Revenue Up, Profits Down: Cemig Faces Cost Pressures in First Quarter 2025

Companhia Energética de Minas Gerais (Cemig), one of Brazil’s largest integrated energy utilities, reported a net profit of R$ 1.038 billion ($173 million) for the first quarter of 2025.

This marks a 9.9% decline from the same period last year, according to company filings and financial statements. This result highlights the impact of regional price disparities and rising costs on the company’s profitability.

Cemig’s adjusted EBITDA for the quarter reached R$ 1.799 billion ($300 million), down 9.6% year-on-year, while net revenue climbed 8.7% to R$ 9.844 billion ($1.641 billion).

The company’s gross debt rose sharply, reaching R$ 15.242 billion ($2.540 billion) by the end of March, a 24.1% increase over the previous quarter, with an average maturity of 5.5 years.

Cemig’s cash position stood at R$ 4.8 billion ($800 million), resulting in a net debt of R$ 10.5 billion ($1.750 billion) and a net debt to EBITDA ratio of 1.4x, which remains well below its covenants.

The company’s performance this quarter was shaped by a volatile energy market, with prices in the Southeast/Central-West and South submarkets nearly R$ 400 ($67 million if annualized per GWh, but here it is a price per MWh, so $67 per MWh) higher than in the Northeast and North.

Revenue Up, Profits Down: Cemig Faces Cost Pressures in First Quarter 2025

This price gap negatively affected Cemig’s energy trading segment, leading to a R$ 133 million ($22 million) expense due to its exposure to less favorable market spreads.

Distribution volumes dipped 0.3% year-on-year, as milder temperatures and a shift to distributed generation reduced commercial, rural, and public consumption.

However, the distribution segment’s adjusted EBITDA of R$ 798 million ($133 million) came in 9% above expectations, driven by operational improvements.

Cemig’s generation, transmission, and trading operations reported an adjusted EBITDA of R$ 799 million ($133 million), slightly below estimates, as the company faced lower margins and increased costs.

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The company’s capital expenditures reached R$ 1.2 billion ($200 million) in the quarter, with R$ 979 million ($163 million) allocated to distribution, reflecting a focus on grid modernization and reliability.

Despite these headwinds, Cemig maintains a strong liquidity position and continues to invest in its core business, with over 75% of its R$ 35 billion ($5.833 billion) investment program contracted or in bidding.

The company also completed the sale of non-core assets and expects further divestments. Its trading arm remains the market leader in Brazil, and the company plans to launch its first solar plants in July.

Cemig’s dividend yield remains attractive at 8.77%, but analysts note a recent decline in dividend growth, raising questions about future payout sustainability.

The company’s management continues to negotiate legacy liabilities and seeks to keep leverage under control while exploring expansion opportunities.

The real story in Cemig’s first quarter is the tension between growing revenue and rising costs, as well as the operational challenges posed by Brazil’s regional energy price imbalances.

While the company’s fundamentals remain solid, the coming quarters will test its ability to manage costs, maintain margins, and deliver on investment promises amid a shifting market landscape.

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