-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GwropHVyLDj2Gf++q2Untj814nm0BrP4WgA21vYlw55B0jbOI2zMbg86ziY8vp47 I3AZkZSw0ou1GPpEDOIQ1w== 0001005150-97-000551.txt : 19970717 0001005150-97-000551.hdr.sgml : 19970717 ACCESSION NUMBER: 0001005150-97-000551 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970618 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970716 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AES CORPORATION CENTRAL INDEX KEY: 0000874761 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 541163725 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12291 FILM NUMBER: 97641630 BUSINESS ADDRESS: STREET 1: 1001 N 19TH ST CITY: ARLINGTON STATE: VA ZIP: 22209 BUSINESS PHONE: 7035221315 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (date of earliest event reported): June 18, 1997 THE AES CORPORATION (exact name of registrant as specified in its charter) DELAWARE 333-15487 54-1163725 (State of (Commission File No.) (IRS Employer Incorporation) Identification No.) 1001 North 19th Street, Suite 2000 Arlington, Virginia 22209 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (703) 522-1315 NOT APPLICABLE (Former Name or Former Address, if changed since last report) ITEM 2. ACQUISITION OF DISPOSITION OF ASSETS On June 18, 1997, AES together with The Southern Company and The Opportunity Fund, a Brazilian investment fund, (collectively, the "AES Consortium"), acquired 14.41% of Companhia Energtica de Minas Gerais ("CEMIG"), an integrated electric utility serving the State of Minas Gerais in Brazil, for a total purchase price of approximately $1.056 billion, $654 million of the financing for which was in the form of non-recourse financing provided by Banco Nacional de Desenvolvimento Economico e Social ("BNDES"). AES's portion of the purchase price was approximately $364 million after consideration of the BNDES facility. The shares of CEMIG, which represent approximately 33% of the voting interest, have been purchased from the State of Minas Gerais in a partial privatization of CEMIG. Initially, AES and The Opportunity Fund will have a 90.6% and a 9.4% economic interest in the AES Consortium, respectively. The Southern Company has an option until January 9, 1998 to purchase up to a 25% interest in the AES Consortium from AES. Pursuant to a shareholders agreement between the AES Consortium and the State of Minas Gerais, AES will have significant operating influence, including the right to appoint the chief operating officer of CEMIG, and will otherwise share control of CEMIG with the State of Minas Gerais. CEMIG owns approximately 5,000 MW of generating plants and serves approximately 4 million customers. The foregoing transaction and the financing therefor described below are referred to herein as the "CEMIG Acquisition". ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS a.(i) Financial statements of Businesses Acquired The following audited financial statements of Companhia Energetica de Minas Gerais - CEMIG as of and for the years ended December 31, 1996 and 1995, together with the Independent Auditors' Report are prepared in accordance with generally accepted accounting principles in Brazil. Rua dos Inconfidentes, 1190 9' Telefone (031) 261-6322 Caixa Postal 289 Fax (031) 261-6950 30161-970 Belo Horizonte, MG-Brasil Price Waterhouse Report of Independent Accountants February 28, 1997 To the Board of Directors and Stockholders Companhia Energetica de Minas Gerais - CEMIG 1 We have audited the accompanying balance sheets of Companhia Energetica de Minas Gerais - CEMIG as of December 31, 1996 and 1995 and the related statements of income, of changes in stockholders' equity and of changes in financial position for the years then ended, expressed in currency of constant purchasing power. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements. 2 We conducted our audits in accordance with Brazilian approved auditing standards which require that we perform the audit to obtain reasonable assurance about whether the financial statements are fairly presented in all material respects. Accordingly, our work included, among other procedures: (a) planning our audits taking into consideration the significance of balances, the volume of transactions and the accounting and internal control systems of the company; (b) examining, on a test basis, evidence and records supporting the amounts and disclosures in the financial statements; and (c) assessing the accounting practices used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 3 In our opinion, the financial statements audited by us present fairly, in all material respects, the financial position of Companhia Energetica de Minas Gerais - CEMIG at December 31, 1996 and 1995 and the results of its operations, the changes in stockholders' equity and the changes in its financial position for the years then ended, in conformity with accounting principles generally accepted in Brazil. 4 The U. S. dollar amounts shown in these financial statements are presented solely for the convenience of the reader. These amounts were translated on the bases explained in Note 2.2 to the financial statements. /s/ Price Waterhouse Price Waterhouse Auditores Independentes CRC--SP-16O "S" MG /s/ Jorge R. Manoel Jorge R. Manoel Partner Contador CRC-SP-110.719 "T" MG COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG BALANCE SHEET AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - --------------------------------------------------------------------------------
R$ US$ -------------------------- ------------ ASSETS 1996 1995 1996 ------------ ------------ ------------ CURRENT ASSETS Cash and banks 154,348 160,481 148,497 ------------ ------------ ------------ Accounts receivable, securities and other assets Consumers and dealers 338,157 305,060 325,339 Income receivable 6,329 l0,815 6,089 Recoverable taxes and social contribution 99,960 59,569 96,171 Sundry debtors 56,226 24,646 54,094 Other receivables 14,543 2,038 13,992 Allowance for doubtful accounts (31,223) (15,336) (30,039) Stores 94,918 84,292 91,320 Services in process 13,919 5,727 13,391 ------------ ------------ ------------ 592,829 476,811 570,357 ------------ ------------ ------------ Prepaid expenses 3,161 3,262 3,041 ------------ ------------ ------------ 750,338 640,554 721,895 ------------ ------------ ------------ LONG-TERM RECEIVABLES Securities 135,461 130,327 Judicial deposits 1,714 1,816 1,649 Other receivables 933,501 880,346 898,115 ------------ ------------ ------------ l,070,676 882,162 l,030,091 ------------ ------------ ------------ PERMANENT ASSETS Investments l08,917 91,842 104,788 Property, plant and equipment 11,268,491 9,431,734 10,841,342 Deferred charges 5,170 1,548,709 4,974 ------------ ------------ ------------ 11,382,578 ll,072,285 l0,951,104 ------------ ------------ ------------ TOTAL ASSETS 13,203,592 12,595,001 12,703,090
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG BALANCE SHEET AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS (continued) - --------------------------------------------------------------------------------
R$ US$ LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995 1996 ------------ ---------- ----------- CURRENT LIABILITIES Suppliers 118,876 128,186 114,370 Payroll 2,486 6,900 2,392 Financial charges l0,909 10,067 10,495 Taxes and social contribution 185,617 148,634 178,581 Proposed dividends 130,787 141,903 125,829 Loans and financings 141,029 79,291 135,683 Accrued liabilities 182,014 189,683 175,115 Taxes charged to consumers 66,057 75,134 63,553 Profit sharing 12,918 12,428 Advance billing of electric power 47,832 3,337 46,019 Other 94,306 74,266 90,731 ------------ ---------- ----------- 992,831 857,401 955,196 ------------ ---------- ----------- LONG-TERM LIABILITIES Loans and financings 879,807 746,634 846,456 Deferred taxes 523,720 492,098 503,868 Advance billing of electric power 64,315 61,877 Other 30,374 64,556 29,223 ------------ ---------- ----------- 1,498,216 1,303,288 1,441,424 Special contributions 1,143,350 1,041,397 l,l00,0l0 ------------ ---------- ----------- 2,641,566 2,344,685 2,541,434 ------------ ---------- ----------- STOCKHOLDERS' EQUITY Capital 1,736,116 1,735,045 1,670,306 Capital reserves 5,846,192 5,683,970 5,624,583 Revenue reserves 1,929,301 1,946,941 1,856,168 Retained earnings 45,989 15,396 44,246 ------------ ---------- ----------- 9,557,598 9,381,352 9,195,303 Funds for future capital increase 11,597 11,563 11,157 ------------ ---------- ----------- 9,569,195 9,392 915 9,206,460 ------------ ---------- ----------- TOTAL LIABILITIES 13,203,592 12,595,001 12,703,090 ============ ========== ===========
The accompanying notes are an integral part of these financial statements. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG BALANCE SHEET AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - --------------------------------------------------------------------------------
R$ US$ ------------------------- --------- 1996 1995 1996 ----------- ------------ --------- OPERATING REVENUE Electricity sales to final consumers 2,462,677 2,276,246 2,369,326 Electricity sales to the Interconnected Power System and other concessionaires 98,868 79,920 95,120 Other 42,582 30,874 40,968 ----------- ------------ --------- 2,604,127 2,387,040 2,505,414 Deduction from operating revenue Global reversal of reserve quota (60,401) (121,781) (58,112) Fuel consumption account quota (81,806) (75,983) (78,705) Taxes and contributions on revenue (506,188) (463,342) (487,000) ----------- ------------ --------- (648,395) (661,106) (623,817) ----------- ------------ --------- NET OPERATING REVENUE 1,955,732 1,725,934 1,881,597 ----------- ------------ --------- OPERATING EXPENSES Personnel (553,328) (509,730) (535,353) Supplies (38,921) (35,842) (37,446) Third-party services (129,070) (ll0,267) (124,177) Electric power purchased for resale (435,253) (461,733) (418,754) Depreciation and amortization (441,436) (466,480) (424,703) Royalties for the use of water resources (24,637) (25,375) (23,703) Leasing, rents and loans of assets (16,104) (15,631) (15,494) Formation of operating provisions (39,901) (19,667) (38,389) Other expenses, net (42,651) (66,139) (41,034) ----------- ------------ --------- (1,721,301) (1,710,864) (1,656,053) ----------- ------------ ---------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG STATEMENT OF INCOME YEARS DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS (continued) - --------------------------------------------------------------------------------
R$ US$ --------------------- --------- 1996 1995 1996 --------- --------- --------- FINANCIAL INCOME (EXPENSES) Income from financial investments 32,394 70,065 31,166 Interest on electricity bills paid in arrears 59,484 60,044 57,229 Finance charges (57,546) (66,475) (55,364) Net monetary variations and others 61,276 43,513 58,953 --------- --------- --------- 95,608 107,147 91,984 --------- --------- --------- OPERATING PROFIT 330,039 122,217 317,528 --------- --------- --------- Non-operating income 17,001 19,546 16,357 Non-operating expenses (13,982) (26,448) (13,452) --------- --------- --------- 3,019 (6,902) 2,905 --------- --------- --------- INCOME BEFORE TAXATION AND PROFIT SHARING 333,058 115,315 320,433 INCOME TAX AND SOCIAL CONTRIBUTION (78,151) (68,160) (75,189) REVERSAL OF DEFERRED TAXES 8,082 189,873 7,776 EMPLOYEES' PROFIT SHARING (21,414) (20,602) --------- --------- --------- NET INCOME FOR THE YEAR 241,575 237,028 232,418 ========= ========= ========= NET INCOME PER THOUSAND SHARES R$/US$ 1.86 1.83 1.79 --------- --------- ---------
The accompanying notes are an integral part of these financial statements. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS - ------------------------------------------------------------------------------------------------------------------------------------ FUNDS RESTATED OTHER FOR FUTURE PAID-UP CAPITAL REVENUE RETAINED CAPITAL CAPITAL RESERVES RESERVES EARNINGS INCREASE TOTAL ----------- ---------- ---------- ---------- ------------ ----------- AT DECEMBER 31, 1995 1,735,045 5,683,970 1,946,941 15,396 11,563 9,392,915 ----------- ---------- ---------- ---------- ------------ ----------- Capital increase (EGM of 11.08.96) 1,071 (1,071) Premium on share subscription 3,211 (3,211) Remuneration of construction in progress financed by own resources 156,973 156,973 Funds for capital increase - advances received 4,316 4,316 Reversal of income tax and social contribution on special restatement of special contributions (51,316) (51,316) Difference in social contribution rate (49,113) (49,113) Transfer relating to reduction in 1992 income tax rate 98,807 (98,807) Investment credits 4,805 4,805 Treasury stock (1,145) (1,145) Reversal of dividends relating to treasury stock 56 56 Net income for the year 241,575 241,575 Transfer to retained profits reserve 122,499 (122,499) Reversal of unrealized profits reserve (41,388) 41,388 Proposed dividends R$ 1.00 per thousand shares) (129,871) (129 871) ----------- ---------- ---------- ---------- ------------ ----------- AT DECEMBER 31, 1996 1,736,116 5,846,192 1,929,301 45,989 11,597 9,569,195 ----------- ---------- ---------- ---------- ------------ -----------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS (CONTINUED) - ------------------------------------------------------------------------------------------------------------------------------------ FUNDS RESTATED OTHER FOR FUTURE PAID-UP CAPITAL REVENUE RETAINED CAPITAL CAPITAL RESERVES RESERVES EARNINGS INCREASE TOTAL ----------- ---------- ---------- ---------- ------------ ----------- AT DECEMBER 31, 1994 1,666,410 4,370,666 891,643 969,817 130,710 8,029,246 ----------- ---------- ---------- ---------- ------------ ----------- Capital increase (AGM de 03.27.95 e EGM 12.11.95) 68,635 (68,635) Premium on share subscription 72,122 (72,122) Remuneration of construction in progress financed by own resources 134,587 134,587 Funds for capital increase - advances received 21,610 21,610 Income tax on special restatement - adjustment of rate - Law 9249/95 328,036 328,036 Investment credits Credit assignment of results account for offset - CRC 771,745 771,745 Others 6,814 6,814 Adjustment of deferred taxes 5,606 5,606 Net income for the year 237,028 237,028 Transfer to reserves: Legal 11,849 (11,849) Retained profits 854,482 (854,482) Unrealized profits 225,134 (225,134) Reversal of unrealized profits reserve (36,167) 36,167 Proposed dividends (R$ 1.OO per thousand shares) (141,757) (141.757) ----------- ---------- ---------- ---------- ------------ ----------- AT DECEMBER 31, 1995 1,735,045 5,683,970 1,946,941 15,396 11,563 9,392,915 ----------- ---------- ---------- ---------- ------------ ------------
The accompanying notes are an integral part of these financial statements. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF U.S. DOLLARS
- ------------------------------------------------------------------------------------------------------------------------------------ FUNDS RESTATED OTHER FOR FUTURE PAID-UP CAPITAL REVENUE RETAINED CAPITAL CAPITAL RESERVES RESERVES EARNINGS INCREASE TOTAL ----------- ---------- ---------- ---------- ------------ ----------- AT DECEMBER 31, 1995 1,669,276 5,468 511 1,873,139 14,812 11,125 9,036,863 ----------- ---------- ---------- ---------- ------------ ----------- Capital increase (EGM of 11.08.96) 1,030 (1,030) Premium on share subscription 3,089 (3,089) Remuneration of construction in progress financed by own resources 151,023 151,023 Funds for capital increase - advances received 4,151 4,151 Reversal of income tax and social contribution on special restatement of special contributions (49,371) (49,371) Difference in social contribution rate (47,251) (47,251) Transfer relating to reduction in 1992 income tax rate 95,061 (95,061) Investment credits 4,623 4,623 Treasury stock (1,102) (1,102) Reversal of dividends relating to treasury stock 54 54 Net income for the year 232,418 232,418 Transfer to retained profits reserve 117,855 (117,855) Reversal of unrealized profits reserve (39,819) 39,819 Proposed dividends (US$ 0 96 per thousand shares) (124,948) (124,948) ----------- ---------- ---------- ---------- ------------ ------------ AT DECEMBER 31, 1996 1,670,306 5,624,583 1,856,168 44,246 11,157 9,206,460 ----------- ---------- ---------- ---------- ------------ ------------
The accompanying notes are an integral part of these financial statements. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG BALANCE SHEET AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - --------------------------------------------------------------------------------
R$ US$ ------------------------- ------------ 1996 1995 1996 ----------- ------------ ------------ FINANCIAL RESOURCES WERE PROVIDED BY: Operations Net income for the year 241,575 237,028 232,418 Expenses (income) not affecting working capital: 441,436 466,480 424,703 Depreciation and amortization 21 (416) 20 Allowance for doubtful accounts - long-term (15,561) Remuneration of construction in progress (13,967) 6,073 (13,437) Increase in deferred income tax Equity in the earnings of subsidiary (501) (4,810) (482) company (80,724) (23,354) (77,664) Long-term gains and losses 14,110 25,002 13,575 Residual value of asset disposals 9,680 12,637 9,313 Adjustments to present value - long-term receivables (8,082) (189,873) (7,776) Reversal of deferred taxes Interest and charges on long-term receivables (62,629) (31,907) (60,255) ----------- ------------ ------------ 540,919 481,299 520,415 ----------- ------------ ------------ Stockholders Advances for future capital increase 4,316 21,61O 4,151 ----------- ------------ ------------ Third-parties Financing 292,984 210,368 281,879 Transfer from current to long-term 120,132 financing - renegotiations 4,805 1,615 4,623 Investment credits Write down of fixed assets on discontinued 25,539 2,714 24,571 operations 101,953 91,420 98,088 Special contributions Increase in other long-term liabilities 69,192 2,043 66,569 Other 56 27 54 ----------- ------------ ------------ 494,529 428,319 475,783 ----------- ------------ ------------ TOTAL FUNDS PROVIDED 1,039,764 931,228 1,000,350 ----------- ------------ ------------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG STATEMENT OF CHANGES IN FINANCIAL POSITION YEARS ENDED DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS (continued) - --------------------------------------------------------------------------------
R$ US$ ------------------------ ----------- 1996 1995 1996 ---------- ---------- ----------- FINANCIAL RESOURCES WERE USED FOR: Property, plant end equipment 624,798 642,943 601,114 Proposed dividends 129,871 141,757 124,948 Increase in long-term receivables 127,674 75,304 122,834 Increase in investments 8,480 2,982 8,158 Transfer from long-term to current liabilities Deferred taxes 5,181 73,064 4,985 Loans and Financing 145,163 82,748 139,660 Other 23,041 17,728 22,168 Increase in deferred charges 57 60 55 Treasury stock 1,145 1,102 ---------- ---------- ----------- TOTAL FUNDS USED 1,065,410 1,036,586 1,025,024 ---------- ---------- ----------- DECREASE IN WORKING CAPITAL (25,646) (105,358) (24,674) ---------- ---------- ----------- CHANGES IN WORKING CAPITAL CURRENT ASSETS At the beginning of the year 640,554 536,166 616,273 At the end of the year 750,338 640,554 721,895 ---------- ---------- ----------- 109,784 104,388 105,622 ---------- ---------- ----------- CURRENT LIABILITIES At the beginning of the year 857,401 647,655 824,900 At the end of the year 992,831 857,401 955,196 ---------- ---------- ----------- 135,430 209,746 130,296 ---------- ---------- ----------- DECREASE IN WORKING CAPITAL (25,646) (105,358) (24,674) ========== ========== ===========
The accompanying notes are an integral part of these financial statements. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 1 OPERATIONS Companhia Energetica de Minas Gerais - CEMIG, a Brazilian listed corporation registered under GEMEC/RCA certificate No. 200-75/109 and the General Taxpayers' Register (C.G.C) No. 17.155.730/0001 -64, is an electric power public utility concessionaire controlled by the Minas Gerais State Government. Its principal business activities are the construction and operation of systems used in the generation, transformation, transmission, distribution and sale of electric power, as well as the development of activities in diverse energy-related areas for business purposes. The concession area held by CEMIG covers 562,762 km(2), approximately 97% of the territory of the State of Minas Gerais, providing power to some 4,248 thousand (1995 - 4,049 thousand) consumers. It has 35 power plants, mainly hydroelectric, with a generating capacity of approximately 5,068 MW (1995 - 4,962 MW). The construction of the following hydroelectric power plants is still in progress: * Miranda, with a generating capacity of 390 MW. Start-up of operations of the first unit is programmed for 1997. The total estimated cost is R$ 848,628 (US$ 816,459), which is being financed with the company's own funds and funds from Eletrobras and from IMPSA. R$ 618,820 (US$ 595,363) of this amount has already been expended to date, net of interest on construction. * Igarapava, with a generating capacity of 210 MW, is a joint venture with private enterprise. The total estimated cost is R$ 243,599 (US$ 234,365), of which CEMIG's participation is 14.5%. The company has 14,923 employees (16,452 in 1995) and the minimum and maximum monthly salaries in December 1996 were R$ 389.00 (US$ 374.25) and R$ 8,943.00 (US$ 8,604.00), respectively. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 2 PRESENTATION OF THE FINANCIAL STATEMENTS The financial statements were prepared in conformity with the requirements of Brazilian corporate legislation and the Brazilian Securities Commission (CVM). The procedures adopted may be summarized as follows: MONETARY ITEMS Monetary items which include anticipated inflation and interest were adjusted to present value by using the National Association of Investment Banks and Securities Dealers (ANBID) rate. Monetary gains and losses, as well as the adjustments to present value, were allocated to the statement of income accounts according to their nature. In the specific cases of suppliers, consumers and dealers, monetary gains and losses were allocated to the financial income (expense) accounts. NON-MONETARY ITEMS These are shown at restated cost expressed in currency of constant purchasing power at December 31, 1996. ITEMS IN THE STATEMENTS OF INCOME, OF CHANGES IN STOCKHOLDERS' EQUITY AND OF CHANGES IN FINANCIAL POSITION These are restated as from the date or month they were recorded through December 31, 1996, adjusted both for gains and losses on monetary items and for the adjustment to present value of receivables and payables. COMPARATIVE FINANCIAL STATEMENTS The financial statements for the year ended December 31, 1995 were adjusted for comparative purposes to currency of constant purchasing power at December 31, 1996, using the variation of the General Market Price Index (IGP-M) in 1996 as the basis for restatement. Monetary gains and losses, adjustments to present value and the restatement of inventories and monetary items were allocated to the income and expense accounts to which they relate as follows: GAINS AND LOSSES NET OF RESTATEMENTS (1996) COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- INCOME AND EXPENSE ACCOUNTS R$ US$ MONETARY ITEMS - ------------------------------------------------------------------------------------------------------------------------------------ Deductions from operating revenue Reserve/fuel consumption quotas 5,590 5,378 Taxes charged to consumers Taxes and contributions on revenue 3,766 3,623 Taxes and social contributions - ICMS OPERATING EXPENSES Personnel 8,664 8,336 Payroll and social security contributions Supplies (5,001) (4,811) Stores Third party services (1,146) (1,103) Services in progress Royalties for the use of water resources 380 366 Water resources Other operating expenses 35,371 34,030 Sundry FINANCIAL INCOME (EXPENSES) Finance charges 646 622 Finance charges payable Other 10,626 10,223 Sundry NON-OPERATING INCOME (554) (533) Services in progress PROVISION FOR INCOME TAX 41,596 40,019 Provision for income tax - ------------------------------------------------------------------------------------------------------------------------------------ GAINS AND LOSSES NET OF RESTATEMENTS (1995) - ------------------------------------------------------------------------------------------------------------------------------------ INCOME AND EXPENSE ACCOUNTS R$ MONETARY ITEMS - ------------------------------------------------------------------------------------------------------------------------------------ Deductions from operating revenue Reserve/fuel consumption quotas 6,745 Taxes charged to consumers Taxes and contributions on revenue 12,316 Taxes and social contributions - ICMS OPERATING EXPENSES Personnel 24,984 Payroll and social security contributions Supplies (9,488) Stores Third party services (2,181) Services in progress Royalties for the use of water resources 934 Water resources Social charges not related to payroll 195 Taxes and social charges payable Other operating expenses 13,256 Sundry FINANCIAL INCOME (EXPENSES) Finance charges 871 Finance charges payable Other 10,873 Sundry NON-OPERATING INCOME (177) Services in progress PROVISION FOR INCOME TAX 3,108 Provision for income tax
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- ADJUSTMENT TO PRESENT VALUE AND RESTATEMENT OF INVENTORIES (1996)
OPERATING REVENUE R$ US$ - ------------------------------------------------------------------------------------------------------------ Electricity sales (28,076) (27,012) Consumers and dealers OPERATING EXPENSES Supplies 8,259 7,946 Stores - special restatement 126 121 Suppliers Third-party services 1,875 1,804 Suppliers Electric power purchased for resale 1,040 1,001 Suppliers Other expenses 471 453 Suppliers FINANCIAL INCOME (EXPENSES) Commercial financial income 28,390 27,314 Consumers and dealers Commercial financial expense (11,055) (10,636) Suppliers ---------- -------- 1,030 991 EFFECT OF INCOME TAX (315) (303) ---------- -------- 715 688 ========== ======== ADJUSTMENTS TO PRESENT VALUE AND RESTATEMENT OF INVENTORIES (1995) OPERATING REVENUE R$ - --------------------------------------------------------------------------------------------------- Electricity sales (46,193) Consumers and dealers OPERATING EXPENSES Supplies 14,816 Stores - special restatement 286 Suppliers Third-party services 2,808 Suppliers Electric power purchased for resale 1,797 Suppliers Other expenses 606 Suppliers FINANCIAL INCOME (EXPENSES) Commercial financial income 46,310 Consumers and dealers Commercial financial expense (20,364) Suppliers ---------- 66 EFFECT OF INCOME TAX (21) ---------- 45 ==========
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 2.1 SIGNIFICANT ACCOUNTING PRINCIPLES The accounting principles comply with the requirements of Brazilian corporate legislation, of the Brazilian Securities Commission (CVM) and with those of the regulatory authority - the National Water and Electric Power Department - DNAEE. The main principles are the following: * Assets and liabilities in foreign currency are restated based on the exchange rates ruling at the balance sheet dates; * Other assets and liabilities, subject to monetary correction by force of law or contract, are restated to show amounts at the balance sheet dates, using the indices determined by law or the related contracts; * The electric power supplied at the balance sheet dates, but not yet billed, was accounted for on the accrual basis; * The allowance for doubtful accounts is recorded at an amount considered sufficient to cover probable losses, both short and long-term; * Inventories of materials, classified as current assets, are stated at their average cost; * Investment in subsidiary company is recorded on the equity method of accounting; * Property, plant and equipment in use is depreciated on the straight-line basis at rates determined by the regulatory authority. Depreciation is charged to operating expenses or the cost of expansion projects, depending on the use of the assets concerned. * Remuneration of own resources used to finance construction of assets and installations is based on the Long-term Interest Rate (TJLP), limited to 10% a year and recorded in property, plant and equipment with counter entries credited to stockholders' equity. * Interest and other financial charges on financing from third parties related to construction in progress were appropriated to property, plant and equipment during the course of construction. * The provision for income tax is recorded gross and is charged against results for the year net of credits from tax losses and from the effects of tax temporary differences. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 2.2 TRANSLATION INTO U.S. DOLLARS The amounts in U.S. dollars in these financial statements as at and for the years ended December 31,1996 were translated from the amounts in the reais financial statements expressed in constant currency at December 31,1996 at the exchange rate of R$ 1.0394 to US$ 1.00. Such translation should not be construed as representing that the reais amounts represent or have been or could be converted into U.S. dollars at that or any other rate. 3 CONSUMERS AND DEALERS
R$ US$ ----------------------------- ----------- 1996 1995 1996 ---------- ----------- ----------- Consumers - Invoices rendered 159,858 142,848 153,799 Consumers - Invoices not yet rendered 108,637 103,727 104,519 Consumers - Renegotiated receivables 33,817 41,096 32,535 Dealers - Billed 9,968 10,708 9,590 Other 25,877 6,681 24,896 ---------- ----------- ----------- 338,157 305,060 325,339 ========== =========== ===========
4 OTHER LONG-TERM RECEIVABLES
R$ US$ ----------------------------- ----------- 1996 1995 1996 ---------- ----------- ----------- Renegotiated contracts with consumers 77,025 77,735 74,105 Credit assignment contracts (CRC) 855,860 802,185 823,417 Other 616 426 593 ---------- ----------- ----------- 933,501 880,346 898,115 ========== =========== ===========
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 5 INVESTMENTS
R$ US$ ----------------------------- ----------- 1996 1995 1996 ---------- ----------- ----------- Long-term equity investments 36,939 30,366 35,539 (-) Provision for loss (357) (357) (343) Project studies 50,645 40,004 48,725 Jequitinhonha river control project 13,548 14,009 13,034 Other investments 8,142 7,820 7,833 ---------- ----------- ----------- 108,917 91,842 104,788 ========== =========== ===========
Long-term equity investments include R$ 31,215 (US$ 30,032) representing a 95.05% holding in the capital of Companhia de Gas de Minas Gerais - GASMIG. CEMIG intends to sell control of this subsidiary company, approval for which was given in State Law 12279 of July 29, 1996. Project studies relate to expenses for technical and economic feasibility studies for the construction of power plants and installations, sub-stations and transmission lines to be carried out in the company's concession area and in particular with the Formoso, Bocaina and Irape projects. Once projects start, expenses are transferred to construction in progress accounts. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 6 PROPERTY, PLANT AND EQUIPMENT
R$ US$ ----------------------------- ----------- 1996 1995 1996 ---------- ----------- ----------- In operation Generation Thermoelectric plants 141,253 148,430 135,899 Hydroelectric plants and other 5,376,803 4,349,675 5,172,987 Transmission 2,656,873 2,403,098 2,556,160 Distribution 5,076,539 4,545,913 4,884,105 Intangibles 19,185 17,796 18,458 Other 1,077,030 1,031,339 1,036,204 ---------- ----------- ----------- 14,347,683 12,496,251 13,803,813 (-) Accumulated depreciation and amortization (5,246,872) (4,456,105) (5,047,982) ---------- ----------- ----------- 9,l00,811 8,040,146 8,755,831 Constructions in progress 2,167,680 1,391,588 2,085,511 ---------- ----------- ----------- 11,268,491 9,431,734 10,841,342 ========== =========== ===========
Depreciation and amortization are calculated at the following annual rates specifically established for electric power concessionaires: Thermoelectric plants and intangibles -5%; distribution assets -4% and all other assets - 3%. Construction in progress relates mainly to the expansion of the generation, transmission and distribution systems, as follows:
R$ US$ ----------------------------- ------------ 1996 1995 1996 ---------- ----------- ----------- Generation 1,080,018 405,251 1,039,078 Transmission 485,790 322,977 467,376 Distribution 14,531 28,320 13,980 Material in stores 125,506 111,888 120,749 Dams for river control 253,353 222,381 243,749 Other 208,482 300,771 200,579 ---------- ----------- ----------- 2,167,680 1,391,588 2,085,511 ========== =========== ===========
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- As prescribed in articles 63 and 64 of Decree 41,019 of February 26, 1957, assets and installations used in the generation, transmission and distribution of electricity cannot be withdrawn, sold, lent or mortgaged without prior specific authorization by the regulatory authority. As from 1996, the company is capitalizing financial charges and inflationary effects on the construction financing as part of the cost of property, plant and equipment as prescribed in Article 2 of DNAEE Administrative Rule 526, of November 22, 1995, The following amounts were capitalized in 1996: R$ US$ --------- --------- Financial charges 21,440 20,627 Inflationary effects 11,035 10,617 --------- --------- 32,475 31,244 ========= ========= Expenses have been incurred on river control works which are included in the property, plant and equipment accounts. The company has started negotiations with the State Government for their transfer. At December 31, 1996, amounts incurred are as follows: R$ US$ --------- --------- Investments 13,548 13,035 Constructions in progress 253,353 243,749 --------- ---------- 266,901 256,784 ========== ========== These amounts include approximately R$ 80,000 (US$ 76,967) related to interest capitalized on construction. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 7 DEFERRED CHARGES
R$ US$ ----------------------------- ----------- 1996 1995 1996 ---------- ----------- ----------- Expenses on remuneration of construction in progress 1,880,164 Financial charges and inflationary effects 102,309 Other deferred items 11,053 22,127 10,634 ---------- ----------- ----------- 11,053 2,004,600 10,634 (-) Accumulated amortization (5,883) (455,891) (5,660) ---------- ----------- ----------- 5,170 1,548,709 4,974 ========== =========== ===========
Expenses on remuneration of construction in progress, financial charges and inflationary effects recorded as deferred charges up to December 31, 1995 were transferred to the respective Construction in progress and Services accounts in 1996, under the terms of DNAEE Administrative Rule 526, of November 22, 1995. 8 ADVANCE BILLING OF ELECTRIC POWER In October 1996, the company sold 3,980,400 MW of electricity to a private sector consumer over a 30-month period. The amount agreed between the parties of R$ 118,572 (US$ 114,077) was fully received and is substantially invested in long-term securities. At December 31, 1996, the amount related to future sales is reflected in liabilities as follows: R$ US$ --------- --------- Short-term 47,832 46,019 Long-term 64,315 61,877 --------- --------- 112,147 107,896 ========= ========= Balances are subject to restatement based on the U. S. dollar variation. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 9 LOANS AND FINANCING Most of the loans and financing are secured by guarantees from the Federal and State Governments and were contracted in order to generate resources for the expansion of the generation, transmission and distribution of electric power systems in its concession area. The composition of loans and financing outstanding at December 31, 1996 is presented as follows: COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS
FOREIGN CURRENCY DEBT (1) 1996 ------------------------------ ANNUAL SHORT LONG INSTITUTIONS DUE DATE INTEREST(%) CURRENCY TERM TERM TOTAL - -------------------------------------------- ------------- ----------------- --------- --------- --------- --------- Interamerican Development Bank (BID) 1984/2O06 4.0 to 9.25 Sundry 26,496 90,235 116,731 International Bank for Reconstruction and Development (IBRD) 1981/2002 7.25 Sundry 5,141 28,791 33,932 Chase Manhattan Bank 1997/1998 9.88125 US$ 34,647 17,323 51,970 IMPSA - Industria Metalurgica Pescarmona S/A 1999/2003 9.8 US$ 43,776 43,776 Banco do Brasil S/A (2) 1997/2024 Sundry US$ 370 111,354 111,724 Citibank N.A. 1997 8.8125 US$ 2,868 2,868 Sundry (3) 2004 9.125 US$ l55,9l0 l55,9l0 Autotrol S.A.C.I.A.F. & I 1999/2002 12.0 US$ 215 215 Bank Boston 1997 5.8125 and 5.8750 US$ 4,307 4,307 S.B.E./Asea 1997/1999 10.5 US$ 26,207 50,846 77,053 Siemens S/A 2000 9.97 US$ 1,205 1,205 Nativa S/A 2000 9.97 US$ 2,641 2,641 --------- --------- --------- Total foreign currency debt 100,036 502,296 602,332 --------- --------- - --------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS
LOCAL CURRENCY DEBT 1996 ------------------------------ ANNUAL SHORT LONG INSTITUTIONS DUE DATE INTEREST(%) TERM TERM TOTAL - -------------------------------------------- ------------- ----------------- --------- --------- --------- Centrais Eletricas Brasileiras S/A - ELETROBRAS 1995/2024 5 to 10 38,715 365,584 404,299 Fundacao Forluminas de Seguridade Social - FORLUZ 1985/1996 10.0 Major consumers - TELEMIG / CVRD 1982/1998 Sundry 1,367 10,886 12,253 Consumers - RECON/REDES A. PARTICULARES 1994/1997 6.0 773 773 FINEP 1997/2000 10.0 138 734 872 INEPAR 1998/2002 14.48 307 307 ----------- --------- -------- Total local currency debt 40,993 377,511 418,504 ----------- --------- -------- Total debt (4) 141,029 879,807 1,020,836 ----------- --------- -------- The long-term amounts fall due as follows: 1) Amounts are payable in foreign currency, however, in order to facilitate presentation they were translated into reais. 1996 1995 2) Interest rates vary: - 4% to 8% a year ------- ------- - LIBOR readjusted half-yearly, plus interest from O.8125 to 0.8750% a year 1997 134,513 3) In 1996, the company raised funds in foreign markets through the issue of fixed 1998 167,861 117,450 rate notes and the balance at December 31, 1996 amounts to R$ 155,910. 1999 93,348 95,165 4) At December 31, 1996, in addition to these loans and financing, the company had 2000 85,366 78,180 unused lines of credit of R$ 158,990, of which R$ 71,235 in Brazil and 2001 to 2004 533,232 321,326 R$ 87,755 abroad, which are to be used in the construction program. ------- ------- 879,807 746,634 ------- -------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF U.S. DOLLARS
FOREIGN CURRENCY DEBT (1) 1996 ----------------------------------------- ANNUAL SHORT LONG INSTITUTIONS DUE DATE INTEREST(%) CURRENCY TERM TERM TOTAL - -------------------------------------------- ------------- ----------------- --------- --------- --------- --------- Interamerican Development Bank (BID) 1984/2006 4.0 to 9.25 Sundry 25,491 86,815 112,306 International Bank for Reconstruction and Development (IBRD) 1981/2002 7.25 Sundry 4,946 27,700 32,646 Chase Manhattan Bank 1997/1998 9.88125 US$ 33,334 16,666 50,000 IMPSA - Industria Metalurgica Pescarmona S/A 1999/2003 9.8 US$ 42,117 42,117 Banco do Brasil S/A (2) 1997/2024 Sundry US$ 356 107,133 107,489 Citibank N.A. 1997 8.8125 US$ 2,759 2,759 Sundry (3) 2004 9.125 US$ l50,000 l50,000 Autotrol S.A.C.I.A.F. & I 1999/2002 12.0 US$ 207 207 Bank Boston 1997 5.8125 and 5.8750 US$ 4,144 4,144 S.B.E./Asea 1997/1999 10.5 US$ 25,213 48,919 74,132 Siemens S/A 2000 9.97 US$ 1,159 1,159 Nativa S/A 2000 9.97 US$ 2,541 2,541 --------- --------- --------- Total foreign currency debt 96,243 483,257 579,500 --------- --------- ---------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF U.S. DOLLARS
LOCAL CURRENCY DEBT (1) 1996 ------------------------------- ANNUAL SHORT LONG INSTITUTIONS DUE DATE INTEREST(%) TERM TERM TOTAL - -------------------------------------------- ------------- ----------------- --------- --------- --------- Centrais Eletricas Brasileiras S/A - ELETROBRAS 1995/2024 5 to 10 37,247 351,726 388,973 Fundacao Forluminas de Seguridade Social - FORLUZ 1985/1996 10.0 Major consumers - TELEMIG / CVRD 1982/1998 Sundry 1,315 10,473 11,788 Consumers - RECON/REDES A. PARTICULARES 1994/1997 6.0 744 744 FINEP 1997/2000 10.0 133 706 839 INEPAR 1998/2002 14.48 294 295 ----------- --------- -------- Total local currency debt 39,439 363,199 402,639 ----------- --------- -------- Total debt (4) 135,682 846,456 982,139 ----------- --------- -------- The long-term amounts fall due as follows: 1) Amounts are payable in local currency, however, in order to facilitate presentation they were translated into U.S. dollars. 1996 1995 2) Interest rates vary: - 4% to 8% a year ------- ------- - LIBOR readjusted half-yearly, plus from 0.8125 to 0.8750% 1997 129,414 a year 1998 161,498 112,998 3) In 1996, the company raised funds in foreign markets through the issue of fixed 1999 89,810 91,558 rate notes and the balance at December 31, 1996 amounts to US$ 150,000. 2000 82,130 75,216 4) At December 31, 1996, in addition to these loans and financing, the company had 2001 to 2004 513,019 309,146 unused lines of credit of US$ 152,963, of which US$ 68,535 in Brazil and ------- ------- US$ 84,428 abroad, which are to be used in the construction program. 846,457 718,332 ------- -------
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- Percentage participation of currencies in loans and financing at December 31, 1996. ABROAD BRAZIL ----------------------------------------------- ---------------------- CURRENCY % CURRENCY % INDEX % -------- ----- --------- ------ ------- ------ US$ 81 FLS 1 IGP-M 57 DM 3 SWFR 4 FINEL 37 Y 2 Unit of account 9 Other 6 The percentage variations in the principal currencies and indexes used to adjust loans and financing during 1996 were as follows: CURRENCY/INDEX VARIATION % CURRENCY/INDEX VARIATION % -------------- ----------- -------------- ------------ FINEL 1.78 DM (1.25) IGP-M 9.19 SWFR (8.60) US$ 6.88 SRLS (6.88) Y (5.28) FLS (162) Accounting Monetary Unit (UMC)(1.06) COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 10 DEFERRED TAXES
R$ US$ ----------------------------- ----------- 1996 1995 1996 ---------- ----------- ----------- INCOME TAX Inflationary gain 14,711 Result of the special restatement 426,886 413,109 410,704 426,886 427,820 410,704 Tax credits (temporary timing differences and tax losses) (43,923) (64,764) (42,258) Adjustments on inflationary effects 15,753 15,156 Effects of present value adjustments and restatement of inventories (5,271) (5,586) (5,071) 393,445 357,470 378,531 SOCIAL CONTRIBUTION Result of special restatement 136,605 134,628 131,427 Tax credits on temporary timing differences (6,330) (6,090) ---------- ----------- ----------- 523,720 492,098 503,868 ========== =========== ===========
11 INCOME TAX AND SOCIAL CONTRIBUTION The main effects on the 1996 financial statements are the following: (a) Income tax - due to the non-deductibility of the social contribution as from 1997 when determining taxable income as prescribed in Law 9316 of November 22,1996, the balance of the Income Tax on the Special Price-level Restatement was increased by R$ 38,9O7(US$ 37,432), with a counter entry to the Special Price-Level Restatement Reserve account. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- (b) Social Contribution - due to the increase in the Social Contribution rate from 7.4O7% to 8% as from 1997, the deferred Social Contribution asset balance and the Special Price-Level Restatement balance were increased by R$ 468 (US$ 450) and R$ 10,206 (US$ 9,819), respectively of which R$ 468 (US$ 450) was credited to net income for the year. (c) The company prepaid at a discount Income Tax on inflationary gains as permitted by paragraph 3 of Article 7 of Law 9249/95. This option reduced the provision for deferred income tax by R$ 8,082 (US$ 7,776), related to realizations occurred in 1996. The most significant effects arising from this option were recorded in the year ended December 31, 1995. (d) The company reversed Income Tax and Social Contribution on the Special Price-Level Restatement of Special Contributions due to the non-realization of these taxes because of the specific characteristics of the special contributions. The reversals of R$ 38,877 (US$37,4O4) and R$ 12,439 respectively, were made against the Special Price-level Restatement Reserve Account. 12 TAX LOSSES FOR OFFSET AND TIMING DIFFERENCES The company recorded in the Taxable Income Control Register (LALUR), accumulated tax losses and timing differences which may be offset against future taxable income and amount to R$ 1,924 (US$ 1,851) and R$ 41,999 respectively. 13 SPECIAL CONTRIBUTIONS
R$ US$ ----------------------------- ----------- 1996 1995 1996 ---------- ----------- ----------- Consumer contributions 1,134,496 1,032,543 1,091,492 Federal Government participations 8,804 8,804 8,470 Others 50 5O 48 ---------- ----------- ----------- 1,143,350 1 041.397 1,100,010 ========== =========== ===========
Consumer contributions represent funds received to finance expansion to enable the company to meet increased demands for the supply of electricity. Because of their nature these contributions do not represent effective financial obligations and, accordingly, should not be considered as liabilities when calculating economic-financial ratios. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 14 STOCKHOLDERS' EQUITY Fully subscribed and paid-up capital amounts to R$ 1,736,116 (US$ 1,670,306). Shares have a nominal value of R$ 0.01 (US$ 0.01) each and are held as follows:
NUMBER OF SHARES IN 1996 STOCKHOLDERS ORDINARY % PREFERRED % TOTAL % ---------------- ------- ----------------- ------ ----------------- --------- Minas Gerais State 28,938,227,169 51 3,948,482,470 5 32,886,709,639 25 MGI 18,719,600,000 33 2,608,329,828 4 21,327,929,828 16 ELETROBRAS 831,165,440 1 831,165,440 1 Others Local 6,701,522,734 12 15,216,956,279 21 21,918,479,013 17 Foreign 1,597,5O6,860 35 51,364,174,420 70 52,961,681,280 41 ---------------- ------- ----------------- ------ ----------------- --------- Total 56,788,022,203 100 73,137,942,997 100 129,925,965,200 100 ================ ======= ================= ====== ================= =========
COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - --------------------------------------------------------------------------------
NUMBER OF SHARES IN 1995 STOCKHOLDERS ORDINARY % PREFERRED % TOTAL % ---------------- ------- ----------------- ------ ----------------- --------- Minas Gerais State 34,070,765,444 60 12,989,050,573 18 47,059,816,017 36 MGI 13,587,OOO,OOO 24 13,587,000,000 1O ELETROBRAS 831,165,440 1 1,269,618,153 2 2,100,783,593 2 Others Local 7,641,965,418 14 20,748,409,835 28 28,390,375,253 22 Foreign 610,744,695 1 38,071,134,442 52 38,681,879,137 30 ---------------- ------- ----------------- ------ ----------------- --------- Total 56,741,640,997 100 73,078,213,003 100 129,819,854 000 100 ================ ======= ================= ====== ================= =========
Preference shares have priority in the return of capital and the right to a minimum annual dividend equal to 1O% of their nominal value, and share equally with the ordinary shares when the ordinary stockholders receive dividends in excess of 10% However, such dividends can never be less than 25% of net income for the year as adjusted by law. In accordance with legislation and the company's statutes, the issue of stock dividends up on capitalizing the reserve resulting from the price-level restatement of capital must comply with the following: * Preference shares are to be treated in the same manner as ordinary shares. * New shares may be issued or the value of those already held may be increased. * Capitalization is subject to the decision of shareholders in General Meeting, but is mandatory once the balance of the restatement reserve account exceeds 50% of capital. The company's statutes assure, and the State of Minas Gerais guarantees (pursuant to Article 9 of State Law 828, of December 14,1951, and Article I of State Law 8796 of April 29,1985) that private stockholders are entitled to a minimum dividend of 6% per year in the years the company does not have sufficient profits to pay dividends to its stockholders. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- Proposed 1996 dividends are equivalent to 10% of the total capital of R$1,736,116 (US$ 1,670,306), excluding the treasury stock whose nominal value is R$ 554 (US4 533), appropriated from: R$ US$ ----------- ---------- Realization of unrealized profits reserves 41,388 39,819 Part of net income for the year 88,483 85,129 ----------- ---------- 129,871 124,948 The amount transferred to the Retained Profits Reserve is intended to strengthen working capital as well as to set aside resources for investments in generating, transmission and distribution projects. Treasury stock relates to the transfer of shares originating from funds invested in the company's projects in the SUDENE area (Superintendency for the Development of the Northeast) by the Northeast Investment Fund (FINOR), as fiscal incentives. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- The composition of other Capital Reserves and Revenue Reserves is as follows: R$ US$ ---------------------- ---------- 1996 1995 1996 ---------- ---------- ---------- Other capital reserves Capital restatement - Special price-level restatement reserve - Law 8.200/91 1,537,412 1,539,033 1,479,134 Remuneration of construction in progress financed by own resources 1,303,225 1,146,252 1,253,824 Investment credits 2,931,367 2,926,563 2,820,249 Premium on capital subscription 75,333 72,122 72,477 Treasury stock (1,145) (1,101) ---------- ---------- ---------- 5,846,192 5,683,970 5,624,583 ---------- ---------- ---------- R$ ---------------------- ---------- 1996 1995 1996 ---------- ---------- ---------- Revenue reserves Legal 102,829 102 829 98,931 Unrealized profits 941,473 982 861 905,785 Retained profits 878,230 854,482 844,939 Other 6,769 6,769 6,513 ---------- ---------- ---------- 1,929,301 1,946,941 1,856,168 ---------- ---------- ---------- COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 15 ELECTRICITY SALES
Electric power sales, analyzed by class of consumer, are as follows: MWH R$ US$ ----------------------------- ---------------------- ----------- NUMBER OF CONSUMERS 1996 1995 1996 1995 1996 --------- ---------- ----------- ---------- ---------- ---------- Residential 3,501,576 6,331,111 5,826,442 767,569 580,541 738,473 Industrial 53,715 20,948,387 20,685,703 1,090,626 1,117,702 1,049,284 Commercial, services and other activities 400,873 2,601,781 2,395,838 320,316 292,424 308,174 Rural 245,899 1,268,356 1,157,049 99,976 96,247 96,186 Public authorities 35,960 453,092 419,562 51,831 51,737 49,866 Streetlighting 3,748 812,125 770,105 60,284 53,790 58,000 Public services 4,660 824,193 780,319 57,572 57,371 55,390 Own consumption 1,638 77,052 78,020 7,444 --------- ---------- ----------- ---------- ---------- ---------- 4,248,069 33,316,097 32,113,038 2,448,174 2,257,256 2,355,373 --------- ---------- ----------- ---------- ---------- ---------- Supply 11 4,219,122 3,791,983 98,868 79,920 95,120 --------- ---------- ----------- ---------- ---------- ---------- 4,248,080 37,535,219 35,905,021 2,547,042 2,337,176 2,450,493 Power supplied not yet billed 14,503 18,990 13,953 Other income 42,582 30,874 40,968 ---------- ---------- ---------- 2,604,127 2,387,040 2,505,414 Deductions from operating revenue (648,395) (661,106) (623,817) --------- ---------- ----------- ---------- ---------- ---------- Total 4,248,080 37,535219 35,905,021 1,955,732 1,725,934 1,881,597 --------- ---------- ----------- ---------- ---------- ----------
16 DEDUCTIONS FROM OPERATING REVENUE As from 1996, the Global Reversal of Reserve quota (RGR) is being calculated in accordance with the requirements of Decree 1771/96 of January 3, 1996, which determined the rate of 2.5% on assets subject to reversal but limited to 3% of annual sales of the concessionaire. In prior years the RGR was calculated at 3% of such assets limited to 12% of annual sales. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 17 PROFIT SHARING The collective labor agreement established the criteria for determining employees' profit sharing and defined the parameters for establishing this amount, to include: Investment Remuneration Rate, Consumers Satisfaction Index, Electricity Billed per Employee, Time Equivalent Interruption by Consumer and Voluntary Absenteeism. Based on this criteria, a provision for profit sharing in 1996 was set up of R$ 13,118 (US$ 12,620). Also in 1996, the 1995 Employees' Profit Sharing of R$ 8,296 (US$ 7,982) was paid. Since the profit sharing agreement was signed in May 1996, performance targets in 1995 were not established. 18 RELATED PARTY TRANSACTIONS The principal transactions with related parties are the financing received from ELETROBRAS and FORLUZ (Note 9) and negotiation of the remaining balance of the Compensation of Rate Shortfalls Account (CRC), as described in Note 21. Transactions with Minas Gerais State Government entities were carried out at normal market prices. No other related party transactions are significant apart from those referred to above. 19 SUPPLEMENTARY RETIREMENT AND PENSION PLAN Since 1973, the company has sponsored the Fundacao Forluminas de Seguridade Social - FORLUZ, a non-profit making entity, whose main objective is to supplement the social security benefits of CEMIG employees. FORLUZ bases the calculation and accumulation of the funds required by its benefit plans on the "Established Benefits Plan" and the "Financial Capitalization System". Accordingly, regular contributions (from the sponsor and participants) are used to cover, at present values, the benefits payable to participants, accumulated as from the date they joined the plan, and also to amortize benefits related to prior periods which were not covered by additional contributions from the sponsor. The last actuarial review was carried out in December 1996. The benefits related to prior periods, estimated at R$ 472,521 (US$ 454,609) as of December 31, 1996 and R$ 431,226 at December 31, 1995, are being amortized. through additional monthly contributions based on the consistent installments system (Price Table) with interest of 6% per year and readjusted yearly based on the General Price Index - Internal Availability (IGP-DI) variation. This amortization system has been in effect since July 1996. CEMIG is responsible for the differences in the mathematical reserve, actuarially calculated, of R$ 113,182 (US 108,892) at December 31, 1996 related to the granting of special retirement in anticipation of length of service retirement, except for those participants enrolled after January 29, 1996. The balance related to unamortized reserves must be amortized during a period actuarially prescribed of no COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- longer than 28 years. Additional contributions from the company to FORLUZ amounted to R$$ 44,472 (US$ 42,786) in 1996 and R$ 23,060 in 1995, for normal cost R$ 25,065 (US$ 24,115) in 1996 and R$ 19,460 in 1995 and for special retirement, R$ 24,578. These amounts were charged against the net income of CEMIG. Any insufficiency in the reserves for beneficiaries are the responsibility of the sponsor. Financial information on the plan at December 31,1996, prepared by independent actuaries is as follows: R$ US$ ---------------------- ---------- 1996 1995 1996 ---------- ---------- ---------- TECHNICAL RESERVES 829,904 621,359 798,445 MATHEMATICAL RESERVES Benefits granted 1,038,092 682,063 998,742 Benefits to be granted 430,784 450 398 414,454 ---------- ---------- ---------- 1,468,876 1,132,461 1,413,196 UNAMORTIZED RESERVES (585,703) (431,226) (563,501) TECHNICAL DEFICIT FOR THE YEAR (53,269) (79,876) (51,250) ---------- ---------- ---------- As from 1997, all expenses previously covered by the health plans for retired employees will no longer be the responsibility of CEMIG, including any possible insufficiency in this program. CEMIG still pays, independently part of the life insurance premium for retired employees. The actuarial estimate corresponding to potential liabilities for this benefit amounts to R$ 141,642 (US$ 136,273) at December 31,1996. 20 INSURANCE Insurance cover, mainly against fire, is maintained in conformity with the company's policy of considering the degree of risk to which each asset is exposed, individually, and the cost of the insurance premium. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 21 Financial Instruments (a) The present value at December 31, 1996 of the main financial instruments which are recorded in the account "other receivables", is calculated as prescribed by Article 3 of the Brazilian Securities Commission (CVM) Instruction 235 of March 23, 1995 based on the discounted cash flow method using a discount rate of 12% a year, as shown below: R$ US$ --------------------- -------------------- Contracts Contracts Book - present Book - present value value value value --------- ----------- -------- ----------- Renegotiated contract with private sector consumers 79,300 53,820 76,294 51,780 Credit assignment contract of the balance of the Compensation of Rate Shortfall Account (CRC) to the Government of the State of Minas Gerais 855,860 544,159 823,417 523,532 --------- ----------- -------- ----------- 935,160 597,979 899,711 575,312 --------- ----------- -------- ----------- R$ 4,956 (US4 4,768) of the renegotiated contract with private sector consumers is short-term. The remaining credit balance of the Compensation of Rate Shortfall Account (CRC) was transferred to the Government of the State of Minas Gerais through a credit assignment contract under the terms of Law 8724/93, with a grace period of three years after which time the amount will be received in monthly installments over a period of seventeen years. The receivable is subject to restatement based on the Fiscal Reference Unit (UFIR) variation and to interest of 6 % a year as from May 2, 1995 and is guaranteed by the State Government's participation in taxes collected by the Federal Government (FPE). (b) Swap operations, in which pre-fixed interest rates are exchanged for post-fixed rates, are recorded in the amount of R$ 9,488 (US$ 9,128) which represents market value. Management of financial instruments is accomplished by using operating strategies and controls to achieve liquidity, profitability and security. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE FINANCIAL STATEMENTS AT DECEMBER 31, 1996 AND 1995 IN THOUSANDS OF REAIS AND IN THOUSANDS OF U.S. DOLLARS - -------------------------------------------------------------------------------- 22 CONTINGENCIES Several industrial consumers took legal action against the increase in tariffs approved by DNAEE Regulations O38/86 and O45/86 - Cruzado Plan. Based on the opinion of its legal advisors, the company expects no loss and does not consider it necessary to make any provision for contingencies. 23 OTHER INFORMATION On December 27, 1996, Law 9430 was approved and changed income tax and social contribution legislation, and also introduced other changes effective as from January 1, 1997. The main changes are as follows: o The option to prepare quarterly or annual tax computations. o The creation of a system of transfer prices for transactions with related parties in local and foreign markets; o The deductibility limit of the allowance for doubtful accounts was changed; o The full deductibility of directors' remuneration is permitted. a.(ii) The following condensed unaudited quarterly financial information of Companhia Energetica de Minas Gerais - CEMIG as of March 31, 1997 and for the quarters ended March 31, 1997 and 1996 have been derived from the financial report prepared by CEMIG to meet their statutory reporting requirements stipulated by Comissao de Valores Mobiliarios ("CVM"), the governmental body which regulates securities in Brazil. COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG CONDENSED UNAUDITED STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 1997 AND MARCH 31, 1996 (Expressed in thousands of Brazilian Reais, except per share amounts) 1997 1996 ---- ---- Net Sales R$484,284 R$451,761 Operating Costs and Expenses 423,123 386,708 ------------- ------------- Operating Income 61,161 65,053 Interest Expense (35,032) (31,084) Interest Income 34,706 43,040 Other Income (Expense) (20,859) (16,838) ------------- ------------- Income Before Taxes 39,976 60,171 Income Taxes 13,272 18,185 ------------- ------------- NET INCOME R$26,704 R$41,986 ============= ============= Income Per 1,000 Shares R$0.21 R$0.32 ============= ============= See Notes to Condensed Unaudited Financial Information COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG CONDENSED UNAUDITED BALANCE SHEETS FOR MARCH 31, 1997 AND MARCH 31, 1996 (Expressed in thousands of Brazilian Reais) 1997 1996 ---- ---- ASSETS CURRENT ASSETS Cash and cash equivalents R$61,885 R$36,409 Investments 234,299 117,939 Receivables 439,006 500,730 Inventories 55,432 54,602 Prepaid and other 1,278 3,161 --------------- ---------------- Total current assets 791,900 712,841 --------------- ---------------- Fixed Assets 10,481,843 10,401,464 Investments 100,843 100,290 Receivables 958,310 1,070,676 Deferred Charges 4,373 4,678 TOTAL ASSETS R$12,337,269 R$12,289,949 =============== ================ See Notes to Condensed Unaudited Financial Information COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG CONDENSED UNAUDITED BALANCE SHEETS FOR MARCH 31, 1997 AND MARCH 31, 1996 (Expressed in thousands of Brazilian Reais) 1997 1996 ---- ---- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Trade payables R$136,570 R$136,884 Accrued taxes 206,651 181,308 Other accrued liabilities 658,142 679,362 --------------- ---------------- Total current liabilities 1,001,363 997,554 --------------- ---------------- LONG-TERM LIABILITIES Debt 869,884 879,807 Other 1,652,275 1,659,554 --------------- ---------------- Total long-term liabilities 2,522,159 2,539,361 --------------- ---------------- STOCKHOLDERS' EQUITY Capital 1,299,260 1,299,260 Capital reserves 5,696,741 5,662,732 Revenue reserves 1,766,072 1,766,072 Retained earnings 51,674 24,970 --------------- ---------------- Total stockholders' equity 8,813,747 8,753,034 --------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY R$12,337,269 R$12,289,949 =============== ================ See Notes to Condensed Unaudited Financial Information COMPANHIA ENERGETICA DE MINAS GERAIS - CEMIG NOTES TO THE CONDENSED UNAUDITED FINANCIAL INFORMATION 1. Basis of Presentation The condensed unaudited quarterly financial information is derived from the Company's March 31, 1997 statutory report filed with the CVM. All amounts are in Brazilian reais and have been prepared in conformity with accounting principles generally accepted in Brazil. 2. Subsequent Event At an auction on May 28, 1997 at Rio de Janeiro Stock Exchange, a group of investors headed by Southern Electric and AES bought 33% of the Company's common shares for R$1,130,000. These shares were offered by the Government of the State of Minas Gerais in accordance with the tender and stockholders' agreement published in Minas Gerais on March 12, 1997. b. Unaudited Pro Forma Consolidated Financial Information On June 18, 1997, AES together with The Southern Company and the Opportunity Fund, a Brazilian investment Fund (collectively, the "AES Consortium"), acquired 14.41% of Companhia Energtica de Minas Gerais ("CEMIG"), an integrated electric utility serving the State of Minas Gerais in Brazil, for a total purchase price of approximately $1.056 billion. Initially, AES and the Opportunity Fund will have a 90.6% and a 9.4% economic interest in the AES Consortium, respectively. The Southern Company has an option until January 9, 1998 to purchase up to a 25% interest in the AES Consortium from AES. Pursuant to a shareholders agreement between the AES Consortium and the State of Minas Gerais, AES will have significant operating influence. The foregoing transaction is referred to herein as the "CEMIG Acquisition." The following tables and related notes present financial information at and for the periods presented herein to give effect on a pro forma basis to the CEMIG Acquisition. The unaudited pro forma adjustments are based upon available information and certain assumptions and estimates which the Company believes are reasonable under the circumstances. The unaudited pro forma results do not purport to be indicative of the results that would have been obtained had the CEMIG Acquisition occurred at the beginning of the periods presented, nor are they intended to be a projection of future results. The unaudited pro forma financial information should be read in conjunction with the notes hereto. The following unaudited pro forma consolidated statements of operations information combine the results of AES's investment in the CEMIG Acquisition for the year ended December 31, 1996 and the quarter ended March 31, 1997 on the equity method as if the CEMIG Acquisition had occurred at the beginning of the periods.
YEAR ENDED DECEMBER 31, 1996(1)(2)(3) ------------------------------------ ADJUSTMENTS FOR THE CEMIG PRO FORMA ACTUAL ACQUISITION AS ADJUSTED -------- ------------- ------------- In millions except per share data Statement of Operations Data: Total revenues......................................... $ 835 $ -- $ 835 Total operating cost and expenses...................... 557 -- 557 -------- ------------- ------------- Operating income....................................... 278 -- 278 Other income and (expense): Interest expense...................................... (144) (56)(d) (200) Interest income....................................... 24 -- 24 Equity in earnings of affiliates....................... 35 50 (c) 85 -------- ------------- ------------- Income (loss) before income taxes and minority interest.............................................. 193 (6) 187 Income taxes........................................... 60 (22)(e) 38 Minority interest...................................... 8 5 (f) 13 -------- ------------- ------------- Net income (loss)...................................... $ 125 $ 11 $ 136 ======== ============= ============= Net income (loss) per share............................ $1.62 $0.14 $1.76 ======== ============= =============
QUARTER ENDED MARCH 31, 1997(1)(2)(3) ------------------------------------ ADJUSTMENTS FOR THE CEMIG PRO FORMA ACTUAL ACQUISITION AS ADJUSTED -------- ------------- ------------- Statement of Operations Data: Total revenues.................................. $ 261 $ -- $ 261 Total operating cost and expenses............... 183 -- 183 -------- ------------- ------------- Operating income................................ 78 -- 78 Other income and (expense): Interest expense............................... (44) (13)(d) (57) Interest income................................ 8 -- 8 Equity in earnings of affiliates................ 16 3 (c) 19 -------- ------------- ------------- Income before income taxes and minority interest....................................... 58 (10) 48 Income taxes.................................... 16 (5)(e) 11 Minority interest............................... 2 -- (f) 2 -------- ------------- ------------- Net income...................................... $ 40 $ (5) $ 35 ======== ============= ============= Net income per share............................ $0.50 $(0.06) $ 0.44 ======== ============= =============
The following unaudited pro forma consolidated balance sheet information represents AES's financial position at March 31, 1997 as if the acquisition by the Company of the CEMIG Interest had occurred on that date.
AS OF MARCH 31, 1997 (1)(2)(3) ------------------------------------ ADJUSTMENTS FOR THE CEMIG PRO FORMA ACTUAL ACQUISITION AS ADJUSTED -------- ------------- ------------- In millions except ratios Balance Sheet Data: Assets Current Assets: Cash and cash equivalents............... $ 423 $ -- $ 423 Other current assets.................... 307 -- 307 -------- ---------- -------- Total Current Assets.................... 730 -- 730 Property, plant and equipment, net ..... 2,304 -- 2,304 Investments in and advances to affiliates............................ 590 1,077(a) 1,667 Other assets............................ 454 -- 454 -------- ---------- -------- Total.............................. $4,078 $1,077 $5,155 ======== ========== ======== Current Liabilities: Other notes payable..................... $ -- 134(b) 134 Project financing debt.................. 110 250(b) 360 Other current liabilities............... 166 -- 166 -------- ---------- -------- Total current liabilities............... 276 384 660 -------- ---------- -------- Long-Term Liabilities: Other notes payable..................... 325 -- 325 Project financing debt.................. 1,841 654(b) 2,495 Other long-term liabilities............. 284 -- 284 -------- ---------- -------- Total long-term liabilities............. 2,450 654 3,104 -------- ---------- -------- Minority interest....................... 211 39(f) 250 Company-obligated mandatorily Redeemable Preferred Securities of AES Trust I................................. 250 -- 250 Stockholders' equity.................... 891 -- 891 -------- ---------- -------- Total Liabilities & Stockholders Equity................................ $4,078 $1,077 $5,155 ======== ========== ========
- ------------- (1) Basis of presentation. Pursuant to a shareholders agreement between the AES Consortium and the State of Minas Gerais, the AES consortium will have significant operating influence, including the right to appoint the chief operating officer of CEMIG, and will otherwise share control of CEMIG with the State of Minas Gerais. The AES Consortium will account for its investment in CEMIG using the equity method. AES will reflect in minority interest its non-owned portion of the earnings and net assets of the AES Consortium. The unaudited pro forma financial information presented is based on CEMIG's financial position and results of operations as of March 31, 1997 and for the periods ended December 31, 1996 and March 31, 1997. The unaudited pro forma financial information has been prepared based on the Company's estimate of CEMIG's financial position and results of operation in conformity with U.S. generally accepted accounting principles. Equity in earnings of CEMIG for the year ended December 31, 1996 has been translated into U.S. dollars at the average rate during the year of R$1.04 to U.S.$1.00, and at the average rate for the quarter ended March 31, 1997, of R$1.07 to U.S.$1.00. (2) Goodwill. The estimated excess of the purchase price over the Company's proportionate share of the net assets acquired is being amortized over its 40 year life. (3) Financing. For purposes of the unaudited pro forma financial information presented herein, the acquisition of the CEMIG Interest was funded at the AES level assuming the use of the CEMIG Bridge of $250 million at an interest rate of 8.25%, a portion of the AES Bridge Loan of $200 million at an interest rate of 7.75%, and project financing of $126 million at an interest rate of 9.75%, provided by BNDES, the State Development Bank of Brazil. The remaining portion of the purchase price amounting to approximately $528 million is deferred, by contract, for a period of one year. Such obligation bears no interest and has been guaranteed by BNDES for a fee of 1% per year which is included in interest expense. No additional subsequent financing costs are assumed in these pro formas. (4) Description of unaudited pro forma entries. (a) Represents the CEMIG Investment of $1,056 million and costs of $21 million financed by borrowings described in (3), above. (b) Represents the financing of the transaction described in (3), above. (c) Represents equity in earnings of CEMIG, net of goodwill amortization. (d) Represents interest expense associated with the borrowings described in (3), above. (e) Represents the income tax benefit related to the interest costs. (f) Represents the minority interest of The Opportunity Fund, which has a 9.4% interest in the AES consortium. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE AES CORPORATION ------------------- (Registrant) Date: July 16, 1997 By /s/ Barry J. Sharp --------------------------- Barry J. Sharp Chief Financial Officer EX-23.1 2 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statement on Form S-3 (NO. 333-15487) of The AES Corporation of our report dated February 28, 1997 relating to the financial statements of Companhia Energetica de Mina Gerais - CEMIG as at and for the years ended December 31, 1996 and 1995 prepared in accordance with accounting principles generally accepted in Brazil, which appears in the Item 7 on Form 8-K of The AES Corporation dated July 16, 1997 and to the reference to us under the heading "Experts" in the Prospectus or Prospectus Supplement which are part of such registration Statement. Price Waterhouse Auditores Independentes Belo Horizonte, MG-Brazil July 16, 1997 -----END PRIVACY-ENHANCED MESSAGE-----