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Equity and Remuneration to Shareholders | 12 Months Ended
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Dec. 31, 2023
Equity And Remuneration To Shareholders |
Equity and Remuneration to Shareholders | 26. EQUITY AN D REMUNERATION TO SHAREHOLDERS (a) Share capital On December 31, 2023 and 2022, the Company’s issued and share capital was R$11,007 represented by 735,847,624 common shares and 1,465,523,064 preferred shares, both of them with nominal value of R$5.00, as demonstrated below:
|  | Number of shares on December 31, 2023 |
Shareholders |  | Common |  |  | % |  |  | Preferred |  |  | % |  |  | Total |  |  | % |
State of Minas Gerais |  |  | 375,031,302 |  |  |  | 51 |  |  |  | 17,085 |  |  |  | - |  |  |  | 375,048,387 |  |  |  | 17 |
PZENA |  |  |  |  |  | - |  |  |  | 73,283,989 |  |  |  | 5 |  |  |  | 73,283,989 |  |  |  | 3 |
FIA Dinâmica Energia S/A |  |  | 233,004,992 |  |  |  | 31 |  |  |  | 116,951,354 |  |  |  | 8 |  |  |  | 349,956,346 |  |  |  | 16 |
BNDES Participações |  |  | 82,007,784 |  |  |  | 11 |  |  |  | - |  |  |  | - |  |  |  | 82,007,784 |  |  |  | 4 |
BlackRock |  |  | - |  |  |  | - |  |  |  | 217,550,174 |  |  |  | 15 |  |  |  | 217,550,174 |  |  |  | 10 |
Others |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
In Brazil |  |  | 29,160,676 |  |  |  | 4 |  |  |  | 101,717,633 |  |  |  | 7 |  |  |  | 130,878,309 |  |  |  | 6 |
Foreign shareholders |  |  | 16,642,870 |  |  |  | 2 |  |  |  | 956,002,829 |  |  |  | 66 |  |  |  | 972,645,699 |  |  |  | 44 |
Total |  |  | 735,847,624 |  |  |  | 99 |  |  |  | 1,465,523,064 |  |  |  | 101 |  |  |  | 2,201,370,688 |  |  |  | 100 |
|  | Number of shares on December 31, 2022 |
Shareholders |  | Common |  |  | % |  |  | Preferred |  |  | % |  |  | Total |  |  | % |
State of Minas Gerais |  |  | 375,031,302 |  |  |  | 51 |  |  |  | 17,085 |  |  |  | - |  |  |  | 375,048,387 |  |  |  | 17 |
Other entities of Minas Gerais State |  |  | 30,021 |  |  |  | - |  |  |  | 21,880,950 |  |  |  | 1 |  |  |  | 21,910,971 |  |  |  | 1 |
FIA Dinâmica Energia S/A |  |  | 233,625,046 |  |  |  | 31 |  |  |  | 118,771,654 |  |  |  | 8 |  |  |  | 352,396,700 |  |  |  | 16 |
BNDES Participações |  |  | 82,007,784 |  |  |  | 11 |  |  |  | - |  |  |  | - |  |  |  | 82,007,784 |  |  |  | 4 |
BlackRock |  |  | - |  |  |  | - |  |  |  | 218,212,381 |  |  |  | 15 |  |  |  | 218,212,381 |  |  |  | 10 |
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
In Brazil |  |  | 26,546,632 |  |  |  | 4 |  |  |  | 178,219,966 |  |  |  | 12 |  |  |  | 204,766,598 |  |  |  | 9 |
Foreign shareholders |  |  | 18,606,839 |  |  |  | 3 |  |  |  | 928,421,028 |  |  |  | 64 |  |  |  | 947,027,867 |  |  |  | 43 |
Total |  |  | 735,847,624 |  |  |  | 100 |  |  |  | 1,465,523,064 |  |  |  | 100 |  |  |  | 2,201,370,688 |  |  |  | 100 |
|  | Number of shares on December 31, 2021 |
Shareholders |  | Common |  |  | % |  |  | Preferred |  |  | % |  |  | Total |  |  | % |
State of Minas Gerais |  |  | 288,485,632 |  |  |  | 51 |  |  |  | 13,143 |  |  |  | - |  |  |  | 288,498,775 |  |  |  | 17 |
Other entities of Minas Gerais State |  |  | 23,094 |  |  |  | - |  |  |  | 14,472,345 |  |  |  | 1 |  |  |  | 14,495,439 |  |  |  | 1 |
FIA Dinâmica Energia S.A. |  |  | 153,354,328 |  |  |  | 27 |  |  |  | 80,004,762 |  |  |  | 7 |  |  |  | 233,359,090 |  |  |  | 14 |
BNDES Participações |  |  | 63,082,911 |  |  |  | 11 |  |  |  | 22,141,720 |  |  |  | 2 |  |  |  | 85,224,631 |  |  |  | 5 |
BlackRock |  |  | - |  |  |  | - |  |  |  | 123,325,741 |  |  |  | 11 |  |  |  | 123,325,741 |  |  |  | 7 |
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
In Brazil |  |  | 43,689,699 |  |  |  | 8 |  |  |  | 145,881,261 |  |  |  | 13 |  |  |  | 189,570,960 |  |  |  | 11 |
Foreign shareholders |  |  | 17,400,970 |  |  |  | 3 |  |  |  | 741,486,462 |  |  |  | 66 |  |  |  | 758,887,432 |  |  |  | 45 |
Total |  |  | 566,036,634 |  |  |  | 100 |  |  |  | 1,127,325,434 |  |  |  | 100 |  |  |  | 1,693,362,068 |  |  |  | 100 |
The Company’s Share Capital may be increased by up to a limit of 10% (ten percent) of the share capital set in the by-laws, without need for change in the by-laws and upon decision of the Board of Directors, having previously heard statement of opinion issued by the Fiscal Council. (b) Earnings per share The number of shares included in the calculation of basic and diluted earnings, is described in the table below:
|  | Number of shares |
|  | 2023 |  |  | 2022 |  |  | 2021 |
Common shares already paid up |  |  | 735,847,624 |  |  |  | 735,847,624 |  |  |  | 735,847,624 |
Shares in treasury |  |  | (102 | ) |  |  | (102 | ) |  |  | (102 | )
|  |  | 735,847,522 |  |  |  | 735,847,522 |  |  |  | 735,847,522 |
Preferred shares already paid up |  |  | 1,465,523,064 |  |  |  | 1,465,523,064 |  |  |  | 1,465,523,064 |
Shares in treasury |  |  | (846,062 | ) |  |  | (846,062 | ) |  |  | (846,062 | )
|  |  | 1,464,677,002 |  |  |  | 1,464,677,002 |  |  |  | 1,464,677,002 |
Total |  |  | 2,200,524,524 |  |  |  | 2,200,524,524 |  |  |  | 2,200,524,524 |
The calculation of basic and diluted earnings per share is as follows:
|  | 2023 |  |  | 2022 |  |  | 2021 |
Net income for the year attributed to equity holders of the parent |  |  | 5,764 |  |  |  | 4,092 |  |  |  | 3,751 |
Minimum mandatory dividend from net income for the year – preferred shares |  |  | 2,080 |  |  |  | 1,486 |  |  |  | 1,309 |
Net income for the year not distributed – preferred shares |  |  | 1,757 |  |  |  | 1,238 |  |  |  | 1,188 |
Total earnings - preferred shares (A) |  |  | 3,837 |  |  |  | 2,724 |  |  |  | 2,497 |
Minimum mandatory dividend from net income for the year - common shares |  |  | 1,045 |  |  |  | 747 |  |  |  | 657 |
Net income for the year not distributed – common shares |  |  | 883 |  |  |  | 622 |  |  |  | 597 |
Total earnings - common shares (B) |  |  | 1,928 |  |  |  | 1,369 |  |  |  | 1,254 |
Basic and diluted earnings per preferred share (A / number of preferred shares) |  |  | 2.62 |  |  |  | 1.86 |  |  |  | 1.70 |
Basic and diluted earnings per common share (B / number of common shares) |  |  | 2.62 |  |  |  | 1.86 |  |  |  | 1.70 |
Considering that each class of share participates equally in the income reported, the earning per share in the fiscal years ended on December 31, 2023 and 2022 were, respectively, R$2.62 and R$1.86, calculated based on the weighted average number of the Company’s shares. (c) Rights and preferences of the common and preferred shares Every holder of CEMIG common shares has the right to vote in an election for members of our Board of Directors. Under the Brazilian Corporate Law, any shareholder holding at least 5% of CEMIG’s common shares in circulation may request adoption of a multiple vote procedure, which confers upon each share a number of votes equal to the present number of members of the Board of Directors and gives the shareholder the right to accumulate his or her votes in one sole candidate or distribute them among several. Under the Brazilian Corporate Law, holders of preferred shares representing at least 10% of CEMIG’s share capital and also holders of common shares representing at least 15% of its share capital (other than the controlling shareholder) have the right to appoint a member of the Board of Directors and his or her respective substitute member in a separate election. If none of the holders of common or preferred shares qualifies under the minimum limits specified above, shareholders representing, in the aggregate, a minimum of 10% of the share capital may combine their holdings to elect a member of the Board of Directors, and that member’s substitute member. Under Article 171 of the Corporate Law, every shareholder has a generic right of first refusal in subscription of new shares, or securities convertible into shares, issued in any capital increase, in proportion to their percentage shareholding, except in the event of exercise of any option to acquire shares in our share capital. Shareholders are required to exercise their right of first refusal within 30 days from publication of the notice of increase of capital. Every holder of CEMIG preferred shares has preference in the event of share redemption. The dividend rights of the preferred and common shares are described below. (d) Dividends Under the by-laws, if the Company is able to pay dividends higher than the mandatory minimum dividends required for the preferred Shareholders, and the remaining net income is sufficient to offer equal dividends for both the common and preferred shares, then the dividends per share will be the same for the holders of common shares and preferred shares. Dividends declared are paid in two equal installments, the first by June 30 and the second by December 30, of the year following the generation of the income to which they refer. The Executive Board decides the location and processes of payment, subject to these periods. Under its by-laws, CEMIG is required to pay to its shareholders, as mandatory dividends, 50% of the net income of each year. The preferred shares have preference in the event of reimbursement of capital and participate in incomes on the same conditions as the common shares have the right, when there is net income, to a minimum mandatory dividend equal to the greater of: (a) 10% of their par value, and (b) 3% of the portion of equity that they represent. Under its by-laws, CEMIG’s shares held by private individuals and issued up to August 5, 2004, have the right to a minimum dividend of 6% per year on their par value in all years when CEMIG does not obtain sufficient incomes to pay dividends to its Shareholders. This guarantee is given by the State of Minas Gerais by Article 9 of State Law 828 of December 14, 1951, and by State Law 15,290 of August 4, 2004. Calculation of the minimum dividends proposed The calculation of the minimum dividends proposed for distribution to Shareholders, considering the unrealized income assumption as mentioned in the previous paragraph, is as follows:
|  | 2023 |  |  | 2022 |  |  | 2021 |
Calculation of minimum dividends required by the by-laws for the preferred shares |  |  |  |  |  |  |  |  |
Nominal value of the preferred shares |  |  | 7,328 |  |  |  | 7,328 |  |  |  | 5,637 |
|  |  | 7,328 |  |  |  | 7,328 |  |  |  | 5,637 |
Percentage applied to the nominal value of the preferred shares |  |  | 10.00 | % |  |  | 10.00 | % |  |  | 10.00 | %
Amount of the dividends by the first payment criterion |  |  | 733 |  |  |  | 733 |  |  |  | 564 |
Equity |  |  | 24,649 |  |  |  | 21,777 |  |  |  | 19,457 |
Preferred shares as a percentage of Equity (net of shares held in Treasury) |  |  | 66.56 | % |  |  | 66.56 | % |  |  | 66.56 | %
Portion of Equity represented by the preferred shares |  |  | 16,406 |  |  |  | 14,495 |  |  |  | 12,950 |
Percentage applied to the portion of Equity represented by the preferred shares |  |  | 3.00 | % |  |  | 3.00 | % |  |  | 3.00 | %
Amount of the dividends by the second payment criterion |  |  | 492 |  |  |  | 435 |  |  |  | 389 |
Minimum Dividends required by the Bylaws for the preferred shares |  |  | 733 |  |  |  | 733 |  |  |  | 564 |
Calculation of the Minimum Dividend under the by-laws based on the net income for the year |  |  |  |  |  |  |  |  |
Net income for the year |  |  | 5,764 |  |  |  | 4,092 |  |  |  | 3,751 |
|  |  | 50 | % |  |  | 50 | % |  |  | 50 | %
Mandatory dividends – 50% of Net income |  |  | 2,882 |  |  |  | 2,046 |  |  |  | 1,876 |
Unrealized profit reserve |  |  | (835 | ) |  |  | (835 | ) |  |  | (835 | )
Reversal of the unrealized profit reserve |  |  | 835 |  |  |  | 835 |  |  |  | 835 |
Withholding income tax on Interest on equity |  |  | 242 |  |  |  | 186 |  |  |  | 91 |
|  |  | 3,124 |  |  |  | 2,232 |  |  |  | 1,967 |
Dividends recorded, as specified in the by-laws |  |  |  |  |  |  |  |  |
Interest on Equity |  |  | 2,592 |  |  |  | 1,983 |  |  |  | 956 |
Ordinary dividends |  |  | 532 |  |  |  | 249 |  |  |  | 1,011 |
|  |  | 3,124 |  |  |  | 2,232 |  |  |  | 1,967 |
Total dividends for the preferred shares |  |  | 2,079 |  |  |  | 1,486 |  |  |  | 1,309 |
Total dividends for the common shares |  |  | 1,045 |  |  |  | 747 |  |  |  | 658 |
Unit value of dividends – R$ |  |  |  |  |  |  |  |  |
Minimum dividends required by the by-laws for the preferred shares |  |  | 0.50 |  |  |  | 0.50 |  |  |  | 0.50 |
Mandatory dividends (including withholding income tax on Interest on Equity) |  |  | 1.42 |  |  |  | 1.01 |  |  |  | 1.16 |
Dividends proposed: Common (ON) shares |  |  | 1.42 |  |  |  | 1.01 |  |  |  | 1.16 |
Dividends proposed: Preferred (PN) shares |  |  | 1.42 |  |  |  | 1.01 |  |  |  | 1.16 |
This table provides the changes on dividends and interest on capital payable:
Balances at December 31, 2021 |  |  | 1,910 |
Proposed dividends |  |  | 2,232 |
Proposed dividends - Non-controlling interests |  |  | 1 |
Withholding income tax on interest on capital |  |  | (186 | )
Dividends retained – Minas Gerais state government |  |  | - |
Dividends paid |  |  | (2,094 | )
Balances at December 31, 2022 |  |  | 1,863 |
Proposed dividends |  |  | 3,124 |
Proposed dividends - Non-controlling interests |  |  | 2 |
Withholding income tax on interest on capital |  |  | (242 | )
Dividends paid |  |  | (1,823 | )
Balances at December 31, 2023 |  |  | 2,924 |
(e) Remuneration to shareholders The obligation to pay dividends is recognized when the distribution is authorized or as provided for by law and/or the Company's bylaws. In view of the applicable legislation and the Company's bylaws, which provide for a minimum dividend payment of 50% of net income for the year, this is considered a present obligation on the closing date of the fiscal year, and is recognized as a liability. The Company’s Executive Board decided to declare Interest on Equity as follows:
Declaration date |  | Entitled shareholders (1) |  | Amount |  |  | Income tax withheld |
March 22, 2023 |  | March 27, 2023 |  |  | 424 |  |  |  | (40 | )
June 20, 2023 |  | June 23, 2023 |  |  | 427 |  |  |  | (40 | )
September 20, 2023 |  | September 25, 2023 |  |  | 418 |  |  |  | (39 | )
December 14, 2023 |  | December 21, 2023 |  |  | 1,323 |  |  |  | (123 | )
|  |  |  |  | 2,592 |  |  |  | (242 | )
(1) Shareholders who have their names entered in the Register of Registered Shares on the dates indicated are entitled. The amount of income tax withheld at source, due to tax legislation, is not taken into account when attributing JCPs to the mandatory dividend and is calculated at the rate of 15%, in cases where this tax is levied, under the terms of the legislation in force. (f) Allocation of net income for 2023 - Management’s proposal The Board of Directors declared at the Annual General Meeting (AGM), held on April 29, 2024, the following allocation of the net income for 2023, totaling R$5,764, of realization of the deemed cost of PP&E, totaling R$6, realization of the unrealized earnings reserve totaling R$835, as follow: • R$288 was held in Stockholders’ equity in the Legal Reserve, as established in Brazilian corporate Law 6,404/1976. • R$3,124 as minimum mandatory dividends, to the Company’s shareholders, to be paid in two equal installments, by June 30 and December 30, 2024, as follows: o R$2,591 declared as interest on own equity and imputed to the mandatory dividend, as deliberated by the Executive Board in 2023; o R$533 in the form of dividends, to holders whose names are in the Company’s Nominal Share Registry on the date of the AGM. • R$2,295 was held in Shareholders’ equity in the Retained Earnings Reserve, to provide funding for the Company’s consolidated investments planned for 2024, as per capital budget. • R$63 was held in Shareholders’ equity in the Tax Incentives Reserve, related to tax incentive due to investment in the region of Sudene. The amount of R$835 remains as Unrealized Earnings Reserve, considering the reversal of the reserve constituted in 2022 and the new constitution in 2023, of the same amount. Payment of the dividends will be made by December 30, 2024, in accordance with the availability of cash and at the decision of the Executive Board. (g) Equity valuation adjustments
|  | 2023 |  |  | 2022 |  |  | 2021 |
Adjustments to actuarial liabilities – Employee benefits |  |  | (2,072 | ) |  |  | (2,303 | ) |  |  | (2,762 | )
Deemed cost of PP&E |  |  | 421 |  |  |  | 427 |  |  |  | 554 |
Others |  |  | 3 |  |  |  | 2 |  |  |  |
Valuation adjustments |  |  | (1,648 | ) |  |  | (1,874 | ) |  |  | (2,208 | )
The adjustments to post-employment benefit obligations comprise gains or losses resulting from re-measurements of the net defined-benefit obligation, in accordance with the actuarial report, net of tax effects. The amounts recorded as deemed cost of the generation assets represents its fair value determined using the replacement cost at initial adoption of IFRS on January 1, 2009. The valuation of the generation assets resulted in an increase in their book value, recorded in a specific line in Equity, net of the tax effects. These values are being realized based on the depreciation of the assets. The curtailment event occurred in 2023 affected the actuarial assumptions, as consequence it altered the discount rates applicable to the plans. Since the new discount rate was higher, there was a reduction of the liability, and as a result an actuarial gain of R$60 for the health plan, and R$1 for the dental plan which impacted the statements of income in 2023. (h) Reserves Capital reserves
|  | 2023 |  |  | 2022 |  |  | 2021 |
Investment-related donations and subsidies |  |  | 1,857 |  |  |  | 1,857 |  |  |  | 1,857 |
Goodwill on issuance of shares |  |  | 394 |  |  |  | 394 |  |  |  | 394 |
Shares in treasury |  |  | (1 | ) |  |  | (1 | ) |  |  | (1 | )
|  |  | 2,250 |  |  |  | 2,250 |  |  |  | 2,250 |
The reserve for investment-related donations and subsidies basically refers to the compensation by the Federal Government for the difference between the profitability obtained by CEMIG up to March 1993 and the minimum return guaranteed by the legislation in effect at the time. The reserve for treasury shares refers to the pass-through by Finor (‘Fundo de Investimentos do Nordeste’) of shares arising from funds applied in CEMIG projects in the area covered by Sudene (the development agency for the Northeast) under tax incentive programs. Income reserves
|  | 2023 |  |  | 2022 |  |  | 2021 |
Legal reserve |  |  | 1,674 |  |  |  | 1,387 |  |  |  | 1,181 |
Statutory reserve |  |  | 57 |  |  |  | 57 |  |  |  | 57 |
Profit retention reserve |  |  | 8,842 |  |  |  | 6,546 |  |  |  | 7,331 |
Unrealized profit reserve |  |  | 835 |  |  |  | 835 |  |  |  | 835 |
Incentive tax reserve |  |  | 213 |  |  |  | 150 |  |  |  | 124 |
Reserve for mandatory dividends not distributed |  |  | 1,420 |  |  |  | 1,420 |  |  |  | 1,420 |
|  |  | 13,041 |  |  |  | 10,395 |  |  |  | 10,948 |
Legal reserve Constitution of the legal reserve is mandatory, up to the limits established by law. The purpose of the reserve is to ensure the security of the share capital, its use being allowed only for offsetting of losses or increase capital. This reserve constitution corresponds to 5% of the net income for the year, less the amount allocated to incentive tax reserve. Statutory reserve The reserve under the By-laws is for future payment of extraordinary dividends, in accordance with Article 28 of the by-laws. Retained earnings reserve Retained earnings reserves refers to incomes not distributed in prior years, to guarantee execution of the Company’s Investment Program, and amortization of loans and debentures. The retentions are supported by capital budgets approved by the Board of Directors in the respective years. Unrealized earnings reserve Article of the Brazilian corporate law no. 6,404/76 allows the Company to pay the mandatory dividend, calculated as required by the Bylaws up to the amounts of the realized portion of the net income for the year. In 2023, Company presented a positive net share of income of subsidiaries, jointly controlled entities and affiliates of R$4,836, which can be regarded as unrealized portion of net income for the year, in accordance with the Brazilian corporate law. Additionally, the above does not apply to the payment of the minimum mandatory dividends on preferred shares, which are required to be paid in full for an amount of R$733 as described in further details in (f) below. In addition, since the creation of the Unrealized Earnings Reserve is optional, Management decided to propose the same proportion of dividend payment to shareholders owning common shares, considering Company’s expected financial capacity. The outstanding balance of the Unrealized Earnings Reserve will remain R$835, considering the reversal of the reserve recorded in 2022 and the creation of a new one in 2023, in the same amount. The Unrealized Earnings Reserve amounts can only be used to pay mandatory dividends. Hence, when the Company realizes such incomes in cash, it must distribute the corresponding dividend in the subsequent period, after offsetting of any losses in subsequent years. Incentives tax reserve The Company has a right to 75% reduction in income tax, including the tax paid at the additional rate, calculated on the basis of the operating income in the region of Sudene (the Development Agency for the Northeast), for 10 years starting in 2014. In 2023, this benefit was renewed, valid for another 10 years. The amount of the incentive recognized in the Statement of income was R$63 in 2023 (R$26 in 2022), and it was subsequently transferred to the incentives tax reserve. This reserve cannot be used for payment of dividends. Reserve for mandatory dividends not distributed
Dividends withheld, arising from the net income of 2015 |  |  | 623 |
Dividends withheld, arising from the net income of 2014 |  |  | 797 |
|  |  | 1,420 |
These dividends were retained in Equity, in years 2015 and 2014, in the account Reserve for mandatory dividends not distributed; and as per the proposal approved in the Annual General Meetings of 2016 and 2015, the dividends retained will be paid as soon as the Company’s financial situation permits. The Company's Management, in view of the estimated cash requirement for the next year, concluded that the financial situation does not yet allow the payment of these retained dividends.

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