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FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Tables)

12 Months Ended

Dec. 31, 2021

IfrsStatementLineItems [Line Items]

Schedule of financial instruments and fair value

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

 Schedule of financial instruments and fair value

						2021								2020
		Level				Balance				Fair value				Balance				Fair value
Financial assets
Amortized cost (1)
Marketable securities – Cash investments			2				1,095				1,095				1,214				1,214
Accounts receivable from Customers and traders; Concession holders (transmission service)			2				4,482				4,482				4,534				4,534
Restricted cash			2				19				19				64				64
Accounts receivable from the State of Minas Gerais (AFAC)			2				13				13				12				12
Concession financial assets – CVA (Parcel ‘A’ Costs Variation Compensation) Account and Other financial components			3				2,148				2,148				133				133
Reimbursement of tariff subsidies			2				291				291				88				88
Low-income subsidy			2				47				47				43				43
Escrow deposits			2				1,155				1,155				1,056				1,056
Concession grant fee – Generation concessions			3				2,792				2,792				2,549				2,549
							12,042				12,042				9,693				9,693
Fair value through profit or loss
Cash equivalents – Cash investments							708				708				1,587				1,587
Marketable securities
Bank certificates of deposit (CDBs)							101				101				545				545
Treasury Financial Notes (LFTs)			1				178				178				731				731
Financial Notes – Banks			2				705				705				1,635				1,635
							1,692				1,692				4,498				4,498
Derivative financial instruments (Swaps)			3				1,219				1,219				2,949				2,949
Derivative financial instruments (Ativas and Sonda Put options)			3				—				—				3				3
Concession financial assets – Distribution infrastructure			3				718				718				559				559
Indemnifiable receivable – Generation			3				816				816				816				816
							4,445				4,445				8,825				8,825
							16,487				16,487				18,518				18,518
Financial liabilities
Amortized cost (1)
Loans, financing and debentures			2				(11,364	)			(11,364	)			(15,020	)			(15,020	)
Debt with pension fund (Forluz)			2				(385	)			(385	)			(473	)			(473	)
Deficit of pension fund (Forluz)			2				(539	)			(539	)			(540	)			(540	)
Concessions payable			3				(27	)			(27	)			(23	)			(23	)
Suppliers			2				(2,683	)			(2,683	)			(2,358	)			(2,358	)
Leasing transactions			2				(244	)			(244	)			(227	)			(227	)
Sector financial liabilities			2				(51	)			(51	)			(231	)			(231	)
							(15,293	)			(15,293	)			(18,872	)			(18,872	)
Fair value through profit or loss
Derivative financial instruments - Swaps			3				(6	)			(6	)			—				—
Derivative financial instruments (SAAG put options)			3				(636	)			(636	)			(536	)			(536	)
							(642	)			(642	)			(536	)			(536	)
							(15,935	)			(15,935	)			(19,408	)			(19,408	)

(1) On December 31, 2021 and 2020, the book values of financial instruments reflect their fair values.

Schedule of net liabilities in relation to its equity

On December 31, 2021 and 2020, the options values were as follows:

 Schedule of net liabilities in relation to its equity

		2021				2020
Put option – SAAG			636				536
Put / call options – Ativas and Sonda			—				(3	)
			636				533

Schedule of changes in value of options

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

 Schedule of changes in value of options

Balance at December 31, 2018			419
Adjustment to fair value			64
Balance at December 31, 2019			483
Adjustment to fair value			53
Balance at December 31, 2020			536
Adjustment to fair value			100
Balance at December 31, 2021			636

Schedule of derivative instruments contracted Realized gain

 Schedule of derivative instruments contracted Realized gain

Realized gain / loss

Assets

Liability

Maturity period

Trade market

Notional amount

2021

2020

US$ exchange variation + Rate (9.25% p.y.)

Local currency + R$ 151.99% of CDI

Interest: Half-yearly Principal: Dec. 2024

Over the counter

US$1,000

1,019

329

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

155

166

US$ exchange variation higher R$5.0984

US$ exchange variation lower R$5.0954

August 03, 2021

Over the counter

US$600

24

—

1,198

495

Schedule of derivative instruments contracted

This table presents the derivative instruments contracted by Company as of December 31, 2021 and 2020:

Schedule of derivative instruments contracted

													Unrealized gain / loss								Unrealized gain / loss
Assets			Liability			Maturity period		Trade market		Notional amount (2)			Carrying amount 2021				Fair value 2021				Carrying amount 2020				Fair value 2020
US$ exchange variation + Rate (9.25% p.y.) (1)			R$151.99% of CDI			Interest: Half-yearly Principal: Dec. 2024		Over the counter		US$500			873				706				1,772				2,110
US$ exchange variation + Rate (9.25% p.y.) (1)			R$125.52% of CDI			Interest: Half-yearly Principal: Dec. 2024		Over the counter		US$500			578				507				588				839
													1,451				1,213				2,360				2,949
Current asset																	—								523
Non-current asset																	1,219								2,426
Current liabilities																	(6	)							—

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. In July 20 21, Cemig GT dismantled a total of US$500 of the original hedge issued. For the additional US$500 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 The upper limit for the exchange rate in the hedge instrument contracted by the Company for the principal of the Eurobonds is R$5.00/US$. The instrument matures in December 2024. If the USD/BRL exchange rate is still over R$5.00 in December 2024, the company will disburse, on that date, the difference between the upper limit of the protection range and the spot dollar on that date. The Company is monitoring the possible risks and impacts associated with the dollar being valued above R$5.00, and assessing various strategies for mitigating the foreign exchange risk up to the maturity date of the transaction. The hedge instrument fully protects the payment of six-monthly interest, independently of the USD/BRL exchange rate.

2) In millions of US$.

Schedule of fair value of derivative hedge instrument One

Schedule of fair value of derivative hedge instrument One

Risk: foreign exchange rate exposure		Base Scenario				‘Probable’ scenario US$1=R$5.10				‘Possible’ scenario Appreciation 25.00% US$1= R$6.38				‘Remote’ scenario Appreciation 50.00% US$1=R$7.65
US dollar
Loans and financings (note 22)			(5,623	)			(5,139	)			(6,429	)			(7,709	)
Suppliers (Itaipu Binacional) (note 20)			(331	)			(303	)			(378	)			(454	)
Total			(5,954	)			(5,442	)			(6,807	)			(8,163	)
Total
Net liabilities exposed			(5,954	)			(5,442	)			(6,807	)			(8,163	)
Net effect of exchange rate fluctuation							512				(853	)			(2,209	)

The net exposure to exchange rates is as follows:

The net exposure to exchange rates is as follows:

		2021								2020
Exposure to exchange rates		Foreign currency				R$				Foreign currency				R$
US dollar
Loans and financing (note 22)			(1,008	)			(5,623	)			(1,514	)			(7,866	)
Suppliers (Itaipu Binacional) (note 20)			(59	)			(331	)			(63	)			(325	)
Total			(1,067	)			(5,954	)			(1,577	)			(8,191	)
Net liabilities exposed							(5,954	)							(8,191	)

Schedule of exposure to exchange rates

This exposure occurs as a result of net assets indexed to variation in interest rates, as follows:

 Schedule of exposure to exchange rates

Risk: Exposure to domestic interest rate changes		2021				2020
Assets
Cash equivalents – Cash investments (Note 6) – CDI			708				1,587
Marketable securities (Note 7) – CDI / SELIC			2,078				4,125
Restricted cash – CDI			19				64
CVA and in tariffs (Note 14) – SELIC			2,148				133
Assets			4,953				5,909
Liabilities
Loans, financing and debentures (Note 22) – CDI			(1,458	)			(2,310	)
Loans, financing and debentures (Note 22) – TJLP			(21	)			(73	)
Sector financial liabilities (note 14)			(51	)			(231	)
Total liabilities			(1,530	)			(2,614	)
Net assets exposed			3,423				3,295

Schedule of exposure to exchange rates

 Schedule of exposure to exchange rates

		2021				2022
Risk: Increase in Brazilian interest rates		Book value				‘Probable’ scenario Selic 13.00% TJLP 6.94%				‘Possible’ scenario Selic 9.75% TJLP 5.21%				‘Remote’ scenario Selic 6.50% TJLP 3.47%
Assets
Cash equivalents (Note 6)			708				800				777				754
Marketable securities (Note 7)			2,078				2,348				2,281				2,213
Restricted cash			19				21				21				20
CVA and Other financial components – SELIC (Note 14)			2,148				2,427				2,357				2,288
Assets			4,953				5,596				5,436				5,275
Liabilities
Loans and financing (Note 22) – CDI			(1,458	)			(1,648	)			(1,600	)			(1,553	)
Loans and financing (Note 22) – TJLP			(21	)			(22	)			(22	)			(22	)
Sector financial liabilities (Note 14)			(51	)			(55	)			(54	)			(53	)
Liabilities			(1,530	)			(1,725	)			(1,676	)			(1,628	)
Net assets (liabilities) exposed			3,423				3,871				3,760				3,647
Net effect of fluctuation in interest rates							448				337				224

Schedule of risk of increase in inflation

This table presents the Company’s net exposure to inflation index:

Schedule of risk of increase in inflation 

Exposure to increase in inflation		2021				2020
Assets
Concession financial assets  related to Distribution infrastructure - IPCA (1)			718				559
Receivable from Minas Gerais state government (AFAC) – IGPM (Note 11 and 30)			13				12
Concession Grant Fee – IPCA (Note 14)			2,792				2,549
Assets			3,523				3,120
Liabilities
Loans, financing and debentures – IPCA and IGP-DI (Note 22)			(4,322	)			(4,863	)
Debt with pension fund (Forluz) – IPCA (Note 24)			(385	)			(473	)
Deficit of pension plan (Forluz) – IPCA (Note 24)			(539	)			(540	)
Liabilities			(5,246	)			(5,876	)
Net assets (liabilities) exposed			(1,723	)			(2,756	)

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

Schedule of exposure to exchange rates Risk

Schedule of exposure to exchange rates Risk

		2021				2022
Risk: increase in inflation		Amount Book value				‘Probable’ scenario IPCA 6.68% IGPM 11.46%				‘Possible’ scenario (25%) IPCA 8.35% IGPM 14.33%				‘Remote’ scenario (50%) IPCA 10.02% IGPM 17.19%
Assets
Concession financial assets  related to Distribution infrastructure – IPCA (1)			718				766				778				790
Accounts receivable from Minas Gerais state government (AFAC) – IGPM index (Note 11 and 30)			13				14				15				15
Concession Grant Fee – IPCA (Note 14)			2,792				2,979				3,025				3,072
Assets			3,523				3,759				3,818				3,877
Liabilities
Loans, financing and debentures – IPCA and IGP-DI (Note 22)			(4,322	)			(4,611	)			(4,683	)			(4,755	)
Debt agreed with pension fund (Forluz) – IPCA (Note 24)			(385	)			(411	)			(417	)			(424	)
Deficit of pension plan (Forluz)  (Note 24)			(539	)			(575	)			(584	)			(593	)
Liabilities			(5,246	)			(5,597	)			(5,684	)			(5,772	)
Net liability exposed			(1,723	)			(1,838	)			(1,866	)			(1,895	)
Net effect of fluctuation in IPCA and IGP–M indexes							(115	)			(143	)			(172	)

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

Schedule of flow of payments of the company's obligations for debt agreed, financings and debentures for floating and fixed rates including the interest specified in contracts

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:

 Schedule of flow of payments of the company's obligations for debt agreed, financings and debentures for floating and fixed rates including the interest specified in contracts

		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			60				967				1,126				10,398				930				13,481
Onerous concessions			—				1				3				13				15				32
Debt with pension plan (Forluz) (Note 24)			14				28				129				269				—				440
Deficit of the pension plan (FORLUZ) (Note 24)			6				12				57				331				482				888
			80				1,008				1,315				11,011				1,427				14,841
- Fixed rate
Suppliers			2,419				264				—				—				—				2,683
			2,499				1,272				1,315				11,011				1,427				17,524

Schedule of credit exposure

Banks that exceed these thresholds are classified in three groups, in accordance with their equity value, plus a specific segment comprising those whose credit risk is associated only with federal government, and within this classification, limits of concentration by group and by institution are set:

 Schedule of credit exposure

				Limit per bank (% of equity) (1) (2)
Group		Equity		AAA				AA				A				BBB
Federal Risk		-			10	%			10	%			10	%			10	%
A1		Equal or over R$10 billion			9	%			8	%			7	%			6	%
A2		Between R$5 billion and R$10 billion			8	%			7	%			6	%			5	%
A3		Between R$2 billion and R$5 billion			7	%			6	%			5	%			4	%
A4		Between R$800 million and R$2 billion			6	%			5	%			4	%			—

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

2. When the institution has different ratings from different risk rating agencies, the rating that is most favorable for the institution is taken into account.

Schedule of net liabilities in relation to its equity

This table shows comparisons of the Company’s net liabilities and its Equity on December 31, 2021 and 2020:

Schedule of net liabilities in relation to its equity 

		2021				2020
Total liabilities			32,584				36,605
(–) Cash and cash equivalents			(825	)			(1,680	)
(–) Restricted cash			(19	)			(64	)
Net liabilities			31,740				34,861
Total equity			19,462				17,478
Net liabilities / equity			1.62				1.99

Fair value hedges [member]

IfrsStatementLineItems [Line Items]

Schedule of fair value of derivative hedge instrument One

 Schedule of fair value of derivative hedge instrument

		Base scenario Dec. 31, 2021				‘Probable’ scenario:				‘Possible’ scenario exchange rate depreciation and interest rate increase 25%				‘Remote’ scenario: exchange rate depreciation and interest rate increase 50%
Swap (asset)			4,157				4,036				3,605				3,199
Swap (liability)			(3,943	)			(3,839	)			(3,902	)			(3,963	)
Option / Call spread			999				1,149				813				296
Derivative hedge instrument			1,213				1,346				516				(468	)

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