Breaking Down Companhia Energética de Minas Gerais (CIG) Financial Health: Key Insights for Investors

You're looking at Companhia Energética de Minas Gerais (CIG) and trying to reconcile two very different pictures: a utility with strong top-line performance but a noticeable dip in profitability. The numbers tell a story of massive transition: while the trailing twelve months (TTM) revenue is robust, clocking in at BRL 42,427 million, the recurring net profit for the first nine months of 2025 dropped sharply by about 30.2% compared to the prior period. This isn't a sign of fundamental weakness; it's the immediate cost of an aggressive, near-term capital expenditure (CapEx) push, where the company invested BRL 4.7 billion in the first nine months of 2025, primarily focused on modernizing the distribution network. This heavy investment drives higher depreciation and, coupled with high interest rates, hits the net income right now, but the payoff is the expected BRL 500 million in additional regulated revenue that these projects should generate. Still, you have to weigh this against the challenge of client migration to the free market, which is impacting their distribution segment, even as their leverage remains defintely safe at 1.76x Net Debt/Recurring EBITDA.

Revenue Analysis

You're looking for a clear picture of how Companhia Energética de Minas Gerais (CIG) is actually making its money in this volatile energy market, and the short answer is: revenue growth is solid, but the underlying segments show a complex mix of regulated stability and trading volatility. The company's Trailing Twelve Months (TTM) revenue, as of September 30, 2025, hit BRL 42.43 billion, which is a healthy 9.92% increase year-over-year.

This near-term growth is defintely a positive sign, but it masks some pressures. The growth rate has actually moderated throughout the year. For example, Q1 2025 net revenue was R$ 9.844 billion, showing a strong 8.7% year-on-year climb, but by Q3 2025, the quarterly sales growth slowed to 4.64%, reaching BRL 10,619.74 million. Here's the quick math on the recent performance:

The primary revenue streams for Companhia Energética de Minas Gerais (CIG) are rooted in its core utility functions: Distribution, Generation, Transmission, and Trading. The distribution segment, which is highly regulated, remains a foundational, reliable revenue source. The growth we saw in the first half of 2025 was largely driven by the retail segment, thanks to contract price adjustments that are typically indexed and updated at the start of the fiscal year.

Still, the segments aren't all pulling in the same direction, which is the key risk you need to watch. The company is facing significant shifts that are changing the revenue mix:

• Trading Headwinds: The energy trading segment took a hit, incurring a R$ 133 million expense in Q1 2025 due to unfavorable market spreads.
• Distribution Volume Pressure: Distribution volumes dipped slightly by 0.3% year-on-year, hurt by milder temperatures and the ongoing trend of client migration to distributed generation.
• Regulated Investment Upside: Companhia Energética de Minas Gerais (CIG) is aggressively investing, with BRL 3.6 billion allocated to distribution in the first nine months of 2025. This capital expenditure is expected to generate roughly BRL 500 million in additional regulated revenue over nine months once the regulatory agency recognizes the assets.

So, while the overall revenue number looks good, the real story is a strategic pivot: stable, regulated revenue from distribution is being actively reinforced by massive capital spending, which is necessary to offset the volatility and client loss in the trading and distribution volumes. You can read more about the company's full financial picture in Breaking Down Companhia Energética de Minas Gerais (CIG) Financial Health: Key Insights for Investors.

Profitability Metrics

You need to know how much cash Companhia Energética de Minas Gerais (CIG) is actually keeping from its sales, especially with the recent market volatility. The direct takeaway is that while the trailing twelve months (TTM) net margin looks strong, the recent third quarter of 2025 (Q3 2025) results show a sharp contraction in profitability, signaling a near-term headwind you must factor in.

For the TTM period ending September 30, 2025, CIG's core profitability ratios, calculated from a total revenue of R$ 42.427 billion (Brazilian Reais), paint a mixed picture. The Gross Profit Margin-which tells you the efficiency of their core electricity generation, transmission, and distribution before operating expenses-is healthy, but the Operating Margin is much tighter. Here's the quick math:

• Gross Profit Margin: The TTM Gross Profit of R$ 7.830 billion translates to a margin of approximately 18.45%. This is a solid starting point for a utility.
• Operating Profit Margin: The TTM Operating Income of R$ 4.048 billion gives an Operating Margin of about 9.54%. This gap from the gross margin shows that Selling, General, and Administrative (SG&A) expenses and depreciation are taking a significant bite.
• Net Profit Margin: The TTM Net Income of R$ 7.117 billion yields a Net Profit Margin of roughly 16.77%. What this estimate hides is the impact of non-operating items, like equity income, which often inflate the net figure beyond the core operational performance.

Looking at the trend, CIG's operational efficiency is under pressure. The Q3 2025 earnings report showed a significant decrease in net profit to R$ 796.7 million, down sharply from the R$ 3.280 billion in Q3 2024. This recurring net profit decrease of approximately 30.2% year-over-year is a serious concern, driven by lower margins in the energy trading business and increased operating costs. The company is struggling to maintain its margins despite efforts to keep PMSO (personnel, materials, services, and others) expenses below inflation.

When you compare CIG to the broader Brazilian utilities sector, the picture gets clearer. While the sector as a whole is trading at a higher Price-to-Earnings (P/E) ratio of 14.4x compared to its three-year average of 10.7x, indicating investor optimism about regulated, stable returns, CIG's recent margin contraction is a red flag. The core utility business should be resilient, but CIG is facing market reduction and client migration to the free market, which directly impacts its distribution results. The high TTM Net Margin is a historical anomaly; the 9.54% Operating Margin is a more defintely realistic measure of its core, regulated business health. For a deeper dive into the company's financial structure, check out the full analysis: Breaking Down Companhia Energética de Minas Gerais (CIG) Financial Health: Key Insights for Investors. Your next step should be to model a lower, more sustainable net margin-closer to the operating margin-for your forward-looking discounted cash flow (DCF) valuation.

Debt vs. Equity Structure

Companhia Energética de Minas Gerais (CIG) operates with a notably conservative capital structure, which is a major positive for investors in a high-interest-rate environment. You should see this as a sign of financial discipline: the company is relying far more on its own capital (equity) than on borrowed money (debt) to fund its massive investment program.

As of the second quarter of 2025, Companhia Energética de Minas Gerais's total debt sits around $2.829 billion. This is split strategically, with the majority being long-term obligations. Specifically, short-term debt (what's due in the next 12 months) was approximately $511 million, while long-term debt was substantially higher at $2,318 million. That's a healthy mix that avoids immediate liquidity pressure. Cash is king, and they know it.

The clearest indicator of this conservative approach is the debt-to-equity (D/E) ratio, which measures a company's total liabilities against its shareholder equity. Companhia Energética de Minas Gerais's D/E ratio as of June 2025 was a low 0.55. To put that in perspective, the average for similar companies in the utilities sector is closer to 1.8. A ratio this low means that for every dollar of equity capital, the company only has about 55 cents of debt. This is defintely a low-leverage profile, which reduces risk for shareholders, even if it means sacrificing some potential return on equity (ROE) from financial leverage.

Management is actively balancing debt and equity to finance growth. They are using debt, but they are doing it smartly. In May 2025, the company issued debentures (unsecured bonds) totaling BRL 5.1 billion to raise capital. This fresh capital is crucial for their substantial capital expenditure (CapEx) plans, particularly in the distribution segment. However, they are also focused on liability management, which is why they fully repaid their Eurobond exposure in late 2024. This is all part of a plan to increase the average tenure (term) of their debt, which has now reached approximately 5.7 years.

Here's the quick math on their leverage and credit strength:

• Net Debt-to-Recurring EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a very safe 1.76x as of Q3 2025.
• This safe leverage is why the company has received its best credit ratings in history, including two AAA ratings and one AA+ rating from major agencies like Moody's and Fitch.

What this estimate hides is the potential for increased debt as their massive investment program accelerates, but their strong credit profile gives them plenty of room to borrow at favorable rates. For a deeper dive into who is buying into this low-leverage story, you should check out Exploring Companhia Energética de Minas Gerais (CIG) Investor Profile: Who's Buying and Why?

Next Step: Review the covenants on the May 2025 debentures to understand the specific limitations on future debt issuance.

Liquidity and Solvency

You need to know if Companhia Energética de Minas Gerais (CIG) has enough short-term cash to cover its immediate bills, and the answer is a tight yes, but with a clear reliance on external financing for its ambitious growth plan. The company's liquidity position, as of the most recent reporting, is right on the line, but its operating cash flow remains a core strength.

Assessing CIG's Liquidity Ratios

The first place any analyst looks is the Current Ratio (Current Assets / Current Liabilities) and the Quick Ratio (Quick Assets / Current Liabilities). For Companhia Energética de Minas Gerais (CIG) in the current fiscal year (TTM/Current), both ratios sit at approximately 1.00. [cite: 1, 4, 5 from previous step]

• Current Ratio: 1.00. This means CIG's current assets-cash, accounts receivable, etc.-are just enough to cover its current liabilities (debts due within one year). A ratio of 1.00 is a break-even point; it's defintely not a cushion. [cite: 1, 4, 5 from previous step]
• Quick Ratio: 1.00. This ratio excludes inventory, which is less liquid. For a utility company like CIG, this figure is often similar to the Current Ratio because inventory is a smaller component. The 1.00 figure confirms the tight liquidity position. [cite: 1, 5 from previous step]

A ratio of 2.0 is often considered ideal, so CIG's 1.00 signals a need for careful cash management. What this estimate hides, however, is the quality of those current assets, which is a key follow-up question for investors.

Working Capital and Near-Term Risk

The tight ratios translate directly into a thin, or even negative, working capital (Current Assets minus Current Liabilities). While a Current Ratio of 1.00 implies a working capital of zero, other recent data suggests a slight deficit, with working capital reported at approximately -$290.65 million USD on a trailing twelve-month basis. [cite: 3 from previous step] This negative figure means that CIG is relying on its long-term assets or continuous cash generation to meet its short-term obligations. For a stable utility, this isn't an immediate panic button, but it does raise the near-term risk if a major, unexpected expense hits. They're running a lean ship, which cuts costs but also cuts margin for error.

Cash Flow Statement Overview (9M 2025)

To understand how CIG manages this tight liquidity, you have to look at the cash flow statement. The 9-month results for 2025 paint a clear picture of a company investing heavily in its future, largely financed by debt. All figures below are in Brazilian Reais (BRL) for the first nine months of the 2025 fiscal year.

The company generated a robust BRL 3.4 billion in cash from operations (OCF) in the first nine months of 2025. This is the core strength: their day-to-day business throws off a lot of cash. However, CIG is executing its largest investment program, with a massive BRL 4.7 billion in investments over the same period, primarily focused on distribution and new substations. This capital expenditure (CapEx) is a major cash drain, leading to a negative free cash flow (OCF minus CapEx) if we assume CapEx is the majority of ICF. To bridge this gap, the Financing Cash Flow shows a net inflow, largely thanks to a BRL 5.1 billion debenture issuance in May, which offsets BRL 2.4 billion in prior debenture payments and BRL 1.7 billion in dividends and Interest on Capital (IOC) payments. This is a classic growth-funding profile.

Liquidity Strengths and Concerns

The primary strength is the sheer stability and volume of the Operating Cash Flow, which is the engine of the business. The major concern is the reliance on the capital markets to fund the investment program. The net debt-to-recurring EBITDA ratio is a manageable 1.76, which is good for a utility, and the company maintains multiple high credit ratings, a testament to its solvency. Still, the tight liquidity ratios (1.00) and the need for a BRL 5.1 billion debt raise to cover investments and dividends means any disruption to their OCF or to the credit markets would quickly expose a vulnerability.

If you want to dive deeper into the strategic rationale for these investments, you can check out the Mission Statement, Vision, & Core Values of Companhia Energética de Minas Gerais (CIG).

Next Step: Portfolio Managers should model a 15% reduction in OCF for Q4 2025 to stress-test the current debt service coverage ratio by the end of the year.

Valuation Analysis

You want to know if Companhia Energética de Minas Gerais (CIG) is overvalued or undervalued right now. Based on the latest fiscal year data through November 2025, the stock appears to be trading at a discount compared to industry averages, but the high dividend payout raises a flag about sustainability.

The core of a valuation check is comparing a company's price multiples to its peers and its own history. Companhia Energética de Minas Gerais's trailing twelve-month (TTM) Price-to-Earnings (P/E) ratio sits at 8.97, which is significantly lower than the US Electric Utilities industry average of around 20.7x. That's a clear sign of potential undervaluation, or at least a market-discounted risk. Forward P/E is slightly higher at 9.43.

Here's the quick math on key multiples:

• Price-to-Earnings (TTM): 8.97x
• Price-to-Book (P/B): 1.2x
• Enterprise Value-to-EBITDA (EV/EBITDA): 6.99x

The Price-to-Book (P/B) ratio of 1.2x suggests the market is valuing the company at only a small premium over its net tangible assets, which is low for a utility. Also, the Enterprise Value-to-EBITDA (EV/EBITDA) of 6.99x is a healthy number, showing a reasonable valuation relative to operating cash flow before non-cash charges and debt. These ratios defintely lean toward the stock being undervalued.

Stock Performance and Dividend Insight

Looking at the stock price trend over the last 12 months, Companhia Energética de Minas Gerais has seen a 52-week range between $1.590 and $2.300. The stock is currently trading near the high end of that range, at approximately $2.130 as of November 2025. Over the last 52 weeks, the price has increased by +3.16%. It's a slow-and-steady utility, not a growth stock.

For income investors, the dividend story is compelling but requires a caveat. The annual dividend yield is a high 10.67%. However, the payout ratio is also high at 90.37%. What this estimate hides is that a payout ratio this high means the company is distributing nearly all its earnings as dividends, leaving little for internal reinvestment or a buffer against future earnings dips. You need to keep an eye on that. For a deeper look at the company's long-term strategy, you can review its Mission Statement, Vision, & Core Values of Companhia Energética de Minas Gerais (CIG).

Analyst Consensus and Next Steps

The analyst consensus on Companhia Energética de Minas Gerais is mixed, which explains the low valuation multiples. Some analysts rate it a Moderate Buy, while others have a Hold or even a Sell rating. This conflict stems from the inherent regulatory and political risks in the Brazilian utilities sector.

The average 12-month price target consensus is around $1.94 per share, which is actually below the current trading price of $2.130. This suggests that while the fundamentals look cheap on paper, the market and some analysts are pricing in a discount due to external risks. Your next step should be to model a few different dividend scenarios to test the stock's resilience if the payout ratio becomes unsustainable.

Risk Factors

You're looking at Companhia Energética de Minas Gerais (CIG), a major player in the Brazilian utility space. But here's the defintely honest truth: a utility's stability is only as good as its regulatory framework and its balance sheet. For CIG in late 2025, the picture is one of significant, near-term regulatory pressure and a massive capital expenditure (Capex) cycle that demands vigilance.

The biggest external risk is the regulatory shift eroding CIG's captive market. Analysts project this change could lead to a revenue decrease of up to 40% from commercial and residential customers over the next two years. This is a direct hit to the distribution segment, which, as of the second quarter of 2025, accounted for a substantial 54.9% of the company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

Internally, the strategic decision to invest heavily creates a financial risk. CIG has an ambitious Capex plan of roughly R$35.6 billion for the 2024-2028 period, focused on its core businesses. Here's the quick math: this level of investment is expected to create an annual shortfall in Free Operating Cash Flow (FOCF) of between R$1.5 billion and R$2.7 billion from 2025 to 2027. That means the company's debt, which was around R$12 billion in 2024, is projected to nearly double to roughly R$24 billion by 2027. That's a lot of new debt to service.

This financial strain is already showing up in the bottom line. For the nine months of 2025, the recurring net profit dropped around 30.2%, primarily due to the depreciation from these major investments and the higher cost of interest rates on the increased leverage. This pressure directly impacts shareholder returns, with analysts anticipating dividend payouts will compress by over 50% as non-recurring revenues fade. You should be prepared for a leaner distribution policy.

Operational risks are also a constant factor, especially for a hydro-heavy generator like CIG, where over 95% of its capacity comes from water. The hydrological risk is real. For example, in the Q3 2025 earnings call, management highlighted the Generation Scaling Factor (GSF) as a main impact, forcing CIG to purchase energy to mitigate the risk from low water levels. Plus, they are exposed to physical climate risks like extreme weather, which can disrupt their extensive distribution network.

Mitigation is centered on execution and financial engineering. CIG is actively managing its debt structure, having increased the average tenure to 5.7 years as of Q3 2025, which is smart. On the operational front, the company is making the necessary investments to keep its distribution losses-which were 11.43% for the 12 months leading up to June 2025-within the regulatory limit of 11.48%. They are also expanding tools for weather forecasting to better manage hydrological volatility.

Here is a snapshot of the key financial risks and their 2025 context:

The company is trading on a consensus analyst rating of Hold, with a 52-week range of $1.59-$2.30. The market is clearly weighing the solid operational performance against the significant regulatory and financial headwinds. It's a classic utility trade-off: stability versus growth execution risk.

If you want to dig deeper into who is currently buying and selling, you should read Exploring Companhia Energética de Minas Gerais (CIG) Investor Profile: Who's Buying and Why?

Growth Opportunities

You need to look past the immediate regulatory headwinds to see the real story at Companhia Energética de Minas Gerais (CIG): a massive, near-term capital expenditure program that is fundamentally repositioning the company. This isn't just maintenance; it's a pivot toward the high-growth, modern energy market in Brazil.

The core of CIG's growth strategy is a significant infrastructure push and a strong move into renewable energy (distributed generation). The company is executing its largest investment program to date, committing BRL 6.3 billion in 2025 alone to modernize its grid and accelerate Brazil's energy transition. This is a serious commitment, and it's already showing results: distributed generation grew 20% year-over-year (YoY) as of Q2 2025, offsetting a 3.3% drop in energy distribution. You are seeing the company swap out older, less profitable segments for new, high-potential ones. That's smart capital allocation.

Here's the quick math on the near-term financial picture, based on consensus estimates for the 2025 fiscal year. What this estimate hides is the long-term benefit of the $10.7 billion investment plan through 2029, which should drive efficiency and new revenue streams.

Still, be a realist: some analysts forecast a decline in earnings per annum over the next three years, with one predicting a 24.4% drop, largely due to regulatory changes eroding the captive market. The market is defintely pricing in risk, which is why the stock is trading at a consensus analyst rating of Hold.

Strategic Initiatives and Competitive Edge

CIG's competitive advantage lies in its integrated position as one of Brazil's largest utilities and its early, aggressive move into renewables and grid modernization. Brazil's overall electricity consumption is projected to grow by 3.6% in January 2025, and the country is a global leader in clean energy, which CIG is well-positioned to capitalize on.

The company's strategic initiatives are focused on efficiency and new market capture:

• Digital Transformation: Upgrading to smart meters and adopting advanced systems like SAP S4/HANA for improved service reliability.
• Renewable Expansion: Launching its first solar plants in July 2025, tapping into the free energy market where renewable sources are the most competitive.
• Infrastructure Reinforcement: Energizing nine new substations and adding 2,600 kilometers of new networks to enhance grid resilience.
• Divestment: Strategically selling non-core assets, like four hydro plants for R$52 million, expected by mid-2025, to support the investment program and manage debt.

The liberalization of the Brazilian energy market is a major tailwind. Customers migrating to the free energy market can see a price difference of up to 25% to 30% compared to the captive market, and CIG's focus on competitive renewable generation positions it to capture these new, discerning customers. This is how a utility shifts from a slow-growth regulated entity to a dynamic energy player. For a deeper dive into the company's financial health, check out Breaking Down Companhia Energética de Minas Gerais (CIG) Financial Health: Key Insights for Investors.