Companhia Energetica de Minas Gerais CEMIG
NYSE:CIG.C
Earnings Call Analysis
Q4-2023 Analysis
Companhia Energetica de Minas Gerais CEMIG
Investors would find the company's remarkable dividend yield of 12.4% to be impressive, especially in the current climate of falling interest rates. A deep dive into the dividend program shows that in addition to the 50% of net income distributed, the company also shares interests on equity, which substantially raises the payout rate above the statutory minimum of 25%, culminating to over 60% following the sale of some generation assets. This clearly signals a strong commitment to shareholder returns.
The company not only focuses on its financials but also shows a strong commitment to environmental, social, and governance (ESG) standards. With highlights such as joining the UN Global Compact in 2023, it is evident that the company is dedicated to aligning with global sustainability efforts.
Investors could take note of the company’s strategic divestments from non-core sectors, which procured roughly BRL 800 million in 2023. These funds are being redirected to regulated sectors, including a record BRL 23 billion expected to be invested in distribution―a move that promises to transform the industry and uplift societal standards. Furthermore, with planned expenditures of more than BRL 6 billion in 2024, the company is experiencing the highest levels of investment in its history.
A key selling point for the company is its distribution concession which is secure until 2045, providing predictability and consistent cash flow over an extended period, which is a cornerstone for value investing.
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Thank you. Good afternoon, everyone. My name is Carolina Senna. I'm Investor Relations Superintendent of Cemig. We now start Cemig's fourth quarter 2023 earnings call and webcast. We have the following executives: Reynaldo Passanezi Filho, CEO; Dimas Costa, Commercial VP; Leonardo George de Magalhães, Chief Financial Officer and IR Officer; Marco Soligo, Chief Participation Officer; Marney Tadeu Antunes, Chief Distribution Officer and Thadeu Carneiro da Silva, Chief Generation and Transmission Officer.
For the initial remarks, I turn the floor over to our CEO, Reynaldo Passanezi Filho.
Good afternoon, everyone. Again, it is a pleasure to be disclosing our earnings. These results, we believe, are extraordinary. Okay, you can see my video now. I'll repeat. I'll start again. Good afternoon, everyone. It is a pleasure to be here to present our 2023 earnings. These results are extraordinary, and they show the success of our strategy. I think it is very important to give you a summary of the 2023 results, but you have to understand that these are the results of our strategic planning, results of the execution of a strategy that is focused on concentrating our activities on the businesses that make news.
The electricity sector in Minas trading all over Brazil with control, efficiency and operating performance. So this is the strategy, and this is what justifies our record investment plan of BRL 35.6 billion. How are we executing? Well, I think that here, we have these bullet items, and we see the consequences of this strategy. The first was concentrating, focusing on the assets that we know and divest from our minority equity stakes of assets which are basically outside the state of Minas. So we divested from light.
We divested from Renova, and we ended up divesting this year from Santo Antonio, Retiro Baixo, Baguari and the first lot of SHPPs, and this was extremely positive, not just in terms of the cash inflow because of these divestments, but also because we didn't need to inject capital. You all know that Renova required a capital increase. Light also needed a capital increase. Santo Antonio also required a capital increase.
So Cemig, if we still have those shareholdings and if we wanted to keep those shareholdings, we would have to inject capital at these companies. So considering the BRL 795 million in sale of assets in 2023. So you have to look at this general movement, i.e., divesting from nonstrategic assets where Cemig held a minority stake. And now the cash that we generate can be reinvested in the business that we know -- you see before we had to take part in these capital increases that were required. So the first phase is to focus and concentrate on the assets that we know and divest from minority shareholdings. And this process is well advanced. So we exited Light Renova, Santo Antonio, Retiro Baixo, Baguari and the first lot of SHPPs. So we changed the company's capital allocation.
The second part is trying to remain within regulatory thresholds and targets. That is fundamental for us to achieve the EBITDA that we're delivering here. You will all remember that Cemig was outside the target of regulatory expenses for distribution and beyond the regulatory threshold for losses and today, we are proud to say that we're within those regulatory targets or thresholds. We are compliant with the regulatory PMSO threshold and technical and non-technical regulatory losses authorized by the agency. This is also the result of an effort to generate cash because before the resources that we would use for investments were used to pay for expenses. So we divested from the nonstrategic assets, and we increased efficiency. This is exactly what enabled the delivery of these results, a strong cash generation, a record adjusted EBITDA of BRL 8.1 billion. This is the reflection of the fact that we are now within the regulatory target. In the past, we were beyond them.
And today, this EBITDA no longer needs to be invested in minority shareholdings. It can be fully invested in the businesses controlled by Cemig. And we have a second record investment of BRL 4.8 billion. So like I said this is a summary of the transformation movement of the company. I had a first wave of a turnaround, i.e., allocating capital on the businesses that we control and seeking efficiency and also increasing the operating performance of our assets.
Our wind farms, for example, increased the performance a lot in the sectors where we improved the operating efficiency, we can generate more revenue. We're also trying to improve efficiency. It can come through less expenses or through higher operating efficiency of the asset. So we have more efficiency in terms of expenses and more efficiency in terms of revenue.
And we have less need to spend money in those minority shareholdings. So this is what enabled this record EBITDA of BRL 8.1 billion. This is what led to the current phase we're living, the highest investment program in our history. So wave 1 was the turnaround. Phase 2 is executing the investment plan, BRL 4.8 billion to be invested in 2023 and BRL 6 billion to be invested in 2024. But when we look at our track record, it was under EUR 1 billion in 2018. So we increased from BRL 950 million in 2018, increasing to BRL 4.8 billion in 2023. So in a 5-year time frame, we grew investments by 5x from BRL 954 million to BRL 4.8 billion, and we continue to grow.
Our forecast for 2024 is around BRL 6.2 billion or BRL 6.1 billion. So I guess that this is kind of the snapshot. We did a turnaround of the company. We turned it around and now we are at our maximum moment of investment. Again, investing in the businesses that we know regulated businesses. And when they are not regulated, this is business that we invested because there is a guarantee of profitability. So we have an associated PPA. Our generation business, for example, is linked to a PPA. There is no exposure to our price risks.
At the same time, we're making an effort to preserve our leading position in the markets that we lead in the trading sector, for example, and to be prepared for a movement of market opening. We are moving forward in being present in the free retail market. And we want to maintain our leadership in trading. So this is kind of the general strategy that led to these results that you see on the screen, a record EBITDA of BRL 8 billion, record investments of BRL 4.8 billion and a record net income of BRL 5.4 billion, which is also bringing to you shareholders a spectacular yield -- dividend yield of 12.4%. In other words, we are remunerating more than BRL 3 billion in investment and interest and equity. So this profitability is even greater because a part of this has been reinvested. So my message -- my initial message to you is look at these numbers and understand them as results. We're not thinking about a number. We're thinking about executing the strategy. Executing a strategy that makes sense. In other words, focusing on the activities we know seeking efficiency, reducing expenses, seeking efficiency, increasing revenue, having safe investments because we are doing this in the regulated market.
When it's a competition environment, we have a PPA, and we are then prepared for the future. Being prepared for the future means having the ability to trade power in the free retail market. So I would like to congratulate the whole Cemig team, our own employees and third parties because we have delivered results, which are the reflection of the dedication of each and every one of you. And I would like to say that this is indeed our commitment to execute our strategy, a strategy which is clear, easy to understand, and which is bringing all of these results because we are allocating capital to the sectors where Cemig has a competitive edge. And to me, that's the most important thing. We have to invest in what we do and be prepared for the future. I truly believe that these results, given the execution of our strategy, allowed us to get this far and will allow us to continue to post even greater results in the future. I will turn the floor to Leo, but again, I'd like to congratulate the whole Cemig team for these results. Hello, let's hear about the results for the quarter and the more general financial topics to be presented by Leo and Carol. And I'll be around for the Q&A session. Thank you.
As the CEO said, the results for the year were excellent. We understand we had an EBITDA greater than BRL 8 billion, net income greater than BRL 5 billion results that we believe are delivering -- we are delivering to the shareholders where we promised in our strategic planning. The CEO said we're executing our strategy, and these results are the reflection of this adequate execution of the plan as we communicated to the market. Our dividends proposed for 2023 are very attractive.
We understand that Cemig today more than in the electricity sector, in Brazil has one of the highest and most attractive dividends, considering the dividends for 2023. That represents a remuneration -- a dividend yield of 12.4%. That's the remuneration for shareholders. The very attractive dividend yield considering declining interest rates and considering our strategy in regulated sectors. Our ability to execute our operation, we believe that these results are solid and healthy. They bring us optimism that Cemig will continue to be a company that can ensure attractive remuneration for our shareholders in the future.
We understand that the company in the electricity sector, more than that, in the environment of listed companies in Brazil, is a company that is among the most attractive companies in terms of dividend payout.
Moving on, as mentioned by our CEO, we divested in those equity stakes where we do not have control, that were not core to our business. We divested from these assets that led to about BRL 800 million in 2023. This boosts our cash. This is about capital allocation. This is investments to be made in regulated sectors. And it also brings important gains for the company. In 2019 -- if we look at 2019, the divestments from light Renova and other companies led to almost BRL 3 billion capital injection for the company.
And more than that, if we had maintained our shareholdings in these assets, we would have had to spend practically BRL 5 billion. In other words, an increase in our net debt. If we hadn't changed the strategy, we would have an impact of almost BRL 8 billion, a significant amount. But more than that, we were able to generate BRL 1 billion in tax credits reducing our cash expenditures. And we reduced the number of financial guarantees, which helped improve the credit rating of the company.
Moving on, the company is a benchmark in ESG. We have joined practically all the sustainability indicators, either in Brazil or abroad. And here, we have some important highlights in 2023. We joined the UN Global Compact, 100% transparency movement. The Energia Legal program regularizing and reduced supply for more than 13,000 households in 16 low-income communities. This means our commitment with the communities and the societies where we operate in addition to training to provide ESG education for all our suppliers.
Talking about our investment program in 2023. We had an execution that was quite significant, almost BRL 5 billion invested in 2023. We highlight our investments in distribution, greater than BRL 3 billion, more than 3x the regulatory depreciation. We understand that this is very important. These investments will be included in the next tariff review. These investments transform society. These investments mean more power available to the state. So the new industries can be connected to our grid, in addition to improving the quality of service to our customers and clients, which is very important to us. This is the focus of the company. We are customer-centric. So we have almost BRL 23 billion expected to be invested in distribution and more to be invested in transmission, generation and distributed generation.
All of these investments will bring adequate return for the company and the other stakeholders. Planned investments for 2024 more than BRL 6 billion. Again, the highlight greater than EUR 4 billion to be invested in our distribution business, in addition to representative investments in transmission, generation, distributed generation and gas, so BRL 6 billion, undoubtedly, the highest level of investment in the history of the company.
Now we'll start speaking about the results for the fourth quarter '23, very positive results. I'll turn the floor to Carolina, Investor Relations Superintendent to discuss and present the results. Adjusted EBITDA in Q4 greater than 2 billion interest on equity of BRL 1.3 billion showing our ability to remunerate our investors in addition to maintaining our assertive actions, which ensure that OpEx, EBITDA and energy losses will remain within the regulatory parameters. So all of our costs are included in the tariffs, and we don't want to charge more from customers. Today, the company is very efficient, and we deliver value to our shareholders in a very clear and positive way considering these indicators. And this is how the company sees and respects in compliance with these regulatory parameters.
So we see here the conclusion of the sale of Baguari and Retiro Baixo. This led to a gain in trading. The result of Cemig GT in the quarter will be mentioned momentarily, but we see again a significant result. That's another strength of the company. The fact that we have a company that is relevant in its several businesses. This brings us consistent and solid results, which we believe are very important our investors. Carolina, over to you.
Thank you, Leonardo. So now talking about the consolidated results, we can see that we grew our over 2022, recurring EBITDA up 16.6%. The highlight that led to this result is the trading activity, which in 2023 gave us a surprising result, which we will show momentarily. Net income, as our CEO mentioned, was a record of BRL 5.359 billion. That enables us to continue with our investment program, executing our strategic planning. And we'll continue to share part of these resources with our shareholders as we pay 50% of the accounting profit as dividends.
In Q4 '23 results, we see EBITDA growing 30.5% recurring EBITDA, in other words. Net of the Baguari and Retiro Baixo sale, which were events that happened in Q4, which helped grow our accounting EBITDA and net income growing 39.8%. And in Q4 '23, over Q4 '22, partly impacted by the adjustment of the tariff review of the DisCos in effect as of May '23. So when I compare Q4 '23, with Q4 '22, the adjustment in tariff is already accounted for in Q4, in addition to higher temperatures, something I will comment in more detail later, that brought a positive impact to the result of the DisCos.
When I look at the evolution of operating costs and expenses been consolidated, we see a 0.9% increase in PMSO costs below inflation. Here, we show the impact of the profit sharing program. We had a reversal in 2022. So when I compare 2023 with 2022, it feels like we had a significant increase in this expense. But in 2022, we also had a higher personnel costs given the voluntary retirement program, which cost BRL 29 million. In 2023, we did not have this program at the company.
So again, we improved our personnel expenses. But I'd like to remind you of the commitment we made. We want to comply with the regulatory OpEx threshold. So we have tariff coverage for our expenses and costs. As mentioned by our CEO, the company's strong cash cow. We invest in assets -- we invested in companies and assets where we had minority shareholders. But now we are focusing on assets and investments that we have full control of. So along 2023, we had an operating cash of BRL 8.344 billion, very close to the accumulated EBITDA of the company and a cash outflow of about BRL 5 billion of the investment program execution in 2023 alone. We ended with a cash and cash equivalent of BRL 2.3 billion.
At the end of the year, we had a buyback of the bonds of Cemig GT partial. I'm going to show you that in more detail in a moment.
Now I turn the floor to Leonardo because he's going to speak a little about debt management, liability management, and then I'll speak about the results of Cemig GT and Cemig D.
Last week, the company completed its debenture issuance. And this was a very successful move. It represents -- reflects investors' confidence in Cemig management. We had a demand of almost 3x for our issuance. It was an important issuance of debentures BRL 2 billion. The resource of the proceeds will be used in our investment program, as we said, BRL 6 billion to be invested in 2024, BRL 35 billion from 2023 to 2028. So the company will be frequently making issuances in the market because that's then the need to access the capital market. But we understand that our leverage is low. We have a very positive credit rating, and that ensures that the company will have a demand of almost 3x, almost BRL 6 billion, considering our issuance of BRL 2 billion. And the rates were very attractive. They were reduced compared to our offer. So we were very happy with this issuance, and we also reduced our exposure to foreign exchange.
I'd like to remind you, in 2017, '18, the company had practically 1.5 billion bonds issued in dollars in the international market. During this period from 2019 to date, we started buying back these bonds just to reduce our foreign exchange exposure. Now we have practically 25% of this amount, close to $381 million. In other words, we reduced our foreign exchange exposure quite substantially in this time frame, thus reducing the risk level of the company. Here, we see our net debt over EBITDA close to 1x in the end of 2023. We believe that this ratio is low. And as we said before, this will allow the company to frequently access the capital market without impacting our credit rating and credit quality, and we'll continue to be a company that pays good dividends. We believe that this is a sustainable strategy. Investing in the regulated sector, where we have the highest guarantee of return to our shareholders, maintaining our credit quality, even going, resorting more frequently to the capital market, maintaining an adequate net debt over EBITDA and at the same time, ensuring a dividend yield that is very attractive to our shareholders.
And we'll continue to be one of the companies that pays the best dividends among listed companies in Brazil.
Okay. So now let's speak about Cemig distribution in Q4 '23. We can see that EBITDA grew almost 35%. We did not have any nonrecurring effect in Q4 of the DisCos, and this result was partly impacted by the tariff review, which, as I mentioned before, in May 2023, is accounted for the 2023 results compared to 2022. And later on I will show you a slide showing that because of increased temperatures, we had an increased demand in both the captive and the free markets because of transmission. So this is a significant result for the distribution despite an increase in expenses with third-party maintenance services.
I follow the review of some reports, and this is information that we have disclosed to you in 2023. In addition to increasing investment and my asset base, we are changing our corrective maintenance. We are now focusing on preventive maintenance. And Q4, like I said, had higher temperatures. So we had increased not only in transported energy, but energy to end users. And I'd like to remind you that our concession was very much impacted and continues to be impacted by the migration of clients to distributed generation. Today, 18.4% of the total captive market has migrated to distributed generation. And this investment program ends up helping us with market growth because I allow the existence of new industries, I enable the development of agri business, which is an important segment for the state of Minas Gerais. And I also enable better levels of service to my end customers. So when I look at the market of Cemig D with Cemig D in the area of concession of the DisCos, we had an accumulated growth of 2.4% in Cemig D market.
And looking at DG, we can see how distributed generation grew significantly in our concession area. We ended 2023 comparing with 2022 with 55% increase in energy injected. Law 14,300, which was a law to address these subsidies that DG1 does not pay to the DisCos is a law that got into effect in January 2023. And we can see that connection cost estimates issued posted a reduction when I look at 2023 compared to 2022. When I look at this for micro, almost 40% for Mini, 56% as mentioned before, now the company complies with all regulatory limits and thresholds for losses, OpEx and EBITDA. This is a commitment that we took on and that we pursue and we continue to show quarter after quarter, how we remain compliant within the regulatory limits. So regarding losses in 2023, well, we achieved that in 2021. And every year, we show that we are compliant. We need to continue to invest in inspections and replacing obsolete meters and replacing conventional meters by smart meters. So in addition to the Energia Legal program, Legal Energy program, which brings a great benefit, not only for the company, reducing losses, but also bringing technology and security for low-income communities. Regarding default to delinquency, it is important to say that digital channels have helped collection. We reached -- they reached 65%. Every quarter, we show that Pix, although this was deployed only 2 years ago and already accounts for 21.8% of our collection.
In addition, alpha is an indicator that shows how much of the revenue we actually can collect. It is very important. It is the receivables collection index. It is important to show how we are collecting. We are delivering every year, an indicator close to 100%, showing the effectiveness of our initiatives to improve collection. As mentioned before, OpEx and EBITDA have 2 regulatory limits that we now comply with. Regarding OpEx, which is my coverage in my tariff compared to what was realized. We are below the coverage in 0.7% and EBITDA 3.8%, showing our commitment, our investment in our capital allocation. So we won't have any capital outlay due to noncompliance to regulatory thresholds.
Now speaking about Cemig GT results. We have to remember that part of the trading activity of Cemig GT is part of Cemig holding. But there is a part of the trading activity which is under Cemig GT. In 2023, as we communicated to you was surprising for the trading activity, given our strategy to sell power, which started in 2021. When I compared Q4 '23, with Q4 '22 recurring EBITDA, net of the sale of Retiro Baixo and Baguari EBITDA grew 37.7%, and net income grew 58.9% at Cemig GT.
Gasmig. Gasmig is a company that we consolidated. It is the natural gas distributing company in the state of Minas Gerais. When I look at 2023 over 2022, we posted an EBITDA growth of 21.9%. Part of this EBITDA increase is explained by the tariff review and partly by the offsetting portion which was added in the quarters of 2023. But in Q4, there was no balance of this offsetting portion, and that's why we see an EBITDA reduction of 25.3%. It is important to remember that we are investing not only in distribution, transmission, generation in the state of Minas Gerais, but also Gasmig is building a pipeline in the Mid-West region, an investment estimated at BRL 800 million after spending many, many years without investing in its concession area. To end, we like to show this slide. It reinforces what we have been promising to the market and what we have been delivering, what we have achieved, what is in progress and the challenges and opportunities. I'd like to draw your attention to challenges and opportunities, investments in floating, distributed generation. We've shared this with you in the renewal of generation concessions, [indiscernible] in '26 and another one in 2027. We have shown interest in renewing those concessions. And these 2 commitments remain in our agenda.
Now we will begin the Q&A session. Thank you very much.
We will now begin the Q&A session. Please ask all of your questions at once and hold for the company's answers.
[Operator Instructions] I was looking at the questions here in the chat, and I see that there are many questions around 3 areas: divestment, federalization and dividends. So I'll make a general comment and then Leo and the other officers can add to my comments.
Regarding divestment I think that Leo has already spoken about this during the presentation. We have divested from the assets with more complexity. Those divestments that would have entailed expenses to us. They would have required a lot of capital injection. And that has a big effect. If we had the resources that we received, the avoided cost I'm having to participate in a capital injections plus tax credits, we are talking about BRL 9 billion coming from these divestments of these assets, as we mentioned.
Now obviously, the main divestment portion has been carried out. We still have some divestments to make, and this is public information. And the rationale is always very simple. We divest where we believe there's a third party that can operate better than us, given our characteristics. So we had a lot of SHPPs, but there are still some small hydropower plants, and we sold them at a very good premium, which shows that a third party can use these assets better than we can. And we have some divestments such as Aliança, Taesa, Belo Monte. But of course, these are complex, slow processes, but they're part of our plan. I should say that this is all I have to say about divestments.
What else about federalization, I say that this is a theme for our shareholders who have very little to say about this, except what is public knowledge, what's in the media and the press. And we are waiting for a reply from the Ministry of Finance regarding the proposal that is being negotiated. We don't have anything to comment on that. We are working business as usual, seeking the best earnings and results for the company. Because this is our role regardless of who the controlling shareholder. Regarding dividends. There are many questions about dividend payout terms. And my comment is sole divestment program will lead to capital gains. And this capital gain will be distributed. 50% of our results, actually, it's more than 50% because it's 50% of the result plus the interest on equity benefits. So in practice, we have a dividend payout greater than 50%. It's 50% of the result plus the tax cost of interest on equity. So we understand that this is quite a reasonable number, way higher than the law. The law requires a minimum dividend payout of 25%. So actually, it's a lot more than 50%, again, it's 50% plus interest on equity.
And I believe that you need to know that we are now reviewing the capital structure of the company. And we are investing a lot. So again, we are exiting some sectors, but we are entering new sectors. We saw a record investment plan for -- that we had in 2023, an 80%. We're invested in regulated business, distribution, natural gas, transmission. So our expectations are, yes, we are creating profitability for the company in 2 ways. When we remunerate our shareholders with a cash outlay and also when we invest and create value for the company. So dividends that were not distributed, that's because they are being reinvested in regulated sectors, creating value to our shareholders. So we create value either through the cash that we distribute or the resources we keep in the company to invest and appreciate the company. So of course, these topics are always discussed. Dividend payout. When the dividend payout will happen, but we do have a large investment program. We understand it is critical to better serve our clients and at the same time, remunerating our shareholders. So we believe that the current practice 50% of net income plus the financial effect of interest on equity allows us to adequately remunerate our shareholders. It enables a remuneration based on capital gain, also when we sell an asset. At the same time, resources kept in the company being reinvested, creating even more value to shareholders and more results in terms of improved services to clients. I don't know Leo whether you want to add to that. But I think that these are the 3 main topics that were asked in the chat. So they asked about divestments, federalization again, and we have very little to comment on that and dividends.
I just want to make clear that everything we do aims to create value to our shareholder base, either when we have a dividend payout or when we make investments, all investments aim to create value to the company and to our shareholders.
I agree Reynaldo. I think you spoke very well about dividends. When we look at dividends. In 2023, we had capital gains with the sale of some generation assets. They were part of the dividend calculation base. So BRL 3.1 billion divided by the recurring operating profit, we are talking about almost 60% payout. So if we have future -- additional capital gains with future sale of assets, this will mean an additional payout, which will continue to make the company, as Reynaldo said one of the best companies in Brazil in terms of dividend payout. A company with consistent results, concessions, which are very profitable.
Our distribution concession was renewed from 2015 to 2045. So we have predictability of results and cash generation for the company. So we understand that we are already one of the most attractive companies in terms of investor and shareholder remuneration.
I have a question to our distribution of VP, Marney. It is about DEC in 2023. The question is, could you comment on the growth on the increase of DEC in 2023, do you see any OpEx expectation at the DisCos to maintain that level with the regulating agency now asking for more quality?
Well, Guilherme, thank you. Indeed DEC did increase last year, more specifically in Q4, where we had a considerable increase of extreme weather events. You all followed what happened in the southeast of Brazil. And of course, it impacted Minas Gerais state. To give you an idea, in the previous year, we had about 800,000 lightnings in the state of Minas last year, 2.4 million lightnings and contributed a lot to the increase in DEC. And also the scheduled DEC, we had a lot of disconnections done for civil works to better serve the market. So that contributed to a DEC a little outside the threshold intended. But I can assure you that in the month of February already, DEC is back within the regulatory threshold. In March, again, an expectation to remain below regulatory threshold. And of course, within -- with our regulatory OpEx within thresholds.
Now Leonardo will answer 2 questions regarding share subscription that we will approve in the shareholders' meeting of April 2024.
Yes, given the profit reserve exceeding the capital stock, the company will increase the capital using profit reserves, capital reserves through the share subscription. We've done that in previous years, and we will suggest a 30% new share subscription for our shareholders in the meeting to be held by the end of April. That's the expectation of the company considering compliance with the SA Law of Brazil. So we use the profit results to increase the capital stock of the company.
Next question regarding the company's participation in the next transmission auction, I'll turn the floor to the transmission VP, Thadeu.
Hello, as we had informed before, to the market in the last earnings conference call, we will not be participating in the next auction to be held next week at São Paulo.
Thank you, Thadeu. Next question regarding distributed generation DG. I now turn the floor to Reynaldo, CEO.
There are 2 questions here, Carol, about DG and another one about actuarial liability. So for DG, there was a recent decision by the Federal Court of accounts in a model of power by subscription. We understand that we comply with the absolutely all requirements for Cemig to participate in the distributed generation market. I have a lot of peace of mind regarding all the shining walls we have here. There was some comments here. And some comments about my Portuguese. I apologize. I'll take Portuguese lessons. But we have Chinese walls, Chinese walls. The distribution and Cemig activities are totally shared. There is no relationship between 1 area and the other, of course, they're all part of the same economic group. But the activities are totally independent, including Cemig SIM. And of course, the TCU decision includes the subsidies for distributed generation, which I believe will be analyzed by TCU, the federal card of accounts and other control agencies of the country. But specifically regarding Cemig SIM, we have a lot of peace of mind, we fulfill all the requirements. If there is any debate regarding charges and subsidies of the G, if there is any decision, it will not be specific for Cemig SIM. It will be for the whole sector.
Regarding actuarial liabilities. It is public knowledge that we aim to look for structural solutions for the company's actuarial liabilities. A part of these issues are at the court. We have to wait for the court decisions.
Thank you. And now we are closing the Q&A session. For the conclusion of the call. I will turn the floor to our CEO, Reynaldo Passanezi Filho.
Again, thank you very much for attending our earnings video conference call for your questions. Please continue to trust Cemig and we will continue to deliver more and more results to our shareholders, always seeking to deliver a level of excellence of service to our consumers. That's our purpose to continue transforming the lives of the people of Minas with our energy.
We want to drive the development, the sustainable development of Minas because all our energy is clean energy. And at the same time, creating value to the company's shareholders. Thank you very much, and enjoy your weekend.
This concludes Cemig's Fourth Quarter 2021 Earnings Conference Call. Thank you for your participation. The IR department of the company is available to answer any further questions you might have. Thank you very much for your participation, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]