CEMIG's 2Q25 Earnings: A Test of Resilience in Brazil's Evolving Energy Landscape

In the second quarter of 2025, Companhia Energética de Minas Gerais (CEMIG) delivered a mixed but telling performance, reflecting the dual pressures of Brazil's regulatory uncertainty and the volatility of its energy markets. While consolidated EBITDA fell 15.3% year-over-year to R$2.0 billion, adjusted EBITDA surged 15.4% to R$2.2 billion, underscoring the company's ability to navigate non-operational headwinds. Net profit contracted 29.7% to R$1.19 billion, but adjusted net profit rose 16.6% to R$1.32 billion. These figures highlight a company that is recalibrating its strategy to balance short-term challenges with long-term resilience.

Strategic Execution: Capital Discipline and Operational Efficiency

CEMIG's 2Q25 results reveal a disciplined approach to capital allocation and cost management. Total investments in 1H25 reached R$2.8 billion, a 12.6% increase from the prior year, with R$2.16 billion directed to Cemig D (distribution) and R$200 million to transmission infrastructure. This focus on grid modernization aligns with Brazil's push for renewable integration and digitalization. Notably, Cemig D's adjusted EBITDA grew 39.2% year-over-year, driven by efficiency gains and a 7.78% tariff increase implemented in May 2025.

Operational efficiency metrics further reinforce CEMIG's resilience. Personnel, materials, services, and other expenses (PMSO) rose 2.5% year-over-year, below the 5.3% inflation rate, while energy losses in the 12 months to June 2025 stood at 11.43%, within the regulatory target of 11.48%. These figures suggest CEMIG is tightening its cost structure without compromising service reliability—a critical differentiator in a sector where operational slack can erode margins.

Regulatory and Market Volatility: A Double-Edged Sword

Brazil's energy sector remains a patchwork of centralized dispatch models, renewable integration, and regulatory inertia. The National System Operator (ONS) continues to manage a grid where 90% of generation is renewable, but the intermittent nature of wind and solar has strained traditional cost-based pricing mechanisms. CEMIG's exposure to these dynamics is evident in its Cemig GT segment, where EBITDA fell 37% year-over-year, yet adjusted EBITDA declined only 5.8%. This divergence reflects the company's hedging strategies and its pivot to trading and transmission activities, which are less sensitive to hydrological variability.

The regulatory environment, however, remains a wildcard. Recent laws on low-carbon hydrogen and “future fuels” signal Brazil's ambition to lead in green energy, but implementation lags behind policy. CEMIG's $6.3 billion modernization plan—focused on smart meters, Advanced Distribution Management Systems (ADMS), and solar projects—positions it to capitalize on these trends. Yet, the company must navigate the risk of delayed regulatory approvals and the inherent volatility of Brazil's PLD (Price of Last Dispatch), which remains a key driver of short-term earnings fluctuations.

ESG-Driven Growth: A Sustainable Edge

CEMIG's ESG strategy is no longer a peripheral initiative but a core pillar of its value proposition. The company's 2025 modernization plan includes R$200 million allocated to transmission infrastructure, a 93% year-over-year increase, and the launch of its first solar energy plants in July 2025. These moves align with global decarbonization trends and Brazil's own climate commitments. Moreover, CEMIG's energy losses within regulatory targets and its 12.6% year-over-year investment growth demonstrate a commitment to sustainability that resonates with both regulators and investors.

Investment Thesis: A Core Holding in a Long-Term Portfolio

Despite near-term headwinds, CEMIG's 2Q25 results and strategic execution make a compelling case for its inclusion in a long-term Brazilian utilities portfolio. The company's adjusted EBITDA and net profit growth, coupled with its disciplined capital allocation and ESG alignment, suggest a business that is not only surviving but adapting to the sector's transformation.

Key risks remain, including regulatory delays and energy market volatility, but CEMIG's proactive investments in grid resilience and renewable integration mitigate these. The company's dividend policy—declaring R$596.7 million in interest on equity to be paid in 2026—also provides a buffer for shareholders during uncertain periods.

For investors seeking exposure to Brazil's energy transition, CEMIG offers a rare combination of operational rigor, regulatory engagement, and forward-looking strategy. While the road ahead is not without potholes, the company's 2Q25 performance underscores its ability to navigate complexity and emerge stronger. In a sector where resilience is paramount, CEMIG is not just keeping pace—it is setting the standard.