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CONCESSION FINANCIAL AND SECTOR ASSETS AND LIABILITIES
 12 Months Ended
Dec. 31, 2021
Concession Financial And Sector Assets And Liabilities  
CONCESSION FINANCIAL AND SECTOR ASSETS AND LIABILITIES

 

14.CONCESSION FINANCIAL AND SECTOR ASSETS AND LIABILITIES

 

Concession financial assets  2021  2020
Concession financial assets related to the infrastructure          
Energy distribution concession (14.1)   684    530 
Gas distribution concession (14.1)   34    29 
Indemnifiable receivable — Generation (14.2)   816    816 
Concession grant fee — Generation concessions (14.3)   2,792    2,549 
    4,326    3,924 
Sector financial assets          
Amounts receivable from Parcel A (CVA) and Other Financial Components  (14.4)   2,148    133 
Total   6,474    4,058 
           
Current assets   1,505    258 
Non-current assets   4,969    3,799 

 

Concession sector liabilities  2021  2020
Amounts receivable from Parcel A (CVA) and Other Financial Components  (14.4)   51    231 
Total   51    231 
           
Current liabilities   51    231 

 

 

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

 

   Generation  Distribution  Gas  Total
Balances at December 31, 2018   3,225    396    —    3,621 
Amounts received   (259)   —    —    (259)
Transfers from contract assets   —    48    —    48 
Transfers from (to) intangible assets   —    (1)   24    23 
Monetary updating   318    18    —    336 
Disposals   —    (1)   —    (1)
Balances at December 31, 2019   3,284    460    24    3,768 
Amounts received   (266)   —    —    (266)
Transfers from contract assets        60         60 
Transfers from (to) intangible assets        (5)        (5)
Monetary updating   347    15    5    367 
Balances at December 31, 2020   3,365    530    29    3,924 
Amounts received   (280)   —    —    (280)
Transfers from contract assets   —    110    —    110 
Transfers from (to) intangible assets   —    (9)   —    (9)
Monetary updating   523    54    5    582 
Disposals   —    (1)   —    (1)
Balances at December 31, 2021   3,608    684    34    4,326 

 

14.1Distribution - Financial assets

The energy and gas distribution concession contracts are within the scope of IFRIC 12. The financial assets under these contracts refer to the investments made in infrastructure that will be paid by grantor at the end of the concession period. These financial assets 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.

 

 

14.2Generation — Indemnity receivable

 

As from August 2013, with the extinction of the concession for various plants operated by Company under Concession Contract 007/1997, it 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 recorded as financial assets at fair value through profit or loss, and totaled R$816 on December 31, 2021 and 2020.

 

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    413 
UHE Salto Grande  July 2015   102    11    39 
UHE Itutinga  July 2015   52    3    7 
UHE Camargos  July 2015   46    8    23 
PCH Piau  July 2015   18.01    2    9 
PCH Gafanhoto  July 2015   14    1    10 
PCH Peti  July 2015   9.4    1    8 
PCH Dona Rita  Sep. 2013   2.41    1    1 
PCH Tronqueiras  July 2015   8.5    2    12 
PCH Joasal  July 2015   8.4    1    8 
PCH Martins  July 2015   7.7    2    4 
PCH Cajuru  July 2015   7.2    4    4 
PCH Paciência  July 2015   4.08    1    4 
PCH Marmelos  July 2015   4    1    4 
Others                  
UHE Volta Grande  Feb. 2017   380    26    70 
UHE Miranda  Dec. 2016   408    27    23 
UHE Jaguara  Aug. 2013   424    40    174 
UHE São Simão  Jan. 2015   1,710    2    3 
       3,601.70    204    816 

 

 

As specified by the grantor (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 grantor. The Company does not expect any losses in the realization of these amounts.

 

On December 31, 2021, investments made after the Jaguara, São Simão and Miranda plants came into operation, in the amounts of R$174, R$3 and R$23, respectively, are recorded as concession financial assets, and the determination of the final amounts to be received by the Company is in discussion with Aneel (the grantor). The Company does not expect losses in realization of these amounts.

 

In 2019, Publicc Hearing 003/2019 was opened to obtain inputs on improvement of the criteria and procedures for calculation of investments in assets returnable to the Grantor, not yet amortized or not depreciated, of generation concessions (whether extended or not), under Law 12,783/2013, which resulted in the publication, on July 13, 2021, of Normative Resolution 942, by Aneel.

 

Under Normative Resolution 942, concession holders must attest the respective investments linked to reimbursable assets, based on an evaluation report, by July 12, 2022, — this period may be extended by Aneel for an equal period. According to Grantor’s rules, the evaluation report must be prepared by a company accredited by Aneel, to be hired by the concession holder. Additionaly, the concession holders were required to state interest in receipt of the complementary amount until August 20, 2021. Cemig GT complied with this requirement within the specified period.

 

Appendix I of the above mentioned Resolution details the methodology and general criteria for calculation of investment portion linked to reversible assets, which must be based on the New Replacement Value — which is calculated, preferably, based on the reference database of prices, then, if it is not possible, by the concession holder’s prices database, and, as the last alternative, by the updated inspected accounting cost.

 

The Company is assessing the effects of this resolution, and does not expect losses in its financial assets as a result of application of these new requirements.

 

On August 9, 2021, the Company stated its interest in receiving the complementary amount related to the portions of the investments linked to revertible assets that had not yet been modernized or depreciated, and have not been indemnified.

 

The Company hired the valuation specialist service provider accredited by Aneel, and expects to meet the requirements of Normative Resolution (ReN) 942/2021, proving the realization of related investments linked to revertible assets through a valuation report, within the stipulated deadline.

 

14.3Concession grant fee — Generation concessions

 

The concession grant fee paid to Company for a 30-year concession contracts nº 08 to 16/2016, related to 18 hydroelectric plants, as an amount of R$2,216. The amount of the concession fee was recognized as a financial asset measured at amortized cost, as the 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 these concession financial assets are as follows:

 

SPE  Plants  2020  Monetary updating  Amounts received  2021
Cemig Geração Três Marias S.A.  Três Marias   1,447    287    (150)   1,584 
Cemig Geração Salto Grande S.A.  Salto Grande   454    90    (47)   497 
Cemig Geração Itutinga S.A.  Itutinga   171    37    (21)   187 
Cemig Geração Camargos S.A.  Camargos   128    27    (15)   140 
Cemig Geração Sul S.A.  Coronel Domiciano, Joasal, Marmelos, Paciência and Piau   167    38    (21)   184 
Cemig Geração Leste S.A.  Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras   114    27    (16)   125 
Cemig Geração Oeste S.A.  Cajurú, Gafanhoto and Martins   69    17    (11)   75 
 Total      2,550    523    (281)   2,792 

 

SPE  Plants  2019  Monetary updating  Amounts received  2020
Cemig Geração Três Marias S.A.  Três Marias   1,402    188    (143)   1,447 
Cemig Geração Salto Grande S.A.  Salto Grande   440    59    (45)   454 
Cemig Geração Itutinga S.A.  Itutinga   165    25    (19)   171 
Cemig Geração Camargos S.A.  Camargos   124    18    (14)   128 
Cemig Geração Sul S.A.  Coronel Domiciano, Joasal, Marmelos, Paciência and Piau   161    26    (20)   167 
Cemig Geração Leste S.A.  Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras   110    19    (15)   114 
Cemig Geração Oeste S.A.  Cajurú, Gafanhoto and Martins   66    12    (9)   69 
 Total      2,468    347    (265)   2,550 

 

SPE  Plants  2018  Monetary updating  Amounts received  2019
Cemig Geração Três Marias S.A.  Três Marias   1,370    171    (139)   1,402 
Cemig Geração Salto Grande S.A.  Salto Grande   430    54    (44)   440 
Cemig Geração Itutinga S.A.  Itutinga   161    23    (19)   165 
Cemig Geração Camargos S.A.  Camargos   120    17    (13)   124 
Cemig Geração Sul S.A.  Coronel Domiciano, Joasal, Marmelos, Paciência and Piau   157    24    (20)   161 
Cemig Geração Leste S.A.  Dona Rita, Ervália, Neblina, Peti, Sinceridade and Tronqueiras   107    18    (15)   110 
Cemig Geração Oeste S.A.  Cajurú, Gafanhoto and Martins   64    11    (9)   66 
 Total      2,409    318    (259)   2,468 

 

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

 

14.4Account for compensation of variation of parcel A items (CVA) and Other financial components

 

As established in the amendment to the concession contract of Cemig D, there is a guarantee 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-controllable costs and the costs actually incurred. The variations are subject to adjustment using the Selic rate and considered in the subsequent tariff adjustments.

 

 

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, are as follows:

 

                                           
  2021  2020
Financial position   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   989    4,133    5,122    84    1,562    1,646 
Current assets   989    2,397    3,386    84    834    918 
Non-current assets   —    1,736    1,736    —    728    728 
                               
Liabilities   (1,040)   (1,985)   (3,025)   (246)   (1,498)   (1,744)
Current liabilities   (1,040)   (1,175)   (2,215)   (246)   (903)   (1,149)
Non-current liabilities   —    (810)   (810)   —    (595)   (595)
                               
Total current, net   (51)   1,222    1,171    (162)   (69)   (231)
Total non-current, net   —    926    926    —    133    133 
Total, net   (51)   2,148    2,097    (162)   64    (98)

 

 

  2021  2020
Financial components     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   24    (91)   (67)   1    —    1 
Tariff for use of transmission facilities of grid participants   146    97    243    1    218    219 
Tariff for transport of Itaipu supply   13    (1)   12    —    18    18 
Alternative power source program (Proinfa)   11    19    30    —    6    6 
ESS/EER System Service/Energy Charges   31    953    984    (1)   39    38 
Energy purchased for resale   390    1,178    1,568    4    449    453 
                               
Other financial components                              
Over contracting of supply (1)   (68)   193    125    (56)   165    109 
Neutrality of Parcel A   24    73    97    (3)   110    107 
Billing return — Covid Account (2)   (371)   —   (371)   (86)   (395)   (481)
Other financial items   (230)   (226)   (456)   —   (504)   (504)
Excess demand and reactive power   (21)   (47)   (68)   (22)   (42)   (64)
TOTAL   (51)   2,148    2,097    (162)   64    (98)

 

(1)The wholly-owned subsidiary Cemig D was over contracted in 2017 and 2018 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. On August 27, 2020, Aneel published the Dispatch 2,508/2020-SRM-SGT, which set new amounts for distributors’ over contracting for the years 2016 and 2017, based on a new valuation criterion established by Aneel Technical Note 97/2020-SRM-SGT — not contained in the regulatory rules which were currently in force. As a result, Cemig D filed an appeal with the Council of Aneel, for the amounts of distribution agents’ over contracting to be reset in accordance with the calculation criteria based on maximum effort contained in Aneel Normative Resolution 453/2011. The Company’s position on this case is reinforced by the fact that the Brazilian Energy Distributors’ Association (Abradee) filed a similar appeal, supported by the opinion of contracted legal advisors. 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$192 on December 31, 2021, as ‘Other financial components’ to be ratified. At the reporting date for these financial statements, this matter was still pending analysis by Aneel, however, the decision of SGT/SEM Dispatch 2508 of 2020 is in force, and was considered in the last tariff process, in which part of the amount relating to over contracting in 2017 was ratified, totaling R$39.
(2)This is a financial component created for return to customers of the amounts that were invoiced to them but received by Cemig from the Covid Account in 2020. These amounts will be returned to customers in the tariff process of 2021, updated by the Selic rate, ensuring of neutrality.

 

 

Changes in balances of these sector assets and liabilities:

 

    
Balance at December 31, 2018   1,080 
Additions   724 
Amortization   (666)
Payments from the Flag Tariff Centralizing Account   (361)
Updating — Selic rate   105 
Balance at December 31, 2019   882 
Additions   611 
Amortization   (156)
Payments from the Flag Tariff Centralizing Account   (63)
Receipt funds of “Covid-account”   (1,404)
Updating — Selic rate (Note 29)   32 
Balance at December 31, 2020   (98)
Additions   1,908 
Amortization   238 
Transfer of other liabilities (1)   (15)
Updating — Selic rate (Note 29)   64 
Balance at December 31, 2021   2,097 

 

(1)Amounts relating to the reversal of the credits that could not be returned to customers in final billing, due to moderation of tariffs, as specified in §6 of Article 88 of REN 414/2010, included by REN 714/2016.

 

Cemig D tariff adjustment

 

On May 25, 2021 the grantor (Aneel) approved the Annual Tariff Adjustment for Cemig D, effective from May 28, 2021 to May 27, 2022, with an average increase for customers of 1.28% – being: (i) 2.14% for high-voltage customers, and (ii) 0.89% for customers connected at low voltage. There was no adjustment to tariffs for residential customers connected at low voltage. This result arises from: (i) variation of 2.64% reflect Cemig D’s manageable costs (Parcel B), and the direct pass-throug within the tariff, of 1.37% – the latter having zero economic effect, not affecting profitability, relating to the following items: (a) increase of 8.84% in non-manageable costs (Portion A), mainly related to purchase of energy supply, regulatory charges and transmission charges; (b) decrease of 8.80% in the financial components of the current process, led by the reduction of R$1,573 relating to credits of PIS/Pasep and Cofins taxes, which generated a negative variation in the tariff of 9.67%, and the reversal of the Covid account (8.78%); and (c) withdrawal of 1.41% from the financial components of the prior process.