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Loans and Debentures | 12 Months Ended
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Dec. 31, 2023
Loans And Debentures |
Loans and Debentures | 21. LOANS AND DEBENTURES
|  |  |  |  |  |  |  | 2023 |  |  | 2022 |
Financing source |  | Principal maturity |  | Annual financial cost |  | Currency |  | Current |  |  | Non-current |  |  | Total |  |  | Total |
Foreign currency |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Eurobonds (1) |  | 2024 |  | 9.25% |  | U$$ |  |  | 1,857 |  |  |  | - |  |  |  | 1,857 |  |  |  | 3,975 |
(-) Transaction costs |  |  |  |  |  |  |  |  | (1 | ) |  |  | - |  |  |  | (1 | ) |  |  | (6 | )
(±) Interest paid in advance (2) |  |  |  |  |  |  |  |  | (2 | ) |  |  | - |  |  |  | (2 | ) |  |  | (9 | )
Debt in foreign currency |  |  |  |  |  |  |  |  | 1,854 |  |  |  | - |  |  |  | 1,854 |  |  |  | 3,960 |
BRAZILIAN CURRENCY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Eletrobrás (3) |  | 2023 |  | UFIR + 6,00% a 8,00% |  | R$ |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2 |
Sonda (4) |  | 2022 |  | 110,00% do CDI |  | R$ |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Debt in Brazilian currency |  |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2 |
Total of loans and financings |  |  |  |  |  |  |  |  | 1,854 |  |  |  | - |  |  |  | 1,854 |  |  |  | 3,962 |
Debentures - 3rd Issue - 3rd Series (5) |  | 2025 |  | IPCA + 5,10% |  | R$ |  |  | 331 |  |  |  | 304 |  |  |  | 635 |  |  |  | 913 |
Debentures - 7th Issue - 1st Series (3)(7) |  | 2024 |  | CDI + 0,45% |  | R$ |  |  | 271 |  |  |  | - |  |  |  | 271 |  |  |  | 816 |
Debentures - 7th Issue - 2nd Series (3)(7) |  | 2026 |  | IPCA + 4,10% |  | R$ |  |  | 3 |  |  |  | 1,945 |  |  |  | 1,948 |  |  |  | 1,864 |
Debentures - 8th Issue - 1st Series (3)(7) |  | 2027 |  | CDI + 1,35% |  | R$ |  |  | 2 |  |  |  | 500 |  |  |  | 502 |  |  |  | 503 |
Debentures - 8th Issue - 2nd Series (3)(7) |  | 2029 |  | IPCA + 6,10% |  | R$ |  |  | 1 |  |  |  | 529 |  |  |  | 530 |  |  |  | 507 |
Debentures - 7th Issue - Single series (8) |  | 2026 |  | CDI + 2,05% |  | R$ |  |  | 32 |  |  |  | 2,000 |  |  |  | 2,032 |  |  |  | - |
Debentures - 7th Issue - Single series (8) |  | 2023 |  | CDI + 1,50% |  | R$ |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 20 |
Debentures - 8th Issue - Single series (8) |  | 2031 |  | IPCA + 5,27% |  | R$ |  |  | 134 |  |  |  | 958 |  |  |  | 1,092 |  |  |  | 1,044 |
Debentures - 9th Issue - 1st Series (6) |  | 2027 |  | CDI + 1,33% |  | R$ |  |  | 3 |  |  |  | 700 |  |  |  | 703 |  |  |  | 703 |
Debentures - 9th Issue - 2nd Series (6) |  | 2029 |  | IPCA + 7,63% |  | R$ |  |  | 1 |  |  |  | 315 |  |  |  | 316 |  |  |  | 302 |
(-) Discount on the issuance of debentures (6) |  |  |  |  |  |  |  |  | - |  |  |  | (9 | ) |  |  | (9 | ) |  |  | (12 | )
(-) Transaction costs |  |  |  |  |  |  |  |  | (2 | ) |  |  | (41 | ) |  |  | (43 | ) |  |  | (42 | )
Total, debentures |  |  |  |  |  |  |  |  | 776 |  |  |  | 7,201 |  |  |  | 7,977 |  |  |  | 6,618 |
Total |  |  |  |  |  |  |  |  | 2,630 |  |  |  | 7,201 |  |  |  | 9,831 |  |  |  | 10,580 |
(1) Cemig Geração e Transmissão; (2) Advance of funds to achieve the yield to maturity agreed in the Eurobonds contract; (3) Cemig Distribuição; (4) Debentures issued by Gasmig. (5) Discount on the sale price of the 2nd series of the Seventh issue of Cemig Distribuição. The debentures issued by the subsidiaries are non-convertible, there are no agreements for renegotiation, nor debentures held in treasury. Issue of debentures - 2023 On June 6, 2023, Cemig D concluded all the procedures related to the financial settlement of the 9th issue of simple debentures, not convertible into shares, of the unsecured type, with an additional fiduciary guarantee, in a single series, for public distribution under the automatic distribution regime, in accordance with CVM regulations. Two million debentures were issued, totaling R$2,000 (two billion reais), at a remuneration rate of CDI + 2.05% and maturing in 3 years. The balance of the nominal unit value of the debentures will be paid in 2 (two) installments, with the first payment (50% of the balance) on May 15, 2025 and the second, of the remaining balance, on May 15, 2026, the date of the main maturity. The funds raised will be used to replenish Cemig D's cash flow, including, but not limited to, Cemig D's operations and investments.
Company |  | Entry Date |  | Due Date Principal |  | Financial charges |  | Value |
BRAZILIAN CURRENCY |  |  |  |  |  |  |  |  |
Debentures – 9th Issue Single serie |  | June 2023 |  | 2026 |  | CDI + 2.05% |  |  | 2,000 |
(-)Transaction costs |  |  |  |  |  |  |  |  | (12 | )
Total |  |  |  |  |  |  |  |  | 1,988 |
The credit risk rating agency Fitch Ratings has assigned a AA+(bra) rating to the Issue. Partial repurchase of Eurobonds On December 20, 2023, the Company concluded the partial early redemption, without premium, by exercise of a call option, of its debt securities in the external market, maturing in December 2024, remunerated at 9.25% a year, in the principal amount of US$375 million. This reduced the balance of these securities, due in December 2024, to US$381 million. The table below shows the effects related to the repurchase of bonds:
|  | % |  |  | US$ |  |  | R$ |
Principal Amount |  |  | 100.00 |  |  |  | 375 |  |  |  | 1,823 |
Accrued interests |  |  | 0.41 |  |  |  | 2 |  |  |  | 8 |
|  |  |  |  |  | 377 |  |  |  | 1,831 |
Income tax on accrued interests |  |  | 17.65 |  |  |  | - |  |  |  | 1 |
|  |  |  |  |  | - |  |  |  | 1 |
Total of payments |  |  |  |  |  | 377 |  |  |  | 1,832 |
Partial disposal of hedge |  |  |  |  |  | - |  |  |  | (283 | )
NDF positive adjustment (*) |  |  |  |  |  | - |  |  |  | 117 |
Total |  |  |  |  |  | 377 |  |  |  | 1,666 |
(*) Difference between the PTAX dollar rate on the day of purchase (R$4.9091) in relation to the financial instrument - exchange protection NDF, with the dollar purchase lock in April/23 at R$5.1110 and difference between the PTAX dollar rate on the day of purchase (R$4.8663) in relation to the financial instrument - exchange protection NDF, with the dollar purchase lock in December/23 at R$4.9675. Guarantees The guarantees of the debt balance on loans and debentures, on December 31, 2022, were as follows:
|  | 2023 |
Promissory notes and sureties |  |  | 2,489 |
Guarantee and receivables |  |  | 2,208 |
Sureties |  |  | 4,059 |
Receivables |  |  | — |
Unsecured |  |  | 1,075 |
Total |  |  | 9,831 |
Composition and consolidated changes on loans and debentures The company's debt has an average repayment period of 2.8 years. The consolidated breakdown of loans and debentures, by currency and index, considering their maturities, is as follows:
|  | 2024 |  |  | 2025 |  |  | 2026 |  |  | 2027 |  |  | 2028 |  |  | 2029 onwards |  |  | Total |
Currency |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
US dollar |  |  | 1,857 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,857 |
Total, currency denominated |  |  | 1,857 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,857 |
Index |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
IPCA (1) |  |  | 470 |  |  |  | 1,397 |  |  |  | 1,099 |  |  |  | 132 |  |  |  | 403 |  |  |  | 1,021 |  |  |  | 4,522 |
UFIR/RGR (2) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
CDI (3) |  |  | 308 |  |  |  | 1,233 |  |  |  | 1,233 |  |  |  | 733 |  |  |  | - |  |  |  | - |  |  |  | 3,507 |
Total by index |  |  | 778 |  |  |  | 2,630 |  |  |  | 2,332 |  |  |  | 865 |  |  |  | 403 |  |  |  | 1,021 |  |  |  | 8,029 |
(-) Transaction costs |  |  | (4 | ) |  |  | (9 | ) |  |  | (9 | ) |  |  | (4 | ) |  |  | (7 | ) |  |  | (13 | ) |  |  | (46 | )
(±) Interest paid in advance |  |  | (2 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2 | )
(-) Discount |  |  | - |  |  |  | (4 | ) |  |  | (4 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (8 | )
Overall total |  |  | 2,629 |  |  |  | 2,617 |  |  |  | 2,319 |  |  |  | 861 |  |  |  | 396 |  |  |  | 1,008 |  |  |  | 9,830 |
(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 US dollar and index used for monetary updating of Loans had the following variations:
Currency |  | Accumulated change on 2023 (%) |  |  | Accumulated change on 2022 (%) |  |  | Indexer |  | Accumulated change on 2023 (%) |  |  | Accumulated change on 2022 (%) |
US dollar |  |  | (6.50 | ) |  |  | (6.50 | ) |  | IPCA |  |  | 4.62 |  |  |  | 5.79 |
|  |  |  |  |  |  |  | CDI |  |  | 13.04 |  |  |  | 12.39 |
|  |  |  |  |  |  |  | TJLP |  |  | (9.03 | ) |  |  | 35.34 |
The changes in loans and debentures are as follows:
Balance at December 31, 2020 |  |  | 15,020 |
Liabilities arising from business combination |  |  |
Initial balance for consolidation purposes |  |  | 15,020 |
Liabilities arising from business combination |  |  | 13 |
Discount and premium on repurchase of debt securities (Eurobonds) |  |  | 491 |
Monetary variation |  |  | 331 |
Exchange rate variation |  |  | 353 |
Financial charges provisioned |  |  | 1,162 |
Amortization of transaction cost |  |  | 20 |
Financial charges paid |  |  | (1,589 | )
Amortization of financing |  |  | (4,437 | )
Reclassification to “Other obligations” |  |  |
Subtotal |  |  | 11,364 |
FIC Pampulha: Marketable securities of subsidiary companies |  |  |
Balance at December 31, 2021 |  |  | 11,364 |
Loans and financing obtained |  |  | 2,000 |
Transaction costs |  |  | (18 | )
Financing obtained, net |  |  | 1,981 |
Monetary variation |  |  | 167 |
Exchange rate variation |  |  | (338 | )
Financial charges provisioned |  |  | 975 |
Premium on repurchase of debt securities (Eurobonds) |  |  | 47 |
Amortization of transaction cost |  |  | 7 |
Financial charges paid |  |  | (1,010 | )
Amortization of financing |  |  | (2,613 | )
Balance at December 31, 2022 |  |  | 10,580 |
Loans and financing obtained |  |  | 2,000 |
Transaction costs |  |  | (12 | )
Discount in the issues of securities |  |  | - |
Financing obtained, net |  |  | 1,988 |
Monetary variation |  |  | 148 |
Exchange rate variation |  |  | (276 | )
Financial charges provisioned |  |  | 1,082 |
Amortization of transaction cost |  |  | 14 |
Financial charges paid |  |  | (1,026 | )
Amortization of financing |  |  | (2,679 | )
Balance at December 31, 2023 |  |  | 9,831 |
Borrowing costs, capitalized Borrowing costs directly related to the acquisition, construction or production of an asset that necessarily requires substantial time to be completed for its intended use or sale are capitalized as part of the cost of the corresponding asset. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs comprise interest and other costs incurred by the Company related to Loans and debentures. The subsidiaries CEMIG D and Gasmig considered the costs of loans and debentures linked to construction in progress as construction costs of intangible and concession contract assets, as follows:
|  | 2023 |  |  | 2022 |  |  | 2021 |
Costs of loans and financing |  |  | 1,083 |  |  |  | 975 |  |  |  | 1,162 |
Financing costs on intangible assets and contract assets |  |  | (70 | ) |  |  | (47 | ) |  |  | (15 | )
Net effect in Profit or loss |  |  | 1,013 |  |  |  | 928 |  |  |  | 1,147 |
(1) The average capitalization rate p.a. on December 31, 2022 was 11.36% (9.44% on December 31, 2021). 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. Restrictive covenants 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 (‘cross default’). The Company has contracts with financial covenants as follows:
Title - Security |  | Covenant |  | Ratio required - Issuer |  | Ratio required CEMIG (guarantor) |  | Compliance required
Eurobonds CEMIG GT (1) |  | Net debt / Adjusted Ebitda for the Covenant (3) |  | 2.5 or less |  | 3.0 or less |  | Semi-annual and annual
7th and 8th Debentures Issuance CEMIG D |  | Net debt / Adjusted Ebitda |  | 3.5 or less |  | 3.0 or less |  | Semi-annual and annual
8th Debentures Issuance Gasmig (2) |  | Ebitda/Debt servicing Net debt/EBITDA |  | 1.3 or more 3.0 or less |  | - |  | Annual
9th Debenture Issue CEMIG GT 1st and 2nd Series (3) |  | Net debt / Adjusted Ebitda |  | 3.5 or less |  | 3.0 or less from Dec. 31, 2022 onwards 3.5 or less from Dec. 31, 2026 onwards |  | Semi-annual and annual
9th Debentures Issuance CEMIG D |  | Net debt / Adjusted Ebitda |  | 3.5 or less from June 30, 2023 onwards |  | 3.5 or less from June 30, 2023 onwards |  | Semi-annual and annual
(1) Adjusted Ebitda corresponds to earnings before interest, income taxes and social contribution on net income, depreciation and amortization, calculated in accordance with CVM Resolution 156, dated June 23, 2022, from which non-operating income, any credits and non-cash gains that increase net income are subtracted, to the extent that they are non-recurring, and any cash payments made on a consolidated basis during such period in respect of non-cash charges that were added back in the determination of Ebitda in any prior period, and increased by non-cash expenses and non-cash charges, to the extent that they are non-recurring. (2) Non-compliance with financial covenants implies non-automatic early maturity. If early maturity is declared by the debenture holders, Gasmig must make the payment upon receipt of the notification. (3) Non-compliance with financial covenants implies early maturity resulting in the immediate enforceability of payment by CEMIG GT of the Unit Nominal Value or Updated Unit Nominal Value of the Debentures, as the case may be, plus remuneration, in addition to the other charges due, regardless of judicial or extrajudicial notice, notification or interpellation. Management monitors these indexes, so that the conditions are satisfied. 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 31.

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