Frequently Asked Questions

No. But the company made an adjustment in the second quarter to the Cofins expenses posted in the first quarter – reducing the expense originally posted in the 1 st quarter by R$44,616.

Hence, when calculating the effective rate of Cofins in 1Q 2005, the amount of this adjustment (R$44,616) should be deducted

The Board of Directors of Companhia Energética de Minas Gerais – CEMIG, at a meeting held on October 27, 2005, authorized the payment to the State of Minas Gerais of the amount of approximately R$26 million referring to the license fee for the use or occupation of the zones of public domain along the highways (“TFDR”).

The above amount is being booked in the results of the 3rd quarter of 2005, under operating expenses. We would also inform that CEMIG is negotiating with the ANEEL (National Electric Power Agency) for the costs related to this amount to be passed through to its tariffs.

Law 9718 of November 27, 1998 amended the federal legislation governing the PIS/Pasep and Cofins contributions, expanding the basis for the calculation, by defining as sales revenue the revenue from sales of merchandise and provision of services, and equating it with gross revenue, that is to say, the totality of revenues including financial revenues.

This law came into effect on the date of its publication (November 28, 1998), but this was not in accordance with the Constitution, due to the fact that Constitutional Amendment No. 20 is dated December 15, 1998. Thus, at the moment when it was created it was not in accordance with the provisions of the Constitution that governed its creation and its content.

With the advent of Law 10637 of December 30, 2002, which contains provisions governing the non-cumulative application of (PIS/Pasep), and Law 10833, of December 29, 2003, on the non-cumulative application of Cofins, the composition of the amounts to be used as the basis for calculation were reaffirmed, supported by the text of the Constitution then in force, and Law 9718/98 did not have Constitutional support during the period in which was in force.

On the basis of updating of the credits for the Cofins and Pasep contributions on financial revenues up to October 31, 2005, less the effects, on these amounts, of corporate income tax and the Social Contribution on Net Profit, the net effect of this action is R$134,768,044.98, as follows:

In terms of the immediate future, however, the decision of November 9 benefits only those companies that have filed extraordinary appeals on which final judgment has been given, although those who have pending actions, and also taxpayers who still intend to bring cases in the future, are likely to be successful.

Cemig filed a legal action on June 8, 2005, and we are awaiting the decision of the courts, to enable us to make the resulting offsets and post them in our accounting records.

The dates and percentages for the latest tariff adjustments are shown in the table below:

The novelty that exists in relation to tariff adjustments is Normative Resolution no. 166, dated October 10, 2005, which can be obtained in the Legislation area within ANEEL’s website (www.aneel.gov.br).

In relation to the time schedule for tariff adjustments at CEMIG Distribuição S.A., the date is always April 7 of each year; these adjustments will only be put into force on the following day.

With regard to estimates for tariff adjustments, the Company does not publish any forecast.

The presentation that deals with the 2006 tariff adjustment says that the amount of the CVA does not represent cash flow for the company. I would like to know why, since the CVA covers operational costs of the previous year – which are, thus, costs which have in fact already been paid.

The CVA for the current year is only accounted as an expense at the moment when it becomes part of revenue. Until that moment, it is provisioned as a receivable, and does not go to the income statement.

Within the annual adjustment of Cemig Distribution, in April 2009, I would like to know what was the average adjustment of the Distribution System Usage Tariff – TUSD.

The average adjustment of TUSD in April 2009 was -3.81%.

Cemig’s dividend policy is established by Clauses 5, 6, 7, 28, 29, 30 and 31 of its bylaws.

Clause 5 of the bylaws establishes that the preferred shares have right of preference in the event of reimbursement, and have the right to a minimum annual dividend equal to the greater of:

1. 10% (ten percent) of their par value; or

2. 3% (three percent) of the value of stockholders’ equity corresponding to the shares.

Clause 7 states that in the business years in which the company does not obtain sufficient profit to pay dividends to its stockholders, the State of Minas Gerais shall guarantee to those shares that were issued by the company up to 5 August 2004 and are now held by individual persons a minimum dividend of 6% (six percent) per year, in accordance with Clause 9 of State Law 828 of 14 December 1951, and State Law 15290 of 4 August 2004.

Clause 29 requires that the dividends must be distributed in the following order:

1. the annual minimum dividend guaranteed to the preferred shares;

2. the dividend for the common shares, up to a percentage equal to that guaranteed to the preferred shares;

and further states that in addition to these dividends the general meeting of stockholders may allocate additional dividends, provided that the preferred shares shall have equality of rights with the common shares in any such distribution.

Clause 28 requires that 50% of the net profit of each business year shall be distributed as an obligatory dividend to the stockholders, subject to the other terms of the bylaws and the applicable legislation.

Clause 30 requires that, without prejudice to the obligatory dividend, every two years, starting from the business year of 2005, or with a shorter periodicity if the company’s availability of cash so permits, the company shall use the profit reserve provided for in Clause 28 for the distribution of extraordinary dividends, up to the limit of cash available, as determined by the Board of Directors, in obedience to the company’s Strategic Guidelines Plan and the Dividend Policy.

It should be noted that although the preferred shares have a minimum dividend established in the bylaws, the company has in practice given equality of conditions to the common shares in the distribution of dividends.

The proposal by the Board of Directors to those meetings is for distribution, in the form of dividends, of R$1,381,781,000, based on the net profit for 2006 of R$1,718,841,000, as follows:

1. R$884,781,000 as the obligatory dividend, made up of the following portions:1.1. Interest on Equity in the amount of R$169,067,000, corresponding to R$1.0430781547 per thousand shares. This was decided by the meeting of the Board of Directors held on April 27, 2006, and is payable to stockholders whose names were on the company’s Nominal Share Registry on May 11, 2006.

   1.2. Complementary dividends in the amount of R$715,714,000, corresponding to R$2.943786152 5000 shares

2. R$497,000,000 as extraordinary dividends, corresponding to R$2.0441988247 per thousand shares.

Items 1.2 and 2 above are payable to stockholders whose names are on the company’s Nominal Share Register on the day of the General Meeting, that is to say, April 26, 2007. We emphasize that the amounts per thousand shares given for the complimentary and extraordinary dividends were calculated taking into account the bonus of 50% in shares, of the same type as those held, on the date of the General Meetings of Stockholders referred to.

The shares will trade ex-dividend and ex- the stock bonus on April 27, 2007.

There is in fact no incongruity in the amounts contained in the Proposal by the Board of Directors and the Statement of Changes in Stockholders’ Equity. The reason is that the amounts contained in the Statement of Changes in Stockholders’ Equity allude to the calculation based on the composition of the company’s registered capital on December 31, 2006.

In the Proposal by the Board of Directors, the amount of R$10.60 thousand shares refers to the total value of the profit per thousand shares.

This table shows the sources of funding for the Luz para Todos project:

The Luz para Todos ( “Light for Everyone” ) project aims to bring forward compliance with the electricity service universalization targets from 2010 to 2006, as proposed by the federal government, and is conditional upon use of subsidy from the Energy Development Account (CDE) and financing from the RGR (Global Reversion Reserve) fund in this period.

(*) Non-manageable costs which are part of the CVA and were transferred to the result due to their inclusion in the calculation of Cemig’s tariff adjustment. (**) Changes in non-manageable costs of the CVA which are not part of Cemig’s tariff and were thus excluded from the result.

As mentioned on page 68 of our ITR for 2Q05, the change, on December 31, 2004, in the discount rate on future obligations, from 8% to 6%, resulted in an increase in the present value of the actuarial obligations, justifying the increase in the amount of post-employment obligation expenses. The recurring level should now remain close to the figures for the second quarter of 2005, though it should be noted that the figure does depend on the returns on assets and the actual inflation rate.

The recurring level will be close to that of the second quarter of 2005. The figure for the first quarter was lower than normal because, due to the unbundling, and the changes made to the SAP system, there were operational difficulties in contracting and making payments in this period.

In the second quarter there was a reversal of provisions for labor lawsuits, as can be seen above. It is difficult to predict a recurring level because the amount of the operational provisions varies greatly and is very unpredictable.

The energy purchase contracts of CEMIG-D, their periods of duration and the inflation correction indices to be applied, are as follows:

(a) Contracts result from “Existing Energy Auctions” – auctions for purchase of electricity from existing enterprises:

(b) Contracts resulting from the “New Energy Auction” (of energy to be produced by new generation enterprises):

The periods are different for the different generation sources: 15 years for thermal generation and 30 years for hydroelectric generation. For the bilateral contracts:

Other energy purchases:

Cemig’s average tariff for all generation in the first half of 2006 (public service + independent production) was R$67/MWh, and the same average for Free Consumer was R$71/MWh.

Up to June the financial updating of the RTE provision was accounted in Operational costs and expenses; starting in August it began to be accounted in Financial expenses.

To show the calculation of Ebitda for the third quarter of 2006, as a complement to the information in Explanatory Note 2, we advise you that the amounts accounted in the first and second quarters of 2006 relating to the Provision for Losses on Recovery of Amounts of the RTE, in the amount of R$47,149,000, were reclassified to Financial Expenses. Hence the Ebitda of the third quarter of 2006 in isolation, with adjustment relating to Ebitda for the period January through June 2006, can be calculated as shown in this table:

EBITDA (calculation procedure not reviewed by the company’s external auditors)

Cemig sold power supply averaging 355 MW in the “New Energy” auction, in a single contract for 30 years, with delivery starting in 2009. For the years 2007 and 2008, part of this energy was sold in bilateral contracts and part may be settled through the CCEE. The figures for Cemig’s average sale prices for generation presented in the forecasts for the company’s results published on November 9, 2006 take into account prices of bilateral contracts already signed, estimates of prices for new contracts, and contract renewals, and also the estimates of Differences Settlement Prices (PLDs) relating to the portions to be settled through the CCEE. For the purposes of long-term forecasts, we assume a technical reserve of 100 MW average, to cover hydroelectric risks.

The IRR of 14.48% does not depend on the Voluntary Dismissal Program. This return was calculated assuming Cemig’s historic level of employee turnover of 300 employees/year, who will be replaced without the cost of 16.67% on their base salary. The Voluntary Dismissal Program will only accelerate this rate of turnover in the next 3 years, helping to make the return referred to even higher.

Our statements of sources and uses of electricity can be found, as soon as they are published, under “Sources and uses of electricity”.

Cemig’s stake in Capim Branco is 21.0526%. And, no, the rest of the electricity generated by Capim Branco is used by the other members of the Consortium in their own industrial processes. Capim Branco started commercial operation on February 21, 2006 – and thus is not in the Statement of Sources and Uses of Electricity for 2005

CEMIG D:

• From Itaipu, under obligatory contract: 12,143,511 MWh

• Initial contract with Cemig GT: 7,587,102 MWh – Direct flow

• Initial Contract through the Grid (with Furnas): 709,560 MWh

• Initial Contracts with the Isolated System (Furnas): 10,130 MWh

• Bilateral Contract (Ponte de Pedra): 444,780 MWh

• Bought in the Regulated Market (ACR): 4,644,324 MWh

• Bought under co-generation: 228,099 MWh

• Bought in the CCEE: 1,020,183 MWh

• Received from Furnas but through our own Distribution Network: 24,326 MWh

• Generators within our own Distribution Network: 21,195 GWh

CEMIG GT:

• Net generation at the “Center of Gravity”: 31,042,503 MWh

• Bought under the MRE: 335,522 MWh

• Bought in the CCEE: 110,247 MWh

This refers to the situation when a company – usually an industrial company –produces electricity for its own consumption. Some large consumers, with authorizations from Aneel, build generation plants to supply their own consumption needs. This electricity can replace, or complement, the volume acquired from the electricity distributor – and any excess from time to time can be sold, under authorization from Aneel.

Sá Carvalho S.A., Usina Térmica Ipatinga S.A., Central Termelétrica de Cogeração S.A., Horizontes Energia S.A., Usina Hidrelétrica Pai Joaquim S.A. and Rosal Energia S.A.

With the self-producers who built the Igarapava hydroelectric power plant, Cemig entered into a so-called operating agreement. Under this agreement Cemig would operate the plant, receive the electricity produced, and in exchange, would guarantee continuous provision of an amount of electricity, and/or level of power (jointly referred to as the “take”) to these self-producers at the point where the Igarapava plant is linked to Cemig’s Distribution System.

(1) Refers to the quantity of electricity for calculation of the regulatory charges charged to free consumer clients (“Portion A”) (2) Total electricity distributed (3) Sum of the demand on which the TUSD is invoiced, according to demand contracted (“Portion B”)

The energy purchase contracts of CEMIG-D, their periods of duration and the inflation correction indices to be applied, are as follows:

(a) Contracts result from “Existing Energy Auctions” – auctions for purchase of electricity from existing enterprises:

• CCEARs 2005 Until December 2012 IPCA

• CCEARs 2006 Until December 2013 IPCA

• CCEARs 2008 Until December 2015 IPCA

(b) Contracts resulting from the “New Energy Auction” (of energy to be produced by new generation enterprises):

• CCEARs 2008 varying from 15 to 30 years IPCA

• CCEARs 2009 varying from 15 to 30 years IPCA

• CCEARs 2010 varying from 15 to 30 years IPCA

The periods are different for the different generation sources: 15 years for thermal generation and 30 years for hydroelectric generation. For the bilateral contracts:

• Ponte de Pedra* to 2025 IGP-M * Price (base: April 2001) falls from R$69.00/MWh to R$62.00/MWh from August 2008.

• Capim Branco I Jan.31,2016 IGP-M

• Capim Branco II 20 years from first delivery (until early 2027) IGP-M

Other energy purchases:

• Itaipu No duration limit (purchase is obligatory) Tariff is regulated in US$

• Proinfa There is no contract. Cemig-D pays these amounts compulsorily and receives corresponding amounts of energy

**In accordance with Article 12 of CVM Instruction 358, of January 3, 2002, the concession contracts of the Jaguara and São Simão hydroelectric plants have clauses of guarantee of the right to renewal of the concession, in the terms of Law 9074 of July 7, 1995, as amended by Laws 9648/98 and 10848/04; these two concessions will expire for the first time in 2013 and 2015, respectively. * Plants of which the concessions have already been renewed by the Mining and Energy Ministry, under Law 9074 of July 7, 1995: Emborcação and Nova Ponte: Assured average 773 MW; installed capacity 1,702 MW; concessions renewed up to 2025; Camargos, Itutinga, Salto Grande and Três Marias: Assured average 363 MW; installed capacity 596 MW; concessions renewed until 2015; Volta Grande: Assured average 773 MW; installed capacity 380 MW; concessions renewed up to 2017; 13 Small Hydroelectric Plants: Total assured average 44.242 MW; installed capacity 87.9 MW; concessions renewed up to 2015.

The total amount is roughly R$ 100 million (one hundred million reais), in prices as of September, 30th 2009. However, the final amount will only be determined on the closing date, after the other partners exercise their rights of first refusal. In due course, Cemig will make public the final amount of this acquisition.

If the sale option is exercised, Cemig will acquire 100% of the share units of LUCE INVESTMENT FUND, which holds 75% (seventy five per cent) of the shares of LUCE BRASIL FUNDO DE INVESTIMENTO EM PARTICIPAÇÕES. The result would be that Cemig would acquire 19,932,112 (nineteen million nine hundred thirty two thousand one hundred twelve) common shares in Light S.A., representing 9.75% (nine point seven five per cent) of its total and voting capital for the price of US$340,455,675.00 (three hundred forty million four hundred fifty five thousand six hundred seventy five United States dollars), from which would be deducted any dividends and Interest on Equity paid or declared by Light S.A. in the period starting on December 1, 2009 up to and including the date of the exercise of the option, if any.