Energy of Minas Gerais Co (CIG) 2008 Q2 法說會逐字稿

(Interpreted). Good morning, everyone. We now begin the transmission of video webcast of the Cemig's results vis-a-vis the second quarter 2008 [accounting], with the presence of Dr. Djalma Bastos de Morais, our CEO, and Luiz Fernando Rolla, the Chief Financial Officer and Investor Relations and Equity Control.

The webcast can be followed through our site www.infoinvest.com.br, also over the phone 0 11 4688 6301.

And we now give the floor to Dr. Djalma Bastos de Morais.

(Interpreted). Good morning, gentlemen. It is with pleasure that we are here once again. And this pleasure that we have is due to two great reasons. First, we are now at an exceptionally good situation. You can observe during the next minutes with Dr. Rolla and Dr. (inaudible) the exceptional situation we find ourselves in. And the correct decision that we have made making possible a business portfolio.

All of you are aware that approximately nine or ten years ago we had only one company in our Cemig. Today we have a portfolio that contains over 40 different companies. This was the decision that was made within the managerial staff of our Company, within all the directorates that were part of the administration of this Company and, evidently, with the consent of all our investors that are present here.

Our pleasure -- the pleasure that we show -- the pleasure that we express here on behalf of the managing staff, is that we have made correct decisions, thanks to which, we had in this quarter a performance of approximately 16% better than the previous quarter, even though because of tariff reductions in our distributing company this -- even though it has fallen a few points, two points to be -- two percentage points -- approximately two percentage points, only our portfolio -- business portfolio guaranteed this performance of our Company in the second quarter this year.

Another very auspicious factor is that our Gasmig, our gas company, we already had last week a definition of a service order for the building of the first part -- or the first section of our pipeline. We are implementing within the State an investment of approximately BRL730 million, allowing us to create a network of pipelines within the State and making feasible the problematic of industries that wants to set up their plants here in the State and we have a problem of fuels and a gas problem.

So, ladies and gentlemen, we would like once again to congratulate our top management and our management, in general -- to congratulate our top managers for the results and to congratulate Dr. Rolla's staff for the effort and tenacity with which they have conducted business in this Company. And all of you who have trusted our Company and all of you who are going to continue, I am certain, investing safely in a business portfolio called Cemig.

Thank you very much and then I will give the floor to Dr. Rolla. Dr. (inaudible) if you will allow me, I'll have to leave -- I'll take leave and I'm at your service at any time. Thank you very much.

(Interpreted). Thank you, Mr. President. We'll now give the floor to Dr. Luiz Fernando Rolla, our Chief Financial -- our CFO, who is going to explain the results over the second quarter.

(Interpreted). Good morning, everyone. It is with great pleasure that we are presenting the results of the second quarter and our President's -- in the CEO's words, very positive results for our Company. Unfortunately, our CEO couldn't remain with us, because of urgent appointments elsewhere. But we want to present in a very analytical manner all the results from the second quarter.

We had positive results, as our CEO has said; 16% over what we had last quarter in terms of net profits. And this showed the correctness, not only of our portfolio, as the President mentioned, but also the management practices that the Company has chosen to adopt so as to maximize stockholder value and other present assets.

If you look at the results as measured by the EBITDA we had a small reduction. This small reduction results partly from the tariff revision of the distributing company, partly due to some non-recurrent items that we are going to tell you about in a while.

The net profits increased substantially, also because a non-recurrent item, a significant one was the sales of option rights -- of purchase option rights of generation assets to RME partners, which was an agreement that we had with these partners. And Cemig decided due to its strategy of expanding its assets, especially those in partnerships with other investors, so as to guarantee the Company's growth --or the purchase company's growth. And this is a policy that we have adopted for all growth vehicles that we have.

You can also see in slide number four that we continue adding value to --for our stockholders. This time in the last 12 months ended June 2008, we headed BRL423 million, which is a substantial amount as compared to the year 2007; practically what we had gotten in 2007. We also proceed trying to increase this value for the next quarters and very certainly, as you will notice, we are going to be successful in this enterprise.

The return on invested capital has increased substantially, reaching today 13.8% with a main -- weighted mean cost of 11.2%. This economic profit reached BRL423 million.

In the next page I selected some highlights about the results in order to comment on them with you. Without any shadow of a doubt, the first one is the issue of the construction of our Trading strategy. We're building a contract portfolio, which is a very solid portfolio of customers, with a very successful capture of bigger -- higher prices for power within the perspective of growth in the price of electric power, thus making concrete this trend in our contracts.

And this has brought a great benefit to us, as you will see, to our generator -- Cemig GT. Our generating company has sustained practically the growth of the net profits and the cash generation of the C Company.

Contracts are first line customers, customers who have a risk ranking in close to AAA. This gives us an ease of mind as for the future cash flow and gives us a very good stability and, therefore, results sustainability for GT -- Cemig GT in the future.

As you'll have an idea with all our generation capacity already shown and we are purchasing new contracts -- power contracts, so that we can supply our -- to our customers, and this shows that our customers' portfolio is very solid. And it will demand investments on the part of this Company so as to assure the supply for these customers in the long run.

For that, Cemig Trading, which is our trader company, has had a fundamental strategic role in finding solutions -- power solutions for our customers.

Other highlights, on page six, we had the Santo Antonio Hydroelectric Plant, the contract -- or the concession contract, was signed on June 13th. This was an extremely positive factor for us once we -- soon after the bid in process have worked this heavily, so as to -- or very hard, so as to anticipate the beginning of the construction of this HP. You will -- you know that this is a crucial factor to guarantee the return on this investment.

The license was granted on the 12th this year, which is going to guarantee the anticipation and the generation of this plant, thus allowing the return gains for our investment.

Now Gasmig, as mentioned by our CEO, also has major investments. I'm not going to repeat what he said, but it's vitally important for the growth of this Company to assure sustainability also in the cash flow and the generation of profit by this Company, which already presents very positive results in its everyday operation.

On the next page we have the gains allowed by the operational efficiency program, which is in the first quarter. We -- as announced to our investors, there is a very positive project for our stockholders, because we have been maximizing the results of present assets. The existing assets today are able -- still able to add significant value to -- for our stockholders.

Therefore, we have identified opportunities to reduce operational expenses around BRL200 million, which we -- within the global strategy to maintain costs under control and [are] very low, so as to give to our customers some of the gains that are going to allow these customers to pay tariffs, especially for the distributing company a little lower, because of the complicated tariff situation that they face nowadays.

We have also had a voluntary dismissal program, which added some costs to our program, which is not significant, around BRL30 million to BRL40 million. And this cost -- this additional cost is going to allow a positive return on the next few months. The next quarters we will be reporting the reduction of our number of our employees. And now we're going to reach a number that -- within the operational efficiency, which is adequate for Cemig. But unfortunately, in this quarter it did bring -- it did have a significant impact.

The -- on the next page, the system -- we implemented a system of client -- customer management with an SAP platform that is very efficient system, what has to do with the billings and what has to do with the management -- our customer management. In general, we invested something around BRL6.5 million and it's going to bring BRL60 million that is -- BRL170 million that is, thus allowing some gains that are going to add new revenues to Cemig, both Distributor and Cemig Generator.

Now, we -- this system is going to control the trade, to have an idea around 6.5 million consumers. This is the largest system in Latin America involving such a significant number of customers.

One remark that we must make in terms of clarifications, we naturally employ -- we delivered our [ATRs] to CVM, the asset commission and after analyzing our results, the Cemig Holding profits -- the profits are slightly different from consolidated profit, because of Instruction 469 by the regulating agency, which created a few operations that are reflected here in the net profits. The good news is that a higher profit is going to give better dividends to be paid in 2009.

The other piece of good news is that Moody's classification -- credit risk classification, Moody's also gave -- Moody's also support classification to the Brazilian Electric Sector, which is going to allows Cemig to benefit from this new view.

On the next page you see as a highlight our investment program. And this investment program was revised -- or has been -- was revised last July and approved by our Board. And it includes an update, which was forecast as a review -- as a result of the tariff revision, and this is forecast within our budgeting process. But we decided to include some of our additional investments in terms of acquisitions and some capital investments, so as to give support to Gasmig and its expansion. We have invested in Gasmig something around BRL94 million this year and next year we're going to invest another BRL94 million.

We have expanded our transmission through TBE, also part of our strategy, as I said in the beginning, to expand our position in the several segments through the companies that we have acquired.

TBE, we have already announced in the first quarter the acquisition of some transmission lines. And now we are announcing more investment, which is going to be made, around BRL500 million in the second semester. In due time we are going to announce what the investment is going to be, but it's going to add significant value to our TBE.

On the next page, page ten, you have a summary of the results. The net profits reaching in the quarters BRL600 million, and an addition, as compared to the same quarter last year, of 16%; participation of our profits without tax, before tax that is, increased also based on the financial results, which grew as a function of the sales of the rights -- of the option rights to acquire generation assets of Light. And our RNE partners' operational profits gained 5%. We're going to see why it declines in the next slide.

EBITDA, as previously announced, falls by 7%, but the operational revenues increase; this is practically constant, 0.4%, as a result of the tariff revision, as already mentioned. Operation expenses adds -- or added 3% more and we're going to see the reasons why the operational expenses appear.

We have in the next page consolidated sales, so all of them quarterly and this allows for a very good comparison, not only with the previous quarters, but also with the quarters of the previous years showing a very solid, sustainable growth and the next years, much in line with what we have proposed within our tariff revision.

I believe that the projections that we've made were very precise and show exactly what is going on. In reality, we had accumulated sales in the second quarter by 14,412 gigawatts per hour, showing a large growth. I also -- showing also that in the second quarter we're having a -- second quarter, a better performance is going to come in the third and fourth quarters. And so, you can expect better results even beginning in the third quarter.

On the next page you will see -- consolidate of our sales. You can see variations that happened during the quarter. This is a more detailed analysis of the results presented in the previous slide. We had an addition -- a quite significant addition of sales to residential consumers, 65 gigawatts hour, but a large volume of industrial consumption, because of the economic activity in the State of Minas Gerais has been very strong. And this is reflected here in this consumption, which was an important contribution of 3.9% and a global growth, which was approximately 3.5%.

On the next page we can see the consolidated net revenues, leaving the second quarter 2007 and point-by-point add in the sales to consumers, which was slightly lower, but made up for by the TUSD increase. Who pays TUSD are the large industrial consumers, not let's say the captive consumers. I'd say that this allowed us that in general our net revenues for the second quarter 2008 increased by 3.14% vis-a-vis the same quarter 2007.

On the next page you can already see in the detail of Cemig Generation and Transmission we had an addition of significant revenues by 13% as compared to the same quarter last year. By virtue of the capture of the trend -- the growth trends in the price of electric power, we had some positive variations.

And our short term transactions, which are made through CCEE, which added BRL23 million in revenues, but specially, as a result of the contracts that we have signed -- bilateral contracts with our customers, we had an addition of BRL39 million which, together with the revenues from the Transmission use, have become the additions that we had -- revenues in such a way that it reached BRL700 million in the second quarter 2008.

On the next page you have the variation of sales volume of the distributor company. I'm going to show, immediately -- shortly, the growth of revenues as a function of the more sales -- more end power sales. You see that the residential grew by 75 gigawatts hour, followed closely by industrial 81 gigawatts hour and commercial.

This goes to show in a clear and an eloquent manner the great economic activity that is going on in the State of Minas Gerais. We had the consolidated only in the distributed Cemig growth of 4%, going to show the power of the local market in the State of Minas Gerais.

And what has to do with net revenues, on page 16, you have a reduction of 2%. It is already -- it was already predicted, because of the tariff revision. We had a reduction of the level of tariffs around 12% -- net 12%, thus reflecting on the net revenues. That is 2% lower. This is part of the regulations, which our distributing company's subjected to.

What we're going to do from now on is based upon the growth of the market and try to increase our revenues from our distributing company. You can see that the great impact was the sales to final consumers by our distributing company.

The net revenues in general -- consolidated the second quarter had a very good performance. And in slide number 17 you have all the details about the net revenues per company. As you can see Cemig D had a reduction of 2%, made up for -- more than made up for actually by the increase of GT increase.

RME had a reduction of 9%. This is a combination of two factors, not only the market issue in the area of Light concessions is a little depressed, but also because our participation in Light company was reduced in the second quarter 2007. You remember that the Brazilian National Development Bank exercised their right to convert the debentures into shares. This was done last year. Unfortunately, the reflections are still present.

But in general you can see that that statement by our CEO that our business portfolio is aiming at sustainability in our growth of profitability at a time when we had a Company in such an uncomfortable situation, which is the case of the distributor going through tariff revision. The other investments more than compensate and make up for this possible reduction. Therefore, in maintenance of results that is always positive.

On page 18 a little more detail, consolidated expenses or expenditures in the second quarter we had, we have an x-ray of the expenditures, very detailed. There you can see the growth of one and the other. We in the second quarter had expenses 7.5% larger, because of non controllable expenses, as you remember are those imposed by the regulations. And as a result of the tariff revision they increased, especially the total of our purchased power. We have updated the values already -- all the amounts with the growth of the price of power that we see in the market. On the one hand it benefits Cemig GT. On the other it reduces profitability of our distributor company.

But it was made up for by the reduction of controllable expenses. The controllable expenses, we have a negative contribution of BRL13 million, which is concentrated around two items. Firstly, staff personnel and post employment benefits as a function of the program to -- for voluntary dismissals, and for the provision of the -- forecast of expenses with this part.

On the next page we have the evolution of productivity of GT -- of the GT Group. Cemig CT, (technical difficulty) as for any indicator that (technical difficulty) you might choose, we had (technical difficulty) very positive gains, and this is reflected upon the results (technical difficulty) of our Generator (technical difficulty) company.

The evolving distributing, Cemig Distribution (technical difficulty) operational expenses have -- has the results (technical difficulty) influenced by the tariff revision, a growth (technical difficulty) by 3% (technical difficulty) or lower than the maximum, as predicted by the market, but much above the average in the medium and the minimum, as predicted by the market. Therefore, we believe that our results were extremely aligned with what the market was expecting.

On page 24 what you can see is the consolidated EBITDA by company. In spite of Cemig D reduction and the EBITDA of Cemig D, because of the reduction of -- the 2% of revenues and increase of operational expenses that we showed in previous slides, also made up for by the growth of Cemig GT showing the correctness again of our business portfolio.

We have reached practically 47% of the EBITDA generated by our Cemig GT and the Cemig D 37%. I don't know if you remember, but in the first quarter we had the EBITDA 52% generated by the Cemig D, now we had the little inversion there.

Now let us go to the consolidated financial results. It's also important; because it is there that we record the financial compensation for the agreement of RME. This was the premium that we obtained, because we did not exercise the purchase option of generation of Light company. This is an extremely positive factor and substantial gains for our financial results.

All the rest we had some revisions -- reversals that is of revisions -- of the social tax coming from Light, especially a positive factor that Light has transferred to our results. And this has brought a financial result that is quite positive as compared to the previous quarters.

On page 27 you have there a summary of investments that were made in Light company; very interesting slide showing the correctness of our acquisition. We invested somewhere around BRL174 million in order to purchase our participation in this Company. And with dividends that we received and the sales of option rights, we have practically recovered our investment. And this is as a result from a strategy that we have adopted. And as you will see in the other investments as well, we have some gains that are going to speed up the return on investments that we have made.

We -- are now adding very strong value to Light. We have chosen to sell the option rights and not to segregate the generation assets of Light, because of our strategy of expansion for Light company. You saw in last quarter we announced some projects that we have been developing in partnership with Light. We have a sequence of other projects to be carried out in the future. We have already made this commitment and this is going to allow Light to be able to increase its productivity and its profitability in the next quarters.

This is part of our strategy ever since -- we, together with our other three investors, we agreed upon this strategy and we're putting that strategy into practice. We have the biggest interests in keeping the -- all the growth potential of Light, because this benefits not only the shareholders of Light company, but also our own stockholders.

On the next page we have the growth of the consolidated profit. We already touched on that. As a result of the financial results given by the gains of the option sale and the reducing operational expenses, because -- deducting their operational expenses, because of the tariff revision, but we had a final growth of 16%.

If we make the adjustment of the consolidated profit, you're going to see that the net adjusted profit reaches BRL530 million. Even then it's a substantial growth vis-a-vis 2007 by 4.1%, especially relative to our first quarter 16.2%, if we compare the result with the market expectation.

In what has to do with the net profits, we had a performance better than all the expectations that the market had about our results, to the point of going beyond the expectations as forecast by the very optimistic analysts. So, it is a result that makes us very happy.

On the next page you can see -- the results of the distributor company, the net profits. Its evolution was a little negative, 16% as a result exactly of the tariff revision and increase of operational expenses, because of the increase of the -- voluntary lay-off plan and the obligations -- the post employment obligations. This affected the distributor profits. But in the next quarter, free from this non-recurring impact, it should return upon a very interesting -- to a very interesting level.

It was very largely made up for by the results of our generator, 34%; and, therefore, showing the correctness of our investment portfolio.

On the next page, page 33 you have the net profit per company, with the contribution of each company, once again showing the correctness of our portfolio.

On the next page 34 you have the net -- the cash flow that is. And this cash flow, which has kept very strong as we have added new resources every quarter. You can see, you can notice that the results of the second quarter and what has to do with the cash generated by the operations, was superior to the previous quarter, thus showing that the cash generation is still strong in spite of the distributor cash tariff revision, because of the growth of the results of our generator.

We reduced our debt a little also this quarter. This is seasonal. We intend to do this to the end of the year. We intend to keep the debt at the level that we have today. We're going to capture some financing to the end of the year, so that we can help finance this investment program that we have showed in some previous slides. But we still have the utilization of this cash flow in the acquisitions that we are going to be announcing.

Therefore, the expectation is that we're going to use part of this cash, which reaches BRL2 billion in some acquisitions still up to the end of the year.

On the next page what you have is a diagnosis -- a very detailed diagnosis of our debt profile in what has to do with indicators and our financial indicators -- the key financial indicators. We are practically within the covenants that we have agreed upon with the Board -- our Board. And what has to do with EBITDA in the coverage of interests, we are practically within the level of five times, which gives us a lot of comfort.

And the rating agencies are keeping this risk classification -- this risk ranking, which was granted last year. And beginning of this year we still have very positive expectations, because the investment rate of Brazil to obtain a biased towards a [standard] bias in our indicators, thus reflecting upon our risk classification.

We had an increase of debt costs, as you can see in the -- on the chart at page 36, as a result of the increase of Cemig. This is actually a big peak we had this year. But next year, because of indexation of our debt, some CDI is going to return back to previous levels, therefore, proceeding in its declining trend. This reduce our weighted costs of capital, and this going to go to investment banks and find costs that will allow us to keep this trend.

The amortization is already in a very interesting -- on a very interesting level. On average, BRL1 billion amortization per year. We're going to maintain this level of debt, around 40% of total capitalization, as a function of the fact that we have to maintain our weighted cost of capital as low as possible. A variation of up to 50% is possible with the authorization of the Board, but we're going to try to keep all this within this perimeters.

And the last slide we have the next events that we will be taking part in, publicizing not only today's results but our strategy, and very likely the events that will materialize in the next quarters.

We have already in this month, on the next -- the last week, the APIMEC Congress, which is an event extremely important for Cemig. It is part of our investment relations program and it's to be together with the analysts in this congress -- this conference, which every two years bring us to the state of the art, and what has to do the companies and investment market.

We have a sequence of exhibits and fairs throughout the year. And we'll be present presenting our strategy.

And this is what at this time I'd like to bring to you, so we can move on now to the question and answer session. And we'll be at your service in case you want to approach other subjects that have not been approached during our presentation. Thank you very much.

(Interpreted). We will now move on to the question and answer part through telephone 011 4688 6301 or through your email ir.cemig.com.br.

(Interpreted). Excuse me. Ladies and gentlemen, we will now begin the question and answer session. (OPERATOR INSTRUCTIONS). We have a first question from Mr. Marcio Prado from Santander.

(Interpreted). Good morning, everyone. Thank you for your presentation. I'd like to ask a few questions, beginning with the tariff provision in the distributor. If you believe that all the impact has already been felt in the second quarter or whether, as the tariff started to be in effect last April, most of April would not have had this impact, we would not have the impact throughout the quarter? So, it would be one question.

The second question having to do with dividends. Can you talk about the payout prospects for this year 2008?

And could you give us more information about the generation assets of Light, the option of purchase Cemig would have sold to the other R&D partners the rights for the assets of generation of Light company, just to make sure and this is -- this evaluation's correct? Thank you.

(Interpreted). Thank you, Marcio, for your questions. We still have not reflected 100% the results of tariff revision upon the results of the distributor -- the distributor still, because we have applied a tariff beginning on April 7, because of the readings at our customer sites, we have not reflected the total results in the quarter. This is going to show up in the third quarter. But we do not expect any negative variation, because the growth of the market, as you saw, has been very vigorous, which is going to make up for this issue.

We had some impacts. We are going to have some positive impacts in our billing, because of our billing system that has just been implemented, and this is going to make up for this reduction in our revenues, because of the total application of the new tariff in the quarter.

As for dividends, we're going to apply this year our status policy of minimum dividends of 50% of the net profits. This is what is forecast by our budget -- which is provided for in our budget. We're going to use the cash that you see, the BRL2 billion, to acquire some assets. We have already announced that before. Very likely, we're going to be able to make concrete these acquisitions until the end of the year, and part of the cash is going to be used to finance the acquisitions.

Very probably, if by any chance the acquisitions fall through, then the Board may reassess this decision -- revaluate this decision. But this what we have in mind, and which is already within the tariff revision that we approved last July on the Board is exactly the payment -- the payout of 50% of the net profits.

It wasn't -- has to do with the option. It was a non-negotiation item when we negotiated with our partners, the acquisition of Light. It was signed exactly when we purchased it. We thought at the time that the generation of Light was not going to have a positive impact on the Light results, because it was already, I'd say, contracted for through contracts in a regulated environment. And, therefore, the benefit it would bring would be very little for the Company as a whole.

But since then, when we took over Light, we noticed that we could add value by maintaining Light generation in Light company. And this has been considered. We recently announced contracts of power sales at a very attractive level, which is going to improve the Light results in the future.

It was a trade-off that we made. We chose to keep generation within Light, because this would give more value to Light stock. And with our other measures in -- that we're going to do, joint measures, we're going to be adding more value to this stock. This is going to be reflected upon our results. As you see, this is a fantastic investment that we made and which has already given our stockholders a very positive result, and which, by means of strategy, we believe we're going to add even more value.

We have a plan -- a transformation plan being implemented by the Executive Management of Light, and which is going to bring about more gains. And investments in generation than we have been making in partnership with Light are going to allow us -- or are going to allow Light, to take up again the [billage] or the capacity and what has to do with its generation.

It did not invest in generation for a long time. It did not have a staff. And we are lending this expertise to construct and evaluate our projects to a live company in such a way that in the future we shall have other opportunities in order to enjoy profits together with Light.

(Interpreted). Our next question comes from Mr. Felipe Leal from Merrill Lynch.

(Interpreted). Good morning. I have two questions; one about the investments program and another one about Gasmig.

As for the investment program, the BRL500 million would be for transmission, that this would be the Cemig's participation in the acquisitions to be made by TBE; and also, whether for some reason these acquisitions do not come about, if the investments program would again be what it was? The BRL500 million are really destined to transmission acquisitions.

And a second question, vis-a-vis, has to do with Gasmig. The contract situation of Gasmig in terms of gas acquisitions or gas purchased, so what is the situation.

(Interpreted). Felipe, thank you for your questions; in what has to do with the investment program, that BRL500 million value is, no doubt, Cemig's participation in generation assets that we're going to acquire. That is the transmission that is -- that we're going to acquire in the second quarter.

We have requested from our stockholders permission to go beyond one of the indicators, statute indicators, which is exactly the investment program by the EBITDA, which as a function of this additional investment went beyond the 40% that is established by our [standards]. And this is going to allow us to make this investment and invest the BRL2.1 billion that are already programmed and approved by the Board.

After this investment, naturally, we're going to go back to the 40% level until it becomes necessary, because of another acquisition, to make a special request to the Board or to the stockholders.

We are now going through a process of revision -- of revising our master plan, our strategic plan. And the Board is going to need this year probably to analyze the alternatives, to update the strategic plan and our master plan. And it may result in a revision of those indicators. This is not -- has not been decided upon. We're still in the process of assessing that with the Executive Management. And the Board is still going to meet in order to evaluate this update of our master plan, our strategic plan.

And what has to do with Gasmig, we have at Gasmig Petrobras as a partner. Years ago, it had signed a contract to supply natural gas to Gasmig. It is a contract that went beyond 3 million cubic meters of gas per day. And now, we are now seeking to get an additional contract so that we can meet the -- serve the regions where we're going to invest, especially in the region of the Steel Valley, Ipatinga where the consumption of natural gas is still very -- is going to be even stronger than it is. Together with Petrobras, we're going to do this so that we have -- we ensure the gas supply.

(Interpreted). Thank you.

(Interpreted). Okay.

Ladies and gentlemen our next question comes from Mr. Henry (microphone inaccessible), Investment Capital.

(Inaudible).

(Interpreted). Mr. [Colby] asked a question. One relative to the BRL2 billion investment program that was included in there. And the other one has to do with the level of the number of employees at the end of the second quarter. And I'm going to respond to those two questions.

The first one, the value of BRL2 billion -- the amount of BRL2 billion includes the debt we presented the values -- the amounts without deducting the figures corresponding to what is going to be financed. A significant parcel of these numbers are financed either through Eletrobras, Light for All program, or through the Brazilian -- the national development Banco Brazil, which finances some generation investments.

The net figure is close to BRL1.5 billion, which should be considered in our cash. As I said, the debt was reduced this quarter but is going to be made up for by the new debts that are going to finance the new projects. We have financed practically -- we are financing practically the projects, the new projects with the BNDES and Eletrobras.

And what has to do with the number of employees, we had a reduction, because of the voluntary redundancy plan, somewhere around 300 employees in the quarter. So, we are close now to the 11,000 employees, which is our target for this year. We have the opportunities to reduce our total number even more, but we still have to make a few negotiations with the Unions so as to reduce this figure a little more.

But, at any rate, we should reach at the end of the year the number that had already been provided for in previous agreements, reaching 11,000 employees.

Because I thought the starting (inaudible) -- a lower number. (Inaudible) the target was 9,800 for the end of this year.

(Interpreted). Well, he's asking if the 300 employees are going to -- and the answer is part of the employees has already left this first quarter, and we still have a certain number of employees to leave the company up until the end of the year. So, at the end of the year we should be below the 11,000 employees that we have targeted.

At the end of the quarter, we had 10,458 employees, but this -- and there should be a compensation in such a way that we should be around 11,000 employees until the end of the year.

(Interpreted). Thank you very much.

(Interpreted). Thank you.

(Interpreted). Our next question comes from Mr. Eduardo Haiama from UBS Pactual Bank.

(Interpreted). Good morning, everyone. First, I would only like to congratulate the results, which really showed a lot of improvement and it's -- the improvement is very clear, and you are to be congratulated, because of the changes.

First questions would be, first, having to do with the dividends, in the case -- in this case the investment is BRL2 billion, so BRL1.5 billion, and if this would have any impact upon a possibility you are paying extraordinary dividends or not? Or if you're thinking of the generation cash -- operational cash of the Company would really support the investment and the pay out of extraordinary dividends? That's the first question.

The second question would have to do with new investments. You've been announcing investments in biomass and alternative power sources, windmill projects. What is the expectation of a company in this segment of alternative power sources? How much would -- are you going strong in that? What do you expect to grow in terms of installed capacity the next few years in terms of alternative power sources?

(Interpreted). Thank you, Eduardo Haiama. We try to in as wide as possible way to meet the requests of our investors and analysts. Our presentation has evolved in a very positive way. We try to make our presentation as -- ever more clear, so that you have a better and better understanding of the reasons that have led us to obtain the results.

This is the commitment that we make. And for you to have an idea, we already, for the third time around, we have been included in the -- for the fifth time around, that is, we have been included in the Transparency Award promoted by (inaudible), by the University of Sao Paulo.

And, in fact, I apologize for the lapse. And, in fact, for the fifth time around, using the University of Sao Paulo, considers us as included in the transparency award, which it promotes every year, which gives us the certainty that we are on the right track to enlarge our knowledge, or the knowledge of the investors and stockholders about the accomplishments of the Company.

Now, returning specifically to your question, the issue of extraordinary dividends, we had already announced since the beginning of the year that this year was going to be a year in which we will use part of the resources in acquisitions. We have already made part of the acquisitions in the first quarter, with the acquisition of two transmission lines by TBE, and now in the second quarter, we have some more investments to make -- second semester, that is, some more investments to make.

As I said, this year, we're going to restrict -- to be restricted to ordinary dividends -- the minimum compulsory dividends established by our [standards]. We are seeking alternatives to grow in the generation of cash, as you mentioned already, has been very strong. And maybe if, until the end of the year, we do not have met all the investment program, the Board can make some other decisions.

But in our plan we have the acquisitions, and we have to deliver strong results by 2009, as you can see on our guidance. And this is going to force us to make more investments this year, as we have been announcing. Therefore, we're going to retain part of this cash in order to finance the investments.

And what has to do with the investments of HPs biomass, and windmills, we practically cannot be out of those investments. In the hydroelectric plants we have some investments with ongoing constructions already. We have closed a few deals with [Barclays]. BNDES is financing some of these projects. And we are going to proceed, looking for alternatives.

We -- together with Light, we have two hydroelectric plant projects, one on medium power in such a way that we're going to keep always a portfolio of five to six plants under construction, and one has to do with biomass.

We also have good opportunities in this segment. There is a great potential of generation -- of coal generation of power in the ethanol plants. We're going to use the sugar cane waste to use for that. And we already contacted some investors, so as to make the most of those opportunities. There are some negotiations that are underway aiming probably at in the next quarters we're going to be announcing the beginning of a partnership.

And what has to do with the wind power, we also made an agreement with some investors in the sector, so as to evaluate the wind potential of the State. We understand that this potential is very positive in the State, and it has great future, and very probably, we will be announcing, also, some projects of our own.

As you well know, these projects do demand a few subsidies of some -- the Federal Government will provide the subsidies, and we will be trying to develop to carry out these projects. It's part of our investment policy, to invest in these segments, whether HPs, biomass, or wind power.

We have this attitude turning towards sustainability so as to guarantee our future generation, that generation's the same potential that we enjoy today. This is a principal that we adopt internally, and we put that into practice. Therefore, these projects are inserted into this strategy.

(Interpreted). Thank you.

(Interpreted). We have two questions, if we may, of Mr. Bruno [Zamil] about acquisitions. Acquisitions, Luiz Fernando Rolla has already answered that. What is predicted in our investment programs has to do with transmission acquisitions.

And the last question, which I will read from Mr. -- Dr. [Hall] from what [Cemig Madeira's] office, who asks whether there will be payments of interest on their own capital in 2008?

(Interpreted). This matter of interest on our own capital has to do with an evaluation of fiscal efficiency, and we very probably, in the quarters will be announcing also the payment of interest on our capital.

We have a policy with our Board -- as already approved by the Board, so as to maximize the fiscal benefits obtained from this item of interest on our capital. Where we maximize our results, we choose where to pay, and we have been doing this in our subsidiaries, which maximize this benefit.

The Holding company, unfortunately, we have not been able to gain all the benefits that we could have, as a function of the credits -- the tax credits that we have. We have [studied] some alternatives to use those tax credits, but unfortunately, because of -- for interest on capital, we have not been doing that.

But we do that in our Company's, generation transmission in such a way that we proceed -- continue maximizing, optimizing, that is, our fiscal benefits. And this is reflected on the dividends that are paid to our holding company -- Cemig Holding company.

Well, we have already been here for 60 minutes in this presentation. I would like to close this webcast and this teleconference, telling you about this commitment of communication with the market. If you see -- if you notice, we today communicate exactly that which had been communicated previously, and what has to do with strategy.

That is, we have sought to keep our growth in a sustainable way, with predictability to our cash flow, so that the investors and other stockholders can evaluate, in an absolutely clear way, the opportunity to invest in our shares. We're going to continue to go on with this policy.

We announced the strategy of the Company so as to add value and to grow. And at every quarter, we're going to be showing what the facts are that corroborate this strategy. And we are already undergoing a process of implementing strategies that have shown extremely positive results, as the ones we have just told you about and investments that we've made in Light company.

And this gives us the certainty that we are on the correct track, and we're going to deliver everything that has been promised in our projections that we published last May in our meeting at [Aracha].

I'd like to thank you all for your presence into this dial-in conference. And I expect in the other events that we have programmed for the next months to see you all again in a more personal way. Thank you very much, and good day.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.