fee | 15,413 | 14,172
Royalties for use of water resources | 22,551 | 16,512
Customer charges – the ‘Flag Tariff’ system | 59,656 | 19,868
Others | - | 15
| 1,425,309 | 1,501,186
| 5,699,829 | 6,097,956

| Consolidated
Apr to Jun 2020 | Apr to Jun 2019
Taxes on revenue |  |
ICMS | 1,408,778 | 1,472,166
COFINS | 490,591 | 595,004
PIS/Pasep | 106,509 | 129,177
Others | 1,605 | 1,876
| 2,007,483 | 2,198,223
Charges to the customer |  |
Global Reversion Reserve (RGR) | 4,002 | 4,185
Energy Efficiency Program (PEE) | 16,539 | 15,707
Energy Development Account (CDE) | 608,155 | 679,017
Research and Development (R&D) | 8,998 | 9,528
National Scientific and Technological Development Fund (FNDCT) | 8,998 | 9,528
Energy System Expansion Research (EPE of MME) | 4,499 | 4,764
Customer charges – Proinfa alternative sources program | 10,023 | 13,024
Energy services inspection fee | 7,706 | 7,230
Royalties for use of water resources | 10,913 | 6,513
Customer charges – the ‘Flag Tariff’ system | 73 | 8,712
Others | - | 1
| 679,906 | 758,209
| 2,687,389 | 2,956,432

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27. OPERATING COSTS AND EXPENSES

| Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
Personnel (a) | 650,789 | 677,072 | 11,112 | 18,369
Employees’ and managers’ profit sharing | 33,280 | 174,515 | 6,032 | 11,207
Post-employment benefits – Note 23 | 223,727 | 198,699 | 23,985 | 21,746
Materials | 34,766 | 40,256 | 100 | 94
Outsourced services (b) | 601,690 | 585,969 | 15,793 | 11,359
Energy bought for resale (c) | 5,569,733 | 5,120,200 | - | -
Depreciation and amortization (1) | 488,449 | 479,299 | 1,552 | 2,398
Operating provisions (reversals) and adjustments for operating losses (d) | 356,729 | 978,379 | 48,986 | 35,845
Charges for use of the national grid | 622,453 | 701,171 | - | -
Gas bought for resale | 543,303 | 725,162 | - | -
Construction costs (e) | 683,676 | 465,225 | - | -
Other operating expenses, net (f) | 138,456 | 93,854 | 5,542 | 4,507
| 9,947,051 | 10,239,801 | 113,102 | 105,525

| Consolidated | Parent Company
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
Personnel (a) | 339,183 | 312,031 | 4,916 | 4,756
Employees’ and managers’ profit sharing | 7,440 | 108,478 | 2,792 | 6,720
Post-employment benefits | 118,322 | 97,790 | 12,310 | 10,796
Materials | 16,141 | 19,766 | 73 | 88
Outsourced services (b) | 302,609 | 302,241 | 8,488 | 6,051
Energy bought for resale (c) | 2,755,238 | 2,526,019 | - | -
Depreciation and amortization (1) | 245,697 | 248,403 | 776 | (541)
Operating provisions (reversals) and adjustments for operating losses (d) | 197,613 | 869,373 | 47,144 | 17,832
Charges for use of the national grid | 257,441 | 367,375 | - | -
Gas bought for resale | 231,378 | 330,180 | - | -
Construction costs (e) | 373,405 | 266,107 | - | -
Other operating expenses, net (f) | 84,321 | 41,922 | 1,642 | 3,587
| 4,928,788 | 5,489,685 | 78,141 | 49,289

| (1) | Net of PIS/Pasep and Cofins taxes applicable to amortization of the Right of Use, in the amount of R$1,080 in the consolidated statements and R$71 in the Parent company statements.

| a) | Personnel

2020 Programmed Voluntary Retirement Plan (‘PDVP’)

On April 2020, the Company approved the Programmed Voluntary Retirement Plan for 2020 (‘the 2020 PDVP’). Those eligible – any employees who had worked with the Company for 25 years or more by December 31, 2020 – are able to join from May 4 to 22, 2020. The program will pay the standard legal payments for severance, 50% of the period of notice, an amount equal to 20% of the Base Value of the employee’s FGTS fund, an additional premium equal to 50% of the period of notice plus 20% of the Base Value of the employee’s FGTS fund, as well as the other payments under the legislation. The total of R$58,850 has been recorded as expense related to this program, corresponding to acceptance by 396 employees. In March, 2019, has been appropriated as expense, including severance payments, a total of R$21,491 (155 employees).

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| b) | Outsourced services

| Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
Meter reading and bill delivery | 65,168 | 64,334 | - | -
Communication | 33,043 | 34,458 | 239 | 1,696
Maintenance and conservation of electrical facilities and equipment | 229,996 | 198,413 | 9 | 6
Building conservation and cleaning | 52,229 | 53,860 | 77 | 166
Contracted labor | 5,086 | 6,240 | 18 | -
Freight and airfares | 1,420 | 3,289 | 275 | 634
Accommodation and meals | 4,614 | 6,528 | 72 | 77
Security services | 8,753 | 8,202 | - | -
Consultant | 18,088 | 9,510 | 11,800 | 4,219
Maintenance and conservation of furniture and utensils | 2,716 | 2,310 | 15 | -
Information technology | 24,932 | 23,899 | 586 | 606
Maintenance and conservation of vehicles | 1,265 | 1,233 | - | -
Disconnection and reconnection | 15,278 | 34,542 | - | -
Environmental services | 4,529 | 6,290 | - | -
Legal services | 9,857 | 11,490 | 591 | 727
Costs (recovery of costs) of proceedings | 1,014 | 176 | 70 | 82
Tree pruning | 24,336 | 21,331 | - | -
Cleaning of power line pathways | 33,933 | 28,802 | - | -
Copying and legal publications | 10,159 | 9,713 | 247 | 124
Inspection of customer units | 12,618 | 5,223 | - | -
Other expenses | 42,656 | 56,126 | 1,794 | 3,022
| 601,690 | 585,969 | 15,793 | 11,359

| Consolidated | Parent Company
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
Meter reading and bill delivery | 33,118 | 32,291 | - | -
Communication | 12,726 | 14,167 | 157 | 244
Maintenance and conservation of electrical facilities and equipment | 113,872 | 97,879 | 5 | 3
Building conservation and cleaning | 25,178 | 27,342 | 34 | 53
Contracted labor | 1,452 | 2,567 | 9 | -
Freight and airfares | 253 | 1,915 | 49 | 352
Accommodation and meals | 1,493 | 3,556 | 30 | 51
Security services | 4,223 | 4,194 | - | -
Consultant | 10,517 | 6,117 | 6,572 | 2,935
Maintenance and conservation of furniture and utensils | 1,404 | 1,395 | - | (1)
Information technology | 11,056 | 16,667 | 292 | 454
Maintenance and conservation of vehicles | 585 | 693 | - | -
Disconnection and reconnection | 4,049 | 16,996 | - | -
Environmental services | 2,144 | 2,883 | - | -
Legal services | 6,081 | 5,069 | 443 | 283
Costs (recovery of costs) of proceedings | 574 | 592 | 18 | 82
Tree pruning | 15,308 | 13,079 | - | -
Cleaning of power line pathways | 19,161 | 15,090 | - | -
Copying and legal publications | 5,556 | 5,230 | 240 | 141
Inspection of customer units | 8,829 | 3,134 | - | -
Other expenses | 25,030 | 31,385 | 639 | 1,454
| 302,609 | 302,241 | 8,488 | 6,051

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| c) | Energy purchased for resale

| Consolidated
Jan to Jun 2020 | Jan to Jun 2020
Supply from Itaipu Binacional | 952,413 | 694,177
Physical guarantee quota contracts | 379,450 | 364,358
Quotas for Angra I and II nuclear plants | 151,484 | 134,586
Spot market | 633,003 | 762,267
Proinfa Program | 155,866 | 190,617
‘Bilateral’ contracts | 163,392 | 151,479
Energy acquired in Regulated Market auctions | 1,567,953 | 1,395,566
Energy acquired in the Free Market | 1,743,809 | 1,838,169
Distributed generation (‘Geração distribuída’) | 327,796 | 82,858
PIS/Pasep and Cofins credits | (505,433) | (493,877)
| 5,569,733 | 5,120,200

| Consolidated
Apr to Jun 2020 | Apr to Jun 2019
Supply from Itaipu Binacional | 524,601 | 361,021
Physical guarantee quota contracts | 189,617 | 185,427
Quotas for Angra I and II nuclear plants | 75,742 | 67,293
Spot market | 251,066 | 278,055
Proinfa Program | 77,933 | 95,309
‘Bilateral’ contracts | 84,216 | 78,883
Energy acquired in Regulated Market auctions | 748,514 | 684,774
Energy acquired in the Free Market | 900,703 | 973,506
Distributed generation (‘Geração distribuída’) | 154,315 | 44,892
PIS/Pasep and Cofins credits | (251,469) | (243,141)
| 2,755,238 | 2,526,019

| d) | Operating provision (reversals)

| Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2020 | Jan to Jun/2020 | Jan to Jun/2019
Estimated losses on doubtful accounts receivables (Note 7) | 215,100 | 126,978 | - | -
Estimated losses on other accounts receivables (1) | - | 4,935 | - | 183
Estimated losses on doubtful accounts receivable from related (3) (note 29) | 37,361 | 688,031 | 37,361 | -
Contingency provisions (reversals) (Note 24) (2) |  |  |  |
Labor claims | 30,688 | 106,558 | 6,140 | 15,853
Civil | 22,690 | 1,076 | 2,002 | (510)
Tax | 24,439 | 19,310 | 3,510 | 20,268
Regulatory | (136) | 952 | (81) | 607
Other | 3,787 | 8,593 | 54 | (556)
| 81,468 | 136,489 | 11,625 | 35,662
| 333,929 | 956,433 | 48,986 | 35,845
Adjustment for losses |  |  |  |
Put option – SAAG (Note 30) | 22,800 | 21,946 | - | -
| 22,800 | 21,946 | - | -
| 356,729 | 978,379 | 48,986 | 35,845

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Table of Contents

| Consolidated | Parent Company
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
Estimated losses on doubtful accounts receivables (Note 7) | 115,360 | 47,627 | - | -
Estimated losses on other accounts receivables (1) | - | 4,752 | - | -
Estimated losses on doubtful accounts receivable from related (3) (note 29) | 37,361 | 688,031 | 37,361 | -
Contingency provisions (reversals) (Note 24) (2) |  |  |  |
Labor claims | 23,375 | 105,122 | 7,986 | 13,136
Civil | 6,379 | 3,571 | 1,235 | (64)
Tax | 12,005 | 4,384 | 1,237 | 4,833
Regulatory | (373) | 276 | (702) | (108)
Other | 1,518 | 4,672 | 27 | 35
| 42,904 | 118,025 | 9,783 | 17,832
| 195,625 | 858,435 | 47,144 | 17,832
Adjustment for losses |  |  |  |
Put option – SAAG (Note 30) | 1,988 | 10,938 | - | -
| 1,988 | 10,938 | - | -
| 197,613 | 869,373 | 47,144 | 17,832

| (1) | The estimated losses on other accounts receivable are presented in the consolidated Statement of income as operating expenses.

| (2) | The provisions for contingencies of the Parent company are presented in the consolidated profit and loss account for the year as operating expenses.

| (3) | Estimated losses on amounts receivable from Renova, as a result of the assessment of credit risk.

| e) | Construction costs

| Consolidated
Jan to Jun 2020 | Jan to Jun 2019
Personnel and managers | 40,445 | 30,398
Materials | 337,298 | 228,763
Outsourced services | 239,960 | 155,365
Others | 65,973 | 50,699
| 683,676 | 465,225

| Consolidated
Apr to Jun 2020 | Apr to Jun 2019
Personnel and managers | 23,522 | 16,946
Materials | 180,348 | 141,304
Outsourced services | 139,977 | 80,071
Others | 29,558 | 27,786
| 373,405 | 266,107

| f) | Other operating expenses (revenues), net

| Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
Leasing and rentals (1) | 5,234 | 1,783 | 427 | 1,273
Advertising | 2,877 | 1,961 | 31 | 66
Own consumption of energy | 10,750 | 8,105 | - | -
Subsidies and donations | 3,317 | 4,584 | - | -
Onerous concession | 1,387 | 1,287 | - | -
Insurance | 12,004 | 4,541 | 1,411 | 824
CCEE annual charge | 2,974 | 3,078 | 1 | 1
Net loss (gain) on deactivation and disposal of assets | 11,969 | 12,386 | 157 | -
Forluz – Administrative running cost | 14,856 | 14,024 | 731 | 688
Collection agents | 42,393 | 42,356 | - | -
Taxes and charges | 6,223 | 7,568 | 729 | 511
Other expenses (revenues) | 24,472 | (7,819) | 2,055 | 1,144
| 138,456 | 93,854 | 5,542 | 4,507

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| Consolidated | Parent Company
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
Leasing and rentals (1) | 3,124 | 1,270 | 206 | 2,312
Advertising | 1,662 | 224 | 31 | 28
Own consumption of energy | 5,539 | 1,816 | - | -
Subsidies and donations | 1,645 | 1,673 | - | -
Onerous concession | 707 | 659 | - | -
Insurance | 5,943 | 2,418 | 726 | 424
CCEE annual charge | 1,500 | 1,441 | 1 | 1
Net loss (gain) on deactivation and disposal of assets | 5,536 | 4,887 | 157 | -
Forluz – Administrative running cost | 7,552 | 7,312 | 371 | 359
Collection agents | 20,395 | 21,398 | - | -
Taxes and charges | 1,442 | 2,899 | 112 | 172
Other expenses (revenues) | 29,276 | (4,075) | 38 | 291
| 84,321 | 41,922 | 1,642 | 3,587

| (1) | Related to remaining leasing arrangements and rentals that do not qualify for recognition under IFRS 16 as well as short-term leases and leases for which the underlying asset is of low value.

| 28. | FINANCE INCOME AND EXPENSES

| Consolidated | Parent Company
Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
FINANCE INCOME |  |  |  |
Income from financial investments | 39,590 | 50,868 | 2,122 | 1,888
Interest on sale of energy | 176,823 | 182,451 | - | -
Foreign exchange variations – loans and financings (note 21) | - | 70,470 | - | -
Monetary variations | 8,729 | 12,873 | 1 | 1
Monetary variations – CVA (Note 13) | 25,688 | 53,046 | - | -
Monetary updating of escrow deposits | 54,042 | 19,906 | 10,172 | 6,474
PIS/Pasep and Cofins charged on finance income (1) | (15,812) | (50,752) | (2,036) | (5,343)
Gains on financial instruments –swap (Note 30) | 1,800,960 | 613,394 | - | -
Borrowing costs paid by related parties | 3,483 | 45,979 | 803 | -
Monetary updating on PIS/Pasep and Cofins taxes credits over ICMS (note 8) | 27,092 | 1,553,112 | 3,489 | 300,831
Others | 32,218 | 71,641 | 842 | 1,263
| 2,152,813 | 2,622,988 | 15,393 | 305,114
FINANCE EXPENSES |  |  |  |
Charges on loans and financings (Note 21) | (583,106) | (605,952) | (942) | (1,542)
Cost of debt – amortization of transaction cost (Note 21) | (7,101) | (13,948) | (104) | (81)
Foreign exchange variations - loans and financing (Note 21) | (2,162,364) | - | - | -
Foreign exchange variations – Itaipu | (66,466) | (3,132) | - | -
Monetary updating – loans and financings (Note 21) | (35,978) | (82,711) | - | -
Monetary updating – onerous concessions | (1,782) | (1,776) | - | -
Charges and monetary updating on post-employment obligations (Note 23) | (21,749) | (33,578) | (1,070) | (1,652)
Leasing – Inflation adjustment (Note 18) | (13,737) | (18,332) | (153) | (286)
Others | (22,593) | (56,532) | (3) | (14,890)
| (2,914,876) | (815,961) | (2,272) | (18,451)
NET FINANCE INCOME (EXPENSES) | (762,063) | 1,807,027 | 13,121 | 286,663

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| Consolidated | Parent Company
Apr to Jun 2020 | Apr to Jun 2019 | Apr to Jun 2020 | Apr to Jun 2019
FINANCE INCOME |  |  |  |
Income from financial investments | 21,424 | 25,836 | 749 | 411
Interest on sale of energy | 84,751 | 95,933 | - | -
Foreign exchange variations – loans and financings (note 21) | - | 70,470 | - | -
Monetary variations | 5,079 | 7,888 | 1 | -
Monetary variations – CVA | 14,045 | 32,140 | - | -
Monetary updating of escrow deposits | 37,682 | 13,219 | 4,476 | 5,942
PIS/Pasep and Cofins charged on finance income (1) | (7,018) | (41,487) | (1,582) | (5,196)
Gains on financial instruments –swap | 486,720 | 461,083 | - | -
Borrowing costs paid by related parties | 3,075 | 23,315 | 395 | -
Monetary updating on PIS/Pasep and Cofins taxes credits over ICMS (note 8) | 12,243 | 1,553,112 | 1,580 | 300,831
Others | 12,077 | 30,961 | 474 | 120
| 670,078 | 2,272,470 | 6,093 | 302,108
FINANCE EXPENSES |  |  |  |
Charges on loans and financings | (271,806) | (302,540) | (400) | (783)
Cost of debt – amortization of transaction cost | (3,556) | (7,015) | (53) | (42)
Foreign exchange variations - loans and financing | (405,828) | 32,980 | - | -
Foreign exchange variations – Itaipu | (32,457) | (3,132) | - | -
Monetary updating – loans and financings | 32,467 | (38,703) | - | -
Monetary updating – onerous concessions | (1,091) | (895) | - | -
Charges and monetary updating on post-employment obligations | (4,416) | (18,349) | (217) | (903)
Leasing – Inflation adjustment | (6,738) | (8,992) | (74) | 106
Others | (11,970) | (17,237) | - | (7,164)
| (705,395) | (363,883) | (744) | (8,786)
NET FINANCE INCOME (EXPENSES) | (35,317) | 1,908,587 | 5,349 | 293,322

| (1) | The PIS/Pasep and Cofins expenses apply to Interest on Equity.

| 29. | RELATED PARTY TRANSACTIONS

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

COMPANY | ASSETS | LIABILITIES | REVENUE | EXPENSES
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019 | Jan to Jun 2020 | Jan to Jun 2019 | Jan to Jun 2020 | Jan to Jun 2019
Shareholder |  |  |  |  |  |  |  |
Minas Gerais State Government |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Customers and traders (1) | 379,027 | 345,929 | - | - | 70,851 | 80,131 | - | -
Non-current |  |  |  |  |  |  |  |
Accounts Receivable – AFAC (2) | 120,258 | 115,202 | - | - | 5,056 | 10,749 | - | -
Jointly-controlled entity |  |  |  |  |  |  |  |
Aliança Geração |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Transactions with energy (3) | - | - | 15,048 | 13,622 | 19,872 | 19,569 | (82,633) | (78,109)
Provision of services (4) | 324 | 626 | - | - | 2,420 | 4,943 | - | -
Interest on Equity, and dividends | - | 103,033 | - | - | - | - | - | -
Contingency (5) | - | - | 32,088 | 32,088 | - | - | - | -
Baguari Energia |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Transactions with energy (3) | - | - | 893 | 924 | - | - | (4,172) | (5,393)
Provision of services (4) | 211 | - | - | - | 559 | 466 | - | -
Interest on Equity, and dividends | 10,640 | - | - | - | - | - | - | -
Madeira Energia |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Transactions with energy (3) | 2,174 | 5,745 | 112,340 | 57,860 | 13,014 | 33,087 | (548,860) | (331,510)
Norte Energia |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Transactions with energy (3) | 2,445 | - | 24,352 | 24,459 | 13,859 | 9,199 | (108,885) | (103,837)
Advance for future power supply (6) | 20,150 | 40,081 | - | - | - | - | (19,931) | -
Lightger |  |  |  |  |  |  |  |

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Current |  |  |  |  |  |  |  |
Transactions with energy (3) | - | - | 2,154 | 1,541 | - | - | (11,599) | (9,178)
Interest on Equity, and dividends | 1,729 | - | - | - | - | - | - | -
Hidrelétrica Pipoca |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Transactions with energy (3) | - | - | 1,816 | 1,387 | - | - | (11,599) | (9,178)
Interest on Equity, and dividends | - | - |  | - | - | - | - | -
Retiro Baixo |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Transactions with energy (3) | - | - | 142 | 567 | 2,519 | - | (2,103) | (2,556)
Interest on Equity, and dividends | 6,474 | 6,474 | - | - | - | - | - | -
Hidrelétrica Cachoeirão |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Interest on Equity, and dividends | 7,349 | 2,536 | - | - | - | - | - | -
Renova |  |  |  |  |  |  |  |
Non-current |  |  |  |  |  |  |  |
Accounts Receivable (7) | - | - | - | - | - | 93,708 | - | 688,031
Loans from related parties (8) | - | 16,559 | - | 6,418 | (803) | - | (37,361) | -
Light |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Transactions with energy (3) | 336 | 312 | 153 | 1,311 | 31,425 | 30,860 | (904) | (2,974)
Interest on Equity, and dividends | 71,206 | 72,737 | - | - | - | - | - | -
TAESA |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Transactions with energy (3) | - | - | 6,030 | 8,523 | - | - | (45,323) | (48,869)
Provision of services (4) | 174 | 170 | - | - | 295 | 299 | - | -
Hidrelétrica Itaocara |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Adjustment for losses (9) | - | - | 22,153 | 21,809 | - | - | - | -
Axxiom |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Provision of services (10) | - | - | 1,337 | 3,306 | - | - | - | -
Other related parties |  |  |  |  |  |  |  |
FIC Pampulha |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Cash and cash equivalents | 500,496 | 36,434 | - | - | - | - | - | -
Marketable securities | 2,536,682 | 742,561 | - | - | 15,794 | 10,186 | - | -
(-) Marketable securities issued by subsidiary companies (note 21) | (8,009) | (3,031) | - | - | - | - | - | -
Non-current |  |  |  |  |  |  |  |
Marketable securities | 194,405 | 1,825 | - | - | - | - | - | -
FORLUZ |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Post-employment obligations (11) | - | - | 167,067 | 144,828 | - | - | (102,892) | (98,346)
Supplementary pension contributions – Defined contribution plan (12) | - | - | - | - | - | - | (36,285) | (38,764)
Administrative running costs (13) | - | - | - | - | - | - | (14,855) | (14,024)
Operating leasing (14) | 2,508 | 178,504 | 865 | 35,458 | - | - | (885) | (27,672)
Non-current |  |  |  |  |  |  |  |
Post-employment obligations (11) | - | - | 2,850,222 | 2,827,308 | - | - | - | -
Operating leasing (14) | - | - | 1,787 | 149,415 | - | - | - | -
Cemig Saúde |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Health Plan and Dental Plan (15) | - | - | 147,631 | 140,830 | - | - | (120,392) | (113,451)
Non-current |  |  |  |  |  |  |  |
Health Plan and Dental Plan (15) | - | - | 3,065,919 | 3,021,852 | - | - | - | -

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

| (1) | Refers to sale of energy supply to the Minas Gerais State government. The price of the supply is set by the regulator (Aneel) through a Resolution relating to the annual tariff adjustment of Cemig D. In 2017 the government of Minas Gerais State signed a debt recognition agreement with Cemig D for payment of debits relating to the supply of power due and unpaid, in the amount of R$113,032, up to November 2019. Twenty installments were unpaid at June 30, 2020. These receivables have guarantee in the form of Cemig’s right to retain dividends and Interest on Equity otherwise payable to the State (in proportion to the State’s equity interest in the Company), for as long as any payments are overdue or in default. The amount of the Public Lighting Contribution relating to the debt recognition agreement at June 30, 2020 is R$246,104.

| (2) | This refers to the recalculation of the inflation adjustment of amounts relating to the Advance against Future Capital Increase (AFAC), which were returned to the State of Minas Gerais. These receivables have guarantee in the form of Cemig’s right to retain dividends and Interest on Equity otherwise payable to the State (in proportion to the State’s equity interest in the Company), for as long as any payments are overdue or in default. For further information, see Note 10.

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| (3) | The transactions in sale and purchase of energy between generators and distributors take place through auctions in the Regulated Market, and are organized by the federal government. In the Free Market, transactions are made through auctions or through direct contracting, under the applicable legislation. Transactions for transport of energy, on the other hand, are carried out by transmission companies and arise from the centralized operation of the National Grid, executed by the National System Operator (ONS).

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

| (5) | This refers to the aggregate amounts of legal actions realized and legal actions provisioned arising from the agreement made between Aliança Geração, Vale S.A. and Cemig. The action is provisioned in the amount of R$98 million, of which Cemig’s portion is R$32 million.

| (6) | Refers to advance payments for energy supply made in 2019 to Norte Energia, established by auction and by contract registered with the CCEE (Wholesale Trading Exchange). Norte Energia will deliver contracted supply until December 31, 2020, starting on January 01, 2020. Until June 30, 2020, the amount corresponding to energy supplied is R$19,931 and the remaining amount of the advanced payments is R$20,150. There is no financial updating of the contract.

| (7) | As mentioned in Note 15(b), in June 2019, due to the uncertainties related to continuity of Renova, an estimated loss on realization of the receivables was recorded for the full value of the balance, R$688 million.

| (8) | On November 25, 2019, December 27, 2019 and January 27, 2020 DIP loan contracts under court-supervised reorganization proceedings, referred to as ‘DIP’, ‘DIP 2’ and ‘DIP 3’, were entered into between the Company and the investee Renova Energia S.A., which is in court-supervised reorganization, in the amounts of R$10 million, R$6.5 million and R$20 million, respectively. The contracts specify interest equal to 100% of the accumulated variation in the DI rate, plus an annual spread, applied pro rata die (on 252-business-days basis), of 1.083% for the DIP contract, 2.5% for the DIP2 contract and 1.5% for the DIP3, up to the date of respective full payment. The Company recognized an impairment loss for the receivables from Renova, of its total carrying amount of R$37,361, in the second semester of 2020. For further information, see note 15 (c).

| (9) | A liability was recognized corresponding to the Company’s interest in the share capital of Hidrelétrica Itaocara, due to its negative equity (see Note 15).

| (10) | This refers to a contract for development of management software between Cemig D and Axxiom Soluções Tecnológicas S.A., instituted in Aneel Dispatch 2657/2017;

| (11) | The contracts of Forluz are updated by the Expanded Customer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA) calculated by the Brazilian Geography and Statistics Institute (IBGE) plus interest of 6% p.a. and will be amortized up to the business year of 2031 (see Note 23).

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

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

| (14) | Rental of the Company’s administrative head offices, in effect up to November 2020 (able to be extended every five years, up to 2035) and August 2024 (able to be extended every five years, up to 2034), with annual inflation adjustment by the IPCA index and price reviewed every 60 months. Aiming at costs reduction, in November 2019, Cemig returned the Aureliano Chaves building to Forluz. Cemig is still negotiating with Forluz the returning of the remaining leased floors of Aureliano Chaves building, aiming at balancing the headquarters leasing costs to Cemig’s budgeting.

| (15) | Post-employment obligations relating to the employees’ health and dental plan (see Note 23).

Dividends receivable

Dividends receivable | Consolidated | Parent Company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Cemig GT | - | - | 781,769 | 781,769
Cemig D | - | - | 352,287 | 822,183
Gasmig | - | - | 104,146 | 46,578
Centroeste | - | - | 8,744 | -
Light | 71,206 | 72,737 | 71,206 | 72,737
Aliança Geração | - | 103,033 | - | -
Others (1) | 26,192 | 10,228 | 2,411 | 3,628
| 97,398 | 185,998 | 1,320,563 | 1,726,895

| (1) | The subsidiaries grouped in ‘Others’ are identified in the table above under “Interest on Equity, and Dividends”.

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Guarantees on loans, financing and debentures

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

Related party | Relationship | Type | Objective | Jun. 30, 2020 | Maturity
Norte Energia (NESA) (1) | Affiliated | Surety | Financing | 2,536,909 | 2042
Light (2) | Affiliated | Counter-guarantee | Financing | 683,615 | 2042
Santo Antônio Energia S.A. | Jointly-controlled entity | Surety | Debentures | 434,075 | 2037
Santo Antônio Energia S.A. | Jointly-controlled entity | Guarantee | Financing | 961,491 | 2034
|  |  |  | 4,616,090 |

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

| (2) | Corporate guarantee given by Cemig to Saesa.

At June 30, 2020, Management believes that there is no need to recognize any provisions in the Company’s interim financial information for the purpose of meeting any obligations arising under these sureties and guarantees.

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

Cemig and its subsidiaries and affiliates invest part of their financial resources in an investment fund which has the characteristics of fixed income and obeys the Company’s cash investment policy. The amounts invested by the fund at June 30, 2020 are reported in Marketable securities in current or non-current assets, or presented after deduction of the account line Debentures in Current or Non-current liabilities.

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

Remuneration of key management personnel

The total costs of key personnel, comprising the Executive Board, the Fiscal Council, the Audit Committee and the Board of Directors, are within the limits approved at a General Shareholders’ Meeting, and the effects on the income statements of the in period ended June 30, 2020 and 2019, are as follows:

| Jun. 30, 2020 | Jun. 30, 2019
Remuneration | 12,449 | 14,253
Profit sharing (reversal) | 2,672 | 5,078
Assistance benefits | 578 | 965
Total | 15,699 | 20,296

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| 30. | FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

| a) | Financial instruments classification and fair value

The main financial instruments, classified in accordance with the accounting principles adopted by the Company, are as follows:

| Level | Jun. 30, 2020 | Dec. 31, 2019
Balance | Fair value | Balance | Fair value
Financial assets |  |  |  |  |
Amortized cost (1) |  |  |  |  |
Marketable securities – Cash investments | 2 | 603,106 | 603,106 | 102,109 | 102,109
Customers and Traders; Concession holders (transmission service) | 2 | 4,247,485 | 4,247,485 | 4,600,605 | 4,600,605
Restricted cash | 2 | 15,750 | 15,750 | 12,337 | 12,337
Accounts receivable from the State of Minas Gerais (AFAC) | 2 | 120,258 | 120,258 | 115,202 | 115,202
Concession financial assets – CVA (Parcel ‘A’ Costs Variation Compensation) Account and Other financial components | 3 | 926,183 | 926,183 | 881,614 | 881,614
Reimbursement of tariff subsidies | 2 | 89,048 | 89,048 | 96,776 | 96,776
Low-income subsidy | 2 | 37,915 | 37,915 | 29,582 | 29,582
Escrow deposits | 2 | 1,170,254 | 1,170,254 | 2,540,239 | 2,540,239
Concession grant fee – Generation concessions | 3 | 2,482,994 | 2,482,994 | 2,468,216 | 2,468,216
Reimbursements receivable – Transmission |  | 1,265,445 | 1,265,445 | 1,280,652 | 1,280,652
|  | 10,958,438 | 10,958,438 | 12,127,332 | 12,127,332
Fair value through profit or loss |  |  |  |  |
Cash equivalents – Cash investments |  | 858,740 | 858,740 | 326,352 | 326,352
Marketable securities |  |  |  |  |
Bank certificates of deposit | 2 | - | - | 267 | 267
Treasury Financial Notes (LFTs) | 1 | 638,350 | 638,350 | 94,184 | 94,184
Financial Notes – Banks | 2 | 1,492,464 | 1,492,464 | 557,018 | 557,018
Debentures | 2 | - | - | 103 | 103
|  | 2,989,554 | 2,989,554 | 977,924 | 977,924
Derivative financial instruments (Swaps) | 3 | 3,281,491 | 3,281,491 | 1,690,944 | 1,690,944
Derivative financial instruments (Ativas and Sonda Put options) | 3 | 2,678 | 2,678 | 2,614 | 2,614
Concession financial assets – Distribution infrastructure | 3 | 506,094 | 506,094 | 483,374 | 483,374
Reimbursements receivable – Generation | 3 | 816,202 | 816,202 | 816,202 | 816,202
|  | 7,596,019 | 7,596,019 | 3,971,058 | 3,971,058
|  | 18,554,457 | 18,554,457 | 16,098,390 | 16,098,390
Financial liabilities |  |  |  |  |
Amortized cost (1) |  |  |  |  |
Loans, financing and debentures | 2 | (15,862,429) | (15,862,429) | (14,776,031) | (14,776,031)
Debt with pension fund (Forluz) | 2 | (551,778) | (551,778) | (566,381) | (566,381)
Deficit of pension fund (Forluz) | 2 | (536,853) | (536,853) | (550,151) | (550,151)
Concessions payable | 3 | (20,205) | (20,205) | (19,692) | (19,692)
Suppliers | 2 | (1,945,496) | (1,945,496) | (2,079,891) | (2,079,891)
Leasing transactions | 2 | (256,251) | (256,251) | (287,747) | (287,747)
|  | (19,173,012) | (19,173,012) | (18,279,893) | (18,279,893)
Fair value through profit or loss |  |  |  |  |
Derivative financial instruments (SAAG put options) | 3 | (505,641) | (505,641) | (482,841) | (482,841)
|  | (505,641) | (505,641) | (482,841) | (482,841)
|  | (19,678,653) | (19,678,653) | (18,762,734) | (18,762,734)

| (1) | On June 30, 2020 and December 31, 2019, the book values of financial instruments reflect their fair values.

At initial recognition the Company measures its financial assets and liabilities at fair value and classifies them according to the accounting standards currently in effect. Fair value is a measurement based on assumptions that market participants would use in pricing an asset or liability. The Company uses the following classification to its financial instruments:

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

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

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

For assets and liabilities that are recognized at fair value on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization.

Fair value calculation of financial positions

Distribution infrastructure concession financial assets: These are measured at New Replacement Value (Valor novo de reposição, or VNR), according to criteria established by the Concession-granting power (‘Grantor’), based on fair value of the concession assets in service and which will be revertible at the end of the concession, and on the weighted average cost of capital (WACC) defined by the Grantor, which reflects the concession holder’s return on the operations of the concession. The VNR and the WACC are public information disclosed by the Grantor and by Cemig respectively. Changes in concession financial assets are disclosed in Note 13.

Indemnifiable receivable – generation: measured at New Replacement Value (VNR), as per criteria set by regulations of the grantor power, based on the fair value of the assets to be indemnify at the end of the concession.

Marketable securities: Fair value of marketable securities is determined taking into consideration the market prices of the investment, or market information that makes such calculation possible, considering future interest rates and exchange of investments to similar securities. The market value of the security is deemed to be its maturity value discounted to present value by the discount rate obtained from the market yield curve.

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Put options: The Company adopted the Black-Scholes-Merton method for measuring fair value of the SAAG and Sonda options. The fair value of these options was calculated on the basis of the estimated exercise price on the day of exercise of the option, less the fair value of the underlying shares, also estimated for the date of exercise, brought to present value at the reporting date.

Swaps: Fair value was calculated based on the market value of the security at its maturity adjusted to present value by the discount rate from the market yield curve.

Other financial liabilities: Fair value of its loans, financing and debentures were determined using 133.40% of the CDI rate – based on its most recent funding. For the loans, financing, debentures and debt renegotiated with Forluz, with annual rates between IPCA + 4.10% to 8.07% and CDI + 0.19% to 1.10%, Company believes that their carrying amount is approximated to their fair value.

| b) | Derivative financial instruments

Put options

Company holds options to sell certain securities (put options) for which it has calculated the fair value based on the Black and Scholes Merton (BSM) model, considering the following assumptions: exercise price of the option; closing price of the underlying asset as of June 30, 2020; risk-free interest rate; volatility of the price of the underlying asset; and the time to maturity of the option.

Analytically, calculation of the exercise price of the options, the risk-free interest rate and the time to maturity is primarily deterministic, so that the main divergence in the put options takes place in the measurement of the closing price and the volatility of the underlying asset.

On June 30, 2020 and December 31, 2019, the options values were as follows:

Consolidated | Jun. 30, 2020 | Dec. 31, 2019
Put option – SAAG | 505,641 | 482,841
Put / call options – Ativas and Sonda | (2,678) | (2,614)
| 502,963 | 480,227

Put option – SAAG

Option contracts were signed between Cemig GT and the private pension entities that participate in the investment structure of SAAG (comprising FIP Melbourne, Parma Participações S.A. and FIP Malbec, jointly, ‘the Investment Structure’), giving those entities the right to sell units in the Funds that comprise the Investment Structure, at the option of the Funds, in the 84th (eighty-fourth) month from June 2014. The exercise price of the Put Options will correspond to the amount invested by each private pension plan in the Investment Structure, updated pro rata temporis by the Expanded National Customer Price

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(IPCA) index published by the IBGE, plus interest at 7% per year, less such dividends and Interest on Equity as shall have been paid by SAAG to the pension plan entities. This option was considered to be a derivative instrument, accounted at fair value through profit and loss.

For measurement of the fair value of SAAG put options Cemig GT uses the Black-Scholes-Merton (‘BCM’) model. The assumption was made that the future expenditures of FIP Malbec and FIP Melbourne are insignificant, so that the options are valued as if they hold direct equity interests at Mesa. However, neither SAAG nor Mesa have its share traded on a securities exchange, so that some assumptions are necessary for calculation of the price of the asset and its volatility for application of the BSM model. The closing price of the share of Mesa on June 30, 2020 is ascertained based on free cash flow (FCFE), expressed by equity pick-up of the indirect interests held by the FIPs. Volatility, in turn, is measured as an average of historic volatility (based on the hypothesis that the series of the difference of continuously capitalized returns follows a normal distribution) of comparable companies in the energy generation sector that are traded at Bovespa.

Based on the analysis performed, a liability of R$505,641 was recorded in the Company’s interim financial information (R$482,841 on December 31, 2019), for the difference between the exercise price and the estimated fair value of the assets.

The changes in the value of the options are as follows:

| Consolidated
Balance at December 31, 2018 | 419,148
Adjustment to fair value | 21,946
Balance at June 30, 2019 | 441,094
Balance at December 31, 2019 | 482,841
Adjustment to fair value | 22,800
Balance at June 30, 2020 | 505,641

Cemig GT performed the sensitivity analysis of the exercise price of the option, varying the risk-free interest rate and the volatility, keeping the other variables of the model unchanged. In this context, scenarios for the risk-free interest rate at -0.89% to 3.11% p.a., and for volatility between 0.08 and 0.68 p.a., were used, resulting in estimates of minimum and maximum price for the put option of R$494,765 and R$516,740, respectively.

This option can potentially dilute basic earnings per share in the future; however, they have not caused dilution of earnings per share in the years presented.

Sonda options

As part of the shareholding restructuring, CemigTelecom and Sonda signed a Purchase Option Agreement (issued by Cemig Telecom) and a Sale Option Agreement (issued by Sonda). With the merger of Cemig Telecom into Cemig, on March 31, 2018, the option contract became an agreement between Cemig and Sonda.

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This resulted in Cemig simultaneously having a right (put option) and an obligation (call option). The exercise price of the put option will be equivalent to fifteen times the adjusted net income of Ativas in the year prior to the exercise date, multiplied by the percentage of equity interest held. The exercise price of the call option will be equivalent to seventeen times the adjusted net income of Ativas in the business year prior to the exercise date, multiplied by the percentage of equity interest held. Both options, if exercised, result in the sale of the shares in Ativas currently owned by the Company, and the exercise of one of the options results in nullity of the other. The options may be exercised as from January 1, 2021.

The put and call options in Ativas (‘the Ativas Options’) were measured at fair value and posted at their net value, i.e. the difference between the fair values of the two options on the reporting date of the interim financial information for June 30, 2020. The net value of the Ativas Options may be an asset or a liability of the Company.

The measurement has been made using the Black-Scholes-Merton (BSM) model. In the calculation of the fair value of the Ativas Options based on the BSM model, the following variables are taken into account: closing price of the underlying asset on June 30, 2020; the risk-free interest rate; the volatility of the price of the underlying asset; the time to maturity of the option; and the exercise prices on the exercise date.

The valuation base date is June 30, 2020, the same date as the closing of the Company’s interim financial information, and the methodology used to calculate the fair value of the company is discounted cash flow (DCF) based on the value of the shares transaction of Ativas by Sonda, occurred on October 19, 2016. The calculation of the risk-free interest rate was based on yields of National Treasury Bills. Maturity was calculated assuming exercise date of March 31, 2021.

Considering that the exercise prices of the options are contingent upon the future financial results of Ativas, the estimated exercise prices on the maturity date was based on statistical analyses and information of comparable listed companies.

Swap transactions

Considering that part of the loans and financings of the Company’s subsidiaries is denominated in foreign currency, the companies use derivative financial instruments (swaps) to protect the servicing associated with these debts (principal plus interest).

The derivative financial instruments contracted have the purpose of protecting the operations against the risks arising from foreign exchange variation and are not used for speculative purposes.

The notional amount of derivative transactions are not presented in the statement of financial position, since they refer to transactions that do not require cash as only the gains or losses actually incurred are recorded. The net result of those transactions on June 30, 2020 was a positive adjustment of R$1,800,960 (positive adjustment of R$613,394 on June 30, 2019), which was posted in finance income (expenses).

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The counterparties of the derivative transactions are the banks Bradesco, Itaú, Goldman Sachs and BTG Pactual and Cemig is guarantor of the derivative financial instruments contracted by Cemig GT.

This table presents the derivative instruments contracted by Cemig GT as of June 30, 2020 and December 31, 2019.

Assets (1) | Liability (1) | Maturity period | Trade market | Notional amount (2) | Unrealized gain / loss | Unrealized gain / loss
Carrying amount Jun. 30, 2020 | Fair value Jun. 30, 2020 | Carrying amount Dec. 31, 2019 | Fair value Dec. 31, 2019
US$ exchange variation + Rate (9.25% p.y.) | Local currency + R$ 150.49% of CDI | Interest: Half-yearly Principal: Dec. 2024 | Over the counter | US$1,000,000 | 1,774,001 | 2,330,216 | 813,535 | 1,235,102
US$ exchange variation + Rate (9.25% p.y.) | Local currency + R$125.52% of CDI | Interest: Half-yearly Principal: Dec. 2024 | Over the counter | US$500,000 | 588,717 | 951,275 | 108,532 | 455,842
| 2,362,718 | 3,281,491 | 922,067 | 1,690,944
Current Assets |  | 589,555 |  | 234,766
Non-current Assets |  | 2,691,936 |  | 1,456,178

| 1) | For the US$1 billion Eurobond issued on December 2017: (i) for the principal, a call spread was contracted, with floor at R$3.25/US$ and ceiling at R$5.00/US$; and (ii) a swap was contracted for the total interest, for a coupon of 9.25% p.a. at an average rate equivalent to 150.49% of the CDI. For the additional US$500 million issuance of the same Eurobond issued on July 2018: (1) a call spread was contracted for the principal, with floor at R$3.85/US$ and ceiling at R$5.00/US$; and (2) a swap was contracted for the interest, resulting in a coupon of 9.25% p.a., with an average rate equivalent to 125.52% of the CDI rate.

| 2) | In millions of US$.

In accordance with market practice, Cemig GT uses a mark-to-market method to measure its derivatives financial instruments for its Eurobonds. The principal indicators for measuring the fair value of the swap are the B3 future market curves for the DI rate and the dollar. The Black & Scholes model is used to price the call spread, and one of parameters of which is the volatility of the dollar, measured on the basis of its historic record over 2 years.

The fair value at June 30, 2020 was R$3,281,491 (R$1,690,944 on December 31, 2019), which would be the reference if Cemig GT would liquidate the financial instrument on that date, but the swap contracts protect the Company’s cash flow up to the maturity of the bonds in 2024 and they have carrying value of R$2,362,718 at June 30, 2020 (R$922,066 on December 31, 2019).

Cemig GT is exposed to market risk due to having contracted this hedge, the principal potential impact being a change in future interest rates and/or the future exchange rates. Based on the futures curves for interest rates and dollar, Cemig GT prepare a sensitivity analyses and estimates that in a probable scenario its results would be affected by the swap and call spread at the end of the period in the amount of R$1,736,780 for the option (call spread), partially compensated by R$1,375,980 for the swap – comprising a total of R$3,112,759.

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Cemig GT has measured the effects on its net income of reduction of the estimated fair value for the ‘probable’ scenario, analyzing sensitivity for the risks of interest rates, exchange rates and volatility changes, by 25% and 50%, as follows:

Parent company and Consolidated | Base scenario Jun. 30, 2020 | ‘Probable’ scenario: | ‘Possible’ scenario exchange rate depreciation and interest rate increase 25% | ‘Remote’ scenario: exchange rate depreciation and interest rate increase 50% |
Swap (asset) | 7,356,512 | 6,942,340 | 6,044,964 | 5,188,489 |
Swap (liability) | (5,658,748) | (5,566,361) | (5,652,379) | (5,734,539) |
Option / Call spread | 1,583,727 | 1,736,780 | 1,098,137 | 396,154 |
Derivative hedge instrument | 3,281,491 | 3,112,759 | 1,490,722 | (149,896) |

The same methods of measuring marked to market of the derivative financial instruments described above were applied to the estimation of fair value.

| c) | Financial risk management

Corporate risk management is a management tool that is part of the Company’s corporate governance practices, and is aligned with the process of planning, which sets the Company’s strategic business objectives.

The Company monitor the financial risk of transactions that could negatively affect the Company’s liquidity or profitability, recommending hedge protection strategies to minimize the Company’s exposure to foreign exchange rate risk, interest rate risk, and inflation risks, which are effective, in alignment with the Company’s business strategy.

The main risks to which the Company is exposed are as follows:

Exchange rate risk

Cemig and its subsidiaries are exposed to the risk of appreciation in exchange rates, with effect on loans and financing, suppliers, and cash flow. The net exposure to exchange rates is as follows:

Exposure to exchange rates | Jun. 30, 2020 | Dec. 31, 2019
Foreign currency | R$ | Foreign currency | R$
US dollar |  |  |  |
Loans and financing (Note 21) | (1,513,698) | (8,289,009) | (1,515,814) | (6,109,793)
Suppliers (Itaipu Binacional) | (31,770) | (173,973) | (60,229) | (242,766)
| (1,545,468) | (8,462,982) | (1,576,043) | (6,352,559)
Net liabilities exposed |  | (8,462,982) |  | (6,352,559)

Sensitivity analysis

Based on information from its financial consultants, the Company estimates that in a probable scenario the variation of the exchange rates of foreign currencies in relation to the Real at June 30, 2021 will be an depreciation of the dollar by 8.69% to R$5.00. The Company has prepared a sensitivity analysis of the effects on the Company’s net income arising from depreciation of the Real exchange rate by 25%, and by 50%, in relation to this ‘probable’ scenario.

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Risk: foreign exchange rate exposure | Base Scenario | ‘Probable’ scenario US$=R$5.00 | ‘Possible’ scenario US$= R$6.25 | ‘Remote’ scenario US$=R$7.50
US dollar |  |  |  |
Loans and financings | (8,289,009) | (7,568,489) | (9,460,611) | (11,352,733)
Suppliers (Itaipu Binacional) | (173,973) | (158,850) | (198,563) | (238,276)
| (8,462,982) | (7,727,339) | (9,659,174) | (11,591,009)
Net liabilities exposed | (8,462,982) | (7,727,339) | (9,659,174) | (11,591,009)
Net effect of exchange rate fluctuation | - | 735,643 | (1,196,192) | (3,128,027)

Company has entered into swap operations to replace the exposure to the US dollar fluctuation with exposure to fluctuation in the CDI Rate, as described in more detail in the item ‘Swap Transactions’ in this note.

Interest rate risk

The Company is exposed to the risk of decrease in Brazilian domestic interest rates. This exposure occurs as a result of net assets indexed to variation in interest rates, as follows:

Risk: Exposure to domestic interest rate changes | Consolidated
Jun. 30, 2020 | Dec. 31, 2019
Assets |  |
Cash equivalents – Cash investments (Note 5) – CDI | 858,740 | 326,352
Marketable securities (Note 6) – CDI / SELIC | 2,733,920 | 753,681
Restricted cash – CDI | 15,750 | 12,337
CVA and in tariffs (Note 13) – SELIC | 926,183 | 881,614
| 4,534,593 | 1,973,984
Liabilities |  |
Loans, financing and debentures (Note 21) – CDI | (3,620,721) | (3,771,549)
Loans, financing and debentures (Note 21) – TJLP | (247,628) | (243,430)
| (3,868,349) | (4,014,979)
Net liabilities exposed | 666,244 | (2,040,995)

Sensitivity analysis

In relation to the most significant interest rate risk, Company estimates that, in a probable scenario, at June 30, 2021 Selic and TJLP rates will be 2.00% and 4.61%, respectively. The Company has made a sensitivity analysis of the effects on its net income arising from increases in rates of 25% and 50% in relation to the ‘probable’ scenario. Fluctuation in the CDI rate accompanies the fluctuation of Selic rate.

Risk: Decrease in Brazilian interest rates | Jun. 30, 2020 | Jun. 30, 2021
Book value | ‘Probable’ scenario Selic 2.00% TJLP 4.61% | ‘Possible’ scenario Selic 1.50% TJLP 3.46% | ‘Remote’ scenario Selic 1.00% TJLP 2.31%
Assets |  |  |  |
Cash equivalents (Note 5) | 858,740 | 875,915 | 871,621 | 867,327
Marketable securities (Note 6) | 2,733,920 | 2,788,598 | 2,774,929 | 2,761,259
Restricted cash | 15,750 | 16,065 | 15,986 | 15,908
CVA and Other financial components – SELIC | 926,183 | 944,707 | 940,076 | 935,445
| 4,534,593 | 4,625,285 | 4,602,612 | 4,579,939
Liabilities |  |  |  |
Loans and financing (Note 21) – CDI | (3,620,721) | (3,693,135) | (3,675,032) | (3,656,928)
Loans and financing (Note 21) – TJLP | (247,628) | (259,044) | (256,196) | (253,348)
| (3,868,349) | (3,952,179) | (3,931,228) | (3,910,276)
Net assets exposed | 666,244 | 673,106 | 671,384 | 669,663
Net effect of fluctuation in interest rates |  | 6,862 | 5,140 | 3,419

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Increase in inflation risk

The Company and its subsidiaries are exposed to risk of increase in inflation, due to their having more liabilities than assets indexed to the variation of inflation indicators, as follows:

Exposure to increase in inflation | Jun. 30, 2020 | Dec. 31, 2019
Assets |  |
Concession financial assets related to Distribution infrastructure - IPCA (1) | 481,371 | 459.711
Concession financial assets related to Gas distribution infrastructure – IGP-M (1) | 24,723 | 23.663
Receivable from Minas Gerais state government (AFAC) – IGPM (Note 10 and 29) | 120,258 | 115,202
Receivable for residual value – Transmission – IPCA (Note 13) | 1,265,445 | 1,280,652
Concession Grant Fee – IPCA (Note 13) | 2,482,994 | 2,468,216
| 4,374,791 | 4,347,444
Liabilities |  |
Loans, financing and debentures – IPCA and IGP-DI (Note 21) | (3,779,068) | (4,729,928)
Debt with pension fund (Forluz) – IPCA | (551,778) | (566,381)
Deficit of pension plan (Forluz) – IPCA | (536,853) | (550,151)
| (4,867,699) | (5,846,460)
Net assets (liabilities) exposed | (492,908) | (1,499,016)

| (1) | Portion of the concession financial assets relating to the Regulatory Remuneration Base of Assets ratified by the regulator (Aneel) after the 4rd tariff review cycle.

Sensitivity analysis

In relation to the most significant risk of reduction in inflation index, reflecting the consideration that the Company has more assets than liabilities indexed to inflation indices, the Company estimates that, in a probable scenario, at June 30, 2021 the IPCA inflation index will be 3.00% and the IGPM inflation index will be 2.37%. The Company has prepared a sensitivity analysis of the effects on its net income arising from a reduction in inflation of 25% and 50% in relation to the ‘probable’ scenario.

Risk: increase in inflation | Jun. 30, 2020 | Jun. 30, 2021
Amount Book value | ‘Probable’ scenario IPCA 3.00% IGPM 3.91% | ‘Possible’ scenario (25%) IPCA 3.75% IGPM 4.89% | ‘Remote’ scenario (50%) IPCA 4.50% IGPM 5.87%
Assets |  |  |  |
Concession financial assets related to Distribution infrastructure – IPCA (1) | 481,371 | 495,812 | 499,422 | 503,033
Concession financial assets related to Gas distribution infrastructure – IGP-M | 24,723 | 25,690 | 25,932 | 26,174
Accounts receivable from Minas Gerais state government (AFAC) – IGPM index (Note 29) | 120,258 | 124,960 | 126,139 | 127,317
Receivable for residual value – Transmission – IPCA (Note 13) | 1,265,445 | 1,303,408 | 1,312,899 | 1,322,390
Concession Grant Fee – IPCA (Note 13) | 2,482,994 | 2,557,484 | 2,576,106 | 2,594,729
| 4,374,791 | 4,507,354 | 4,540,498 | 4,573,643
Liabilities |  |  |  |
Loans, financing and debentures – IPCA and IGP-DI | (3,779,068) | (3,892,440) | (3,920,783) | (3,949,126)
Debt agreed with pension fund (Forluz) – IPCA | (551,778) | (568,331) | (572,470) | (576,608)
Deficit of pension plan (Forluz) | (536,853) | (552,959) | (556,985) | (561,011)
| (4,867,699) | (5,013,730) | (5,050,238) | (5,086,745)
Net liability exposed | (492,908) | (506,376) | (509,740) | (513,102)
Net effect of fluctuation in IPCA and IGP–M indices |  | (13,468) | (16,832) | (20,194)

| (1) | Portion of the Concession financial assets relating to the Regulatory Remuneration Base of Assets ratified by the regulator (Aneel) after the 4rd tariff review cycle.

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Liquidity risk

Cemig has sufficient cash flow to cover the cash needs related to its operating activities.

The Company manages liquidity risk with a group of methods, procedures and instruments that are coherent with the complexity of the business, and applied in permanent control of the financial processes, to guarantee appropriate risk management.

Cemig manages liquidity risk by permanently monitoring its cash flow in a budget-oriented manner. Balances are projected monthly, for each one of the companies, over a period of 12 months, and daily liquidity is projected over 180 days.

Short-term investments must comply with investing principles established in the Company’s Cash Investment Policy. These include applying its resources in private credit investment funds, without market risk, and investment of the remainder directly in bank CDs or repo contracts which earn interest at the CDI rate.

In managing cash investments, the Company seeks to obtain profitability through a rigid analysis of financial institutions’ credit risk, applying operational limits for each bank, based on assessments that take into account their ratings, exposures and balance sheet. It also seeks greater returns on investments by strategically investing in securities with longer investment maturities, while bearing in mind the Company’s minimum liquidity control requirements.

Any reduction in the Company’s ratings could result in a reduction of its ability to obtain new financing and could also make refinancing of debts not yet due more difficult or more costly. In this situation, any financing or refinancing of the Company’s debt could have higher interest rates or might require compliance with more onerous covenants, which could additionally cause restrictions to the operations of the business.

The flow of payments of the Company’s obligation to suppliers, debts with the pension fund, loans, financing and debentures, at floating and fixed rates, including future interest up to contractual maturity dates, is as follows:

Consolidated | Up to 1 month | 1 to 3 months | 3 months to 1 year | 1 to 5 years | Over 5 years | Total
Financial instruments at (interest rates): |  |  |  |  |  |
- loating rates |  |  |  |  |  |
Loans, financing and debentures | 109,861 | 1,082,284 | 2,812,022 | 13,146,941 | 805,411 | 17,956,519
Onerous concessions | 234 | 462 | 2,021 | 9,060 | 12,515 | 24,292
Debt with pension plan (Forluz) (Note 23) | 12,011 | 24,060 | 110,017 | 467,676 | - | 613,764
Deficit of the pension plan (FORLUZ) (Note 23) | 5,358 | 10,741 | 124,523 | 210,000 | 578,226 | 928,848
| 127,464 | 1,117,547 | 3,048,583 | 13,833,677 | 1,396,152 | 19,523,423
- Fixed rate |  |  |  |  |  |
Suppliers | 1,936,386 | 8,032 | 930 | - | 148 | 1,945,496
| 2,063,850 | 1,125,579 | 3,049,513 | 13,833,677 | 1,396,300 | 21,468,919

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Parent Company | Up to 1 month | 1 to 3 months | 3 months to 1 year | 1 to 5 years | Over 5 years | Total
Financial instruments at (interest rates): |  |  |  |  |  |
- Floating rates |  |  |  |  |  |
Loans, financing and debentures | - | - | 50,138 | - | - | 50,138
Debt with pension plan (Forluz) (Note 23) | 591 | 1,184 | 5,413 | 23,010 | - | 30,198
Deficit of the pension plan (FORLUZ) (Note 23) | 264 | 528 | 6,127 | 10,332 | 28,449 | 45,700
| 855 | 1,712 | 61,678 | 33,342 | 28,449 | 126,036
- Fixed rate |  |  |  |  |  |
Suppliers | 1,786 | - | - | - | - | 1,786
| 2,641 | 1,712 | 61,678 | 33,342 | 28,449 | 127,822

Credit risk

The distribution concession contract requires levels of service on a very wide basis within the concession area, and disconnection of supply of defaulting customers is permitted. Additionally, the Company uses numerous tools of communication and collection to avoid increase in default. These include: telephone contact, emails, text messages, collection letters, posting of customers with credit protection companies, and collection through the courts.

The risk arising from the possibility of Cemig and its subsidiaries incurring losses as a result of difficulty in receiving amounts billed to its customers is considered to be low. The credit risk is also reduced by the extremely wide customers’ base.

The allowance for doubtful accounts receivable recorded on June 30, 2020, considered to be adequate in relation to the credits in arrears receivable by the Company, was R$888,024.

Cemig and its subsidiaries manage the counterparty risk of losses resulting from insolvency of financial institutions based on an internal policy, has been in effect since 2004.

This Policy assesses and scales the credit risks of the institutions, the liquidity risk, systemic risk related to macroeconomic and regulatory conditions, the market risk of the investment portfolio and the Treasury operational risk.

All investments are made in financial securities that have fixed-income characteristics, always indexed to the CDI rate. The Company does not carry out any transactions that would bring volatility risk into its financial statements.

As a management instrument, Cemig and its subsidiaries divide the investment of its funds into direct purchases of securities (own portfolio) and investment funds. The investment funds invest the funds exclusively in fixed income products, having companies of the Group as the only unit holders. They obey the same policy adopted in the investments for the Company’s directly-held own portfolio.

The minimum requirements for concession of credit to financial institutions are centered on three items:

| 1. | Rating by three risk rating agencies.

| 2. | Equity greater than R$400 million.

| 3. | Basel ratio one percentage point above the minimum set by the Brazilian Central Bank.

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Banks that exceed these thresholds are classified in three groups, in accordance with its equity amount, plus a specific segment comprising those whose credit risk is associated only with federal government. The credit limits are determined based on this classification, as follows:

Group | Equity | Limit per bank (% of equity)1
Federal Risk (FR) | - | 10%
A1 | Over R$ 3.5 billion | Between 6% and 9%
A2 | Between R$1.0 billion and R$3.5 billion | Between 5% and 8%
A3 | Between R$400 million and R$1.0 billion | Between 0% and 7%

1The percentage assigned to each bank depends on individual assessment of indicators, e.g. liquidity, and quality of the credit portfolio.

Cemig also sets two concentration limits:

| 1. | No bank may have more than 30% of the Group’s portfolio.

| 2. | “Federal Risk” and “A1” banks may have more than 50% of the portfolio of any individual company.

COVID-19 Pandemic – Risks and uncertainties related to Cemig’s business

The Company’s assessment concerning the risks and potential impacts of Covid-19 are disclosed in Note 1.1..

Risk of over-contracting and under-contracting of energy supply

Sale or purchase of energy supply in the spot market to cover a positive or negative exposure of supply contracted, to serve the captive market of Cemig D, is an inherent risk to the energy distribution business. The regulatory agent limits for 100% pass-through to customers the exposure to the spot market, valued at the difference between the distributor’s average purchase price and the spot price (PLD) is 105% of the distributor’s contracted supply. Any exposure that can be proved to have arisen from factors outside the distributor’s control (‘involuntary exposure’) may also be passed through in full to customers. Company’s management is continually monitories its contracts for purchase of energy supply to mitigate the risk of exposure to the spot market.

On April 07, 2020, Aneel expanded the limit of total amount of energy that can be declared by energy distributors in the process of the mechanism for the sale of surplus (‘Mecanismo de Venda de Excedentes’ - MVE), during 2020, from 15% to 30%, for the purpose of facilitating contractual reductions, considering the scenario caused by Covid-19 pandemic.

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Risk of continuity of the concession

The risk to continuity of the distribution concession arises from the new terms included in the extension of Cemig D’s concession for 30 years from January 1, 2016, as specified by Law 12,783/13. The extension introduced changes to the present contract, conditional upon compliance by the distributor with new criteria for quality, and for economic and financial sustainability.

The extension is conditional on compliance with indicators contained in the contract itself, which aim to guarantee quality of the service provided and economic and financial sustainability of the company. These are determinant for actual continuation of the concession in the first five years of the contract, since non-compliance with them in two consecutive years, or in the fifth year, results in cancellation of the concession.

Additionally, as from 2021, non-compliance with the quality criteria for three consecutive years, or the minimum parameters for economic/financial sustainability for two consecutive years, results in opening of proceedings for termination of the concession.

Due to the inspection carried out by Aneel, the indicators of efficiency criteria regarding service continuity were recalculated for the period from January 2016 to May 2019, resulting in a non-compliance of the annual global limit for the indicator DEC (Customer Unit Average Outage Duration) for the periods of 2016 and 2017. Once the DEC calculated for the period of 2019 also exceeded the regulatory global limit, the prohibition on declaration of dividends and interest on equity, provided in Article 2º of Aneel Normative Resolution 747/2016, was applied, limiting the amount of dividend and interest on equity, isolated or jointly, to 25% of net income, less the amounts allocated to the legal reserve and the Contingency Reserve. It is important to note that the internal indicators (DECi and FECi) for maintaining the distribution concession were complied with in all periods.

The efficiency criteria for continuity of supply and for economic and for financial management, required to maintain the distribution concession, were met in the period ended June 30, 2020.

Hydrological risk

The greater part of the energy sold by the Company’s subsidiaries is generated by hydroelectric plants. A prolonged period of drought can result in lower water volumes in the reservoirs of these plants, which can lead to an increase in the cost of acquisition of energy, due to replacement by thermoelectric generation, or reduction of revenues due to reduction in consumption caused by implementation of wide-ranging programs for saving of energy. Prolongation of the generation of energy using the thermal plants could pressure costs of acquisition of supply for the distributors, causing a greater need for cash, and could result in future increases in tariffs.

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Risk of debt early maturity

The Company’s subsidiaries have loan contracts with restrictive covenants normally applicable to this type of transaction, related to compliance with a financial index. Non-compliance with these covenants could result in earlier maturity of debts.

On June, 30, 2020, the Company was compliant with all the covenants for financial index requiring half-yearly and annual compliance, except for non-compliance with the non-financial covenant of the loan contracts with the CEF of the subsidiaries Central Eólica Praias de Parajuru and Central Eólica Volta do Rio. More details in Note 21.

Capital management

This table shows comparisons of the Company’s net liabilities and its equity:

| Consolidated | Parent company
Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2020 | Dec. 31, 2019
Total liabilities | 35,658,078 | 34,036,187 | 1,794,749 | 1,865,610
(–) Cash and cash equivalents | (971,314) | (535,757) | (32,278) | (64,356)
(–) Marketable securities | (2,529,359) | (740,339) | (106,679) | (185,211)
Net liabilities | 32,157,405 | 32,760,091 | 1,655,792 | 1,616,043
Total equity | 16,877,062 | 15,890,865 | 16,872,604 | 15,886,615
Net liabilities / equity | 1.91 | 2.06 | 0.10 | 0.10

| 31. | OPERATING SEGMENTS

The operating segments of the Company reflect their management and their organizational structure, used to monitoring its results. They are aligned with the regulatory framework of the Brazilian energy industry.

The Company also operates in the gas market, through its subsidiary Gasmig, and in other businesses with less impact on the results of its operations. These segments are reflected in the Company’s management, organizational structure, and monitoring of results.

The tables below show segment information for June 30, 2020 and 2019:

INFORMATION BY SEGMENT FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 2020
DESCRIPTION | ENERGY | GAS | OTHER | ELIMINATIONS | TOTAL
GENERATION | TRANSMISSION | DISTRIBUTION
SEGMENT ASSETS | 16,485,518 | 4,790,258 | 25,818,455 | 2,800,120 | 3,437,851 | (797,062) | 52,535,140
INVESTMENTS IN SUBSIDIARIES AND JOINTLY-CONTROLLED ENTITIES | 4,110,936 | 1,314,968 | - | - | 29,276 | - | 5,455,180
INVESTMENTS IN AFFILIATES CLASSIFIED AS HELD FOR SALE | - | - | 1,124,088 | - | - | - | 1,124,088
ADDITIONS TO THE SEGMENT | 64,372 | 118,819 | 581,746 | 27,887 | 2 | - | 792,826
CONTINUING OPERATIONS |  |  |  |  |  |  |
NET REVENUE | 2,994,897 | 747,480 | 7,555,731 | 798,779 | 51,437 | (154,695) | 11,993,629
COST OF ENERGY AND GAS |  |  |  |  |  |  |
Energy bought for resale | (1,785,145) | - | (3,822,279) | - | - | 37,691 | (5,569,733)
Charges for use of the national grid | (98,288) | (95) | (638,051) | - | - | 113,981 | (622,453)
Gas bought for resale | - | - | - | (543,303) | - | - | (543,303)
Total | (1,883,433) | (95) | (4,460,330) | (543,303) | - | 151,672 | (6,735,489)

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OPERATING COSTS AND EXPENSES |  |  |  |  |  |  |
Personnel | (96,653) | (58,803) | (451,411) | (29,125) | (14,797) | - | (650,789)
Employees’ and managers’ profit sharing | (5,048) | (2,989) | (19,211) | - | (6,032) | - | (33,280)
Post-employment obligations | (25,746) | (22,233) | (151,763) | - | (23,985) | - | (223,727)
Materials | (4,305) | (1,882) | (27,904) | (548) | (132) | 5 | (34,766)
Outsourced services | (50,365) | (20,164) | (506,300) | (10,596) | (17,283) | 3,018 | (601,690)
Depreciation and amortization | (101,627) | (3,141) | (329,133) | (52,961) | (1,587) | - | (488,449)
Operating provisions (reversals) | (37,305) | (17,967) | (250,678) | (1,791) | (48,988) | - | (356,729)
Construction costs | - | (74,044) | (581,744) | (27,888) | - | - | (683,676)
Other operating expenses, net | (34,066) | (6,503) | (80,978) | (5,003) | (11,906) | - | (138,456)
Total cost of operation | (355,115) | (207,726) | (2,399,122) | (127,912) | (124,710) | 3,023 | (3,211,562)
OPERATING COSTS AND EXPENSES | (2,238,548) | (207,821) | (6,859,452) | (671,215) | (124,710) | 154,695 | (9,947,051)
Fair value of business combination | - | 51,736 | - | - | - | - | 51,736
Impairment (reversals) of assets held for sale | - | - | (134,023) | - | - | - | (134,023)
Equity in earnings of unconsolidated investees, net | (3,246) | 167,556 | - | - | 166 | - | 164,476
OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES) | 753,103 | 758,951 | 562,256 | 127,564 | (73,107) | - | 2,128,767
Finance income | 1,677,876 | 176,616 | 246,095 | 34,136 | 18,090 | - | 2,152,813
Finance expenses | (2,418,076) | (262,154) | (221,440) | (10,919) | (2,287) | - | (2,914,876)
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAXES | 12,903 | 673,413 | 586,911 | 150,781 | (57,304) | - | 1,366,704
Income tax and social contribution tax | (4,963) | (144,018) | (241,544) | (45,651) | 56,620 | - | (379,556)
NET INCOME (LOSS) FOR THE PERIOD | 7,940 | 529,395 | 345,367 | 105,130 | (684) | - | 987,148
Equity holders of the parent | 7,940 | 529,395 | 345,367 | 104,673 | (684) | - | 986,691
Non-controlling interests | - | - | - | 457 | - | - | 457
| 7,940 | 529,395 | 345,367 | 105,130 | (684) | - | 987,148

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INFORMATION BY SEGMENT FOR THE PERIOD OF SIX MONTHS ENDED JUNE 30, 2019

DESCRIPTION | ENERGY | GAS | OTHER | ELIMINATIONS | TOTAL
GENERATION | TRANSMISSION | DISTRIBUTION
SEGMENT ASSETS (1) | 14,748,832 | 4,112,858 | 25,616,174 | 2,688,670 | 3,887,602 | (1,127,084) | 49,927,052
INVESTMENTS IN SUBSIDIARIES AND JOINTLY-CONTROLLED ENTITIES (1) | 4,133,104 | 1,237,177 | - | - | 29,110 | - | 5,399,391
INVESTMENTS IN AFFILIATES CLASSIFIED AS HELD FOR SALE (1) | - | - | 1,258,111 | - | - | - | 1,258,111
ADDITIONS TO THE SEGMENT | 36,374 | 82,989 | 363,167 | 19,397 | - | - | 501,927
CONTINUING OPERATIONS |  |  |  |  |  |  |
NET REVENUE | 3,804,889 | 329,457 | 7,785,779 | 902,123 | 254,645 | (146,922) | 12,929,971
COST OF ENERGY AND GAS |  |  |  |  |  |  |
Energy bought for resale | (1,699,161) | - | (3,455,727) | - | - | 34,688 | (5,120,200)
Charges for use of the national grid | (92,252) | - | (713,263) | - | - | 104,344 | (701,171)
Gas bought for resale | - | - | - | (725,162) | - | - | (725,162)
Total | (1,791,413) | - | (4,168,990) | (725,162) | - | 139,032 | (6,546,533)
OPERATING COSTS AND EXPENSES |  |  |  |  |  |  |
Personnel | (108,721) | (60,092) | (463,651) | (23,130) | (21,478) | - | (677,072)
Employees’ and managers’ profit sharing | (24,743) | (17,588) | (120,976) | - | (11,208) | - | (174,515)
Post-employment obligations | (24,447) | (18,184) | (134,323) | - | (21,745) | - | (198,699)
Materials | (8,022) | (2,135) | (29,102) | (907) | (103) | 13 | (40,256)
Outsourced services | (58,556) | (20,422) | (486,762) | (9,265) | (13,823) | 2,859 | (585,969)
Depreciation and amortization | (111,236) | (2,699) | (325,019) | (37,921) | (2,424) | - | (479,299)
Operating provisions (reversals) | (733,237) | (9,781) | (194,748) | (1,520) | (39,093) | - | (978,379)
Construction costs | - | (82,989) | (363,167) | (19,069) | - | - | (465,225)
Other operating expenses, net | (10,615) | (7,550) | (81,049) | (4,582) | 4,924 | 5,018 | (93,854)
Total cost of operation | (1,079,577) | (221,440) | (2,198,797) | (96,394) | (104,950) | 7,890 | (3,693,268)
OPERATING COSTS AND EXPENSES | (2,870,990) | (221,440) | (6,367,787) | (821,556) | (104,950) | 146,922 | (10,239,801)
Equity in earnings of unconsolidated investees, net | 3,347 | 100,567 | - | - | (414) | - | 103,500
OPERATING INCOME BEFORE FINANCE INCOME (EXPENSES) | 937,246 | 208,584 | 1,417,992 | 80,567 | 149,281 | - | 2,793,670
Finance income | 946,898 | 65,550 | 1,250,669 | 50,880 | 308,991 | - | 2,622,988
Finance expenses | (409,417) | (45,928) | (329,796) | (12,320) | (18,500) | - | (815,961)
INCOME BEFORE INCOME TAX AND SOCIAL CONTRIBUTION TAXES | 1,474,727 | 228,206 | 2,338,865 | 119,127 | 439,772 | - | 4,600,697
Income tax and social contribution tax | (680,745) | (59,037) | (771,698) | (39,593) | (137,399) | - | (1,688,472)
NET INCOME (LOSS) FOR THE PERIOD | 793,982 | 169,169 | 1,567,167 | 79,534 | 302,373 | - | 2,912,225
Equity holders of the parent | 793,982 | 169,169 | 1,567,167 | 79,159 | 302,373 | - | 2,911,850
Non-controlling interests (note 25) | - | - | - | 375 | - | - | 375
| 793,982 | 169,169 | 1,567,167 | 79,534 | 302,373 | - | 2,912,225

| (1) | Balance at December 31, 2019.

The following is a breakdown of the revenue of the Company by activity:

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Jan to Jun 2020 | ENERGY | GAS | OTHER | ELIMINATIONS | TOTAL
GENERATION | TRANSMISSION | DISTRIBUTION
Revenue from supply of energy | 3,440,383 | - | 9,286,600 | - | - | (39,531) | 12,687,452
Revenue from Use of Distribution Systems (the TUSD charge) | - | - | 1,410,801 | - | - | (11,693) | 1,399,108
CVA and Other financial components in tariff adjustment | - | - | 81,652 | - | - | - | 81,652
Transmission concession revenue | - | 525,379 | - | - | - | (102,278) | 423,101
Transmission construction revenue | - | 74,044 | - | - | - | - | 74,044
Reimbursement revenue – Transmission | - | 316,218 | - | - | - | - | 316,218
Distribution construction revenue | - | - | 581,744 | 27,888 | - | - | 609,632
Adjustment to expectation of cash flow from Financial assets of distribution concession to be indemnified | - | - | (955) | - | - | - | (955)
Gain on inflation updating of Concession Grant Fee | 146,412 | - | - | - | - | - | 146,412
Sale transaction in CCEE (i) | 31,598 | - | - | - | 1 | (1) | 31,598
Mechanism for the sale of surplus | - | - | 104,814 | - | - | - | 104,814
Supply of gas | - | - | - | 962,892 | - | (5) | 962,887
Fine for violation of continuity indicator | - | - | (29,117) | - | - | - | (29,117)
Other operating revenues | 3,471 | 16,001 | 812,854 | 10 | 55,463 | (1,187) | 886,612
Sector / Regulatory charges reported as Deductions from revenue | (626,967) | (184,162) | (4,692,662) | (192,011) | (4,027) | - | (5,699,829)
Net operating revenue | 2,994,897 | 747,480 | 7,555,731 | 798,779 | 51,437 | (154,695) | 11,993,629

Jan to Jun 2019 | ENERGY | GAS | OTHER | ELIMINATIONS | TOTAL
GENERATION | TRANSMISSION | DISTRIBUTION
Revenue from supply of energy | 3,423,710 | - | 9,542,996 | - | - | (37,552) | 12,929,154
Revenue from Use of Distribution Systems (the TUSD charge) | - | - | 1,276,741 | - | - | (11,022) | 1,265,719
CVA and Other financial components in tariff adjustment | - | - | 80,241 | - | - | - | 80,241
Transmission concession revenue | - | 336,060 | - | - | - | (93,317) | 242,743
Transmission construction revenue | - | 82,989 | - | - | - | - | 82,989
Reimbursement revenue – Transmission | - | 90,420 | - | - | - | - | 90,420
Distribution construction revenue | - | - | 363,167 | 19,069 | - | - | 382,236
Adjustment to expectation of cash flow from Financial assets of distribution concession to be indemnified | - | - | 8,967 | - | - | - | 8,967
Gain on inflation updating of Concession Grant Fee | 176,151 | - | - | - | - | - | 176,151
Transactions in energy on the CCEE | 404,037 | - | (6,601) | - | 1 | - | 397,437
Supply of gas | - | - | - | 1,131,248 | - | (15) | 1,131,233
Fine for violation of continuity indicator | - | - | (35,510) | - | - | - | (35,510)
PIS/Pasep and Cofins taxes credits over ICMS | 424,636 | - | 830,333 | - | 183,594 | - | 1,438,563
Other operating revenues | 75,435 | 12,998 | 677,012 | 34 | 77,121 | (5,016) | 837,584
Sector / Regulatory charges reported as Deductions from revenue | (699,080) | (193,010) | (4,951,567) | (248,228) | (6,071) | - | (6,097,956)
Net operating revenue | 3,804,889 | 329,457 | 7,785,779 | 902,123 | 254,645 | (146,922) | 12,929,971

For further details of operating revenue, see Note 26.

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Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025 This text is a translation, provided for information only. The original text in Portuguese is the legally valid version.

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| 32. | ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS

On June 30, 2020 and December 31, 2019 assets and liabilities classified as held for sale, and the results of discontinued operations, were as follows:

Consolidated and Parent company – Statements of financial position | Jun. 30, 2020 | Dec. 31, 2019
Assets held for sale – investment in an affiliate | 1,124,088 | 1,258,111

Consolidated and Parent company – Statements of income | Jun. 30, 2020 | Jun. 30, 2019
Loss for write-down of non-current assets held for sale arising from continuing operations, before taxes | (134,023) | -
Deferred taxes arising from non-current assets held for sale, recognized in continuing operations | 45,568 | -
Loss after taxes | (88,455) | -

Disposal of interest in and control of Light

On November 27, 2018, the Board of Directors of the Company decided, in the context of Cemig’s disinvestment program, to maintain as a priority for 2019 the firm commitment to sale of the shares in Light S.A. owned by Cemig, on conditions that are compatible with the market and also in accordance with the interests of shareholders.

Additionally, the Company has concluded that its investment in Light now meets the criteria of CPC 31 – Non-current assets held for sale and discontinued operations; and that its sale in the near future is highly probable. The Company has also evaluated the effects on the investments held in the companies LightGer, Axxiom, Guanhães and UHE Itaocara, which are jointly controlled by the Company and by Light.

On July 17, 2019, together with the public offering of shares by Light, the Company sold 33,333,333 shares that it held in that investee, at the price per share of R$18.75, in the total amount of R$625,000.

Additionally, with completion of the public offering of shares by Light, the Company’s equity interest in the total capital of this investee was reduced from 49.99% to 22.58%, corresponding to 68.621.263 shares of a total of 303.934.060, this limited its right of voting in meetings of shareholders, and consequently its ability to direct material activities of the investee.

Thus, as from that date, with the alteration of the equity interest in Light, the Company ceased to have the power ensuring it control over that investee. In these circumstances, the Company wrote down the values of assets and liabilities of its former subsidiary, and recognized, at fair value, its remaining equity interest as an investment in an affiliate or jointly-controlled entity, in accordance with IFRS 10 / CPC 36 (R3) – Consolidated financial statements.

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Since the Company maintains its firm commitment to dispose of the remaining equity interest in Light, the investment in that company continues to be classified in Assets held for sale, in accordance with CPC 31 / IFRS 5 – Non-current assets held for sale, and discontinued operations, at its fair value, subtracting the cost of sale. The difference between the book value of the remaining equity interest and its fair value was recognized in the net income for the period from discontinuing operations.

The Company also wrote down, on the date of the sale of the control, the assets and liabilities of the former subsidiaries Itaocara, Guanhães, LightGer and Axxiom, and recognized its remaining equity interest in these investees at fair value as investments in jointly-controlled subsidiaries, valued by the equity method. These investments, which are jointly controlled with Light, were not classified under Held for sale and Discontinued operations, since the company does not have the intention of selling these interests. For more information, see Note 15.

The restatement of the remaining equity interest in Light at fair value used the sale price of the shares on the date of the loss of control (Level 1 in the fair value hierarchy), of R$18.75 per share, less the estimated costs for the sale estimated at R$28,538.

Maintenance of the interest in Light as an asset held for sale

In 2019, Management has not completed the process of disinvestment of the entire investment in Light due to external factors, beyond its control and to unfavorable market conditions.

Company’s management continues to have a firm commitment to dispose of the remaining equity interest in Light and estimates that conclusion of the process in 2020 is highly probable. Considering that it is an investment in an affiliate, it was classified as an asset held for sale, but no longer as a discontinued operation, in accordance with the provisions established in CPC 31/IFRS 5 – Non-current assets held for sale, and discontinued operations.

On March 31, 2020, the market conditions have deteriorated as a result of Covid-19 situation and the Company reduced the carrying amount of the asset to its market value less estimated costs to sell, resulted in the recognition of an impairment loss of R$609 million in profit or loss from continuing operations.

On June 30, 2020, with the partial recovery in the stock market, the Company remeasured the fair value of the shares held, using the closing price on that date, of R$ 16.58, less estimated cost to sell, based on the most likely disposal process in the current scenario, of 1.2% on the total negotiated. The impairment of the asset held for sale, accumulated until June 30, 2020, recognized in the net income from continuing operations, totals R$ 134 million, corresponding to the difference between the fair values of Light interest, as valued at December 31, 2019 and June 30, 2020, less cost to sell. Thus, the recovery in the market price of the investee in the second quarter of 2020 resulted in a reversal of R$ 475 million in the impairment constituted in the first quarter of 2020.

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The equity value of the interest held by Cemig in Light is R$1,506,620 (R$1,406,857 on December 31, 2019), corresponding to the Company’s shareholding of 22.58% in Light total equity of R$6,672,366 (R$6,230,544 on December 31, 2019).

33. NON-CASH TRANSACTIONS

On the period ended June 30, 2020 and 2019, the Company had the following transactions not involving cash, which are not reflected in the Cash flow statement:

| § | Capitalized financial costs of R$22,515 on June 30, 2020 (R$22,822 on June 30, 2019);

| § | Except for the cash arising from the business combination, in the amount of R$27,110, and the payment of R$44,775, the acquisition of the Centroeste’s remaining equity interest did not generate effects in the Company’s cash flow;

| § | Except for the cash arising from the merger of the subsidiaries RME and LUCE, in April 24, 2019, amounting R$ 22,444, this transaction did not generate effects in the Company’s cash flow.

34. SUBSEQUENT EVENTS

Offsetting of receivables from the State of Minas Gerais against ICMS tax payable

On July 31, 2020, Cemig D filed an application to the tax authority of State of Minas Gerais to offset debts for energy consumption and service owed by the Direct and indirect administrations of Minas Gerais State, using amounts of ICMS tax payable, under Article 3 of State of Minas Gerais Decree 47,908/2020, which regulated State Law 47,891/2020.

The main criteria applying to offsetting of these debts, under that Decree, are:

| § | Offsetting in at least 12 installments. The maximum value of installments is limited to the number of months counted from the month following the request granting, until December, 2022;

| § | Relinquishing by the creditor of the financial updating (arreas interest, fines, updating of the amounts of the installments, and legal fees, if any);

| § | Offsetting starts from the first month after acceptance of the request.

Debts from the State of Minas Gerais that qualify for offsetting are those past due at June 30, 2019, which amount approximately R$ 240 million. The Company’s expects to begin the offsetting in the third quarter of 2020, after acceptance of its request

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CONSOLIDATED RESULTS

(Figures in R$ ’000 unless otherwise indicated)

Net income for the period

From January to June 2020, Cemig reports profit of R$986,691, compared to a profit of R$2,912,225 in the same period in 2019. This variation in Company’s income was due, mainly, to the recognition, in the same period of 2019, of PIS/Pasep and Cofins taxes credits over ICMS, in the amount of R$1,984,069 (see note n. 8), which was partially offset by the recognition of an impairment loss for receivables from Renova, in the amount of R$688,031 (see note n. 27).

For the first semester of 2020, we highlight the recognition of (i) the positive adjustments of Periodic Reset of Permitted Annual Revenue in the amount of R$283,694 (net of taxes), (ii) an impairment loss of R$88,455 (net of taxes) related to the Light equity interest classified as asset held for sale, and (iii) the negative result arising from the debt in foreign currency (Eurobonds) and its corresponding hedge instrument, which was R$242,213 (net of taxes). The main variations in revenues, costs, expenses and financial items are described in the following pages.

Ebitda (Earnings before interest, tax, depreciation and amortization)

Cemig’s consolidated adjusted Ebtida, with the removal of non-recurrent items, reduced in 8.54% in 1H20 compared to 1H19, whereas the adjusted Ebtida margin decreased from 21.95% to 19.95%. Consolidated Ebtida, measured according to CVM Instruction 527, decreased 20.04% % in 1H20 compared to 1H19, whereas the Ebtida margin was 25.31% in 1H19 and 22.63% in 1H20.

Ebitda – R$ ’000 | Jan to Jun 2020 | Jan to Jun 2019 | Var %
Net income for the period | 987,148 | 2,912,225 | (66.10)
+ Income tax and Social Contribution tax | 379,556 | 1,688,472 | (77.52)
+ Net financial revenue (expenses) | 762,063 | (1,807,027) | (142.17)
+ Depreciation and amortization | 488,449 | 479,299 | 1.91
= Ebitda according to “CVM Instruction 527” (1) | 2,617,216 | 3,272,969 | (20.04)
Non-recurrent items |  |  |
+ Non-controlling interests | (457) | (375) | 21.87
+ PIS/Pasep and Cofins over ICMS | - | (1,438,563) | (100.00)
+ Impairment loss – Receivables from Renova | 37,361 | 688,031 | (94.57)
+ Impairment (reversals) of assets held for sale (note 32) | 134,023 | - | -
+ Result of business combination (note 15) | (51,736) | - | -
+ RTP adjustments | (429,840) | - | -
Ebitda Adjusted (2) | 2,306,567 | 2,522,062 | (8.54)

| (1) | Ebitda is a non-accounting measure prepared by the Company, reconciled with the consolidated Interim financial information in accordance with CVM Circular SNC/SEP 1/2007 and CVM Instruction 527 of October 4, 2012. It comprises Net income adjusted by the effects of net financial revenue (expenses), Depreciation and amortization, and Income tax and social contribution tax. Ebitda is not a measure recognized by Brazilian GAAP nor by IFRS; it does not have a standard meaning; and it may be non-comparable with measures with similar titles provided by other companies. Cemig publishes Ebitda because it uses it to measure its own performance. Ebitda should not be considered in isolation or as a substitution for net income or operational profit, nor as an indicator of operational performance or cash flow, nor to measure liquidity nor the capacity for payment of debt.

| (2) | The Company adjusts the EBTIDA measured according to CVM Instruction 527 removing non-current items, which, because of their nature, do not contribute towards information on the potential of future cash generation, since they are extraordinary items.

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The lower adjusted Ebtida in 1H20 than in 1H19 mainly reflects the increase of 3.84% in the adjusted operational costs, partially offset by the 0.63% rise in adjusted net revenue. The consolidated LAJIDA, on the other hand, reduced mostly because of the recognition of revenue with PIS/Pasep and Cofins taxes credits, in an amount of R$1,438,563, in 1H19.

The main items in revenue in the period:

Revenue from supply of energy

Revenue from sales of energy in 1H20 were R$12,687,452 and R$12,929,154 in 1H19, a decrease of 1.87%.

Final customers

Total revenue from energy sold to final customers in the 1H20 was R$11,083,458 – or 3.53% lower compared to 1H19 (R$11,489,454).

The main factors in this revenue were:

| § | The annual tariff adjustment for Cemig D, effective May 28, 2019 (full effect in 2020) resulting in an average increase in customer tariffs of 8.73%; and

| § | Volume of energy invoiced to captive and free industrial clients 15.8% lower in 1H20 than in 1H19, mainly due to the measures to contain the Covid-19 pandemic.

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Cemig’s energy market

The total for sales in Cemig’s consolidated energy market comprises sales to: (i) Captive customers in Cemig’s concession area in the State of Minas Gerais; (ii) Free Customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ACL); (iii) other agents of the energy sector – traders, generators and independent power producers, also in the Free Market; (iv) Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and (v) the Power Trading Exchange (Câmara de Comercialização de Energia Elétrica – CCEE), eliminating transactions between companies of the Cemig Group.

This table details Cemig’s market and the changes in sales of energy by customer category, comparing the period of 1H20 to 1H19:

Revenue from supply of energy

| Jan to Jun 2020 | Jan to Jun 2019 | Charge %
| MWh (2) | R$ | Average price billed (R$/MWh) (1) | MWh (2) | R$ | Average price billed (R$/MWh) (1) | MWh | R$
Residential | 5,442,910 | 4,866,632 | 894.12 | 5,291,676 | 4,665,228 | 881.62 | 2.86 | 4.32
Industrial | 6,583,436 | 1,981,349 | 300.96 | 7,819,238 | 2,295,328 | 293.55 | (15.80) | (13.68)
Commercial, services and others | 4,594,310 | 2,577,247 | 560.96 | 4,654,040 | 2,619,879 | 562.93 | (1.28) | (1.63)
Rural | 1,671,865 | 984,629 | 588.94 | 1,775,702 | 917,625 | 516.77 | (5.85) | 7.30
Public authorities | 386,015 | 279,249 | 723.42 | 455,643 | 311,737 | 684.17 | (15.28) | (10.42)
Public lighting | 664,656 | 295,455 | 444.52 | 685,933 | 291,353 | 424.75 | (3.10) | 1.41
Public services | 675,124 | 356,523 | 528.09 | 679,065 | 333,397 | 490.96 | (0.58) | 6.94
Subtotal | 20,018,316 | 11,341,084 | 566.54 | 21,361,297 | 11,434,547 | 535.29 | (6.29) | (0.82)
Own consumption | 17,376 | - | - | 17,230 | - | - | 0.85 | -
Unbilled retail supply, net | - | (257,626) | - | - | 54,907 | - | - | (569.20)
| 20,035,692 | 11,083,458 | 553.19 | 21,378,527 | 11,489,454 | 537.43 | (6.28) | (3.53)
Wholesale supply to other concession holders (3) | 6,626,096 | 1,588,364 | 239.71 | 5,499,766 | 1,458,670 | 265.22 | 20.48 | 8.89
Wholesale supply not yet invoiced, net | - | 15,630 | - | - | (18,970) | - | - | 182.39
Total | 26,661,788 | 12,687,452 | 475.87 | 26,878,293 | 12,929,154 | 479.69 | (0.81) | (1.87)

| (1) | The calculation of the average price does not include revenue from supply not yet billed.

| (2) | Data not audited by external auditors. .

| (3) | Includes Regulated Market Energy Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.

The volume of energy sold to the industrial sector decreased 15.80% compared to 1H19, due, mainly, to the Covid-19 pandemic restrictive measures. The following factors also contributed significantly:

| § | Residential consumption 2.86% higher YoY in 1H20, mainly reflecting the increase of 1.8% in the number of customers.

| § | Decrease of 5.85% in the volume of energy sold to the rural customer category compared to 1H19, mainly due to the higher rainfall in 1Q20 than 1Q19, which reduced consumption for irrigation.

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| § | Supply to other concession holders 20.48% higher YoY, due to the higher volume of sales to traders in the early months of 2020, due to the lower consumption by clients due to the economic activity contraction resulting from the pandemic – partially offset by sales in the Regulated Market 1.5% lower YoY, due to differences in the seasonalization profile of the distributors.

Revenue from Use of Distribution Systems (the TUSD charge)

This is revenue from charging Free Customers the Tariff for Use of the Distribution System (TUSD), on the volume of energy distributed. In 1H20, this was R$1,399,108, compared to R$1,265,719 in 1H19 - an increase of 10.54%. This difference mainly arises from the Company’s annual tariff adjustment, in effect from May 28, 2019 (full effect in 2020), which was an increase of 15.47% for free clients, partially offset by volume of energy transported in 1H20 1.26% lower than in 1H19.

| MWh
Jan to Jun 2020 | Jan to Jun 2019 | Var %
Industrial | 8,750,291 | 8,844,838 | (1.07)
Commercial | 608,096 | 646,291 | (5.91)
Rural | 14,274 | 5,682 | 151.20
Concessionaires | 144,465 | 165,230 | (12.57)
Total | 9,517,126 | 9,662,041 | (1.50)

CVA and Other financial components in tariff adjustments

These items are the recognition of the difference between actual non-controllable costs (in which the contribution to the CDE – the Energy Development Account and energy bought for resale, are significant components) and the costs that were used in calculating rates charged to customers. The amount of this difference is passed through to customers in the next tariff adjustment of Cemig D (the distribution company), represented a gain of R$81,652 in 1H20, whereas in 1H19 it produced a revenue gain of R$80,241.

Additions to the CVA account were higher in In 1H20 compared to 1H19, mainly due to (i) higher costs of energy from Itaipu, as a result of the increase in the dollar exchange rate, and (ii) the effects of overcontracting, resulting from the reduction of consumption in the context of the Covid-19 pandemic. These effects on revenue were offset by the passthrough of excess funds in the Energy Reserve Account (CONER) in 1H20 and by the tariff adjustment of 2019, which was significantly higher than the amount awarded in the previous year.

For further details, see Note 13.

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Transmission concession revenue

Cemig GT’s transmission revenue comprises the sum of the revenues of all the transmission assets. The concession contracts establish the Permitted Annual Revenue (Receita Anual Permitida, or RAP) for the assets of the existing system, updated annually based on the variation in the IPCA inflation index. Whenever there is an upgrade or adaptation to an existing asset, made under specific authorization from Aneel, an addition is made to the RAP.

This revenue was 74.30% higher in 1H20 compared to 1H19, being R$423,101 and R$242,743 respectively. The higher figure arises, mainly, from the periodic reset of RAP, ratified by Aneel in June 30, 2020, resulting in an adjustment of R$198,714. More details see note 14.

Additionally, these revenues were impacted by the increase in annual RAP, in July 2019 – this includes the effects of inflation and also new revenues resulting from investments authorized. They also include an adjustment to expectation of cash flow from financial assets, arising from change in the fair value of the Regulatory Remuneration Base of Assets (BRR).

Transmission reimbursement revenue

As specified in the sector regulations, the Company reports in each period the amount of the inflation/monetary adjustment applicable to the amount of indemnity receivable, based on the IPCA inflation index, which has a two-month delay, and the average regulatory cost of capital.

The revenue from reimbursements of transmission assets in 1H20 was R$316,218, – or 249.72% higher than in 1H19 (R$90,420). This higher figure mainly reflects the upward adjustment to the economic portion of the indemnity base, as a result of the Periodic Reset of RAP, which was remeasured in accordance with the applicable regulatory rules, resulting in an increase of R$ 231,126 in the Company’s income at June 30, 2020. More details see note 14.

At the beginning of the tariff cycle, which occurs in July of each year, the amounts received, plus the adjustment made for the cycle, corresponding to the amortization of the debtor balance up to the end of the period, are excluded from the remuneration base, reducing the amounts of the monetary updating and the remuneration on the remaining balance. The amounts of the reimbursements are being received through RAP, since July 2017, over a period of 8 years.

For more details see Notes 13 and 14.

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Revenue from transactions in the Power Trading Exchange (CCEE)

Revenue from transactions in energy on the CCEE in 1H20 was R$31,598, or 92.05% lower than in 1H19, which was R$397,437. This reduction is primarily due to the deficit position on the CCEE assumed by Cemig GT in 1H20, compared to 1H19, due to: (i) lower allocation of its own generation; (ii) lower GSFs; and (iii) higher sales through spot-market bilateral contracts. On the other hand, in 1Q19 Cemig had a high excess of supply to be sold on the CCEE, arising from higher allocation of its own output, associated with higher GSFs and a lower volume of bilateral sales. Additionally, there was a reduction of 37.51% in the average spot price (PLD), which was R$ 131.68/MWh in 1H20, compared to R$ 210.73/MWh in 1H19.

The revenue from the mechanism for the sale of energy surplus (MVE) were R$ 104,814 in 1H20, relating to offers of supply made at the end of 2019 by Cemig D. The MVE enables distributors to sell excesses of supply and, for sales related to amounts of the regulatory limit or involuntary exposure, enables part of the benefit gained to be passed through to the customers tariffs in the tariff adjustments.

Revenue from supply of gas

Cemig reports revenue from supply of gas totaling R$962,887 in 1H20, compared to R$1,131,233 in 1H19 – a decrease of 14.88%. This basically reflects the reduction in the price of gas, which was passed through to customers – since the volume of gas sold was in fact 20% lower (at 433,273 m³ in the first half of 2020, vs. 537,346 m³ in same period of 2019), – under the influence, mainly, of the thermoelectric power generation and industrial sector, in which consumption was 45% and 13% lower, respectively. The effect of lower volume of gas sold was partially offset by the increase from application of the IGP-M inflation index to distribution costs, which occurs annually in February: the resulting increases were: 6.74% in 2019, and 7.81% in 2020, beyond Tariff Adjustment.

Construction revenue

Infrastructure construction revenue in 1H20 was R$683,676, or 46.96% higher compared to 1H19 (R$465,225).This variation is mainly due to the execution of a larger proportion of the Investment Plan budget in assets related to distribution concession infrastructure, especially those related to the medium- and low- voltage and sub-transmission networks. For the assets related to transmission infrastructure the difference arises mainly arises from the suspension of three implementation contracts, halting their financial realization – they will be re-tendered – and also the reductions resulting from the Covid-19 pandemic.

This revenue is fully offset by Construction costs, of the same amount, and corresponds to the Company’s investments in assets of the concession in the period.

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PIS/Pasep and Cofins taxes credits over ICMS

The credits of PIS/Pasep and Cofins taxes (previously erroneously charged to include the amounts of ICMS taxes paid or due), totaling R$1,438,563, resulted from the success in the Company’s legal action questioning the inclusion of ICMS tax in these amounts, and is backdated to July 2003. For more information please see Note 8.

Other operating revenues

The other operating revenues line for the Company and its subsidiaries in first half of 2020 totaled R$886,612, compared to R$837,584 in the same period of 2019 – 5.85% higher YoY. See Note 26 for a breakdown of other operating revenues.

Taxes and regulatory charges reported as Deductions from revenue

The taxes and charges that are recorded as deductions from operating revenue totaled R$5,699,829 from January to June 2020, or 6.53% less than the same period in 2019 (R$6,097,956).

The Energy Development Account – CDE

The amounts of payments to the Energy Development Account (CDE) are decided by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities (reimbursements of costs of assets), tariff subsidies, and the subsidy for balanced tariff reduction, the low-income-customer subsidy, the coal consumption subsidy, and the Fuels Consumption Account (CCC). Charges for the CDE in 1H20 were R$1,217,865, compared to R$1,331,366 in 1H19 – 8.53% lower YoY, due, primarily, to the Regulated Market Account (ACR), in August, 2019.

This is a non-manageable cost: the difference between the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Customer charges – the ’Flag’ Tariff system

The ‘Flag’ Tariff bands are activated as a result of low levels of water in the system’s reservoirs – tariffs are temporarily increased due to scarcity of rain. The ‘Red’ band has two levels – Level 1 and Level 2. Level 2 comes into effect when scarcity is more intense. Activation of the flag tariffs generates an impact on billing in the subsequent month.

Customer charges were, from January to June, 2020, at R$59,656, than the same period in 2019 (R$19,868) – or 200,26% higher year-on-year.

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The difference reflects the application of the ‘yellow’ tariff flag in December 2019 (affecting the billing of January 2020), and January 2020. There were no flag tariffs activated in the other months of 1H20. For comparison, in 1H19 the yellow flag was activated only in May (influencing billing in June 2019) and there was no activation of flags in the other months. Additionally, the increase also reflects re-invoicing in 2020 of invoices from previous periods.

Other taxes and charges on revenue

The deductions and charges with the most significant impact on revenue are mainly taxes, calculated as a percentage of sales revenue. Thus their variations are, substantially, in proportion to the variations in revenue.

Operating costs and expenses (excluding financial income/expenses)

Operating costs and expenses from January to June 2020 totaled R$9,947,051, or 2.86% less than the same period in 2019 (R$10,239,801). For more on the components of Operating costs and expenses see Note 27.

The following paragraphs comment on the main variations:

Employee profit sharing

The expense on employees’ and managers’ profit sharing was R$650,789 in 1H20, compared to R$677,072 in 1H19, 3.88% lower YoY. This arises mainly from the following factors:

| § | The average number of employees was 4.87% lower in 1H20, at 5,467, compared to 5,747 in 1H19, parcially offset by the events described bellow.

| § | Recognition, in 1H20, of a cost of R$58,850 on voluntary retirement plans, compared to R$21,495 in 1H19.

| § | Salary increase of 2.55% under the Collective Work Agreement, as from November 2019.

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Energy purchased for resale

This expense was R$5,569,733 in 1H20, or 8.78% higher year-on-year, compared to R$5,120,200 in 1H19. This arises mainly from the following items:

| § | Expense on supply from Itaipu was 37.20% higher, at R$952,413 in 1H20, compared to R$694,177 in 1H19. The difference is mainly due to the increase of 29.79% in the average dollar quotation in 1H20 compared to 1H19 (R$5.01 and R$3.86, respectively), which has contributed to the rise in dollar energy price per KW (US$28.41/KW in 1H20 and US$27.71/KW in 1H19);

| § | Expenses on supply acquired through physical guarantee quota contracts 4.14% higher, at R$379,450 in 1H20, compared to R$364,358 in 1H19. This is mainly due to the average price per MWh being 6.52% higher year-on-year in 1H20 (at R$108.62, compared to R$ 101.97 in 1H19).

| § | Expenses on supply acquired at auction 12.35% higher: R$1,567,953 in 1H20, compared to R$1,395,566 in 1H19. This increase reflects volume of energy acquired.

| § | Higher expenses on distributed generation (‘geração distribuída’): R$327,796 in 2H20, compared to R$82,858 in 1H19. This reflects the higher number of generation units installed (49,339 in June 2020, compared to 17,906 in June 2019); and the higher volume of energy injected into the grid (426,761 MWh in 1H20, compared to 179,833 MWh in 1H19).

| § | The expense on purchase of supply at the spot price was lower in 1H20, at R$ 633,003, than in 1H19 (R$ 762,267). The result expressed for spot-price supply is the net balance between revenues and expenses of transactions on the Power Trading Chamber (CCEE). The lower figure is mainly due to the average spot price (PLD) being 37.51% lower, at R$ 131.68/MWh in 1H20, compared to R$ 210.73/MWh in 1H19, and also the position assumed by Cemig D in 1H20, which was a creditor due to the lower consumption caused by the pandemic, contrasting with the position assumed in 1H19.

This is a non-manageable cost: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment. For more details please see Note 27.

Charges for use of the transmission network

Charges for use of the transmission network in 1H20 totaled R$622,453, a lower of 11.23% compared to 1H19 (R$701,171).

These charges are payable by energy distribution and generation agents for use of the facilities that are components of the national grid. The amounts to be paid are set by a Resolution from the Regulator (Aneel).

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The lower figure is due to the adjustment for the national grid – which was negative – being brought forward from July to April 2020, to financially support distributors agents during the Covid-19 pandemic, generating discounts in April, May and June 2020.

This is a non-manageable cost in the distribution activity: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Operating provisions

Operating provisions in 1H20 totaled R$356,729, or 63.54% less than 1H19 (R$978,379). This arises mainly from the following factors:

| § | Recognition, in 1H19, of an estimated loss on realization of the receivables from Renova, in the amount of R$688,031, compared to R$37,361 in 1H20.

| § | Net additional provisions for third-party liability legal actions were higher – at R$22,690, in 1H20, compared to 1H19, of R$1,076. The difference mainly arises from provisions made for legal actions for third party liability, claiming payment of indemnity for pain and suffering, and material and aesthetic damage, caused by accidents involving the electricity network.

| § | Losses expected on doubtful receivables from clients 69.40% higher, at R$215,100 in 1H20, compared to R$126,978 in 1H19. This difference mainly reflects an exponential increase in default by clients in the Public Authorities category, and also, worsening of performance in the Residential and Industrial category, because the Covid-19 pandemic.

| § | provisions for employment-law legal actions amounting R$106,558 in 1H19, compared to provisions of R$30,688 in 1H20. The difference was recognized for application of the IPCA-E inflation index instead of the TR reference rate in monetary adjustment for employment-law legal actions dealing with debts arising from March 25, 2015 to November 10, 2017. These are at the advanced execution phase and now have chances of loss assessed as ‘probable’. For further information, see Note 24.

Construction cost

Infrastructure construction costs in 1H20 totaled R$683,676, or 46.96% more than 1H19 (R$465,225). This line records the Company’s investment in assets of the concession in the period, and is fully offset by the line Construction revenue, in the same amount.

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Gas bought for resale

In 1H20, the Company recorded an expense of R$543,303 on acquisition of gas, 25.08% less than its comparable expense of R$725,162 in 1H19. This is basically due to volume of gas sold 20% lower (at 433,273 m³ in 1H20, compared to 537,346 m³ in 1H19), – under the influence, mainly, of the thermoelectric power generation and industrial sector, in which consumption was 45% and 13% lower in 1H20, respectively. The effect of lower volume of gas sold was partially offset by the increase from application of the IGP-M inflation index to distribution costs, which occurs annually in February: the resulting increases were: 6.74% in 2019, and 7.81% in 2020, beyond Tariff Adjustment.

Post-employment obligations

The Company’s post-retirement obligations in 1H20 is R$223,727 and R$198,699 in 1H2019. This is mainly the result of higher in the discount rate used in the actuarial calculation – which increased the amount of the actuarial liabilities, and consequently the scale of the expense reported.

Asset held for sale impairment

The Company recognized an impairment loss related to its equity interest in Light, classified as asset held for sale, in the amount of R$134,023. The market conditions have deteriorated as a result of Covid-19 situation and, in such circumstances, the fair value of equity interest in Light decreased significantly. For further information, see Note 32.

Share of profit (loss) of associates and joint ventures, net

The result of equity method valuation of interests in non-consolidated investees was a gain of R$164,476 in 1H20, an increase of 58.91% compared to 1H19, as a result, mainly, of the increase of 71.47% in the investee TAESA’s result, which was R$97,719 in 1H19 and R$167,556 in 1H20. In Addition, the loss of the associate Madeira decreased 56.97%, from (R$70,882) in 1H19 to (R$45,156) in 1H20.

The breakdown of the results from the investees recognized under this line is given in detail in Note 15.

Net financial revenue (expenses)

Cemig reports net financial expenses from January to June, 2020 of R$762,063, compared to the same period in 2019 (R$1,807,027). The main factors are:

| § | Recognition of financial updating of PIS/Pasep and Cofins taxes credits in 1H19, in the amount of R$1,553,112 (see note 8).

| § | Net negative effect of R$ 366,990 in 1H20 in the Eurobonds transaction and its corresponding hedge instrument – compared to a net gain of R$ 677,297 in 1H19.

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The difference mainly reflects (i) the dollar appreciated by 35.86% against the Real in the 1H20, compared to appreciation of 1.10% in 1H19. This resulted in negative effects on the principal of the Eurobond debt in both periods: R$2,167,950 in 1H20, vs. R$63,904 in 1H19; (ii) Variation in the fair value of the financial instrument contracted to hedge the risks of the Eurobond lower than the depreciation of the exchange rate, at March 31, 2020, in contrast to the positive effect at March 31, 2019. In 1H20 the variation in the fair value of the hedge instrument resulted in a gain of R$1,800,960, compared to R$613,394 in 1H19. The higher figure was the result of the dollar future curve moving upward, resulting in both the call spread and the asset becoming more valuable; and also due to the curve for the future DI interest rate (the liability side of the transaction) moving downward, and contributing to an increase in fair value.

For a breakdown of financial revenues and expenses please see Note 28.

Income tax and social contribution tax

In 1H20, the expense on income and the Social Contribution taxes totaled R$379,556, on pre-tax profit of R$1,366,704, an effective rate of 27.77%. In 1H19, the expense on income and the Social Contribution taxes was R$1,688,472, on pre-tax profit of R$4,600,697 an effective rate of 36.70%.

These effective rates are reconciled with the nominal tax rates in Note 9(c).

Results for the quarter

In 2Q20, Cemig reports profit of R$1,043,994, compared a profit of R$2,114,986 in 2Q19. The negative year-on-year comparison in the Company’s net profit is mainly due to the recognition in 2Q19 of non-recurring recovery of PIS/Pasep and Cofins taxes credits over ICMS tax, totaling (net of tax) R$ 1,984,069 – resulted from the success in the Company’s and its subsidiaries legal, subject to no further appeal – partially offset by the write-down of R$ 688,031 for doubtful credits receivable from the investee Renova (see Note 27).

The net income of 1H20 was also significantly impacted by the recognition of the positive adjustment arising from the periodic reset of RAP in the amount of R$283,694 (net of taxes) and by the partial reversal, in the amount of R$313,590 (net of taxes), and the impairment of R$ 402,046 (net of taxes) recorded in 1Q20 for the value of the investment in Light, classified as held for sale.

There was also a positive net gain of R$ 486,720 in Net financial revenue (expenses) from the net effect of FX variation on the Eurobond debt in foreign currency and its corresponding hedge transaction. See more information in Notes 21 and 30.

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The following items describe the main variations between the two periods in revenues, costs, expenses and financial items.

Ebitda (Earnings before interest, tax, depreciation and amortization)

Cemig’s consolidated adjusted EBTIDA, with the removal of non-recurrent items reduced in 11.30% in 2Q20 compared to 2Q19, whereas the adjusted Ebtida margin decreased from 19.02% to 17.10%. Consolidated Ebtida, measured according to CVM Instruction 527, decreased 0.15% % in 2Q20 compared to the same period last year, whereas the Ebtida margin was 25.82% in 2Q19 and 32.86% in 2Q20.

Ebitda – R$ ’000 | Apr to Jun 2020 | Apr to Jun 2019 | Var %
Net income for the period | 1,043,994 | 2,114,986 | (50.64)
+ Income tax and Social Contribution tax | 483,986 | 1,356,983 | (64.33)
+ Net financial revenue (expenses) | 35,317 | (1,908,587) | (101.85)
+ Depreciation and amortization | 245,697 | 248,403 | (1.09)
= Ebitda according to “CVM Instruction 527” (1) | 1,808,994 | 1,811,785 | (0.15)
Non-recurrent items |  |  |
+ Non-controlling interests | (188) | (212) | (11.32)
+ PIS/Pasep and Cofins over ICMS | - | (1,438,563) | (100.00)
+ Impairment loss – Receivables from Renova | 37,361 | 688,031 | (94.57)
+ Impairment (reversals) of assets held for sale (note 32) | (475,137) | - | -
+ RTP adjustments | (429,840) | - | -
Ebitda Adjusted (2) | 941,190 | 1,061,041 | (11.30)

| (1) | Ebitda is a non-accounting measure prepared by the Company, reconciled with the consolidated Interim financial information in accordance with CVM Circular SNC/SEP 1/2007 and CVM Instruction 527 of October 4, 2012. It comprises Net income adjusted by the effects of net financial revenue (expenses), Depreciation and amortization, and Income tax and social contribution tax. Ebitda is not a measure recognized by Brazilian GAAP nor by IFRS; it does not have a standard meaning; and it may be non-comparable with measures with similar titles provided by other companies. Cemig publishes Ebitda because it uses it to measure its own performance. Ebitda should not be considered in isolation or as a substitution for net income or operational profit, nor as an indicator of operational performance or cash flow, nor to measure liquidity nor the capacity for payment of debt.

| (2) | The Company adjusts the EBTIDA measured according to CVM Instruction 527 removing non-current items, which, because of their nature, do not contribute towards information on the potential of future cash generation, since they are extraordinary items.

The lower adjusted Ebtida in 2Q20, 2020 than 2Q19 mainly adjusted net revenue 1.32% lower, and adjusted operational costs 2.03% higher. The consolidated Ebtida, on the other hand, reduced mostly because of the recognition in 2Q19 of the gain of PIS/Pasep and Cofins taxes credits over ICMS in the amount R$1,438,563 – partially offset by (i) recognition in 2Q20 of a gain of R$429,840 resulting from the periodic reset of RAP, and (ii) the reversal of impairment of Light, classified as held for sale, in the amount of R$475,137.

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The main items in revenue in the period:

Revenue from supply of energy

Revenue from sales of energy in 2Q20 were R$5,920,014, compared to R$6,327,737 in 2Q19 – a decrease of 6.44%.

Final customers

Total revenue from energy sold to final customers in 2Q20 was R$5,332,353 – or 4.23% lower than 2Q19 (R$5,567,717), because the annual tariff adjustment for Cemig D, effective May 28, 2019 (full effect in 2020) resulting in an average increase in customer tariffs of 8.73%.

Cemig’s energy market

The total for sales in Cemig’s consolidated energy market comprises sales to: (i) Captive customers in Cemig’s concession area in the State of Minas Gerais; (ii) Free Customers in both the State of Minas Gerais and other States of Brazil, in the Free Market (Ambiente de Contratação Livre, or ACL); (iii) other agents of the energy sector – traders, generators and independent power producers, also in the Free Market; (iv) Distributors, in the Regulated Market (Ambiente de Contratação Regulada, or ACR); and (v) the Power Trading Exchange (Câmara de Comercialização de Energia Elétrica – CCEE), eliminating transactions between companies of the Cemig Group.

This table details Cemig’s market and the changes in sales of energy by customer category, comparing 2Q20 to 2Q19:

Revenue from supply of energy

| Apr to Jun 2020 | Apr to Jun 2019 | Charge %
| MWh (2) | R$ | Average price billed (R$/MWh) (1) | MWh (2) | R$ | Average price billed (R$/MWh) (1) | MWh | R$
Residential | 2,657,910 | 2,307,578 | 868.19 | 2,547,878 | 2,206,790 | 866.13 | 4.32 | 4.57
Industrial | 3,105,644 | 934,197 | 300.81 | 3,947,233 | 1,154,786 | 292.56 | (21.32) | (19.10)
Commercial, services and others | 2,085,089 | 1,136,848 | 545.23 | 2,374,683 | 1,280,841 | 539.37 | (12.20) | (11.24)
Rural | 896,651 | 511,810 | 570.80 | 915,078 | 460,746 | 503.50 | (2.01) | 11.08
Public authorities | 169,009 | 121,381 | 718.19 | 231,943 | 158,145 | 681.83 | (27.13) | (23.25)
Public lighting | 325,162 | 142,679 | 438.79 | 333,969 | 140,508 | 420.72 | (2.64) | 1.55
Public services | 339,650 | 177,860 | 523.66 | 339,954 | 165,901 | 488.01 | (0.09) | 7.21
Subtotal | 9,579,115 | 5,332,353 | 556.66 | 10,690,738 | 5,567,717 | 520.8 | (10.40) | (4.23)
Own consumption | 7,970 | - | - | 7,247 | - | - | 9.98 | -
Unbilled retail supply, net | - | (104,793) | - | - | 80,721 | - | - | (229.82)
| 9,587,085 | 5,227,560 | 545.27 | 10,697,985 | 5,648,438 | 527.99 | (10.38) | (7.45)
Wholesale supply to other concession holders (3) | 3,401,541 | 726,004 | 213.43 | 2,422,273 | 641,532 | 264.85 | 40.43 | 13.17
Wholesale supply not yet invoiced, net | - | (33,550) | - | - | 37,767 | - | - | (188.83)
Total | 12,988,626 | 5,920,014 | 466.44 | 13,120,258 | 6,327,737 | 473.26 | (1.00) | (6.44)

| (1) | The calculation of the average price does not include revenue from supply not yet billed.

| (2) | Data not audited by external auditors. .

| (3) | Includes Regulated Market Energy Sale Contracts (CCEARs) and ‘bilateral contracts’ with other agents.

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The variations are primarily due to the following events:

| § | Volume of energy sold to industrial clients 21.32% lower, and to commercial clients 12.20% lower, mainly due to the Covid-19 restrictive measures, under which non-essential commercial facilities were closed, industrial companies were shut down for part of the period, in-person school classes were canceled, and public bodies with in-loco activities were reduced or shut down.

| § | Increase of 4.32% in the volume of energy sold to the residential category, related to the addition in the number of customers.

Revenue from Use of Distribution Systems (the TUSD charge)

This is revenue from charging Free Customers the Tariff for Use of the Distribution System (TUSD), on the volume of energy distributed. In 2Q20, this was R$674,737, compared to R$635,675 in the same period 2019 - increase of 6.14%. This difference mainly arises from the Company’s annual tariff adjustment, in effect from May 28, 2019 (full effect in 2020), which was an increase of 15.47% for free clients, partially offset by volume of energy transported in 1H20 5.61% lower than in 1H19.

| MWh
Apr to Jun 2020 | Apr to Jun2019 | Var %
Industrial | 4,247,588 | 4,455,679 | (4.67)
Commercial | 259,661 | 315,065 | (17.58)
Rural | 7,045 | 2,670 | 163.87
Concessionaires | 72,652 | 86,206 | (15.72)
Total | 4,586,946 | 4,859,620 | (5.61)

CVA and Other financial components in tariff adjustments

These items are the recognition of the difference between actual non-controllable costs (in which the contribution to the CDE – the Energy Development Account and energy bought for resale, are significant components) and the costs that were used in calculating rates charged to customers. The amount of this difference is passed through to customers in the next tariff adjustment of Cemig D (the distribution company), represented a gain of R$136,254 in 2Q20, whereas in the same period in 2019 it produced a revenue gain of R$40,109.

This variation is due, primarily, to the high amount of revenue recognized in 2Q20 mainly because of the increase in the Itaipu energy cost, caused by the rise in the dollar exchange rate compared to 2Q19, and due to the overcontracting effects resulting from the energy consuption reduction, leading to a increment in the Company net financial asset. These effects on revenue were offset by the passthrough of excess funds in the Energy Reserve Account (CONER), determined by the Aneel Order (‘Despacho’) n. 986/2020

For further details, see Note 13.

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Transmission concession revenue

Cemig GT’s transmission revenue comprises the sum of the revenues of all the transmission assets. The concession contracts establish the Permitted Annual Revenue (Receita Anual Permitida, or RAP) for the assets of the existing system, updated annually based on the variation in the IPCA inflation index. Whenever there is an upgrade or adaptation to an existing asset, made under specific authorization from Aneel, an addition is made to the RAP.

This revenue was R$299,832 in 2Q20, compared to 2Q19 (R$125,564) – or 138.79% higher year-on-year. The higher figure arises from the reameasurement of the base of remuneration arising from the periodic reset of RAP, ratified by Aneel in June 30, 2020, resulting in an adjustment of R$198,714. More details see note 14.

Additionally, these revenues were impacted by the increase in annual RAP, in July 2019 – this includes the effects of inflation and also new revenues resulting from investments authorized. They also include an adjustment to expectation of cash flow from financial assets, arising from change in the fair value of the Regulatory Remuneration Base of Assets (BRR).

Transmission reimbursement revenue

As specified in the sector regulations, the Company reports in each period the amount of the inflation/monetary adjustment applicable to the amount of indemnity receivable, based on the IPCA inflation index, which has a two-month delay, and the average regulatory cost of capital.

The revenue from reimbursements of transmission assets in 2Q20 was R$259,680 – or 348.33% higher than the same period in 2019 (R$57,921). This higher figure mainly reflects the upward adjustment to the economic portion of the indemnity base, as a result of the Periodic Reset of RAP, which was remeasured in accordance with the applicable regulatory rules, resulting in an increase of R$ 231,126 in the Company’s income at June 30, 2020. More details see note 14.

At the beginning of the tariff cycle, which occurs in July of each year, the amounts received, plus the adjustment made for the cycle, corresponding to the amortization of the debtor balance up to the end of the period, are excluded from the remuneration base, reducing the amounts of the monetary updating and the remuneration on the remaining balance. The amounts of the reimbursements are being received through RAP, since July 2017, over a period of 8 years.

For more details see Note 13 – Financial assets of the concession.

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Revenue from transactions in the Power Trading Exchange (CCEE)

Revenue from transactions in energy on the CCEE in 2Q20 was R$7,074, or 95.12% lower than the same period in 2019, which was R$144,821. This reduction is principally due to the deficit position on the CCEE assumed by Cemig GT in the first quarter of 2020, when compared to the same period 2019, due to: (i) lower allocation of its own generation; (ii) lower GSFs; and (iii) higher sales through spot-market bilateral contracts. On the other hand, in first quarter of 2019 Cemig had a high excess of supply to be sold on the CCEE, arising from higher allocation of its own output, associated with higher GSFs and a lower volume of bilateral sales.

The revenue from the mechanism for the sale of energy surplus (MVE) were R$41,514 in 2Q20, relating to offers of supply made at the end of 2019 by Cemig D. The MVE enables distributors to sell excesses of supply and, for sales related to amounts of the regulatory limit or involuntary exposure, enables part of the benefit gained to be passed through to the customers tariffs in the tariff adjustments.

Revenue from supply of gas

Cemig reports revenue from supply of gas totaling R$403,227 in 2Q20, compared to R$534,955 in the same period in 2019 – 24.62% lower YoY. This basically reflects the reduction in the price of gas, which was passed through to customers – since the volume of gas sold was in fact 17.55% lower (at 183,138 m³ in the second quarter of 2020, vs. 222,106m³ in same period of 2019), – under the influence, mainly, of the industrial sector, in which consumption was 21.75% lower in the second quarter of 2020. The effect of lower volume of gas sold was partially offset by the increase from application of the IGP-M inflation index to distribution costs, which occurs annually in February: the resulting increases were: 6.74% in 2019, and 7.81% in 2020, beyond Tariff Adjustment.

Construction revenue

Infrastructure construction revenue in 2Q20 was R$373,405, or 40.32% more than the same period in 2019 (R$266,107). This variation is mainly due to the major capital expenditure in 2Q20.

This revenue is fully offset by Construction costs, of the same amount, and corresponds to the Company’s investments in assets of the concession in the period.

PIS/Pasep and Cofins taxes credits over ICMS

The credits of PIS/Pasep and Cofins taxes (previously erroneously charged to include the amounts of ICMS taxes paid or due), totaling R$1,438,563, resulted from the success in the Company’s legal action questioning the inclusion of ICMS tax in these amounts, and is backdated to July 2003. For more information please see Note 8.

Other operating revenues

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The other operating revenues line for the Company and its subsidiaries in 2Q20 totaled R$473,142, compared to R$396,386 in the same period of 2019 – 19.36% lower YoY. See Note 26 for a breakdown of other operating revenues.

Taxes and regulatory charges reported as Deductions from revenue

The taxes and charges that are recorded as deductions from operating revenue totaled R$2,687,389 in 2Q20, or 9.10% less than the same period in 2019 (R$2,956,432).

The Energy Development Account – CDE

The amounts of payments to the Energy Development Account (CDE) are decided by an Aneel Resolution. The purpose of the CDE is to cover costs of concession indemnities (reimbursements of costs of assets), tariff subsidies, and the subsidy for balanced tariff reduction, the low-income-customer subsidy, the coal consumption subsidy, and the Fuels Consumption Account (CCC). Charges for the CDE in 2Q20 were R$608,155, compared to R$679,017 in the same period in 2019 – 10.44% lower YoY, primarily, due to the Regulated Market Account (ACR), in August, 2019.

This is a non-manageable cost: the difference between the amounts used as a reference for setting of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Customer charges – the ’Flag’ Tariff system

The ‘Flag’ Tariff bands are activated as a result of low levels of water in the system’s reservoirs – tariffs are temporarily increased due to scarcity of rain. The ‘Red’ band has two levels – Level 1 and Level 2. Level 2 comes into effect when scarcity is more intense. Activation of the flag tariffs generates an impact on billing in the subsequent month.

Customer charges were, in 2Q20, at R$73, than the same period in 2019 (R$8,712) – or 99.16% lower year-on-year.

The variation is mostly because there were no flag tariffs activated in the 2Q20. In comparison, in the 2Q19, the yellow flag was activated in May (influencing billing in June 2019).

Other taxes and charges on revenue

The deductions and charges with the most significant impact on revenue are mainly taxes, calculated as a percentage of sales revenue. Thus their variations are, substantially, in proportion to the variations in revenue.

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Operating costs and expenses (excluding financial income/expenses)

Operating costs and expenses in 2Q20 totaled R$4,928,788, or 10.22% less than the same period in 2019 (R$5,489,685). For more on the components of Operating costs and expenses see Note 27.

The following paragraphs comment on the main variations:

Employee profit sharing

The expense on employees’ and managers’ profit sharing was R$339,183 in 2Q20, compared to R$312,031 in the same period in 2019, 8.70% higher YoY. This arises mainly from the recognition, in the second quarter of 2020, of a cost of R$58,850 on voluntary retirement plans and salary increase of 2.55% under the Collective Work Agreement, as from November 2019.

Energy purchased for resale

This expense in 2Q20 was R$2,755,238, or 9.07% higher year-on-year, compared to R$2,526,019 in the same period in 2019. This arises mainly from the following items:

| § | Expense on supply from Itaipu was 45.31% higher, at R$524,601 in the second quarter of 2020, compared to R$361,021 in the same period of 2019. The difference is mainly due to the increase of 37.76% in the average dollar quotation in the second quarter of 2020 compared to the same period last year (R$3.92 and R$5.40, respectively), which has contributed to the rise in dollar energy price per KW (US$28.41/KW in the year of 2020 and US$27.71/KW in 2019);

| § | Expenses on supply acquired through physical guarantee quota contracts 2.26% higher, at R$189,617 in 2Q20, compared to R$185,427 in the same period of 2019. This is mainly due to the average price per MWh being 7.2% higher year-on-year in 2Q20 (at R$109.36, compared to R$101.93 in 2Q19);

| § | Expenses on supply acquired at auction 9.31% higher: R$748,514 in 2Q20, compared to R$684,774 in the same period of 2019. This increase reflects volume of energy acquired approximately 10% higher year-on-year, added to the effect of upward adjustment in power purchasing agreements in the Regulated Market (CCEARs) taking place at the moment of the distributors’ tariff adjustment.

| § | Higher expenses on distributed generation (‘geração distribuída’): R$154,315 in 2Q20, compared to R$44,892 in 2Q19. This reflects the higher number of generation units installed and the higher volume of energy injected into the grid (232,076 MWh in 2Q20, compared to 95,965 MWh in 2Q19).

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| § | Lower expense on purchase of supply in the spot market, R$251,066 in 2Q20 compared to R$278,055 in the same period of 2019. The result expressed for spot-price supply is the net balance between revenues and expenses of transactions on the Power Trading Chamber (CCEE). The lower figure is mainly due to the average spot price (PLD) being 42.55% lower, at R$75.47/MWh in 2Q20 compared to R$131.37/MWh in 2Q19, and also the position assumed by Cemig D in 2Q20, which was a creditor due to the lower consumption caused by the Covid-19 pandemic, contrasting with the position assumed in 2Q19. This effect was partially offset by the increase in the Cemig GT consolidated expenses on purchase of supply in the spot market, mostly because of the deficit assumed in CCEE in 2Q20.

This is a non-manageable cost: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment. For more details please see Note 27.

Charges for use of the transmission network

Charges for use of the transmission network in 2Q20 totaled R$257,441, a lower of 29.92% compared with the same period in 2019 (R$367,375).

These charges are payable by energy distribution and generation agents for use of the facilities that are components of the national grid. The amounts to be paid are set by a Resolution from the Regulator (Aneel).

This is a non-manageable cost in the distribution activity: the difference between the amounts used as a reference for calculation of tariffs and the costs actually incurred is compensated for in the subsequent tariff adjustment.

Operating provisions

Operating provisions in 2Q20 totaled R$197,613, or 77.27% less than the same period in 2019 (R$869,373). This arises mainly from the following factors:

| § | Recognition, in the 2Q19, of an estimated loss on realization of the receivables from Renova, in the amount of R$688,031, compared to R$37,361 in 2Q20.

| § | Losses expected on doubtful receivables from customers 142.22% higher, at R$115,360 in 2Q20, compared to R$47,627 in 2Q19. This difference mainly reflects an exponential increase in default by clients in the Public Authorities category, and also, worsening of performance in the Residential and Industrial category, because the Covid-19 pandemic.

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| § | Provisions for employment-law legal actions amounting R$105,122 in 2Q2019, compared to provisions of R$23,375 in 2Q20. The difference was recognized for application of the IPCA-E inflation index instead of the TR reference rate in monetary adjustment for employment-law legal actions dealing with debts arising from March 25, 2015 to November 10, 2017. These are at the advanced execution phase and now have chances of loss assessed as ‘probable’. For further information, see Note 24.

Construction cost

Infrastructure construction costs in 2Q20 totaled R$373,405, or 40.32% higher than 2Q19 (R$266,107). This line records the Company’s investment in assets of the concession in the period, and is fully offset by the line Construction revenue, in the same amount.

Gas bought for resale

In 2Q20, the Company recorded an expense of R$231,378 on acquisition of gas, 29.92% less than its comparable expense of R$330,180 in the same period in 2019. This is basically due to volume of gas sold 14.61% lower (at 185,852m³ in the second quarter of 2020, compared to 217,646m³ in the same period of 2019).

Post-employment obligations

The Company’s post-retirement obligations in 2Q20 is R$118,322 and R$97,790 in 2019. This is mainly the result of higher in the discount rate used in the actuarial calculation – which increased the amount of the actuarial liabilities, and consequently the scale of the expense reported.

Asset held for sale impairment

The market conditions have deteriorated as a result of Covid-19 situation and, in such circumstances, the fair value of equity interest in Light decreased significantly. The Company recognized an impairment loss related to its equity interest in Light, classified as asset held for sale, in the amount of R$609,160 in 1Q20, which was reversed in 2Q20 due to the shares price recovery, resulting in a positive effect of R$475,137 on net income for 2Q20. For further information, see Note 32.

Share of profit (loss) of associates and joint ventures, net

The result of equity method valuation of interests in non-consolidated investees was a gain of R$82,534 in 2Q20, an increase of 127.52% compared to the same period of 2019, as a result, mainly, of the increase of 39.39% in the investee TAESA’s result, which was R$64,858 in the second quarter of 2019 and R$90,404 in same period of 2020.

The breakdown of the results from the investees recognized under this line is given in detail in Note 15.

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Net financial revenue (expenses)

Cemig reports net financial expenses in 2Q20 of R$35,317, compared to net financial income of R$1,908,587 in the same period in 2019. The main factors are:

| § | Recognition of the financial updating of PIS/Pasep and Cofins taxes credits over ICMS in the amount of R$1,553,112 in 2Q19 (see note n. 8).

| § | The dollar appreciated by 5.33% against the Real in the 2Q20, compared to appreciation of (1.66%) in 2Q19. This resulted in negative effects on the principal of the Eurobond debt in both periods: R$415,950 in 2Q20, vs. R$96,750 in 2Q19.

| § | In 2Q20, the variation in the fair value of the hedge instrument resulted in a gain of R$486,720, which was partially offset by the positive effect of R$70,770. In 2Q19, the variation in the fair value of the hedge instrument resulted in a gain of R$461,083, plus the positive debt exchange rate variation of R$96,750, which was partially offset by the positive effect of R$557,833. The higher figure was the result of the dollar future curve moving upward, resulting in both the call spread and the asset becoming more valuable; and also due to the curve for the future DI interest rate (the liability side of the transaction) moving downward.

For a breakdown of financial revenues and expenses please see Note 28.

Income tax and social contribution tax

In 2Q20, the expense on income and the Social Contribution taxes totaled R$483,986, on pre-tax profit of R$1,474,802, an effective rate of 31.67%. In the same period in 2019, the expense on income and the Social Contribution taxes was R$1,356,983, on pre-tax profit of R$3,471,969 an effective rate of 39.08%.

These effective rates are reconciled with the nominal tax rates in Note 9(c).

OTHER INFORMATION THAT THE COMPANY BELIEVES TO BE MATERIAL

Board of Directors

Meetings

The Board of Directors met 11 times up to June 30, 2020, to discuss strategic planning, projects, acquisition of new assets, various investments, and other subjects.

Membership, election and period of office

The present period of office began with the EGM on June 11, 2018, with election by the multiple voting system.

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The periods of office of the present members of the Board of Directors expire at the Annual General Meeting of Shareholders to be held in 2020.

Principal responsibilities and duties:

Under the by-laws, the Board of Directors has the following responsibilities and duties, as well as those conferred on it by law:

| § | Decision on any sale of assets, loans or financings, charge on the company’s property, plant or equipment, guarantees to third parties, or other legal acts or transactions, with value equal to 1% or more of the Company’s total Shareholders’ equity.

| § | Authorization for issuance of securities in the domestic or external market to raise funds;

| § | Approval of the Long-term Strategy and the Multi-year Business Plan, and alterations and revisions to them, and the Annual Budget.

Qualification and remuneration

The Board of Directors of the Company comprises 9 (nine) sitting members and the same number of substitute members. One is the Chair, and another Deputy Chair. The members of the Board of Directors are elected for concurrent periods of office of 2 (two) years, and may be dismissed at any time, by the General Meeting of Shareholders. Re-election for a maximum of 3 (three) consecutive periods of office is permitted, subject to any requirements and prohibitions in applicable legislation and regulations.

A list with the names of the members of the Board of Directors and their résumés is on our website at: http://ri.cemig.com.br.

The Audit Committee

The Audit Committee is an independent, consultative body, permanently established, with its own budget allocation. Its objective is to provide advice and assistance to the Board of Directors, to which it reports. It also has the responsibility for such other activities as are attributed to it by legislation.

The Audit Committee has four members, the majority of them independent, nominated and elected by the Board of Directors in the first meeting after the Annual General Meeting for periods of office of three years, not to run concurrently. One re-election is permitted.

Under the by-laws, the Audit Committee of Cemig has the following duties, among others:

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| § | to supervise the activities of the external auditors, evaluating their independence, the quality of the services provided and the appropriateness of such services to the Company’s needs;

| § | to supervise activities in the areas of internal control, internal audit and preparation of the financial statements;

| § | to evaluate and monitor, jointly with the management and the Internal Audit Unit, the appropriateness of the transactions with related parties.

Executive Board

The Executive Board has 7 (seven) members, whose individual functions are set by the Company’s bylaws. They are elected by the Board of Directors, for a period of office of two years, subject to the applicable requirements of law and regulation, and may be re-elected up to three times.

Members are allowed simultaneously also to hold non-remunerated positions in the management of wholly-owned subsidiaries, subsidiaries or affiliates of Cemig, upon decision by the Board of Directors. They are also, obligatorily under the by-laws, members, with the same positions, of the Boards of Directors of Cemig GT (Generation and Transmission) and Cemig D (Distribution). The period of office of the present Chief Officers expires at the first meeting of the Board of Directors held after the Annual General Meeting of 2020.

The members of the Executive Board and their résumés are on our website: http://ri.cemig.com.br.

The members of the Executive Board (the Company’s Chief Officers) have individual responsibilities set by the Board of Directors and the by-laws. These include:

| § | Current management of the Company’s business, subject to compliance with the Long-term Strategy, the Multi-year Business Plan, and the Annual Budget, prepared and approved in accordance with these by-laws.

| § | Authorization of the Company’s capital expenditure projects, signing of agreements or other legal transactions, contracting of loans and financings, and creation of any obligation in the name of the Company, based on an approved Annual Budget, which individually or in aggregate have values less than 1% (one per cent) of the Company’s Shareholders’ equity, including injection of capital into wholly-owned or other subsidiaries, affiliated companies, and the consortia in which the Company participates.

| § | The Executive Board meets, ordinarily, at least two times per month; and, extraordinarily, whenever called by the Chief Executive Officer or by two Executive Officers with at least two days’ prior notice in writing or by email or other digital medium, such notice not being required if all the Executive Officers are present. The decisions of the Executive Board are taken by vote of the majority of its members, and in the event of a tie the Chief Executive Officer shall have a casting vote.

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Audit Board

| Meetings |

| § | The Audit Board held seven meetings through the first half 2020.

Membership, election and period of office

| § | We have a permanent Audit Board, made up of five sitting members and their respective substitute members. They are elected by the Annual General Meeting of Shareholders, for periods of office of two years.

| § | Nominations to the Audit Board must obey the following:

| a) | The following two groups of shareholders each have the right to elect one member, in separate votes, in accordance with the applicable legislation: (i) the minority holders of common shares; and (ii) the holders of preferred shares.

| b) | The majority of the members must be elected by the Company’s controlling shareholder; at least one must be a public employee, with a permanent employment link to the Public Administration.

| § | The members of the Audit Board are listed on our website: http://ri.cemig.com.br.

Under the by-laws, the Audit Board has the duties and competencies set by the applicable legislation and, to the extent that they do not conflict with Brazilian legislation, those required by the laws of the countries in which the Company’s shares are listed and traded.

Qualification and remuneration

The global or individual compensation of the members of the Audit Board is set by the General Meeting of Shareholders which elects it, in accordance with the applicable legislation.

Résumé information on its members is on our website: http://ri.cemig.com.br.

Corporate risk management and internal controls

As a part of Cemig’s corporate governance practices, corporate risk management overall objective is to build and maintain a structure capable of providing material information to senior management to support making of decisions, creating and protecting the company’s value. The process of risk management enables the risk of the business’s objectives to be managed effectively, making it possible to influence and align strategy and performance in all the areas of the company.

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Since 2016 Cemig’s corporate risk management activity is subordinated to the office of the CEO. In 2019, a separate senior management unit, Compliance, Corporate Risks and Internal Controls, was created, bringing the processes of risk management and internal controls together under a single administration. This change underlines the intention to increase the synergy between these processes, and the independence from other processes – so as to supply senior management with independent information for decision-making, preserving the value of the company.

Thus, in 2019, the Executive Board and the Board of Directors approved the ‘Top Risks’ corporate risk matrix, for the years 2019/2020, which comprehends business such as Generation, Transmission, Distribution, Trading, Distributed Generation (‘Geração Distribuída’), Holding as well as ordinary business risks.

These risks, related to execution of strategy and scenarios, and also risks of conflicts of interest, fraud and corruption are under responsibility of the Chief Officers and they are monitored and reported periodically to the Management.

Each Chief Officer’s Department has responsibility for monitoring and managing the Company’s exposure to these risks as they relate to execution of strategy and scenarios, and also risks of conflicts of interest, fraud and corruption. The Chief Officers report on this monitoring periodically to senior management.

In 2019, the Company hired an expert consulting firm to support the review of internal control and risk matrix as well as to monitor periodically the execution and sufficiency of controls, analysis of failure/weakness and to support the remediation plans development and execution.

The matrix of internal controls is also revised and approved annually. The Risk Management and Internal Controls Unit tests and monitors the controls design. The internal audit, in its turn, monitors independently the internal control practices by testing control effectiveness. The conclusion of this assessment is reported periodically to the Board of Directors, the Audit Board, and the Audit Committee.

The internal controls provide reasonable assurance that errors and frauds that might cause an impact on the performance are detected and prevented, aimed at:

| § | Operational effectiveness and efficiency

| § | Reliable financial reporting

| § | Compliance with laws, regulations and policies.

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The controls linked to mitigation of risks associated with preparation and publication of the financial statements are a part of Cemig’s Risks and Internal Controls Matrix. The financial statements are issued in accordance with Section 404 of the Sarbanes-Oxley Law and the rules of the US Public Company Accounting Oversight Board (PCAOB), included as part of the annual 20-F Report filed with the US Securities and Exchange Commission (SEC). Cemig obtained the first certification of its internal controls for the business year of 2006, filed with the US Securities and Exchange Commission (SEC) on July 23, 2007.

Statement of Ethical Principles and Code of Professional Conduct

On May 11, 2004 Cemig’s Board of Directors approved the Statement of Ethical Principles and Code of Professional Conduct, which aims to orient and discipline everyone acting in the name of, or interacting with, Cemig, to ensure ethical behavior at all times, and always in accordance with the law and regulations. The code can be seen at http://ri.cemig.com.br. It was updated in 2018 and in 2019 to comply with the laws n. 12,486/2013 and n. 13,303/2016. Annually, the Company provide training on Statement of Ethical Principles and Code of Professional Conduct for all its employees.

The Ethics Committee

This was created on August 12, 2004, and is responsible for coordinating action in relation to management (interpretation, publicizing, application and updating) of the Statement of Ethical Principles and Code of Professional Conduct, including assessment of and decision on any possible non-compliances with Cemig’s Code of Ethics.

The Committee has eight sitting members. It may be contacted through our Ethics Channel – the anonymous reporting channel on the corporate Intranet, or by email, internal or external letter or by an exclusive phone line – these means of communication are widely publicized internally to all staff. These channels enable both reports of adverse activity and also consultations. Reports may result in opening of proceedings to assess any non-compliances with Cemig’s Statement of Ethical Principles and Code of Professional Conduct.

The Ethics Channel

Cemig installed this means of communication, available on the internal corporate Intranet, in December 2006.

Through it the Ethics Committee can receive anonymous reports or accusations that can enable Cemig to detect irregular practices that are contrary to its interest, such as: financial fraud, including adulteration, falsification or suppression of financial, tax or accounting documents; misappropriation of goods or funds; receipt of undue advantages by managers or employees; irregular contracting; and other practices considered to be illegal.

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It is one more step in improving Cemig’s transparency, compliance with legislation, and alignment with best corporate governance practices. It improves the management of internal controls and dissemination of the ethical culture to Cemig’s employees in the cause of optimum compliance by our business.

Anti-fraud Policy

In its business and activities, Cemig does not accept the practice and concealment of acts of fraud or corruption in all its forms. Suspicions and allegations of such acts are rigorously assessed and where proven, apply disciplinary procedures set out in the internal rules of the Company, as well as lawsuits and criminal charges, when applicable.

Thus, in 2012, Cemig consolidated its Anti-Fraud Policy is applicable to all members of the Board of Directors and Fiscal Officers, employees and contractors. The policy underscores the Company's commitment to the Global Compact principles on the subject, particularly the principle of number ten, which deals with combating corruption in all its forms, including extortion and bribery.

SHAREHOLDING POSITION OF HOLDERS OF

MORE THAN 5% OF THE VOTING STOCK ON JUNE 30, 2020

| COMMON SHARES | % | PREFERRED SHARES | % | TOTAL SHARES | %
Estado de Minas Gerais | 248,516,953 | 50.96 | 11,323 | - | 248,528,276 | 17.04
FIA Dinâmica Energia S/A | 48,772,500 | 10.00 | 49,914,344 | 5.14 | 102,394,844 | 7.02
BNDESPAR | 54,342,992 | 11.14 | 26,220,938 | 2.70 | 80,563,930 | 5.52

CONSOLIDATED SHAREHOLDING POSITION OF

THE CONTROLLING SHAREHOLDERS AND MANAGERS, AND FREE FLOAT,

ON JUNE 30, 2020

| January to June 2020
ON | PN
Controlling shareholder | 248,516,953 | 11,323
Board of Directors | - | 16,600
Executive Board | 1 | 10,400
Shares in Treasury | 69 | 560,649
Free float | 239,097,190 | 970,539,416
TOTAL | 487,614,213 | 971,138,388

Investor Relations

In 2019 we expanded Cemig’s exposure to the Brazilian and global capital markets, through strategic actions intended to enable investors and shareholders to make a correct valuation of our businesses and our prospects for growth and addition of value.

We maintain a constant and proactive flow of communication with Cemig’s investor market, continually reinforcing our credibility, seeking to increase investors’ interest in the Company’s shares, and to ensure their satisfaction with our shares as an investment.

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Our results are published through presentations transmitted via video webcast and telephone conference calls, with simultaneous translation in English, always with members of the Executive Board present, developing a relationship that is increasingly transparent and in keeping with best corporate government practices.

To serve our shareholders – who are spread over more than 40 countries – and to facilitate optimum coverage of investors, Cemig has been present in and outside Brazil at a very large number of events, including seminars, conferences, investor meetings, congresses, roadshows, and events such as Money Shows; as well as holding phone and video conference calls with analysts, investors and others interested in the capital markets.

At the end of May 2019, we held our 24rd Annual Meeting with the Capital Markets, in Belo Horizonte, Minas Gerais – where market professionals had the opportunity to interact with the Company’s directors and principal executives.

Corporate governance

Our corporate governance model is based on principles of transparency, equity and accountability, focusing on clear definition of the roles and responsibilities of the Board of Directors and the Executive Board in the formulation, approval and execution of policies and guidelines for managing the Company’s business.

We seek sustainable development of the Company through balance between the economic, financial, environmental and social aspects of our enterprises, aiming always to improve the relationship with shareholders, customers, and employees, the public at large and other stakeholders.

Cemig’s preferred and common shares (tickers: CMIG4 and CMIG3 respectively) have been listed at Corporate Governance Level 1 on the São Paulo Stock Exchange since 2001. This classification represents a guarantee to our shareholders of optimum reporting of information, and also that shareholdings are relatively widely dispersed. Because Cemig has ADRs (American Depositary Receipts) listed on the New York Stock Exchange, representing its preferred (PN) shares (ticker CIG) and common (ON) shares (ticker CIG.C), it is also subject to the regulations of the US Securities and Exchange Commission (SEC) and the New York Stock Exchange Listed Company Manual. Our preferred shares have also been listed on the Latibex of the Madrid stock exchange (with ticker XCMIG) since 2002.

In June 11, 2018 an Extraordinary Meeting of Shareholders approved alterations to the Company’s bylaws, to maintain best corporate governance practices, and adapt to Law 13,303/2016 (also known as the State Companies Law).

The improvements now formally incorporated in the by-laws include:

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

| § | Creation of the Audit Committee (Comitê de Auditoria). The Audit Board (Conselho Fiscal) remains in existence.

| § | The Policy on Eligibility and Evaluation for nomination of a member of the Board of Directors and/or the Executive Board in subsidiary and affiliated companies.

| § | The Related Party Transactions Policy.

| § | Formal designation for the Board of Directors to ensure implementation of and supervision of the Company’s systems of risks and internal controls.

| § | Optional power for the Executive Board to expand the technical committees (on which members are career employees), with autonomy to make decisions in specific subjects.

| § | The CEO now to be responsible for directing compliance and corporate risk management activities.

| § | Greater emphasis on the Company’s control functions: internal audit, compliance, and corporate risk management.

| § | Adoption of an arbitration chamber for resolution of any disputes between the Company, its shareholders, managers, and/or members of the Audit Board.

* * * * * * * * * * * *

(The original is signed by the following signatories)

Reynaldo Passanezi Filho | Dimas Costa | Leonardo George de Magalhães
Chief Executive Officer | Chief Trading Officer | Chief Finance and Investor Relations Officer cumulatively with charge of Controller CRC-MG 53,140
Ronaldo Gomes de Abreu |  | Rafael Falcão Noda
Chief Distribution Officer |  | Chief Officer Cemigpar
Paulo Mota Henriques |  | Eduardo Soares
Chief Generation and Transmission Officer |  | Chief Regulation and Legal
| Carolina Luiza F. A. C. de Senna |
| Financial Accounting and Equity Interests Manager Accountant – CRC-MG 77,839 |

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| Edifício Phelps Offices Towers Rua Antônio de Albuquerque, 156 11º andar - Savassi 30112-010 - Belo Horizonte - MG - Brasil Tel: +55 31 3232-2100 Fax: +55 31 3232-2106 ey.com.br

A free translation from Portuguese into English of Independent Auditor’s Review Report on Quarterly Information prepared in Brazilian currency in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS), issued by International Accounting Standards Board – IASB

Independent Auditor’s Review Report on Quarterly Information - ITR

To the Shareholders and Management of

Companhia Energética de Minas Gerais - CEMIG Belo Horizonte - MG

Introduction

We have reviewed the accompanying individual and consolidated interim financial information, contained in the Quarterly Information Form (ITR) of Companhia Energética de Minas Gerais - CEMIG (the “Company”), for the quarter ended June 30, 2020, comprising the statements of financial position as at June 30, 2020, and the related statements of profit or loss, of comprehensive income for the three and six month periods then ended, and of changes in equity and cash flows for the six-month period then ended, including the explanatory notes.

Management is responsible for preparation of the individual and consolidated interim financial information in accordance with Accounting Pronouncement NBC TG 21 – Interim Financial Reporting and IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board (IASB), as well as for the fair presentation of this information in conformity with the rules issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of the Quarterly Information Form (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of review

We conducted our review in accordance with Brazilian and international standards on review engagements (NBC TR 2410 and ISRE 2410 - Review of Interim Financial Information performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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Conclusion on the individual and consolidated interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the quarterly information referred to above are not prepared, in all material respects, in accordance with NBC TG 21 and IAS 34, applicable to the preparation of Quarterly Information Form (ITR), and presented consistently with the rules issued by the Brazilian Securities and Exchange Commission (CVM).

Emphasis of matters

Risks related to compliance with laws and regulations

As mentioned in Note 15 to the individual and consolidated interim financial information, currently investigations and other legal measures are being conducted by public authorities in connection with the Company and certain investees regarding certain expenditures and their allocations, which involve and also include some of its other shareholders and certain executives of the Company and of these other shareholders. The governance bodies of the Company have authorized engaging a specialized company to analyze the internal procedures related to these certain investments and to ascertain such claims. The internal and independent investigation was completed, and the corresponding report was delivered on May 8, 2020, with the conclusion that no evidence has been identified to support the preliminarily investigated allegations. Thus far, it is not possible to predict future developments arising from investigations conducted by public authorities, or their possible impact on the interim financial information of the Company and its subsidiaries. Our conclusion is not modified in respect of this matter.

Risk regarding the ability of jointly-controlled entity Renova Energia S.A. to continue as a going concern

As disclosed in Note 15 to the individual and consolidated interim financial information, on December 17, 2019, under the terms of Law No. 11101/05, the jointly-controlled entity Renova Energia S.A. and some of its subsidiaries filed its first court-supervised reorganization plan, and on July 7,2020 two others reorganization plans were filed. The reorganization plan of the jointly-controlled entity is still in progress on the second State of São Paulo Bankruptcy and Court-Supervised Reorganization Court. The jointly-controlled entity shall submit the court-supervised reorganization plan to the General Meeting of Creditors approval in accordance with the terms and conditions established by the referred Law. The jointly-controlled entity is in the process of discussing such plan and up to the present date has not measured the possible effects on its accounting balances. In addition, the jointly-controlled entity has incurred recurring losses and, as at June 30, 2020, has negative net working capital, equity deficit and negative gross margin. These events or conditions indicate the existence of relevant uncertainty that may raise significant doubt about the ability of this jointly-controlled entity to continue as a going concern. Our conclusion is not modified in respect of this matter.

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Other matters

Statements of value added

The above mentioned quarterly information include the individual and consolidated statements of value added (SVA) for the six-month period ended June 30, 2020, prepared under Company’s Management responsibility and presented as supplementary information by IAS 34. These statements have been subjected to review procedures performed together with the review of the quarterly information with the objective to conclude whether they are reconciled to the interim financial information and the accounting records, as applicable, and if its format and content are in accordance with the criteria set forth by NBC TG 09 – Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that they were not prepared, in all material respects, consistently with the overall individual and consolidated interim financial information.

Belo Horizonte (MG), August 14, 2020.

ERNST & YOUNG

Auditores Independentes S.S.

CRC-2SP015199/O-6

Shirley Nara S. Silva
Accountant CRC-1BA022650/O-0

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4. Minutes of the Ordinary and Extraordinary General Meetings of Stockholders Held On July 31, 2020.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS

CEMIG

CNPJ 17.155.730/0001-64 – NIRE 31300040127

MINUTES

OF THE

ORDINARY AND EXTRAORDINARY

GENERAL MEETINGS OF STOCKHOLDERS

HELD ON

JULY 31, 2020

Date, time and place:

July 31, 2020, at 11 a.m., held exclusively online in accordance with CVM Normative Instruction 622/2020.

Convocation and publication:

The Meeting was regularly called by publication of the convocation announcement on July 1, 2 and 3, 2020, in the publication Minas Gerais, on pages 19, 61 and 18 respectively, and in O Tempo on page 20. The Report of Management and the financial statements for 2019, and the related complementary documents, were widely published by the press, and placed at the disposal of stockholders on April 24, 2020, in Minas Gerais, on pages 16 to 56 of ‘Caderno 1’, and in O Tempo on pages 2 to 42 in the Financial Reports section (‘Caderno Balanço’). The summary statement of votes by Remote Voting Form was published to the market on July 29 and 30, 2020, and will be at the disposal of stockholders for them to examine.

Attendance, quorum:

Stockholders representing 76.73% of the voting stock were present. The following were also present: Leonardo George de Magalhães, Chief Finance and Investor Relations Officer; Eduardo Soares, Chief Counsel and Chief Officer for Regulation; Cláudio Morais Machado, member of the Audit Board; Pedro Carlos de Mello, member of the Audit Committee; and Bruno Costa Oliveira, for Ernst & Young Auditores Independentes S/S.

Meeting committee:

The meeting was chaired by Mr. Antônio Carlos Vélez Braga. He invited me, Carlos Henrique Cordeiro Finholdt, to be Secretary of the meeting. The meeting having been opened, stockholders unanimously approved issuance of these minutes in summary form. Stockholders had the right to present statements of vote, and/or statements of protest or dissidence, it being required that these be numbered and authenticated by the Meeting Committee, and filed at the Company’s head office.

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Agenda of the Meeting:

Decisions on the following:

| 1. | Approval of the Report of Management and the Financial Statements for the year ended December 31, 2019, accompanied by the related complementary documents.

| 2. | Allocation of the net profit for the business year 2019, of R$ 3,127,398,000, and realization of the Equity Revaluation reserve, of R$ 24,812,000.

| 3. | Election of the members of the Board of Directors and the Audit Board, due to completion of their period of office.

| 4. | Decision on the annual global remuneration of the Managers, the members of the Audit Board, and the Audit Committee.

| 5. | Increase in the share capital by creation of new shares and consequent alteration and consolidation of the by-laws.

Reading of documents and receipt of votes:

Reading of the documents related to the matters on the agenda of the meeting was dispensed with, unanimously, since their content was entirely known to the stockholders.

Decisions:

| 1 | Approval, by majority, as per the final voting summary attached, of the Report of Management and the Financial Statements for the year ended December 31, 2019, and the related complementary documents.

| 2 | Allocation of the net profit for 2019, of R$ 3,127,398,000, and realization of the Equity Revaluation Reserve in the amount of R$ 24,812,000, as follows:

| I) | R$ 764,181,000 as minimum obligatory dividend, to be paid to the Company’s stockholders, as to: R$ 400,000,000 in the form of Interest on Equity (‘JCP’), to be paid by in two equal installments, to stockholders on the Company’s Nominal Share Register on December 23, 2019; and R$ 364,181,000 in the form of dividends, to be paid by December 30, 2020, to stockholders whose names were on the Company’s Nominal Share Registry on the date of this Meeting.

| (II) | R$ 834,603,000 to be allocated to the Future Earnings reserve, considering that the aggregate positive profits in non-consolidated investees are positive, but not yet financially realized;

| (III) | R$ 1,535,170 to be held in Stockholders’ equity in the Retained Earnings reserve, to ensure funding for the Company’s planned consolidated investments for 2020, in accordance with a capital budget; and

| (IV) | R$ 18,256,000 to be held in Stockholders’ equity in the Tax Incentives reserve, for tax incentive gains obtained in 2019 as a result of profits realized in the region of Sudene.

| 3 | Elections:

The following members of the Board of Directors and the Audit Board, nominated by the stockholders, were elected with period of office of two years, i.e. up to the AGM to be held in 2022 – with a separate vote moved by the stockholder BNDES Participações S.A. (BNDESPar), which will be filed by the Company:

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3.1 Board of Directors:

| (I) | A separate vote was held, in which votes representing 337,631,121 shares, attributed by the representative of the holders of preferred shares, elected:

|  | José João Abdalla Filho | – Brazilian, unmarried, economist, domiciled in Rio de Janeiro, RJ, at Av. Presidente Vargas 463, 13th floor, Centro, CEP 20071-908, bearer of Identity Card 1.439.471, SSP/SP, and CPF 245730788-00.

| (II) | By adoption of the multiple vote, on nominations by the majority stockholder, as per Official Notices SEDE/SECAD 54/2020, of June 8, 2020, and SEDE/CHEFEGAB 280/2020, of July 14, 2020:

with 49,871,640 votes in favor:

|  | Márcio Luiz Simões Utsch | – Brazilian, widower, graduate in law, domiciled in São Paulo, SP, at Rua Lourenço de Almeida 487, Apto 71, Vila Nova Conceição, CEP 04508-000, bearer of Identity Card M1.167.351 SSP/MG, and CPF 220418776-34;

with 51,179,937 votes in favor:

|  | Antônio Rodrigues dos Santos e Junqueira | – Brazilian, married, company manager, domiciled in São Paulo, SP, at Rua Amauri, 255, 5th floor, Itaim, CEP 01424-000, Identity Card 07405196-2 DIC/RJ and CPF 093966667-77;

with 51,211,215 votes in favor:

|  | Cledorvino Belini | – Brazilian, married, company manager, domiciled in Nova Lima, Minas Gerais at Av. Alpina 16, Condomínio Vila Alpina, CEP 34007-294, Identity Card M6.539.933 SSP/MG, and CPF 116050068-15;

with 51,165,129 votes in favor:

|  | José Reinaldo Magalhães | – Brazilian, married, economist, domiciled in Rio de Janeiro, RJ, at Rua Nascimento Silva 224, Apto 301, Ipanema, CEP 22421-024, bearer of Identity Card M-607363 SSP/MG and CPF 227177906-59;

with 51,315,297 votes in favor:

|  | Afonso Henriques Moreira Santos | – Brazilian, married, electrical engineer, domiciled at Itajubá, Minas Gerais, at Rua Cel. Joaquim Francisco 341, Varginha, CEP 37501-052, bearer of Identity Card MG737.136 SSP/MG and CPF 271628506-34;

| (III) | Election, by adoption of the multiple vote system, on nomination by the stockholder Fundo de Investimentos em Ações Dinâmica Energia (FIA Dinâmica),

with 54,582,820 votes in favor:

|  | Marcelo Gasparino da Silva | – Brazilian, married, lawyer, domiciled in Florianópolis, Santa Catarina, at Rua Esteves Júnior 605, Bloco A, Apto 1411, Centro, CEP 88015-130, Identity Card 2302967 SSP/SC, and CPF 807383469-34;

| (IV) | Election, by adoption of the multiple vote system, on nomination by the stockholder BNDES Participações S.A. (BNDESPar),

with 56,117,360 votes in favor:

|  | Paulo César de Souza e Silva | – Brazilian, company manager, domiciled in São Paulo, SP, at Rua Dr. Renato Paes de Barros 296, Itaim Bibi, CEP 04530-906, bearer of Identity Card 3.962.200 SSP/SP and CPF 032220118-77.

The Board of Directors is thus now constituted as follows:

Márcio Luiz Simões Utsch | nominated by the majority stockholder
Antônio Rodrigues dos Santos e Junqueira | nominated by the majority stockholder
Cledorvino Belini | nominated by the majority stockholder
José Reinaldo Magalhães | nominated by the majority stockholder
Afonso Henriques Moreira Santos | nominated by the majority stockholder
José João Abdalla Filho | nominated by a preferred stockholder
Marcelo Gasparino da Silva | nominated by the minority stockholders
Paulo Cesar de Souza e Silva | nominated by the minority stockholders
Marco Aurélio Dumont Porto | representative of the employees

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3.2 The Audit Board:

| (I) | A separate vote was held, in which votes representing 411,235,594 shares, attributed by the representative of the holders of preferred shares, elected, as a sitting member:

|  | Michele da Silva Gonsales Torres | – Brazilian, married, lawyer, domiciled in São Paulo, SP, at Rua Sabará 402/ 42, Higienópolis, CEP 01239-010, Identity Card 33347425-9 SSP/SP and CPF 324731878-00,

and as her substitute member

|  | Ronaldo Dias | – Brazilian, married, accountant, domiciled in Rio de Janeiro, RJ, at Rua Maxwell 452/704, Vila Isabel, CEP 20541-125, bearer of Identity Card 2201087-0 IFP/RJ, and CPF 221285307-68.

| (II) | By the separate vote procedure, representatives of the minority holders of common shares,

with votes representing 116,901,292 common shares elected, as sitting member:

|  | Cláudio Morais Machado | – Brazilian, married, accountant, domiciled in Porto Alegre, Santa Catarina, at Rua Gen. Rondon 411, Casa, Tristeza, CEP 91900-120, Identity Card 9002545292 SSP/RS, and CPF 070068530-87,

and as his substitute member

|  | Carlos Roberto de Albuquerque Sá | – Brazilian, divorced, economist and accountant, domiciled in São Paulo, SP, at Alameda Jauaperi 755, Apto 132, Moema, CEP 04523-013, Identity Card 8842-0 CRE/RJ, and CPF 212107217-91.

| (III) | On nominations by the majority stockholder, as per Official Notices SEDE/SECAD 54/2020, of June 8, 2020, and SEDE/CHEFEGAB 280/2020, of July 14, 2020:

with 91,664,452 votes in favor, as sitting member:

|  | Gustavo de Oliveira Barbosa | – Brazilian, married, accountant, domiciled in Rio de Janeiro, RJ, at Rua Prudente de Morais 985, Apto 701, Ipanema, CEP 22420-041, Identity Card M3050541 SSP/MG and CPF 494126476-20,

and as his substitute member

|  | Germano Luiz Gomes Vieira | – Brazilian, lawyer, domiciled in Belo Horizonte, Minas Gerais at Rua Vereador Washington Walfrido 116, Buritis 123/301, CEP 30575-170, Identity Card M9274.686 SSP/MG and CPF 051529976-65;

with 91,652,743 votes in favor, as sitting member:

|  | Marco Aurélio de Barcelos Silva | – Brazilian, single, lawyer, domiciled in Belo Horizonte, MG, at Rua Dom Rodrigo 161, Apto 603, Indaiá, CEP 31270-165, Identity Card MG10.545.332 SSP/MG and CPF 013543946-90, and as his alternate member

and as his substitute member

|  | Carlos Eduardo Amaral Pereira da Silva | – Brazilian, married, doctor, domiciled in Juiz de Fora, Minas Gerais, at Rua Senador Salgado Filho 510, Apto 1102, Bom Pastor, CEP 36021-660, bearer of Identity Card M6649324 SSP, SSP/MG, and CPF 898977736-49;

with 91,681,177 votes in favor, as sitting member:

|  | Elizabeth Jucá e Mello Jacometti | – Brazilian, economist, domiciled in Juiz de Fora, Minas Gerais, at Rua São Sebastião 1035, Apto 601, Centro, CEP 36015-410, Identity Card MG1.406.836 PC/MG, and CPF 454965956-49,

and as her substitute member

|  | Fernando Passalio de Avelar | – Brazilian, married, company manager, domiciled in Belo Horizonte, MG, at R. Desembargador Leão Starling 420, Ouro Preto, CEP 31310-370, Identity Card 01.056443/D CRA/MG, and CPF 027397026-71.

The Audit Board is thus now constituted as follows:

SITTING MEMBERS
Gustavo de Oliveira Barbosa | nominated by majority stockholder
Marco Aurélio de Barcelos Silva | nominated by majority stockholder
Elizabeth Jucá e Mello Jacometti | nominated by majority stockholder
Michele da Silva Gonsales Torres | nominated by holders of preferred shares
Cláudio Morais Machado | nominated by minority stockholder
SUBSTITUTE MEMBERS
Germano Luiz Gomes Vieira | majority stockholder
Carlos Eduardo Pereira da Silva | majority stockholder
Fernando Passalio de Avelar | majority stockholder
Ronaldo Dias | holders of preferred shares
Carlos Roberto de Albuquerque Sá | minority stockholders

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All the elected members had been previously analyzed by the governance bodies, including by the Audit Committee. They declared in advance that they are not the subject of any prohibition on exercise of commercial activity, that they comply with the legal requirements and are not subject to any of the prohibitions described in Law 6404/1976, Law 13303/2016, or any of the other applicable rules or regulations. They further made a solemn commitment to become aware of, obey and comply with the principles, ethical values and rules established by the Code of Professional Conduct of Cemig, and the Code of Ethical Conduct of Government Workers and Senior Administration of the State of Minas Gerais.

| 4 | Approval, by majority, as per the final voting record, attached hereto, and a separate vote moved by the stockholder BNDES Participações S.A. (BNDESPar), which will be filed by the Company, of the proposal for remuneration of the Managers – comprising the Board of Directors, the Executive Board, and the members of the Audit Board and the Audit Committee – of a global annual amount of up to R$ 23,259,187.88 (twenty three million two hundred fifty nine thousand one hundred eighty seven Reais and eighty eight centavos), with no alteration to the individual amounts currently in effect.

| 5 | Approval, by majority, of:

| (I) | Increase in the share capital

| from | R$ 7,293,763,005 | (seven billion two hundred ninety three million seven hundred sixty three thousand five Reais)

| to | R$ 7,593,763,005 | (seven billion five hundred ninety three million seven hundred sixty three thousand five Reais),

| by issuance of | sixty million | new shares,

| comprising | 20,056,076 | (twenty million fifty six thousand seventy six)

nominal common shares

| and | 39,943,924 | (thirty nine million nine hundred forty three thousand nine hundred twenty four)

nominal preferred shares,

| all with par value of | R$ 5.00 | (five Reais),
| by capitalization of | R$ 300,000,000 | (three hundred million Reais)

from the Retained Earnings reserve,

thus distributing to stockholders new shares

| in the proportion of | 4.113103206% | of the same type as they hold, each with
| nominal (par) value | R$ 5.00 | (five Reais).

| (II) | Redrafting of the head paragraph of Clause 4 of the by-laws as follows, with consolidation of the bylaws to include this change, in the form presented in Appendix 1 to these minutes:

“ Clause 4 The share capital of the Company is R$ 7,593,763,005.00 (seven billion five hundred ninety three million seven hundred sixty three thousand and five Reais), represented by:

| a) | 507,670,289 (five hundred seven million six hundred seventy thousand two hundred eighty nine) nominal common shares each with nominal value of R$ 5.00 (five Reais); and

| b) | 1,011,082,312 (one billion eleven million eighty two thousand three hundred twelve) nominal preferred shares each with nominal value of R$ 5.00 (five Reais).”

| (III) | The following measures to be taken by the Executive Board in relation to the issue of new shares:

| a) | attribute an issue of new shares in the proportion of 4.113103206% to and of the same type as those held, to the holders of the current share capital of R$ 7,293,763,005 whose names are on the Company’s Nominal Share Registry on the date of this Meeting;

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| b) | establish that all the shares resulting from the said capital increase shall have the same rights as the corresponding existing shares, excluding any corporate action payments decided or to be decided;

| c) | sell, on the stock exchange, the whole numbers of nominal shares resulting from the sum of remaining fractions arising from the issue of new shares; and

| d) | Distribute the net proceeds of the sale of the fractions to stockholders on the same date as payment of dividends or interest on Equity for the 2019 business year.

Closing:

The meeting being opened to the floor, and since no-one wished to make any statements, these minutes were written, read, approved unanimously, and signed by me, Carlos Henrique Cordeiro Finholdt, Secretary of the Meeting, and by Carlos Velez, as specified in the applicable legislation.

Secretary of the Meeting | Carlos Henrique Cordeiro Finholdt |
Chair of the Meeting | Antônio Carlos Vélez Braga |
For the Executive Board: | Leonardo George Magalhães, Eduardo Soares |
For the Audit Board: | Cláudio Morais Machado |
For the Audit Committee: | Pedro Carlos de Mello, Roberto Tommasetti |
For Ernst & Young Auditores Independentes S/S. | Bruno Costa Oliveira |
For the stockholder Romário Fernando da Silva: | Virginia Kirchmeyer Vieira |
For the stockholder State of Minas Gerais | Rafael Rezende Faria |
For the stockholder BNDES Participações S.A. – BNDESPar | Thiago Tadeu da Silva Costa |
For the stockholders: |  |
Fundo de Investimento de Ações Dinâmica Energia -Fia Dinâmica; |  |
Luiz Barsi Filho; Stichting Juridich Eigenaar Actiam Beleggingsfondsen; The New Zealand Guardian Trust Company Limited in its Capacity as Trustee of the BNZ Wholesale International Equities (Index) Fund; Phoenix Umbrella Fund-Phoenix GBaR Fund; HSBC ETFS Public Limited Company; Conti International; Global Multi-Factor Equity Fund; Citibank N.A.; | Daniel Alves Ferreira
Nuveen ESG Emerging Markets Equity ETF |  |
Stockholders: | Alexandre Eustáquio Sydney Horta | Alexandre de Queiroz Rodriguez |
| Alexandre Nunes da Cunha | Ana Ribeiro |
| André Luiz Fernandes | Bruno Benedeti Teixeira de Freitas |
| Caroline Sousa Franco | Eneida Claussen |
| Felippe Marques | Francisco Antônio Ferreira de Almeida |
| Inácio Tarciso Kugik | Jhonald Hernandez |
| João Filipe Gomes Pinto | Jonizio Pina |
| Joubert Marinho do Nascimento | Juliano Klug |
| Marcio Luiz Barbosa | Paulo Augusto Raymundo Pereira |
| Paulo Ervilha Paleta | Raphael Silveira Amaro |
| Regina Andrade | Rebeca Rossi Brasileiro |

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| Rogério Henrique Costa Matos | Roberto do Prado Júnior
| Valter Palmeira |

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

BY-LAWS

CHAPTER I

Name, constitution, objects, head office and duration

Clause 1 | Companhia Energética de Minas Gerais – Cemig, constituted on May 22, 1952 as a corporation with mixed private and public sector stockholdings, is governed by these by-laws and by the applicable legislation, and its objects are:

| – | to build, operate and make commercial use of systems for generation, transmission, distribution and sale of electricity, and related services;

| – | to operate in the various fields of energy, from whatever source, with a view to economic and commercial operation;

| – | to provide consultancy services within its field of operation to companies in and outside Brazil; and

| – | to carry out activities directly or indirectly related to its objects, including development and commercial operation of telecommunication and information systems, technological research and development, and innovation.

| §1 | The activities specified in this Clause may be exercised directly by Cemig or, as intermediary, by companies constituted by it or in which it may hold a majority or minority stockholding interest, upon decision by the Board of Directors, under State Laws 828 of December 14, 1951, 8655 of September 18, 1984, 15290 of August 4, 2004 and 18695 of January 5, 2010.

| §2 | No subsidiary of Cemig, wholly-owned or otherwise, may take any action or make any decision which might affect the condition of the State of Minas Gerais as controlling stockholder of the Company, in the terms of the Constitution of the State of Minas Gerais and the legislation from time to time in force.

| §3 | Since the Company’s securities are traded on the special listing section known as Corporate Governance Level 1 on the São Paulo stock exchange (B3 S.A. – Brasil, Bolsa, Balcão), the Company, its stockholders, managers and members of the Audit Board are subject to the provisions of the Level 1 Corporate Governance Regulations of the B3 (under this or any name attributed to it in future).

Clause 2 | The Company shall have its head office and management in Belo Horizonte, capital city of the State of Minas Gerais, Brazil, and may open offices, representations or any other establishments in or outside Brazil, upon authorization by the Executive Board.

Clause 3 | The Company shall have indeterminate duration.

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CHAPTER II

Share capital

Clause 4 | The share capital of the Company is R$ 7,593,763,005.00 (seven billion five hundred ninety three million seven hundred sixty three thousand and five Reais), represented by:

| a) | 507,670,289 (five hundred seven million six hundred seventy thousand two hundred eighty nine) nominal common shares each with nominal value of R$ 5.00 (five Reais); and

| b) | 1,011,082,312 (one billion eleven million eighty two thousand three hundred twelve) nominal preferred shares each with nominal value of R$ 5.00 (five Reais).

| §1 | The right to vote is reserved exclusively for the common shares; each common share has the right to one vote in decisions of the General Meeting of Stockholders.

Clause 5 | The preferred shares have right of preference in the event of reimbursement of shares and shall have the right to a minimum annual dividend of the greater of the following amounts:

| a) | 10% (ten percent) of their nominal value;

| b) | 3% (three percent) of the value of the stockholders’ equity corresponding to the shares.

Clause 6 | The common shares and the preferred shares have equal rights to distribution of bonuses and stock dividends.

Clause 7 | In business years in which the Company does not make enough profit to pay dividends to its stockholders, the State of Minas Gerais guarantees to the shares that were issued by the Company on or before August 5, 2004 and held by individual persons a minimum dividend of 6% (six percent) per year, under Clause 4 of State Law 15290/2004.

Clause 8 | The State of Minas Gerais shall at all times obligatorily be the owner of the majority of the shares carrying the right to vote, and all its capital shall be subscribed in accordance with the legislation from time to time in force. Capital subscribed by other parties, whether individuals or legal entities, shall be paid in as specified by the General Meeting of Stockholders which decides on the subject.

| §1 | The Executive Board may, in order to obey a decision by a General Meeting of Stockholders, suspend the services of transfer and registry of shares, subject to the applicable legislation.

| §2 | Stockholders have the right of preference in subscription of increases in the share capital, and in issue of the Company’s securities, in accordance with the applicable legislation. There shall, however, be no right of preference when the increase in share capital is paid with resources arising from tax incentive systems, subject to the terms of §1 of Article 172 of Law 6404 of December 15, 1976, as amended.

Clause 9 | The Company’s share capital may be increased by an amount equal to up to 10% (ten percent) of the share capital set in the by-laws, without need for change in the by-laws and upon decision by the Board of Directors, having previously heard statement of opinion by the Audit Board.

| §1 | As well as the other conditions relating to the issuance of new shares, the Board of Directors shall be the competent body for deciding the number of shares to be issued, the issue price, and the period and terms for paying up of shares subscribed.

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CHAPTER III

The General Meeting of Stockholders

Clause 10 | The General Meeting of Stockholders shall be held, ordinarily, within the first 4 (four) months of the year, for the purposes specified by law, and extraordinarily whenever necessary, and shall be called with minimum advance notice of 15 (fifteen) days, and the relevant provisions of law shall be obeyed in its convocation, opening and decisions.

| §1 | In the event that a provision of law or regulations alters this minimum period for convocation, that alteration shall prevail.

| §2 | Stockholders may be represented in General Meetings of Stockholders in the manner specified in Article 126 of Law 6404/1976, as amended, by showing at the time of the meeting, or by previously depositing at the Company’s head office, proof of ownership of the shares, issued by the depositary financial institution, accompanied by the identity document of, and a power of attorney granting specific powers to, the proxy.

Clause 11 | Ordinary or Extraordinary General Meetings of Stockholders shall be chaired by a stockholder elected, by the Meeting, from among those present, and said stockholder shall choose one or more secretaries.

CHAPTER IV

Management

Clause 12 | The Company shall be managed by the Board of Directors and the Executive Board.

| §1 | The structure and composition of the Board of Directors and the Executive Board shall be identical in the wholly-owned subsidiaries Cemig Distribuição S.A and Cemig Geração e Transmissão S.A., with occasional exceptions if approved by the Board of Directors.

| §2 | Where it is the competency of the Company to fill appointments to positions on the Board of Directors and/or Executive Board of the Company’s subsidiary or affiliated companies, the Company shall make nominations in accordance with criteria, and a policy, of eligibility and assessment approved by the Board of Directors.

| §3 | Where it is the competency of the Company to nominate candidates for positions on the Support Committees to the Boards of Directors of the subsidiaries and affiliated companies, these positions shall be filled in accordance with specific regulations, to be approved by the Boards of Directors of the respective subsidiaries or affiliated companies.

| §4 | In management of the Company, of the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A., and of the other subsidiaries or affiliates, and of the consortia in which any of them have direct or indirect holdings, the Board of Directors and the Executive Board shall obey the provisions of the Company’s Long-term Strategy.

| §5 | The Long-term Strategy shall contain grounds, targets, goals and results to be pursued and achieved in the long term by the Company, reflecting its dividend policy, and must obey the commitments and requirements specified in §7 of Clause 12 of these by-laws.

| §6 | The Company’s Multi-year Business Plan shall reflect the assumptions and premises of the Long-term Strategy, and shall contain the targets for 5 (five) years, including the Annual Budget.

| §7 | The Long-term Strategy, the Multi-year Business Plan and the Annual Budget shall be revised annually by the Executive Board and submitted no later than the last ordinary meeting of the Board of Directors of the prior year, for decision, in accordance with the applicable legislation.

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| §8 | The Executive Board shall obey and comply with targets and limits established by the Board of Directors, especially in relation to indebtedness, liquidity, rates of return, investment and regulatory compliance.

| §9 | In companies in which the Company has an interest, whether controlling or otherwise, practices of governance and control must be adopted that are in proportion to the importance, materiality and the risks of the business.

| §10 | The Long-term Strategy, the Multi-year Business Plan and the Annual Budget shall be reflected in all plans, projections, activities, strategies, investments and expenses of the Company and its wholly-owned or other subsidiaries, affiliated companies or consortia in which it directly or indirectly holds an interest.

| §11 | The global or individual amount of the compensation of the Board of Directors, the Executive Board and the Audit Committee shall be set by the General Meeting of Stockholders, in accordance with the applicable legislation. Payment of any type of percentage or other participation in the profits of the Company to any member of the Audit Committee or the Board of Directors is forbidden, with the exception of the Board member representing the employees.

| §12 | For the purpose of improving the Company, every year the managers and the members of the committees shall undergo individual and collective performance evaluation, with the following minimal requirements:

| a) | report on acts of management, as to lawfulness and efficacy of administrative action;

| b) | contribution to the profit for the period; and

| c) | achievement of the objectives established in the Multi-year Business Plan and compliance with the Long-term Strategy and the Annual Budget.

| §13 | The managers of the Company may not be sworn in unless they have agreed to and signed the applicable legal and regulatory commitments and documents. In the practice of their responsibilities they shall obey the requirements, prohibitions and obligations specified in the applicable legislation and regulations.

Section I

The Board of Directors

Clause 13 | The Board of Directors of the Company comprises 9 (nine) members, of which one shall be the Chair, and another the Deputy Chair.

| §1 | The members of the Board of Directors shall be elected for concurrent periods of office of 2 (two) years by the General Meeting of Stockholders, and may be dismissed at any time by a General Meeting of Stockholders. Re-election, after the initial period of office, is permitted for a maximum of 3 (three) consecutive periods of office, subject to the requirements and prohibitions established in the applicable law and regulations.

| §2 | The following rules apply to the composition of the Board of Directors:

| (a) | The following two groups of stockholders each have the right to elect one member, in separate votes, in accordance with the applicable law:

| (i) | the minority holders of common shares; and

| (ii) | the holders of preferred shares.

| (b) | If there is a decision for the minority stockholders to exercise their option to use the multiple vote mechanism, under Article 141 of Law 6404/1976, at least 25% (twenty five per cent) of the members must be independent, or at least one of them.

| (c) | The employees have the right to elect one member, subject to the terms of Federal Law 12353 of December 28, 2010, as applicable.

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| (d) | In any event, the majority of the members shall be elected by the controlling stockholder of the Company.

| §3 | For election and for actions taken in office, the member of the Board of Directors representing the employees is subject to all the criteria, requirements, impediments and prohibitions specified in Law 6404/1976, Law 13303 of June 30, 2016, and regulations made under those laws.

| §4 | Without prejudice to the impediments and prohibitions specified in these by-laws, the member of the Board of Directors representing the employees shall not take part in debate and decisions on subjects that involve union relationships, remuneration, and/or benefits, including matters relating to private pension plans and/or other assistance plans, and/or in any other situation in which a conflict of interest is characterized.

| §5 | The Boards of Directors of the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A. shall be made up of the same members elected to the Board of Directors of the Company, for periods running concurrently, from start to termination, with their membership of the Board of Directors of Cemig, being remunerated for only one of these positions.

| §6 | The posts of Chair of the Board of Directors and Chief Executive Officer of the Company may not be held by the same person.

| §7 | The members of the Board of Directors may have other remunerated activities, provided that there is no incompatibility of working time/hours and/or conflict of interests.

| §8 | The Board of Directors may confer delegation of powers to the Executive Board for approval and signature of legal transactions related to the ordinary acts of management, including sale of electricity.

Clause 14 | In the event of a vacancy on the Board of Directors, the first subsequent General Meeting of Stockholders shall elect a new member, for the period of office that remained to the previous member.

| §1 | In this event, if the previous Board member was elected by a minority, the new member shall be elected by the same minority. The same rule shall be obeyed for the member representing the employees.

Clause 15 | The Board of Directors shall meet ordinarily, in accordance with its Internal Regulations, at least once a month, to analyze the results of the Company and its wholly-owned and other subsidiaries and affiliated companies, and to decide on other matters included on the agenda. It shall also meet extraordinarily, on convocation by its Chair, or by its Deputy Chair, or by one-third of its members, or when requested by the Executive Board.

| §1 | Meetings of the Board of Directors shall be called by its Chair or Deputy Chair, with at least 10 (ten) days’ prior notice in writing or by email, containing the agenda. Convocation is not necessary when all the members of the Board of Directors, or their substitute members, are present. The Chair may call meetings of the Board of Directors on the basis of urgency without their being subject to this period of notice, provided that the other members of the Board are advised of the convocation.

| §2 | Decisions of the Board of Directors shall be taken by the majority of the votes of the Board Members present, and in the event of a tie the Chairman shall have the casting vote.

Clause 16 | The Chair of the Board of Directors has the competency to grant leave to the Board’s members, and the other members of the Board have the competency to grant leave to the Chair.

Clause 17 | The Chair and Vice-Chair of the Board of Directors shall be chosen by the members of that Board, at the first meeting of the Board of Directors that takes place after the election of its members, and the Vice-Chair shall take the place of the Chair when the Chair is absent or impeded from exercising the function.

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Clause | 18 The following are functions of the Board of Directors:

| a) | to set the general orientation of the Company’s business;

| b) | to elect, dismiss and evaluate the Executive Officers of the Company, in accordance with the applicable legislation, subject to these by-laws;

| c) | to approve the policy on transactions with related parties;

| d) | to decide, upon proposal by the Executive Board, on disposal of, or placement of a charge upon, any of the Company’s property, plant or equipment, and on the Company giving any guarantee to any third party, of which the individual value is equal to 1% (one per cent) or more of the Company’s stockholders’ equity;

| e) | to decide, upon proposal by the Executive Board, on the Company’s investment projects, signing of contracts and other legal transactions, contracting of loans or financings, or the constitution of any obligations in the name of the Company, which individually or jointly have value equal to 1% (one per cent) or more of the Company’s stockholders’ equity, including injections of capital into wholly-owned or other subsidiaries, or affiliated companies, or consortia in which the Company participates;

| f) | to call the General Meeting of Stockholders;

| g) | to monitor and inspect the management by the Executive Board: the Board of Directors may, at any time, examine the books and papers of the Company, and request information on contracts entered into or in the process of being entered into, and on any other administrative facts or acts which it deems to be of interest to it;

| h) | to give a prior opinion on the report of management and the accounts of the Executive Board of the Company;

| i) | to choose and to dismiss the Company’s auditors, from among companies with international reputation that are authorized by the Securities Commission (CVM) to audit listed companies, subject to statement of position by the Audit Committee;

| j) | to authorize, upon proposal by the Executive Board, opening of administrative tender proceedings, or proceedings for dispensation or non-requirement of tender, or of non-applicability of the duty to tender, and the corresponding contractings, when the amount is equal to 1% (one percent) or more of the Company’s stockholders’ equity, or more than R$ 100,000,000.00 (one hundred million Reais), as adjusted annually by the IPCA Inflation Index, if that index is positive;

| k) | upon proposal by the Executive Board, to authorize filing of legal actions, or administrative proceedings, or entering into court or out-of-court settlements, for amounts equal to 1% (one per cent) or more of the stockholders’ equity of Cemig;

| l) | to authorize the issuance of securities in the Brazilian or external market, for raising of funding in the form of non-convertible debentures, promissory notes, commercial paper and/or other instruments;

| m) | to approve the Long-term Strategy, the Multi-year Business Plan and the Annual Budget, and alterations and revisions to them;

| n) | annually, to set the directives and establish the limits, including financial limits, for spending on personnel, including concession of benefits and collective employment agreements, subject to the competency of the General Meeting of Stockholders, and compliance with the Annual Budget;

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| o) | to authorize the exercise of the right of preference and rights under stockholders’ agreements or voting agreements in wholly-owned or other subsidiaries, affiliated companies and the consortia in which the Company participates, except in the cases of the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A., for which the General Meeting of Stockholders has the competency for decision;

| p) | to approve participation in the share capital of, or constitution of, or winding up of, any companies, undertakings or consortia;

| q) | to approve, in accordance with its Internal Regulations, the institution of committees supporting the Board of Directors – the opinions or decisions of which are not a necessary condition for decision on the matters being considered by the Board of Directors;

| r) | to monitor and inspect the activities of internal auditing;

| s) | to discuss, approve and monitor decisions that involve corporate governance practices, relationship with interested parties, policy on management of people, or the code of conduct;

| t) | to ensure implementation of, and to supervise, the systems for management of risks and internal controls established for the prevention and mitigation of the principal risks to which the Company is exposed, including the risks related to safety and security of accounting and financial information and the occurrence of corruption or fraud;

| u) | to establish an information disclosure policy to mitigate the risk of contradiction between the various areas and the managers of the Company;

| v) | to make statement on any increase in number of the Company’s employees, concession of benefits and/or advantages, or revision of a salaries and careers plan, including alteration in the amount paid for commissioned posts or free appointments, and compensation of Chief Officers;

| w) | to appoint, and to dismiss, in both cases with grounds, the head of the Internal Audit Unit, from among the Company’ career employees;

| x) | to elect the members of the Audit Committee, at the first meeting held after the Annual General Meeting, and to dismiss them, at any time, upon vote given with grounds by absolute majority of the members of the Board of Directors;

| y) | to arrange for analysis, every year, of the success in meeting targets and results in execution of the Multi-year Business Plan and the Long-term Strategy, and to publish its conclusions and state them to the Legislative Assembly and Audit Court of Minas Gerais State; and

| z) | to approve the complementary policies, including the policy on holdings, in accordance with the terms of these by-laws.

| §1 | The financial limits relating to decisions by the Board of Directors that correspond to a percentage of the stockholders’ equity of Cemig shall be automatically adopted when the financial statements of each year are approved.

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Section II

The Executive Board

Clause 19 | The Executive Board shall comprise seven Executive Officers, resident in Brazil, who may be stockholders, elected by the Board of Directors for a period of two years, subject to the requirements of the applicable legislation and regulations. After the initial period of office, a maximum of three re-elections for consecutive periods of office is permitted.

| §1 | The Executive Officers shall remain in their posts until their duly elected successors take office.

| §2 | The Executive Officers shall exercise their positions as full-time occupations in service of the Company. They may at the same time exercise non-remunerated positions in the management of the Company’s wholly-owned or other subsidiaries, or affiliated companies, at the option of the Board of Directors. They shall, however, obligatorily hold and exercise the corresponding positions in the wholly-owned subsidiaries Cemig Distribuição S.A. and Cemig Geração e Transmissão S.A.

| §3 | Those members of the Executive Board who are not employees, or those with employment contracts suspended, shall have the right to annual paid leave of not more than 30 (thirty) days, non-cumulative, receiving an additional one-third of their current monthly remuneration.

Clause 20 | In the event of any of the other members of the Executive Board being absent, or on leave, or their seat being vacant, or in the event of impediment of their position, or resignation, that Board may, on approval by the majority of its members, attribute the temporary exercise of the related functions to another member of the Executive Board.

| §1 | A member of the Executive Board elected in this way shall hold the position for the remainder of the period of office of the Executive Officer who is substituted.

Clause 21 | The Executive Board shall meet, ordinarily, at least two times per month; and, extraordinarily, whenever called by the Chief Executive Officer or by two Executive Officers with at least two days’ prior notice in writing or by email or other digital medium, such notice not being required if all the Executive Officers are present. The decisions of the Executive Board are taken by vote of the majority of its members, and in the event of a tie the Chief Executive Officer shall have a casting vote.

Clause 22 | The Executive Board is responsible for current management of the Company’s business, subject to obedience to the Long-term Strategy, the Multi-year Business Plan, and the Annual Budget, prepared and approved in accordance with these by-laws.

| §1 | The Multi-year Business Plan shall comprise plans and projections for a period of five business years, and must be updated at least once a year. It shall deal in detail with the following subjects, among others:

| a) | the Company’s strategies and actions, including any project related to its corporate objects;

| b) | new investments and business opportunities, including those of the Company’s wholly-owned and other subsidiaries, and affiliated companies, and of the consortia in which they participate;

| c) | the amounts to be invested, or amounts in any other way to be originated, from the Company’s own funds or funds of third parties; and

| d) | the rates of return and profits to be obtained or generated by the Company.

| §2 | The Annual Budget shall reflect the Company’s Multi-year Business Plan and, consequently, the Long-Term Strategy, and must give details of operational revenue and expenses, costs and capital expenditure, cash flow, the amount to be allocated to the payment of dividends, investments of cash from the Company’s own funds or from funds of third parties, and any other data that the Executive Board considers to be necessary.

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| §3 | The Long-term Strategy, the Multi-year Business Plan, and the Annual Budget shall be:

| a) | prepared under coordination by the Chief Executive Officer, with participation of all the Chief Officers;

| b) | prepared and updated annually, by the end of each business year, to take effect in the following business year;

| c) | submitted to examination by the Executive Board and, subsequently, to approval by the Board of Directors.

| §4 | The following matters shall require a decision by the Executive Board:

| a) | approval of the plan of organization of the Company and issuance of the corresponding rules, and any changes to them;

| b) | examination, and submission to the Board of Directors, for approval, of the Long-term Strategy and the Multi-year Business Plan, and revisions of them, including timetables, amount and allocation of the capital expenditure specified therein;

| c) | examination, and submission to the Board of Directors, for approval, of the Annual Budget, which must reflect the Multi-year Business Plan at the time in force, and revisions of it;

| d) | decision on reallocation of investments or expenditure specified in the Annual Budget which amount, individually or in aggregate, in a single financial year, to less than 1% (one per cent) of the stockholders’ equity of Cemig, with consequent adaptation of the targets approved, obeying the Multi-year Business Plan, the Long-term Strategy and the Annual Budget;

| e) | approval of disposal of, or placement of a charge upon, any of the Company’s property, plant or equipment, and/or giving of guarantees to third parties, in amounts less than 1% (one per cent) of the Company’s stockholders’ equity;

| f) | authorization of the Company’s capital expenditure projects, signing of agreements or other legal transactions, contracting of loans and financings, or creation of any obligation in the name of the Company, based on the Annual Budget approved, which individually or in aggregate have value less than 1% (one per cent) of the Company’s Stockholders’ equity, including injection of capital into wholly-owned or other subsidiaries, affiliated companies, and the consortia in which it participates;

| g) | authorization to open administrative tender proceedings, and proceedings for dispensation from or non-requirement of tender, and contracts, for amounts of up to 1% (one per cent) of the stockholders’ equity of Cemig, limited to R$ 100,000,000.00 (one hundred million Reais), adjusted annually by the IPCA (expanded Consumer Price) index, if it is positive;

| h) | authorization to file legal actions and administrative proceedings, and to enter into Court or out-of-court settlements, for amounts less than 1% (one per cent) of the Company’s stockholders’ equity;

| i) | approval of the nominations of employees to hold management posts in the Company, upon proposal by the Chief Officer responsible, subject to the provisions of Sub-clause ‘h’ of Sub-item I of Clause 23;

| j) | authorization of expenditure on personnel expenses and collective employment instruments, subject to the competency of the General Meeting of Stockholders, directives and limits approved by the Board of Directors, and the Annual Budget;

| k) | examination of and decision on the contracting of external consultants, when requested by any of the Directorates, subject to the provisions of Clause 18, Sub-clause ‘j’, and Clause 22, §4, Sub-clause ‘g’;

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| l) | formulation, for decision by the Board of Directors or the General Meeting of Stockholders, of policies complementary to these by-laws, including the policy on holdings in other companies; and

| m) | approval of nominations for positions on the Boards of Directors, Audit Boards and Executive Boards of wholly-owned and other subsidiaries, affiliated companies and the consortia in which the company participates.

| §5 | Actions necessary for the regular functioning of the Company, signature of contracts, and other legal transactions shall be carried out by the Chief Executive Officer jointly with one Executive Officer, or by two Executive Officers, or by a person holding a duly constituted power of attorney.

| §6 | Powers of attorney must be granted by the Chief Executive Officer, jointly with one Executive Officer, except for the power described in Sub-clause ‘c’ of Sub-item I of Clause 23, for which only the signature of the Chief Executive Officer is required.

| §7 | Subject to the provisions of these by-laws the Executive Board may delegate powers to approve and sign legal transactions relating to matters in the remit of the bodies pertaining to each Directorate, in relation to ordinary acts of management, including sale of electricity.

| §8 | The financial limits for decision by the Executive Board that correspond to a percentage of the stockholders’ equity of the Company shall be adopted automatically upon approval of the financial statements of each year.

| §9 | Within the limits of its competencies and areas of autonomy, the Executive Board may, by formal act, attribute limits of autonomy to lower levels, upon composition of technical committees with decision capacity in specific subjects.

Clause 23 | Subject to the provisions in the preceding Clauses and good corporate governance practices, it shall be the duty of each member of the Executive Board to comply with these by-laws, the decisions of the General Meeting of Stockholders and of the Board of Directors, and the Internal Regulations and decisions of the Executive Board, and to cause others to comply with them. The duties of the Offices of the members of the Executive Board include the following:

| I | The Office of the Chief Executive Officer (CEO):

| a) | to coordinate and manage the work of the Company, and all the strategic and institutional activities of the affiliated companies and subsidiaries, and of the consortia in which the Company participates;

| b) | to coordinate preparation, consolidation and implementation of the Company’s Long-term Strategy and Multi-year Business Plan, and those of the affiliated and subsidiary companies: in the latter case jointly with the Chief Officer responsible, and in both cases with participation of the other Chief Officers;

| c) | to represent the Company in the Courts, on the plaintiff or defendant side;

| d) | to sign, jointly with one Chief Officer, documents which bind the Company;

| e) | to present the annual report on the Company’s business to the Board of Directors and to the Ordinary General Meeting of Stockholders;

| f) | to hire and dismiss employees of the Company;

| g) | to be responsible for the activities of Strategic Planning, Compliance and Corporate Risk Management;

| h) | jointly with the Chief Officer responsible, to propose to the Executive Board nominations for management positions in the Company;

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| i) | to propose the nominations for positions of management and on the Audit Boards of the wholly-owned and other subsidiaries, the affiliated companies and of the consortia in which the Company participates, and on the statutory bodies of Fundação Forluminas de Seguridade Social (Forluz) and Cemig Saúde, after consultation of the Chief Officer responsible.

| j) | to coordinate the policy and actions adopted in management of people in the Company and in its wholly-owned and other subsidiaries.

| k) | to coordinate and administer processes and activities related to communication and institutional relations, externally and internally, in the area related to the Company and its wholly-owned and other subsidiaries.

| l) | to plan the activities relating to supply of materials and services, infrastructure, information technology, telecommunications and transactional services, and to arrange for them to be put into effect.

| II | The Finance and Investor Relations Directorate:

To manage the processes and activities relating to finance and relations with investors.

| III | The Regulations and Chief Counsel’s Directorate:

To manage the processes and activities relating to the regulation of the Brazilian electricity industry and related regulated sectors, in both the domestic and external contexts, and to plan, coordinate and manage the legal activities of the Company and its wholly-owned and other subsidiaries, including the Corporate Executive Office and governance.

| IV | The Distribution Directorate:

To manage the processes and activities of distribution of electricity, and sales, in the Regulated Market.

| V | The Generation and Transmission Directorate:

To manage the processes and activities of generation and transmission of electricity.

| VI | The Trading Directorate:

To manage the processes and activities related to trading and sale of electricity, transactions for use of the electricity system, market planning, and trading relationships, in the Free Market;

| VII | The CemigPar Directorate:

Subject to compliance with the Policy on Holdings, to manage the processes and activities relating to monitoring of management of: the Company’s wholly-owned subsidiaries other than Cemig GT and Cemig D; other subsidiaries, and affiliated companies; and negotiation and implementation of partnerships, consortia, associations and special-purpose companies.

| §1 | In relation to the affiliated companies, the Executive Officers shall at all times act in obedience to the related by-laws or articles of association and/or stockholders’ agreements.

| §2 | The competencies given to these Directorates under this Clause to enter into contracts and other legal transactions, and to constitute any obligation in the name of the Company, do not exclude the competency of the Executive Board and of the Board of Directors, as the case may be, nor the need to obey the provisions in these by-laws in relation to financial limits and to prior obtaining of authorizations from the management bodies, as applicable.

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| §3 | As well as exercise of the duties set for them in these by-laws, each Directorate should seek cooperation, assistance and support from the other Directorates in the areas of their respective competencies, aiming for success in achieving the Company’s greater objectives and interests.

| §4 | Each Directorate, within the area of its activity, shall take the actions necessary for compliance with and effective implementation of the work safety policies approved by the Company.

| §5 | The individual duties of each Directorate are set specifically in the Internal Regulations of the Executive Board. They include the following:

| a) | to propose to the Executive Board, for approval or submission to the Board of Directors or the General Meeting of Stockholders, approval of legal transactions affecting the Directorate’s area of activity;

| b) | to propose, implement and manage the work safety policies within the scope of the Directorate’s activities;

| c) | to disclose, at least annually, to the Executive Board, the reports on performance related to the activities that the Directorate coordinates and monitors; and

| d) | to represent the Company in relations with the market, and with the bodies, associations and other related entities of the electricity sector, including those of regulation and inspection.

Section III

The Audit Committee

Clause 24 | The Audit Committee is an independent, consultative, permanent body, with its own budget allocation. Its objective is to provide advice and support to the Board of Directors, to which it reports. It also has the responsibility of other activities attributed to it by legislation.

| §1 | The Audit Committee has four members, the majority of them independent, nominated and elected by the Board of Directors at its first meeting after the Annual General Meeting, for periods of office of three years, not to run concurrently. One re-election is permitted.

| §2 | Exceptionally, in the first election of the members of the Audit Committee, one member shall be elected for a period of office of two years.

| §3 | The minutes of the meetings of the Audit Committee, which shall be held every two months, must be disclosed, except when the Board of Directors considers that disclosure might put legitimate interest at risk, and in this case only its summary shall be disclosed.

| §4 | The restriction in §3 may not be used in opposition to the control and/or inspection bodies to which the Company and its wholly-owned and other subsidiaries are subject – these bodies shall have total and unrestricted access to the content of the minutes of the Audit Committee, under the obligation of secrecy and confidentiality.

| §5 | The internal control over the Company entrusted to the Office of the General Inspectorate (‘Controladoria Geral’) of Minas Gerais State shall be of a subsidiary nature, and shall be subject to the principles of motivation, reasonableness, appropriateness and proportionality, and must be exercised in compatibility with the duties of the Internal Audit Unit and the Audit Committee.

| §6 | Members of the Board of Directors who are also members of the Audit Committee shall receive only the remuneration of the latter.

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Clause 25 | The Audit Committee may exercise its duties and responsibilities in relation to such wholly-owned and other subsidiaries of the Company as adopt the structure of sharing of a common Audit Committee.

Clause 26 | The following are attributions and duties of the Audit Committee:

| a) | to state opinion on contracting, and dismissal, of external auditors;

| b) | to supervise the activities of the external auditors, assessing their independence, the quality of the services provided, and the appropriateness of such services to the Company’s needs;

| c) | to supervise the activities in the areas of internal control, internal audit and preparation of the financial statements;

| d) | to monitor the quality and integrity of the internal control mechanisms, the financial statements and the information and measurements disclosed by the Company;

| e) | to evaluate and monitor the Company’s exposures to risk – it may requisition, among other matters, detailed information on policies and procedures relating to compensation of the management, utilization of assets, and expenditures made in the name of the Company;

| f) | to evaluate and monitor, jointly with management and the Internal Audit Unit, the appropriateness of transactions with related parties;

| g) | to prepare an annual report with information on its activities, results, conclusions and recommendations, reporting any significant divergence between management, external auditors and the Audit Committee in relation to the financial statements;

| h) | to assess the reasonableness of the parameters on which actuarial calculations are based, and the actuarial result of the benefit plans maintained by the pension fund, when the Company is sponsor of a closed private pension plan entity;

| i) | to give opinion, in order to assist the stockholders in their appointment of managers, members of the Board of Directors’ support committees, and members of the Audit Board, on compliance with the requirements of, and absence of prohibitions for, the related elections; and

| j) | to verify compliance in the process of evaluation of managers, members of the Board of Directors’ support committees, and members of the Audit Board.

| §1 | If an eligibility and assessment committee is created, the competencies described in sub-clauses ‘i’ and ‘j’ of this Clause shall be transferred to that body.

Clause 27 | The Audit Committee has operational autonomy to conduct or order consultations, evaluations and investigations within the scope of its activities, including contracting and use of independent external specialists.

| §1 | The Audit Committee must have means for receiving accusations, including those of a confidential nature, internal and external to the Company, on subjects related to its area of duties.

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CHAPTER V

Control Areas

Clause 28 | The following are Control Areas: Internal Audit, Compliance, and Corporate Risk Management.

| §1 | The Control Areas operate with independence, and have the prerogative of reporting directly to the Board of Directors, as applicable, in accordance with the applicable legislation.

Clause 29 | The Internal Audit Unit is linked to the Board of Directors, with a view to preparation of the financial statements, and is responsible for assessing:

| a) | the appropriateness of the internal controls, and the effectiveness of risk management and of the governance process; and

| b) | the reliability of the process of collection, measurement, classification, accumulation, recording and disclosure of events and transactions.

Clause 30 | The Compliance Management Unit operates as part of, and reports to, the Office of the CEO, and is responsible for:

| a) | managing the Company’s compliance program, with prevention and detection of, and response to, any failings in compliance with internal or external rules and/or inappropriate conduct; and

| b) | coordinating and defining the methodology to be used in the management of internal controls.

| §1 | The person responsible for the Compliance Management Unit shall report directly to the Board of Directors in any situation in which it is suspected that the Chief Executive Officer is involved in irregularities, or when the CEO omits to act on his obligation to adopt necessary measures in relation to a situation reported to him.

Clause 31 | The Corporate Risk Management Unit operates as part of, and reports to, the Office of the CEO; is led by a Statutory Director; and is responsible for:

| a) | coordinating and mapping the management of the portfolio of corporate risks;

| b) | supporting the other areas of the Company in adoption of the decisions on the corporate risks policy and adoption of the risk appetite parameters decided by the Board of Directors; and

| c) | deciding the methodology to be used in corporate risk management; and supporting the other areas in its implementation.

| §1 | The Risk Management Unit shall periodically send reports to the Audit Committee containing its indications and recommendations.

CHAPTER VI

The Audit Board

Clause 32 | The Audit Board is constituted permanently, and has five sitting members, each having a substitute member. These are elected by the General Meeting of Stockholders for a period of office of two years.

| §1 | The following rules govern nomination of members of the Audit Board:

| a) | The following two groups of stockholders each have the right to elect one member, in separate votes, in accordance with the applicable legislation:

| (i) | the minority holders of common shares, and

| (ii) | the holders of preferred shares.

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| b) | The majority of the members must be elected by the Company’s controlling stockholder; at least one must be a public employee, with a permanent employment link to the Public Administration.

| §2 | The Audit Board shall elect its Chair from among its members, and the Chair shall call, and conduct, the meetings.

| §3 | Where it is the competency of the Company to fill appointments to positions on the Audit Boards of the Company’s subsidiaries and/or affiliated companies, the Company shall make nominations in accordance with criteria and a policy of eligibility and assessment approved by the Board of Directors.

Clause 33 | In the event of resignation, death or impediment, a member of the Audit Board shall be replaced by his or her respective substitute member, until the new member is elected, by the General Meeting of Stockholders, and such member shall be chosen by the same party that appointed the member substituted.

Clause 34 | The Audit Board shall have the duties and competencies set by the applicable legislation and, to the extent that they do not conflict with Brazilian legislation, those required by the laws of the countries in which the Company’s shares are listed and traded, including the following:

| a) | to monitor and inspect, through any one of its members, the acts of the managers and to verify compliance with their duties under the law and the by-laws;

| b) | to give opinion on the annual report of management, and to include in such opinion any such complementary information that it deems to be necessary or useful to the decision of the General Meeting of Stockholders;

| c) | to give opinion on any proposals made by the bodies of management to be submitted to the General Meeting of Stockholders or the Board of Directors, as the case may be, in relation to any change in the share capital, issuance of debentures or warrants, investment plans and/or capital budgets, distribution of dividends, transformation, absorption, merger or split;

| d) | to report, through the person of any of its members, to the management bodies and, if these do not take the measures necessary for the protection of the Company’s interests, to the General Meeting of Stockholders, any errors, frauds or crimes that they discover, and suggest measures that will be useful to the Company;

| e) | to call the Annual General Meeting of Stockholders, if the management bodies delay its convocation by more than one month, and to call an Extraordinary General Meeting of Stockholders whenever there are serious or urgent reasons, and include on the agenda of such Meetings whatever matters they consider to be necessary;

| f) | to analyze, at least quarterly, the trial balance and other financial statements prepared periodically by the Company;

| g) | to examine the financial statements for the business year and to give opinion on them; and

| h) | to carry out these functions during liquidation, having in mind the special provisions that regulate that procedure.

Clause 35 | The global or individual compensation of the members of the Audit Board shall be set by the General Meeting of Stockholders which elects it, in accordance with the applicable legislation.

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CHAPTER VII

The business year

Clause 36 | The business year shall coincide with the calendar year, closing on December 31, when the financial statements shall be prepared, in accordance with the applicable legislation. Financial statements may be prepared for periods of six months or interim statements for shorter periods.

Clause 37 | Before any sharing of the profit, there shall be deducted from the profit for the business year, in this order: retained losses, the provision for income tax, the Social Contribution tax on Net Profit, and then, successively, employees’ and managers’ profit shares.

| §1 | The net profit ascertained in each business year shall be allocated as follows:

| a) | 5% (five per cent) to the legal reserve, up to the maximum limit specified by law;

| b) | 50% (fifty per cent) distributed as mandatory dividend to the stockholders of the Company, subject to the other terms of these by-laws and the applicable legislation; and

| c) | the balance, after the retention specified in a capital expenditure and/or investment budget prepared by the Company’s management, in compliance with the Company’s Long-Term Strategic Plan and the dividend policy contained therein and duly approved, shall be applied in the constitution of a profit reserve for the purpose of distribution of extraordinary dividends, in accordance with Clause 39 of these by-laws, up to the maximum limit specified by Clause 199 of Law 6404/1976.

Clause 38 | The dividends shall be distributed in the following order:

| a) | the minimum annual dividend guaranteed to the preferred shares;

| b) | the dividend for the common shares, up to a percentage equal to that guaranteed to the preferred shares.

| §1 | Once the dividends specified in Sub-clauses ‘a’ and ‘b’ of the head paragraph of this clause have been distributed, the preferred shares shall have equality of rights with the common shares in any distribution of additional dividends.

| §2 | The Board of Directors may declare interim dividends, in the form of interest on equity, to be paid from retained earnings, profit reserves or profits ascertained in six-monthly or interim financial statements.

| §3 | The amounts paid or credited as Interest on Equity, in accordance with the relevant legislation, shall be imputed as on account of the amounts of the mandatory dividend or of the dividend payable under the by-laws to the preferred shares, being for all purposes of law a part of the amount of the dividends distributed by the Company.

Clause 39 | Without prejudice to the mandatory dividend, every two years, or more frequently if the Company’s availability of cash so permits, the Company shall use the profit reserve specified in Sub-clause ‘c’ of Clause 37 of these by-laws for the distribution of extraordinary dividends, up to the limit of cash available, as determined by the Board of Directors, in obedience to the Company’s Long-Term Strategic Plan and the Dividend Policy contained therein.

Clause 40 | The dividends declared, mandatory or extraordinary, shall be paid in two equal installments, the first by June 30 and the second by December 30 of each year, and the Executive Board shall decide the location and processes of payment, subject to these periods.

| §1 | Dividends not claimed within three years from the date on which they are placed at the disposal of the stockholder shall revert to the benefit of the Company.

Clause 41 | The employees have the right to a share in the profits or results of the Company, upon criteria authorized by the Executive Board based on the guidelines approved by the Board of Directors and limits established by the General Meeting of Stockholders, in accordance with the applicable legislation.

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CHAPTER VIII

Liability of the managers

Clause 42 | Members of the Company’s management are accountable to the Company and to third parties for the actions which they take in the exercise of their functions, in the terms of the applicable law and regulations and these by-laws.

Clause 43 | The Company will provide defense in Court and/or administrative proceedings, on the plaintiff or defendant side, for members and former members of the Board of Directors, the Audit Board, the Executive Board and the Audit Committee, during or after their periods of office, occasioned by events or acts related to the exercise of their specific functions.

| §1 | This guarantee also extends to employees who legally carry out actions by delegation or under orders from members of the Company’s management.

| §2 | Upon decision of the Board of Directors, the Company shall contract third-party liability insurance to cover expenses of legal actions, fees of counsel and indemnities arising from legal or administrative actions referred to in the head paragraph of this Clause.

| §3 | Contracting of insurance may also cover defense of the insured parties in other spheres, provided that the acts in question do not show implication of illegality or abuse of power.

| §4 | If funding of procedural expenses, fees of counsel and/or other expenses is less expensive than contracting of insurance or making of insurance claims, the Company may alternatively contract a specialized external office for defense in relation to the acts being impugned.

| §5 | Any member of the Board of Directors or the Audit Board, or any Chief Officer or employee against whom final judgment, subject to no further appeal, is given, must reimburse the Company all the costs, expenses and losses caused to it.

| §6 | The Company shall issue a Comfort Letter to the members of the Board of Directors, the Audit Board, the Executive Board and the Audit Committee covering acts made in good faith, subject to the provisions of law.

CHAPTER IX

Resolution of disputes

Clause 44 | The Company, its stockholders, managers and members of the Audit Board undertake to resolve through arbitration, preceded by mediation, before the Market Arbitration Chamber (CAM) of the B3 or the FGV Mediation and Arbitration Chamber, all and any dispute or controversy that may arise between them related to or arising from, in particular, the application, validity, efficacy, interpretation or violation of the provisions contained in the applicable legislation and regulations, the by-laws, any stockholders’ agreements filed at the head office, the rules issued by the Brazilian Securities Commission (CVM), or the other rules applicable to the functioning of the capital markets in general, as well as those contained in the Level 1 Regulations of the B3.

| §1 | Without prejudice to the validity of this arbitration clause, application for urgency measures, before the arbitration tribunal has been constituted, should be remitted to the Judiciary, through the courts of the legal distinct of Belo Horizonte, Minas Gerais.

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CHAPTER X

General provisions

Clause 45 | Admission to the permanent staff of employees of the Company shall be by approval in a public competition.

| §1 | The employees are subject to the applicable employment law and the internal regulations of the Company.

Clause 46 | In contracts entered into, and other legal transactions, between the Company and its related parties, including the State of Minas Gerais and Cemig, the Company’s policy on transactions with related parties shall be obeyed.

Clause 47 | References to the term ‘applicable legislation’ in these by-laws shall include reference to the regulatory rules, subject to the prevalence of Law over rules of an infra-legal nature.

Clause 48 | Financial covenants currently in effect for the Company must obligatorily be mentioned in the Company’s policy on dividends and indebtedness, which must be approved by the General Meeting of Stockholders.

Clause 49 | Policies complementary to these by-laws, required by the applicable legislation, shall be approved by the Board of Directors upon proposal by the Executive Board.

Clause 50 | Upon being sworn in, and annually, management, members of the Audit Board and members of the Audit Committee, including the representatives of employees and minorities, must take part in specific training made available by the Company on the following subjects:

| a) | corporate law and the capital markets;

| b) | disclosure of information;

| c) | internal controls;

| d) | code of conduct;

| e) | Federal Law 12846 of August 1, 2013; f) tenders and contracts; and

| g) | other subjects related to the Company’s activities.

| §1 | Those who have not participated in annual training made available by the Company in the last two years are prohibited from being re-appointed to their positions.

Clause 51 | For the purposes of the provisions of Article 17, §2, IV and Article 22, §1, V of Law 13303/2016 and Article 26, IX of State Decree 47154 of February 20, 2017, any contracting of Cemig or any of its wholly-owned subsidiaries for activities carried out under natural monopoly, in the role of consumer, is not considered to be an activity preventing appointment as managers, nor as independent managers.

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CHAPTER XI

Transitory provisions

Clause 52 | The rules relating to the members of the Board of Directors, the Executive Board, the Audit Board and the Audit Committee specified in these by-laws shall be applied as from the first periods of office beginning after the change in these by-laws, reflecting the adaptation specified by Law 13303/2016 and State Decree 47154/2017.

| §1 | Exceptionally, the first period of office of the members of the Board of Directors, the Executive Board and the Audit Board shall begin with the election held immediately after the approval of these by-laws, ending at the Annual General meeting of 2020.

| §2 | The interregnum period between the Annual General Meeting held on April 30, 2018 and the election immediately after the approval of these by-laws shall not be considered as a new period of office for the purposes of Clause 13, §2, Clause 19, and Clause 32 of these by-laws.

Clause 53 | Until the representative of the employees on the Board of Directors is chosen in accordance with sub-clause ‘c’ of §3, and §4, of Clause 13 of these by-laws, an employee who complies with the specific requirements shall be designated, and the unions representing the various groups of employees shall be advised of the designation.

Clause 54 | Until the specific decisions by the Board of Directors take place, the internal processes, organizational structure, names and terms used in the Company on the date of approval of these by-laws shall remain operative.

Clause 55 | Any cases of omission in these by-laws shall be resolved by the General Meeting of Stockholders, subject to the applicable legislation.

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5. Notice to Stockholders Dated July 31, 2020: (1) Dividends declared by AGM of July 31; (2) Capital increase with issue of 4.1% in new shares.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS - CEMIG

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

NOTICE TO STOCKHOLDERS

(1) Dividends declared by AGM of July 31;

(2) Capital increase with issue of 4.1% in new shares

Cemig advises its stockholders that the Ordinary (Annual) and Extraordinary General Meetings of Stockholders (‘AGM/EGM’) held on July 31, 2020 decided the following:

| 1. | DIVIDENDS:

| a) | Of the net profit for 2019, in the amount of R$ 3,127,398,000:

R$ 764,181,000 is allocated as minimum mandatory dividend, payable to the Company’s stockholders, as follows:

| ü | R$ 400,000,000 in the form of Interest on Equity (‘JCP’), corresponding to R$ 0.27431232108 per share, subject to withholding of income tax at source at the rate of 15% (except for stockholders exempt from such retention under current legislation), to be paid by December 30, 2020, in a single payment, to stockholders on the Company’s Nominal Share Register on December 23, 2019.

· The shares began trading ‘ex–’ these rights on December 26, 2019.

| ü | R$ 364,181,000 in the form of dividends for the 2019 business year, corresponding to R$ 0.24974833850 per share, to be paid by December 30, 2020, in a single payment, to stockholders whose names were on the Company’s Nominal Share Registry on the date on which the AGM and EGM were held, namely July 31, 2020.

· The shares trade ‘ex–’ these rights on August 3, 2020.

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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| 2. | CAPITAL INCREASE WITH ISSUES OF NEW SHARES:

| a) | Increase in the share capital, from R$ 7,293,763,000 to R$ 7,593,763,000, by issuance of 60,000,000 (sixty million) new shares, comprising 20,056,076 common shares and 39,943,924 preferred shares, by capitalization of R$ 300,000,000 from the Earnings Reserve, with distribution to stockholders, as a result, of new shares totaling 4.113103206% of the number of shares held, of the same type, each with nominal value of R$ 5.00.

| b) | For shares traded on the São Paulo stock exchange (‘B3’), the beneficiaries of the stock bonus will be those stockholders who held shares on July 31, 2020.

· The shares trade ‘ex–’ these rights on August 3, 2020.

| c) | The new shares issued will be credited on August 5, 2020, and will not have the right to dividends declared for the 2019 business year.

| d) | For the purposes of §1º of Article 25 of Normative Instruction 25/2001, issued by the Brazilian tax authority (Secretaria da Receita Federal), the attributed unit cost of acquisition of the bonus shares is R$ 5.00.

| e) | As per Normative Instruction 168/91 issued by the CVM (Brazilian Securities Commission), the aggregate proceeds in Reais from the sale of the fractions of shares resulting from calculation of numbers of new shares will be paid to the holders of those fractions together with the single payment of dividends for the 2019 business year.

For stockholders whose shares are not held for custody by CBLC and whose registration details are not up to date, we recommend visiting any branch of Banco Itaú Unibanco S.A. (the institution which administers Cemig’s Nominal Share Registry System), with their identification documents, for the necessary updating.

Belo Horizonte, July 31, 2020

Leonardo George de Magalhães

Chief Finance and Investor Relations Officer

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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6. Market Notice Dated August 5, 2020: Following success in court action, Cemig D files proposal for early return of ICMS tax to customers.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS –

CEMIG

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

MARKET NOTICE

Following success in court action,

Cemig D files proposal for early return of ICMS tax to customers

Cemig (Companhia Energética de Minas Gerais – listed and traded on the exchanges of São Paulo, New York and Madrid), hereby informs the CVM (Brazilian Securities Commission), the São Paulo stock exchange (B3) and the market in general as follows:

Administrative appeals have been filed with Brazil’s electricity regulator, Aneel (National Electricity Agency), contesting Aneel’s award of an annual tariff increase of 4.27% to Cemig’s wholly-owned distribution subsidiary Cemig D, in effect from May 28, 2020.

The appeals request annulment of the tariff increase, and restitution to Cemig D’s customers of the amounts of the escrow deposits repaid by the Courts to Cemig D on February 13, 2020.

This repayment of escrow deposits is the result of the Supreme Court judgment in favor of Cemig D, against which there is no further appeal, in Cemig D’s legal action (‘the Action’) against the tax authority, which requested – and won – a ruling that amounts of the ICMS tax paid or to be paid by Cemig D must be excluded from the base amount for calculation of PIS, Pasep and Cofins tax payable by Cemig D.

The current administrative appeals request creation of a negative financial component in the calculation of Cemig D’s annual tariff adjustment.

Aneel has given Cemig D the right of reply, and, based on internal assessments and those of its legal advisers, Cemig D has today submitted to Aneel a proposal for bringing forward Cemig D’s already-planned restitution to its customers of a total amount of R$ 714.4 million – corresponding to part of the funds released by the courts due to Cemig’s success in the Action.

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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This proposal by Cemig D takes into consideration the wholly exceptional context caused by the Covid-19 pandemic, and Cemig’s responsibility to carry out its social function and its duties to the community in which it operates, the rights and interests of which it is obliged loyally to respect and serve (under Article 16, §1 of Law 6404/76).

Cemig D’s proposal is also an important contribution to keeping tariffs at reasonable levels, at a moment when all economic agents are seeking measures that can reduce the impacts of the pandemic.

Cemig’s offer is also an anticipation of the effects, and treatment in terms of regulations – which are yet to be defined in detail by the tax authorities and Aneel – of the Supreme Court’s decision in the Action. These regulatory decisions will be applied equally to all electricity distribution concessions through an Aneel Normative Ruling, which will be issued after conclusion of Public Consultation 005/2020 – during which there will be discussion on the merits, and in which Cemig will be able to take part in a wide-ranging discussion on the subject.

Cemig emphasizes that the portion of the credits that it proposes to repay to its customers has already been posted as a liability in its financial statements.

Thus, in the event that Aneel, in its decision on the administrative appeals mentioned above, accepts Cemig D’s proposal, the decision reported in this notice will not cause any impact on Cemig’s profit or financial results.

Cemig also notes that the Council of Aneel will also carry out its own analysis and decision on the proposal.

Belo Horizonte, August 5, 2020.

Leonardo George de Magalhães

Chief Finance and Investor Relations Officer

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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7. Market Notice Dated September 1, 2020: Resignation of member of the Board of Directors.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS –

CEMIG

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

MARKET NOTICE

Resignation of member of the Board of Directors

Cemig (Compamia Energetical de Minas Gerais, listed in São Paulo, New York and Madrid), in compliance with CVM Instruction 358/2002 as amended, and Article 151 of Law 6404 of December 15, 1976 as amended, hereby informs the public as follows:

On September 1, 2020 Cemig received a letter of resignation from Mr. Antônio Rodrigues dos Santos e Junqueira, a member of the Board of Directors who had been nominated by the majority stockholder.

As from September 1, 2020 the Board of Directors is now as follows:

BOARD OF DIRECTORS
MEMBERS
Márcio Luiz Simões Utsch – Chair | (Nominated by the majority stockholder)
Seat vacant | (Nomination of the majority stockholder)
Cledorvino Belini | (Nominated by the majority stockholder)
José Reinaldo Magalhães | (Nominated by the majority stockholder)
Afonso Henriques Moreira Santos | (Nominated by the majority stockholder)
José João Abdalla Filho | (Nominated by the preferred stockholders)
Marcelo Gasparino da Silva | (Nominated by minority stockholders)
Paulo Cesar de Souza e Silva | (Nominated by minority stockholders)
Marco Aurélio Dumont Porto | (Representative of the employees)

The Company offers its sincere thanks to Mr. Antônio Rodrigues dos Santos e Junqueira for his service on the Board.

Belo Horizonte, September 1, 2020.

Leonardo George de Magalhães

Chief Finance and Investor Relations Officer

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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8. Market Announcement Dated September 8, 2020: BlackRock notifies significant holding in Cemig PN.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS –

CEMIG

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

MARKET ANNOUNCEMENT

BlackRock notifies significant holding in Cemig PN

Cemig (Companhia Energética de Minas Gerais – listed and traded in São Paulo, New York and Madrid), in accordance with Article 12 of CVM Instruction 358 of Jan. 3, 2002 as amended, hereby informs the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (B3), market and the public as follows:

Cemig has received the following notice from BlackRock, Inc. (‘BlackRock’):

| 1. | In the name of certain of its clients, BlackRock, Inc. (‘BlackRock’), as investment manager, hereby reports its acquisition of preferred shares in Cia. Energética de Minas Gerais – CEMIG (‘the Company’), as follows:

On September 1, 2020 its aggregate holdings were:

| – | 94,888,261 preferred shares, and 58,801,709 American Depositary Receipts (‘ADRs’) for preferred shares, totaling 153,689,970 preferred shares, representing approximately 15.20% of the total of the preferred shares issued by the Company, and

| – | 2,320,928 derivative financial instruments referenced to preferred shares with financial settlement, representing approximately 0.23% of the total of the preferred shares issued by the Company.

( Continued ) >

Av. Barbacena 1200 Santo Agostinho 30190131 Belo Horizonte, Minas Gerais Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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| 2. | To comply with Article 12 of Brazilian Securities Commission (‘CVM’) Instruction 358 of January 3, 2002 as amended, BlackRock hereby requests the Chief Investor Relations Officer of Cemig to publish the following information to the CVM and the other competent bodies:

| (i) | BlackRock has head office registered at 55 East 52nd Street, New York 10022-002, NY, United States of America.

| (ii) | As specified above, the equity interests held by BlackRock now total, in aggregate,

94,888,261 preferred shares, and 58,801,709 ADRs representing preferred shares, comprising a total of 153,689,970 preferred shares, representing approximately 15.20% of the total of the preferred shares issued by the Company, and

2,320,928 derivative financial instruments referenced to preferred shares with financial settlement, representing approximately 0.23% of the total of the preferred shares issued by the Company.

| (iii) | The objective of the stockholding interests referred to above is strictly investment, there being no intention to alter the stockholding control or administrative structure of the Company.

| (iv) | BlackRock has not entered into any contracts or agreements regulating exercise of the right to vote or the purchase or sale of securities issued by the Company.

| 3. | Please do not hesitate to contact us for any additional information or comment that you may feel to be necessary on this matter.”

Belo Horizonte, September 8, 2020.

Leonardo George de Magalhães

Chief Finance and Investor Relations Officer

Av. Barbacena 1200 Santo Agostinho 30190131 Belo Horizonte, Minas Gerais Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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9. Material Announcement Dated September 10, 2020: Gasmig completes R$ 850 million debenture issue.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS –CEMIG

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

MATERIAL ANNOUNCEMENT

Gasmig completes R$ 850 million debenture issue

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

On today’s date Cemig’s subsidiary Companhia de Gás De Minas Gerais – Gasmig (“Gasmig”), which is in the process of obtaining registry with the CVM for category B listing, concluded its Eighth Issue of Non-convertible Debentures, in the amount of

· R$ 850,000,000.00 (eight hundred fifty million Reais),

in a single series, with maturity at 11 years, monetary updating by the IPCA inflation index, and remuneratory interest of 5.27% (five point two seven per cent) per year, on the 252 (two hundred fifty two) business days basis.

The debentures were issued under Article 2 of Law 12431, of June 24, 2011, as amended, Decree 8874 of October 11, 2016, and Mining and Energy Ministry (MME) Order 252 of June 17, 2019 as amended, since the project qualifies as priority for the MME under Ministerial Order 6 of April 15, 2020.

As specified in the Issue Instrument (“the Deed of the 8th Issue of Non-convertible Debentures by Companhia de Gás de Minas Gerais – Gasmig, Unsecured, in a Single Series, for Public Distribution with Restricted Placement Efforts”), signed on August 26, 2020 and duly registered with the Minas Gerais Commercial Board under number 7985285 on August 28, 2020, as amended on September 4, 2020, and the applicable regulations, the whole of the net proceeds from the issue was allocated to the obligatory early redemption by Gasmig, on today’s date, of the First Issue of Commercial Promissory Notes, in a Single Series, with nominal unit value of R$ 1,000,000.00 (one million Reais), comprising a total of R$ 850,000,000.00 (eight hundred fifty million Reais) on their issue date.

Belo Horizonte, September 10, 2020.

Leonardo George de Magalhães

Chief Finance and Investor Relations Officer

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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10. Market Notice Dated September 17, 2020: Moody’s upgrades Cemig’s ratings, maintains outlook positive.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS –

CEMIG

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

MARKET NOTICE

Moody’s upgrades Cemig’s ratings, maintains outlook positive

Cemig (Companhia Energética de Minas Gerais – listed and traded on the exchanges of São Paulo, New York and Madrid), hereby informs the Brazilian Securities Commission (CVM), the São Paulo stock exchange (B3) and the market in general as follows:

| 1) | The risk rating agency Moody’s América Latina (‘Moody’s’) has upgraded its ratings for Cemig and its wholly-owned subsidiaries Cemig Distribuição S.A. (‘Cemig D’) and Cemig Geração e Transmissão S.A. (‘Cemig GT’):

| - | on the global scale: from B1 to Ba3;

| - | and from on the Brazilian scale: from Baa1.br to A1.br.

Moody’s maintains its outlook positive for all three companies.

These increases of one ‘notch’ on the global scale and 3 notches on the Brazilian scale reflect Moodys’ perception of an overall improvement in Cemig’s liquidity profile, with effective strategies for reduction of costs and leverage.

| 2) | On July 10, 2020, Standard & Poor’s revised its outlook for Cemig and its wholly-owned subsidiaries to positive, also reflecting stronger metrics of credit and liquidity.

Cemig believes the changes made by these rating agencies are a recognition of its efforts to improve its credit quality, and reiterates its commitment to improving its liquidity and capital structure through lengthening of its debt profile, strategic management of liabilities, and reduction of its cost of capital.

Belo Horizonte, September 17, 2020

Leonardo George de Magalhães

Chief Finance and Investor Relations Officer

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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11. Convocation Dated September 18, 2020: Extraordinary General Meeting of Stockholders (EGM).

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COMPANHIA ENERGÉTICA DE MINAS GERAIS – CEMIG

LISTED COMPANY

CNPJ 17.155.730/0001-64 – NIRE 31300040127

EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS (EGM)

CONVOCATION

Stockholders are hereby called to an Extraordinary General Meeting (EGM) of Companhia Energética de Minas Gerais – Cemig, to be held on October 19, 2020 at 2 p.m., exclusively by digital media, at the Company’s head office, in Belo Horizonte, Minas Gerais, Brazil, through the electronic platform Zoom, which will enable stockholders to take part and vote, provided they send the Remote Voting Form, to decide on the following matters:

| I | – Approval and authorization of signature of the Protocol of Absorption and Justification, with Cemig Geração Distribuída S.A – Cemig GD, to specify the terms and conditions that will govern the absorption of Cemig GD by Cemig;
|  | – authorization for absorption of Cemig GD by Cemig; and subsequently, the consequent extinction of the absorbed company; and
|  | – ratification, under and for the purposes of Article 8 of Law 6404/1976, of the appointment of the three expert analysts to provide a valuation of the Stockholders’ equity of Cemig GD, made in accordance with Law 6404/1976.
| II | Election of one member of the Audit Board of the Company, since the member elected was not sworn in within the legally required period.

Any stockholder who wishes to do so may exercise the right to vote using the remote voting system, in accordance with CVM Instruction 481/2009, by sending the corresponding Remote Voting Statement Form (Boletim de Voto à Distância, or BVD), through the stockholder’s custodian institution or mandated bank by October 9, 2020, or directly to the Company by email at: ri@cemig.com.br, by October 9, 2020.

Any stockholder who wishes to be represented by proxy at the said General Meeting of Stockholders should obey the precepts of Article 126 of Law 6406 of 1976, and Paragraph 2 of Clause 10 of the Company’s by-laws, by sending to the email address ri@cemig.com.br, by email, preferably by October 14, 2020, proofs of ownership of the shares, issued by a depositary financial institution, and a power of attorney with specific powers.

Belo Horizonte, September 18, 2020

Márcio Luiz Simões Utsch

Chair of the Board of Directors

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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12. Proposal by the Board of Directores to the Extraordinary General Meeting of Stockholders to be held on October 19, 2020, Dated September 18, 2020.

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PROPOSAL

BY THE BOARD OF DIRECTORS

TO THE

EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS

TO BE HELD ON

OCTOBER 19, 2020

Dear Stockholders:

The Board of Directors of Companhia Energética de Minas Gerais – Cemig submits the following proposals to the Extraordinary General Meeting of Stockholders:

| I | – Approval and authorization of signature of the Protocol of Absorption and Justification, with Cemig Geração Distribuída S.A . – Cemig GD, to specify the terms and conditions that will govern the absorption of Cemig GD by Cemig;

| – | authorization for absorption of Cemig GD by Cemig; and subsequently, extinction of the absorbed company; and

| – | ratification of the appointment of the following three expert analysts:

Andréa de Lourdes Pereira | – Brazilian, married, accountant, holder of Identity Card M- 4.591.486, CPF 646.074.296-00, and CRC/MG 67.602;
Leonardo Felipe Mesquita | – Brazilian, married, accountant, holder of Identity Card 7.113.448, CPF 027.614.426- 01, and CRC/MG 85.260; and
Mário Lúcio Braga | – Brazilian, married, accountant, holder of Identity Card MG- 3.632.149, CPF 469.088.896- 53, and CRC/MG 47.822,

to provide a valuation, under and for the purposes of Article 8 of Law 6404/1976, of the Stockholders’ equity of Cemig GD; and approval of the Valuation Opinion valuing the stockholders’ equity of Cemig GD, carried out in accordance with Law 6404/1976.

| II | Election of one member of the Audit Board of the Company, since Mr. Marco Aurélio de Barcelos Silva, who had been nominated by the majority stockholder and elected at the Annual General Meeting held on July 31, 2020, has not been sworn in within the legally-required period.

As can be seen, the objective of these proposals is to meet the legitimate interests of the stockholders and of the Company, and for this reason it is the hope of the Board of Directors that it will be approved.

Belo Horizonte, September 18, 2020

Márcio Luiz Simões Utsch

Chair of the Board of Directors

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APPENDICES:

| I | Protocol of Absorption and Justification of Absorption

| II | Approval of the Valuation Opinion valuing the Stockholders’ Equity of Cemig Geração Distribuída S.A – Cemig GD

| III | Opinion of the Audit Board

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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13. Notice to Stockholders Dated September 22, 2020: Interest on Equity: R$ 120 million on account of 2020 dividend.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS - CEMIG

CEMIG

LISTED COMPANY – CNPJ 17.155.730/0001-64

NOTICE TO STOCKHOLDERS

Interest on Equity: R$ 120 million on account of 2020 dividend

We hereby notify stockholders that the Executive Board has decided to declare payment of Interest on Equity in the amount of R$ 120,000,000 (one hundred twenty million Reais), corresponding to R$ 0.07904259285 per share, on account of the minimum obligatory dividend for the 2020 business year.

Income tax at 15% will be deducted at source, unless the stockholder is exempt under the current legislation.

For shares traded on the São Paulo stock exchange (‘B3’), this benefit will be paid to stockholders of record on September 25, 2020, in two equal installments, by June 30, 2021 and December 30, 2021. The shares will trade ‘ex–’ these rights on September 28, 2020.

Stockholders whose shares are not held in custody by CBLC and whose registration details are not up to date should visit any branch of Banco Itaú Unibanco S.A. (the Institution which administers Cemig’s Nominal Share Registry System), with their personal identification documents, for the necessary updating.

Belo Horizonte, September 22, 2020

Leonardo George de Magalhães

Chief Finance and Investor Relations Officer

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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14. Market Notice Dated September 25, 2020: Banco Clássico reports 16% holding of common shares.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS –

CEMIG

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

MARKET NOTICE

Banco Clássico reports 16% holding of common shares

In accordance with Article 12 of CVM Instruction 358 of Jan. 3, 2002 as amended, Cemig (Companhia Energética de Minas Gerais – listed and traded in São Paulo, New York and Madrid), hereby reports to the Brazilian Securities Commission (CVM), the São Paulo Stock Exchange (B3) and the market as follows:

Cemig has received the following notice from Banco Clássico S.A.:

| “ | In compliance with Article 12 of CVM Instruction 358 of January 3, 2002, we notify you that, as a result of transactions in the session of the São Paulo Stock Exchange on September 23, 2020, Banco Clássico S.A., through its exclusive fund FIA Dinâmica Energia, acquired:

5,471,800 |  | common shares in Companhia Energética de Minas Gerais – CEMIG, for aggregate value of
R$ 59,837,618.24 |  | (fifty nine million eight hundred thirty seven thousand six hundred eighteen Reais twenty four centavos).

This acquisition brings the interest in Companhia Energética de Minas Gerais – CEMIG held by FIA Dinâmica Energia to:

81,605,977 |  | common (ON) shares,
comprising 16.07% |  | of the total common shares issued by Cemig;
and 51,967,372 |  | preferred (PN) shares,
comprising 5.14% |  | of the total preferred shares issued by Cemig;
thus comprising 8.79% |  | of the total shares issued by Cemig.

Also in compliance with the above Instruction, Banco Clássico S.A. states that the aim of this transaction is to diversify the investments of FIA Dinâmica Energia in electricity, while seeking to direct part of the Bank's investments to Brazil’s infrastructure sector.

Complementing this information, we attach the Bank’s complete details, in accordance with Sub-items I and III of Article 12 of CVM Instruction 358 of January 3, 2002. ”

Belo Horizonte, September 25, 2020

Leonardo George de Magalhães

Chief Finance and Investor Relations Officer

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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15. Convocation Dated October 9, 2020: Extraordinary General Meeting of Stockholders.

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COMPANHIA ENERGÉTICA DE MINAS GERAIS

CEMIG

CNPJ 17.155.730/0001-64 – NIRE 31300040127

EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS

CONVOCATION

Stockholders are hereby called to an Extraordinary General Meeting of Stockholders to be held on November 9, 2020, at 2 p.m., exclusively online, at the Company’s head office, in Belo Horizonte, Minas Gerais, Brazil, through the Zoom digital platform, which will enable stockholders to take part and vote, provided they send the Remote Voting Form, to decide on:

| – | Election of one alternate member of the Audit Board, following the resignation of a member.

Any stockholder who wishes to do so may exercise the right to vote using the remote voting system, in accordance with CVM Instruction 481/2009, by sending the corresponding Remote Voting Form (Boletim de Voto à Distância, or BVD), through the stockholder’s custodian agent or mandated bank by October 28, 2020, or directly to the Company by email at: ri@cemig.com.br, by October 28, 2020.

Any stockholder who wishes to be represented by proxy at the said General Meeting of Stockholders should obey the precepts of Article 126 of Law 6406 of 1976, and Paragraph 2 of Clause 10 of the Company’s by-laws, by sending to the email address ri@cemig.com.br, by email, preferably by November 5, 2020, proofs of ownership of the shares, issued by a depositary financial institution, and a power of attorney with specific powers.

Belo Horizonte, October 9, 2020

Márcio Luiz Simões Utsch

Chair of the Board of Directors

Av. Barbacena 1200 Santo Agostinho 30190-131 Belo Horizonte, MG Brazil Tel.: +55 31 3506-5024 Fax +55 31 3506-5025

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

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